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Farm Bill; Ag Economy; Smithfield; and, Regulations

Farm Bill

Senate Agriculture Committee Chairwoman Debbie Stabenow (D) continued to address Farm Bill issues in her home state of Michigan yesterday.

As the Senate’s Memorial Day state work period continues, Chairwoman Stabenow was a guest on yesterday’s Current State radio program (WKAR) where she noted that the legislation has “overwhelming support” in The Great Lakes State.

“Michigan is on every page of this Bill,” she said.

With respect to the House of Representatives, which did not take up the Agriculture Committee passed Farm Bill last year, Chairwoman Stabenow indicated that, “hopefully they will understand how important this is as a jobs bill, and a nutrition bill and be willing to pass it this year.”

AP writer Matt Gouras reported yesterday that, “Farmers told U.S. Sen. Max Baucus [D., Mont.] on Wednesday that planned cuts to the farm bill could make the crop insurance safety net too expensive.”

“Farm groups told Baucus that they are most concerned about the way cost-saving cuts to farm programs could make crop insurance harder to get. They said the program is especially critical for new farmers trying to get loans, but it is important to almost all grain farmers in the state and helps bring stability to an agriculture industry that fuels the state’s economy,” the article said.

Mr. Gouras added that, “The Senate has reduced the subsidies given to farmers with adjusted gross incomes of more than $750,000 to buy crop insurance. But Montana farmers say that could increase the cost of crop insurance by as much as a third for them because many of those wealthy farmers are in low risk areas in other parts of the country that help reduce the cost of the insurance for everyone else.”

And the AP article pointed out that, “Baucus said during the meeting that he hopes to be on the critical conference committee that could hash out partisan differences between House and Senate versions of the bill later this summer.”

David Murray reported yesterday at The Great Falls Tribune (Mont.) Online that, “[Sen.] Baucus generally agreed with [Sec. of Agriculture Tom] Vilsack’s condemnation of Republican proposals for deep cuts to SNAP, saying that the Senate’s version of the farm bill was sufficient to weed out many fraudulent and wasteful practices associated with federal food assistance programs. However, Baucus did not rule out the possibility that Democrats might be willing to negotiate with Republicans over increased SNAP program cuts.”

In a related item on nutrition, David Rogers reported yesterday at Politico that, “Taking aim at nervous conservatives, the political arm of the Heritage Foundation is coming out with radio ads Thursday painting the House farm bill as more about food stamps than those who grow the crops.”

In an interview yesterday on KBUF radio (Kans.) with Lory Williams, Sen. Jerry Moran (R., Kans) also discussed crop insurance: “Last week an amendment was offered to the farm bill dealing with crop insurance and it set an adjusted gross income level of $750,000.  And if a farmer has more—a farming operation has more than that adjusted gross income, then the crop insurance premiums for that farmer, the portion that that farmer pays goes up by 15%.  That’s a very damaging amendment, and it was passed.  It was approved.  And it’s a damaging amendment.

“And while it may sound very appealing to trying to focus the limited resources we have to spend on our smallest farmers, we need a crop insurance program that covers broad-based agriculture, because if we lose those farmers with higher adjusted gross income levels from the crop insurance program, then the crop insurance program begins to unravel.”

Also, Kip Hill reported yesterday at The Spokesman-Review (Wash.) Online that, “Sen. Maria Cantwell [D., Wash.] toured Spokane Seed Co. after touting a provision in the pending Senate Farm Bill authorizing the purchase of $10 million in pulse crops, such as chickpeas and lentils, for use in school lunches. If it passes, students would receive more nutritious meals and Washington state would gain food production jobs in an already booming industry, Cantwell said.”

In other Farm Bill news, a recent University of Georgia update by Chris Beckham stated that, “The bills produced by the agricultural committees in both the U.S. House and Senate are similar, said UGA Peanut Economist Nathan Smith… ‘But there is some choice for producers with the choice between the price loss program and the shallow loss program. That’s something new and something that should be good for our farmers.’”

The article noted that, “Smith added that revenue insurance is relied on heavily by corn and grain growers in other parts of the country but does not benefit Southern growers as much.”

And, an update yesterday from the National Cotton Council stated that, “The farm bill approved by the House Agriculture Committee saves nearly $40 billion in mandatory funds while providing reforms to farm policy.

“National Cotton Council Chairman Jimmy Dodson, a south Texas cotton producer, said The Federal Agriculture Reform and Risk Management Act (FARRM) not only contains significant reforms but ‘provides American farmers with the certainty for making the long-term investments necessary for maintaining productivity and economic viability. This legislation will provide a balanced safety net for all commodities and regions while facilitating market-driven cropping and marketing decisions.’”

With respect to dairy issues, a news release yesterday from the International Dairy Foods Association stated that, “Farm bills should help farmers, not penalize consumers. Yet, the current Farm Bill includes a new intrusive program that would significantly increase the cost of milk, yogurt, cheese and other dairy products.

“The Dairy Market Stabilization Program would periodically limit how much milk dairy farmers can sell and, according to the Congressional Research Service, it is designed ‘to result in a higher future farm price for milk.’ Several studies concur that the program would raise prices, as much as $1 per hundredweight in 2012 adding nearly $2 billion to the consumer costs for dairy products.”

 

Agricultural Economy

AP writer Jim Salter reported yesterday that, “Rivers in the nation’s heartland are rising again, and with heavy rain in the forecast, parts of Iowa, Missouri and Illinois are bracing for yet another round of flooding.”

Mr. Salter pointed out that, “The expected downpours will add to what has been an extremely wet spring — the wettest on record in Iowa, where the Iowa, Skunk and Chariton rivers are topping their banks, along with the Mississippi. Further south in several towns north of St. Louis on either side of the Mississippi, the river is a few feet above flood stage.”

Jens Manuel Krogstad reported yesterday at The Des Moines Register Online that, “Rain forecast to fall this week over the state’s already swollen river basins has central Iowans bracing for the first significant floods in three years… [S]teady May showers mean the soil can’t absorb more moisture, forcing water to run off into rivers already at or near flood stage.”

Chicago based meteorologist Tom Skilling tweeted this graphic yesterday, and noted that, “Here’s our in-house RPM’s 72 hour rainfall forecast. The purple areas are regions which could receive 5″+ totals.”

In related news, DTN Executive Editor Marcia Zarley Taylor reported yesterday  that, “In south-central Minnesota, farmer Mark Nowak has already buried hopes for the remaining 25% of his 2013 corn crop. With only 3 1/2 days suitable for planting this spring and a chance for rain everyday now through June 8, Nowak plans to file a prevented planting claim when his crop insurance final planting date hits May 31. Now he will devote his attention to salvaging his soybean crop and getting it planted in time for full insurance coverage June 10.

“It’s the first time in his 40-year career this ground won’t get planted and, with a 220-bu. yield average, it’s some of the nation’s top corn ground.

After paying cash rent, machinery costs, $20/acre for preplant grass herbicide, $245/acre in fertilizer and $10/acre seeding a cover crop, Nowak expects to barely cover his $600/acre overhead. Gone is the $200/acre profit margin he expected earlier this year. ‘We’re in the bull’s eye of the distressed planting area,’ he said. ‘But without that cash flow from insurance, it would be a train wreck.’”

The DTN article stated that, “Dates and decisions vary by region of the country and insurance coverage. But beginning June 1, most Midwest corn producers with unplanted acres have three choices: 1) Plant corn as soon as possible with a reduced guarantee through June 25; 2) Shift to soybeans with full insurance coverage; or 3) Apply for prevented planting on corn. Prevented planting acres are insured at 60% of their original guarantee and must have a cover crop established on them.

Howard County, Iowa, farmer Eric Hawbaker worries he will lose money on every option in his dwindling playbook. With 2.6 inches of rain over the weekend and forecasts for 3″ to 5″ this week, it could be June 10 before he’s able to plant the last 420 acres of corn or even start the first of his 500 acres of soybeans.”

Ms. Zarley Taylor also pointed to these links: “For rules on prevented planting, see the Risk Management Agency guidelines; and, for examples of how crop insurance prevented planting claims work, go to an Iowa State University fact sheet on prevented planting.”

In addition, an AP article from yesterday reported that, “The cool wet spring has delayed planting for corn farmers but it also has presented a problem for soybean producers.

A soil-borne fungus that thrives in excessively wet years causes a disease known as sudden death syndrome in soybean plants.

“It can destroy entire fields or parts of fields. In 2010, Iowa farmers lost about 28 million bushels of soybeans to SDS.”

Andrew Johnson Jr. reported yesterday at The Wall Street Journal Online that, “Traders are concerned that heavy rainfall in the U.S. Farm Belt will keep farmers from planting as much corn as they had intended. Some traders now think as many as two million or three million acres of corn could be lost.”

In news on trade developments, James Politi reported yesterday at The Financial Times Online that, “US trade negotiators were hit by a wave of demands from business lobbyists and consumer groups as they prepare for the launch of trade talks with the European Union, highlighting the tough balancing act facing the Obama administration.

“The office of the US trade representative on Wednesday began two days of public hearings on the planned free trade deal with the EU, allowing ten minutes of testimony each from groups ranging from Wall Street representatives and other corporate executives supporting the deal to advocates for tough health and safety standards arguing against it.”

 

Smithfield Foods- To be Purchased by Company from China

Michael J. De La Merced and David Barboza reported yesterday at The New York Times Online that, “Demand for pork in China reflects its booming economy and rising middle class. But that rapidly growing appetite has strained its food production systems, leading to breakdowns and a number of food safety scandals.

Now China’s biggest pork producer, seeking plentiful supplies and technical expertise, has agreed to buy Smithfield Foods, the 87-year-old Virginia-based meat giant with brands like Armour and Farmland, for $4.7 billion in cash.

“If completed, the deal that was announced on Wednesday would be the biggest takeover of an American company by a Chinese concern. But it must first overcome skepticism in Washington — and a potentially close examination process by United States regulators. Both Smithfield and its suitor, Shuanghui International, said that they will submit the deal for review by the Committee on Foreign Investment in the United States, or Cfius, a panel of government agencies tasked with clearing deals for national security.”

The article noted that, “Other hurdles lie in wait. A takeover by a Chinese company — because of well-publicized food safety scandals in that country — could prompt concerns among American consumers and consumer groups, who may worry that Shuanghui will ultimately export the pork it produces in China to the United States.

“Smithfield and Shuanghui said that the deal was meant to do the opposite: increase exports of American products to China, already the nation’s third-largest export market for pork. Meat consumption in China has exploded over the past decade because of a growing middle class and a shift in diet from rice and vegetables to more protein.”

Dana Mattioli, Dana Cimilluca and David Kesmodel reported yesterday at The Wall Street Journal Online that, “The Smithfield deal is far from guaranteed. In addition to political concerns and fears surrounding Chinese food safety, a rival offer could surface. Smithfield Chairman Joseph Luter said in an interview that other bidders for the company might yet emerge. ‘Lots of people love us,’ he said. ‘I’ll leave it at that.’

William Mauldin and Corey Boles reported yesterday at The Wall Street Journal Online that, “The proposed purchase of Smithfield Foods Inc. by China’s Shuanghui International Holdings Ltd. is unlikely to face serious opposition from the U.S. committee that reviews foreign acquisitions or spark the kind of political pushback that has hurt previous bids for U.S. companies, former U.S. officials, economists and trade experts say.”

Howard Schneider and Brady Dennis reported in today’s Washington Post that, “With no obvious national security concerns stemming from the production of ham, bacon and sausage, Smithfield chief executive C. Larry Pope said he expects approval. He emphasized that the deal wasn’t about bringing Chinese pork products or management standards to the United States but about sending U.S. products and expertise the other way. The deal will leave intact Smithfield’s management, workforce and 70-year presence in Virginia, he said.”

Stephanie Strom noted in today’s New York Times that, “A growing amount of food commonly consumed by Americans — ranging from canned tuna and mandarin oranges to fresh mushrooms and apple juice — is now being imported from China. By the end of last year, the United States imported 4.1 billion pounds of food products from China, according to the Agriculture Department.”

And The Wall Street Journal editorial board indicated today that, “If U.S. politicians still want someone to blame for the acquisition, they might start with themselves. Smithfield has struggled in recent years with its vertical integration model—farms to meat packing to branded packaged products—and major shareholders have urged the company to spin off underperforming operations.

Then again, Smithfield has also suffered as government distorts the low-margin livestock business, most notably by diverting corn to fuel via ethanol subsidies and mandates. Roughly two-thirds of the cost of raising a hog is the price of grain, which has surged in recent years. The irony is that if anyone exposed Smithfield to a foreign takeover it is the ethanol lobby and the politicians who bow before it.”

Iowa GOP Senator Charles Grassley issued a statement on the Smithfield development yesterday and pointed to concerns about market integration, food safety, and noted that, “The Smithfield-Shuanghui deal also highlights the need for Country of Origin Labeling.  Like so many Americans, I would rather eat pork, beef and poultry raised in the United States.  The deal only makes it more logical to ensure that American consumers know exactly what they are paying for and eating.”

Rep. Rosa DeLauro (D., Conn.) indicated in a statement yesterday that, “This potential merger raises real food safety concerns that should alarm consumers.  We know that Chinese food products have been a threat to public health and that Shuanghui was found to have produced and sold tainted pork.  This merger may only make it more difficult to protect the food supply. I have deep doubts about whether this merger best serves American consumers and urge federal regulators to put their concerns first. I will be in touch with regulators throughout this process to ensure the public health and safety of the American public is safeguarded.”

 

Regulations- Wheat, Cattle Issues

Bloomberg writer Alan Bjerga reported yesterday that, “Genetically modified wheat created by Monsanto Co. that wasn’t approved for use turned up on an 80-acre farm in Oregon last month, threatening the outlook for U.S. exports of the grain that are the world’s largest.

“A farmer attempting to kill wheat with Monsanto’s Roundup herbicide found several plants survived the weedkiller, the U.S. Department of Agriculture said today in a statement. Scientists found the wheat was a strain field-tested from 1998 to 2005 and deemed safe before St. Louis-based Monsanto, the world’s largest seedmaker, pulled Roundup Ready wheat from the regulatory approval process on concern that importers would avoid the crop.”

Mr. Bjerga noted that, “Government investigators are tracking the origin of the plants and consulting with trade partners to assure them the exposure is limited and poses no threat to human health, according to Michael Firko, acting deputy administrator at the USDA’s Animal and Plant Health Inspection Service [APHIS]. No evidence exists that the never-approved wheat has entered the commercial food or feed supply, he said. Monsanto said there’s reason to believe the incident is highly isolated and should not concern consumers or trading partners.”

“U.S. Wheat Associates and the National Association of Wheat Growers, two of the industry’s biggest trade groups, said in a joint statement they are confident in the government’s investigation,” the Bloomberg article said.

USDA also released an APHIS Factsheet on this issue yesterday.

Meanwhile, Julian Hattem reported yesterday at The Hill’s RegWatch Blog that, “Agriculture Secretary Tom Vilsack is praising an international animal disease organization’s determination that the United States poses just a negligible risk for mad cow disease.

“On Wednesday the World Organization for Animal Health (OIE) declared that the U.S. has the lowest risk of mad cow disease. That announcement supports the Department of Agriculture’s surveillance and protections efforts against the disease, technically known as bovine spongiform encephalopathy (BSE), Vilsack said in a statement.”

National Cattlemen’s Beef Association (NCBA) President-Elect Bob McCan indicated yesterday that, “This announcement is an important step forward in increasing export opportunities for U.S. cattle producers. This is a significant achievement for the United States, our beef producers and federal and state partners who have successfully collaborated on this issue.”

Keith Good