FarmPolicy

August 22, 2019

Ag Economy; Farm Bill; Biotech; CFTC; and Political Notes

Agricultural Economy

Tony C. Dreibus, Leslie Josephs and Julie Jargon reported in today’s Wall Street Journal that, “Surging prices for food staples from coffee to meat to vegetables are driving up the cost of groceries in the U.S., pinching consumers and companies that are still grappling with a sluggish economic recovery [related graph].

“Federal forecasters estimate retail food prices will rise as much as 3.5% this year, the biggest annual increase in three years, as drought in parts of the U.S. and other producing regions drives up prices for many agricultural goods. The Bureau of Labor Statistics will release its latest monthly report on consumer prices for food and other products Tuesday.”

Today’s article noted that, “In the U.S., much of the rise in the food cost comes from higher meat and dairy prices, due in part to tight cattle supplies after years of drought in states such as Texas and California and rising milk demand from fast-growing Asian countries. But prices also are higher for fruits, vegetables, sugar and beverages, according to government data. In futures markets, coffee prices have soared so far this year more than 70%, hogs are up 42% on disease concerns and cocoa has climbed 12% on rising demand, particularly from emerging markets.

Drought in Brazil, the world’s largest producer of coffee, sugar and oranges, has increased coffee prices, while dry weather in Southeast Asia has boosted prices for cooking oils such as palm oil.”

The Journal writers pointed out that, “Though rising, U.S. food inflation isn’t yet near some lofty recent levels. In 2008, food prices jumped 5.5%, the most in 18 years, and they climbed 3.7% in 2011. Inflation also could be tempered if U.S. farmers, as expected, plant large corn and soybean crops this spring and receive favorable weather during the summer. That would hold down feed prices for livestock and poultry, as well as ingredient costs for breakfast cereals and baked goods.”

And today’s Journal article added that, “In California, the biggest U.S. producer of agricultural products, about 95% of the state is suffering from drought conditions , according to data   from the U.S. Drought Monitor. This has led to water shortages that are hampering crop and livestock production.”

Emiko Terazono reported yesterday at The Financial Times Online that, “Your breakfast platter looks set to become more expensive. Drought, disease and rising demand have led to prices of eight key breakfast commodities rising on average almost 25 per cent this year, fuelling consumer fears of food inflation [related graph].

“‘Everything we have for breakfast is up,’ said Abdolreza Abbassian at the UN Food and Agriculture Organisation of the increases of coffee, orange juice, wheat, sugar, milk, butter, cocoa and pork. ‘This has all happened unexpectedly but shows how quickly things can change.’”

The FT article stated that, “Wheat prices have been hit by political uncertainties. After edging higher because of the extreme cold winter in the US, they have been pushed further by the crisis in Ukraine, a key grain producer.”

Reuters news reported yesterday that, “Ukraine, gripped by political turmoil for more than three months, could lose about 11 million tonnes of grain in the 2014 harvest due to a sharp decrease in sowing area caused by a shortage of funds, analyst UCAB said on Monday.

“Ukraine’s Crimea peninsula has been taken over by Russian forces after three months of protests culminated in the removal of Moscow-backed president Viktor Yanukovich.”

The article indicated that, “In a statement, UCAB said up to 20 percent of Ukrainian arable land might not be sown this year, mainly because of ‘the absence of any financing in connection with the difficult economic and political situation.’

“‘The situation has become more complicated due to atypical weather conditions, a lack of moisture in the topsoil and the need to carry out field works in an extremely short period of time,’ it said.”

“Analysts and traders said last week that optimal weather might help Ukraine to achieve a bumper harvest, but the financing problems remained,” the Reuters article said.

Tony C. Dreibus reported yesterday morning at The Wall Street Journal Online that, “Corn and wheat futures declined on speculation that grain shipments out of Ukraine will be unaffected after a referendum in the breakaway peninsula of Crimea to secede easily passed, as expected.”

And Grigori Gerenstein reported yesterday at The Wall Street Journal Online that, “Russia has exported 38.9% more grain so far this marketing year compared with the corresponding period the previous year, the agriculture ministry said Monday.”

Meanwhile, in a closer look at domestic variables, Bloomberg writers Jeff Wilson and Megan Durisin reported yesterday that, “Milk futures in Chicago jumped to an all-time high as surging U.S. dairy exports depleted supplies available for domestic consumers… A rise in global demand for U.S. dairy goods comes as a drought threatens output in California, the nation’s top producer. Milk prices jumped 21 percent this year, signaling higher costs for consumers and restaurants such as Domino’s Pizza Inc. and Potbelly Corp., while the cost of cheddar cheese also reached a record today.”

Joe Taschler reported late last week at the Milwaukee Journal Sentinel Online that, “The term ‘milk money’ has taken on a whole new meaning in recent weeks.

Milk prices are hovering near their highest point ever, driven by strong demand for U.S. dairy products overseas as well as worries about a drought ravaging large pieces of California’s dairy country.”

And a news release yesterday from Purdue University stated that, “Growing dairy profit margins on the heels of strong export demand are giving producers more opportunities to improve and repair farm equipment and facilities, a Purdue Extension dairy specialist says.

“While Mexico continues to be the largest buyer of dairy products exported from the U.S., growing demand in Southeast Asia for powdered milk and whey has helped boost on-farm profits. That, coupled with lower feed prices, has put dairy farmers into better financial positions than what they’ve faced in recent years.”

Chinese demand has also impacted production in France; Ruth Bender reported yesterday at The Wall Street Journal Online that, “Mayor Christian Troadec is trying a new formula to revive his sleepy town in central Brittany [France]: quenching Chinese thirst for baby milk.

“On a recent damp morning at exactly 08:08—a lucky number in Chinese culture—workers broke ground on a 37-acre tract the municipality sold to Synutra International Inc., one of China’s top 10 baby-formula makers, to build a milk plant.”

The article noted that, “The plant feeds two needs. China’s voracious demand for infant formula is surging as the middle class flourishes. But since a 2008 scandal, when Chinese-made formula tainted with the industrial chemical melamine killed six infants and sickened 300,000, parents have preferred to buy formula from well-known Western brands. Now, dairy companies in China, already the world’s largest importers of milk, are racing to win back consumers by tying up with producers abroad.

“At the same time, Chinese investment offers a lifeline to Brittany, a farmland on the western tip of Europe that has been hurt by the unwinding of European subsidies.”

Recall that a dairy processing plant in Nevada (U.S.) that is also making milk powder mostly for Chinese consumption, was featured on the front page of Sunday’s Los Angles Times- see this very short FarmPolicy.com video recap.

Meanwhile, in more specific news on the California drought, Ian James reported this week at The Desert Sun (Palm Springs, Calif.) that, “A red padlock atop a closed canal gate is keeping water from flowing to a 97-acre field, leaving scraggly remnants of alfalfa that will soon wither in the baking sun.

“This field is one of many across the Imperial Valley being left dry and brown as a result of the nation’s largest agricultural-to-urban water transfer. Landowners are being paid by the Imperial Irrigation District to fallow their farms, while increasing flows of water are diverted to cities in San Diego County and the Coachella Valley.”

The article explained that, “The reliance on fallowing to meet rising water demands is a reflection of larger tradeoffs as California copes with growing water scarcity constraints that transcend the current drought. The transfer of water away from the Imperial Valley is putting new pressures on the area’s farmers, many of whom rent fields from landowners and are finding themselves unable to compete with the high amounts paid for the fallowing of thousands of acres.

Rents for farmland have shot up. Tenant farmers complain that the situation is hurting their businesses. And some also say they worry that in the long run, it will be difficult to meet a provision of the water transfer deal that calls for fallowing to be phased out after 2017 and replaced with water-use efficiency improvements on farms.”

(Note that both The New York Times and Los Angeles Times highlighted water and farm production issues as front-page news yesterday).

More broadly with respect to crop production, Bloomberg writer Rudy Ruitenberg reported yesterday that, “Corn, wheat and rice yields will start to suffer from climate change in 2030, according to a study led by the U.K.’s University of Leeds based on climate models and research on crop productivity.

“‘Crop yields will be negatively affected by climate change much earlier than expected,’ Andy Challinor, a Leeds professor and lead author of the study, was cited as saying in a statement on the university’s website.”

 

Farm Bill- Policy Issues

AP writer Stephen Singer reported yesterday that, “Gov. Dannel P. Malloy struck back Monday against U.S. House Speaker John Boehner, saying it was reprehensible to accuse Connecticut and other states of cheating the federal food stamp program by approving nominal increases in home heating assistance.

“Boehner told reporters last week that state officials are circumventing the intent of Congress, which cut $800 million a year, or about 1 percent, in food stamp spending.”

The AP article noted that, “In a letter to the Ohio Republican, Malloy, a Democrat, said Congress intended to grant states the authority to provide heating assistance linked to food stamps.

“‘To characterize as cheating and fraud states’ implementation of this provision is disingenuous at best and shameful at worst,’ he told Boehner.”

Yesterday’s article added that, “Rep. Joe Courtney, D-Conn., said the governors are following the law as written. If Boehner is surprised, he did ‘not do his due diligence when voting on the bill,’ he said.

“‘It was something that people were actively discussing in Washington before the vote that the states could do what Connecticut did,’ Courtney said.”

The Washington Insider section of DTN reported yesterday (link requires subscription) that, “Rep. Jim McGovern D-Mass., an aggressive food stamp proponent, put his own spin on the situation. He said, ‘The cuts to SNAP in the farm bill demonstrate how out of touch members of Congress are from what’s going on in their districts. The governors obviously are trying to make up the difference here, trying to respond to this because they see a need, but the people down here in Washington are in another world, and they seem to have no appreciation of how difficult it is to be poor in this country.’

“Rep. Collin Peterson, D-Minn., and ranking member on the House Ag Committee, told the press that he had nothing to do with any underhandedness, of course, but that Republicans simply should pay more attention. ‘Why wouldn’t a governor take $6 million of federal money … and get $450 million back?’ he asked rhetorically. ‘Why wouldn’t you do that? I kept saying to my staff, how can CBO score this at $8 billion because it’s not going to be there,’ he noted.”

In other policy news, Dave Jamieson reported yesterday at the Huffington Post Online that, “It appears the Agriculture Department’s controversial plan to create faster line speeds in poultry processing plants has hit another snag. On Monday, 68 members of Congress — nearly all Democrats — signed a letter to Secretary Tom Vilsack asking that he scrap the proposal until the agency has addressed all the concerns raised by public health and labor groups.”

A news update yesterday from Rep. Rosa DeLauro noted that, “The proposed rule is largely based on the HACCP-Based Inspection Models Project (HIMP). The Government Accountability Office raised serious questions about whether HIMP data being used by FSIS supports USDA’s claims of improved food safety benefits in this rule, further calling the wisdom of this proposed rule into question.”

Kimberly Kindy reported yesterday at The Federal Eye Blog (Washington Post) that, “USDA officials said they have previously received six letters from members of Congress about the new inspection system since it was first proposed in early 2012. According to the agency, four letters were against the proposal – one with four signatures and three others with one signature. One letter was in favor of the proposal with 13 signatures while another was neutral with two signatures.”

And a separate news release yesterday on a different food safety issue from Rep. DeLauro indicated that, “Today, [Reps. DeLauro (D-CT) and Louise Slaughter (D-NY)] sent a letter to the U.S. Department of Agriculture’s (USDA) Food Safety and Inspection Service (FSIS) asking the agency to delay their proposed Salmonella Action Plan because it is inadequate to protect public health. The plan was crafted in response to an ongoing outbreak of antibiotic-resistant Salmonella Heidelberg which has sickened 481 people, with a hospitalization rate of approximately 40% — twice the normal average for outbreaks of Salmonella Heidelberg.”

Meanwhile, Reuters writer Sharon Begley reported earlier this week that, “If the news last month that the prevalence of obesity among American preschoolers had plunged 43 percent in a decade sounded too good to be true, that’s because it probably was, researchers say.”

The article explained that, “First Lady Michelle Obama and others seized on the finding as a sign that efforts to combat the national obesity epidemic were paying off.

“But as obesity specialists take a closer look at the data, some are questioning the 43 percent claim, suggesting that it may be a statistical fluke and pointing out that similar studies find no such decrease in obesity among preschoolers.

In fact, based on the researchers’ own data, the obesity rate may have even risen rather than declined.”

 

Biotech

Henry I. Miller, a fellow at Stanford University’s Hoover Institution, indicated in a column in today’s Wall Street Journal that, “In November, China suddenly announced that it would block corn shipments from the U.S. that contain Viptera, a genetically engineered trait that offers superior insect-resistance and the reduction of potentially harmful mycotoxins. Since then Beijing has rejected nearly a million tons of U.S. corn, throwing U.S. agriculture into disarray and imperiling future innovations.”

Dr. Miller stated that, “China’s action has nothing to do with safety. Its cryptic November announcement mentioned only that Viptera was not approved for import—yet earlier in 2013 China had imported nearly a million tons of corn that included the Viptera trait from the U.S. It also accepted corn from Argentina that included Viptera.

China bears no animus toward genetic engineering. Its farmers grow a larger number of genetically engineered plants—cotton, papaya, poplar, tomato and sweet pepper—than any other nation except the U.S.”

Dr. Miller also observed that, “Why did China block Viptera? Some speculate it is buying time to copy and steal the technology by ‘reverse engineering’ the genetic trait. Others think Beijing wants to back out of contracts it signed last year when the price of corn was higher. According to a Bloomberg story earlier this month, Peng Yufa, the chief scientist of China’s biotechnology safety committee, admitted that trade issues play a role in its approval process.

“Whatever the motivation, the effects have convulsed U.S. agriculture. The North American Export Grain Association and the National Grain and Feed Association, the two major grain-industry trade groups, have demanded that agribusiness giant Syngenta immediately stop selling Viptera and another genetically engineered corn, Duracade, which was approved in the U.S. last year.

“Their position makes no sense: Viptera has been grown since 2011 and it would take years to remove it from the supply chain. Worse, it would be a prescription for paralysis, effectively giving Beijing a veto on new plant technologies.”

A news release yesterday from Purdue University stated that, “Genetically modifying a key protein complex in plants could lead to improved crops for the production of cellulosic biofuels, a Purdue University study says.

Clint Chapple, distinguished professor of biochemistry, and fellow researchers generated a mutant Arabidopsis plant whose cell walls can be converted easily into fermentable sugars but does not display the stunted growth patterns of similar mutants. The finding could maintain yield while reducing the need for costly pretreatment processes that make cellulosic biofuels more inefficient to produce than corn ethanol.

“‘This study opens the door to a whole new set of technologies we never could have imagined,’ Chapple said. ‘This finding is not the silver bullet that will suddenly make the wide-scale production of cellulosic biofuels possible, but it is a very important step forward.’”

 

CFTC

Andrew Ackerman reported yesterday at The Wall Street Journal Online that, “Bart Chilton, an outspoken member on the Commodity Futures Trading Commission, said he would step down Friday.

“Mr. Chilton, a Democrat who has pushed for tougher Wall Street regulation in his nearly seven years at the CFTC, said last year he planned to leave. But he agreed to stay for several months while a successor was identified and nominated.

“Mr. Chilton’s departure will leave the top U.S. derivatives overseer with just two members–acting chairman Mark Wetjen, a Democrat, and Scott O’Malia, a Republican–making it difficult for the five-member commission to advance controversial policy until the Senate confirms new members.”

 

Political Notes

Cameron Joseph reported yesterday at The Hill’s Ballot Box Blog that, “Rep. Collin Peterson (D-Minn.) will run for reelection, he announced Monday morning.

“‘I still have a lot of work to do,’ Peterson said in a statement.”

Don Wick filed a report on yesterday’s Agriculture Today radio program (Red River Farm Network) that included remarks from Rep. Peterson.  To listen to the Red River Farm Network audio clip, just click here (MP3- 1:23).

Keith Good

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