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Ag Economy (Hearing- PEDv); Trade; Farm Bill; Regs; and, Biofuels

Agricultural Economy: House Ag Livestock Subcommittee Hearing- PEDv, Drought

DTN Ag Policy Editor Chris Clayton reported yesterday that, “Animal-health experts at USDA don’t know how they are going to implement a plan to require pork producers to report cases of porcine epidemic diarrhea virus or track movements of animals in herds with the infection.

“Two weeks ago, the department announced new plans to tighten biosecurity and reduce the spread of PED that was first reported in the country nearly a year ago. Since that time, the pork industry has raised a lot of questions about just how USDA intends to implement such a plan. USDA’s Animal and Plant Health Inspection Service doesn’t yet have a strategy to track the movement of hogs from infected herds without putting an undue burden on pork producers nationally.”

The DTN article noted that, “Howard Hill, president of the National Pork Producers Council, testified Wednesday before a House Agriculture Subcommittee that USDA projects PED has killed roughly 2 million pigs. Private economists have put the number closer to 7 million head lost, based on estimates that roughly 2.6 million sows have been infected and each sow may have lost an average of nearly three pigs.

The losses effectively translate into lower overall hog production. Fewer pigs mean lower slaughter numbers later on. The industry could increase market weights, but that won’t make up the difference, Hill said in his testimony. Consumer prices for pork could rise 10% to 12% as a result.”

Yesterday’s article explained that, “A spokeswoman for USDA’s Animal and Plant Health Inspection Service told DTN the agency has no new details about the reporting and monitoring announcement made by the department on April 18. In an email, she stated, ‘USDA has been working with our partners on PEDv since the disease was first found last year. We’ve met with them several times and know what they are looking for to address PEDv. We discussed the monitoring and control program with them before announcing it publicly. We are currently taking their input into consideration as we draft the Federal Order and program requirements.’

“Rep. Mike McIntyre, D-N.C., asked industry representatives at the hearing Wednesday about USDA’s monitoring regulation. Shane Miller, a senior vice president for Tyson Foods, said USDA needs to ensure its program is ‘practical at the farm level’ and does not disrupt commerce.”

Ken Anderson reported yesterday at Brownfield that, “Ironically, 2014 could end up being one of the best years ever financially for many pork producers, thanks to record hog prices. But testifying Wednesday before a House Agriculture livestock subcommittee, National Pork Producers Council president Howard Hill said the industry isn’t celebrating.

“‘Even though a reduced supply may increase pork prices for farmers, I know first-hand that pork producers are not happy about this disease,’ Hill said. ‘Producers talk about their PEDv experiences using terms such as ‘devastating’, ‘heartbreaking’ and ‘gut-wrenching’ when describing the disease’s impact on themselves, their family and their employees.’

Hill said pork producers are also concerned about the impact of PEDv on their customers and others who depend on the pork industry.”

In prepared testimony at yesterday’s House Ag Subcommittee hearing, USDA Chief Economist Joe Glauber indicated that, “On April 15, the U.S. Bureau of Labor Statistics (BLS) reported that the Consumer Price Index (CPI) for beef and veal prices in March was 7.4 percent higher than year ago levels. The CPI for pork was also up 5.3 percent above year ago levels while chicken prices were up 3.6 percent. While hog and cattle prices have been at or near record levels so far in 2014, these prices reflect tight supply due in part to tight margins the last several years, but also drought in the southern plains and California and the outbreak of PEDv among swine herds, which will continue to influence the ability of producers to benefit from and respond to these high prices.”

Dr. Glauber added that, “With falling grain and oilseed prices following record global crops of grains and soybeans, the livestock sector would normally be poised to take advantage of strong livestock prices and moderating feed costs in 2014. However, the ability of the beef and pork sectors to expand production will be limited by non-feed cost factors. We expect that red meat production will remain constrained in the near term and is forecast in 2014 to be the lowest since 2010 and 1.8 percent below the 2008 record (figure 1). Prospects for the beef sector, in the near term, are limited by the decline in cattle inventory, the biological lags inherent in the production system and persistent dryness in the southern plains, now in its fourth consecutive year of drought. Likewise, in the hog sector, positive producer returns and lower feed costs have set the stage for strong expansion. However, the spread of Porcine Epidemic Diarrhea virus (PEDv) through the U.S. herd is expected to sharply limit the supply of hogs compared to earlier expectations.”

Dr. Glauber also pointed out that, “USDA’s January Cattle report estimated that the number of cattle and calves on January 1, 2014 fell about 2 percent to 87.7 million head, the lowest cattle and calf inventory since 1951 (figure 5) … Both the U.S. cattle inventory and the beef cow herd are expected to continue to shrink in 2014.”

In response to a question at yesterday’s Subcommittee hearing from Michelle Lujan Grisham (D., N.M.), Dr. Glauber pointed out (audio clip- one minute) that USDA estimates that approximately 45 percent of the domestic cattle inventory was within an area experiencing drought.

He also noted: “What happens is, of course, as you contract, you have problems with [the] processing industry…”

Also with respect to cattle and hog prices, USDA’s National Agricultural Statistics Service (NASS) indicated yesterday in its monthly Agricultural Prices report that, “The April hog price, at $91.60 per cwt, is up $9.70 from March and $29.80 higher than a year ago [related graph]…and…The April beef cattle price of $149 per cwt increased $1.00 from last month and is $24.00 higher than April 2013 [related graph].”

Yesterday’s NASS update also stated that, “The April all milk price of $25.50 per cwt is up 30 cents from last month and $6.00 above April 2013 [related graph];” while, “The corn price, at $4.73 per bushel, is up 22 cents from last month but $2.24 below April 2013 [related graph].”

Meanwhile, a news release yesterday from the National Farmers Union (NFU) indicated that, “Today [NFU] President Roger Johnson testified before a U.S. House Agriculture Subcommittee on Livestock, Rural Development and Credit hearing to review the state of the livestock industry.

“‘Farmers and ranchers are proud of what they produce and studies have shown that 95 percent of consumers want Country-of-Origin Labeling (COOL),’ Johnson said. ‘The World Trade Organization said the law is compliant. COOL has won twice in federal court. It is unfortunate to hear so many members of the subcommittee be more concerned about the fortunes of multinational packing and food companies rather than on-the-ground family farmers and ranchers. We know that consumer trust is of the utmost importance, and accurate COOL labels must be preserved.’”

 

Agricultural Economy- 2014 Crop

University of Illinois agricultural economists Scott Irwin and Darrel Good indicated yesterday at the farmdoc daily blog (“Prospects for Timely Planting of the 2014 Corn Crop”) that, “It is generally acknowledged that the U.S. average corn yield is largely determined by weather conditions during the reproductive and grain filling stages during the summer months. Still, weather conditions during other times of the year, as well as the timeliness of planting, are known to influence the yield outcome. In the case of the timeliness of planting, it has been demonstrated that U.S. average yields are negatively correlated to the portion of the acreage planted after the optimum date for maximum yield potential regardless of subsequent weather. With the slow start to planting the 2014 corn crop, there is some concern that a larger than average percent of the crop may be planted after the optimum date and therefore reduce the average yield potential.

Here, we examine the prospects for timely planting of the 2014 corn crop in Illinois. That analysis is extended to the U.S. based on the assumption that planting conditions experienced in Illinois can be applied to the rest of the major corn producing states.”

After additional analysis, yesterday’s farmdoc update noted that, “The late start to the 2014 corn planting season and the relatively slow pace of planting progress to date increases the odds that more than the average percentage of the acreage will be planted late. For example, we calculate there is about a 60 percent chance that more than the average percentage of the U.S. corn acreage will be planted late (after May 20) if the average planting rate per suitable field day is near the historical average of 5 percent. A higher than average percentage of late-planted acreage would likely reduce expectations for the U.S. average corn yield. Extreme planting delays might also reduce expectations for the magnitude of acreage planted to corn. Based on current conditions and near term weather forecasts, planting progress in northern growing areas appears most likely to be delayed. The USDA’s weekly Crop Progress reports released on Monday afternoon’s will continue to provide clues about the potential magnitude of late plantings.”

Meanwhile, Isabella Steger reported yesterday at The Wall Street Journal Online that, “Asian economies look better equipped to deal with a return of El Niño this year than in the past, easing worries of a repeat of past havoc wreaked on food prices and supplies.

“Meteorologists predict an increasing likelihood of El Niño developing this year. Australia’s Bureau of Meteorology, for example, said there is a 70% chance that the weather system will develop in southern hemisphere’s winter.

“Asia’s stocks of staples such as wheat, and more importantly rice, are unusually high, thanks to big harvests last year and the unleashing of Thailand’s huge rice stockpile onto the market. That should help cushion some of the El Niño impact [related graph].”

 

Trade

Shawn Donnan noted yesterday at The Financial Times Online that, “When US President Barack Obama set off for a long-delayed tour of Asia last week, he had one overwhelming economic priority. If nothing else, he needed to notch up progress and restore faith, both in Asia and at home, in the Trans-Pacific Partnership, the mooted 12-country Pacific Rim pact at the top of his trade agenda.

“But Mr Obama returned home this week with anything but a clear win. That ought to be of concern to anyone in business hoping for a new round of global trade liberalisation, or anyone from Geneva to Brussels to Beijing engaged in trade negotiations with Washington.”

The FT article added that, “The White House’s latest plan has been to close the deal on the TPP in order to convince reluctant Democrats in Congress to grant him the ‘fast-track’ authority that allows US presidents and their interlocutors to conclude trade deals without fear they will be renegotiated on Capitol Hill.

“Crucial to that plan is striking a bilateral deal with Japan over agricultural and automotive market access, the absence of which has caused the broader TPP negotiations to stall.

“Those bilateral discussions dominated Mr Obama’s visit to Japan last week. The end result, according to the leaders’ joint statement, was the identifying of a ‘path forward’, language that left observers scratching their heads.”

Speaking on yesterday’s AgriTalk radio program with Mike Adams, Sen. Mike Johanns (R., Neb.) noted that, “I support trade promotion authority, and I definitely support trade agreements. The Trans-Pacific Partnership, the concern I have is we haven’t seen the detail yet. Generally my attitude is I want to be supportive of trade because it’s awfully good for agriculture. We need open markets to be able to sell the commodities that we raise not only in Nebraska, but across the country.

“But I worry a little bit about the Trans-Pacific Partnership because if the President gives away too much, then you have a trade agreement that isn’t in the best interests of the country. But I always approach trade agreements with a desire to be a yes vote on them, so we’re just going to have to see what gets negotiated, we’ll see what the President releases, and then I’ll make a judgment as to whether it’s a good trade agreement worthy of my support or not. And we just won’t know those details for a while.”

Agriculture Secretary Tom Vilsack, who was also on yesterday’s AgriTalk program, pointed out that, “This is a tough negotiation, and we are holding strong. The President brought this issue up, ag issues up specifically with the prime minister. He was very clear that this is about market access, from our perspective. I think some progress was made. There is still more progress that will need to be made before we’re at a place where we’ve got an agreement, but I think at least we have a pathway to making that progress. This is a tough negotiation, no question about it, Mike.”

And Rep. Adrian Smith (R., Neb.) pointed out yesterday on the House floor that, “If the U.S. fails to lead, our exports will be placed at a competitive disadvantage to those from countries moving forward with aggressive trade agendas. To enhance U.S. leverage in the marketplace, we need to pass the Bipartisan Trade Priorities Act. By renewing TPA, we would demonstrate seriousness about formulating enforceable, science-based rules, and empower the rest of the world to follow suit.”

Beyond TPP and “fast track,” James Politi reported in yesterday’s Financial Times that, “The president of Europe’s biggest business lobby group has issued an unusually blunt warning to the US administration that trade talks with Brussels are in danger of stalling unless Washington shows much more ‘commitment.’

“‘The message we are bringing is that we need to see real progress, real contents. The risk is that in Europe the negative opinion will prevail,’ Emma Marcegaglia, president of BusinessEurope and the new chairman of Eni, Italy’s state-owned oil company, told the Financial Times on a visit to Washington. ‘What we see is everyone sticking to their positions – the Americans more than the Europeans,’ she added.”

Recall that Michael Froman, the United States Trade Representative, will be testifying this morning at the Senate Finance Committee.

 

Farm Bill

House Ag Committee Chairman Frank Lucas (R., Okla.) was a guest on yesterday’s AgriTalk radio program with Mike Adams, where in part, the conversation focused on the recently passed Farm Bill.

In part, Chairman Lucas noted that, “My chief regret, Mike, my chief regret is I still, to this day, believe we should have replaced the ’38 and 1949 laws with the 2014 Agriculture Act and made it permanent law. I do believe that in the coming years it’s going to be harder, not easier, to pass farm bills and that we needed something on the books in the way of permanent law we could live with just in case we can’t get it done next time. But that’s my chief regret—should have been permanent law, but not many other people in this town agreed with that, and ultimately the majority prevails, so we have another five year farm bill.”

On the issue of crop insurance, Chairman Lucas pointed out that, “I think it’s a struggle for…every time we do an annual appropriation bill, it’ll be a struggle. Every time there’s any piece of ag related legislation, there’ll be people who try and tie onto that. And it’s not so much a push from folks who are trying to fix the entire national debt, who are trying to change how the federal government engages in these safety nets across the national economy; it’s the crowd that’s been after us as ag people from day one. They attacked us over the old programs, they attacked us for three farm bills through the direct payments, and now the only real cash sum left is crop insurance, and they’re going to attack on that.”

And with respect to SNAP reforms, Chairman Lucas indicated that, “I know that the governors in certain states want to continue to keep that flow of Treasury money going into their states. Some in my home district might use the phrase ‘gaming the system’ or ‘mining the Treasury.’ But what the governors have done in the way they’ve handled this is they have gotten the Speaker of the United States House’s attention engaged, Mr. Boehner, they’ve got my colleagues in the Republican Conference’s attention and engaged. This just means that there will now be amendments on various appropriation bills to close more loopholes, to go farther than the farm bill went, even.

“Will the Senate touch any of those in the present makeup? Probably not. Would President Obama sign any legislation that further reforms food stamps? Probably not. But Mike, in nine months there’s a distinct possibility we’ll have a different majority in the United States Senate, and in 33 months we’ll have a different President. The Constitution will limit President Obama. So what the governors have done, almost in a gleeful way, is started the next round of struggles on reform. And whether it’s this summer or 33 months from now, they’ll get more reform than they planned on as a result of the way they’ve handled this.”

 

Regulations

Jacob Bunge reported yesterday at The Wall Street Journal Online that, “U.S. environmental authorities signaled they may approve a new herbicide developed by Dow Chemical Co., potentially broadening farmers’ weaponry against super weeds that have exacted a toll on crops.

The Environmental Protection Agency proposed Wednesday to register Dow’s Enlist Duo herbicide, which includes a new formulation of the chemical 2,4-D, a tougher product than some existing sprays that has also raised new environmental and health concerns.”

A news release yesterday from Rep. Kevin Cramer (R., N.D.) stated that, “A package of four legislative reforms to the Endangered Species Act (ESA), each cosponsored by [Rep. Cramer], advanced in the House Committee on Natural Resources today. The legislation aims to improve the ESA, which has not been updated since 1988 and has a species recovery rate of one percent.”

 

Biofuels

Christopher Doering reported yesterday at The Des Moines Register Online that, “Despite falling short of cellulosic production goals in recent years, producers of ethanol made from crop waste, wood, grasses and other plants said Tuesday they can produce more of the fuel in 2014 than the Environmental Protection Agency proposed last November.

“Biofuel companies scheduled to start making cellulosic at four plants in 2014 said the industry is finally poised to ramp up production. But they warned that momentum could be slowed if the EPA chooses to scale back the Renewable Fuel Standard, a 2007 law that mandates a growing amount of ethanol to be blended into the country’s gasoline supply through 2022.”

Keith Good