June 16, 2019

Ag Economy; and Farm Bill Issues

Agricultural Economy

DTN Ag Policy Editor Chris Clayton reported yesterday (link requires subscription) that, “Pork producers who have hogs testing positive for porcine epidemic diarrhea virus now will be required to report the outbreak to USDA and develop a strategy for improving biosecurity measures on their farm.

“USDA issued a federal order on Thursday requiring pork producers to notify the department when their hog herds test positive for PEDV. Producers must notify their veterinarians or the state veterinarian’s office about positive cases.

“While mandating producers report the disease, Agriculture Secretary Tom Vilsack told pork producers at the World Pork Expo that the federal order does not require herd quarantines or restrictions on the movement of animals. Those issues had been major concerns by industry leaders when USDA announced in April that it would get more engaged in trying to stem the spread of PEDV.”

The DTN article added that, “Along with the federal order, USDA announced $26.2 million in funds to help the pork industry in various capacities, ranging from tightening biosecurity to helping with vaccine studies and conducting genomic work to better understand PEDV. Along with funds that USDA could receive in its 2015 budget, the department will be effectively spending roughly $30 million on PEDV measures.

“Of the USDA funds, the biggest slice, $11.1 million, will be used for cost-share programs with hog producers to improve their biosecurity measures on the farm.

“USDA will use $3.9 million for the Agricultural Research Service to help develop a vaccine for PEDV and the delta coronavirus. USDA will work with the Food and Drug Administration to get a vaccine in the field as quickly as possible once such a vaccine is ready.”

Mr. Clayton explained that, “U.S. border security measures allowed the disease in, and industry measures to curb the disease have not been able to control it. In fact, there are two variants of PEDV that have entered the country, so multiple strains continue to spread. Still, Vilsack disagreed with the suggestion that the country has failed to adequately deal with PEDV.

“‘I don’t think this is a failure,’ Vilsack said. ‘I think this is a challenge … It is something we will be confronting for quite awhile now that we are in a global economy. I think we’re going to learn a lot from this experience and this situation.’

“Pork industry leaders told reporters afterward that USDA’s funding announcements matched priorities that the National Pork Producers Council had laid out to the secretary and USDA officials. They noted the devil is in the details when it comes to the federal order. They also want to ensure any data sent to USDA remains confidential.”

Kelsey Gee reported yesterday at The Wall Street Journal Online that, “The U.S. Department of Agriculture on Thursday formalized a requirement that the pork industry report and track new incidents of fast-spreading viruses that reportedly have killed millions of young pigs.

“The USDA issued a federal order to complete measures, announced in April, aimed at combating the spread of porcine epidemic diarrhea virus and swine delta coronavirus, another disease that recently has emerged in the U.S.”

Donnelle Eller reported today at The Des Moines Register Online that, “Vilsack said it was important to take aggressive action. ‘This is too important an industry to this country,’ he said. ‘We need to protect producers, protect jobs and protect consumers’ who have seen pork prices rise 10 percent due to lower supplies.”

In a statement yesterday, Rep. Rosa DeLauro (D., Conn.) indicated that, “I applaud USDA for its critical, though long overdue actions. In the past year families have seen pork prices skyrocket and farmers have seen millions of pigs die. Yet no one can figure out the cause of this disease. The department in charge of protecting our nation’s food supply should not have taken a year to act. But I hope with resources finally being put in to monitoring PEDv, we will at long last be able to track the cause of this virus and stop it in its tracks.”

A press release yesterday from the National Pork Producers Council (NPPC) indicated that, “Since PEDV first was identified in the United States more than a year ago, NPPC, along with the National Pork Board, has been encouraging pork producers who have had outbreaks of the virus on their farms to voluntarily report to their state veterinarians.”

Meanwhile, Reuters writer Theopolis Waters reported yesterday that, “Hog losses on U.S. farms from a deadly virus have slowed, reaching about 8 million head currently after hitting 7 million around February, an economist with a leading pork industry group told Reuters.

“Rising temperatures heading into the summer may be a factor, Paragon Economics President and National Pork Producers Council consultant Steve Meyer said at World Pork Expo 2014, as the virus tends to thrive under cold, damp conditions.

There is still no official tally of the number of pig deaths from Porcine Epidemic Diarrhea virus (PEDv), which first appeared in the United States in April 2013 and has since swept through 30 states.”

Bloomberg writer Megan Durisin reported yesterday that, “The spreading virus [PEDv] sent retail pork-chops to an all-time high of $4.044 a pound in April, the latest data from the Bureau of Labor Statistics show, and the American Farm Bureau Federation has said that meat expenses are going to keep climbing. Costs are rising before the start of the seasonal peak in U.S. meat demand, as a shrinking cattle herd sent ground beef to a record, while whole chickens are near the highest ever.”

And Donnelle Eller reported yesterday at The Des Moines Register Online that, “A deadly disease [PEDv] that’s hitting the nation’s pork industry and whittling supplies could hurt Iowa towns where the animals are processed, says an expert at the World Pork Expo in Des Moines today.

“Processors in Oklahoma, North Carolina and other parts of the country are already cutting hours to adjust for reduced pork supplies — a problem that will likely grow through the summer, said Steve Meyer, president of Paragon Economics in Adel.”

Also yesterday, Reuters writer Isla Binnie reported that, “The United Nations food agency raised its outlook for world cereal production and stocks on Thursday as expectations that ample supply of most food commodities would continue dragged prices down for the second month in a row.

The Food and Agriculture Organisation’s (FAO) price index, which measures monthly price changes for a basket of cereals, oilseeds, dairy, meat and sugar, averaged 207.9 points in May.

“That was a fall of 2.5 points or 1.2 percent from April, when a sharp drop in dairy prices pulled the index down 3.5 points or 1.6 percent from the previous month.”

Neena Rai reported yesterday at The Real Time Economics Blog (Wall Street Journal) that, “Upbeat news for food shoppers: the cost of meals is likely to fall as improving supply prospects for a variety of food groups from cereals to dairy improve.

“World food prices fell for the second consecutive month in May, on the back of lower dairy, cereal and vegetable oil prices, according to latest data from the United Nations.”

With respect to weather related variables, Reuters news reported yesterday that, “The U.S. weather forecaster said there was an increased likelihood of an El Nino weather phenomenon striking during the Northern Hemisphere summer in its monthly outlook on Thursday.

“The Climate Prediction Center, an agency of the National Weather Service, said there was a 70 percent chance of El Nino, which can wreak havoc on global crops, during the summer and 80 percent during the fall and winter.”

A recent update from the U.S. Drought Monitor indicated that, “In the dry swath from South Dakota and Minnesota southward through Oklahoma, fairly widespread moderate to heavy rain fell on southeastern, central, and northern sections, Amounts generally topped 2 inches, with patches of 4 to 7 inch totals reported in southeast South Dakota and adjacent Minnesota, from east-central through northeastern Oklahoma and adjacent Kansas, and on the eastern tier of the Nebraska Peninsula. Spotty amounts over 2 inches were also reported in the Oklahoma Panhandle and southwestern Kansas, but otherwise, light precipitation at best fell from western Kansas and southeastern Colorado southeastward through roughly the southwestern half of Oklahoma, including most areas along the Red River.”

The update added that, “In contrast, light precipitation of late in central and most of southern Oklahoma, including less than half of normal for the last 30 days in central and south-central Oklahoma, has pushed 90-day moisture deficits into the 4 to 8 inch range, prompting a significant eastward expansion of D1 to D3 conditions, most notably right along the Red River.

Winter wheat continued to suffer in the region, and prospects for improvement look bleak. NASS reported 62% of the crop in Kansas and 78% in Oklahoma was in poor or very poor condition. Nationally, 44% of the crop in the primary growing areas are in poor or very poor condition. Both the topsoil and subsoil are substantially short of moisture in many areas across the central Plains. Deficient topsoil moisture covers 55% of Nebraska, 60% of Kansas, and 68% of Oklahoma. Insufficient subsoil moisture is even more widespread, covering 75%, 75%, and 84% of these states, respectively [related graph].”

Meanwhile, Bloomberg writer Marvin G. Perez reported yesterday that, “After a disease-spreading bug wreaked havoc on Florida citrus groves this year, growers like Maury Boyd are seeing a new threat from the weatherman that would mean ‘pure hell’ for orange-juice supplies.

“As many as six hurricanes are forecast to develop in the Atlantic from now until November, increasing the risk of losses to Florida’s 2015 harvest, after citrus greening disease made this year’s orange crop the smallest in 29 years. Florida is the world’s largest grower after Brazil and the target for more hurricanes than any other U.S. state over the past century.”

The Bloomberg article noted that, “Florida will harvest 110.3 million boxes of oranges in the season that ends Sept. 30, down 17 percent from a year earlier and the fewest since 1985, the U.S. Department of Agriculture said May 9. Each box weighs 90 pounds, or 41 kilograms.”

In other news, Ben Leubsdorf reported in today’s Wall Street Journal that, “More states want to recycle their food waste instead of dumping it into landfills, but they have run into a snag: The infrastructure needed to turn huge quantities of table scraps into fertilizer or electricity isn’t ready.”

Americans tossed out more than 36 million tons of food in 2012, but less than 5% got recycled, according to the U.S. Environmental Protection Agency. Much of it ended up rotting in landfills, releasing methane—a potent greenhouse gas—into the atmosphere. That worries officials concerned about climate change,” the Journal article explained.

In trade related developments, Reuters writers Ana Isabel Martinez, Linda Sieg and Krista Hughes reported yesterday that, “Some Pacific trading partners are aiming for a deal on a regional free trade zone as early as the next few months, sources close to the negotiations said, although others caution a pact is still a long way off and see the U.S. elections as a wild card.

“Trade ministers from the 12 Trans-Pacific Partnership (TPP) countries said after May meetings in Singapore the talks gained momentum and they would step up efforts over coming weeks [see also this overview on TPP from April].”

The article noted that, “A central element of U.S. President Barack Obama’s strategic shift towards Asia, the TPP would cut trade barriers and harmonize rules in a complex deal covering two-fifths of the world economy and a third of global trade.

“Some officials close to the talks told Reuters they worried about a closing window of opportunity to finalize talks with U.S. mid-term elections in November.

“A Mexican official, who was not authorized to speak publicly, said some were pushing to get an agreement in September at the latest.”


Farm Bill

A news release yesterday from the Senate Agriculture Committee stated that, “Senator Debbie Stabenow, Chairwoman of the U.S. Senate Committee on Agriculture, Nutrition and Forestry, will convene a Committee hearing on Thursday, June 12 at 10:00 a.m. in room 328A of the Russell Senate Office Building.The hearing, A National Priority: The Importance of Child Nutrition Programs to our Nation’s Health, Economy and National Security, will examine how child nutrition programs can help to address some of the biggest challenges facing the nation including national security, economic vitality and the health of children and families.”

Also, a news release yesterday from Sen. Heidi Heitkamp (D., N.D.) stated that, “U.S. Senators [Heitkamp] and John Thune (R-SD) today led a bipartisan effort to support farmers who are prevented from planting crops due to adverse weather, which can seriously impact a family farm’s bottom line. The senators requested U.S. Department of Agriculture (USDA) Secretary Tom Vilsack appropriately take these losses into account when implementing a new safety net program created by the Farm Bill by including approved prevented planted acres in each farmer’s and county’s current year revenue calculation.

“As USDA implements the 2014 Farm Bill, the senators want to make sure farmers receive appropriate and accurate support, as intended by Congress, from the Agriculture Risk Coverage safety net program by using the correct current year revenue calculation. In their letter, the senators point out that such action by USDA would be consistent with crop insurance calculations and the 2008 Farm Bill’s Average Crop Revenue Election Program, which used prevented planting acres in the calculation to determine its safety-net payment triggers.”

University of Illinois agricultural economist Nick Paulson indicated yesterday at the farmdoc daily blog (“2014 Farm Bill: Historical Likelihood of County ARC and SCO Payments for Soybeans in Illinois”) that, “The daily posts on May 8th and May 15th analyzed the County Ag Risk Coverage (ARC) and Supplemental Coverage Option (SCO) programs created in the 2014 Farm Bill.  County ARC is one of the optional commodity programs available to producers of eligible program crops, while SCO is an optional insurance program which supplements the producer’s underlying individual plan of insurance.  Both programs have ‘shallow loss’ coverage designs: payments are triggered when actual revenues or yields fall below a specific guarantee, and are capped at a percentage of the value of the guarantee (details on the new commodity program options can be found here; details on SCO can be found here and here; all posts in our continuing series on the 2014 Farm Bill can be accessed here). Today’s post extends the historical analysis of County ARC and SCO to soybeans in Illinois.  Since the decision to use the County ARC (or Individual ARC) program limits the producer’s eligibility to use SCO, analysis comparing these programs should be useful in making program decisions.”

Keith Good

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