FarmPolicy

August 20, 2019

Ag Economy; Farm Bill; Regulations; Immigration; and, Africa Issues

Agricultural Economy

Purdue University agricultural economist Chris Hurt indicated yesterday at the farmdoc daily blog (“Where Will Beef Cows Expand?”) that, “It is getting to be a well repeated story. Beef cow numbers are at their lowest level since 1962. Cattle and feeder cattle prices are at record highs and feed prices have dropped. Beef consumers continue to eat beef and are rewarding the beef industry with very profitable returns. So when are beef producers going to expand the breeding herd and in what regions of the country will that occur?

“To answer those questions we first look at the areas of the country that had the biggest reductions in beef cow numbers due to drought, high feed prices, and financial losses. Since 2007, beef cow numbers dropped by 12 percent totaling 3.8 million head. The biggest declines were in the region with the most cows-the Southern Plains– which accounted for 1.6 million of the decline. Texas, the big beef cow state, had a reduction of 1.4 million head, an astonishing 36 percent of the nation’s total decline. That region’s expansion opportunities are very mixed due to lingering drought. About one-third of Texas remains in the three highest drought categories, D2-D4. Importantly, parts of cow-dense eastern Texas are now out of drought and the National Weather Service is forecasting some continued drought abatement by this fall for the region. In conclusion, lingering drought in the Southern Plains will tend to mean a slow expansion there.

“The second most important region for beef cows is the Southeast, which had an 822,000 head beef cow reduction since 2007, or 21 percent of the nation’s total. The biggest reductions were in Tennessee and Kentucky and accounted for 59 percent of the region’s decline. The Southeast is generally in good shape for pastures as the impacts of the 2012 drought have passed.”

Yesterday’s update added that, “Finished cattle prices have reached record highs over $160 in recent weeks. In 2013, finished cattle prices averaged about $126. At the start of 2014, forecasts were for prices to average in the mid-$130’s. Now, it appears the 2014 yearly average price will be close to $150. The mid-$150s are expected for the remained of the year, with prices dropping to the low-$150s for the first-half of next year.

“When will expansion begin and where will it occur? Clearly the profit incentive has returned more powerfully than expected. Pastures and ranges have returned in some regions and feed is more available. But drought is limiting forages in other significant areas. This means the national beef cow expansion will be slowed and that tight beef supplies will be with the country for several more years.”

Bloomberg writers Megan Durisin and Fareeha Ali reported today that, “Declining supplies of pigs that resulted from a deadly virus that spread across 30 states since the outbreak began last year have pushed up retail-bacon prices 10 percent in 2014 to $6.106 a pound in June, the highest since at least 1980, government data show. Wholesale pork-belly costs doubled, reaching a record $2.0353 a pound in April, according to the U.S. Department of Agriculture.”

Today’s article explained that, “Hog slaughter through Aug. 2 fell 4.8 percent from a year earlier after pig losses from the deadly porcine epidemic diarrhea virus. Hog and pork prices will continue to break records through the rest of the year in countries that have seen outbreaks of the virus, including the U.S. and Mexico, Rabobank International said in a report e-mailed July 25.”

Meanwhile, Anthony Greder and Emily Unglesbee reported yesterday at DTN (link requires subscription) that, “The condition of the nation’s corn crop slipped slightly to 73% good to excellent this past week from 75% the previous week, according to the latest USDA Crop Progress report. However, the development of the crop remains ahead of the average pace.”

A one-minute update yesterday from USDA radio, that included remarks from USDA meteorologist Brad Rippey, noted that, “The Midwest corn crop has slipped a couple of notches in condition due to small pockets of dry patches.”

The DTN article added that, “Eighty-five percent of U.S. soybeans had bloomed and 57% were setting pods, compared to 77% and 36% last year and 83% and 48% five-year averages.”

Yesterday’s USDA report indicated that 71% of the soybean crop was in good to excellent condition, unchanged from last week.

More broadly, Biman Mukherji and Vibhuti Agarwal reported yesterday at The Wall Street Journal Online that, “The monsoon rains have come late to northern India. In the past, that would have meant certain hardship. But this year, farmers here aren’t worried, thanks to new drought-resistant strains of rice that are helping sow prosperity across India’s grain belt.”

“Two decades ago, a bad monsoon could cut India’s annual economic growth rate in half. Today, however, new seeds and advances in drip irrigation and other agricultural technologies are helping to cushion farmers and the economy,” the article said.

And Bloomberg writer Yuriy Humber reported yesterday that, “WH Group Ltd. [which changed its name from Shuanghui International Holdings Ltd. in January], rose on its debut in Hong Kong after the world’s biggest pork producer raised HK$15.3 billion ($2 billion) in its second attempt at an initial public share sale…Asia now accounts for at least a quarter of global consumption of beef, pork and chicken, Bloomberg Intelligence analyst Thomas Jastrzab said in a report yesterday. China, home to about a fifth of the world’s population, accounted for more than half of global pork consumption last year as rising wages change dietary habits, Jastrzab said, citing U.S. Department of Agriculture data.”

In trade developments, Reuters writer Tom Polansek reported late last week that, “China on Friday ended a four-month ban on imports of live U.S. pigs after the U.S. Department of Agriculture established protocols to test animals for deadly swine diseases, the USDA said.”

Also, Reuters writers Tom Polansek and Karl Plume reported yesterday that, “Russia’s threatened ban on U.S. poultry imports, the latest move in a sanctions skirmish over Moscow’s support of rebels in Ukraine, has agriculture companies alert to the risks of a conflict that’s already roiled trading of crops ranging from soy, beef and fruit to California pistachios.”

Polansek and Plume noted that, “Sanderson Farms Inc, the third-largest poultry producer in the U.S., is among American agricultural companies preparing to respond if Russia carries out plans, reported in Russian media this week, to restrict imports of U.S. poultry.”

 

Farm Bill

Marcia Zarley Taylor reported yesterday at the DTN Minding Ag’s Business blog that, “Do you or your landowners need more coaching on your one-time 2014-2018 farm bill decisions? If farmers I interviewed last week in Indiana are typical, many growers spent the last decade wishing farm programs would go away. Now they are unaware that potential 2014 corn payments could rescue farm incomes from disaster this season–provided they do their homework.

“‘When congressional authors passed the Farm Bill last winter, they didn’t contemplate as dramatic a drop in commodity prices as we’ve experienced,’ Jerry Lehnertz, vice president of lending for AgriBank says, referring to the 30% crash in average cash corn in the last 90 days. ‘But that’s the exact situation where new programs like Agriculture Risk Coverage (ARC) come into play.’

“Activating the right income contingency plan is especially important for growers in western North Dakota now experiencing sub-$2.50 cash corn, Lehnertz says. He blames the problem on rail backlogs, particularly the lack of engines to put empty cars back on track. Some elevators tell DTN they have waited as long as five months for rail orders to be fulfilled, leaving elevator capacity filled to the brim even before wheat harvest began. What’s more, rail car rates than ran $300 to $400 a car a year ago have ballooned to $3,000 to $3,500 now, he says. Eventually, those excess costs get passed on in bids, eroding farm incomes in the process.”

Meanwhile, a news release yesterday from USDA indicated that, “[USDA] is seeking public input concerning a proposal to provide more information to the public about the amount of Supplemental Nutrition Assistance Program (SNAP) benefits used by participants at individual grocery stores and retailers. USDA’s goal is to provide as much transparency as possible on retailer data within the limits of the law. In doing so, USDA will consider input from a wide variety of stakeholders through a Request for Information (RFI) published today in the Federal Register. The RFI seeks public comment on several questions related to the transparency of SNAP retailer redemption information.”

A recent article from Amber Waves (“Participating in SNAP Is Associated With Less Time Spent Eating”), a publication from USDA’s Economic Research Service (ERS), stated that, “Many of the low-income households participating in USDA’s Supplemental Nutrition Assistance Program (SNAP) struggle with time constraints related to work and child care. The share of SNAP-participating households with earnings has risen over the last 15 years from 24 percent to 31 percent in fiscal 2012, and single-parent households made up 57 percent of all SNAP households with children in fiscal 2012. A recent study by ERS and University of Minnesota researchers found a significant relationship between SNAP participation and time spent preparing and eating meals [related graph].”

In other policy news, an update yesterday from the National Milk Producers Federation (NMPF) stated that, “The [NMPF] wants the Food and Drug Administration to fix a problem in the planned definition of added sugars on food labels, saying it appears to include dairy products used as food ingredients, even though the lactose – or ‘milk sugar’ – in those products occurs naturally.”

 

Regulations

DTN writer Todd Neeley reported yesterday that, “A group of 50 federal lawmakers have asked the EPA and USDA to reject the registration of Dow AgroSciences’ Enlist Duo, a herbicide designed to be used on corn genetically engineered to tolerate 2,4-D.”

Mr. Neeley noted that, “In a letter sent to USDA and EPA July 31, the lawmakers — led by Rep. Peter DeFazio, D-Ore., and Chellie Pingree, D-Maine — called on EPA to reject the registration. The product would contain the ‘same compound used in Agent Orange that sickened many Vietnam veterans,’ the lawmakers said in a news release posted on DeFazio’s web site.”

Christian Berthelsen reported yesterday at The Wall Street Journal Online that, “U.S. commodity regulators settled an oil-market-manipulation case stemming from the 2008 price run-up against three companies and two traders for $13 million, a fraction of what authorities alleged they made in profits from the strategy.

“The Commodity Futures Trading Commission said in an announcement, issued Tuesday night, that Parnon Energy Inc., Arcadia Petroleum Ltd., Arcadia Energy (Suisse) SA, as well as traders James T. Dyer and Nicholas J. Wildgoose, would pay the penalty and retain an independent consultant to monitor compliance, risk management and internal controls.”

 

Immigration

Nate Cohn noted yesterday at The New York Times Online that, “Republican hopes for attracting more Hispanic voters suffered another setback on Friday when the House passed a bill to effectively end President Obama’s program to defer deportations of undocumented children. Yet the vote is unlikely to deal a severe blow to the party’s chances in November’s midterm elections. Hispanic voters may be flexing their growing political muscles in presidential elections, but they have far less sway over the composition of the House or the Senate, particularly in 2014.”

 

Africa Issues

William Mauldin and Drew Hinshaw reported in today’s Wall Street Journal that, “U.S. and African leaders meeting in Washington on Monday kicked off a campaign to renew a program that gives exemptions on U.S. tariffs and quotas in an effort to boost trade and stimulate the economies of sub-Saharan African countries.

“Leaders in the U.S. and Africa are looking to spur economic ties at a time when trade between the two is sinking and China’s hunger for commodities is boosting Beijing’s influence on the continent.

“American officials and lawmakers say extending the 14-year-old African Growth and Opportunity Act, or Agoa, is crucial to preserving trade ties with fast-growing African countries, especially when U.S. trade negotiations at the World Trade Organization and with other major economies have stalled.”

The Journal writers explained that, “One way to boost trade with the U.S. further would be to loosen Agoa’s rules for sugar, tobacco and cotton.

“‘The issue of cotton, of course, remains a key concern of Africa.’ [Erastus Mwencha, deputy chairman of the 54-nation African Union] told [U.S. Trade Representative Mike Froman] and representatives of 40 African countries gathered on Monday in Washington, the first day of the U.S.-Africa summit.”

Vicki Needham reported yesterday at The Hill Online that, “Congressional trade leaders on Monday called for the quick renewal and strengthening of the African Growth and Opportunity Act (AGOA).

“The bipartisan leaders of the Senate Finance and Foreign Relations committees and House Ways and Means and Foreign Affairs committees said the trade agreement, which expires Sept. 30, 2015, is ‘critical to maintaining and promoting investment opportunities in the region.’”

And Laura Barron-Lopez reported yesterday at The Hill Online that, “Secretary of State John Kerry urged the U.S. and Africa to engage in ‘climate-smart agriculture’ to make fisheries and farms more resilient.

“‘The impacts of climate change are already being felt everywhere in the world: the Arctic, the Antarctic and everywhere in between,’ Kerry said on Monday at the U.S.-Africa Summit. ‘All you have to do is look at the conditions farmers are dealing with around the world: hotter temperatures, longer droughts, unpredictable rainfall patterns.’”

See also this ERS Amber Waves update from yesterday, “Productivity Impacts on Food Security in Sub-Saharan Africa.”

Keith Good

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