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Policy Issues; Cuba; Agricultural Economy; and, Regulations

Policy Issues

DTN Ag Policy Editor Chris Clayton reported yesterday that, “Congress wants USDA to operate like a business, but Agriculture Secretary Tom Vilsack is complaining that Congress is willing to spend $1.5 million on outside studies to duplicate work his department has already finished.

“Vilsack, in a phone interview with DTN on Thursday, expressed his frustration with some of the policy riders in the $1.1 trillion funding bill Congress approved. The policy restrictions ranged from blocking the secretary from creating a new beef checkoff to preventing the Farm Service Agency from eliminating its smallest offices nationally.

“‘I would say that it’s somewhat puzzling when Congress says ‘operate USDA like a business’ and then doesn’t give you the tools and flexibility to do so,’ the secretary said.”

The DTN update indicated that, “Closing FSA offices is politically challenging anytime, regardless of whether anyone works there or not. The budget agreement puts a ‘temporary moratorium’ on closing FSA offices or relocating employees until a comprehensive assessment of FSA workload is completed by USDA. Congress directed USDA spend $900,000 to bring in an outside group to study local office workloads and staffing after USDA already has conducted its own assessment.

“‘Rather than having basic faith and confidence in the study, Congress is now saying $900,000 is going to go towards this review,’ Vilsack said.

“FSA has 31 offices that have no full-time staff. Dozens more have single employees while other offices have heavy workloads but are short on staff. That translates into a lower level of service, the secretary said. ‘It’s not that we want to eliminate service,’ he said. ‘We want to improve service.’”

Philip Brasher reported yesterday at Agri-Pulse Online that, “The cost of a livestock disaster program has soared to more than $4 billion this year – far beyond what Congress expected – even as auditors are finding that earlier payments under the program were rife with errors.

“The payments are being made under the Agriculture Department’s Livestock Forage Program, which was created under the 2008 farm bill, allowed by Congress to lapse after 2011, and then reinstated under the 2014 Farm Bill.

“A new report by the USDA’s inspector general suggests the department was struggling to administer the program properly even before it was revived by the farm bill in February and the department had to rush to process applications for payments going back to 2012 and 2013.”

Meanwhile, Victoria Guida reported yesterday at Politico’s Morning Trade that, “The Commerce Department announced late on Friday that it has finalized agreements with the Mexican government and sugar exporters to suspend antidumping and countervailing duty investigations sugar imports.

“The agreements immediately suspend both the antidumping and countervailing duty investigations, allow Mexican sugar to enter the U.S. market free of those duties, and create mechanisms to ensure that the sugar imports don’t injure the U.S. sugar industry while meeting consumption needs.”

The Politico update noted that, “The finalized agreements incorporate several changes from the draft suspension agreements that Commerce initialed Oct. 27. The changes, which include a revised definition of refined sugar and adjustments to the reference price, reflect the submissions of interested parties in response to the department’s request for public comment.

“The countervailing duty agreement aims to ensure that there won’t be an oversupply of Mexican sugar that causes prices to drop, threatening the U.S. industry and farmers, the Commerce Department said. The agreements will also prevent imports from being concentrated during certain times of the year, limit the amount of refined sugar that may enter the U.S. market, and establish minimum price mechanisms to guard against the undercutting or suppression of U.S. prices.”

With respect to nutrition issues, Jane Brody stated yesterday at the Well blog (New York Times) that, “Many parents undoubtedly think they are doing the best for their children by having them bring lunch from home instead of eating the lunches served in school. But recent studies clearly prove them wrong.

“Home-packed lunches, the research showed, are likely to be considerably less nourishing than the meals offered in schools that abide by current nutrition guidelines for the National School Lunch Program.”

More broadly, Carl Hulse reported in today’s New York Times that, “As he prepares to guide Republicans out of the wilderness of the Senate minority, Senator Mitch McConnell, the incoming majority leader, knows his real problem is not corralling mavericks in his party like Senator Ted Cruz. It is persuading other Senate Republicans conditioned to voting no that it is time to vote yes.

“‘One of my challenges is to try to convince some of my members that passing an appropriations bill is a good thing, not a bad thing,’ Mr. McConnell said during an interview in which he looked ahead to assuming command of the Senate on Jan. 6. Mr. McConnell, who was instrumental in holding Republicans together against President Obama and Democratic initiatives, acknowledges that changing the mind-set of opposition he helped instill in his colleagues will be crucial to advancing legislation that will attract Democratic support and force Mr. Obama into difficult choices over whether to sign measures pushed by his adversaries. And that is why his focus will be lawmakers he thinks he can meld into a governing coalition.”

Today’s article noted that, “‘There are two kinds of people in politics,’ Mr. McConnell said after the recent blowup when Mr. Cruz, the fiery Texan, and Senator Mike Lee of Utah, another firebrand, forced the Senate into a year-end session that handed Democrats more time to confirm dozens of presidential nominees on their way out the door. ‘Those who want to make a point and those who want to make a difference.

“‘All of us from time to time make a point,’ Mr. McConnell said. ‘But it is time now to make a difference.’”

 

Cuba

Reuters news reported yesterday that, “Senate Republican leader Mitch McConnell said on Monday he opposed President Barack Obama’s move to normalize relations with Cuba, and spoke of steps lawmakers could take to try to rein in the new policy.”

Michael R. Crittenden reported yesterday at the Washington Wire blog (Wall Street Journal) that, “Sen. Jerry Moran (R., Kan.) on Monday said he backed the Obama administration’s push to normalize relations with Cuba, an endorsement that could signal more support from lawmakers hailing from farm states.

“Mr. Moran in a written statement said Cuba is a ‘natural market for U.S. agricultural commodities, including Kansas wheat,’ particularly because the country imports much of its food. Normalizing relations and opening up trade with Havana would be good for both U.S. farmers and for Cubans living under the nation’s long-time communist regime, he said.

“‘A change in our nation’s approach that can open Cuba up economically and politically through the exchange of commodities and ideas is necessary,’ Mr. Moran said.”

The update noted that, “The reaction to President Barack Obama’s reversal of five decades of a Cold War footing with Cuba has been mixed on Capitol Hill, with those backing or criticizing the move not hewing to traditional party divisions. Supporters such as Mr. Moran and Sen. Rand Paul (R., Ky.) have said economic and cultural restrictions against Cuba haven’t worked and a new approach is needed. But vocal critics such as Sen. Marco Rubio (R., Fla.) have said normalizing relations would reward a repressive regime and fail to encourage democratic change.”

While groups such as the U.S. Chamber of Commerce and American Farm Bureau Federation have backed the Cuba changes, opposition from lawmakers such as Mr. Rubio and Sen. Lindsey Graham (R., S.C.) could complicate White House efforts. Much of the U.S. government’s embargo of Cuba is codified into law, requiring lawmakers to act. Mr. Graham, appearing on CBS over the weekend, said he would oppose any effort to reestablish diplomatic ties with Cuba,” yesterday’s update said.

 

Agricultural Economy

The U.S. Department of Agriculture’s Economic Research Service (ERS) indicated in a report yesterday (“America’s Diverse Family Farms, 2014 Edition”) that, “Family farms of different types together account for 97 percent of farms and 85 percent of production.”

The update also noted that, “Federal crop insurance has grown in recent decades: the amount of land insured nearly tripled from 102 million acres in 1989 to 296 million acres in 2013, and indemnities exceeded Government payments to farms for the first time in 2011.”

Meanwhile, Julie Harker reported yesterday at Brownfield that, “The director of the University of Missouri’s Food and Agricultural Policy Institute (FAPRI) says it’s been an interesting year – with record corn and soybean crops that have caused major changes in agricultural markets, ‘Prices that were ready well off of the drought level peaks of 2012 have now come down to almost half of that level in the case of corn. That’s had big effects not just on crop producers but, of course, for the livestock industry as well – reducing their costs of production, making the production of beef, pork, chicken and milk more profitable.”

“And, Pat Westhoff tells Brownfield that’s not all, ‘Throw in the fact that we’ve had some disease problems, we’ve had strong demands for livestock products. We’ve gone from a world where the returns to crop producers were fantastic and for livestock producers now it’s just the reverse.’

“He says they were surprised by how high cattle prices peaked, ‘We’ll see if this is a start of a new trend or whether or not it’s a short-term correction.’”

Bloomberg writers Anatoly Medetsky and Olga Tanas reported yesterday that, “Russia, the world’s fourth-largest wheat exporter, plans to introduce export duties on cereals as it tries to rein in domestic prices that leapt amid the rout in the country’s currency.

“The government will draw up proposals for the duties in the next 24 hours, Deputy Prime Minister Arkady Dvorkovich said at a meeting with Prime Minister Dmitry Medvedev outside Moscow today. Russia already has shipped out about 21 million metric tons of grains since the 2014-2015 season started July 1, with the country’s export potential seen at 28 million tons, Dvorkovich said.

Russia needs to take measures to restrict grain exports in order to stem increases in domestic prices, Valentina Matviyenko, speaker of the parliament’s upper chamber, the Federation Council, said today, RIA reported. Exports of above 28 million tons may limit domestic supplies, Dvorkovich said. Restrictions should be temporary and flexible, Medvedev said.”

Ilan Brat reported in today’s Wall Street Journal that, “Wheat extended losses for a second consecutive session Monday after turning up early in the day amid reports that Russia could impose a duty on wheat exports to tame high prices. Concern about a Russian supply squeeze has driven wheat futures higher in recent weeks, and early Monday a top Russian official said the government would consider imposing a duty on wheat exports to help put a lid on domestic prices.

“Early in the session, some investors had been betting that U.S. wheat would fill any shortfall on the world market from Russian exports, which drove wheat prices higher, said Rich Nelson, director of research at commodities advisory firm Allendale Inc. in McHenry, Ill. But it is unlikely the U.S. would be able to cover that gap, he added.

The U.S. government forecasts ample world supplies next year, which could damp prices. Analysts said the price rise spurred selling for traders seeking to take advantage of higher prices before Russia makes an announcement detailing any wheat-export duty.”

Reuters writer Tom Polansek reported yesterday that, “U.S. corn futures on Monday touched a fresh five-month high on firm export demand, while wheat slumped on profit-taking and slow sales to foreign buyers.”

The article noted that, “China, the world’s fastest-growing corn market, officially approved imports of U.S.-grown genetically modified Agrisure Viptera corn, seed maker Syngenta AG said, ending uncertainty after a five-year review.

“Approval of the strain, known as MIR 162, ‘is encouraging but will likely not change China’s demand for corn,’ said Kayla Burkhart, broker for CHS SunPrairie.

“‘It just makes things less of a headache from an export perspective for us,’ she said.”

Politico’s Morning Trade indicated yesterday that, “U.S. farm groups are cautiously optimistic about the future for biotech crop sales in China, their largest overall export market, after Beijing and Washington reached an agreement that could help to resolve differences in both countries’ regulatory approval processes, according to Pro Trade’s Doug Palmer.

Tom Sleight, president of the U.S. Grains Council, said he was ‘very encouraged’ by the new U.S.-China Strategic Agricultural Innovation Dialogue announced last week. He also praised news that China is on the verge of approving a biotech corn variety known as MIR 162, which is widely planted in the United States, as well as two biotech soybean varieties produced by DuPont Pioneer and Bayer CropScience.

“‘We say, ‘hurray,’ but we say ‘hurray’ quietly, because while it’s important, it’s only one step,’ Sleight said. ‘The bigger thing we’re focused on is the whole process: the biotech approval process and biotech acceptance in China.’”

USDA’s Economic Research Service noted yesterday at its Charts of Note webpage that, “The large 2014/15 (September/August) U.S. soybean crop—18 percent above the previous record—has led to a record pace for U.S. soybean export sales commitments, including sales to China, the largest U.S. market for soybeans. The 2014/15 U.S. soybean crop is estimated at 107.7 million tons and total marketing year exports are forecast at a record 47.9 million tons. Cumulative export shipments have accelerated this fall, with record U.S. export inspections of soybeans in October and again in November. China accounts for most of the gains with 72 percent of U.S. export shipments to date, although substantial gains have been seen for other importers, including the EU, Turkey, and Taiwan. Actual U.S. export shipments are now growing faster than export sales and due to this robust pace, future shipments could moderate without another round of new sales. Even with the outlook for record U.S. exports, the large U.S harvest, coupled with expected record Brazilian and Argentine harvests, is forecast to lead to a 23-percent decline in the U.S. farm price of soybeans to about $10/bushel for 2014/15. Find additional analysis in Soybeans and Oil Crops Outlook: December 2014.”

 

Regulations

The Associated Press reported yesterday that, “A federal appeals court on Monday upheld a 2009 federal decision that called for reducing the amount of water pumped from the Sacramento-San Joaquin Delta in order to protect salmon and other species.

“The 2009 environmental review by the National Marine Fisheries Service found that continuing to pump water from the delta at such a high rate would threaten several endangered salmon species and killer whales.”

The article added that, “Some of the state’s biggest water agencies, including Southern California’s Metropolitan Water District, had challenged the 2009 federal decision. A lower court had invalidated part of the National Marine Fisheries Service’s review but allowed the reduced pumping to remain in effect.

“The 9th U.S. Circuit Court of Appeals on Monday affirmed the original 2009 federal decision reducing the pumping.”

Keith Good