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Policy Issues; Ag Economy; Trade; Biotech; and, Regulations

Policy Issues

Jenny Hopkinson, Helena Bottemiller Evich, Bill Tomson and Chase Purdy reported yesterday at Politico that, “The Obama administration is becoming increasingly involved in what Americans put on their dinner plates and in their cereal bowls, from requiring school children to be served fruit to eliminating trans fats in doughnuts. But the new Republican Congress is already laying the groundwork to push back in 2015.”

Yesterday’s article noted that, “Rep. Robert Aderholt (R-Ala.), chairman of the House Appropriations Agriculture Subcommittee, has been leading the charge on school lunch, along with Sen. John Hoeven (R-N.D.), a key member of the Senate Appropriations Agriculture Subcommittee. But their cause is about to be picked up by the House Education and Workforce Committee, chaired by Rep. John Kline (R-Minn.), and the Senate Agriculture Committee, chaired by Sen. Pat Roberts (R-Kan.), as they begin work to reauthorize the law governing school nutrition programs.

“Both Kline and Roberts have been openly critical of the 2010 Healthy Hunger-Free Kids Act, a bipartisan law that included many reforms that are now sparking complaints among schools and Republicans who argue the rules are too prescriptive and costly.”

The Politico writers pointed out that, “Rep. Cathy McMorris Rodgers took aim at the FDA’s menu labeling rules earlier this month, saying the measures are ‘suffocating America’s economy.’ The Washington state Republican is calling for the passage of the Common Sense Nutrition Disclosure Act, HR 1249, a bill she introduced in March 2013 that would roll back some of the administration’s new rules.

“Sen. Roy Blunt (R-Mo.) is expected to push a companion Senate version next year as well.”

Yesterday’s article added that, “And back on the labeling front, Congress can be expected to debate the need for requiring manufacturers to say when their foods contain genetically modified ingredients. Following Vermont’s passage of a GMO labeling requirement and several close votes on ballot initiatives, Rep. Mike Pompeo (R-Kan.) said he plans to reintroduce a food industry-supported bill early in 2015 that would prevent states from setting their own standards and guaranteeing the authority to label GMOs stays squarely with FDA. The agency has expressed little interest in making labeling mandatory.

“A number of lawmakers, including several Democrats, rallied around Pompeo’s bill at a Dec. 10 hearing of the House Energy and Commerce Health Subcommittee.”

Meanwhile, Stephanie Strom reported on the front page of the Business section in today’s New York Times that, “In spite of the surging demand for locally and regionally grown foods over the last few years, there is a chasm separating small and midsize farmers from their local markets.

“But a growing number of small businesses are springing up to provide local farmers and their customers with marketing, transportation, logistics and other services, like the Fresh Connection, a trucking business providing services to help farms around New York City make deliveries.”

In other news, Lydia Wheeler reported yesterday at The Hill Online that, “The Department of Agriculture is making changes to the Farm Loan Program that are required by the 2014 Farm Bill.

“The agency is increasing the percentage of guarantee from 75 percent to 90 percent for conservation loans for a qualified beginning or socially disadvantaged farmers, lowering the interest rate for joint farm ownership loans from 5 percent to 2.5 percent, and eliminating the oil, gas and mineral appraisal requirement for all farm loan programs.”

And more broadly on recent political developments, Ed O’Keefe and Robert Costa reported on the front page of today’s Washington Post that, “Republican leaders moved forcefully on Tuesday to control the damage from a pair of scandals that have suddenly disrupted the party as it prepares to take full control on Capitol Hill.

“In back-to-back moves, House Speaker John A. Boehner (R-Ohio) pushed out Rep. Michael G. Grimm (R-N.Y.), who pleaded guilty last week to federal tax-evasion charges, and backed Majority Whip Steve Scalise (R-La.), who acknowledged that he once ­addressed a white-supremacist group before coming to Congress.”

 

Agricultural Economy

Yesterday, the USDA’s National Agricultural Statistics Service (NASS) released its monthly Agricultural Prices report, which stated in part that: “The corn price, at $3.77 per bushel, is up 19 cents from last month but is 64 cents below December 2013 [related graph], the soybean price, at $10.20 per bushel, is unchanged from November but is $2.80 below December 2013 [related graph], and the December price for all wheat, at $6.53 per bushel, is up 48 cents from November but is 20 cents below December 2013 [related graph].”

With respect to livestock, the NASS report added that, “The December beef cattle price of $168 per cwt is up $1.00 from last month and $38.00 higher than December 2013 [related graph], at $66.50 per cwt, the December hog price is down 20 cents from November but is $5.00 higher than a year ago [related graph] and the December all milk price of $20.30 per cwt is down $2.70 from last month and $1.70 less than December 2013 [related graph].”

With respect to the overall financial outlook for agriculture, an update yesterday from the USDA’s Radio News Service indicated that: “2015 Farm Financial Situation Could be Almost a Mirror of 2014.” The one-minute audio clip, which included remarks from outgoing USDA Chief Economist Joe Glauber, noted that, “One expert does not expect the overall 2015 farm financial situation to be much different from this past year.”

Also yesterday, Dr. Glauber spoke more broadly about the farm economy in an interview with the Red River Farm Network (RRFN)- audio replay here, MP3- 15 minutes; an update at the RRFN Online stated that, “USDA Chief Economist Joe Glauber is leaving the Agriculture Department to join a Washington, D.C. think tank. At the International Food Policy Research Institute, Glauber will focus on food security issues. In an interview with the [RRFN], Glauber said farmers are facing very difficult decisions with the new farm program. ‘I heard someone derisively call it an economist’s farm bill. I couldn’t agree more. There are so many complications in terms of the options producers have. It’s great to have flexibility but it doesn’t make the decision itself any easier.’ With the choice between ARC and PLC, Glauber expects some farmers to be unhappy in two or three years. Given current prices, Glauber fully expects countercyclical payments to be made for some commodities.”

More specifically with respect to farmland, a news release yesterday from Schrader Real Estate and Auction Company in Columbia City Ind. stated that, “Schrader Real Estate and Auction Company continued to see large crowds of active bidders during 2014, according to company President R.D. Schrader.

While noting that ‘prices have fallen off a bit’ in some areas due to lower commodity prices, he said the company found active markets in 2014 well beyond the Midwest. In a week-long series of major auctions in six states, the company sold 13,450 acres for a total of $46.3 million. ‘We had good participation and successful auctions in the Delta, Southwest and Mountain regions, as well as the Midwest,’ he said.”

The news release added that, “Schrader said he remains optimistic. ‘Long term, farmland remains very attractive, especially when you consider the alternatives. We’ve seen wild one-day swings in stocks, and interest rates continue at all-time lows. Meanwhile, over the last decade, Midwestern farmland has been appreciating at an average rate of more than 10 percent per year,’ he said.

“Schrader expects another active year. ‘There’s still a great deal of demand. The marketplace is rewarding quality, and productive land with good soils will continue to do the best,’ he said.”

More broadly, an item from the January 3rd edition of The Economist magazine indicated that, “In the next 40 years, humans will need to produce more food than they did in the previous 10,000 put together. But with sprawling cities gobbling up arable land, agricultural productivity gains decreasing, and demand for biofuels increasing, supply is not keeping up with demand. Clever farmers, scientists and entrepreneurs are bursting with ideas. But they need money to make this jump.

Financiers more often found buying and selling companies have cottoned on to the opportunity. Farm gates have traditionally been closed to capital markets: nine in ten farms are held by families. But demography is forcing a shift: the average age of farmers in Europe, America and New Zealand is now in the late fifties. They often have no successor, because offspring do not want to farm or cannot afford to buy out family members. In addition, adopting new technologies and farming at ever-greater scale require the sort of capital few farmers have, even after years of bumper crop prices.

Institutional investors such as pension funds see farmland as fertile ground to plough, either doing their own deals or farming them out to specialist funds. Some act as landlords by buying land and leasing it out. Others buy plots of low-value land, such as pastures, and upgrade them to higher-yielding orchards. Investors who are keen on even bigger risks and rewards flock to places such as Brazil, Ukraine and Zambia, where farming techniques are often still underdeveloped and potential productivity gains immense.”

The Economist article indicated that, “And yet the 36 agriculture-focused funds, with $15 billion under management, pale in comparison to the 144 funds focused on infrastructure ($89 billion) and 473 targeting real estate ($163 billion), according to Preqin, a data provider. TIAA-CREF, an American financial group, is a market leader with $5 billion in farmland, from Australia to Brazil, and its own agricultural academic centre at the University of Illinois. Canadian pension funds and Britain’s Wellcome Trust are among those bolstering their farming savvy.

Most investors are put off by the sector’s peculiar risks and complexities. Weather, commodity prices, soil health, water access, dietary fads and animal health are not the forte of the average pension-fund investment officer. Political risks abound: cash-strapped governments in Europe and America may (belatedly) get around to cutting farm subsidies. In poor countries, land titles may give outsiders dubious protection—if those countries even allow foreign ownership of land in the first place.”

Concluding, the article noted that, “For more money to flow in, financiers and farmers will have to learn a lot more about each other. Money managers need to get their hands dirty and find out more about crops. Only a handful have the expertise needed; farmers gleefully share stories of Wall Street types wondering how chicks are planted. And farmers can do more to attract capital, for example by seeking out financial deals where investors’ incentives are aligned with their own, such as through joint ventures.

“Investors need to separate the wheat from the chaff, too. Farm investing requires patience; it is ill-suited to flipping and trading. But those willing to climb over the barriers could reap big rewards. The investment thesis is as simple as they come, as Mark Twain realised long ago: ‘Buy land, they’re not making it any more.’”

In other news, Reuters writer Michael Hirtzer reported this week that, “Roaring Chinese demand for cheap animal feed helped fuel the largest week of grain sorghum sales seen by U.S. exporters in nearly two decades, U.S. Agriculture Department data showed Monday.

“China’s appetite for the corn substitute is expected to remain strong for the time being, despite Beijing’s recent approval of one GMO corn variety, possibly signaling a renewed appetite for U.S. corn imports and expanding a lucrative market for American farmers.”

And yesterday Reuters news reported that, “South Korea will disinfect farms around the country over the new year and limit the transport of animals, stepping up its effort to contain an outbreak of foot-and-mouth disease that has spread close to the capital as well as bird flu.

“The foot-and-mouth among hogs had been limited to the center of the country until this week but a case has now been confirmed at a farm just 50 km (30 miles) from Seoul in the north of the country.”

Also Nick Miroff reported in today’s Washington Post that, “The Poligrow mega-project is one of several that have helped make Colombia the world’s fastest-growing producer of palm oil, used widely in snack foods, and cosmetic and beauty products, and as biodiesel. Having doubled its output in the past decade, Colombia ranks fourth in total production behind Indonesia and Malaysia, which dominate the market, and Nigeria.

“But the palm industry’s rapid expansion is yielding new evidence of a boom that benefited from the displacement of small farmers, indigenous groups and others by the armed conflict. Several of the regions where palm has spread during the past decade are places notorious for paramilitary violence and rural terror, such as the north coast outside Cartagena, the Venezuela border region and the southeastern plains of the Meta department, where Mapiripan is located.”

The Post article noted that, “As the government and the country’s largest rebel group, the Revolutionary Armed Forces of Colombia (FARC), attempt to reach a peace accord to end the fighting, Colombia faces the painstaking task of trying to sort out what happened in Mapiripan and other places like it, and how to move forward.

“Central to the dispute is a clashing vision of rural development, between the traditional model that has been partly destroyed by the violence and an agribusiness vision that promises growth, jobs and modernization through the spread of commodity crops like African palm.”

And, Matt Stevens reported yesterday at the Los Angeles Times Online that, “Measurements of Sierra Nevada snowpack on Tuesday showed more snow than surveyors recorded a year ago. But state water officials said it was far from enough to signal a potential end to California’s continuing drought.

“‘Although this year’s survey shows a deeper snowpack than last year, California needs much more rain and snow than we’ve experienced over the past two years to end the drought,’ Department of Water Resources Director Mark Cowin said.”

 

Trade

Mark Landler and Jonathan Weisman reported on the front page of the Business section in today’s New York Times that, “For Michael B. Froman, President Obama’s chief evangelist for expanding global trade, skepticism comes with the territory.

He and his colleagues have clocked more than 1,500 meetings on Capitol Hill to promote the president’s big potential trade deal, the Trans-Pacific Partnership — and still its prospects for passage look as problematic as ever.”

The Times writers noted that, “Mr. Froman insists the political stars have aligned. Republican control of the Senate has elevated pro-trade lawmakers to key positions in leadership and committee control, and the international negotiations themselves have progressed.

“But the deal’s completion is certainly not guaranteed. Republicans inclined to give the president trade-negotiating authority are still seething at his executive action deferring deportation of millions of undocumented immigrants. Many conservatives are in no mood to give Mr. Obama anything, said Senator Rob Portman, Republican of Ohio, and a former United States trade representative in the George W. Bush administration.”

Today’s article added that, “Senator Ron Wyden of Oregon, ranking Democrat on the Senate Finance Committee in the coming Congress, is one of the strongest trade advocates in Washington; he said virtually no Democrat who had supported trade promotion authority in the past would be left in the Senate next year.”

Victoria Guida reported yesterday at Politico that, “Republicans know liberal Democrats have issues with global free trade deals, which they say can give rise to decreased wages and job losses. So when the GOP throws its wholehearted support behind President Barack Obama’s massive trade agenda — including efforts to conclude talks on the largest trade deals in U.S. history, covering nations across the Atlantic and Pacific oceans, they do so knowing it will pit the left wing of the Democratic party against their leader in the White House and his allies among the dwindling number of trade-friendly New Democrats in Congress.”

 

Biotech

Grant Rodgers reported yesterday at The Des Moines Register Online that, “Iowa farmers and companies are suing Syngenta AG, claiming they suffered financial losses when China rejected corn shipments containing a genetically modified seed developed by the agribusiness giant but not approved for use by China.

Sixteen growers and businesses filed suit Monday seeking monetary and punitive damages from Syngenta, which is based in Switzerland and has operations in Iowa. Including previous legal action, the company now faces challenges from more than 100 farmers and commodity traders, including Cargill and Archer Daniels Midland.”

 

Regulations

Josh Hicks reported in today’s Washington Post that, “House Republicans next year will use a new oversight subcommittee to examine the Obama administration’s energy and environmental policies.

“Rep. Jason Chaffetz (R-Utah), future chair of the powerful House Oversight and Government Reform Committee, announced that he would form the new panel to watch over the Environmental Protection Agency, as well as the departments of agriculture, energy and interior.”

The Post article noted that, “Responsibility for those agencies previously fell to two panels — one that focused on energy and the other on regulatory affairs.

“Chaffetz appointed Rep. Cynthia Lummis (R-Wyo.) to head the new subcommittee.”

Mr. Hicks pointed out that, “The energy subcommittee this month examined EPA’s management of federal renewable-fuel guidelines, foreshadowing the type of work that Lumis’s committee is likely to do.

Republicans during the hearing attacked George W. Bush-era renewable-fuel standards as outdated, saying the rules have increased fuel prices and harmed the economy while forcing distributors to carry ethanol products that can damage engines.

Janet McCabe, one of the EPA’s top officials focusing on air issues, testified that the renewable-fuel standards are ‘an important component of the broader strategy to combat climate change.’”

Keith Good