FarmPolicy

September 21, 2019

Policy Issues; Agricultural Economy; Immigration; and, Regulations

Policy Issues

Todd Neeley reported yesterday at DTN that, “USDA is changing the way it funds conservation.

“Calling it a ‘historic moment’ in conservation, U.S. Secretary of Agriculture Tom Vilsack Wednesday pointed to the way $372.5 million in funding would be spent as something unlike anything USDA has undertaken. Funds approved for some 115 conservation projects in all 50 states are aimed at both national- and local-scale projects. Each project includes on average 11 partners, with some larger projects including as many as 46 partners.

“The announcement comes at a time when Des Moines Water Works in Iowa announced it was suing three nearby counties for ongoing nutrient problems in the city’s drinking water system. The DMWW has claimed those counties have not done enough to cut back nutrient runoff, costing the city’s water ratepayers some $7,000 a day to filter the water.”

The DTN article noted that, “Though a national conservation effort is needed, Joni Ernst, newly elected Republican senator from Iowa, said during a news conference Wednesday that nutrient runoff problems have to be addressed locally. Some communities in southwest Iowa, for example, have had success in improving water quality through conservation, she said.”

Mr. Neeley added that, “The conservation funds made available Wednesday through the Regional Conservation Partnership Program (RCPP) represent just 7% of overall EQIP funds available. The funding came about as a result of a request in the new farm bill to set aside the money to test the idea of targeting larger-scale conservation projects in order to realize more bang for the buck.”

Philip Brasher reported yesterday at Agri-Pulse that, “Half of the $370 million in federal funding is targeted for water quality projects such as the Cedar Rapids effort, which was awarded $2.1 million.

“The requirement for monitoring and evaluating the project is considered a key part of the program and represents a relatively new approach to federal conservation spending.”

Mr. Brasher explained that, “Of the 115 projects nationwide, 49 of them are targeted to water quality, 24 would protect wildlife habitat and 23 deal with flooding and other water quantity concerns. Nine of the projects would protect soil quality. Many of the projects are relatively small. Nine will receive at least $10 million while 30 percent will get less than $1 million and 59 will get between $1 million and $5 million.”

AP writer John Flesher reported yesterday that, “Projects designed to cut down on fertilizer runoff, expand bird nesting areas and restore native grasslands are among those selected for funding under a new initiative that encourages conservation partnerships between government and private organizations, U.S. Agriculture Secretary Tom Vilsack said.”

Senate Ag Committee Ranking Member Debbie Stabenow (D., Mich.) indicated yesterday that, “‘Today’s announcement is truly unprecedented and paves the way for innovative conservation projects,’ said Stabenow. ‘Businesses, farmers, non-profits and conservation leaders have a tremendous desire to protect water quality, preserve wildlife habitats, and keep soil healthy. The work accomplished through these public-private partnerships will have a lasting impact on our land, water and air.’”

Meanwhile, Tim Devaney reported yesterday at The Hill Online that, “The U.S. Department of Agriculture (USDA) is proposing strict new dietary guidelines for day cares that would prohibit them from frying food that is served to children.

“Child care providers would also be formally required to provide children with water upon request, though they would face restrictions on how much apple juice and orange juice they serve.

The proposed nutrition standards are intended to promote the ‘health and wellness of children’ at day cares that participate in government-funded meal programs, the USDA’s Food and Nutrition Service said Wednesday.”

Also on the nutrition issue, an update yesterday at the House Ag Committee’s Instagram page included this photo of Ag Committee member Rep. Jackie Walorski (R., Ind.) with a caption that stated: “Congresswoman @jackiewalorski is the Chairwoman of the #Nutrition Subcommittee. She is smart & not easily buffaloed. We are going to do a thorough review of SNAP to see what works & what does not work. This is a picture from last year’s #Indiana State Fair.”

Also yesterday, the House Appropriations Committee announced the GOP members of the Agriculture Subcommittee: Chairman Robert Aderholt (R-AL), Alan Nunnelee (R-MS), Kevin Yoder (R-KS), Tom Rooney (R-FL), David Valadao (R-CA), Andy Harris (R-MD) and David Young (R-IA).

Stephanie Strom reported in today’s New York Times that, “Signs have gone up in about 600 Chipotle Mexican Grill restaurants, informing customers that carnitas is not being served.

“The fast-growing restaurant chain announced on Tuesday that it had suspended a major pork supplier after a routine audit found that it had failed to meet the company’s standards for animal welfare. ‘Without this pork, we cannot get enough pork that meets our Responsibly Raised standard for all our restaurants, and we will not be able to serve carnitas in some locations,’ Chipotle said in a statement, referring to its standards for the humane treatment of livestock.”

Roberto A. Ferdman reported yesterday at the Wonkblog (Washington Post) that, “But the company’s success has also been a lesson in how hard it is to scale the entirety of a business like Chipotle, with its promise to sell ‘food with integrity.’

In 2013, the company was forced to begin serving ‘conventionally raised beef,’ after it became clear that there was no longer enough antibiotic and hormone free beef to go around. ‘We just need more (and it isn’t there),’ [Chris Arnold, the company’s communications director] lamented to Businessweek at the time. The reason Chipotle is willing to serve conventionally raised beef and not conventionally raised pork is that the latter, according to Arnold, compromises animal welfare in a way the former doesn’t.”

Yesterday’s update noted that, “As Paul Shapiro, vice president of farm animal protection for The Humane Society of the United States, told the Associated Press on Tuesday, farms that raise pigs outside of gestation crates still represent a ‘very small portion of the pork industry.’ Meanwhile, Chipotle wants to capture a very large portion of the American fast food industry. Those two realities could eventually prove untenable, because at the moment, they simply don’t add up.”

Also yesterday, University of Illinois agricultural economists Scott Irwin and Darrel Good indicated at the farmdoc daily blog (“Long-Term Corn Price Forecasts and the Farm Bill Program Choice”) that, “Many crop producers are in the process of making the farm program participation decision for the five years beginning with the 2014 crop. Price expectations for this five-year period play a central role in the decision. As a case in point, the farmdoc daily articles on October 14, 2014 and December 18, 2014 illustrate the sensitivity of expected program payments to alternative price projections for 2014/15. Long- term corn price projections are available from several sources, including the USDA’s 10-year baseline forecasts. Given the importance of the program participation decision, the accuracy of these long-term forecasts is of obvious relevance. The purpose of this article is to examine the historical accuracy of two sources of long-term forecasts: i) the USDA’s 10-year baseline forecasts; and ii) the corn futures market.”

After detailed analysis, yesterday’s farmdoc daily update concluded by stating: “The analysis of the historical accuracy of USDA 10-year baseline and futures market forecasts of corn prices demonstrates that it is exceedingly difficult to forecast marketing year average corn prices very far into the future. This is due to the basic fact that the magnitude and timing of market supply and demand shocks cannot be anticipated. This implies that long-term forecasts, regardless of the source, may not be very useful in evaluating farm program choices. What then can producers do when making farm program decisions? One response to this kind of uncertainty is to diversify across the choices in order to hedge the risk of making the wrong choice. This could take the form of enrolling some farms in the Price Loss Coverage (PLC) program and others in the Agricultural Risk Coverage (ARC) County program. Another response is to frame the question differently by focusing on the average corn price that might be expected over the 5-year life of the current farm bill. All available current forecasts suggest that prices will average near to slightly higher than current prices. This differs from our ‘new era’ expectations, as summarized in this farmdoc daily article (February 27, 2013), that the average corn price will likely be well above the current level.”

 

Agricultural Economy

Jesse Neman reported yesterday at The Wall Street Journal Online that, “U.S. grain futures slid on Wednesday amid continued selling by financial investors worried over burdensome inventories of U.S. crops and weakness in commodity markets generally.

Corn prices dropped to a five-week low as investment-fund managers who were long the market–or had bet on higher prices–liquidated positions for a second session in row after an influential crop report confirmed a record U.S. crop and plentiful end-of-season supplies.”

And Wall Street Journal writer Leslie Josephs reported yesterday that, “Cotton prices fell to the lowest point in more than seven weeks Wednesday following reports of slower global economic growth and a decline in U.S. consumer spending.

“The World Bank on Tuesday lowered its 2015 global growth forecast to 3% from an earlier 3.4% projection. Then on Wednesday, the Commerce Department reported a seasonally adjusted 0.9% decrease in December sales at retailers and restaurants in the U.S. from the previous month.”

Yesterday, the Federal Reserve Board released its Summary of Commentary on Current Economic Conditions. Commonly referred to as the “Beige Book,” the report included several observations with respect to the U.S. agricultural economy.

In part, the Chicago District indicated that, “Low crop prices led farmers to focus on minimizing costs instead of maximizing output in 2015, so that they purchased fewer and lower cost inputs. In addition, rental terms for some cropland were under pressure because farmers would not make enough to cover their costs next year.”

The San Francisco District pointed out that, “Dairy farm profits increased significantly over the past year, but milk futures prices declined recently.”

An update yesterday at The Financial Times Online stated that, “Between 2000 and 2013, US per capita consumption of milk dropped by a tenth, according to the US Department of Agriculture. Dairy in total is up 3 per cent (Americans are cramming down ever more butter and yoghurt, thank goodness). But US dairy production has grown by a fifth and the UK looks similarly lopsided. Given the imbalance, farmers have welcomed the emergence a new market: China.

Goldman Sachs forecasts that dairy consumption in China between 2013 and 2018 will grow at a compound annual rate of 7 per cent, well ahead of the average 2 per cent for the biggest-consuming countries. International dairy companies have been piling in. A wobbly domestic supply chain has led to safety concerns, so foreign brands have appeal. Still, as the market has grown, imports have remained a fraction of domestic production, at 2.4 per cent of the total, Bernstein says. Foreign companies have also partnered with local brands. French Danone is tied up with Hong Kong-listed Mengniu Dairy and Yashili while New Zealand’s Fonterra (often touted as a play on Chinese demand) is tied to Beingmate.”

Meanwhile, William Mauldin reported in today’s Wall Street Journal that, “U.S. businesses are pressing the Obama administration to offer wider access to Cuba’s markets than it has signaled, fearing they could lag behind overseas competitors as the nation takes steps toward opening up its economy.

“The administration plans to provide its first set of detailed guidance in coming days, a month after President Barack Obama surprised the world by moving to renew diplomatic and economic ties after decades of sanctions.”

Mr. Mauldin pointed out that, “Some American industries, including agriculture and travel, are eager to recover lost ground in Cuba and are already pressing the administration to go further than it did in December to open up trade and investment, despite determined opposition from some lawmakers.

“‘If we move slowly as Americans, we’re tying one hand behind our backs,’ said Devry Boughner Vorwerk, vice president for corporate affairs at agribusiness giant Cargill Inc.”

 

Immigration

Jeremy W. Peters reported on the front page of today’s New York Times that, “The House voted on Wednesday to gut major provisions of President Obama’s immigration policy, approving legislation that would revoke legal protections for millions of unauthorized immigrants, including children, and put them at risk of deportation.

“The vote drew condemnation from Democrats and the White House and led more than two dozen Republicans, many worried about the perception that the party is hostile to immigrants, to break away and vote no.”

Mr. Peters noted that, “Because Republicans have said that they will use the $40 billion funding bill for the Department of Homeland Security as their vehicle for dismantling Mr. Obama’s action, Congress faces another deadline that seems likely to force an accommodation before the department’s money is due to run out at the end of February.

“Yet, in just their second week of control on Capitol Hill, Republicans on Wednesday were forced to address questions about whether the party again would be hobbled by internal disagreements over immigration policy.”

Seung Min Kim and Jake Sherman reported yesterday at Politico that, “Wednesday’s 236-191 House vote on a Homeland Security spending package was a charade with a predictable outcome, giving conservatives a chance to vent their ire at Obama for unilaterally shielding millions of undocumented immigrants from deportation. But everyone knows the Senate cannot pass this version of the bill, and Obama won’t sign legislation that undoes his executive actions.

What really worries members of both parties is that no one — not even leadership — seems to know what kind of bill could get through Congress in time to avert a funding lapse for DHS after Feb. 27.

“In particular, House Republican leaders don’t yet know what kind of package could squeeze through the Senate by the deadline. But in the end, Speaker John Boehner (R-Ohio) — who promised to fight Obama’s executive order ‘tooth and nail’ — may have to work with whatever bill Senate Majority Leader Mitch McConnell (R-Ky.) can pass. And many Republicans fear that will be a clean funding bill, without policy provisions on immigration attached.”

In a statement yesterday on immigration reform, the Agriculture Workforce Coalition (AWC) indicated that: “America’s immigration system remains broken, unable to provide farmers and ranchers with the stable, secure and skilled workforce they need to grow and harvest the food we eat. As the House’s action today brings renewed focus to the broad issue of immigration, the [AWC], speaking as the unified voice of producers across the country, again calls on Congress to act to address the sector’s labor crisis. We look forward to working with Congress in the weeks and months ahead to see legislation passed to resolve this pressing issue.

“In doing so, the AWC believes that any proposal to address the situation must include both the current agricultural workforce—many members of which are unauthorized to work in the U.S.—and the future labor needs of agricultural employers. It must also provide a solution that works for all of agriculture, including producers with seasonal need for workers and those with year-round needs.”

 

Regulations

Tony Barboza reported in today’s Los Angeles Times that, “California farmers must restrict their use of a tear gas-like pesticide applied to strawberries and other crops under new rules designed to protect farmworkers and people who live, work and go to school near agricultural fields.

“The state Department of Pesticide Regulation on Wednesday announced the nation’s strictest limits on chloropicrin, a chemical that many farmers inject into the soil of strawberries, raspberries, almonds and other valuable crops. Hundreds of people have suffered respiratory ailments, skin irritation and headaches from the pesticide when it has leaked into the air in recent years, according to agency officials, who say use of the chemical has been increasing.”

The article added that, “Industry groups said the rules could raise produce prices.

“‘California farmers already follow stricter regulations than farmers in any other state, and these added regulations equal added costs,’ including up to $20 million a year to purchase new tarps, said Carolyn O’Donnell, spokeswoman for the California Strawberry Commission, a state government agency that represents the $2.3-billion industry.”

Tim Devaney reported yesterday at The Hill Online that, “The Department of Agriculture (USDA) is delaying new organic food rules.

“The USDA’s Agricultural Marketing Service announced Wednesday it is extending the comment period on proposed changes to the organic assessment exemption regulations.”

A news release yesterday from Senate Ag Committee Chairman Pat Roberts (R., Kan.) stated that, “[Chairman Roberts], in keeping with his campaign promise, has introduced his first bill of the new Congress — sweeping legislation to fight overly burdensome regulations issued by the Obama Administration which hurt the nation’s struggling economy.

“Roberts’ bill, S.168, the Regulatory Responsibility for our Economy Act, (RREA) would require all federal agencies to review their significant regulations, and propose a timeline to repeal those deemed burdensome, unnecessary or those that harm the economy or job creation.”

And Kevin Cirilli and Cristina Marcos reported yesterday at The Hill Online that, “The House on Wednesday passed legislation, blocked by Democrats last week, that would delay the implementation of a controversial provision in the 2010 Dodd-Frank Wall Street reform law.”

The article explained that, “The bill, which the White House is threatening to veto, would delay implementation of Dodd-Frank’s ‘Volcker rule’ until 2019, rather than 2017 as originally planned.

“The Volcker Rule, named after former Federal Reserve Chairman Paul Volcker, requires big banks to sell-off financial investments known as collateralized loan obligations (CLOs).”

Keith Good

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