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

Agricultural Economy

David Kesmodel reported in today’s Wall Street Journal that, “While many U.S. farmers grappled with lower grain prices last year, Mike Baker had an ace up his sleeve: sorghum.

“The grain, long overshadowed by more-plentiful crops, suddenly is in high demand [related graph] thanks to China’s soaring appetite for animal feed and a shift in its buying preferences away from foreign corn. A 15-fold increase in imports of U.S. sorghum by China over the past year has pushed its price above corn’s in parts of the U.S., a rarity that highlights how policy shifts by Beijing can have a far-reaching impact on the global grain trade.”

Mr. Kesmodel indicated that, “Many traders expect the pace of Chinese orders to slow because the U.S. doesn’t have enough sorghum to sustain it. The USDA estimated the U.S. produced 433 million bushels of sorghum last year, up from 392 million a year earlier. In contrast, the U.S.’s corn output was a record 14.2 billion bushels in 2014…[C]hinese companies are snapping up the grain to feed pigs, chickens and ducks because it is cheaper to import sorghum than to buy corn produced in China, analysts said. Domestic corn prices are high because China’s government has been buying farmers’ grain at a hefty premium to support their incomes, analysts said.”

The Journal article added that, “China’s imports of U.S. corn fell sharply last year after Beijing rejected shipments containing a genetic modification that it hadn’t approved. The country recently approved the biotech corn, prompting analysts to speculate that China may resume significant imports from the U.S. That, in turn, could dent China’s purchases of sorghum and other feed alternatives.

“China’s Ministry of Agriculture declined to comment on grain-importing policies. Ma Wenfeng, a senior analyst at Beijing Orient Agribusiness Consultant Ltd., a state-linked consultancy, said corn likely will start to supplant sorghum because many Chinese livestock producers consider corn a higher-quality feed.”

Also in today’s Wall Street Journal, Leslie Josephs reported that, “Investors have found a sweet spot among plunging commodity markets: sugar.

Raw-sugar futures are up about 10% this year, even as most commodities continue to decline. Sugar’s gains come amid dry weather in No. 1 producer Brazil, which is expected to result in the smallest global surplus of the sweetener in five years. Traders also cite higher fuel taxes in Brazil, which should convince drivers there to fill up their tanks with sugar-cane-based ethanol [related graph].”

The article noted that, “Some investors don’t expect the rally to last. With the global sugar market headed for yet another surplus, money managers as a group are betting on lower prices, according to data from the U.S. Commodity Futures Trading Commission. Prices have fallen below 10 cents a pound in the past before growers cut production enough to tighten supplies and trigger a recovery in the market.”

And Abheek Bhattacharya reported in today’s WSJ that, “The world’s largest pork producer experienced a safety scare last year—in its shares. Now a move by one of its biggest investors should help Hong Kong-listed WH Group, which owns Smithfield Foods in the U.S., become nontoxic again.

“Private-equity firm CDH, WH’s second largest shareholder, is in the process of paying back a loan for which it earlier pledged part of its 30% WH stake, a CDH representative says.”

The article pointed out that, “Meanwhile, WH’s original story of combining Smithfield in the U.S. with Shuanghui, China’s top pork distributor, remains intact, and should get a boost from the recent fall in U.S. pork prices. It makes sense to sell cheaply raised American hogs to Chinese consumers, even if the rate of China’s consumption growth is currently slowing.”

Meanwhile, three separate updates yesterday from University of Missouri Extension provided additional perspective on the U.S. agricultural economy.

The first update noted that, “Prices for all commodities are lower than they have been the last few years, and that will put some economic stress on many farmers.

“‘I think farmers need to have a good idea of their financial needs for this year,’ says University of Missouri agricultural economist David Reinbott. ‘Both short- and long-term ranges and cash flow needs. Any time we get rallies back into the price levels where it can meet those cash flow and financial goals, farmers really need to start locking those in.’”

The release added that, “There is an ample supply of old crop corn because of the record harvest in 2014. Reinbott says USDA has trimmed back the demand outlook some, but it’s still almost 13.6 billion bushels.

“‘Right now we are looking at corn prices for old crop around $3.80,’ Reinbott says. ‘That’s sort of the initial level of support with possible rebounds to $4 or $4.15.’”

An update on livestock variables indicated that, “The song remains the same for the cattle market: tight supplies and high prices.

“‘Supplies are going to remain tight for some time, and domestic and export demand for beef looks good,’ says Ron Plain, University of Missouri Extension agricultural economist. ‘So we expect 2015 cattle prices to average higher than what we saw last year.’”

And in a closer look at the dairy market, an additional update yesterday from the University of Missouri stated that, “Milk prices at the farm level are expected to be about $6 a hundredweight lower than the record prices in 2014.

“‘That is not going to be fun for producers,’ says Joe Horner, University of Missouri Extension agricultural economist. ‘But it is not as bad as it has been some years in the past.’”

 

Trade

Ways and Means Committee Chairman Paul Ryan (R., Wis.) recently commented on President Obama’s call for trade promotion authority (TPA) in his State of the Union address earlier this week, noting that, “I was glad to hear the President ask Congress to pass trade-promotion authority. We simply can’t get the best trade agreements for the American people without it. Now the President needs to follow through. He needs to convince his party to vote for TPA—and soon.”

Also on the TPA issue, Ways and Means Trade Subcommittee Chairman Pat Tiberi (R., Ohio) indicated yesterday that, “Republicans in Congress have worked hard to make the case, but the President must take on the special interests in his own party and build support among his members. I hope he will follow through and make it a priority in the coming weeks.”

And the Ways and Means Committee, in a hearing set for next week on the U.S. trade policy agenda, will hear testimony from U.S. Trade Representative Michael Froman.

In remarks yesterday at the U.S. Conference of Mayors, Ambassador Froman noted that, “Take the Trans-Pacific Partnership, or TPP, which is an agreement we’re negotiating with 11 other countries in the Asia-Pacific and includes 40% of the global economy. It will grow our exports by more than $123 billion every year, according to one study, and support hundreds of thousands of additional well-paying jobs.”

Amb. Froman added that, “Under previous TPA bills, the President was required to provide three months’ notice before signing an agreement. Even when Congress begins its work, the process is designed to take up 90 legislative days, which is typically five calendar months or more. That is hardly ‘rushing to ram something through in the dead of night.’

“So in many ways, TPA is Congress’s best tool to ensure that Congress and the public have ample time to give our trade agreements the public scrutiny and debate they deserve.”

William Mauldin and Siobhan Hughes reported in today’s Wall Street Journal that, “President Barack Obama ’s push for a new round of trade deals looks set to hinge on a small swing contingent of House Democratic lawmakers, testing the president’s ability to woo wary members of his own party.

“To do that, the White House has deployed cabinet secretaries and set up a war room to promote fast-track trade legislation on Capitol Hill.”

The Journal writers explained that, “U.S. trade representative Mike Froman, who met Wednesday with [Sen. Orrin Hatch (R., Utah), chairman of the Senate Finance Committee] and other lawmakers, has led the administration’s push with Congress, and Mr. Obama has deployed cabinet secretaries to promote the trade legislation among lawmakers.

“‘I did get a call yesterday prior to the State of the Union from Commerce Secretary Penny Pritzker,’ said Rep. Gerry Connolly, (D, Va.), who supports giving Mr. Obama trade authority. ‘It was a general conversation: ‘I hope we can count on you.’’

Critics say Mr. Obama himself needs to get more involved in shaking hands and twisting arms.”

Cristina Marcos reported yesterday at The Hill Online that, “Rep. Barbara Lee (D-Calif.) said Wednesday that trade deals that outsource American jobs ‘wreak havoc’ on minorities.”

A recent editorial in The Seattle Times indicated that, “President Obama wants more authority to negotiate global trade deals — a move that could significantly benefit Washington state. Congress should give it to him.

“In 2013, Washington companies exported $81.6 billion worth of products and services, ranging from apples and pears to solar panels and airplanes.”

With respect to Cuba, Karen DeYoung and Nick Miroff reported in today’s Washington Post that, “The most senior U.S. official to visit Cuba in decades arrived here Wednesday for talks on normalizing relations between the two countries, barely a month after President Obama and Cuban President Raúl Castro announced an end to 61 years of official estrangement.

“After a working dinner Wednesday night, Assistant Secretary of State Roberta Jacobson and Josefina Vidal, head of U.S. relations at Cuba’s Foreign Ministry, will meet Thursday to formally initiate discussions on reopening embassies in the two capitals.”

 

Policy Issues

An update yesterday from the Democrats on the House Ag Committee noted that, “[Committee Ranking Member] Collin Peterson today announced the 19 Democrats appointed to serve on the House Agriculture Committee for the 114th Congress.”

Democrat members: Collin Peterson (MN-7), David Scott (GA-13), Jim Costa (CA-16), Tim Walz (MN-1), Marcia Fudge (OH-11), Jim McGovern (MA-2), Suzan DelBene (WA-1), Filemon Vela (TX-34), Michelle Lujan Grisham (NM-1), Ann Kuster (NH-2), Rick Nolan (MN-8), Cheri Bustos (IL-17), Sean Patrick Maloney (NY-18), Ann Kirkpatrick (AZ-1), Pete Aguilar (CA-31), Stacey Plaskett (VI-AL), Alma Adams (NC-12), Gwen Graham (FL-2) and Brad Ashford (NE-2).

Reuters writer P.J. Huffstutter reported yesterday that, “The federal Agriculture Department is looking into recent media reports over controversial animal welfare conditions at its U.S. Meat Animal Research Center in Nebraska, it said on Wednesday.

“The agency said in a statement that it was reviewing additional improvements in its animal science research, including in improving animal well-being.

The New York Times reported on Monday that the Nebraska research facility had failed to follow basic animal welfare standards when conducting decades of research.”

Meanwhile, David Pierson reported yesterday at the Los Angeles Times Online that, “Federal officials Wednesday proposed new standards for permissible levels of salmonella contamination in ground poultry and poultry parts such as breasts, thighs and wings — a move that could prevent 50,000 cases of food-borne illness a year.

The proposal marks the first time federal inspectors have issued standards for poultry parts, which represent the majority of the poultry products available to U.S. consumers.”

Mr. Pierson noted that, “The proposed standards come at a time when the poultry industry and federal inspectors have been under growing pressure to take a harder stance on salmonella contamination. Hundreds of people were sickened nationwide starting in 2013 by an outbreak linked to Foster Farms chicken processed in California.”

Also on this issue, Tennille Tracy reported in today’s Wall Street Journal that, “Ashley Peterson, a vice president at the National Chicken Council, said poultry producers and processors take the issue seriously and could exceed some of the department’s proposed standards.

“‘The fact is, any raw agricultural product…is susceptible to naturally occurring bacteria that could make someone sick if improperly handled or cooked,’ Ms. Peterson said in a statement. When handled correctly and cooked to 165 degrees Fahrenheit, chicken is always safe to eat, she said.”

And Rep. Rosa DeLauro (D., Conn.) indicated yesterday that, “The performance standards for ground poultry were long overdue for an update. But voluntary standards are not sufficient to protect American families from two of the most common foodborne pathogens. Time and again we have seen that when we trust industry to police themselves, public health suffers. I fear this time will be no different.

“The standards themselves are a good first step. But we must stay vigilant and do everything possible to keep industry moving towards enforceable standards. Once these goals are met, FSIS should revisit the standards immediately, and keep us moving in the direction of safer and more wholesome poultry products. We cannot afford to wait another 20-odd years for another review of these standards. Nothing less than our families’ health is at risk.”

And on climate change issues, Coral Davenport reported in today’s New York Times that, “The Senate on Wednesday twice rejected measures declaring that humans are causing climate change.”

Elana Schor reported yesterday at Politico that, “Senate Republicans head-faked Democrats on climate change Wednesday, agreeing in a floor vote that the planet’s climate was changing, but blocking language that would have blamed human activity.”

 

Biotech

Julie Harker reported yesterday at Brownfield that, “A bill introduced in Oregon at the request of that state’s governor would expand authority over GMO crops.

“Governor John Kitzhaber’s bill would increase that state’s authority to regulate GMO plants by establishing ‘control areas’ to separate biotech crops from other crops with the purpose of avoiding conflict between growers. According to a report in the Capital Ag Press, it would be a voluntary system.”

And Monte Morin reported yesterday at the Los Angeles Times Online that, “Synthetic amino acids may one day allow scientists to create ‘genetic firewalls’ that prevent GMO crops or animals from escaping into the wild and causing environmental damage, according to Harvard and Yale researchers.

“On Wednesday, scientists announced that they had genetically engineered bacteria whose very survival depended on lab-formulated amino acids. By ‘locking in’ this synthetic nutritional requirement, researchers said the bacteria would quickly die if they escaped their carefully controlled environment and entered the world at large.”

The article noted that, “The altered bacteria, which [George Church, a Harvard Medical School genetics professor] and his colleagues dubbed genomically recoded organisms, or GROs, were described in a pair of studies published Wednesday in the journal Nature.

“Genetically altered bacteria are used to produce a growing number of products, including pharmaceutical proteins, such as insulin; dairy items, such as yogurt; and polymers used to create textiles.

“While it is much easier to alter the genetic coding of bacteria than it is to alter plant and animal genomes, Church said that it was plausible that the technique could be extend to more complicated GMOs, such as crops.”

The LA Times article added that, “Church and Farren Isaacs – an assistant professor of molecular, cellular and developmental biology at Yale, and the senior author of one of the studies – said their work was motivated by the concern that modified organisms could enter the wild and out-compete natural species. It is this concern that has caused some to heavily criticize the use of GMOs in industry and agriculture.”

 

Regulations

A recent update at the House Transportation and Infrastructure Committee webpage announced a joint hearing with the full committee and the Senate Committee on Environment and Public Works that is set for February 4; the hearing is titled, “Impacts of the Proposed Waters of the United States Rule on State and Local Governments.”

Keith Good