December 12, 2019

Ag Economy; Trade; Biotech; Farm Bill; Budget; and, Biofuels

Agricultural Economy

Kelsey Gee reported in Saturday’s Wall Street Journal that, “The U.S. cattle herd expanded in 2014 for the first time in eight years, offering hope to consumers that beef prices could start to subside after soaring to a series of records.

“The nation’s cattle supply increased 1% in the year through Jan. 1 to 89.8 million head [related graph], according to data released Friday by the U.S. Agriculture Department, reversing a steady decline fueled by prolonged drought in the southern U.S. Great Plains and industry consolidation that encouraged many ranchers to thin herds.

“The USDA report indicated U.S. cattle ranchers retained more breeding animals than analysts had expected to produce new calves, rather than sending cows or heifers to be fattened for beef. Analysts had projected the nation’s herd would drop by 0.1%, according to a Wall Street Journal survey.”

The USDA’s National Agricultural Statistics Service (NASS) also released its monthly Agricultural Prices report on Friday, which stated in part that, “The December beef cattle price of $164 per cwt is down $3.00 from the previous month but is $34.00 higher than December 2013 [related graph], at $64.30 per cwt, the December hog price is down $2.40 from November but is $2.80 higher than a year earlier [graph]…and…the December all milk price of $20.40 per cwt is down $2.60 from November and down $1.60 from December 2013 [graph].”

The NASS report also indicated that, “At 60.4 cents per pound, the price for upland cotton is down 1.8 cents from November and 16.8 cents below December 2013 [related graph], the corn price, at $3.78 per bushel, is up 20 cents from last month but is down 63 cents from December 2013 [related graph]…and…the soybean price, at $10.30 per bushel, increased 10 cents from November but is $2.70 below December a year earlier [related graph].”

Bloomberg writer Megan Durisin reported on Friday that, “An expanding global grain glut drove crop prices to the lowest since 2010, with wheat futures off to the worst start to a year in four decades.

“Farmers collected a record global wheat harvest, U.S. government data show, and the International Grains Council last week raised its outlook for the world’s corn crop. Thailand is preparing unload a mountain of rice to an already oversupplied market, and rains are aiding Brazil’s soybeans.

“Most raw materials are mired in bear markets, with the Bloomberg Commodity Index heading for a seventh straight monthly loss, the longest streak since 2009. A collapse in oil is cutting production costs, and encouraging more output even amid global surpluses. The gluts are helping to keep a lid on global food inflation, and the United Nations reported that prices dropped in eight of the past nine months.”

The article noted that, “Wheat futures for March delivery fell 1 percent to close at $5.0275 a bushel in Chicago, capping a 15 percent drop in January, the most for the month since 1975.”

Reuters indicated on Friday that, “Record harvests and falling oil prices have helped to push food prices to a four-year low, improving the affordability of food in nearly three quarters of countries surveyed, according to data from the Economist Intelligence Unit (EIU).

“The new Global Food Security Index shows that world food prices dropped 2.8 percent between September and November, 2014.

Food became more affordable in 79 out of 109 countries, with Hungary and Botswana seeing the biggest improvements in affordability.”

Meanwhile, Joel Lewin reported last week at The Financial Times Online that, “CNH Industrial, the tractor and truck-making sister company of Fiat Chrysler Automobiles, reported a sharp drop in fourth-quarter sales as falling crop prices hurt demand for agricultural equipment.

“The UK-based conglomerate said group sales fell 10 per cent to $8.4bn in the three months to December 31, compared to the same period last year — reflecting how farmers reined in spending on new machinery.”

And Jim Carlton reported in today’s Wall Street Journal that, “For the second year in a row, California recorded the driest January in its history. No rain fell in many parts of the state in what is normally its wettest month, stoking fears that a four-year drought may not end anytime soon.

“San Francisco received no measurable January rain for the first time since record-keeping began during the 1849 Gold Rush, according to the National Weather Service. In January 2014, San Francisco recorded just six hundredths of an inch of rain in a month when it averages 4.5 inches, forecasters said.”



Reuters writer Michael Hirtzer reported on Friday that, “Cargo backups due to a labor dispute at West Coast container ports are pushing down corn prices in Illinois and could cause importers to renege on deals, adding to record domestic stockpiles of the grain.

“With container shipment delays of two months or more at ports in California, grains handlers that transport supplies to the ports are slowing operations in the fastest-growing segment of agriculture exports.”

The article stated that, “Corn buyers south of Chicago, where railroads converge in the country’s busiest rail hub, are slashing their bids.

“The DeLong Company, one of the biggest shippers of ‘containerized’ grain to destinations in Asia, is canceling a loading shift that was scheduled for Saturday in Minooka, Illinois. The company also reduced what it was willing to pay for corn by 7 cents, to $3.52 per bushel.”

Reuters writer Krista Hughes reported on Friday that, “The Obama administration must insist that U.S. trading partners pledge not to manipulate currencies when negotiating trade deals, the chairman of the Senate Committee on Finance said on Friday.

“Addressing currency concerns was key to winning lawmakers’ support for a bill to fast-track trade agreements through Congress, and deals such as the Trans-Pacific Partnership, committee Chairman Orrin Hatch told the American Enterprise Institute.

‘Pretending these concerns don’t exist will not suffice,’ he said.”

Alan Beattie noted in part late last week in a blog post at The Financial Times that, “Certainly the discontents in the US Congress who want to insert enforceable rules against currency manipulation into the Trans-Pacific Partnership have several emerging markets and particularly China in mind, even though China is not currently a TPP member.

“This is not a happy development. Currency tariffs and the like were a bad idea when they were widely mooted in Congress during the last go-around on this issue and they are a bad idea now. Apart from the accurate and well-rehearsed objections on grounds of principle and political economy, such rules are likely to be almost impossible to implement. They will place other organisations, notably the IMF, in a ludicrously awkward position.”

Meanwhile, Lauren French and Anna Palmer reported on Friday at Politico that, “President Barack Obama, Vice President Joe Biden and a phalanx of top administration officials are making the sales pitch to congressional Democrats for fast-track authority on trade deals.

“Obama and Biden each made that plea during their appearances at this week’s House Democratic retreat in Philadelphia, which ended Friday. Top White House economic adviser Jeffrey Zients, Treasury Secretary Jack Lew, Commerce Secretary Penny Pritzker and Labor Secretary Tom Perez have also joined the effort to sway House and Senate Democrats, as well as some skeptical Republicans.”

The Politico article added that, “The administration hopes to secure the 30 to 50 Democratic yes votes in the House that might be needed to push a trade bill over the top.

“But sources have said the White House is still only informally counting votes, and Obama was careful to soften the hard sell during a closed-door meeting with lawmakers here Thursday night. He said the White House ‘will make [a] substantive case’ for a trade deal but won’t ‘go after folks’ or make the vote a ‘litmus test’ for Democrats, according to sources in the room.”



Stephanie Strom reported in Saturday’s New York Times that, “Few industry debates are as heated these days as the one about labeling foods that contain genetically modified ingredients.

“And while interest groups and advocates wage war in state legislatures, on ballots and in Congress over what should be disclosed on product labels, products certified as containing no genetically modified organisms are proliferating on grocery shelves without any nationwide mandatory regulations.

“Moreover, many manufacturers are nodding to the public debate, adding the phrase ‘non-G.M.O.’ to their packaging without a verification process.”

The article pointed out that, “The shift toward voluntary labeling has also led to a lot of consumer confusion, as different labels, organizations and agencies issue seals or stamps that attest to compliance with few, if any, uniform standards. In addition, food companies are tacking the words ‘non-G.M.O.’ on items that would never be considered in need of such labeling.”


Farm Bill

Former House Ag Committee Chairman Frank Lucas (R., Okla.) tweeted on Friday that, “Appreciate ‪@USDA Secretary Vilsack joining me in Oklahoma this morning to discuss one-year anniversary of ‪#FarmBill

An update on Friday from Ron Hays at The Oklahoma Farm Report Online indicated that, “When the House Ag Committee started writing the Farm Bill, prices were much stronger with corn about double what it is today and many thought that trend would continue. With much lower commodity prices, Lucas said this will test the safety net.

“‘We are going to figure out just how well the safety net works,’ Lucas said. ‘There is a safety net there and we are getting all the cobwebs out of it. It is there, that is the important part. Had we not passed a Farm Bill, the ’38 and ’49 laws would not have continued on the books. They were impossible to implement. We would have wound up with nothing. Explain that to your banker, or your father-in-law or your landlord. Nothing.’”

The Politico Morning Trade newsletter reported on Friday that, “WTO members have also kicked off agriculture negotiations to determine where they might run into problems lowering tariffs and cutting subsidies.

“The discussion on subsidies at a negotiating session this week focused on the United States, European Union, Japan, China, India and Brazil, diplomatic sources in Geneva said. Of those countries, only the United States wouldn’t be able to meet the commitments assigned to it under draft 2008 Doha texts. However, that calculation is based on U.S. subsidies from 2012 and doesn’t factor in changes in U.S. agricultural policies in the new farm bill.

“Under the proposed commitments, the United States would have exceeded its trade-distorting subsidy limits by $3.6 billion in 2012. A diplomatic source said it’s unclear whether the farm bill will help or hurt in this area particularly because it’s not clear whether the U.S. will classify crop insurance as trade-distorting in its next subsidy notification.”

In other policy related news, Reuters writer Carey Gillam reported on Friday that, “Processing lines at some U.S. hog slaughterhouses are moving too fast for inspectors to adequately address contamination and food safety concerns, according to an advocacy group that says it has obtained affidavits from four government meat inspectors.

“In the affidavits, released Friday by the Government Accountability Project, a ‘whistle-blower protection’ organization, the inspectors detail experiences inside pork-processing plants participating in a pilot program engineered by the USDA to speed up lines while improving food safety and trim inspection costs.”

And from an international perspective, Reuters news reported yesterday that, “China has listed food safety and modernising farms as among key priorities this year, its 2015 rural policy outline showed, as it tackles falling agricultural productivity that has raised concerns about its future food supply.

“The ‘number one document,’ issued every January and released by state news agency Xinhua on Sunday, showed China will also protect farmland and lend more to farmers to narrow a wealth gap between rural and urban areas.

“Attempts to clean up land that has been damaged by heavy metal mining and processing will be widened this year, and ‘permanent farmland’ that is off-limit to industrial and urban development will be created, the document said.”



Jonathan Weisman reported in today’s New York Times that, “President Obama will propose a 10-year budget on Monday that stabilizes the federal deficit but does not seek balance, instead focusing on policies to address income inequality as he adds nearly $6 trillion to the debt.

“The budget — $4 trillion for the 2016 fiscal year — would hit corporations that park profits overseas, raise taxes on the richest of the rich and increase the incomes of the middle class through new spending and tax credits. Mr. Obama will challenge the newly elected Republican Congress to answer his emphasis on wage stagnation, according to congressional aides briefed on the details.”



Todd Neeley reported on Friday at DTN that, “The U.S. Environmental Protection Agency’s decision to relax sustainability standards for biodiesel is opening the import market for Argentine producers. That couldn’t have come at a worse time for a U.S. biodiesel industry already on the ropes from EPA delays on the Renewable Fuel Standard.

“Industry representatives told reporters Friday the U.S. biodiesel industry is in full shutdown mode, at a time when the U.S. soon could begin to see an influx of Argentine biodiesel. Anti-dumping duties imposed on Argentina by the European Union in recent years effectively closed off Argentine biodiesel to the EU. That means about 450 million gallons could find its way to the U.S. market initially. One representative said the industry is not ruling out legal action.”

For additional analysis on biodiesel, see this farmdoc daily update last week from University of Illinois agricultural economist Scott Irwin, “The Profitability of Biodiesel Production in 2014.”

Keith Good

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