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FarmPolicy Recap: Trade and the Ag Economy

Trade Developments

News reports continue to document the negative implications for some segments of the U.S. agricultural sector as a result of the ongoing labor dispute effecting the operation of some West Coast Ports.

While more details regarding the dispute were highlighted on the front page of Wednesday’s Los Angeles Times, Shan Li and Diana Marcum focused on the impacts of the dispute in an article in the Business section of Wednesday’s paper.

The writers stated that, “The port stalemate is devastating for some farmers, particularly in California’s $2.4-billion citrus industry.

This time of the year, more than 25% of the crop is meant for export. But delayed shipping has left navel oranges and lemons rotting on ships. Chinese officials have started refusing all citrus from Tulare County because they received decayed fruit, said Joel Nelsen, president of California Citrus Mutual.

“‘This is one of the most challenging seasons we’ve faced in a quarter of a century,’ he said, noting that exports are down 60% from the same time two years ago, when growers exported $385 million worth of oranges and $109 million of lemons.”

The LA Times article indicated that, “Packers have cut worker hours, and picking has slowed or stopped. Stranded fruit may flood the U.S. market, dragging down prices. Other countries are moving into foreign markets that U.S. growers can’t reach because of the port logjam; Egypt, for example, is shipping oranges to South Korea.

“‘When we lose customers, it takes us years to get them back. We’ve seen that after the freezes,’ said Bob Blakely, vice president of the citrus trade group. ‘This is a train wreck.’”

And Bloomberg writer James Nash reported on Tuesday that, “Bottlenecks related to the labor dispute that began last May are creating headaches for scores of U.S. companies, including McDonald’s Corp., Macy’s Inc., ConAgra Foods Inc. and Levi Strauss & Co. The loading and unloading of cargo has been suspended on six weekend and holiday days this month. The congestion may cost retailers as much as $7 billion this year, according to the consulting firm Kurt Salmon.”

In other trade news, Jennifer Steinhauer reported in today’s New York Times that, “The 40,000 chickens — a few short weeks from becoming Valu-Paks at the supermarket — scratched their way toward the rows of water drips, eager for a little midday sip. Eyeing an open door, one bird made a vague attempt to wander away, before it was gently returned to the brood.

Such prancing poultry rests at the center of a major trade dispute between the United States and South Africa, with large economic stakes, especially in states like Delaware, the birthplace of the American chicken industry.”

Wednesday’s article explained that, “But one of the industry’s potentially most lucrative importers, South Africa, has been placing tariffs on American chickens for years, essentially shutting them out, frustrating farmers, trade officials and members of Congress from the unfortunately named Chicken Caucus.

“‘There are 14,000 people in my state whose lives depend on chicken,’ said Senator Chris Coons, Democrat of Delaware. ‘Chicken here is not just a product; it’s a way of life.’

“American officials, led by Mr. Coons and Senator Johnny Isakson, Republican of Georgia, a huge chicken-producing state, are now threatening South Africa’s continued inclusion in a trade partnership that has been particularly beneficial for that nation.”

Ms. Steinhauer noted that, “If South Africa continues to shun the chickens of America to protect its own, officials say, then perhaps that nation should be removed from the trade agreement that allows it to send its wines, luxury automobiles and other goods here.

“‘You want unlimited access to American market to sell autos, yet you won’t let my state send its biggest agriculture export into your country?’ fumed Mr. Coons, who has long been involved in African affairs.

“The dispute over chickens comes just as President Obama is pushing an aggressive trade agenda in Congress. But for some lawmakers the rejection of American chicken is emblematic of other disputes, and evidence that trade agreements often do not live up to their billing for the United States.”

Meanwhile, Sen. Amy Klobuchar (D., Minn.) recently concluded a trip to Cuba with other lawmakers, while Rep. Collin Peterson (D., Minn.) is also in Cuba this week with a group of Democratic House Members- see this FarmPolicy update for more details.

The Politico Morning Agriculture newsletter indicated on Wednesday that, “Add Senate Agriculture Committee Chairman Pat Roberts to the long list of lawmakers headed to Cuba. The Kansas Republican told POLITICO recently that he would be traveling with Sen. Jeff Flake (R-Ariz.) and other members of Congress to the island nation, though a date for the trip has not yet been published.

But that doesn’t necessarily mean Roberts supports The Freedom to Export to Cuba Act, legislation that would lift the embargo against Cuba co-sponsored by Republicans Flake and Mike Enzi (Wyo.) and Democrats Debbie Stabenow (Mich.) Amy Klobuchar (Minn.), Patrick Leahy (Vt.) and Dick Durbin (Ill.). When asked about the bill, Roberts responded: ‘At this time I’m keeping my powder dry … There are a lot of things that have to be worked out. We have to have a much more realistic approach. You really have to sit down and work things out and that hasn’t been done. That kind of hard work has to be done before we introduce legislation.’”

And House Ag Committee Chairman Mike Conaway (R., Tex.) was on KWEL radio (Midland, Tex.) this morning and took phone calls from listeners. Chairman Conaway briefly discussed Trade Promotion Authority with one caller; to hear this discussion, just click here (MP3- 2:00).

Live on the air with Craig Anderson on KWEL, tune in now to listen!

A photo posted by Mike Conaway (@mikeconawaytx11) on

Agricultural Economy

Bloomberg writer Jeff Wilson reported on Tuesday that, “U.S. farmers from Louisiana to North Dakota are preparing to switch more land to soybeans as they seek to limit losses from a slumping corn market.

“While corn remains the biggest domestic crop, prices have tumbled so much after two years of record harvests that the grain fetches less than it costs some farmers to produce. For the first time since the 1970s, corn planting will decline for a third straight season, while soybean acreage expands to the most ever, a Bloomberg survey of analysts showed.

“Look no further than the 3,100 acres Dan Anderson farms in Illinois. From 2007 to 2013, corn generated $150 more cash per acre, Anderson said. Now, there’s no revenue difference. Even though soybean prices also have dropped, they cost about half as much to grow and are better for the soil. The 62-year-old plans to sow more of the oilseed than corn for the first time ever.”

The Bloomberg article noted that, “Perry Vieth, the founder of Ceres Partners LLC, which manages more than 59,000 acres in five Midwest states for investors, says farmers will plant less corn because there is less capital at risk growing soybeans. Tenant farmers are planning to sow 45 percent of their land to soybeans, up from 35 percent, while corn planting drops to 55 percent from 65 percent, he said.

“‘Corn and soybeans margins are thin,’ Vieth said from Granger, Indiana. ‘Farmers will continue to plant corn on the best acres, but will shift to soybeans on more marginal land.’”

The USDA’s Economic Research Service indicated yesterday in its Livestock, Dairy, and Poultry Outlook that, “Accelerating production of competing proteins—in broiler and poultry production in particular, along with slowing pork exports and smaller declines in 2015 beef production—are likely to drag hog prices down this year. For 2015, hog prices are expected to average $54-58 per cwt, over 26 percent below prices last year.”

The ERS update noted that, “The all-milk price for 2015 is forecast at $17.40-$18.10 per cwt, a reduction from last month’s forecast of $17.75-$18.55 per cwt.”

And with respect to cattle, ERS stated that, “USDA National Agricultural Statistics Service (NASS) released its Cattle report January 30, which included a number of revisions to the January 1, 2014 inventory. Total cattle and calf inventories for January 1, 2014, were almost 800 thousand head larger than the prior estimate for 2014. Included in the new higher numbers were 42 thousand additional beef cows and about 80 thousand heifers retained for beef cow replacement. The 2014 calf crop was also revised upward by 300 thousand head. In addition to generally revising January 1, 2014 cattle numbers upward, NASS also reported higher January 1, 2015 inventory numbers for many categories. The total cattle and calf inventory increased about 1 percent from 2014, with about 2 percent more beef cows and 4 percent more heifers for beef cow replacement. Producers indicated that they expect 7 percent more heifers to calve during 2015. States with the largest increases in all cattle and calves include Oklahoma and Texas, with a 6- and 7-percent increase, respectively. Overall, the total cattle and calf inventory is still historically low, but coupled with revisions to 2014, the report shows a faster than anticipated herd expansion, with more beef cows and a large retention of heifers.”

Reuters writer Karl Plume reported recently that, “Craig Uden, who fattens cattle for beef on his Nebraska feedlot, expects to cut his energy costs by as much as a quarter this year because of falling oil prices – a silver lining in an otherwise tough rural economy.”

Keith Good