FarmPolicy

July 19, 2019

Friday Morning Update: Policy; Trade; Ag Economy; Biofuels; Biotech; and, Budget

Policy Issues

On Thursday, the House Agriculture Nutrition Subcommittee met, “to review SNAP recipient characteristics and dynamics.” Yesterday’s hearing followed Wednesday’s full House Ag Committee meeting on SNAP and nutrition issues.

A FarmPolicy.com summary and overview of Thursday’s Subcommittee hearing is available here.

Over the past two days, the House Ag Committee has been presented with a large amount of detailed analysis and information on SNAP; it appears that Chairman Mike Conaway’s (R., Tex.) top-to-bottom review of the program is off to a substantive and serious start.

In remarks on the House floor Thursday, Ag Nutrition Subcommittee ranking member Jim McGovern (D., Mass.) indicated that, “Mr. Speaker, yesterday the House Agriculture Committee – where I am proud to serve – held the first hearing in its ‘top-to-bottom’ review of the Supplemental Nutrition Assistance Program, or SNAP.

“SNAP is the nation’s pre-eminent anti-hunger program that provides critical food assistance to more than 46 million Americans. Last year, 16 million children – or 1 in 5 American children – relied on SNAP. Unfortunately, every indication is that Republicans will once again try to cut this critical safety-net program.”

Note that an update yesterday at FarmPolicy.com on regulatory issues included an announcement that the House Ag Conservation and Forestry Subcommittee will be holding a hearing next week, “To review the definition of ‘waters of the United States’ proposed rule and its impact on rural America.”

Meanwhile, the House Appropriations Subcommittee on Agriculture continued its review of USDA budget issues yesterday and heard testimony from Al Almanza, the Deputy Under Secretary for Food Safety.

In part, Mr. Almanza noted that, “The President is again asking Congress for authority to submit fast-track proposals to reorganize or consolidate Federal programs and agencies to reduce the size of Government or cut costs. With this authority, the Administration is proposing to consolidate the FSIS and the food safety components of the Food and Drug Administration to create a single new agency within the Department of Health and Human Services.”

Subcommittee Chairman Robert Aderholt (R., Ala.) noted in his opening remarks yesterday that, “America is a world leader in agriculture, and we are blessed with the safest food supply in the world. There is a long history of support in Congress for meat and poultry inspection, which plays a unique role at USDA. That is why I question the President’s proposal merging the duties of FSIS with the Food and Drug Administration under the Department of Health and Human Services (HHS).

HHS is a large, cumbersome agency with a myriad of responsibilities, and I fear food safety would not be one of their top priorities.”

Also with respect to food related issues, The New York Times editorial board indicated today that, “Massive food waste by humanity is an undisputed fact documented daily in tons of discarded scrapings from dinner plates around the world. It is now being measured as a serious threat to the global environment and economy, with an estimated one-third of all the food produced in the world left uneaten at a cost of up to $400 billion a year in waste disposal and other government costs… These stark facts have been laid out in a new report from the Waste and Resources Action Program, or WRAP, a British antiwaste organization. The organization warns that the problem is getting worse because the global middle class is, fortunately enough, expanding. According to the report, by 2030, consumer food waste will cost an estimated $600 billion a year — a 50 percent increase from current costs — unless there is a wide effort to change the trend.”

And Helena Bottemiller Evich reported yesterday at Politico that, “First lady Michelle Obama is enlisting some high-wattage star power — including actresses Jessica Alba and Kristen Bell, San Francisco 49ers quarterback Colin Kaepernick and New York Giants wide receiver Victor Cruz — in a new national campaign to convince moms and teens to eat fruits and veggies.

“The celebrity-infused marketing blitz, announced Thursday, will include traditional ad buys, social media and guerrilla marketing and follows several major White House-backed produce promotions, further solidifying Obama as a member of ‘team produce.’”

In a column in today’s Wall Street Journal, Ohio State University Professor Cheryl Achterberg addressed the “recommendations submitted this month to the federal government by 15 experts in nutrition and health—the Dietary Guidelines Advisory Committee,” and noted that, “Heeding these guidelines may improve the health of many Americans, though evidence indicates that other dietary patterns such as low-carbohydrate, higher-fat diets (including meats) may have positive results as well. Nevertheless, a 2007 article in the Journal of Nutrition found that just 3%-4% of Americans follow the guidelines. Not for governmental want of trying. The U.S. government has been providing nutrition guidance to the public since 1980. Yet 35 years later their influence on eating habits has been negligible.”

Dr. Achterberg added that, “While Americans may not adhere to the government’s dietary guidelines, the guidelines can direct policy changes that affect the millions fed by federal nutrition assistance and other programs every day. When policy makers adapt to this reality and partner with American consumers rather than preach at them, the nation’s eating habits will improve.”

 

Trade

David Nakamura reported in today’s Washington Post that, “President Obama promoted his trade agenda in a series of local television interviews Thursday as his administration announced a series of small-scale initiatives aimed at boosting exports in rural communities.

“The coordinated push comes as the White House is ramping up efforts to win support in Congress for expanded powers to finalize a major free trade deal in the Asia­Pacific region, which the president has called a key priority for his final two years in office.”

The Post article stated that, “Among the White House’s new initiatives are a series of reverse trade missions to help rural businesses meet foreign buyers [see related Fact Sheet] as well as an effort to double the number of those businesses attending international trade shows.”

And a news release yesterday from USDA noted that, “In conjunction with a series of Made in Rural America Executive Actions announced today by President Obama and the White House, the [USDA] released data today showing the opportunities for agriculture of the Trans Pacific Partnership (TPP) to help boost agricultural exports across the 50 United States.”

Vicki Needham reported yesterday at The Hill Online that, “Top White House and several Senate Democrats showed on Thursday that a gulf remains between them over the direction of U.S. trade policy.

“Top Obama administration officials touted trade’s benefits with a new export report and the unveiling of expanded plans to help rural businesses reach more markets outside the United States.

“Meanwhile, a group of senators — seven Democrats and one Independent — argued on the floor that they aren’t yet convinced that trade will lead to more job creation and boost workers’ paychecks.”

 

Agricultural Economy

University of Illinois agricultural economists Scott Irwin and Darrel Good penned an update yesterday at the farmdoc daily blog titled, “Forming Expectations for the 2015 U.S. Average Corn Yield: What Does History Teach Us?

After extensive analysis, yesterday’s update concluded by note that, “The U.S. average corn yield since 1960 has shown: i) large positive and negative deviations from trend, ii) the duration of consecutive years with above or below trend yields has varied considerably, iii) the correlation between yield deviations in consecutive years is negligible, and iv) the pattern of yield deviations following years of very large positive deviations (like 2014) is quite mixed. This diverse and largely random set of patterns suggests that the most objective early-season yield expectation for any year, including 2015, should be based on the trend of actual yields. A range of trend yield projections is plausible depending on the sample period, the functional form of the trend model, and whether a bias adjustment is considered or not. Given the various alternatives, we maintain that yield expectations should be based on the longest sample of data with a stable trend yield component. Since we have been unable to find significant evidence of trend yield shifts since 1960, we argue that the period of 1960-2014 best meets this criterion. After adjusting for bias, the best linear fit of actual yields in the U.S. from 1960 through 2014 results in a trend yield projection for 2015 of 164 bushels per acre. This is 2.8 bushels less than the USDA’s 2015 trend yield projection for corn of 166.8 bushels released at last week’s Outlook Forum. The higher trend projection by the USDA is likely due to a sample that starts in the drought year of 1988 and a ‘certainty-equivalent’ approach that assumes with certainty average weather and planting progress will occur in 2015. Regardless of which trend projection is considered, there is, as usual, large risk of deviations from the projection. For example, we estimate there is roughly a one-in-ten chance of the U.S. average corn yield falling below 150 bushels and a two-in-ten chance of yield rising above 170 bushels. It’s no wonder that weather forecasters are in such high demand.”

Emiko Terazono reported yesterday at The Financial Times Online that, “The perils of forecasting the Chinese agricultural market came to the fore earlier this month when the US Department of Agriculture slashed its predictions for Chinese corn imports.

Last year, the USDA reckoned China was set to become the largest importer of grain. But mounting evidence of rising inventories and falling demand triggered a rethink and it has dramatically cut its forecasts. Last year’s long-term import forecast of 22m tonnes for 2023/24 has been reduced to just 6.5m.”

The FT article noted that, “‘The whole picture has really changed over the past 18 months or so,’ said Fred Gale, senior economist at the USDA’s economic research service.

Stronger demand for overseas, especially US, corn in 2011 and 2012, saw analysts both inside and outside China predict the country would become a net importer of the grain, which is mainly used for livestock and poultry feed and processed foods.”

Yesterday’s article added that, “After record crops in 2012 and 2013, and an abrupt drop off in consumption, China has found itself with a huge corn stockpile.

“‘It could take years for China to dispose of such large surpluses,’ says the USDA in its latest report on the country’s agricultural imports.

“Apart from the favourable weather, the story behind the rise in Chinese inventories will be familiar to traders in sugar and cotton. Beijing’s farmer support policies mean a higher support price for corn compared with international prices. Not only does it encourage domestic production but also purchases of cheap imports as global grain prices plunged.”

And Bloomberg writer Megan Durisin reported earlier this week that, “There’s little relief ahead for record U.S. steak and burger prices. While cattle ranchers like Brenda Richards are expanding herds for the first time in almost a decade, it can take two years to get more meat on the plate.”

 

Biofuels

A news release yesterday from Sen. Dianne Feinstein indicated that, “U.S. Senators [Feinstein] and Pat Toomey (R-Pa.) are working to repeal a law that drives up the cost of everything from gasoline to groceries.

“The Feinstein-Toomey Corn Ethanol Mandate Elimination Act of 2015, introduced today, abolishes the corn ethanol mandate in the Renewable Fuel Standard (RFS). Sen. Jeff Flake (R-Ariz.) is also a cosponsor of the measure.”

A news release yesterday from the National Farmers Union (NFU) indicated that, “[NFU] President Roger Johnson said that the Corn Ethanol Mandate Elimination Act would cripple rural America’s economy and be an enormous step backwards for America’s goal of energy independence by a decade or more.”

And a recent letter to President Barack Obama from renewable fuels industry leaders, called on the executive branch to implement the RFS and allow it, “to continue working as intended to create American green energy jobs and promote American innovation.”

 

Biotech

Reuters writer Tom Polansek reported yesterday that, “The number of U.S. grain elevators, mills and feedlots that will buy a type of biotech corn banned by China has more than doubled since July, indicating growing domestic acceptance for a product seen as a potential risk to international trade.

“The number of locations accepting corn containing Syngenta AG’s Agrisure Duracade trait increased to 1,652 from 672 in the past seven months, the seedmaker said in a statement on Thursday.

“The announcement, coming just before the start of the planting season, is aimed at convincing farmers to buy Duracade corn seed by assuring that they will have places to deliver their harvests.”

 

Budget

Sean Sullivan reported in today’s Washington Post that, “House Republicans on Thursday presented a plan for a stopgap bill that would fund the Department of Homeland Security for three weeks, raising hopes of averting a looming shutdown of the agency.”

Keith Good

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