FarmPolicy

April 23, 2017

Friday Morning Update: Biotech; Policy; Ag Economy; Iowa Ag Summit; and, Biofuels

Biotech

Jacob Bunge reported in today’s Wall Street Journal that, “U.S. regulators for the first time are proposing limits on the planting of some genetically engineered corn to combat a voracious pest that has evolved to resist the bug-killing crops, a potential blow to makers of biotech seeds.

“The measures proposed by the Environmental Protection Agency represent a bold step to thwart the corn rootworm, a bug that ranks among the most expensive crop threats to U.S. corn farmers.

“The plan is aimed at widely grown corn varieties sold by Monsanto Co. , the first to sell rootworm-resistant corn, and rival seed makers including DuPont Co. and Dow Chemical Co. Such corn seeds have been genetically modified to secrete proteins that are toxic to destructive insects, but safe for human consumption, helping to reduce farmers’ reliance on synthetic pesticides.”

Mr. Bunge pointed out that, “The EPA’s proposal would require seed companies to limit some Midwestern farmers’ practice of sowing fields with corn year after year in areas harboring resistant rootworms, whose cream-colored larvae gnaw on corn roots and stunt plants’ growth. The EPA is concerned that if the resistance continues, it will lead farmers to use more synthetic chemicals to thwart the bug, creating environmental risks.

“Representatives of the biotech-seed industry have criticized some parts of the proposal, which was released in January and is subject to a public-comment period until March 16, after which the EPA will finalize any new requirements.

“The agency is taking a tougher stance because the industry’s efforts haven’t done enough to stem the spread of pesticide-resistant rootworms in the Midwest, officials said.”

The Journal article added that, “Among its proposed changes, the EPA would require makers of rootworm-resistant corn to curb some repeated corn planting in areas badly afflicted by the pest. In portions of Iowa, Illinois, Nebraska and some surrounding states—what EPA officials called the rootworm ‘red zone’—the agency is pushing for about 35% of corn fields to be planted with another crop, such as soybeans, after two consecutive years of planting of rootworm-resistant biotech corn. Other high-risk fields should be planted with newer corn that can produce multiple types of bug-killing proteins, according to the EPA proposal.”

 

Policy Issues

Reuters writer Nathan Layne reported on Thursday that, “Costco Wholesale Corp is working toward eliminating the sale of chicken and meat from other animals raised with antibiotics that are vital to fighting human infections, senior executives at the third-largest U.S. retailer told Reuters on Thursday.

“The ongoing push by Costco, which sells 80 million rotisserie chickens a year, highlights growing pressure on the supply chain in the wake of this week’s announcement by fast-food giant McDonald’s Corp that it would stop buying chicken raised with so-called ‘shared-use’ antibiotics within two years.

“‘We are working towards, and working with our suppliers and the regulatory agencies… to see how we can get rid of shared-use antibiotics in animals,’ Craig Wilson, vice president of food safety at the Issaquah, Washington-based retail giant, said in a phone interview.”

The Reuters article stated that, “Wilson and Costco Chief Financial Officer Richard Galanti said the company did not have a target date for reaching that goal, a reflection of supply constraints.

“Veterinary use of antibiotics is legal. However, as the rate of human infections from antibiotic-resistant bacteria increases, consumer advocates and public health experts have become more critical of the practice of routinely feeding antibiotics to chickens, cattle and pigs.”

Reuters writers Lisa Baertlein and P.J. Huffstutter reported earlier this week that, “A plan by McDonald’s Corp  to phase out chicken raised with certain kinds of antibiotics at its 14,000 U.S. restaurants will put additional pressure on an already-stressed supply chain.

Antibiotic-free chicken currently accounts for a tiny portion of total U.S. supplies, and an increasing desire on the part of consumers for more ‘natural’ products has meant that demand sometimes exceeds supply.”

The Reuters writers explained that, “Available product has been so tight that when six of the largest U.S. school districts tried to make the switch to antibiotic-free poultry last year, chicken sellers such as Tyson Foods Inc and Pilgrim’s Pride Corp said they could not change their production systems quickly enough to meet the demand.

The decision by the world’s biggest restaurant chain to jump into the fray seems likely to complicate things further, tightening supply and thereby raising prices, said Athlos Research principal Jonathan Feeney.”

Meanwhile, a news release yesterday from Sen. Heidi Heitkamp (D., N.D.) stated that, “During National Nutrition Month, U.S. Senator Heidi Heitkamp today announced that she reintroduced her bipartisan bill to provide schools in North Dakota and across the country with the resources and equipment they need to better serve healthy meals, helping students learn and grow.”

And an update yesterday from the FDA indicated that, “The U.S. Food and Drug Administration today announced results from its milk sampling survey, involving the testing of nearly 2,000 dairy farms for drug residues in milk. More than 99 percent of the samples are free of drug residues of concern– underscoring the safety of the US milk supply. These findings provide evidence that the nation’s milk safety system is effective in helping to prevent drug residues of concern in milk, even in those limited instances when medications are needed to maintain the health of dairy cattle.”

 

Agricultural Economy

Henry Sanderson reported on Thursday at The Financial Times Online that, “China plans to continue stockpiling grain, edible oil and other commodities but will reduce its consumption of coal as it plans to tackle air pollution.

“The country will spend 154.6bn yuan ($24.67bn) this year on its stockpiles, an increase of 33 per cent, the Ministry of Finance said in a report to the National People’s Congress under way in Beijing. Last year spending rose 22 per cent.”

The FT article indicated that, “The money for stockpiling is mostly to pay subsidies for loans to build up reserves of grain and edible oil and to pay for losses on sales of cotton reserves, the ministry of finance said. It did not give details of what other commodities it plans to stockpile.

Corn prices have fallen to below $4 a bushel, from more than $8 in 2012, while wheat, at $4.91, has halved in price since 2012.”

Don Lee reported yesterday at the Los Angeles Times Online that, “California exports of agricultural products to the world fell 9% in the fourth quarter last year compared with a year earlier, and China was a leading factor. The state’s farm shipments to China alone plummeted 30% in the fourth quarter, with nuts, grapes and some other fruits down sharply.

“American exporters of fancy nuts, as well as wine and premium fruits, have been hit with a double whammy in China. Besides the economic slowdown there, demand for such goods has plunged because of the Chinese president’s anti-corruption campaign, which has officials cutting back on parties and gifts.

“‘There’s nothing really much I can do,’ said Ben Zhang of Bellevue, Wash., who spent the last four years developing a wine distribution business in China. With orders down dramatically, he said, he has 50 cases of premium wine stacked up in a warehouse in Shanghai.”

The LA Times article added that, “Bowen Flowers, a fourth-generation cotton farmer in Clarksdale, Miss., blames the plunge in cotton markets on Chinese stockpiling and government subsidies for its farmers. He’s dealing with it by shifting production to other crops. Only problem, he said, is that prices of most other commodities have fallen too.

“‘We got the same problems with soybeans, corn and rice,’ he said. ‘We’ll just have to cut our costs back as much as we can and wait it out.’”

Alexandra Wexler reported yesterday at The Wall Street Journal Online that, “Cotton prices slid to a three-week low on Thursday following disappointing demand data.

“The U.S. Department of Agriculture reported net-sales cancellations of 62,500 bales for the week ended Feb. 26 in its weekly export-sales report Thursday morning, after No. 1 consumer China canceled an order for 114,000 bales of U.S. cotton. Each bale weighs 480 pounds.”

In other news, Bloomberg writer Pablo Rosendo Gonzalez reported yesterday that, “Argentina’s soybean production forecasts are set to be lowered as the highest rainfall in half a century dims the outlook for yields and impedes harvesting.”

And a news release on Thursday from the Food and Agriculture Organization of the United Nations (FAO) stated that, “The FAO Food Price Index declined to a 55-month low in February, dropping 1.0 percent from January and 14 percent below its level a year earlier;” additional details at FarmPolicy.com.

Meanwhile, the AP reported yesterday that, “Federal officials say a serious strain of bird flu has been found in a Minnesota commercial turkey flock.

“The U.S. Department of Agriculture says the finding in Pope County, in western Minnesota, is the first appearance of the highly pathogenic H5N2 strain in the Mississippi flyway.

“It’s the same strain of avian influenza that’s been confirmed in backyard and wild birds in Washington, Oregon and Idaho. Officials consider the risk to people to be low. No human infections have been detected.”

 

Iowa Ag Summit

An update on this weekend’s Iowa Ag Summit has been posted at FarmPolicy.com, note that live coverage of Saturday’s event is available at this Des Moines Register webpage– DesMoinesRegister.com/AgSummitLive.

 

Biofuels

University of Illinois agricultural economist Scott Irwin indicated yesterday at the farmdoc daily blog (“2014 Really Was an Amazing Year for Ethanol Production Profits”) that, “The changing fortunes of the ethanol industry in the face of crashing crude oil prices have attracted a lot of attention. For example, the topic has been the subject of three farmdoc daily articles in recent months (November 12, 2014; December 4, 2014; January 30, 2015). The focus on the changing profit outlook for ethanol producers can obscure the fact that the industry is also coming off the best year it has ever had in terms of profitability. The purpose of this article is to present estimates of ethanol production profitability in 2014 and compare the profits to those earned over 2007-2013.”

After detailed analysis, yesterday’s farmdoc daily update concluded by saying: “Ethanol producers had a record year of profitability in 2014. The representative Iowa ethanol plant that we have tracked since 2007 earned an estimated pre-tax net profit of more than $50 million. This was driven by the happy combination of relatively high ethanol prices and relatively low corn prices. The large profits of 2014 (and 2013) will provide a much needed financial cushion as the industry faces a substantially changed profit outlook in 2015. The recent crash in crude oil prices ended the record streak of ethanol production profits that began in March 2013. The key question moving forward is whether 2013-2014 profits were a temporary blip due to a unique set of circumstances or reflected a new normal driven by a robust ethanol export market.”

Keith Good

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