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Thursday Morning Update: Crop Insurance; Policy; Regulations; Ag Economy; and, Biotech

Crop Insurance- GAO Report

On Wednesday, the Government Accountability Office (GAO) released a report on crop insurance titled, “In Areas with Higher Crop Production Risks, Costs Are Greater, and Premiums May Not Cover Expected Losses.”

A summary and highlights of the report have been posted here, at FarmPolicy.com.

Agri-Pulse reporter Philip Brasher, in an article from yesterday, provided a brief and thorough look at the GAO report.

Mr. Brasher reported that, “Farmers in drought-prone areas of the Plains and other high-risk regions often aren’t being charged enough for crop insurance, according to congressional auditors.”

Mr. Brasher explained that, “From 2005 through 2013, government costs averaged 14 cents per dollar of expected crop value in higher-risk counties versus 5 cents per dollar in lower-risk ones, according to GAO. Those differences mean that for two farms, each with an expected crop value of $1 million, it cost the government on average $140,000 to insure a grower in a higher-risk county versus $50,000 in the lower-risk one.

In 2013, the cost gap between higher risk and lower counties was 17 cents versus 5 cents per dollar of crop value.

RMA challenged some aspects of GAO’s analysis as well as the recommendations. In a letter published as part of the report, RMA Administrator Brandon Willis said that the agency already provided enough cost information and said that the agency had to be cautious about raising rates.”

The Agri-Pulse article noted that, “The American Association of Crop Insurers, which represents companies that provide the coverage, applauded the GAO for what the group called its ‘constructive approach.’

“‘It is important to recall that program costs and rates aren’t necessarily the same thing. That being said, we do have concerns about the level of rates in parts of the program,’ the group said in a statement.

“‘We know that any increases in program costs will only make the crop insurance program a bigger target for its critics.’”

 

Policy Issues

Jonathan Coppess, Gary Schnitkey, Nick Paulson, John Newton (University of Illinois) and Carl Zulauf (Ohio State University) indicated in an update yesterday at the farmdoc daily blog (“Trying to Reason with Price Forecasts and Program Decisions”) that, “Commodity price expectations for the next five crop years are a big driver (farmdoc daily January 27, 2015) of the farm program decision. To assist with that decision, the Illinois-led coalition and the Agricultural Policy Analysis System (APAS) web-based tool are providing an additional price perspective that is based on Chicago Board of Trade (CBOT) futures market prices for corn, soybeans and wheat. This article further evaluates corn and soybean prices for producer decision making; it builds upon previous discussions about price forecasts and the web-based tools (farmdoc daily August 7, 2014; May 13, 2014; February 4, 2015; February 12, 2015; February 17, 2015).”

Reuters news reported yesterday that, “U.S. farmers will boost soybean plantings to a record 86.052 million acres this spring and reduce sowings of corn to the lowest in five years, according to a survey of growers released on Wednesday by Illinois-based research and brokerage firm Allendale Inc…USDA will release its annual prospective plantings report that is based on surveys of tens of thousands of farmers on March 31.”

On a separate issue, Arthur Delaney reported yesterday at The Huffington Post that, “Roughly 60,000 veterans will be cut from food stamps next year absent policy changes at the federal level, a liberal think tank warned Tuesday.

“The vets represent a small share of the million Americans the Center on Budget and Policy Priorities expects to be kicked off the Supplemental Nutrition Assistance Program next year. The caseload cutback will occur as states re-impose a three-month time limit for recipients who are able-bodied, working-age adults without dependents.”

This morning, the Senate Appropriations Agriculture Subcommittee will hear testimony from Dr. Margaret Hamburg, the outgoing commissioner of the Food and Drug Administration.

Recall that on March 4, the House Appropriations Subcommittee on Agriculture heard testimony from Dr. Hamburg.

During the discussion portion of that hearing, Subcommittee Chairman Robert Aderholt (R., Ala.) brought up the recent 2015 Dietary Guidelines Advisory Committee report and noted to Dr. Hamburg that, “Let me switch over to dietary guidelines. The Department of Health & Human Services, and of course FDA is a part of that, has a lead role in developing the dietary guidelines for Americans in 2015. The Secretary of Agriculture appeared before this subcommittee, was sitting where you are sitting just about a week ago. He made a commitment to adhere to the statutory directive for developing the dietary guidelines for Americans. And as he put it, and this was his quote, “I know my role and I will color within the lines.”

More details on the House hearing from March can be found here, at FarmPolicy.com.

More broadly on the Guidelines report, AP writer Mary Claire Jalonick reported yesterday that, “The meat industry is seeing red.

“Meat companies have tried to rehabilitate an image tarnished in recent years by health and environmental concerns. Now the industry is swiftly and aggressively working to discredit a proposal for new dietary guidelines that recommends people eat less red and processed meat.”

“The proposal last month by a government advisory committee also relegates the health benefits of lean meat to a footnote to the main recommendations.”

Ms. Jalonick noted that, “Agriculture Secretary Tom Vilsack has not said what the final guidelines will look like. But he has pledged to keep them focused on nutrition and diet, giving the meat industry some hope that perhaps at least the environmental portion could be left out.”

Tennille Tracy reported yesterday at the Washington Wire Blog (Wall Street Journal) that, “A panel of nutrition experts generated controversy last month when it pressed the federal government to consider the environment when issuing new dietary guidelines later this year. Generally speaking, that would mean asking Americans to eat less meat and more plant-based foods.

“Ever since then, the question has been whether the agencies developing the recommendations – the Departments of Agriculture and Health and Human Services – would take up the suggestion and weigh the impact of food on air and water quality, among other issues.

“In an interview Wednesday with The Wall Street Journal, Agriculture Secretary Tom Vilsack suggested that, for him, the answer is no – that so-called sustainability issues fall outside the scope of the dietary guidelines.”

Yesterday’s update added that, “‘I read the actual law,’ Mr. Vilsack said. ‘And what I read …was that our job ultimately is to formulate dietary and nutrition guidelines. And I emphasize dietary and nutrition because that’s what the law says. I think it’s my responsibility to follow the law.’”

Ms. Tracy noted that, “[Sec. Vilsack] said Wednesday that the advisory committee, with a long leash to consider various aspects of a perfect diet, is like one of his granddaughters who colors outside of the lines. He, on the other hand, was like a younger grandson in preschool.

“‘The little guy, he’s in preschool now, he’s trying to learn how to color inside the lines,’ Mr. Vilsack said. ‘I’m more like my grandson.’”

The Washington Wire update concluded by stating that, “Mr. Vilsack said he could not rule out the possibility that sustainability will play a role in the dietary guidelines. HHS is jointly responsible for their development and both agencies are still gathering comments, he said.

“Both departments ‘will review the advisory report, along with comments from the public, and input from other federal agencies, as we begin the process of updating the guidelines,’ an HHS spokesman said.”

An update yesterday from Kansas State University Extension on the Dietary Guidelines indicated that, “Two K-State specialists, focused on human nutrition and meat science respectively, weigh in on what the new recommendations mean for consumers.”

In a look back at dietary issues, Roberto A. Ferdman reported yesterday at the Wonkblog (Washington Post) that, “Decades-old documents have surfaced showing that the powerful U.S. sugar industry dramatically influenced the government’s medical research on dental care—and ultimately what officials recommended for American diets.

“Despite a widespread understanding that sugar played a key role in tooth decay, sugar industry leaders advocated for policies that did not recommend people eat less sugar, according to an archive of industry letters dating back to the 1950s preserved by the University of Illinois and analyzed by a team of researchers at the University of California in San Francisco. And the government listened, according to a new report.”

 

Regulations

A news release yesterday from the American Farm Bureau Federation (AFBF) stated that, “A California law that regulates agricultural production in other states is unconstitutional for multiple reasons, and a lower court ruling that barred other states from bringing suit against California on behalf of their citizens should be reversed, according to the American Farm Bureau Federation.

“In a friend-of-the-court brief filed today in the U.S. Court of Appeals for the Ninth Circuit (State of Missouri, et al. v. Harris, et al.), AFBF urged the court to find that six states have standing to challenge California’s egg law.”

David Kesmodel reported yesterday at The Wall Street Journal Online that, “Should egg-laying chickens roam free or live in roomy cages?

That question is roiling the $9 billion U.S. egg industry as producers grapple with new state laws and food-company policies aimed at improving the well-being of the country’s 305 million egg-laying hens. The revised rules target the cramped cages that have dominated the industry for decades, enclosures that typically confine birds to 67 square inches each—smaller than a standard sheet of paper.

“Many egg farmers are torn between two strategies: investing in expensive ‘cage-free’ facilities or building larger cages, a less-costly move that generally complies with new laws but doesn’t satisfy all food purveyors and animal-rights advocates.”

The Journal article noted that, “Setting off the latest egg-farming conundrum was California, which in January began requiring every shell egg sold in the most-populous state to come from hens that have room to lie down, turn in a circle and extend their wings. Washington, Oregon, Michigan and Ohio have hen-cage laws taking effect in coming years, and bills are pending in other states.”

Mr. Kesmodel pointed out that, “Marcus Rust, chief executive of Rose Acre Farms, one of the largest U.S. egg producers—with roughly 25 million hens—is wagering that the future lies in cage free. About 18 months ago, Mr. Rust said, his closely held company decided that every facility it builds or refurbishes will lack cages.

“The move came down to dollars and cents, not what’s best for Rose Acre’s hens, most of which remain caged for now. ‘Farming is about making a profit, and if someone is willing to pay us extra, we’re going to do that,’ said the 58-year-old, whose grandfather started the egg business that became Rose Acre. It will take up to 30 years to completely convert to cage-free housing, Mr. Rust said.”

Meanwhile, DTN writer Todd Neeley reported yesterday that, “The Des Moines Water Works Board of Trustees on Tuesday voted to sue 10 rural drainage districts in and around the Des Moines and Raccoon rivers for elevated nitrate levels that have forced the water-works department to increasingly filter drinking water supplies.

“The board announced in a news release the lawsuit will allege those districts violated the Clean Water Act and should be required to apply for National Pollution Discharge Elimination, or NPDES, permits.

The lawsuit ultimately could affect the way farmers manage fertilizer in the affected counties.”

Additional reporting on this development appeared on the front page of Wednesday’s Des Moines Register, a closer look at that coverage is available at FarmPolicy.com.

 

Agricultural Economy

Bloomberg writers Megan Durisin, Shruti Date Singh and Alan Bjerga reported yesterday that, “The U.S. government confirmed a case of bird flu in Arkansas as the disease spreads into the southeast of the country, the heart of the domestic poultry industry…The disease has spread this month after appearing in a migratory route along the Mississippi River.”

The Bloomberg writers explained that, “China has halted all U.S. poultry imports since January. Mexico, the top importer of U.S. chicken and turkey, expanded bans this week to restrict shipments from other states with cases in commercial flocks: California, Missouri and Minnesota, the top turkey producer. The European Union, Guatemala, Jordan and more than a dozen other countries have also restricted some U.S. shipments.”

Meanwhile, Ilan Brat reported in today’s Wall Street Journal that, “Shake Shack Inc. posted a bigger-than-expected quarterly loss, driven partly by higher costs for beef and other ingredients, a setback for the boutique burger chain after its triumphant IPO earlier this year.”

The article pointed out that, “Like many fast-casual chains, Shake Shack serves meat from producers that adhere to more stringent welfare practices and don’t use antibiotics or hormones. Those claims especially appeal to consumers in their 20s and 30s, many of whom have grown up deeply suspicious of the established food industry, analysts and executives say.”

In trade news, The Washington Post editorial board indicated today that, “President Obama’s proposed Trans-Pacific Partnership trade agreement is in trouble on Capitol Hill. Senate Finance Committee Chairman Orrin Hatch (R-Utah) says a bill to enable expedited consideration of the pact will be delayed until April because of opposition from liberal Democrats and a few tea party Republicans. The latest rallying cry for TPP foes is that it would allegedly threaten environmental and labor regulations, as well as U.S. sovereignty, for the benefit, as Sen. Elizabeth Warren (D-Mass.) noted recently, of ‘the biggest multinational corporations in the world.’”

The Post stated that, “On balance, though, free-flowing capital creates more jobs and wealth than it destroys. The TPP would not only increase economic activity but also enhance geopolitical ties between the United States and its East Asian allies, especially Japan. No amount of alarmism should distract Congress from these benefits.”

 

Biotech

Reuters writer Barbara Lewis reported yesterday that, “EU politicians on Wednesday will sign a new law on the cultivation of genetically modified (GM) crops in the European Union, clearing the way for a wave of approvals after years of deadlock.

One of the first crops to get European Commission endorsement is likely to be an insect resistant maize known as 1507, whose developers DuPont and Dow Chemical have been waiting 14 years for the EU executive to authorize its cultivation in the EU.”

The article noted that, “Under the old rules, member states could provisionally ban or restrict a GM crop on their territory only if they had new evidence it constituted a risk to human health or the environment or in the case of an emergency.

“The GM industry says the new law, which gives greater scope to restrict GM farming, flouts scientific evidence that it is safe, while environment campaigners say it will open the floodgates to crops they say are linked to a decrease in biodiversity.”

Keith Good