FarmPolicy

July 24, 2017

U.S. Trade Representative Responds to China’s Announcement to Resume U.S. Beef Trade

Kelsey Gee reported on Thursday at The Wall Street Journal Online that, “U.S. trade officials on Thursday set out steps necessary for China to resume imports of American beef after a 13-year ban, though they didn’t lay out a timetable for the resumption of trade.

The U.S. Trade Representative said the move this week by Chinese officials to drop the ban was a ‘critical first step‘ to restoring market access for U.S. producers.

“The USTR and U.S. Department of Agriculture ‘look forward to China’s final audit report on beef, and subsequent discussions between the United States and China on the specific conditions that will allow trade to resume,’ the representative said in a statement.”

Ms. Gee added that, “The U.S. and China have sparred over acceptable farming practices, including as recently as this month, when the Obama administration launched a case against China at the World Trade Organization. The U.S. alleges that Beijing is subsidizing grain and rice growers above internationally-agreed levels.

“Chinese and U.S. regulators also disagree on whether or not to permit the use of a handful of different veterinary medicines used in animal agriculture.”

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Rains Negatively Impacting Upper Midwest- Crop Insurance Issues

The front page of Saturday’s Des Moines Register

Reuters writer Karl Plume reported yesterday that, “Heavy rains and flooding swamped a broad swathe of the northern Midwest this week, halting the harvest of corn and soybeans and forcing the closure of at least two Iowa crop processing plants, traders and farmers said on Friday.

Farmers’ concerns grew that standing water in fields could damage unharvested crops, while floodwaters swelled the Mississippi River and threatened to disrupt the loading of export-bound grain barges.

“Parts of northern Iowa and southern Minnesota received several inches of rain at midweek, with two-day rain totals topping 10 inches (25 cm) in some areas, meteorologists said.”

Mr. Plume explained that, “Farmers, meanwhile, are waiting for fields to drain and dry out before resuming the harvest, a process that will take longer in cooler September weather than it would in midsummer heat.

“Soggy conditions and waterlogged fields have raised concerns about crop damage and disease, which could reduce farmer revenues at a time when grain prices are already near multi-year lows.

“‘If (soybeans) are under water for more than a day or two, it will be bad,’ said University of Minnesota extension agronomist Seth Naeve.”

Yesterday’s article added that, “Just 2 percent of Minnesota’s soybeans and 2 percent of Iowa’s corn was harvested as of last Sunday, according to the U.S. Department of Agriculture.”

Meanwhile, William Edwards indicated in an update yesterday from Iowa State University Extension,that, “Some Iowa corn and soybean producers are facing substantial if not complete crop losses due to flooding. Fortunately, nearly 90 percent of Iowa’s corn and soybean acres are protected by Multiple Peril Crop Insurance (MPCI).”

Mr. Edwards explained that, “Most Iowa producers purchase crop insurance policies with a 75 to 85 percent level of coverage. This means that if crops are a total loss, the producer must withstand the first 15 to 25 percent of the loss. However, in 2016 nearly 90 percent of the crop acres insured in Iowa were covered under Revenue Protection policies, which offer an increasing guarantee if prices increase between February and October. So far, this has added about $.80 per bushel to soybean guarantees, while the current corn futures price is actually below the February average. Moreover, since Revenue Protection (RP) policies are settled at the average nearby futures price during the month of October, rather than local cash prices, farmers receive a bonus equal to the fall grain basis in their area.

Producers with crops that have been totally destroyed by flooding will not have to incur the variable costs of harvesting. This could save around $20 per acre for soybeans and perhaps $50 per acre for corn, depending on potential yields and drying costs. Nevertheless, even producers who carried insurance at a high coverage level could be looking at net revenues near or below those obtained from normal yields this year.

Looking to next year, Mr. Edwards noted that, “In some cases there may be doubt as to whether land flooded this year can even be planted next year. Risk Management Agency rules state that land must be physically available for planting to be insurable. Land that cannot be planted due to weather events that occurred before the sales closing date (March 15 in Iowa) is not eligible for prevented planting payments. When operators report their 2016 production, they can request that their 2016 yield histories reflect a value equal to 60 percent of the county “T-yield” rather than a zero or very low yield.

“Close communication and cooperation between owners, crop insurance agents and renters can be a ‘win-win’ strategy in the long run, but recovery may take several years.”

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