FarmPolicy

March 30, 2015

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.”

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Highlights: GAO Report on Crop Insurance

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.”

GAO indicated (full report here) that, “The federal government’s crop insurance costs are substantially higher in areas with higher crop production risks (e.g., drought risk) than in other areas. In the higher risk areas, government costs per dollar of crop value for 2005 through 2013 were over two and a half times the costs in other areas. The figure below shows the costs during this period. However, the U.S. Department of Agriculture’s (USDA) Risk Management Agency (RMA)—the agency that administers the crop insurance program—does not monitor and report on the government’s crop insurance costs in the higher risk areas.”

The report added that, “RMA implemented changes to premium rates in 2014, decreasing some rates and increasing others, but GAO’s analysis of RMA data shows that, for some crops, RMA’s higher risk premium rates may not cover expected losses. RMA made changes to premium rates from 2013 to 2014, but its plans to phase in changes to premium rates over time could have implications for improving actuarial soundness. USDA is required by statute to limit annual increases in premium rates to 20 percent of what the farmer paid for the same coverage in the previous year. However, GAO found that, for higher risk premium rates that required an increase of at least 20 percent to cover expected losses, RMA did not raise these premium rates as high as the law allows to make the rates more actuarially sound. Without sufficient increases to premium rates, where applicable, RMA may not fully cover expected losses and make the rates more actuarially sound. Furthermore, in analyzing data on premium dollars for 2013, GAO found that had RMA’s higher risk premium rates been more actuarially sound, the federal government could have potentially collected tens of millions of dollars in additional premiums.”

The GAO report noted that, “As shown in table 1, the federal government’s crop insurance costs generally increased for fiscal years 2003 through 2013. A widespread drought and crop losses in crop year 2012 contributed to the spike in government costs to $14.1 billion in fiscal year 2012. In crop year 2013, weather conditions were more favorable, so government costs were lower than in fiscal year 2012. According to an April 2014 CBO estimate, for fiscal years 2014 through 2023, program costs are expected to average $8.9 billion annually.”


(Click here for a larger image of Table 1).

The GAO report also noted that, “Figure 1 shows counties organized in groups of 20 percent based on average county target premium rates, with the darker areas representing counties with higher average county target premium rates. The color-shaded counties represent all 2,554 counties that had county target premium rates for at least one of the five major crops.”


(Click here for a larger image of Figure 1).

In addition, GAO noted that, “Figure 2 shows the riskiest 20 percent of counties (510) in terms of average county target premium rates. These 510 higher risk counties are color-shaded on the basis of their 2013 premium dollars to show which counties purchased the most crop insurance. The Great Plains, which has areas with relatively high drought risk, had a large portion of the higher risk counties’ premium dollars.”


(Click here for a larger image of Figure 2).

And, GAO added that, “Figure 3 compares the estimated government crop insurance costs per dollar of expected crop value for the five major crops in the 510 higher risk counties with the costs in the 2,044 other U.S. counties from 2005 through 2013. Total government crop insurance costs vary from year to year depending on weather-caused crop losses, crop prices, and farmers’ decisions about how much insurance coverage to purchase. To control for variations in crop prices and farmers’ purchase decisions, and to normalize the costs for higher risk counties and lower risk counties while still reflecting weather-caused crop losses, we expressed the estimated government costs in relation to expected crop value. As shown in figure 3, the costs in higher risk counties were substantially greater. Over the 9-year time frame, government costs averaged 14 cents per dollar of expected crop value in the higher risk counties and 5 cents per dollar in the other counties. For example, if two farms each had an expected crop value of $1 million, the higher risk farm would have had an average annual government cost of $140,000, and the lower risk farm would have had an average annual government cost of $50,000. In 2013, the higher risk counties had a government cost of 17 cents per $1 of expected crop value, 3 cents higher than the average during the time frame, and the other counties had a government cost of 5 cents per $1 of expected crop value, the same as the time frame average.”


(Click here for a larger image of Fig 3).

The report stated that, “Premium subsidies provided on behalf of farmers are a large component of government crop insurance costs. Figure 4 compares premium subsidies provided on behalf of farmers per dollar of expected crop value in the 510 higher risk counties with the premium subsidies in the 2,044 other counties from 1994 through 2013. Similar to the pattern shown in figure 3, figure 4 shows that premium subsidies in higher risk counties were substantially more than in the other counties. An important distinction between figure 3 and figure 4 is that figure 3 is indicative of differences in weather-related loss claim payments, which vary from year to year, while the measures of premium subsidies in figure 4 do not vary with weather-related loss claim payments and are related to the program design.”


(Click here for a larger image of Fig 4).

In addiiton, the report explained that, “Figures 5 and 6 show, for 1994 through 2013, respectively, farmers’ net gains per dollar of expected crop value and net gains per dollar of premium paid by farmers. If a farmer’s net gain per dollar of premium paid is more than zero, it means the farmer received more in loss claim payments than he or she paid in premiums. As shown in these two figures, farmers’ net gains fluctuated from year to year…During the 20-year time frame, farmers’ net gains from crop insurance averaged 9 cents per $1 of expected crop value in the higher risk counties and 2 cents per $1 of expected crop value in the lower risk counties. In addition, farmers in higher risk counties averaged $1.97 in net gains per $1 of premiums paid compared with net gains averaging $0.87 per $1 of premiums paid for farmers in the lower risk counties over the 20-year time frame.”


(Click here for a larger image of Fig 5).


(Click here for a larger image of Fig 6).

Bringing these figures together, the GAO report indicated that, “Figures 3, 4, 5, and 6 illustrate the extent to which higher risk areas have higher relative government costs, and farmers in those areas receive higher relative benefits. Furthermore, the difference between higher risk counties and lower risk counties in premium subsidies provided on behalf of farmers per dollar of expected crop value in 2013—11 cents per $1 versus 4 cents per $1, respectively, on average—indicates that the government’s crop insurance costs might be reduced for farmers in higher risk counties without denying them sufficient risk protection. Specifically, if farmers in the other counties have sufficient risk protection while receiving premium subsidies of 4 cents per $1 of expected crop value, farmers in the higher risk counties might have sufficient risk protection with premium subsidies of less than 11 cents per $1 of expected crop value.”

The GAO report included two recommendations:

“GAO recommends that RMA (1) monitor and report on crop insurance costs in areas that have higher crop production risks and (2), as appropriate, increase its adjustments of premium rates in these areas by as much as the full 20 percent annually that is allowed by law.

“RMA disagreed with GAO’s first recommendation and agreed with the second. GAO continues to believe that RMA can and should do more to monitor and report on crop insurance costs in higher risk areas, where government costs were found to be substantially higher.”

Philip Brasher reported on Wednesday at Agri-Pulse 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.'”

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Wednesday Morning Update: Policy Issues-Ag Economy; Regulations; and, Trade

Policy Issues, Budget Baselines, USDA Reports

Corey Paul reported on Monday at the The Odessa (Tex.) American Online that, “[House Ag Committee Chairman Mike Conaway (R., Tex.)] said when he was appointed chairman in January that his chief priority was launching a review of the country’s Supplemental Nutritional Assistance Program, or food stamps, criticizing a lack of oversight for the $80 billion annual program.

“Conaway said Monday that review is underway and that he does not want his fellow legislators to make cuts to the program before he is finished.

“‘I’m trying to maintain this idea that we don’t have any preconceived reforms in mind right this second, and we want to let those percolate out of the review itself,’ Conaway said. ‘One of the fights I’m having with the budget is to make sure they don’t do things there that would taint the water.’”

Meanwhile, with respect to the commodity title of the Farm Bill, Reuters news reported yesterday that, “Government support for U.S. grain farmers under the new five-year farm bill will peak with the coming 2015 crop, the Food and Agricultural Policy Research Institute said in a new report.”

The article noted that, “‘Payments under 2014 farm bill programs increase when crop prices fall,’ FAPRI said in its 2015 U.S. Baseline Briefing Book. The think tank estimated that $3.9 billion in ARC and PLC payments for last year’s 2014 crop would be made after fiscal 2016 begins on Oct. 1.

“‘ARC spending is greatest in 2015/16 but declines in later years as the moving averages that determine benchmark revenues adjust,’ FAPRI said. ‘Projected average ARC and PLC payments peak with the 2015 crop at about $6.5 billion but decline to $3.4 billion for the 2018 crop.’”

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Jeb Bush Video: Iowa

Des Moines Register reporter Jason Noble pointed to this recent video from Jeb Bush which highlighted his appearance at the Iowa Ag Summit and agricultural issues.

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Baseline Updates: Corn and Soybean Pricies

University of Illinois agricultural economist John Newton provided a visual look at price projections for corn and soybeans in recently updated baseline analysis from CBO and FAPRI:

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USDA- NASS Crop Condition Updates

On Monday, USDA’s National Agricultural Statistics Service (NASS) office in Texas indicated that, “Producers in South Central, the Upper Coast, and the Southern parts of the state began planting corn. Sorghum planting was active in areas of the Coastal Bend and the Lower Valley. Field preparations for cotton and sorghum continued in areas of the High Plains and Trans-Pecos.”

The report added that, “Livestock began experiencing stress due to wet, cool conditions in areas of East Texas. Supplemental feeding remained active. Range and pasture progressed throughout the state; however, continued cold temperatures began to deteriorate conditions in areas of the Blacklands and the South East.”

The NASS report from Texas noted that 50% of the wheat crop is in good to excellent condition.

The Kansas NASS report stated on Monday that, “Livestock continued to graze crop residue with supplemental feeding reported. Cold temperatures caused livestock producers to increase care. Some producers applied fertilizer for the spring planting season.”

The report added that, “Winter wheat condition rated 3 percent very poor, 10 poor, 41 fair, 43 good, and 3 excellent” and, “Cattle and calf conditions rated 1 percent very poor, 2 poor, 32 fair, 59 good, and 6 excellent.”

And the Oklahoma NASS report noted on Monday that 42% of the winter wheat was in good to excellent condition, and added that, “Conditions of pasture and range were rated mostly fair to good. Livestock conditions were rated mostly good to fair. The snow and freezing temperatures have depleted hay supplies in some areas and stock ponds are getting lower. Many operators were still providing hay and supplemental feed for livestock.”

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Tuesday Morning Update: Baseline Updates- Policy Issues; Animal Research; Trade; Iowa Ag Summit; and, the Ag Economy

Baseline Updates- Policy Issues

On Monday, the Congressional Budget Office (CBO) released its updated baseline Budget Projections for 2015 to 2025.

A brief overview of CBO’s January baseline projections can be found here.

Also on Monday, the Food and Agricultural Policy Research Institute (FAPRI) released its latest baseline-briefing book.

Both baseline updates showed a change in farm program spending projections from previous baseline reports.

Politico writer David Rogers, and Philip Brasher of Agri-Pulse, separately examined the numbers in greater detail on Monday- details of their reporting can be found at this FarmPolicy.com update from yesterday.

More broadly, yesterday’s FAPRI update stated that, “Lower prices have resulted in a large decline in crop producer income and could result in significant federal spending under new programs established by the 2014 farm bill. After reaching record levels in 2014, most livestock sector prices are also expected to decline in 2015. As a result, net farm income is projected to fall sharply.”

Average projected corn prices recover to $3.89 per bushel for the 2015/16 marketing year in response to reduced U.S. production. Wheat and soybean prices both fall in 2015/16, to $5.17 per bushel and $9.29 per bushel, respectively, given continued large global supplies,” FAPRI said.

In addition, CBO’s outlook for the SNAP program is available here, while the CBO’s outlook for child nutrition programs can be found here.

Meanwhile, Marcia Zarley Taylor reported yesterday at DTN (link requires subscription) that, “U.S. crop farmers have just weeks left to make their five-year farm program decision. For most, the March 31 choice will be narrowed between ARC-County and Production Loss Coverage (PLC). Many corn-soybean growers in the northern Corn Belt see good reason to go with what they call the ‘surer thing’ of ARC payments, DTN interviews have found.

“Even in counties that experienced bumper yields in 2014, growers may face little or no ARC payments in 2014 but still are banking that ARC will outpay PLC for 2015 and beyond. For example, McLean County, Illinois, averaged an amazing 217 bpa corn yield in 2014, so stands to collect no ARC payments, the University of Illinois estimates. However, with a return to average or below average yields in 2015, ARC-County payments could jump to $78/base acre in 2015.”

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CBO, FAPRI March Baseline Updates

On Monday, the Congressional Budget Office (CBO) released its updated baseline Budget Projections for 2015 to 2025.

A brief overview of CBO’s January baseline projections can be found here.

Also on Monday, the Food and Agricultural Policy Research Institute (FAPRI) released its latest baseline-briefing book.

David Rogers reported on Monday at Politico that, “Fresh projections for the new farm bill Monday show a greater participation rate — and higher costs — associated with a Senate-backed revenue loss program championed by Midwest corn and soybean producers.

“A revised farm baseline prepared by the Congressional Budget Office shows a decided shift in this direction from just months ago. A second report from the Food and Agricultural Policy Research Institute at the University of Missouri projects that the program’s costs will jump by nearly $1.7 billion, or 81 percent, above what FAPRI had previously predicted for the 2015-2016 marketing year.”

Mr. Rogers explained that, “Proponents of the program, formally known as Agricultural Risk Coverage or ARC, argue that it is still more efficient than traditional counter-cyclical, price support programs. And in fact, both the FAPRI and CBO numbers show that the ARC payments to corn farmers will drop off significantly in three to four years.

“Nonetheless, the infusion of so much government money up front is sure to invite criticism. CBO projects that total payments to corn and soybean producers from ARC alone will be $3.37 billion in fiscal 2017 — when the big subsidies come due for the government.

“That is 38 percent higher than what this sector collected in 2014 under the old system of direct cash payments to producers.”

The Politico article pointed out that, “It’s still a bit of a guessing game as to how many farmers will sign up for ARC vs. PLC, but the combined costs in the early years are striking.

“In the case of corn and soybeans, CBO is projecting most producers will go in the direction of ARC, but thousands will opt for PLC instead, accounting for another $1.47 billion in costs in fiscal 2017.

When added to the ARC subsidies, the corn and beans sector is expected then to receive a total of $4.8 billion in government payments in fiscal 2017. That’s nearly double what the direct payments were for these two crops in 2014.”

And Philip Brasher reported on Monday at Agri-Pulse that, “The new farm programs for grain and oilseed growers will pay them up to $7 billion annually over the next few years, surpassing what they would have received through the old system of direct payments, according to new forecasts released Monday.”

After additional analysis of the updated CBO and FAPRI reports, Mr. Brasher pointed out that, “After 2018, ARC payments decline dramatically as the five-year moving average begins to reflect the drop in commodity prices. FAPRI economists estimate that ARC payments will drop from $3.1 billion in fiscal 2018 to $1.8 billion in 2019 and then to $1.2 billion the following year.

PLC payments, on the other hand are expected to peak at $2.8 billion in fiscal 2018 and drop to $2.4 billion the following year, according to FAPRI.

Both CBO and FAPRI estimate that the cost of the federal crop insurance program, which has been expanded with new products under the 2014 farm bill, including a new policy for cotton, will hover around $8 billion a year.”

More broadly, the FAPRI update stated that, “Lower prices have resulted in a large decline in crop producer income and could result in significant federal spending under new programs established by the 2014 farm bill. After reaching record levels in 2014, most livestock sector prices are also expected to decline in 2015. As a result, net farm income is projected to fall sharply.”

Average projected corn prices recover to $3.89 per bushel for the 2015/16 marketing year in response to reduced U.S. production. Wheat and soybean prices both fall in 2015/16, to $5.17 per bushel and $9.29 per bushel, respectively, given continued large global supplies,” FAPRI said.

In addition, CBO’s outlook for the SNAP program is available here, while the CBO’s outlook for child nutrition programs can be found here.

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Highlights and Summary: Iowa Ag Summit

Donnelle Eller and Jennifer Jacobs reported on the front page of Sunday’s Des Moines Register that, “Nine GOP White House contenders did their best to sound more compelling and better-versed on farm-related matters than their competitors Saturday as they were quizzed during an unusual showcase of agriculture policy on the presidential campaign trail.”

The Register writers explained that, “Unlike the raucous, free-wheeling political rock concert that was the freedom summit, which was hosted by conservative Republican U.S. Rep. Steve King, [moderator and pork and ethanol entrepreneur Bruce Rastetter], a mainstream Republican, kept tighter control on the conversation. He staged a living-room-like setting with leather chairs and a vase of tulips and conducted interview-style question-and-answer sessions on renewable fuels, the wind energy production tax credit, normalizing trade with Cuba, biotechnology, illegal immigration, water pollution from farm runoff and other topics.

“The mood in the crowd of about 900 was warm but mostly subdued as they heard from, in order: New Jersey Gov. Chris Christie, former Arkansas Gov. Mike Huckabee, former Florida Gov. Jeb Bush, former Texas Gov. Rick Perry, U.S. Sen. Ted Cruz of Texas, U.S. Sen. Lindsey Graham of South Carolina, former U.S. Sen. Rick Santorum of Pennsylvania, former New York Gov. George Pataki and Wisconsin Gov. Scott Walker. Despite the free tickets and free lunch, a third of the seats were empty by afternoon.”

Sunday’s article noted that, “The Republicans’ stances differed little except on the Renewable Fuel Standard, a federal mandate that outlines how much ethanol and biodiesel must be blended annually into the country’s fuel supply. Most said they understand and accept the need for the mandate, at least until it can be phased out. Santorum and Huckabee in particular passionately defended it.

But Pataki expressed vocal opposition to the RFS, as did Cruz, whose answers were met with applause.”

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Bloomberg Politics: “With All Due Respect” – Iowa Ag Summit Preview

From Bloomberg Politics today: “Mark Halperin is joined by Iowa Agriculture Summit Organizer Bruce Rastetter and Des Moines Register Chief Political Reporter Jennifer Jacobs on ‘With All Due Respect.'”

A video replay of the entire Bloomberg show is available here, while specific clips are available below.

 

Bruce Rastetter, organizer of the agricultural summit in Des Moines on Saturday, previews what to expect when Jeb Bush and other 2016 Republicans take the stage,” Bloomberg Politics.

 

Mark Halperin and John Heilemann discuss what’s at stake for the GOP hopefuls in Iowa on Saturday,” Bloomberg Politics.

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Prelude to The Iowa Ag Summit- Perspective on Crop Insurance Subsidies Will Likely Be Solicited

Following coverage of the Iowa Ag Summit from earlier this week, Jennifer Jacobs reported on Thursday at The Des Moines Register Online that, “The debut of Jeb Bush [related article] on the Iowa presidential landscape is one factor that marks Saturday’s Iowa Agriculture Summit as an important milestone of the early 2016 campaign.

“It’s also the first big multi-contender GOP presidential forum that will attract business Republicans who are more interested in economic issues than social issues or God’s place in the civic arena.”

Ms. Jacobs went on to discuss “eight things to watch for” at the Summit; the list included the following:

1. Who are the hottest speakers?

2. Who will exhibit the best farm savvy?

3. Will anyone be perceived as anti-ag?

4. How will Christie deal with any awkwardness with the moderator? (“[Host Bruce Rastetter, an agribusiness leader and GOP power player] was one of seven Iowa politicos who flew to New Jersey on a 2012 recruitment mission. He has since backed off support for Christie, saying he’s reserving judgment on the 2016 contenders.”)

5. Will Rubio be a new stand-out? Or someone else?

6. How will Patty Judge be received?

7. Will this event elevate Rastetter’s stature among Republicans?

8. Will GOP contenders who skip the summit be hurt by their absence?And  reported today at Radio Iowa Online that, ” who say they may compete for the Republican Party’s 2016 presidential nomination will be featured at the first-ever Iowa Agricultural Summit tomorrow. The event’s host is of Hubbard, a man who has donated hundreds of thousands of dollars to conservative candidates and causes over the past decade and a half — from the fortune he amassed raising hogs and investing in ethanol production.

And, O. Kay Henderson reported today at Radio Iowa Online that, “Eleven politicians who say they may compete for the Republican Party’s 2016 presidential nomination will be featured at the first-ever Iowa Agricultural Summit tomorrow. The event’s host is Bruce Rastetter of Hubbard, a man who has donated hundreds of thousands of dollars to conservative candidates and causes over the past decade and a half — from the fortune he amassed raising hogs and investing in ethanol production.

“‘Food doesn’t come from a grocery store. You just happen to buy it there,’ Rastetter said during an interview with Radio Iowa, ‘so this is something that affects every American because every American eats and is concerned about food safety, the environment, sustainability — those kinds of things.'”

The article noted that, “‘I hear a number of them are calling around, asking people for their views, their perspective, getting updates on policies and why they exist,’ Rastetter said. ‘So I think that’s all a good thing and we had hoped they would be more up-to-speed with ag policy with just the idea of this summit.’

“Rastetter said the topics for his conversations with the candidates haven’t been kept secret. For example, he plans to ask whether the candidates support federal crop insurance subsidies and pending international trade deals that could boost U.S. ag exports. He will also ask for their views on topics like organic food labeling and immigration policy.”

Today’s update added that, “The event comes at a critical time for agriculture, according to [Iowa GOP Governor Terry Branstad]. He points to falling ag land values, layoffs at John Deere and the USDA’s prediction that net farm income will fall by 32 percent this year. Branstad said the candidates will have an opportunity to ‘articulate a vision’ for bringing ‘prosperity’ to rural America.”

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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.”

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FAO Food Price Index Declines…Again

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.

“Lower prices for cereals, meat and especially sugar more than offset an increase in milk and palm oil prices.

“The FAO Food Price Index averaged 179.4 points in February, down from 181.2 points in January and 208.6 points in February 2014.”

The update explained that, “Its ongoing decline – to its lowest level since July 2010 – reflects robust supply conditions as well as ongoing weakness in many currencies versus the U.S. dollar, which appear set to continue, said Michael Griffin, FAO’s dairy and livestock market expert.”

Bloomberg writer Rudy Ruitenberg reported on Thursday that, “‘We’re looking forward to very good crops in many countries,’ Concepcion Calpe, an FAO economist in Rome, said by phone Thursday. ‘Supplies appear to be very, very abundant and more than sufficient to cover the expected demand. With the kind of reserves we have today, it would take a lot of changes in the forecast to change the trend’ for food prices, she said.

“A gauge of grain costs dropped 3.2 percent from January and is down 14 percent from a year earlier, the report showed.”

The Bloomberg article added that, “Global grain production rose 0.8 percent to 2.542 billion metric tons last year, 0.3 percent higher than the agency’s previous estimate, it said in a separate report. World stockpiles will climb 8.6 percent to 630.5 million tons by the end of June, a second consecutive annual increase.”

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Update on the Iowa Ag Summit

In a two page article, with several helpful graphics, Donnelle Eller and Christopher Doering reported in Thursday’s Des Moines Register that, “Bruce Rastetter, the man behind the Iowa Agriculture Summit, is determined not to give away too much about the farm issues he will press potential presidential candidates to discuss Saturday in Des Moines.

“Undoubtedly, Rastetter will pepper the nation’s top Republican contenders about their support for ethanol and biodiesel. Biofuels are a political hot potato that either cuts our need for foreign oil and creates rural jobs or is unnecessary because of higher domestic production, depending on which expert you talk with.

But there’s a host of other issues the presidential aspirants must prepare for: free trade, immigration, conservation, biotechnology and food labeling, government subsidies, wind and solar power, and livestock production and animal welfare, Rastetter said.”


(Click here for large, full screen view).

The Register article indicated that, “Here’s a closer look at five top ag issues:

“1. Immigration

“The issue: Farm organizations say an overhaul is needed to protect undocumented agricultural workers, but it should come from Congress, not the White House. President Barack Obama tried to use his executive power to protect millions of undocumented immigrants from deportation last November, but it provided minimal relief to agriculture and has been overturned by a Texas judge. During the last Congress, the Senate passed a new immigration reform bill, but the Republican-led House failed to act.”


(Click here for large, full screen view).

Thursday’s article noted that, “2. Water quality

“The issue: Despite assurances otherwise from the EPA, agricultural groups contend the federal Waters of the U.S. rule would expand the ‘navigable waters’ protected by the Clean Water Act to include not only rivers and lakes but also ditches, stream beds and self-made ponds that carry water only when it rains. Farmers say they would face higher costs for environmental assessments and would need to apply for permits to allow them to till soil, apply fertilizer or engage in some conservation practices.”


(Click here for large, full screen view).

The article continued, and pointed to: “3. International trade

“The issue: Republicans and the White House have pledged to work together, and one indication of that sincerity could be trade. While much of the attention in recent months has fallen on Cuba, where Obama has proposed to normalize trade relations, a bigger boon to agriculture could come through the Trade Promotion Authority. The so-called fast-track authority, which expired in 2007, would allow Obama to negotiate trade deals, and submit them to Congress for a vote.”


(Click here for large, full screen view).

Next on the Register list: “4. Biotechnology & labeling

“The issue: If more states require labeling of foods made with genetically modified ingredients, Congress could be pressured to establish a uniform, nationwide law regulating the controversial technology found in much of the U.S. food supply.”

And lastly, Thursday’s article indicated that, “5. Ethanol mandate

“The issue: Lawmakers and oil trade groups led by the American Petroleum Institute are opposed to the Renewable Fuel Standard, a mandate that requires a certain amount of the largely corn-based fuel to be blended into the gasoline supply. They are pushing ahead to change or repeal the 8-year-old law popular with farmers and rural America. But change appears difficult. Many newly elected Republicans support the existing measure.”

Also in today’s Register, Kathie Obradovich stated in a column that, “Presidential candidates need to do more than just wear a seed-corn cap and get their eggs in the right baskets on farm issues to impress Iowa Secretary of Agriculture Bill Northey and other Iowa voters.

“‘I wouldn’t want somebody to just walk in and say, ‘I’m against California on eggs, I’m for RFS,’ and just check the boxes trying to get the positions right,’ Northey, a Republican, said. ‘They better explain why … and they should be able to fit that into their overall philosophy of government, if they’ve thought through those things.’

Ms. Obradovich added that, “What does hurt is if a candidate gets caught trying to pretend that playing Farmville on their phones somehow makes them the next John Deere. The gaffes stand out like Gucci loafers at the Iowa State Fair.”

Meanwhile, Geoff Earle reported on Wednesday at the New York Post Online that, ” Former Gov. George Pataki is about to join a throng of potential Republican presidential candidates appearing at high-profile speaking events in South Carolina and Iowa – and he’ll be emphasizing his down-on-the-farm roots.

“‘I’m from New York and I probably spent more of my life on a farm than anybody out there,’ Pataki told The Post, referring to rival Republicans, days before heading out to one GOP event, the Iowa Agriculture Summit.”

The Post update noted that, “Pataki grew up on a family Peekskill farm with ‘everything from corn to tomatoes starting with strawberries in the spring and running through apples and pumpkins in the fall.’ Now, he and his wife, Libby, run a farm that sells cherries, hay, and has 85 head of cattle.

“‘We’re doing grass-fed free range, hormone-free beef. I am not unaccustomed to getting my hands dirty on a farm,’ said Pataki, who also has a successful government consulting and legal practice.”

And Bloomberg writers Julie Bykowicz and Alan Bjerga reported on Thursday that, “The summit dovetails with efforts by Iowa Governor Terry Branstad, a Republican who is close to Rastetter, to start a grass-roots effort to make ethanol a central issue in the Iowa caucuses next January, traditionally the first vote of the presidential primary season. Earlier this year, Branstad announced the formation of a new group, America’s Renewable Future, which intends to mobilize a pro-ethanol army of 25,000 people from each party to participate in the caucuses. The group is backed by Growth Energy, the most active ethanol lobby, and headed by Branstad’s son Eric, who was Iowa field director for the 2004 Bush-Cheney campaign. He says he plans to open an office in each of Iowa’s 99 counties. ‘We can get our message into the coffee shops where the candidates are,’ Eric says. ‘Then we can use Iowa’s unique status to teach the rest of the country how important ethanol is.'”

Beth Reinhard reported on Thursday at The Wall Street Journal Online that, “For decades, presidential candidates have bowed to Iowa’s corn-based ethanol industry while campaigning in a state where corn is king.

But several of the likely Republican candidates slated to address the state’s agricultural industry on Saturday backed the sunset of ethanol subsidies in 2011, and many oppose the industry’s new sacred cow: the renewable-fuel standard, which requires blending ethanol and other biofuels into the gasoline supply.

“How the likely White House contenders navigate the issue will signal how much Republican politics are now driven by the party’s conservative base, which balks at government interference in the marketplace. Two GOP contenders who want to phase out the renewable-fuel standard, Florida Sen. Marco Rubio and Louisiana Gov. Bobby Jindal, are skipping the event.”

The Journal article added that, “Former Florida Gov. Jeb Bush, who is making his first trip to Iowa since flagging his White House ambitions, doesn’t appear to have publicly commented on the fuel standard, which was signed into law by his brother, former President George W. Bushf. However, the former Florida governor praised Republican presidential candidate Tim Pawlenty for ‘truth-telling’ when he advocating phasing out ethanol subsidies in 2011…Longstanding support among presidential candidates for Iowa’s agricultural interests began to crack in the 2008 campaign, when Republican Sen. John McCain opposed federal ethanol subsidies that totaled $6 billion a year.”

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Thursday Morning Update: Policy; Ag Economy; Trade; Regs; and, Political Notes

Policy Issues

A House Ag Committee news release yesterday stated that, “Today, Chairman of the Agriculture Committee K. Michael Conaway (TX-11), Nutrition Subcommittee Chairwoman Jackie Walorski (IN-2), and Livestock and Foreign Agriculture Subcommittee Chairman David Rouzer (NC-7) sent a letter to Agriculture Secretary Tom Vilsack and Health and Human Services Secretary Sylvia Burwell raising concerns about recommendations received from the Dietary Guidelines Advisory Committee (DGAC).

“‘Members of the Dietary Guidelines Advisory Committee greatly exceeded their scope in developing recommendations,’ Chairman Conaway said. ‘The Secretaries share responsibility for these flawed recommendations because they failed to keep the Committee focused on nutritional recommendations and away from areas such as sustainability and tax policy, which are outside of the Committee’s purview. At a time when consumers are already subjected to conflicting and often contradictory nutrition and health information, the dietary guidelines must provide the public with realistic, science-based recommendations. Given the grave concerns that have been raised, more time is needed for public comment, and those comments should be fully reviewed and considered.’”

Also yesterday, House Appropriations Subcommittee on Agriculture Chairman Robert Aderholt (R., Ala.) turned his attention to the Dietary Guidelines during a hearing where FDA Administrator, Dr. Margaret Hamburg, presented budget related testimony.

During the discussion portion of yesterday’s hearing, Chairman Aderholt noted 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.”

Chairman Aderholt went on to ask Dr. Hamburg: “Can we get an assurance from the Department of Health & Human Services that the final report would include only nutrient and dietary recommendations and not include environmental factors and other extraneous material?”

A complete transcript of the exchange between Chairman Aderholt and Dr. Hamburg on the Dietary Guideline issues can be found in this update that was posted yesterday at FarmPolicy.com.

(more…)

New Antibiotics Policy at McDonald’s

Reuters writers Lisa Baertlein and P.J. Huffstutter reported on Wednesday that, “McDonald’s Corp’s U.S. restaurants will gradually stop buying chicken raised with antibiotics vital to fighting human infections, the most aggressive step by a major food company to change chicken producers’ practices in the fight against dangerous ‘superbugs.’

“The world’s biggest restaurant chain announced on Wednesday that within two years, McDonald’s USA will only buy chickens raised without antibiotics that are important to human medicine. The concern is that the overuse of antibiotics for poultry may diminish their effectiveness in fighting disease in humans. McDonald’s policy will begin at the hatchery, where chicks are sometimes injected with antibiotics while still in the shell.”

The article added that, “[Marion Gross, senior vice president of McDonald’s North American supply chain] said McDonald’s expects its suppliers will treat any animals that become ill, using antibiotics when prescribed. McDonald’s, however, will not buy those treated chickens, she said.

“The poultry industry’s lobby takes issue with the concerns of government and academic scientists, saying there is little evidence that bacteria which do become resistant also infect people.”

Wednesday’s article also noted that, “There are exceptions to McDonald’s new policy. The company will buy chicken from farmers who ‘responsibly use’ ionophores, an animal antibiotic not used in human medical treatment, Gross said.

“The phase-out applies only to McDonald’s roughly 14,000 U.S. restaurants. It currently does not affect the company’s approximately 22,000 international restaurants.”

David Kesmodel, Jacob Bunge and Annie Gasparro reported on Wednesday at The Wall Street Journal Online that, “While the shift doesn’t apply to its burgers, McDonald’s is now the biggest company to make such a commitment on drug use in livestock.”

The Journal writers noted that, “McDonald’s said it would work with chicken suppliers including Tyson Foods Inc., the largest U.S. meatpacker—which said it has already taken steps to curb antibiotics in its birds.”

The Journal article pointed out that, “The announcement comes three days after Steve Easterbrook took over as McDonald’s chief executive, vowing significant change at the fast-food giant to reverse two years of worsening sales declines that culminated in the retirement of his predecessor, Don Thompson . Mr. Easterbrook in recent weeks has told analysts that he sees himself as an ‘internal activist’ who plans to create a ‘modern, progressive burger company.’ Observers have been anticipating possible changes to ingredients to improve consumers’ views of McDonald’s food.”

In addition, the Journal writers stated that, “McDonald’s also said it would offer customers milk products from cows that aren’t treated with rbST, an artificial growth hormone. The announcements coincide with a McDonald’s meeting in Las Vegas that includes U.S. franchisees, suppliers and other stakeholders where the burger chain is discussing what it has called its ‘turnaround agenda.'”

A news release from the National Chicken Council on Wednesday included remarks from Ashley Peterson, Ph.D., National Chicken Council vice president of scientific and regulatory affairs, who stated that, “The top priority of farmers and chicken companies is to raise healthy chickens, because healthy chickens are directly related to a safe food supply. Responsible, FDA-approved veterinary treatment and prevention benefits animal welfare and human health by reducing the need for increased doses of antibiotics of human importance in the event of widespread disease.

“The vast majority of these antibiotics are never used in humans. McDonald’s, veterinarians and animal scientists recognize their importance to minimize the use of those antibiotics that are important in human medicine.”

In a news release on Wednesday, Sen. Dianne Feinstein (D., Calif.) stated that, “The tide is shifting. The largest restaurant chain in the United States has taken a huge step to eliminate unnecessary antibiotic use in chickens…McDonald’s announcement demonstrates that businesses can be effective partners in ensuring antibiotic use in animals does not affect human health. Public health officials, businesses and farmers must address this issue, and I look forward to working with them to implement further change and combat the overuse of antibiotics in agriculture.”

Meanwhile, Kelsey Gee reported on Wednesday at The Wall Street Journal Online that, “McDonald’s Corp. ’s announcement that it will curb antibiotic use in its U.S. chicken products raises an obvious question: Where’s the antibiotic-free beef?

“The restaurant company, which became famous for its hamburgers long before it sold chicken sandwiches, unveiled no plans to stop purchasing beef from cattle raised with antibiotics used to treat humans. The same is true for the pork that goes into its sausage patties and Egg McMuffins.

“The decision to start with chicken highlights the complexities of making sweeping changes to a supply chain serving about 14,350 U.S. restaurants, according to meat-industry experts. Antibiotic-free chicken also is more widely available than beef and pork, and chicken costs less.”

Ms. Gee explained that, “Making major changes in the beef supply chain also is more complicated than it is for chicken because beef ranching is highly fragmented, and cattle buyers purchase animals from many different suppliers.

The chicken industry, by contrast, has been vertically integrated for years, with companies like Tyson contracting with farmers to produce chicken for them alone and guiding them on their production, which often includes what the animals are fed. The lifecycle of chickens also is much shorter than for cattle, enabling changes to take effect in the supply chain more quickly.”

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