FarmPolicy

March 2, 2015

FarmPolicy Recap: Trade and the Ag Economy

Trade Developments

News reports continue to document the negative implications for some segments of the U.S. agricultural sector as a result of the ongoing labor dispute effecting the operation of some West Coast Ports.

While more details regarding the dispute were highlighted on the front page of Wednesday’s Los Angeles Times, Shan Li and Diana Marcum focused on the impacts of the dispute in an article in the Business section of Wednesday’s paper.

The writers stated that, “The port stalemate is devastating for some farmers, particularly in California’s $2.4-billion citrus industry.

This time of the year, more than 25% of the crop is meant for export. But delayed shipping has left navel oranges and lemons rotting on ships. Chinese officials have started refusing all citrus from Tulare County because they received decayed fruit, said Joel Nelsen, president of California Citrus Mutual.

“‘This is one of the most challenging seasons we’ve faced in a quarter of a century,’ he said, noting that exports are down 60% from the same time two years ago, when growers exported $385 million worth of oranges and $109 million of lemons.”

The LA Times article indicated that, “Packers have cut worker hours, and picking has slowed or stopped. Stranded fruit may flood the U.S. market, dragging down prices. Other countries are moving into foreign markets that U.S. growers can’t reach because of the port logjam; Egypt, for example, is shipping oranges to South Korea.

“‘When we lose customers, it takes us years to get them back. We’ve seen that after the freezes,’ said Bob Blakely, vice president of the citrus trade group. ‘This is a train wreck.’”

And Bloomberg writer James Nash reported on Tuesday that, “Bottlenecks related to the labor dispute that began last May are creating headaches for scores of U.S. companies, including McDonald’s Corp., Macy’s Inc., ConAgra Foods Inc. and Levi Strauss & Co. The loading and unloading of cargo has been suspended on six weekend and holiday days this month. The congestion may cost retailers as much as $7 billion this year, according to the consulting firm Kurt Salmon.”

In other trade news, Jennifer Steinhauer reported in today’s New York Times that, “The 40,000 chickens — a few short weeks from becoming Valu-Paks at the supermarket — scratched their way toward the rows of water drips, eager for a little midday sip. Eyeing an open door, one bird made a vague attempt to wander away, before it was gently returned to the brood.

Such prancing poultry rests at the center of a major trade dispute between the United States and South Africa, with large economic stakes, especially in states like Delaware, the birthplace of the American chicken industry.”

Wednesday’s article explained that, “But one of the industry’s potentially most lucrative importers, South Africa, has been placing tariffs on American chickens for years, essentially shutting them out, frustrating farmers, trade officials and members of Congress from the unfortunately named Chicken Caucus.

“‘There are 14,000 people in my state whose lives depend on chicken,’ said Senator Chris Coons, Democrat of Delaware. ‘Chicken here is not just a product; it’s a way of life.’

“American officials, led by Mr. Coons and Senator Johnny Isakson, Republican of Georgia, a huge chicken-producing state, are now threatening South Africa’s continued inclusion in a trade partnership that has been particularly beneficial for that nation.”

Ms. Steinhauer noted that, “If South Africa continues to shun the chickens of America to protect its own, officials say, then perhaps that nation should be removed from the trade agreement that allows it to send its wines, luxury automobiles and other goods here.

“‘You want unlimited access to American market to sell autos, yet you won’t let my state send its biggest agriculture export into your country?’ fumed Mr. Coons, who has long been involved in African affairs.

“The dispute over chickens comes just as President Obama is pushing an aggressive trade agenda in Congress. But for some lawmakers the rejection of American chicken is emblematic of other disputes, and evidence that trade agreements often do not live up to their billing for the United States.”

Meanwhile, Sen. Amy Klobuchar (D., Minn.) recently concluded a trip to Cuba with other lawmakers, while Rep. Collin Peterson (D., Minn.) is also in Cuba this week with a group of Democratic House Members- see this FarmPolicy update for more details.

The Politico Morning Agriculture newsletter indicated on Wednesday that, “Add Senate Agriculture Committee Chairman Pat Roberts to the long list of lawmakers headed to Cuba. The Kansas Republican told POLITICO recently that he would be traveling with Sen. Jeff Flake (R-Ariz.) and other members of Congress to the island nation, though a date for the trip has not yet been published.

But that doesn’t necessarily mean Roberts supports The Freedom to Export to Cuba Act, legislation that would lift the embargo against Cuba co-sponsored by Republicans Flake and Mike Enzi (Wyo.) and Democrats Debbie Stabenow (Mich.) Amy Klobuchar (Minn.), Patrick Leahy (Vt.) and Dick Durbin (Ill.). When asked about the bill, Roberts responded: ‘At this time I’m keeping my powder dry … There are a lot of things that have to be worked out. We have to have a much more realistic approach. You really have to sit down and work things out and that hasn’t been done. That kind of hard work has to be done before we introduce legislation.’”

And House Ag Committee Chairman Mike Conaway (R., Tex.) was on KWEL radio (Midland, Tex.) this morning and took phone calls from listeners. Chairman Conaway briefly discussed Trade Promotion Authority with one caller; to hear this discussion, just click here (MP3- 2:00).

Live on the air with Craig Anderson on KWEL, tune in now to listen!

A photo posted by Mike Conaway (@mikeconawaytx11) on

Agricultural Economy

Bloomberg writer Jeff Wilson reported on Tuesday that, “U.S. farmers from Louisiana to North Dakota are preparing to switch more land to soybeans as they seek to limit losses from a slumping corn market.

“While corn remains the biggest domestic crop, prices have tumbled so much after two years of record harvests that the grain fetches less than it costs some farmers to produce. For the first time since the 1970s, corn planting will decline for a third straight season, while soybean acreage expands to the most ever, a Bloomberg survey of analysts showed.

“Look no further than the 3,100 acres Dan Anderson farms in Illinois. From 2007 to 2013, corn generated $150 more cash per acre, Anderson said. Now, there’s no revenue difference. Even though soybean prices also have dropped, they cost about half as much to grow and are better for the soil. The 62-year-old plans to sow more of the oilseed than corn for the first time ever.”

The Bloomberg article noted that, “Perry Vieth, the founder of Ceres Partners LLC, which manages more than 59,000 acres in five Midwest states for investors, says farmers will plant less corn because there is less capital at risk growing soybeans. Tenant farmers are planning to sow 45 percent of their land to soybeans, up from 35 percent, while corn planting drops to 55 percent from 65 percent, he said.

“‘Corn and soybeans margins are thin,’ Vieth said from Granger, Indiana. ‘Farmers will continue to plant corn on the best acres, but will shift to soybeans on more marginal land.’”

The USDA’s Economic Research Service indicated yesterday in its Livestock, Dairy, and Poultry Outlook that, “Accelerating production of competing proteins—in broiler and poultry production in particular, along with slowing pork exports and smaller declines in 2015 beef production—are likely to drag hog prices down this year. For 2015, hog prices are expected to average $54-58 per cwt, over 26 percent below prices last year.”

The ERS update noted that, “The all-milk price for 2015 is forecast at $17.40-$18.10 per cwt, a reduction from last month’s forecast of $17.75-$18.55 per cwt.”

And with respect to cattle, ERS stated that, “USDA National Agricultural Statistics Service (NASS) released its Cattle report January 30, which included a number of revisions to the January 1, 2014 inventory. Total cattle and calf inventories for January 1, 2014, were almost 800 thousand head larger than the prior estimate for 2014. Included in the new higher numbers were 42 thousand additional beef cows and about 80 thousand heifers retained for beef cow replacement. The 2014 calf crop was also revised upward by 300 thousand head. In addition to generally revising January 1, 2014 cattle numbers upward, NASS also reported higher January 1, 2015 inventory numbers for many categories. The total cattle and calf inventory increased about 1 percent from 2014, with about 2 percent more beef cows and 4 percent more heifers for beef cow replacement. Producers indicated that they expect 7 percent more heifers to calve during 2015. States with the largest increases in all cattle and calves include Oklahoma and Texas, with a 6- and 7-percent increase, respectively. Overall, the total cattle and calf inventory is still historically low, but coupled with revisions to 2014, the report shows a faster than anticipated herd expansion, with more beef cows and a large retention of heifers.”

Reuters writer Karl Plume reported recently that, “Craig Uden, who fattens cattle for beef on his Nebraska feedlot, expects to cut his energy costs by as much as a quarter this year because of falling oil prices – a silver lining in an otherwise tough rural economy.”

Keith Good

West Coast Port Issues

Tim Logan and Andrew Khouri reported on the front page of Wednesday’s Los Angeles Times that, “The dispute that has snarled West Coast shipping revolves around a rarity in American business — a small but mighty union.

“The International Longshore and Warehouse Union represents 20,000 dockworkers, a fraction of the organized ranks of teachers, truck drivers or healthcare workers. But the port workers — who still queue up at hiring halls daily for work and spend years earning full membership — stand guard over a crucial chokepoint in the global economy.

“For decades these ‘lords of the docks‘ have been paid like blue-collar royalty. Their current contract pays $26 to $41 an hour, with free healthcare for members. Some earn six figures with overtime. Even as a growing chorus of business groups clamor for a resolution to their months-long contract talks with the Pacific Maritime Assn., which represents shipping companies, the union sees little need to back down.”

Wednesday’s article noted that, “‘They have unique skills that aren’t easily replaced,’ said Goetz Wolff, who teaches about labor and economics at the UCLA Luskin School of Public Affairs. ‘They’re not going to roll over and play dead.”

“They went back to work Tuesday, after a holiday weekend port shutdown that left dozens of ships parked off the Southern California coast. They also returned to the negotiating table, where U.S. Labor Secretary Thomas Perez is now trying to broker a deal.'”

The LA Times article pointed out that, “Still, the ILWU shouldn’t overplay its hand, [Marc Levinson, an economist and author] said.

“‘The employers and the union both have a common interest in the success of L.A.-Long Beach and in keeping the port as efficient as possible,’ he said.

“As the dispute drags on, the union’s solidarity could be a key factor.”

The ILWU is known as an aggressive union — forged in violent strikes on San Francisco’s Embarcadero in the 1930s, booted from national labor groups in the McCarthy-era 1950s for being “too red,” and willing to shut down the docks several times in recent years in solidarity with smaller unions. That’s what happened in 2012, when clerical workers at the L.A.-Long Beach docks went on strike and clogged the ports for several days.”

Laura Stevens and Melanie Trottman reported in Wednesday’s Wall Street Journal that, “Both sides in the labor dispute at the West Coast ports met with the U.S. secretary of labor on Tuesday, as fresh data showed just how sharply business fell at one of the main ports in January.

“The Port of Oakland said that January imports fell 39% to 44,171 containers, compared with the same month last year. Exports fell 26% to 57,581.”

The Journal writers explained that, “Secretary of Labor Thomas Perez traveled to San Francisco to ‘urge the parties to resolve their dispute quickly at the bargaining table,’ his press secretary said.

“In the meetings, Mr. Perez ‘made clear that the dispute has led to a very negative impact on the U.S. economy’ and that ‘further delay risks tens of thousands of jobs and will cost American businesses hundreds of millions of dollars,’ a Labor Department official said.

“Mr. Perez also spoke by phone with various state and local officials about the economic impact of the continuing dispute on their local economies, including with Washington Gov. Jay Inslee, California Gov. Jerry Brown, and the mayors of Los Angeles; Seattle; Long Beach, Calif.; Oakland; San Francisco; and Tacoma, Wash.”

Sarah Halzack reported in yesterday at The Wonk Blog (Washington Post) that, “Meanwhile, meat producers who export their goods overseas are running short on cold storage facilities because of the backup. The North American Meat Institute estimates the industry is losing $85 million a week in sales of meat, poultry, hides and skins.”

Keith Good

Trade Update: Cuba, Trans-Pacific Partnership

Categories: Trade

Cuba Trade Issues

Recall that last week, Sen. Amy Klobuchar (D., Minn.) “led a bipartisan coalition of lawmakers to introduce major legislation to lift the Cuba trade embargo.”

Colby Itkowitz indicated on Tuesday at the In the Loop Blog (Washington Post) that Sen. Klobuchar was wrapping up a four day trip to Cuba with Senators Claire McCaskill (D., Mo.) and Mark Warner (D.,Va.).

Ms. Itkowitz pointed out that, “More Democrats are excited about the prospects of opening up Cuba than Republicans, but Klobuchar said she’s hearing positive things from GOP lawmakers, especially those representing big farm states. The agriculture and business communities are eager to tap into a newly expanded market, which could help sway reluctant Republicans. (Currently U.S. agricultural exports are allowed to Cuba, but only on a cash-basis.)”

Brett Neely reported on Tuesday at the Capitol View Blog (Minnesota Public Radio) that, “Another member of the Minnesota delegation who is on the island is U.S. Rep. Collin Peterson, who represents the 7th District. He is part of a delegation of Democrats led by Minority Leader Nancy Pelosi that also is focusing on trade and agriculture. Peterson has been pushing for years to ease travel restrictions on U.S. citizens to Cuba.

“Although agricultural trade between Minnesota and Cuba clocked in at a modest $20 million in 2013 (limited trade has been allowed despite the embargo), the state’s business community views the island as a potentially lucrative market. Agribusiness giant Cargill has helped organize a coalition of companies to press for an end to the embargo.”

Trans-Pacific Partnership (TPP)

A news release on Tuesday from the House Ways and Means Committee indicated that, “On Monday, a congressional delegation led by Ways and Means Chairman Paul Ryan (R-WI) held meetings in Singapore, the first of three Asian nations the group will visit on the week-long trip.

“Singapore is one of the United States’s strongest partners in the region, and the two nations maintain an important economic and national-security relationship. The country is also playing a critical role in bringing the ongoing Trans-Pacific Partnership (TPP) negotiations to a successful conclusion…The members reaffirmed the United States’s goal to achieve a high-standard TPP agreement in the near term, and they encouraged the government of Singapore to use its leadership position in the region to help meet that goal. The delegation impressed upon the officials the importance of issues like strong intellectual-property protections, increased access for American agriculture and disciplining state-owned enterprises.”

Jacqui Fatka reported on Tuesday at Farm Futures Online that, “Last year’s Trans-Pacific Partnership negotiations were marked by Japan’s unwillingness to lower tariffs and restrictions on key agricultural and auto markets, but the tide could be changing.

Darci Vetter, chief agricultural negotiator for the Office of the U.S. Trade Representative, says that negotiations are ‘entering the end game‘ although the timeline will be decided when tough issues can be resolved.”

Ms. Fatka added that, “Vetter said TPA is ‘critical to getting a trade deal across the finish line.’ It allows negotiating partners to understand that whatever deal is agreed upon will be the one put into final action.”

And U.S. Trade Representative Michael Froman penned an argument at Foreign Policy magazine on Tuesday titled, “The Geopolitical Stakes of America’s Trade Policy.”

More broadly on trade, the USDA Press Team tweeted the following update on Tuesday:

Keith Good

FarmPolicy.com Recap (Tuesday)- Trade; Ag Economy; Regulations; and, Immigration

Trade Issues

Labor related disputes at some West Coast ports continue to hamper container product movement, with one consequence being negative implications for the agricultural sector. The port issue was front-page news in Sunday’s Los Angeles Times as well as Tuesday’s Wall Street Journal.

Mickey Kantor, a former U.S. trade representative and secretary of Commerce, noted in Tuesday’s Los Angeles Times that, “If the West Coast’s 29 ports are not returned to full operation soon, it will create a shock wave that reverberates across the economy, derailing a promising economic recovery that is creating jobs and restoring a sense of economic security for the nation…[F]or American farmers, the cost of a shutdown is equally crippling, as orders for many agricultural products are already taking a hit because of the uncertainty over whether they can be delivered in time.

“The Washington, D.C.-based Agriculture Transportation Coalition, which tracks ocean shipping issues, estimated in December that nationwide the lost sales for fruits, vegetables and meats totaled more than $400 million per week. In California, citrus growers are being hit especially hard. Their trade association reckons reductions in sales to Asian markets are already down 25%, costing growers an estimated $125 million.”

Amb. Kantor added that, “President Obama has directed Labor Secretary Thomas Perez to engage in the dispute to revive negotiations, which is a welcome sign. He is scheduled to meet Tuesday with the employer group, the Pacific Maritime Assn., and with the International Longshore and Warehouse Union. But the president must be prepared to use his bully pulpit — and all other means at his disposal — to ensure that our nation remains open for business.”

An update on Tuesday at The Japan News Online indicated that, “Prime Minister Shinzo Abe expressed on Tuesday his desire for an early conclusion of the Trans-Pacific Partnership free trade agreement.

“‘[The negotiations] are in their final phase. I’ll seek the road that best serves the nation’s interests by protecting what needs to be protected and pushing for what we want,’ Abe said about the TPP negotiations during a question-and-answer session at the plenary session of the House of Councillors.”

Adam Behsudi reported at the Tuesday Politico Morning Trade newsletter that, “The Senate is likely to be the first chamber to consider key legislation for getting the landmark Trans-Pacific Partnership agreement and other trade deals easily passed in Congress, House Ways and Means Chairman Paul Ryan said Friday. ‘Our calendar is pretty crowded, and they, I believe, have reserved calendar space to do that, so I literally think it’s a legislative calendar issue,’ the Wisconsin Republican said in a briefing with reporters.

The introduction of a ‘trade promotion authority’ bill could come as soon as next week following the Presidents Day recess. But if the Senate passes the legislation first, a new procedural step would have to be added to the process.”

For a more detailed look at the political play regarding TPA, TPP and currency related issues among lawmakers, and between the executive and legislative branch, see “Currency Battle Is Tethered to Obama Trade Agenda,” by Jonathan Weisman, which was published on the front page of the Business Section in Monday’s New York Times.

 

Agricultural Economy

Recent reports of a growing U.S. hog herd have been noted, while simultaneously, anecdotally related articles regarding citizen concerns  and litigation over the potential negative environmental impacts of some large scale animal operations have also been published in recent days.

With respect to market information, in mid-December, the University of Illinois held an agricultural outlook meeting that included a detailed Agricultural Commodity Price Outlook by Darrel Good, as well as a presentation by Scott Irwin titled, “Can One Monster Crop End the New Era of Grain Prices?

Darrel Good also took a closer look at soybean market variables in a brief report on Monday.

 

Regulations

Meanwhile, new FAA rules regarding drone use were noted on the front page of Tuesday’s Des Moines Register, it appears that at least for now, one primary use of drones in the ag sector is for detailed and efficient crop scouting.

Jack Nicas and Andy Pasztor reported on the front page of the new “Business and Tech” section of Tuesday’s The Wall Street Journal that, “Long-awaited federal rules proposed for commercial drones should pave the way for thousands of U.S. businesses to fly the devices in industries like filmmaking, farming and construction, but drone proponents worried that limits in the regulations would stifle other possible uses like package delivery.”

The Journal writers added that, “Ted Ellett, a former FAA chief counsel who represents companies that want to use drones, said the proposal ‘seems to be close to a home run’ for many of his clients and their peers.

Drones for farming would likely thrive under the proposal, he said, but the FAA’s proposed limits still would allow the agency to block drone flights if they pass ‘over a single farmer on his tractor in the middle of a 100-acre field in Iowa.’”

And, Katy Burne reported in Tuesday’s Wall Street Journal that, “U.S. regulators are poised to introduce measures that would ensure anonymity for traders in the $700 trillion market for swaps, said people familiar with the discussions, a flip-flop that would hand a victory to hedge funds and speedy trading firms while dealing a blow to banks.

“The planned action from the Commodity Futures Trading Commission would encourage trading among any and all market participants, mirroring futures markets that the agency also oversees, and would raise the chance of traders dealing directly with one another, potentially bypassing banks that have historically been major providers for these complex transactions, the people said.

“The CFTC measures could be unveiled as soon as next month and may come as a rule change or as staff guidance, the people familiar said. The Wall Street Journal reported in November that the CFTC was scrutinizing identity disclosures in swaps. A spokesman for the agency declined to comment.”

 

Immigration

Fred Barbash reported on Tuesday at The Washington Post Online that, “A federal judge in Texas last night temporarily blocked the Obama administration’s executive actions on immigration. The judge, responding to a suit filed by 26 Republican-run states, did not rule on the legality of immigration orders but said there was sufficient merit to the challenge to warrant a suspension while the case goes forward.”

Issues regarding immigration and the budget for the Department of Homeland Security also continue to percolate.

Keith Good

Tuesday Morning Highlights: Trade- Transportation Issues, Immigration, Ag Economy and Livestock Production

Trade- Transportation Issues

Laura Stevens, Suzanne Kapner and Leslie Josephs reported on the front page of Tuesday’s Wall Street Journal that, “As employers at the ports along the West Coast on Monday refused to unload ships for the sixth day out of the past 10, their nine-month contract dispute with port workers is becoming a significant business problem.

“Ocean carrier Maersk Line has canceled some sailings, while China Ocean Shipping (Group) Co. said it will skip at least one port. Truckers that normally haul an average of five containers a day away from the Port of Oakland, Calif., are lucky to haul one. A West Coast customs broker said that her customers are being assessed as much as $300 a day for containers that sit too long on the docks, though the containers are trapped there.”

The Journal writers noted that, “On Saturday, the White House said it would send the secretary of labor to take part in negotiations and urge both sides to come to an agreement. A federal mediator already had been engaged for the talks.

The Agriculture Transportation Coalition estimates that port delays and congestion have reduced U.S. agricultural exports by $1.75 billion a month, while the North American Meat Institute put losses to U.S. meat and poultry producers at more than $85 million a week, including hides and skins.”

Rita Trichur reported in today’s Wall Street Journal that, “The Canadian government is signaling that it could introduce back-to-work legislation as early as Monday to end a strike by unionized workers at Canadian Pacific Railway Ltd. that is snarling freight service across Canada.

“Canada’s Minister of Labour, Kellie Leitch, issued a strongly worded statement Sunday that blamed the union representing CP’s locomotive engineers and conductors for the breakdown in contract talks over the weekend, calling on its officials to abandon their strike and recommence negotiations with the company.

“Thousands of Canadian Pacific’s unionized workers walked off the job early Sunday in a legal strike after negotiations failed to produce a deal. Ms. Leitch, who personally intervened in the dispute, stressed the government would move swiftly to end the job action—a tack that it has increasingly taken to halt other labor disputes.”

The Journal article added that, “With no agreement reached, Canadian Pacific said it would implement a contingency plan to keep at least some freight service moving on its Canadian network with the help of managers.”

Immigration

Meanwhile, Fred Barbash reported on Tuesday at The Washington Post Online that, “A federal judge in Texas last night temporarily blocked the Obama administration’s executive actions on immigration. The judge, responding to a suit filed by 26 Republican-run states, did not rule on the legality of immigration orders but said there was sufficient merit to the challenge to warrant a suspension while the case goes forward.

“The Obama orders would offer a legal reprieve to the undocumented parents of U.S. citizens and permanent residents who have resided in the country for at least five years. This would remove the constant threat of deportation. Many could also receive work permits.”

The Post article indicated that, “The order was issued by Judge Andrew S. Hanen in Brownsville, Tex. Hanen was appointed to the bench by George W. Bush and has been outspoken against the administration’s immigration polices in other cases recently.

“The White House in a statement early Tuesday reported by the AP defended the executive orders issued in November as within the president’s legal authority, saying that the U.S. Supreme Court and Congress have said federal officials can set priorities in enforcing immigration laws.”

Agricultural Economy

University of Illinois agricultural economist Darrel Good noted yesterday at the farmdoc daily blog (“U.S. Soybean Production Prospects for 2015”) that, “Stocks of U.S. soybeans at the end of the current marketing year are expected to be at an eight year high. In addition, the current South American soybean harvest is estimated at a record 6.066 billion bushels, 378 million bushels larger than the 2014 harvest and 710 million bushels larger than the 2013 harvest. The USDA projects September 1, 2015 stocks of soybeans in South America at 2.205 billion bushels, 523 million bushels more than the inventory of the previous year.”

After additional analysis, Monday’s update stated that, “Compared with the current marketing year, expectations for the 2015-16 soybean marketing year include increased acreage, a further increase in year-ending stocks, and lower prices. The expected price decline is moderated by the likelihood that stocks at the end of the current marketing year will be about 90 million bushels less than projected last fall. That is equivalent to two million acres. Prices are not expected to be as low as the CBO baseline projection of $8.19 or even the USDA baseline projection of $8.50. The futures market currently points to a marketing year average near $9.50.”

Livestock Production

AP writer David Pitt reported yesterday that, “Modern meat production, in which thousands of animals are packed into barns for concentrated feeding operations, has proven to be efficient and profitable, but comes with its own set of problems.

From Washington state to North Carolina, federal lawsuits are challenging the livestock industry to change its ways, basing arguments on studies that increasingly show the impact that phosphorous, nitrates and bacteria from fertilizer and accumulated manure have on lakes and rivers, as well as air pollution that can be harmful to respiratory health.

“Livestock farmers insist they’re trying to ameliorate the problem by installing grass strips, tilling less and using other techniques to keep manure and fertilizer from draining into waterways.”

The AP article noted that, “The hog industry’s shift from small family farms to large-scale farms is dramatic, going from more than 200,000 in the early 1990s to just over 21,600 in 2012.

“A driving force behind some of the large-scale hog farms is Murphy-Brown LLC, which became part of the world’s largest pork producer when China-based WH Group bought corporate parent Smithfield Foods in 2013. WH Group aims to feed China’s appetite for meat with cheaper hogs from the United States, and that foreshadows increased production in the U.S., according to lawsuits filed in eastern North Carolina.

“The water- and air-quality lawsuits are mostly driven by advocates of locally grown food as well as animal-rights and environmental activists. But in some cases, farmers are going after farmers.”

Keith Good

Monday Morning Quick Take: Trade Issues, Budget

Categories: Budget /Trade

Trade Issues

Reuters writer Noel Randewich reported on Sunday that, “Growing numbers of freighters were backed up around the two busiest U.S. cargo hubs on Sunday because of a dispute between shipping companies and dockworkers that has led to a partial shutdown of ports along the West Coast.”

The article noted that, “By Sunday morning, 34 container ships, tankers and other cargo vessels were waiting to dock at the ports of Los Angeles and Long Beach, California, up from 32 on Saturday, said Lee Peterson, a spokesman for the port of Long Beach.”

After noting that Labor Secretary Tom Perez had been dispatched by the White House to California to meet with parties to the dispute, the Reuters article stated that, “The Department of Labor is working on Perez’s schedule, spokeswoman Xochitl Hinojosa said on Sunday.

“‘The secretary will meet with the parties to urge them to resolve their dispute quickly at the bargaining table,’ she said.”

In other trade related news, Jonathan Weisman reported in today’s New York Times that, “A number of countries — China most prominent among them — have long acted to hold down the value of their currencies against the dollar, helping their industries by keeping exports to American consumers cheaper and making goods from the United States more expensive.

“And while every president from Bill Clinton on has repeatedly criticized the practice, none have ever taken formal action against China or any other nation to try to stop it.

Now, a growing bipartisan majority in Congress is coalescing around a demand that could derail President Obama’s ambitious trade agenda before it really gets moving: include a robust attack on international currency manipulation or no deal.”

The article, which appeared in the Business Section of Monday’s paper, explained that, “The push for strong currency provisions — in legislation to grant the president ‘fast track’ trade negotiating authority, in a major trade deal with a dozen Pacific Rim countries, or in both — has presented the White House with what it fears is something of a Catch-22.

If members of Congress are to be believed, unless the president’s trade negotiator includes strict, enforceable prohibitions on policies to intentionally hold down the value of currencies, any completed trade accord will die on Capitol Hill. But, administration officials say, demanding the inclusion of such prohibitions would kill the trade deals before they were completed.”

Mr. Weisman noted that, “The administration has a crucial ally in Representative Paul D. Ryan of Wisconsin, the Republican chairman of the House Ways and Means Committee. The trade promotion authority bill he plans to push through his committee by March will include new reporting, monitoring and transparency rules to spotlight currency manipulation, but it will avoid retaliatory enforcement rules that he fears could prompt a trade war.”

And the Times article concluded by pointing out that: [Sen. Chuck Schumer (D., N.Y.) said he had advised the White House to embrace currency protection legislation now, either as part of the bill granting Mr. Obama trade promotion authority or as a stand-alone bill that would move with the Trans-Pacific Partnership. That way, the currency issue would subside before the partnership comes before Congress.

Mr. Schumer said Congress did not ‘have the votes’ for a plain Trans-Pacific Partnership or for granting trade promotion authority.

They actually might need it to happen,’ he said.”

 

Budget Issues

Jeremy W. Peters reported in Monday’s New York Times that, “The House speaker, John A. Boehner, said Sunday that he was ‘certainly’ prepared to allow funding for the Department of Homeland Security to lapse, raising the possibility that one of the government’s largest and most vital agencies could be shut down at the end of the month.”

Mr. Peters noted that, “In dispute is how to handle the issue of immigration. Last month, House Republicans passed a spending plan for the 240,000-employee department that included provisions to gut President Obama’s immigration policy. The bill would revoke legal protections for millions of unauthorized immigrants, including children, and put them at risk of deportation.

“The House measure stands no chance of becoming law…[L]awmakers are gone from Washington until next week, meaning that they have just four days in the Capitol in which to reach a deal before the department’s funding runs out on Feb. 27.”

Keith Good

FarmPolicy.com Recap: Policy Issues; Trade; Agricultural Economy; and, Biotech

Policy Issues

On Friday, the House Appropriations Subcommittee on Agriculture held a budget hearing and heard testimony from USDA Inspector General Phyllis Fong.

During the hearing, Subcommittee Chairman Robert Aderholt (R., Ala.), Subcommittee ranking member Sam Farr (D., Calif.) and Rep. Chellie Pingree (D., Maine) all referenced a recent New York Times article that focused on animal production research procedures and operations at a federal facility in Nebraska. The lawmakers expressed support for the IG to investigate some of the issues raised in the Times article in more detail.

Rep. Sanford Bishop (D., Ga.) raised the issue of fraud and error payments in the SNAP, WIC and farm programs, and Rep. David Young (R., Iowa) brought up antibiotic issues and livestock production during his conversation with IG Fong.

Complete FarmPolicy.com highlights from Friday’s hearing have been posted here.

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Policy Issues; Ag Economy; Biotech; Trade; and, CFTC

Policy Issues

A news release yesterday from the House Ag Committee stated that, “Today the House Committee on Agriculture sent its Budgets Views and Estimates Letter for Fiscal Year 2016 to the House Budget Committee. In the letter, Committee members urged Budget Committee Chairman Tom Price to take into account that with the Farm Bill the Agriculture Committee made a significant contribution to deficit reduction with the passage of the Farm Bill, which Congressional Budget Office (CBO) estimated at the time would save $16 billion over 10 years. Despite a steep decline in commodity prices the CBO estimates that taxpayer savings remain intact.

“‘The Farm Bill is working as it was intended to work, meeting our objectives with substantially fewer resources,’ Committee members wrote in the letter. ‘From our perspective, we believe that the Committee on Agriculture has done its duty for now with respect to deficit reduction and that areas constituting the other 98 percent of the Federal budget ought to be looked to first for any additional savings being sought this Congress.’”

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Policy Issues; Ag Economy; Budget (CFTC); and, Regulations- Thursday

Policy Issues

Yesterday, the House Agriculture Committee heard testimony from Secretary of Agriculture Tom Vilsack at a hearing to review the state of the rural economy.

During his opening remarks, Committee Chairman Mike Conaway (R., Tex.) noted that, “Saturday marked the one-year anniversary of the signing of the Agricultural Act of 2014. As you know, economic conditions for many producers have changed dramatically since then, with commodity markets plunging by up to 50 percent. Drought and other natural disasters also resulted in disaster declarations in 33 states across the country last year. The net effect was an estimated 43 percent decline in net farm income over the past 2 years.”

Chairman Conaway indicated that, “I must admit that I was disappointed to see the administration’s FY2016 budget proposal that slashes $16 billion from crop insurance—a reduction of over 17%. With commodity markets plummeting and producers struggling to find financing, now is precisely the wrong time to weaken crop insurance.”

At the opening of the discussion portion of yesterday’s hearing, Chairman Conaway sought more detail on crop insurance issues from Sec. Vilsack- a transcript of this five minute conversation is available here, at FarmPolicy.com.

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Policy; Ag Economy; Trade; and, Biofuels – Wednesday

Policy Issues

Jerry Hagstrom reported yesterday at National Journal Online that, “When Agriculture Secretary Tom Vilsack testifies before the House Agriculture Committee Wednesday, he is likely to get some tough questions about the Obama administration’s views on food stamps and crop insurance–and the country will get a sense of just how difficult it will be for Congress to cut anything out of Agriculture Department programs.

“Congressional Republican leaders, including House Agriculture Committee Chairman Michael Conaway of Texas, have expressed enthusiasm for reining in the deficit through reconciliation, a budget tool that would require each authorizing committee to trim the programs under its jurisdiction, probably on a percentage basis.

But the Republican congressional focus is on cutting food stamps while the administration has proposed cutting crop insurance. Last week at the first of two crop insurance industry conferences here [Bonita Springs, Fla.], Mary Kay Thatcher of the American Farm Bureau Federation tied the two together, telling the Crop Insurance and Reinsurance Bureau meeting that proposals to cut food stamps put a ‘bull’s eye’ on crop insurance. Liberals will argue that if Congress is going to reduce the deficit by taking food away from children it should also cut farm subsidies, Thatcher said.”

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Policy Issues; Ag Economy; Trade; Regulations; and, Biofuels- Tuesday

Policy Issues

DTN Political Correspondent Jerry Hagstrom reported yesterday that, “A statement by U.S. Agriculture Secretary Tom Vilsack last week that crop insurance companies are making a 14% to 15% return on investment raised eyebrows here [Bonita Springs, Fla.] at a crop insurance industry meeting.

Brandon Willis, the administrator of the Risk Management Agency, sought to clarify the secretary’s comments when speaking to industry leaders this past weekend. Willis acknowledged more recent years had been rockier for the industry than the industry’s historical performance.”

Mr. Hagstrom indicated that, “Vilsack did an interview with the website Politico last week on the one-year anniversary of the farm bill that also delved into crop insurance cuts. Vilsack said, ‘One of those reforms would be to take a look at what the average rate of return is on crop insurance. Today it’s roughly 14%-15% on average of return on investment.’

“‘The reality is that this entity and this operation could be quite effective at a 12% return on investment, and I think most taxpayers would be happy if their portfolio was growing by 12%,’ he said. ‘So I think first and foremost it’s a question of what’s a reasonable rate of return in a government-sponsored and government-supported program.’”

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Policy Issues; Trade; Biotech; and, Animal Feeding Operations (AFOs)

Policy Issues

Alison Rice reported late last week at AgWeb.com that, “Farmers already concerned about the grain markets and the market price for crop insurance need to add a new worry to their lists in 2015: federal support for crop insurance.

“‘This is probably the most challenging year for crop insurance in a very long time,’ warned Mary Kay Thatcher of the American Farm Bureau Federation. Thatcher, the organization’s senior director for Congressional relations, gave her remarks Thursday at the Crop Insurance and Reinsurance Bureau’s annual meeting in Florida.”

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Updated– Trade Issues: West Coast Ports; TPP; Cuba; and, Jobs

Categories: Trade

West Coast Ports

Reuters writer Steve Gorman reported on Friday that, “The loading and unloading of cargo freighters will be suspended at all 29 U.S. West Coast ports this weekend because of chronic slowdowns on the docks that shippers and terminal operators have blamed on the dockworkers’ union, the companies said on Friday.

“However, the Pacific Maritime Association said terminal yard, rail and gate operations at the ports, which handle nearly half of U.S. maritime trade and over 70 percent of imports from Asia, will go on at the discretion of terminal managers through Saturday and Sunday, the group said.

“The announcement came as tensions mounted over negotiations on a new labor contract for 20,000 dockworkers, represented by the International Longshore and Warehouse Union, that have dragged on for nearly nine months.”

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Policy Issues; Trade; Agricultural Economy; Regulations; and, Immigration

Policy Issues

Earlier this week, Politico’s Jason Huffman and Bill Tomson sat down with Secretary of Agriculture Tom Vilsack “to celebrate the one-year anniversary of the 2014 Farm Bill.” A video replay of this discussion is available here, while an unofficial FarmPolicy.com transcript of the interview can be found here.

In part, Sec. Vilsack indicated that, “I think basically what Congress had a difficult time determining is when a non-farm family individual is actively engaged in farming enough so that they qualify to participate in some of the safety net programs. This is a notion of actively engaged, who is actively engaged in terms of providing management responsibilities.

“This involves a very narrow percentage of folks who are in the business of farming, primarily limited partnerships, general partnerships. It doesn’t involve family farms, it doesn’t involve family farm corporations. So our expectation is that probably one to two percent, or perhaps even fewer of the overall farmers are going to be impacted by however we define actively engaged.”

Sec. Vislack added that, “We’re working through that process and I think we have a pretty good handle on it. We’re working it through the regulatory process right now, and I would anticipate and expect sometime in 2015, relatively shortly, we’ll be coming out with how we define it and asking for comment on whether or not we’ve got it right or not.

“The reality is that this has been a loophole that has been utilized by folks in partnerships to allow for many, many, many people to qualify as actively engaged, when in fact they might be only engaged in a conference call or in a very narrow sense participating in the decision-making in a farming operation. So we will close that loophole to the extent that we can, but Congress is not giving us a whole lot of room to do that.”

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Policy; Trade; Regulations; Biofuels; Labor; and, the Ag Economy

Policy Issues

DTN Political Correspondent Jerry Hagstrom reported yesterday that, “The chairmen of the House and Senate Agriculture Committees detailed some of their priorities Tuesday in speeches before the National Association of State Departments of Agriculture.

“House Agriculture Committee Chairman Michael Conaway, R-Texas, discussed a wide range of issues. Senate Agriculture Committee Chairman Pat Roberts, R-Kan., used most of his speech to explain where he thinks the nation stands politically.”

Mr. Hagstrom indicated that, “Conaway also said he hopes the House Budget Committee — should it undertake budget reconciliation — gives the Agriculture Committee a dollar figure to cut from the programs under the committee’s jurisdiction without any instructions on what to cut.

“Conaway declined to say whether he would take any cut entirely from the Supplemental Nutrition Assistance Program (SNAP), the biggest program at USDA, which accounts for about 70% of USDA spending.

“Conaway said President Barack Obama’s budget proposal, which includes a cut to the crop insurance program, has no chance of being approved by Congress, but did not rule out a cut to crop insurance in reconciliation.”

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Policy Issues; Ag Economy; Trade; and, Regulations

Policy Issues

A news release yesterday from Rep. Steve King (R., Iowa) stated in part that, “[Rep. King] released the following statement after introducing the Protect Interstate Commerce Act (PICA). Last Congress, PICA was adopted by voice vote in the House Agriculture Committee to be included in the 2014 Farm Bill [note that a FarmPolicy.com transcript and video replay from the House Ag Committee mark up of the PICA bill is available here].

“‘Open and unrestricted commerce between the states is a vital component for a thriving economy,’ said King. ‘The Constitution gives Congress the power to ‘regulate commerce among the several states’. The Constitution explicitly grants Congress the authority to regulate trade. My legislation would prevent states from enacting laws that would prohibit trade of an agricultural product from other states based on its means of production.

“‘On January 1, 2015 California began a state-wide ban on the sale of eggs based on the facilities in which the hens live. Just within the last month in anticipation of the new law coming into effect, California experienced a 79% increase in egg prices. Outside of California, the Midwest has seen a 35% increase since January 2014 in anticipation of these new requirements. If my legislation is enacted, it would not affect the fact that eggs are already regulated by the Federal Egg Inspection Act, and my legislation would allow their sale even if they aren’t produced by a specific state’s standards. This issue goes far beyond the California egg issue. Restricting interstate trade would create a great deal of confusion and increased costs to manufacturers. This would create a patchwork quilt of conflicting state regulations erected for trade protectionism reasons.'”

Recall also that The Wall Street Journal editorial board addressed this issue late last month, “California’s Scrambled Eggs.”

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