The Los Angeles Times editorial board indicated in today’s paper that, “On Tuesday, the U.N General Assembly will hold a high-level meeting to discuss one of the greatest contemporary threats to global public health. Not war, not Ebola, not Zika — but antibiotic-resistant microbes.
“Scientists and public health officials have been warning for decades that overuse of antibiotics would inevitably lead to a rise of bacteria that have adapted to the drugs and developed a resistance to them.”
After pointing out that, “Already, authorities say that slightly more than 2 million people in the U.S. are sickened each year from antibiotic-resistant microbes. About 23,000 of them die,” the opinion item added that: “Human overuse isn’t the only factor. More than 70 percent of the use of medically important antibiotics (that is, the ones developed to treat human illnesses) is by the agriculture industry for disease prevention and control and for growth production of livestock, though the latter is on the wane since federal guidelines were released in 2013 restricting use. Antibiotics are routinely added to livestock feed and water to keep animals from getting infections. Just as in humans, this overuse helps create antibiotic resistant strains.
“Perplexingly, overall use of antibiotics in livestock has increased slightly since the federal guidelines went into place. Some consumer groups have called for the FDA prohibit the use of antibiotics for disease prevention in animals, saying the the agricultural industry is still too reliant on prophylactic use. Though an outright ban on disease-prevention may be excessive, clearly more needs to be done to rein in overuse.
And Geoffrey Mohan reported in today’s Los Angeles Times that, “Panera Bread and Chipotle Mexican Grill passed with flying colors, but KFC and Olive Garden were among the laggards in commitments to eliminate medically important antibiotics from their meat and poultry supply chains, according to a new report.
“Strong progress nonetheless was made across the top 25 fast-food and casual dining retailers, suggesting that public pressure has helped slow the meat and poultry industry’s routine use of antibiotics that are critical to human health, according to the report released Tuesday by five consumer, environmental and public health groups.”
The article added that, “Subway, which last year received an F rating in the report’s inaugural edition, rose to a B for its commitment announced earlier this year to eliminate antibiotics across its entire menu. Last year, the restaurant chain did not even respond to the survey and did not offer public details of its antibiotics policies, the groups reported. Starbucks, which again earned an F rating, has maintained a similar silence for two years running.
“McDonald’s rose a half grade, to C-plus in the wake of its decision earlier this year to eliminate antibiotics from its chicken supply.”
Today’s L.A. Times article also stated that, “Activists estimate that about 40% of the chicken supply chain is or will soon be free of antibiotics that are important to human health. A commitment by KFC, said [Sasha Stashwick, senior advocate for food and agriculture at the Natural Resources Defense Council], ‘could tip the industry over the 50% mark.’
“But the beef and pork industries have been much slower in adopting more aggressive policies regarding antibiotic use.”
Meanwhile, Melanie Evans reported in today’s Wall Street Journal that, “A new study by the Centers for Disease Control and Prevention found more widespread use by U.S. hospitals of powerful antibiotics designed to fight infections when less-robust antibiotics fail, a ‘worrisome’ development as bacteria grow increasingly immune to treatment, the researchers said.”
In perhaps would could be a precursor to some of the points Sec. Vilsack may highlight tomorrow, he penned a brief opinion item that was posted on Monday at The New York Times Online (“Rural America Has Already Begun to Rebound“) where he noted that, “Despite concerns about the fate of rural America, a number of key benchmarks show these areas have been growing economically since 2014. Many were surprised when the Census Bureau released data last Thursday showing median household income in non-metro areas of the United States had increased by 3.4 percent in 2015 and poverty rates had fallen.”
Sec. Vilsack stated that, “Rural populationshave stabilized and are beginning to grow, the Agriculture Department reported earlier this year. Then we learned that rural counties had added more than 250,000 jobs in 2014 and 2015. As a result, the rural unemployment rate has dropped below 6 percent for the first time since 2007. Hunger is down in rural and urban areas alike. Today, about 8 million fewer people are struggling to provide adequate food for themselves or their families compared to the height of the recession.
“Taken together, these benchmarks demonstrate a turning point in rural communities.”
Note that the title of the Senate Ag Committee hearing includes the words “Farm Economy,” while Sec. Vilsack’s opinion item referenced “Rural America.”
Secretary Vilsack has recently referenced the different components of “farm household” income by pointing to both “off farm income,” as well as “farm income.”
A recent DTN article, that included perspective from Sec. Vilsack, noted that, “The average American farm family has a median income of about $76,282, according to USDA, which is $19,782 higher than average U.S. household.”
And during a recent conference call with reporters, Sec. Vilsack expounded on the fact that overall “farm household” income, which includes “off-farm” income, as well as “farm income,” is significantly above national averages. This is primarily due to the fact that “off farm” income in farm households remains strong. Sec. Vilsack noted that what is done in the policy area of rural development is important because it helps to strengthen “off farm” income opportunities.
Perhaps these different components of “farm household” income will be a subject that is addressed in greater detail at tomorrow’s Ag Committee hearing.
In his weekly electronic newsletter yesterday, House Ag Committee Member Randy Neugebauer (R., Tex.) stated that, “I am very pleased the United States has initiated a new agriculture trade enforcement action against China at the [W.T.O.]. U.S. Trade Representative Michael Froman and U.S. Agriculture Secretary Tom Vilsack announced last week that the United States is bringing a case against China to challenge the support China has provided for its own wheat, corn, and rice crops. Like other countries, China agreed to limits on its domestic government support for agriculture when it joined the WTO. However, China has exceeded the limits it agreed to on corn, rice, and wheat by $100 billion in 2015 alone. Excessive government support, such as the market-price support China provides, artificially inflates the prices Chinese producers receive, causing overproduction that keeps out U.S. exports. China’s actions have created an uneven playing field for American producers who are following the rules. Moving forward, I hope U.S. trade officials also pursue enforcement action against unfair Chinese policies that impact other crops, such as cotton.”
Several variables are currently at play that are negatively impacting the profitability of wheat production in the U.S.
Reuters news reported yesterday that, “Farmers in Oklahoma, the No. 2 winter wheat producing state, face potential losses of roughly $55 an acre for wheat in 2017, according to Kim Anderson, an agricultural economist at Oklahoma State University.”
The Reuters article added that, “The world wheat harvest hit a record in 2016, sending nearby Chicago Board of Trade futures to 10-year lows below $4 a bushel.”
Meanwhile, Emiko Terazono and Heba Saleh reported yesterday at The Financial Times Online that, “For the world’s wheat farmers already reeling from decade-low prices due to bumper crops around the world, it is the last thing they wanted.
“Confusion surrounding quarantine rules in Egypt has effectively taken the world’s largest wheat importer out of the international market, depressing prices, which are already weak from plentiful harvests.
“Wheat sales to Egypt have come to a standstill after the government announced in late August that there would be zero tolerance for any traces of ergot fungus, a naturally occurring fungus, despite internationally accepted standards which allow for levels of 0.05 per cent.”
The FT writers noted that, “The Egyptian government, which provides subsidised bread to citizens, is the top buyer of wheat, but few traders are now willing to put in their offers in the state-run wheat tenders after the country’s authorities recently rejected vessels from Romania as well as Russia.”
Yesterday’s FT article added that, “The virtual absence of the world’s largest buyer comes as wheat markets are groaning under excess supplies.
“The Australian government recently raised its wheat production forecasts for 2016-17 to the second highest on record, while the US Department of Agriculture also increased its world production estimates for the same period to a new record high of 744m tonnes due to increases in India, Kazakhstan, Brazil and Australia.”
Reuters writers Karl Plume and Tom Polansek reported yesterday that, “U.S. wheat farmers, struggling to make money as prices sink and global supplies swell, could be the main beneficiaries if Washington wins a case it brought last week against China over an estimated $100 billion in domestic grain market supports.
“On Tuesday, U.S. trade officials said they would file a case at the World Trade Organization (WTO) against China over allegations that aggressive pricing supports prompted Chinese farmers to overproduce corn, wheat and rice, fuelling a global crop glut and depressing world prices.”
The Reuters article noted that, “While the U.S. allegations cover corn and rice as well as wheat, China has already reformed its corn policy and rice exports were never a major part of U.S. agricultural income.
“It is wheat that is now causing most pain in America’s farming heartland. U.S. wheat prices are at decade lows and some farmers could face losses next year of $55 an acre. In the coming weeks, they are likely to plant the fewest winter wheat acres in a century.”
Meanwhile, Reuters writer Julie Ingwersen reported today that, “U.S. farmers are poised to plant winter wheat on the smallest area in over a century this autumn, as tumbling global prices and fierce competition push the world’s former top supplier into retreat.
“But even that shrinkage is unlikely to dent massive global supplies or help bolster prices. The world wheat harvest hit a record in 2016, sending nearby Chicago Board of Trade futures to 10-year lows below $4 a bushel.
“The strong dollar is adding to the pain for U.S. farmers, as it makes the exports of competitors such as Russia and Ukraine more attractive. Russia is projected to overtake the United States and the European Union as the top wheat exporter for the 2016-17 season, which ends on June 1, 2017.”
Ms. Ingwersen explained that, “Farmers in Oklahoma, the No. 2 winter wheat producing state, face potential losses of roughly $55 an acre for wheat in 2017, according to Kim Anderson, an agricultural economist at Oklahoma State University.
“In the heart of Kansas, the biggest U.S. winter wheat state, mountains of harvested grain flank roadsides. Cash prices in some parts of the state have slid below $3 a bushel.”
And in a separate update regarding China, Reuters writer Paul Carsten reported yesterday that, “The Agricultural Development Bank of China, one of the country’s main policy lenders, agreed to loan at least 3 trillion yuan ($450 billion) by 2020 for the modernization of China’s agriculture industry, state media said on Sunday.
“The Ministry of Agriculture and the bank, which lends in line with government policy, signed an agreement to protect national food security, support the sector doing business overseas and develop China’s seed industry, according to the official Xinhua news agency.”
A House Ag Committee news release from Wednesday indicated that, “Today, the House Agriculture Committee held a hearing to examine the potential for expanded agricultural trade between the United States and Cuba. Much of the conversation centered on the Cuba Agricultural Exports Act (H.R. 3687) and the potential for removing financing restrictions that have limited agricultural exports to Cuba.”
Committee Chairman Mike Conaway (R., Tex.) indicated that, “[The stranglehold the Castro regime has had on Cuba] resulted in the United States imposing an embargo on trade with Cuba that has been in place in various forms for almost 60 years. In 2000, the Trade Sanctions Reform and Export Enhancement Act—known as TSRA, authorized certain sales of food, medicines, and medical equipment to Cuba subject to various restrictions on credit and financing. One such restriction requires Cuba to pay cash in advance for purchases, interpreted in 2005 by the Bush Administration to mean payment in cash before shipment of goods.
“In December 2014, amongst a host of other changes, the Obama Administration announced its intention to modify the cash-in-advance provisions to require payment before transfer of title. While that move was generally applauded, I—and many of my colleagues—believe the U.S. secured too little in return for the litany of other concessions made to the brutal regime that continues to remain in power. The Castro regime remains one of the world’s most oppressive human rights violators. Their heavy hand is in everything—including agriculture—where ALIMPORT remains the sole entity allowed to trade in agricultural products with foreign entities.
“Against this sobering backdrop, I believe there lays an opportunity—albeit a rather narrow one—to make changes that will positively benefit both agricultural producers here at home while contributing to economic growth in Cuba. To that end, our colleague and General Farm Commodities and Risk Management Subcommittee Chairman Rick Crawford authored [H.R. 3687] which lifts the financing restrictions under TSRA while providing for both market promotion and U.S. agribusiness investment under strict safeguards. The Committee was involved in the development of that bill, and both Ranking Member [Collin Peterson (D., Minn.)] and I are co-sponsors.”
Ranking Member Petersonpointed out at last week’s hearing that, “Now, as we’re all aware, the Administration has taken steps to ease both trade and travel restrictions. This is a good step but there is still more work that we can do to open this market to American agricultural products. I would like to see the embargo lifted but am doubtful that it’s politically possible to do so now.
“I do want to caution however, that with the exception of rice and possibly wheat, the potential benefits are limited – at least in the short term. Cuba is a small country with most people having very limited income. I visited Cuba in 2015 and from what I was able to learn from my discussions with Cuban officials it would seem that, without ending the embargo, there’s still a long way to go.”
Rep. Crawford spoke about his bill at the hearing (video replay below) and tweeted that, “We’ve got to change thinking with regard to #Cuba trade. Cold war has been over for many many years.”
U.S. Representative Rick Crawford explains why U.S. trade relations regarding agriculture with Cuba must change during a House Agriculture Committee hearing.
A news release Wednesday from Rep. Cheri Bustos (D., Il) indicated that, “The hearing today focused on a piece of legislation that Congresswoman Bustos strongly supports, the Cuba Agriculture Exports Act.
Rep. Bustos stated that, “Today’s Agriculture Committee hearing was a step in the right direction for Illinois farmers, and I am hopeful that we can move forward with a vote on this legislation so we can cut the red tape and barriers facing farmers and producers in our region. By providing Cubans with access to the standard credit terms offered by virtually every other nation in the world, we can significantly grow our region’s agricultural exports, move toward normalizing relations with Cuba and strengthen our 21st century heartland.”
Meanwhile, the Washington Insider section of DTN reported on Friday that, “The U.S. lost a billion dollars in potential farm sales to Cuba over a span of a few years as result of the restriction, witnesses testified at the hearing. ‘Between 2013 and 2015, the Dominican Republic imported $1.3 billion worth of agriculture products from the United States,’ said [Matt Gibson, vice president at St. Louis, Mo.-based Bunge North America]. He noted that the two Caribbean islands have similar per capita incomes and populations. ‘During this same time, Cuba, however, imported only $262 million from the United States. That is over $1 billion to the U.S. agriculture industry left off the table due to the financing restrictions under which we must currently operate.'”
The DTN item added that, “While the legislation would be a net positive, more would need to be done before American farmers saw significant benefits, said CoBank ACB Senior Vice President of Agriculture Export Finance Karen Lowe. ‘I think in the short run there won’t be a very significant change, because many other things need to happen, particularly in terms of the creditworthiness of the importing entities in Cuba,’ she said. ‘But we have to continue to keep the ball moving so that over a period of time we will create a level playing field.'”
And McClatchy writer Sophie Ota reported on Wednesday that, “A handful of experts urged the House Committee on Agriculture on Wednesday to loosen restrictions on farm trade with Cuba, as legislators further contemplate U.S.-Cuba ties.
“Four witnesses from the agricultural industry encouraged the committee to support the Cuba Agricultural Exports Act, a bill that would repeal restrictions on export financing for agriculture shipments to Cuba.”
Ms. Ota also explained that, “Meanwhile, the only witness opposed to lifting sanctions, Mauricio Claver-Carone, the executive director of Cuba Democracy Advocates, described Cuba’s government as a ‘company’ that ‘values food over people.’
“‘Let’s debunk a myth,’ Claver-Carone said. ‘Financing agricultural transactions with Cuba isn’t about assisting small and midsize farmers on the island, but about financing the monopoly of the Castro regime.’
“Committee Chairman Mike Conaway of Texas, who presided over the hearing, spoke in favor of lifting restrictions, despite being ‘firmly opposed to lifting the embargo or restrictions on travel.'”
The DTN article went on to point out that, “[NFU President Roger] Johnson added that Sen. Charles Grassley, R-Iowa, and House Agriculture Committee Ranking Member Collin Peterson, D-Minn., have indicated support for writing the next farm bill early.”
Also in his DTN article, Mr. Clayton provided executive branch perspective on the ag/rural economy from Sec. Vilsack, who “reminded NFU members that farm income levels over the past five years have been some of the best in recent history. ‘They needed to understand when they talk about tough times, there are a whole lot of people out there who are not doing as well as many farm families are doing,’ Vilsack said.
“The secretary said he told NFU members to consider where they stand relative to the average American family, Vilsack said. The average American farm family has a median income of about $76,282, according to USDA, which is $19,782 higher than average U.S. household.”
In a conference call last week with agricultural reporters, Sec. Vilsack made similar points and noted that, “Over that five-year period we have seen a relatively strong foundation to the agricultural economy. We see continued low debt to equity ratios, notwithstanding the fact that the prices are a little low right now. I think farmers, foundationally, are in good shape to withstand the low commodity prices of today.”
During the conference call, Sec. Vilsack expounded on the fact that overall “farm household” income, which includes “off-farm” income, as well as “farm income,” is significantly above national averages. This is primarily due to the fact that “off farm” income in farm households remains strong. Sec. Vilsack noted that what is done in the policy area of rural development is important because it helps to strengthen “off farm” income opportunities.”
With this background in mind, Quoctrung Bui reported yesterday at The New York Times Online (“Actually, Income in Rural America Is Growing, Too“) that, “Median household incomes in rural America actually grew 3.4 percent in 2015, according to policy experts who study the census numbers very closely.”
Although the primary focus of the Times’ article is a detailed explanation of the way in which the Census Bureau defines, and derives, statistical results for “rural” and “urban” areas; the article concluded by stating that, “In many cases, data further complicates our view of the world, making things murkier instead of clearer. By contrast, the sharp differences in rural and urban income growth suggested by the C.P.S. [Current Population Survey] felt like a gift from the statistics gods.
“But our loss is clearly the American people’s gain, because it shows that the recovery is even more broadly shared than we thought.”
In a recent interview with Bloomberg News, U.S. Secretary of Agriculture Tom Vilsack provided perspective on recent issues impacting the agricultural economy.
Last week, Bayer and Monsanto announced that they signed a definitive agreement under which Bayer will acquire Monsanto. This proposed merger garnered attention in the front pages of The Wall Street Journal, and The Des Moines Register, and was also covered on the front pages of the business section in both The New York Times and Los Angeles Times.
Yesterday, on the “Bloomberg Markets” program, Sec. Vilsack weighed in on the proposed Bayer and Monsanto deal, video replay below.
On Wednesday, Bayer and Monsanto announced that they signed a definitive agreement under which Bayer will acquire Monsanto.
Thursday’s Wall Street Journal had two above the fold articles covering this development.
In the lede article in Thursday’s paper, Jacob Bunge and Christopher Alessi reported that, “Monsanto Co. agreed to sell itself to Bayer AG after months of haggling, in a $57 billion deal that would create an agricultural powerhouse and end the independence of one of the most successful and controversial companies in the U.S.
“If regulators approve the deal, which was unveiled Wednesday, the German pharmaceutical and chemical conglomerate would inherit Monsanto’s market-leading position in seeds and crop genes. That would tilt Bayer heavily toward agriculture in a long-range bet on high-tech crops to sustain a growing global population.”
“The Bayer-Monsanto union is the latest in a wave of tie-ups that have reordered the $100 billion global market in crop seeds and pesticides in the past 10 months. Major fertilizer producers also have pursued deals. Seed makers, having laid off thousands of employees and mothballed some research projects, regard mergers as a way to cut costs while more deeply integrating the development of new seeds and chemicals.”
The Journal article added that, “Bayer plans to fuse its prowess in pesticides—it ranks among the world’s largest suppliers—with Monsanto’s capabilities in seed genetics and biotechnology, which have allowed it to develop corn, soybeans, cotton and other crops that can survive weed-killing sprays and make natural toxins to repel bugs. The merged company would be the largest supplier by sales of both seeds and pesticides.”
This article also noted that, “While farmers prize biotech seeds for simplifying weed and insect control, they also have locked horns with Monsanto. At times they have bridled at the higher cost and the company’s efforts to protect its intellectual property; it sometimes has taken farmers to court when it suspected them of illegally saving and replanting its seeds.”
In the second article from the the front page of Thursday’s WSJ, Mr. Bunge reported that, “Behind a wave of multibillion-dollar mergers in the agriculture business is a moment of change in American farming. The dominance of genetically modified crops is under threat.
“Since their introduction to U.S. farms 20 years ago, genetically engineered seeds have become like mobile phones—multifunctional and ubiquitous. Scientists inserted genes to make crops repel insects, survive amid powerful herbicides, survive on less water and yield oils with less saturated fat, in turn eliminating farmers’ amateur chemistry. The U.S. Department of Agriculture estimates this year that 94% of soybean acres were planted with biotech varieties, and 92% of corn acres.
“Today, farmers are finding it harder to justify the high and often rising prices for modified, or GMO, seed, given the measly returns of the current farm economy. Spending on crop seeds has nearly quadrupled since 1996, when Monsanto Co. became the first of the companies to launch biotech varieties. Yet major crop prices have skidded lower for three years, and this year, many farmers stand to lose money.”
The Journal article stated that, “Biotech farming has also shown limitations, given how certain weeds are evolving to resist sprays, forcing farmers to fork out for a broader array of chemicals. Some are starting to seek out old-fashioned seed, citing diminished returns from biotech bells and whistles.”
Mr. Bunge noted that, “Robert Fraley, Monsanto’s chief technology officer who helped develop the company’s earliest incarnations of genetically engineered crops in the 1980s, said farmers will remain faithful to biotech crops.”
“Kyle Stackhouse, who grows about 1,600 acres of corn and soybeans near Plymouth, Ind., is questioning the high-price seeds’ value,” the Journal article said, while adding that, “Mr. Stackhouse estimates he typically spends about $53 per acre on soybean seeds and $40 on pesticides, versus $83 he would have spent on biotech soybean seeds an additional and $24 on related crop chemicals. That puts him ahead about $14 per acre on costs. Mr. Stackhouse says he has planted no biotech crops for three years.”
The article concluding by pointing out that, “[Jim Kline, president of Kline Family Farms, which raises corn, soybeans and wheat near Hartford City, Ind.], in mid-September was repairing a combine as he prepared to harvest this year’s corn crop, each plant containing genes protecting against Roundup and root-chewing worms. But he has already placed orders to reserve seed for next year, when he anticipates that only about two-thirds of his cornfields will be sown with genetically engineered seeds.
“‘Commodity prices go down every day,’ Mr. Kline said. Since biotech farming isn’t working as well as it once did, he said, ‘why spend the money?.'”
Meanwhile, Leslie Picker, Danny Hakim and Michael J. de la Merced reported on the front page of the business section in Thursday’s New York Times that, “Don Halcomb, a 63-year-old farmer in Adairville, Ky., is expecting his profit to vanish this year, largely because of the confluence of falling crop prices and rising costs for seeds and other materials.
“The price of an 80,000-kernel bag of seed corn rose to $300 from $80 in the last decade, as the companies that produced them consolidated, he said. And with the recent decline in commodity prices, Mr. Halcomb said he expects to lose $100 an acre this year.
“‘We’re producing our crops at a loss now, just like the oil guys are pumping oil at a loss,’ Mr. Halcomb, who grows corn, soybeans, wheat and barley on his 7,000-acre family farm, said by telephone on Wednesday. ‘You can’t cut your costs fast enough.'”
Front page of the Business Section of Thursday’s New York Times
The Times writers explained that, “It is a common plight of farmers across the United States, with the global agriculture industry in a wrenching downturn. Because farmers have produced too much corn, wheat and soybeans, they have been forced to slash prices to sell their crops. They have also reduced spending on seeds, pesticides and fertilizer, which has eaten into sales at agribusiness giants, including Monsanto and DuPont.
“In response, these companies have sought multibillion-dollar deals to cut costs and weather the industry’s storm. Four major agribusiness mergers have been announced in the last year. The latest is Bayer AG’s $56 billion takeover of Monsanto — the largest acquisition of 2016 — announced on Wednesday. Every merger creates the possibility of higher costs for farmers.”
The Times article stated that, “Bayer and Monsanto said they planned to cut about $1.2 billion worth of costs as part of the deal, helping to improve efficiency.”
The trio of Times writers added that, “Christine Hamilton manages a farm of more than 12,000 acres in Kimball, S.D., growing crops like corn and operating a ranch. She said that if the deal can pass the antitrust screening, then maybe it could actually help farmers.
“‘I understand how companies need to get bigger in order to be competitive,’ she said. ‘As we are in a low part of the cycle, anything that might have a chance of reducing our input prices would be great.'”
In a similarly based look at the potential impact of large agri-business deals, Christopher Doering reported on the front page of Thursday’s Des Moines Register (picture, right) that, “Iowa farmers are anxiously waiting to see if they will be helped or harmed by the purchase of seed giant Monsanto Co. by Germany’s Bayer AG — a deal that could shrink competition and increase prices, but also raises the prospect of better seeds and chemical products that could bolster their profits.”
The Register article indicated that, “‘It’s mixed emotions for all of us in farming and agriculture,’ said Ray Gaesser, a corn and soybean producer in Corning, Ia., who has been farming since 1967. ‘We definitely need new traits. Finding the best avenue to get that done is what we should be after, but at the same time we’re concerned about the consolidation and being down to three or four majors instead of six we had even a year ago.'”
James F. Peltz reported on the front page of the business section in Thursday’s Los Angeles Times that, “Farm profits are forecast to drop for the third straight year in 2016 to their lowest level since 2009, according to the U.S. Department of Agriculture.
“In turn, spending on seeds and pesticides as been flat or down in the last three years, the agency said.
“The deal may also be the catalyst needed to start a new green revolution where investment in R&D in seed and crop-chemical combination solutions could significantly increase global crop yields,” said Christopher Shanahan, agriculture and nutrition director at consulting firm Frost & Sullivan.”
With respect to the regulatory aspects of the Bayer/Monsanto deal, Reuters writers Diane Bartz and Greg Roumeliotis reported today that, “U.S. Senate Judiciary Committee Chairman Chuck Grassley has called a hearing next Tuesday to scrutinize the wave of consolidation. Farmers in Iowa, the Republican senator’s home state, are worried that seed and chemical costs are rising while grain prices are near their lowest levels in years. Farm incomes have plunged.
“Senator Bernie Sanders, who recently ended a run for the Democratic presidential nomination, called the deal ‘a threat to all Americans.’
“‘These mergers boost the profits of huge corporations and leave Americans paying even higher prices,’ he said.”
The Reuters article added that, “Senators Mike Lee and Amy Klobuchar, the two top antitrust lawmakers, also expressed concern. ‘The transaction has the potential to result in a significant loss of competition and reduced incentives and ability to innovate, thereby raising prices,’ said Lee, a Republican from Utah.”
And Jacob Bunge reported yesterday at The Wall Street Journal Online that, “To secure its deal to buy Monsanto Co. for $57 billion, Bayer AG will require approvals from a host of government regulators already scrutinizing a wave of consolidation in the agricultural sector.
“While Monsanto’s seed-focused business doesn’t vastly overlap with Bayer’s pesticide-heavy agricultural franchise, combining two of the world’s largest farm suppliers will test the tolerance of farmers and politicians already wary of multibillion-dollar deals to merge other top players in the $100 billion global market for seeds and pesticides, while fertilizer producers also consolidate.”
Mr. Bunge noted that, “The companies have had ‘some initial contacts with regulatory agencies describing what this combination would be about,’ Bayer Chief Executive Werner Baumann said on a call with investors after the deal was announced. ‘We have so far received encouraging feedback but nothing beyond that.’ He said regulatory filings will now begin.
“Monsanto CEO Hugh Grant said on the call that between the two companies, ‘the overlap is quite small, with a few obvious exceptions.’ One area of overlap frequently cited as possibly prompting divestitures is seeds. ‘We feel quite good’ regarding regulatory approval, Mr. Grant said.”
Reuters writers David Lawder and Nathaniel Taplin reported yesterday that, “The United States on Tuesday launched a challenge to China’s price supports for domestic wheat, corn and rice at the World Trade Organization, charging that these far exceed limits that China committed to when it joined the WTO in 2001.”
The article noted that, “The U.S. Trade Representative’s office said China’s ‘market price support’ for wheat, corn and rice was estimated to be nearly $100 billion above the WTO limits and constituted an artificial government incentive for Chinese farmers to increase output, lowering prices worldwide.
“USTR said it found that China’s domestic price supports for wheat, Indica rice, Japonica rice and corn had all exceeded the 8.5 percent ‘de minimis’ level allowed under the WTO commitment for every year since 2012.
“The first step in its formal WTO complaint is to seek formal consultations with Chinese officials to try to resolve the dispute without litigation.”
Jeff Wilson reported yesterday for Bloomberg that, “China’s Ministry of Commerce responded by expressing regret at the U.S. action, saying on its website that it complied with WTO rules and would handle the complaint in accordance with established procedures.”
Mr. Wilson pointed out that, “American farmers have seen their incomes slide amid booming global supplies and lower commodity prices. But while Tuesday’s action was welcomed by some U.S. farm groups, others in the industry cautioned that there may be a backlash.
“‘The most likely impact in the next six months might be to motivate China to impose anti-dumping tariffs on U.S. products, including agricultural products,’ William Tierney, chief economist for Chicago-based research and analysis firm AgResource Co., said in a telephone interview. ‘It will have little or no impact on Chinese ag policies.'”
William Mauldin reported yesterday at The Wall Street Journal Online that, “The administration is also emphasizing compliance with existing trade rules in hopes of getting a majority of the Senate and the House to approve his signature trade agreement, the 12-nation Trans-Pacific Partnership, after the November election.”
Mr. Mauldin also reminded readers that, “The U.S. has run afoul of complicated WTO agricultural rules before, including in a cotton case Washington lost to Brazil.”
More broadly, the Journal article pointed out that, “The U.S. imported $482 billion in Chinese goods last year, compared with $116 billion in U.S. exports.”
Christopher Doering noted in today’s Des Moines Register that, “Agriculture Secretary Tom Vilsack said U.S. agricultural exports to China now exceed $20 billion a year, but the total could be more if American grains could compete ‘on a level playing field.’ China is expected to be the largest market for U.S. agricultural exports in fiscal year 2017, he said.”
Several lawmakers provided reaction, which was generally positive, to yesterday’s executive branch action against China.
– Senate Ag Committee Chairman Pat Roberts (R., Kans.)- “U.S. producers know the importance of sticking to their commitments, and they have experienced first-hand the harm caused to the agriculture industry by countries that don’t follow the rules.”
– House Ag Committee Chairman Mike Conaway (R., Tex.)- “Even as U.S. support for American farmers and ranchers declines, we have seen a tremendous and steady rise in foreign barriers to trade which is troubling. Foreign subsidies and tariffs make it very difficult for American farmers and ranchers to make a living and support their families.”
– Senate Ag Committee Member Heidi Heitkamp (D., N.D.)- “On top of challenging commodity prices, North Dakota farmers shouldn’t have to deal with China breaching trade commitments and making it tougher for us to get market value for our crops.”
– House Ways and Means Committee Member Adrian Smith (R., Neb.)- “With 96 percent of the world’s consumers living outside our country, trade agreements create opportunity for U.S. agriculture, and so long as the U.S. maintains a leadership role, I am confident American producers will continue to meet the demands of an ever-growing population around the world.”
– Senate Ag Committee Member Joe Donnelly (D, Ind.)- “Trade is important to our economy, and nobody knows that better than Hoosier farmers. We also know, however, that trade only works when everyone plays by the same rules. Whether it’s illegal subsidies for corn or steel, China continues to manipulate prices to undercut American farmers and manufacturers. That is why I support strong efforts, like today’s enforcement action, that hold the Chinese accountable, so we can ensure that Indiana’s farmers can compete on a level playing field.”
– Senate Ag Appropriations Subcommittee Chairman Jerry Moran (R., Kans.) tweeted the following yesterday:
Yesterday, House Ag Committee Chairman Mike Conaway (R., Tex.) spoke on the House floor about executive branch regulatory actions that are negatively impacting agricultural producers.
Chairman Conaway noted that:
“Farmers, ranchers and foresters take great pride in their stewardship of the land. They are the original conservationists. And while it may be popular among some to blame farmers and ranchers for any and every environmental concern that crops up, I know that nobody cares more for the environment than those who work the land every day. When a farm family’s livelihood depends on caring for natural resources, there is an undeniable economic incentive to adopt practices that enhance the land’s long-term viability.
“Unfortunately, the Obama Administration has pursued an agenda seemingly absent of any recognition of the consequences for rural America and production agriculture. Obama’s EPA is creating regulations that are burdensome, overreaching, and negatively affecting jobs and the rural economy.
“Perhaps the most poignant example is the EPA and Army Corps of Engineers’ recent power grab with the ‘Waters of the United States’ rule. Or, as EPA likes to call it – The Clean Water Rule. I’ll be frank – this rule is not about clean water. Everyone wants and deserves clean water. This rule simply embodies EPA’s insatiable appetite for power. When EPA Administrator Gina McCarthy testified before the House Committee on Agriculture in February, Members of the Committee brought forth many concerns with the ‘wotus’ rule. Numerous times, Administrator McCarthy brushed off their concerns with statements that were intended to assure us that farmers would have the same longstanding farming exemptions that were originally included in the Clean Water Act.
“These verbal assurances give little comfort to farmers and ranchers who will face steep civil fines for any violation. While the EPA Administrator was telling the farming community they have nothing to fear with the new ‘wotus’ rule, a California farmer was being prosecuted by the Justice Department for simply plowing his field.
“The lawsuit brought against this producer claims that by plowing a field, which every farmer I know considers a normal farming practice, this farmer has created ‘mini mountain ranges’ in his field. These mountain ranges are furrows from normal farming. The suit also claims this producer discharge a pollutant into a waters of the U.S. This so-called ‘pollutant’ was the soil he was plowing.
“These perceived violations only came to attention when an overzealous Corps bureaucrat ‘just happened to be driving by the property’ and discovered perceived ‘wotus’ violations on the land.
“Regardless of the degree to which some deem government regulation justifiable, all regulations must be developed in a manner that is based on science and mindful of the economic consequences. This rule clearly was not. Farmers, ranchers and foresters believe the EPA is attacking them, and it is easy to understand why.
“Instead of using the EPA and Corps’ preferred strategy of fear and intimidation, coupled with punitive enforcement and overreaching regulatory authority, we should be building on the successful approach taken in the 2014 Farm Bill and farm bills prior to protect our natural resources through voluntary, incentive-based conservation programs.”
House Ag Committee Member Dan Newhouse (R., Wash.) indicated in his most recent newsletter that, “Out of 535 people in both the House and the Senate, there are only about 15 farmers and ranchers. As a farmer and the co-chair of the Congressional Fertilizer Caucus, I’ve been working in Congress to increase understanding of the agricultural industry and the importance of fertilizer. During the August district work period, I had the opportunity to take a tour of Agrium fertilizer plant in the Tri-Cities to discuss issues important to Central Washington farmers.”
Recall that over the weekend, Senate Ag Committee Chairman Pat Roberts (R., Kans.) and House Ag Committee Chairman Mike Conaway (R., Tex.) discussed a variety of current issues impacting the U.S. agricultural economy and farm policy at the Kansas State Fair in Hutchinson.
In particular, before embarking on changes to federal agricultural policies, Chairman Conaway said that he wanted “to know what it does to the cost of food.” He added that “we have 45 million Americans on food stamps [SNAP],” when he analyses farm policies he thinks in terms of what we are getting in return for government investment- and current policies are working, “there is no denying that,” he said.
Noting that on average, Americans spend 9.8% of disposable income on food, Chairman Conaway indicated that,“what I care about is the folks at the bottom 20% of the economic food chain, it’s not 9.8% of their disposable income, they are paying 30-35% of their disposable income for food.”
With this background on the importance of food costs to policy makers in mind, the USDA’s Economic Research Service (ERS) indicated last week (“Percent of Income Spent on Food Falls as Income Rises“) that, “[P]oorer households spend less money on food than higher income households, but this accounts for a greater share of their income.”
The ERS update indicated that, “Over the past two and a half decades, U.S. households in the lowest income quintile (the poorest 20 percent of households) spent between 28.8 and 42.6 percent of their annual before-tax income on food, compared with 6.5 to 9.2 percent spent by households in the highest income quintile. Before-tax income includes earnings and other money income, public assistance, Supplemental Security Income payments, and Supplemental Nutrition Assistance Program (SNAP) benefits.
“The share of income spent on food is more volatile for poorer households than for higher income households. The lowest income households saw their share of income spent on food drop from 41.1 to 28.8 percent over the years 2001 to 2007 but then rise to 35.5 percent in 2009. Meanwhile, over the same period, the highest income households saw relatively minor yearly swings of 0.5 to 1.0 percentage points.”
The ERS report explained that, “This volatility in the share of income spent on food by the lowest income quintile is due in part to (1) changes in grocery store (food-at-home) prices and (2) changes in earned income and Federal assistance benefits. The 2001 jump in the share of income spent on food by the lowest income quintile illustrates the impact of rising food prices. Although incomes were steadily increasing for low-income households at this time, at-home food prices increased by 3.3 percent from 2000 to 2001. Higher food prices disproportionately affect the spending behavior of low-income households and often require them to allocate a larger share of their incomes to food.”
House Agriculture Committee Ranking Member Collin Peterson (D., Minn.) indicated in his most recent newsletter (9.9.16) that, “On Thursday, I met with representatives from Rural Community Insurance Services (RCIS), an Anoka-based crop insurance company. Kevin Berg, Mike Day and I discussed the challenging financial situation many farmers currently face and how risk management tools can be strengthened to address their needs. We also talked about what changes could be made in the next farm bill in light of lower commodity prices facing producers today.”
Senator Booker, Representatives Ryan and Lee Urge Department of Agriculture to Modernize SNAP Program by Bringing Benefits Online
“Modernizing SNAP benefits will help increase the opportunity for low-income families to access healthy and affordable food that could ultimately lead to healthier lives.”
WASHINGTON, DC – Today, U.S. Sen. Cory Booker (D-NJ), along with U.S. Reps. Tim Ryan (D-OH) and Barbara Lee (D-CA) sent a letter to U.S. Department of Agriculture Secretary Tom Vilsack urging him to expedite United States Department of Agriculture’s (USDA) acceptance of the Supplemental Nutrition Assistance Program (SNAP) for online transactions, which would expand access to healthier foods for low-income individuals and families.
“It is imperative for the economic future and the health of all Americans to ensure that each person has access to nutritious and affordable food, especially the 46 million people who rely on SNAP to ensure that they and their families have enough food to eat. As you know, individuals and their families who rely on SNAP are more likely to reside in food deserts, have lower nutrition education, and live in poverty. That is why it is vital that our nation commits to reducing hunger and bolstering nutrition through improvements in SNAP, such as online transactions,” Sen. Booker and Reps. Ryan and Lee wrote in the letter.
“We know that technological advancements over the last 10 years, like the proliferation of smartphones, have dramatically increased access to the internet throughout our country. Unfortunately, many of our governmental policies and programs have not kept pace with the dramatic improvement in healthy food access that technology offers.
“We deeply appreciate all of your efforts to increase access to healthy foods for all Americans, including your commitment to launch a demonstration project to allow use of SNAP online. However, given the urgent need to catch up with the rapid pace at which the private sector is utilizing technology to expand access to healthy foods, we urge you to consider moving up the timing for beginning the project, allowing all eligible retailers to participate, and facilitating their participation by shortening the projects timeframe,” they concluded.
* Fifth District- Richmond– “Agricultural activity increased modestly since our previous Beige Book report. Farming contacts reported flat demand in the timber and forestry industries, but noted expansion in the poultry industry. Farm input prices were unchanged in recent weeks, while prices of grains, cotton, soybeans, and corn ended the reporting period at low levels.”
* Sixth District- Atlanta– “Agriculture conditions across the District were mixed. Damage and losses from drought conditions in the region caused the USDA to designate many counties in Alabama, Georgia, Mississippi, and Tennessee as natural disaster areas. Additionally, parts of southern Louisiana experienced severe flooding and there are preliminary reports of crop damage. Compared with last year, District cotton production is forecasted to be higher, while soybean and peanut production is expected to be lower. On a year-over-year basis, prices paid to farmers for corn and soybeans increased, while cotton, rice, beef, broilers and egg prices decreased. However, on a month-over-month basis, prices for corn, cotton, soybeans, and broilers were up, while prices for beef and eggs were down.”
* Seventh District- Chicago– “Already low expectations for farm incomes deteriorated over the reporting period as the potential for a record national harvest pushed prices down further. District corn and soybean growing conditions were better than a year ago (with the exception of Michigan), and the U.S. Department of Agriculture (USDA) forecasted near record yields for corn and soybeans for most District states. Corn and soybean prices moved lower, although soybean prices remained above last year’s level. Strong supplies also resulted in declines for wheat, egg, dairy, hog, and cattle prices. The USDA announced limited purchases of dairy and egg products to help address excess supplies.”
* Eighth District – St. Louis– “While the quick return to low crop prices has weakened the near-term outlook for farm income, crop conditions bode well for strong yields. The proportions of corn, cotton, rice, and soybeans rated fair or better were roughly the same as in our previous report, but the proportion of crops rated excellent increased. Contacts also reported good conditions. Multiple contacts noted that expected strong yields, both in the District and elsewhere, are likely playing a role in the return of low prices.”
* Ninth District- Minneapolis– “District agricultural conditions were mixed, with strong growing conditions offset by low commodity prices. District crops were mostly in good condition as of mid-August, with record harvests expected in some cases; parts of western South Dakota and Montana suffering from severe drought were an exception. Winter and spring wheat harvests were progressing ahead of schedule, but high yields were not expected to fully offset the effect of low prices on income, according to contacts. Prices received by farmers increased in June from a year earlier for corn, soybeans, hogs, and turkeys; prices for wheat, hay, cattle, chickens, eggs, and milk fell from a year earlier.”
* Tenth District- Kansas City– “District farm income and agricultural credit conditions softened moderately since the last survey period. Following an early June rally, crop prices declined in late July and August due to expectations that a strong wheat harvest and favorable growing conditions for fall crops would generate excess supply. Cattle prices also remained well below year ago levels, despite a slight uptick in early August. Although agricultural loan delinquency rates remained low, bankers reported increased demand for farm loan extensions and weaker loan repayments rates. Additionally, District bankers reported modest increases in the severity of agricultural loan repayment problems. Financial strain was particularly high in the western portion of the District due to the combination of subdued commodity prices and increased drought stress. Lower commodity prices, softer farm income and weaker credit conditions continued to push farmland values lower throughout the District when compared with a year ago.”
* Eleventh District- Dallas– “Strong crop production prospects materialized into above-average yields for several crops, with double-digit increases expected for the 2016 cotton, corn and soybean crops. This will help offset some of the negative impact of low crop prices for farmers. Livestock grazing conditions have been very good this year, which, coupled with low grain prices, has reduced feed costs. Dairy producers benefitted from a marked rally in dairy prices over the past six weeks.”
* Twelfth District- San Francisco– “Activity in the agricultural sector expanded modestly. Above-average water availability boosted harvests, with record yields recorded for almonds and walnuts, but contacts expressed concern that a return to earlier weather trends would hurt yields over the near term. On balance, increased foreign production, the elevated dollar, and flat overall demand increased inventories of many agricultural goods. Contacts reported that dairies continued to operate at a loss despite lower input prices, while ranchers benefited from somewhat firmer cattle prices.”
* Fifth District- Richmond– “Agricultural activity increased modestly since our previous Beige Book report, according to sources. Cotton, corn, and peanut planting are underway. However, a few Virginia and North Carolina farmers reported delayed planting and harvesting of some crops because of a protracted period of rain. South Carolina planters continued to report more labor-intensive field preparation work because of last year’s flooding. According to agribusiness contacts, input prices remained unchanged in recent weeks while crop prices and beef prices declined slightly.”
* Sixth District- Atlanta– “Agricultural conditions across the District were mixed. While most of the region remained drought free, abnormally dry to moderate drought conditions were reported in parts of Florida, Georgia, Tennessee, and Alabama. Contacts continued to focus on efficient production and controlling input costs to optimize income in a low commodity price environment. However, low feed prices benefited protein producers relying on grain for feed. On a year-over-year basis, monthly prices paid to farmers for corn, cotton, rice, soybeans, beef, broilers, and eggs declined, although on a month over month basis prices increased for soybeans, beef, and broilers.”
* Seventh District- Chicago– “Contacts expect the growing season to get off to a decent start in most of the District, even though wet, cool weather meant that both the planting and emergence of corn and soybeans were behind the pace of last spring. Corn and soybean prices rose during the reporting period, but soybean prices rose more, which may cause farmers to plant more soybeans at the expense of corn. At current prices, contacts believe that farms can cover this year’s costs for soybean production but not for corn. Many farmers took advantage of the price rally and boosted their working capital by selling old crops and locking in prices on new crops. Milk and dairy product prices moved lower, as production remained strong. Cattle prices were down as well. Hog prices increased however, helped by solid demand from China, and there was one report of new construction of hog facilities.”
* Eighth District – St. Louis– “The District row crop outlook has slightly improved: Corn, cotton, rice, and soybeans were, as of early May, ahead of their respective five-year average levels of planting progress, and crop prices have risen from their lows. However, contacts note that, even with a near-perfect year in the field, most row crop operations will struggle to break even unless a crop price rebound is sustained and significant.”
* Ninth District- Minneapolis– “District agricultural conditions remained weak, despite favorable weather going into the growing season. Nearly all respondents to the Minneapolis Fed’s first quarter survey of agricultural credit conditions reported that farm incomes were down from a year ago, and more than 80 percent expected them to fall further in the second quarter. Planting progress and early emergence for corn, soybeans, sugar beets, and small grains as of mid-May were well ahead of five-year averages in most of the District. Prices received by farmers fell in March from a year earlier for corn, wheat, soybeans, hay, hogs, cattle, chickens, eggs, and milk; prices increased for turkeys.”
* Tenth District- Kansas City– “Despite a moderate increase in soybean and hog prices in May, District contacts reported that most commodity prices remained below levels considered to be profitable, and generally at or below year-ago levels. Low commodity prices and low farm income weighed on credit conditions, and bankers reported further reductions in loan repayment rates and a significant increase in the number of farm borrowers with increased carry-over debt. District contacts expected demand for short-term financing to remain strong amid a relatively pessimistic outlook for farm income. Alongside low farm income, farmland values and cash rents also declined slightly from a year ago.”
* Eleventh District- Dallas– “Favorable weather and good soil moisture improved production prospects for 2016 crops. Contacts noted that above-average yields, if materialized, would help offset some of the negative impact of low crop prices on farm income. Cattle prices declined sharply in April, partly a result of higher beef production, but recovered some of the loss in early May as retail beef demand increased in anticipation of the Memorial Day holiday. Milk prices plummeted from already-low levels over the past six weeks, putting further pressure on dairies’ profit margins.”
* Twelfth District- San Francisco– “Activity in the agriculture sector expanded somewhat over the reporting period. Domestic demand and sales continued to grow for a wide variety of crops. Contacts reported that an oversupply of potatoes from the 2015 harvest has created excess inventories and led some growers to switch acreage to wheat production. The strong dollar continued to hold down agricultural exports in general, although overseas sales of pork products registered further strong growth. Demand for poultry exports was robust as pent-up demand from last year’s avian flu outbreak persisted and lower input prices helped exporters remain competitive globally. By contrast, activity in the cattle industry declined further, and feedlots faced challenges to remain profitable.”