Biotech; Policy Issues; Ag Economy; and, Political Notes- Monday Posted By Keith Good On September 15, 2014 Biotech Neil Hume and Gregory Meyer reported on Friday at The Financial Times Online that, “Cargill, one of the largest suppliers of agricultural products and food, is seeking damages from Syngenta in a state court in the US over a biotech seed it claims has almost brought the country’s corn trade with China to a halt. “Late last year, China started to turn away imports of US corn on the grounds they could contain a genetically modified seed that had not been approved for use in the country. “The product called Agrisure Viptera had been developed by Syngenta and was designed to protect crops from common pests.” The FT writers explained that, “China’s decision affected commodities trading houses, including Archer Daniels Midland and Louis Dreyfus Commodities, whose cargoes were turned back. Total losses globally were in the hundreds of millions of dollars. In its court filing on Friday, Cargill said it had suffered losses of more than $90m. “Cargill claims Syngenta’s decision to commercialise Viptera without gaining import approval from China has put the ability of the US agricultural industry to serve global markets ‘at risk’ and had cost the industry a ‘significant’ amount of money. “It says a study by the National Grain and Feed Association shows that US exporters and farmers could have lost up to $2.9bn because of the Chinese import ban.” The FT article added that, “On Friday Syngenta said it believed the lawsuit was without merit, and that it ‘strongly upholds the right of growers to have access to approved new technologies that can increase both their productivity and their profitability’. “Corn with the Viptera trait was first planted in the US in 2011. Until China began turning away cargoes last autumn, a large amount of corn it imported from the US probably contained the trait.” Jacob Bunge reported on Friday at The Wall Street Journal Online that, “In a fight that highlights global sensitivity over genetically modified crops, Cargill Inc. sued Syngenta AG, claiming that the Swiss seed maker’s push to sell bioengineered corn seeds that weren’t approved in China cost the U.S. grain company $90 million when Beijing rejected corn shipments. “The suit, filed on Friday in Louisiana state court, escalates tensions that have shaken U.S. agribusiness since China last year sharply curtailed imports of U.S. corn. Beijing’s move all but closed off a major market for the grain, contributing to a sharp decline this year in prices for the U.S.’s biggest crop by value and costing shippers hundreds of millions of dollars, according to U.S. grain groups.” The Journal article noted that, “Legal experts said Cargill’s suit raises unusual legal questions because of the complexity of the grain-industry supply chain. Although Cargill argues that Syngenta faced a duty to act responsibly on the industry’s behalf in selling its seeds, Syngenta faced no contractual obligations with Cargill—nor any U.S. legal restrictions—on selling corn to farmers in the U.S. that later might be commingled, sold and shipped to overseas buyers, said David Hickerson, an attorney with Foley & Lardner LLP in Washington. “‘A real issue will be: What duty did Syngenta owe to Cargill?’ Mr. Hickerson said. Syngenta ‘may argue, ‘We are just legally selling our product. If you wanted to sell that product to China, it was your obligation to make sure it complied with whatever import rules applied.’” Policy Issues Bloomberg writer Alan Bjerga reported yesterday that, “Three states are ending a program that qualified residents for extra food paid for by the federal government — including two, New Jersey and Wisconsin, that are led by potential Republican presidential candidates. “Congress in February passed a law to raise the costs of so-called heat-and-eat programs. Such initiatives had allowed states to give residents as little as $1 a year in home-heating assistance to qualify for an average of $1,080 a year in added food stamps. The new minimum state contribution is $20 per household a year, and Chris Christie’s New Jersey, Scott Walker’s Wisconsin as well as Michigan are taking a pass.” Mr. Bjerga noted that, “Christie said a proposal to let New Jersey participate in the program didn’t require recipients to show they needed heating assistance, a violation of new federal guidelines. “‘Distribution of benefits without regard to actual heating and cooling expenses as envisioned in this bill is clearly impermissible,’ Christie wrote to the state’s General Assembly in vetoing a measure to qualify the state for a program that gives $54 in federal money for every $1 the state spends.” Yesterday’s article explained that, “Federal spending on food stamps — formally called the Supplemental Nutrition Assistance Program — more than doubled from 2008 to 2013, with most of the money spent at retailers including Supervalu Inc. and Kroger Co. The program cost a record $79.9 billion in fiscal 2013, almost one-eighth of the roughly $650 billion a year Americans spend on groceries. “About 46.5 million Americans got food stamps in June, the latest month data were available, down from a peak of 47.8 million in December 2012, according to the U.S. Department of Agriculture that runs the nutrition program.” The Bloomberg article added that, “Raising the state cost of heat-and-eat to $20 was designed to push states out of the program and save an estimated $8.6 billion in food-stamp costs over a decade. Those savings may not be realized: 16 states, mostly in northern regions with high winter energy use, participated in the program and 13 have either found ways to pay for the higher minimum or have announced plans to do so. “The third holdout, Michigan, is led by Republican Rick Snyder. The three states accounted for 20 percent of food-stamp recipients in the 16 states. “Michigan state administrators decided the additional state money needed to maintain heat-and-eat would pull too much aid from residents who rely heavily on home-heating assistance, said Bob Wheaton, a spokesman with the state’s Department of Human Services.” Also, the House Agriculture Committee will hold a hearing on Wednesday, “To review the implementation of Section 4022 of the Agricultural Act of 2014: Pilot projects to reduce dependency and increase work requirements and work effort under the Supplemental Nutrition Assistance Program.” And on Thursday, the House Ag Committee will hold a hearing titled: “The benefits of promoting soil health in agriculture and rural America.” Meanwhile, Tim Devaney reported on Friday at The Hill Online that, “The U.S. Department of Agriculture (USDA) is considering new rules for a loan program that finances businesses in rural areas, such as farmers. “The USDA’s Rural Business-Cooperative Service said Friday it is looking to make changes to the Business and Industry Guaranteed Loan Program, which provides loan guarantees to certain lenders to give them an incentive to finance rural businesses. “The changes ‘will allow the agency to guarantee a higher total dollar amount of loan requests,’ the USDA wrote.” In other policy news, Tim Devaney reported on Friday at The Hill Online that, “The American Petroleum Institute and renewable energy groups are furious with the Environmental Protection Agency for ‘playing politics’ with the nation’s ethanol mandate. “These groups rarely see eye to eye, but they both agree the Obama administration is flip-flopping on the Renewable Fuel Standard to save face as the midterm elections approach — or as Jon Doggett of the National Corn Growers Association put it, ‘for all the wrong reasons.’” With respect to regulations, Philip Brasher reported on Friday at Roll Call Online that, “The Obama administration has found itself in a public brawl with farmers over a proposed rule that would more precisely define what land the Clean Water Act regulates. “A diverse group of business interests, including mining companies and developers, even golf courses, also oppose the rule the administration issued this spring, but the farm lobby, led by the American Farm Bureau Federation, has taken the most public role in trying to persuade Congress to stop the regulation from taking effect.” Mr. Brasher indicated that, “Thirty-five House Democrats, mostly from rural districts, joined Republicans Tuesday in passing a bill sponsored by Steve Southerland II, R-Fla., that would kill the rule and make it nearly impossible for the administration to propose an alternative. The 262-152 margin isn’t veto proof, but the vote sets up a battle over the issue in the next Congress, when Republicans could be in control of the Senate. Two fiscal 2015 appropriations bills pending in the House include riders to block the rule from being finalized.” The Roll Call article pointed out that, “Along with releasing the proposed rule, the agencies also joined the Department of Agriculture in immediately implementing a separate interpretive rule that defines 56 agricultural and conservation practices that would be exempted from having to apply for Section 404 permits for activities that involve what’s considered dredged or fill material. Mines and construction projects typically require such approvals. “The administration says the proposed rule would provide certainty to landowners about what gullies, ditches, ponds and wetlands are under the law’s jurisdiction because they have a ‘significant nexus’ with rivers downstream. The rule would increase the amount of land the agencies currently regulate by 3 percent, or 1,500 acres, according to the economic analysis.” And Leslie Josephs reported on Friday at the Money Beat blog (Wall Street Journal) that, “When it comes to the anti-sugar craze, the head of the International Sugar Organization says it’s time to go to the mattresses.” The Journal update added that, “‘We believe there is overwhelming sound scientific evidence that supports the nutritional value of sugar,” said José Orive, who took the helm in January of the London-based group, which is funded by sugar-producing and -consuming countries. “Mr. Orive said measures such as the Food and Drug Administration’s proposal to break out added sugars on food labels and Mexico’s tax on sugary drinks, which executives say has dented profits at bottlers such as Coca-Cola Femsa SAB, could hurt global consumption of the sweetener down the line.” Ag Economy Paul E. Peterson, of the University of Illinois, indicated on Friday at the farmdoc daily blog (“Cattle at the Crossroads”) that, “The year-long across-the-board rally in cattle prices has been driven by a combination of favorable supply and demand factors which have aligned to push prices to record levels (Figure 1). On the supply side, the starting point is cattle numbers. Beef cow numbers are the lowest since 1962, and last year’s calf crop was the smallest since 1949. Cows are the ‘factory’ where beef production begins. Over the years, a combination of poor returns, weather problems in key areas, and strong cull cow prices to satisfy the demand for processing beef encouraged the industry to ‘tear down’ much of its production capacity. Obviously, this situation didn’t develop overnight, but it did set the stage for what has happened in the past 12 months. Rising carcass weights have partially offset the decline in cattle numbers, but the net result has been tight beef supplies.” Friday’s update noted that, “The demand side has been equally positive for cattle and beef prices. US consumers have been willing to pay record-high prices for beef (Figure 2), despite what has been a slow and somewhat shaky economic recovery. Likewise, overseas buyers have shrugged off higher prices, and export shipments have continued at levels consistent with recent years.” Dr. Peterson pointed out that, “Record returns for cow-calf operators have prompted questions about when herd rebuilding will begin and the ‘factory’ will expand. USDA’s midyear Cattle inventory report was inconclusive on this question, at least from an industry-wide standpoint. Areas that have received moisture and have seen grazing conditions improve appear to be taking the first steps toward bumping up production; areas that have not been so fortunate weather-wise are still trimming herds in an effort to hang on until conditions improve. These region-by-region differences make it difficult to determine whether the industry as a whole is expanding, contracting, or holding steady. “Beyond grazing conditions, another consideration driving the expansion decision is the income foregone when a heifer calf is held back as a replacement in the breeding herd instead of sold as a feeder animal. At current price levels, this foregone income is in the neighborhood of $1,200 to $1,500 per head. This makes the decision between the certainty of a dollar now and the possibility of a dollar-plus in a year or two just that much more difficult. Producers considering bred replacement cows will find that bred cow supplies are limited, and prices have increased by 50% in the past year (Figure 3).” University of Illinois agricultural economist Gary Schnitkey tweeted an interesting table on Friday depicting budget variables with $3.50 corn and $9.60 soybean prices. The table, titled, “Central Illinois, High Productivity Projections, 2015,” can be viewed here. And a news release on Friday from the University of Missouri Extension Service stated that, “Missouri cash rent prices for cropland could drop in the next few years due to lower corn and bean prices, says Joe Koenen, University of Missouri Extension agricultural business specialist.” The release noted that, “Estimates from 2014 increased slightly from 2013, Koenen said. Landowners in the Linneus area talked about ways to work with renters in view of USDA’s predictions of $3.25 per bushel corn, less than half of the $8 price fetched in 2012. “Landowners will face pressure to drop cash rent prices based on USDA and MU Food and Agricultural Policy Research Institute predictions that corn income could drop 35 to 40 percent next year compared to just two years ago.” With respect to transportation issues, Christopher Doering reported on Saturday at The Des Moines Register Online that, “At West Central, a farmer-owned Iowa cooperative that depends heavily on trains to move crops, seed and fertilizer, officials had no reason to believe the 2013 harvest would be different from any other. Railroads told executives they had sufficient crews and engines in place to haul the bumper crop on tens of thousands of miles of steel track across the country. “But a few months after fields were harvested the Corn Belt was pummeled by a brutal winter, and competing demands among coal, oil, grain and other commodities for space on the country’s clogged rail network left railroads such as Canadian Pacific Railway and BNSF Railway struggling to ferry cars around the region.” Mr. Doering noted that, “Initially, West Central — accustomed to waiting a few days to receive hopper cars — had to wait a week, with delays extending to more than six weeks. The co-op’s average cost to lease a single rail car nearly doubled in January to more than $12,500 from the same time a year earlier, significantly squeezing profits at the warehouse, which are usually a mere 8 to 13 cents a bushel. “As farmers prepare to harvest this year’s crops, West Central and other agriculture shippers have dramatically lowered their expectations for the railroads. Farmers, ethanol and other producers in the Corn Belt fear that residual delays plaguing the freight system will worsen as farmers harvest record corn and soybean crops this fall.” And Chad Garland reported in Saturday’s Los Angeles Times (“Drones may provide big lift to agriculture when FAA allows their use”) that, “More than a decade later, attention is refocusing on development of drones for commercial purposes. Amazon Inc., Google Inc. and Walt Disney Co. are grabbing headlines with plans to develop drones for deliveries, mapping and entertainment. “But the big boom in unmanned aircraft may come from what’s known as precision agriculture — using high-tech systems to help farmers increase yields and cut costs.” Political Notes Matt L. Barron indicated on Friday at The Hill Online that, “Democrats are playing offense in Georgia and Kentucky in their fight to maintain control of the U.S. Senate and rural voters are critical to wresting both seats away from the GOP column this November.” Nate Cohn noted penned an article recently at the New York Times Online titled, “Democrats Are Seeing More Daylight in Path to Senate Control;” while, Michael A. Memoli reported over the weekend at the Los Angeles Times Online that, “In a campaign so far defined by hogs and chickens, the race for the open Iowa Senate seat that most expected to fall to Democrats is now perhaps the closest in the country.” And Jason Noble reported yesterday at The Des Moines Register Online that, “Democratic superstar Hillary Clinton laid down a placeholder for a 2016 presidential bid Sunday during the feel-good nostalgia festival that was the Harkin Steak Fry.” -- Keith Good President FarmPolicy, Inc. Champaign, IL FarmPolicy is a FREE newsletter and is underwritten and made possible by the generous support of McLeod, Watkinson & Miller- Attorneys at Law. Office accommodations for FarmPolicy are provided by Bartell Powell LLP- Attorneys at Law, located in downtown Champaign, Il. To subscribe to the FarmPolicy Email, send a note to, [email protected]. To unsubscribe, send a note to, [email protected]. 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Posted on: Mon, 15 Sep 2014 10:19:37 +0000
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