Daily Ag News Summary 04/11/2017

USDA Announces Extension of GIPSA Interim Final Rule

The U.S. Department of Agriculture (USDA) is extending the implementation date for the Grain Inspection, Packers and Stockyards Administration’s (GIPSA) interim final rule on competitive injury.  The interim final rule was scheduled to go into effect on April 22 but will now be extended another 180 days and the agency is setting a 60-day comment period – from April 12 to June 10 – on whether to further delay or withdraw it altogether. The so-called Farmer Fair Practices Rules, includes two proposed regulations and an interim final rule, the latter of which now is set to become effective Oct. 19.

“With this extension notice, it is clear the administration has recognized this is a complicated and controversial issue with deep economic consequences for American poultry and livestock producers,” said National Chicken Council (NCC) President Mike Brown.  “The comments filed have obviously had an impact, and we thank the department for postponing the effective date to allow for a more thorough and meaningful review.  We look forward to working with the administration and Congress to resolve this issue during this ‘timeout period’ of further review.”

In comments filed on March 24, NCC explained in great detail the numerous reasons why the agency’s interim final rule and proposed rules are ill-advised, would inflict billions of dollars of economic harm to American agriculture, exceed GIPSA’s statutory authority, and represent an arbitrary and capricious abuse of federal regulatory authority.

“We’re extremely pleased that the Trump administration has extended the time it has to review this regulation and the public comments on it, which will show the devastating effects this rule would have on America’s pork producers,” said National Pork Producers Council (NPPC) President Ken Maschhoff, a pork producer from Carlyle, Ill. “The regulation likely would restrict the buying and selling of livestock, lead to consolidation of the livestock industry – putting farmers out of business – and increase consumer prices for meat.”

NPPC is most concerned with the interim final rule, which would broaden the scope of the Packers and Stockyards Act (PSA) of 1921 related to using “unfair, unjustly discriminatory or deceptive practices” and to giving “undue or unreasonable preferences or advantages.” Specifically, the regulation would deem such actions per se violations of federal law even if they didn’t harm competition or cause competitive injury, prerequisites for winning PSA cases.

USDA in 2010 proposed several PSA provisions – collectively known as the GIPSA Rule – that Congress mandated in the 2008 Farm Bill; eliminating the need to prove a competitive injury to win a PSA lawsuit was not one of them. In fact, Congress rejected such a “no competitive injury” provision during debate on the Farm Bill. Additionally, eight federal appeals courts have held that harm to competition must be an element of a PSA case.

“Eliminating the need to prove injury to competition would prompt an explosion in PSA lawsuits by turning every contract dispute into a federal case subject to triple damages,” Maschhoff said. “The inevitable costs associated with that and the legal uncertainty it would create could lead to further vertical integration of our industry and drive packers to own more of their own hogs.

An Informa Economics study found that the GIPSA Rule today would cost the U.S. pork industry more than $420 million annually – more than $4 per hog – with most of the costs related to PSA lawsuits brought under the “no competitive injury” provision included in the interim final rule.

Ag Researchers Develop New Biodegradable Plastic-Replacement

U.S. Department of Agriculture (USDA) scientists have developed a starch-based coating that improves biodegradability and water resistance in products like paper and plastic films.

While 100 percent biodegradable, starch lacks the flexibility necessary for many plastic and coating applications. Polyvinyl alcohol (PVOH), a synthetic polymer, is usually used in films and coatings to provide flexibility. However, it has limited biodegradability.

At the USDA-Agricultural Research Service’s (ARS) National Center for Agricultural Utilization Research in Peoria, Illinois, scientists have developed new value-added starch-based products to replace synthetic products such as polyethylene bags and polystyrene foam packing materials, which can accumulate in landfills. ARS chemists George Fanta and Gordon Selling, along with their colleagues, recently made starch complexes that, when blended with PVOH, improve strength, enhance flexibility and improve water resistance.

According to Fanta, the starch complex/PVOH blends have valuable properties not found separately in either material. The films could dramatically enhance future production of food packaging, plastic bags and other synthetic products.

Scientists expect to apply the technology to additional items, like clothing, in the future. For example, they envision coating umbrellas made of cotton with the complex rather than today’s reliance on synthetic materials such as nylon, polyester or acrylic.

The coatings resist water better than those prepared from pure PVOH, according to Selling. A drop of water on paper coated with these complexes remains on the surface for minutes and often evaporates before soaking into the paper.

ARS has filed a patent application covering the new paper-related technology, which should prove ideal for small paper making companies. The technology uses ingredients and a production process that are both safe and inexpensive.

Ag Exports Play Role in General Economy

The U.S. Department of Agriculture’s (USDA) Economic Research Service (ERS) estimates that U.S. agricultural exports supported about 1.1 million full-time, civilian jobs in 2015. Yet, the economic linkages between U.S. agricultural exports and rural employment are not fully understood, particularly in the metro and non-metro regions of each State and among production agriculture, food and beverage manufacturing, and other sectors of the economy. ERS researchers used a model of the U.S. economy to explore the possible economic effects of a 10-percent increase in foreign demand for U.S. agricultural exports, including in those various regions and economic sectors.

A hypothetical 10-percent increase in foreign demand for U.S. agricultural exports results in a 6.7-percent increase in the volume of U.S. agricultural exports, worth $9.7 billion at 2013 prices. This increase in export volume (6.7 percent) is smaller than the increase in export demand (10 percent) because the demand stimulus is partially offset by an increase in the prices of agricultural exports.

In addition, total employment in all sectors of the U.S. economy (agricultural and non-agricultural) increases by about 41,500 jobs, above and beyond the approximately 1.1 million jobs currently supported by U.S. agricultural exports. At the regional level, our analysis shows employment increases in 32 of the 50 States and in the District of Columbia. The proportionate increase in non-metro employment is about four times larger than the corresponding increase in metro employment (0.09 percent versus 0.02 percent).

Regions whose share of total employment is greater in the agri-food sector exhibit a stronger positive change in total employment due to the hypothetical 10-percent increase in foreign demand for U.S. agricultural exports. However, regions with a greater share of both mining and non-food-and-beverage manufacturing exhibit a strong negative change in total employment. A region’s commodity mix in agri-food production and the presence of an international port also influence the regional employment results, but to a far lesser extent.

In the simulation, the expansion of export demand also leads to an increase in the exchange rate, which makes U.S. goods more expensive and reduces the competitiveness of products in trade-exposed industries. While employment would increase in some sectors, especially in export-oriented agricultural production and food and beverage industries, it would decrease in other trade-exposed industries, such as mining and manufacturing. On the other hand, an increase in the price of exports relative to the price of imports stimulates U.S. employment overall due to the increase in gross national expenditures. But, even within the agri-food sector, not all industries would expand. For example, land-intensive, non-export-oriented industries such as sugarcane and sugarbeet production would contract slightly.

Steven Zahniser, Tom Hertz, Peter Dixon, and Maureen Rimmer contributed to the report (https://www.ers.usda.gov/webdocs/publications/err227/err-227.pdf?v=42830)

ARC-CO Revenue Guarantees Decline Throughout Much of U.S.

While more than half of all the counties in the U.S. saw their Olympic average yield guarantees increase, ARC-CO payments are based upon the combination of prices and yields or revenues says Dr. Brent Gloy with Agricultural Economic Insights.

The guarantee prices for corn and soybeans have fallen over the life of the ARC-CO program.  For example, corn prices began the program with an Olympic average of $5.29 per bushel and have fallen 9% to $4.79 for 2016.  Soybeans saw a smaller decline in the benchmark price falling by 3% from $12.27 to $11.87.  Wheat actually saw a slight increase rising from $6.60 to $6.70. While most (71%) counties saw their corn yields increase, only 31% of counties saw their benchmark corn revenue guarantees increase from 2014 to 2016.  Soybeans were slightly better, with slightly over half of the counties seeing Olympic average revenues climb from 2014 to 2016.  On the other hand 75% of wheat producing counties saw their revenue benchmarks increase. The average decline in revenue guarantees were the largest for corn, with the average county seeing a revenue decline of $25 per acre from 2014 to 2016.  For wheat and soybeans the average changes in revenue guarantees were small but positive.

There are a few interesting things that can be observed in these graphics.  First, there were several counties that saw rather large declines in benchmark corn revenue guarantees.  In the case of corn, counties that saw their benchmark revenue decline by at least $100 per acre are most prevalent in Minnesota, Indiana and Ohio and Texas. Second, there are only a small number of counties in the corn belt that saw revenue increases. As one might expect the revenue declines were smaller for the case of soybeans and wheat.  In the case of soybeans and wheat some counties saw revenue declines of at least $50 per acre – there are a relatively small number of counties that saw declines of this magnitude however.

The ARC-CO revenue guarantees have started to decline in many counties. This is particularly true for corn whose price has declined by more than that of soybeans.  Unfortunately, it appears that these initial declines are only the beginning and that further revenue declines are highly likely.

Take corn for example: Dr. Art Barnaby reports that Kansas State’s March 31st estimate of the 2016 market year average corn price at $3.30 per bushel.   Unless, the 2016 market year average price is above $3.70 per bushel the benchmark corn price will fall to $3.95 per bushel in 2017.  This would be a 25% decline from its initial ARC-CO price guarantee.  The potential declines for the 2017 guarantee prices in soybeans and wheat are less extreme, but still point to declines in revenue guarantees.

All of this points to the likelihood that government program payments under ARC-CO will begin to decline rapidly with the 2017 crop marketing year Gloy adds.  Farmers enrolled in these programs will need to prepare for smaller government program payments in spite of an economic environment that continues to be described as challenging at best.

See the entire report here (http://ageconomists.com/2017/04/10/arc-co-revenue-guarantees-decline-throughout-much-u-s/)

Breeding Stock Exports to Mexico Set to Begin

American sheep and goat producers have been unable to export breeding animals to Mexican customers, but based upon a recently published rule by the Mexican government exports will begin soon.

According to a veterinary health certificate that is required for live sheep and goat exports to Mexico, animals must have been born and raised in the country of origin and have been isolated from other animals for at least 30 days prior to export. Animals must also be free from any clinical signs of infectious, contagious or parasitic disease during inspection prior to export. Other conditions state that sheep must be enrolled in a Scrapie Flock Certification Program or must meet specific genotype qualifications.