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    Friday, February 22, 2013

    Keith Good: Midwest Wheat Farmers Welcome Snow; Bearish Grain Outlook From USDA Economist


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    Snow Falls on Drought Stricken Fields

    Also, Reuters writer Carey Gillam reported yesterday that, “The heavy winter snowstorm sweeping across the U.S. midsection was a welcomed event for U.S. winter wheat farmers worried that their drought-stricken fields were too parched to produce a healthy crop this year.

    “Nearly a foot or more of snow fell across key growing areas in Oklahoma and Kansas in the last 24 hours, and more was coming.”

    But the article noted that, “Still, [Brian Fuchs, a climatologist with the University of Nebraska Drought Mitigation Center] and wheat agronomy experts said that the ongoing drought has been so pervasive that soil moisture deficits will not be replenished without several large storm systems.

    “‘This is not going to put a big dent in the drought,’ said Fuchs. ‘The moisture is welcomed, but is it a drought-buster? No it is not. We need several more storms like this to really start turning the tide.’”

    Agricultural Economy

    Gregory Meyer reported yesterday at The Financial Times Online that, “The US government has painted a bearish outlook [text presentation by USDA Chief Economist Joe Glauber, slide presentation here] for the prices of corn, wheat and soyabean, [related slide] projecting that the country’s farm production [related slide] in 2013 will bounce back sharply from the devastation of last year’s drought, bringing relief to consumers worldwide.

    Similarly optimistic forecasts a year ago by Joseph Glauber, chief economist at the US Department of Agriculture, were dashed by droughts that led to stunted harvests and record prices by summertime.

    “Mr Glauber said in Thursday’s crop outlook for 2013 that corn prices could fall a third from the average prices of the current season, while soya could decline more than a quarter, if a return to milder weather allows higher yields.”




    The FT article noted that, “Analysts worry that the current bearish forecast could be premature as more than half the US mainland remains in drought.

    “The drought has moved westward from the central corn belt to plains states such as Kansas, threatening the winter wheat crop.

    “However, Mr Glauber said its persistence did not necessarily presage damaging conditions this summer. He estimated this year’s corn crop at a record 14.53bn bushels, up 35 per cent from last year. Soyabean production would rebound 13 per cent to3.41bn bushels.”

    Reuters writer Charles Abbott reported today that, “The U.S. Department of Agriculture on Thursday projected a rebound in U.S. corn and soybean yields in 2013 that, along with high planted acreage [related slide], opens the door to record-large crops and for prices to tumble from 2012/13 levels.”

    The Reuters article noted that, “Another year of drought would drive some livestock producers out of business, said Glauber. ‘Historical odds favor a rebound in crop yields, however, which should bring significantly lower prices in 2013.’”

    Bloomberg writer Alan Bjerga reported yesterday that, “U.S. food inflation may ease later this year as larger crop inventories lessen cost pressures, assuming the worst drought since the 1930s ebbs further, the Agriculture Department’s top food economist said.

    “The drought led to record corn and soybean prices last year. Cattle futures reached the highest ever and the country’s herd dropped to the smallest since 1961 as ranchers culled animals to lower feed costs. Those effects will ease as this year’s grain harvests replenish supplies and agribusinesses worry less about shortages, economist Richard Volpe said today at a USDA conference in Arlington, Virginia.”

    In a closer look at weather variables, Neela Banerjee reported yesterday at the Los Angeles Times Online that, “More than two-thirds of the country is under abnormally dry to exceptional drought conditions [related graph], ‘which, although serious, is a slight improvement since fall 2012,’ said the National Drought Early Warning Outlook.

    “While the report said the drought was over in most of the nation east of the Mississippi River, the portion of the country still facing drought — most of the West and Florida — should expect it ‘to persist or intensify’” [related graph].

    In trade news, yesterday USDA released its “Outlook for U.S. Agricultural Trade” report, which stated in part that, “Fiscal 2013 agricultural exports are forecast at a record $142 billion, down $3.0 billion from the November forecast, but $6.2 billion above final fiscal 2012 exports…U.S. agricultural imports are forecast at a record $112.5 billion, $2.5 billion lower than the November forecast, but $9.1 billion higher than in fiscal 2012.”On the issue of an EU-US trade deal, Marcel Fratzscher noted in an opinion column yesterday at The Financial Times Online that, “There is a lot of hype about the prospects of an EU-US free trade agreement, especially in the wake of Barack Obama’s State of the Union address last week. Supporters point to the benefits such an agreement could bring to both economies. Yet the costs are likely to outweigh the benefits. Most importantly, a transatlantic deal will undermine multilateralism, in particular the long-overdue completion of the Doha round, and weaken multilateral institutions such as the World Trade Organisation.

    “An FTA will of course bring some benefits to the EU and the US via enhanced trade. The removal of trade barriers might raise the gross domestic product of the EU by €190bn and of the US by €100bn, according to estimates by the German Marshall Fund.”

    The column pointed out that, “Even these modest estimates are based on the hope that a comprehensive abolition of trade barriers can be achieved. This is more than doubtful, in particular as some of the largest trade barriers erected by the EU are on agricultural products, while the US is a major exporter of agricultural products.”

    Budget- Policy Issues

    DTN Ag Policy Editor Chris Clayton reported yesterday (link requires subscription) that, “If members of Congress don’t like how USDA has to implement budget cuts under the sequester, then they should stop writing the U.S. agriculture secretary letters and instead write a new bill.

    “That was U.S. Agriculture Secretary Tom Vilsack’s advice Wednesday as he talked to reporters about sequester cuts during the USDA Outlook Forum just outside of Washington.

    “‘It’s a bad, bad policy and I think when it was passed the assumption was it was so bad that folks would be reasonable and reach a consensus on an alternative,’ Vilsack said. ‘And that’s what they should do … Rather than write letters and ask me to do things I can’t do, how about writing a bill and getting it passed?’”

    The DTN article noted that, “‘I’m very confident about the future of agriculture,’ Vilsack said. ‘I think there are manmade risks that we need to resolve — a five-year bill, an answer to the sequester issue, a budget and immigration reform.’”

    Mr. Clayton explained that, “Members of Congress and people in the meat industry have cited the 1990s government shutdowns to reflect that meat inspectors were essential employees who were not furloughed during those events in 1995-96. Vilsack said people are ‘using an old lens that doesn’t fit’ when making the comparison with today. Under a budget shutdown event, the executive branch has some authority to keep essential workers on payroll because there is an understanding that eventually the dispute will be settled and money spent will be reimbursed. Under the sequester, it’s an actual cut to the budget dollars left for the remainder of the year… . [T]he solution, Vilsack said, is for Congress to either provide USDA flexibility to move money around the department or end the sequester with an actual budget agreement.”

    Reuters writer Charles Abbott reported yesterday that, “Although federal budget cuts are scheduled for March 1, it could be months before a threatened shutdown of U.S. meat plants would occur because of a furlough of meat inspectors, U.S. Agriculture Secretary Tom Vilsack said on Thursday.

    “Vilsack said work rules vary for USDA employees, who get from 30 to as many as 120 days, or four months, notice of impending layoffs.”

    Mr. Abbott pointed out that, “During a speech to the USDA conference, Vilsack said the meat inspector furlough was ‘a risk we now face.’

    “‘This is a direct prescription from Congress to reduce every line item,’ said Vilsack. Afterward, he told reporters that he could not shift money to cover the cost of inspectors nor could he exempt the meat inspection agency from cuts.”

    In related news, Kelsey Gee reported yesterday at The Wall Street Journal Online that, “Chicken producer Sanderson Farms Inc. said Thursday that its business would face significant disruptions if federal meat inspectors are furloughed because of government spending cuts.

    “Sanderson would have to shut down plants if U.S. Department of Agriculture inspectors can’t be on hand to supervise operations, the company said in a Securities and Exchange Commission filing. Federal law requires U.S. meat inspectors to be on site when poultry plants are operating.”

    In addition, David Kesmodel reported yesterday at The Wall Street Journal Online that, “CME Group Inc. warned its customers Thursday that federal spending cuts set to start March 1 may affect the physical delivery and cash settlements for some livestock and dairy futures contracts.”

    More broadly on the sequester issue, Reuters writer Mark Felsenthal reported yesterday that, “After weeks without talks on the U.S. budget crisis, President Barack Obama called Republican leaders on Thursday to discuss the harsh ‘sequestration’ cuts to government spending due to begin in just over a week.

    “In what might be just the start of long negotiations to prevent the $85 billion in cuts, Obama spoke to House of Representatives Speaker John Boehner and Senate Minority Leader Mitch McConnell. The conversations were ‘good,’ White House spokesman Jay Carney said, but he declined to provide details.”

    The Reuters article added that, “Republicans want to replace the across-the-board sequester cuts by finding other more-targeted spending reductions.

    “But congressional Democrats have put forward a $110 billion plan that includes not only spending cuts but also tax increases, which are opposed by Republicans.”

    Niels Lesniewski reported yesterday at Roll Call Online that, “The vice chairman of the Republican Conference [Sen. Roy Blunt, R-Mo.,] told a St. Louis radio program that President Barack Obama should embrace the idea of more discretion in implementing the spending cuts required to take effect March 1 under current law.

    “‘The compromise is to give the president authority that he should be willing to use as the leader of the country to target the cuts rather than to take the cuts on every line item,’ Blunt told KMOX. ‘These spending cuts are going to occur, and they should occur, and they should be done in the right way instead of the wrong way.’”

    Meanwhile, in other developments,news release earlier this week from Rep. Stephen Fincher (R., Tenn.) stated that, “[Rep. Fincher] announced that he has been placed back on the House Committee on Agriculture. Fincher served on the committee in the previous Congress, and returns to the committee next week.

    “‘I am pleased to welcome back Stephen to the House Agriculture Committee.  He hails from a strong, agricultural district in Tennessee and is a farmer by trade.  I’m sure he’ll put that experience to good use as we work on issues that are important to production agriculture and rural communities,’ said Chairman Frank Lucas.”

    In Farm Bill related news, Megan R. Wilson reported yesterday at The Hill’s RegWatch Blog that, “The Obama administration is taking additional steps to crack down on cash payments for food stamps.

    “The U.S. Department of Agriculture (USDA) on Thursday announced it would take action against the ‘bad actors’ who abuse the program by extending the legal definition of ‘trafficking’ to include indirect ways of receiving cash for Supplemental Nutrition Assistance Program (SNAP) benefits.”

    In other nutrition related news, Sabrina Tavernise reported in yesterday’s New York Times that, “American children consumed fewer calories in 2010 than they did a decade before, a new federal analysis shows. Health experts said the findings offered an encouraging sign that the epidemic of obesity might be easing, but cautioned that the magnitude of the decline was too small to move the needle much.”

    While Bloomberg writer Stephanie Armour reported earlier this week that, “Adults consumed an average of 11.3 percent of their daily calories from fast food in 2007-2010, a drop from 12.8 percent in 2003-2006, the Centers for Disease Control and Prevention in Atlanta said in a report today. The largest proportion of fast food calories consumed was among obese people, the survey shows.”

    In food safety developments, AP writers Mary Clare Jalonick and Kate Brumback reported yesterday that, “Four former peanut company employees have been charged with scheming to manufacture and ship salmonella-tainted peanuts that killed nine, sickened hundreds and prompted one of the largest recalls in history.”

    The AP article stated that, “The 76-count indictment was unsealed late Wednesday in federal court in Albany, Ga. It accuses Peanut Corporation of America owner Stewart Parnell, his brother Michael Parnell and Georgia plant manager Samuel Lightsey with conspiracy, mail fraud, wire fraud and the introduction of adulterated and misbranded food into interstate commerce with the intent to defraud or mislead. Michael Parnell was a food broker who worked with the company.”

    And an update yesterday from National Crop Insurance Services pointed out that, “As the claims come in from one of the worst droughts in decades, farmers and ranchers across the country are receiving indemnity payments for the losses they have incurred. As of February 18, 2013, more than $14.7 billion has been sent to farmers.  Farmers will invest more than $4.1 billion to purchase more than 1.2 million crop insurance policies.”

    EPA and Biofuels

    Zack Colman reported yesterday at The Hill’s Energy Blog that, “The front-runner to fill the vacancy atop the Environmental Protection Agency (EPA) pledged to push ahead with actions to confront climate change during a wide-ranging speech Thursday.

    “‘As President Obama said, climate change is a priority — and we are going to take action,’ Gina McCarthy, the EPA Assistant Administrator for the Office of Air and Radiation, told attendees at the Georgetown Climate Center Workshop in Washington, D.C.”

    Also yesterday, a news release from the American Petroleum Institute (API) stated that, “API and other groups have appealed to the U.S. Supreme Court a D.C. Circuit Court decision rejecting a challenge to EPA’s grant of partial waivers for use of the ethanol-gasoline blend, E15, API’s group director for downstream and industry operations Bob Greco told reporters this morning:

    “‘We’ve filed this petition because the D.C. Circuit incorrectly concluded that none of the 17 petitioners had standing to challenge the E15 partial waivers – not the engine manufacturers whose products will run on this new fuel blend, not the petroleum industry who must undertake massive infrastructure changes to accommodate the blend and meet the renewable fuel mandate, and not the food producers who now face significantly greater competition in the commodities market for corn, the conventional feedstock for ethanol.’”

    In response, an update yesterday at the Renewable Fuels Association Online noted that, “Commenting on the decision by API and GMA to appeal the E15 case to the Supreme Court, Bob Dinneen, president and CEO of the Renewable Fuels Association, said:

    “‘Good luck with that. We now know why gas prices keep going up and up – to fund unnecessary Big Oil lawsuits to protect their monopoly on the fuel market. I wonder if food prices will spike as well to cover the cost of this Supreme Court challenge?’”

    Meanwhile, AP writer Ryan J. Foley reported earlier this week that, “Regent Bruce Rastetter intervened on behalf of ethanol industry leaders who were upset with a prominent University of Iowa researcher for warning that water-intensive ethanol production was threatening Iowa’s water supply, records show.”

    Immigration

    Laura Meckler reported in today’s Wall Street Journal that, “Leading business and union groups announced agreement Thursday on principles to guide talks on immigration legislation, but they failed to resolve some of their most contentious disputes.

    “The groups had hoped to negotiate a united position on rules governing the future entry into the U.S. of low-skilled workers—one of many issues that lawmakers and outside groups are trying to work through as Congress considers a broad overhaul of immigration laws.

    “The lack of agreement between the U.S. Chamber of Commerce and the AFL-CIO means that senators attempting to write an immigration bill will have to find a compromise on their own on the flow of foreign workers into the country. The lawmakers had hoped for a unified recommendation from the chamber and the labor organization.”


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