Keith Good: Pacific Trade Pact Close to Completion, Official Testifies

    Trade

    Reuters writer Krista Hughes reported yesterday that, “The top U.S. trade official told lawmakers on Tuesday an ambitious Pacific trade pact could be wrapped up within months as he urged Congress to back the administration’s trade agenda.

    “In testimony to congressional committees [Finance Committee statement, Ways and Means Committee statement], U.S. Trade Representative Michael Froman said the administration looked to lawmakers to pass bipartisan legislation allowing a streamlined approval process for trade deals, such as the 12-nation Trans-Pacific Partnership (TPP).

    “TPP chief negotiators are meeting in New York this week and a U.S. negotiator said the talks aimed to close all but the trickiest issues. Some see a mid-March completion date.”

    The article noted that, “Republican Orrin Hatch, chairman of the Senate Committee on Finance, said it would be a ‘grave mistake‘ to close TPP before securing trade promotion authority (TPA), which allows the White House to submit trade deals to Congress for a yes-or-no vote, without amendments, in exchange for setting negotiating goals.

    “Hatch said there was no firm timeline for introducing a TPA bill, which experts say will encourage the best offers from trading partners, but he hoped to move it in February.”

    Note that Ways and Means Committee Chairman Paul Ryan’s (R., Wis.) opening statement from yesterday is available here.

    David Shepardson reported yesterday at The Detroit News Online that, “The Obama administration’s top trade negotiator denied a report that U.S. trade negotiators will end their bid to convince Japan to lift tough requirements on car imports after Japan agreed to expand a tariff-free quota for imported U.S. rice.

    “Nikkei Asian Review reported the Obama administration had agreed to end efforts to convince Japan to drop standards on car imports in exchange for Japan’s agreement to import an additional 10,000 tons of U.S. rice. The report said talks will begin in Washington on Wednesday aimed at working out the details — and a deal means it is more likely a final deal on a 12-nation Trans-Pacific Partnership could be reached by spring.

    “U.S. Trade Representative Michael Froman denied the report.”

    An update yesterday from Rep. Adrian Smith (R., Neb.) indicated that, “[Rep. Smith] participated today in a House Ways and Means Committee hearing on the U.S. trade policy agenda. In the hearing, Smith raised concerns to U.S. Trade Representative Michael Froman about workforce disputes at West Coast ports causing perishable goods such as beef and pork to spoil prior to shipping. He also asked about U.S. efforts to elevate biotechnology issues in ongoing discussions with China and negotiations through the Transatlantic Trade and Investment Partnership (T-TIP).” (A video replay of this exchange with Rep. Smith and Amb. Froman is available here).

    On the west coast port issue, Betsy Morris, Jacob Bunge and Bob Tita reported yesterday at The Wall Street Journal Online that, “The labor dispute that has magnified snarls at U.S. West Coast ports may be on the brink of a settlement, but it will take months to end the widespread pain, freight disruptions, and losses caused by the massive cargo traffic jam.

    “The near-paralysis at the ports is rippling through the economy. Railroads are reducing service to the West Coast. Cargo ships have slowed down–and even turned around–as containers have stacked up at the ports. And an official of a meat-industry trade group said last week that port gridlock was costing meat and poultry companies more than $30 million a week.”

    Also at the Finance Committee hearing yesterday, Sen. Johnny Isakson (R., Ga.) asked Amb. Froman about cotton subsidies and specifically about the impact China’s cotton subsidies are having on markets.

    In part, Amb. Froman noted that, “Well I think this is a very important point more generally, which is that the whole pattern of agricultural subsidies has changed a lot over the last 10 or 15 years. When the Doha Round was first started, the focus on agricultural subsidies was really the United States and the European Union. But in both of those areas, subsidies have come down, while subsidies from China and India in the agriculture area have increased, and by some measure China’s now the largest subsidizer of cotton. And so we’re engaging with them and we had conversations also in the last couple days about that and about taking a fresh look at where subsidies are being provided, how it’s distorting the market, and how that should play into global trade negotiations. I think it’s important that we update our view of where subsidies are coming from and what impact it has.”

    To watch this two-minute exchange from yesterday’s hearing on this issue with Sen. Isakson and Amb. Froman, just click here.

    Meanwhile, Jerry Hagstrom reported yesterday at National Journal Online that, “California Dairies, a large exporter of milk powder and other products, has never exported to Cuba. But Andrei Mikhalevsky, its president and CEO, would like to enter that market.

    “That’s why he and the International Dairy Foods Association, which met here [Miami] this week–and just about every other U.S. farm and agribusiness group except sugar growers–have joined the U.S. Agriculture Coalition for Cuba to work toward normalizing U.S.-Cuban relations and ending the embargo.

    “‘We are very supportive of opening Cuba up as a market, primarily because it is a good market,’ Mikhalevsky said on the sidelines of the IDFA annual Dairy Forum.”

    Farm Bill Issues

    DTN Ag Policy Editor Chris Clayton reported yesterday that, “Corn farmers may not be looking as closely at the potential government payment for corn this year as some observers might think.

    “Despite estimates of $70-per-acre payments for corn farmers in as many as 16 states for this year’s corn crop, the Congressional Budget Office released a new projection Monday showing only 37.5% of corn acreage will enroll in the new Agricultural Risk Coverage-County program.

    “The CBO forecast appears to run counter to the argument from Midwest agricultural economists that the Agricultural Risk Coverage-County program is the better option for corn farmers.”

    Mr. Clayton noted that, “The Congressional Budget Office projects corn prices for 2014 to 2019 will average in a price range from $3.50 to $3.92 per bushel. For at least the current market year and the next two market years, CBO projects corn prices will remain under the $3.70 PLC reference price.

    “If 62.5% of corn acres are enrolled in PLC as the Congressional Budget Office forecasts, then PLC payouts would average $1.48 billion per year from FY 2016 to FY 2020, the effective budget years of the current farm bill. PLC payments would peak in the early years, reaching $1.97 billion in 2017.

    “For ARC-County, the Congressional Budget Office forecasts ARC payouts for corn at an average of $656 million per year over that same five-year span. ARC payments would hit $1 billion in FY 2016 and $1.16 billion in FY 2017.”

    The DTN article pointed out that, “CBO forecasts nearly double the number of acres would go into PLC over ARC-County despite the latest university forecasts projecting far higher commodity payments for corn producers in most of the Corn Belt for the 2014-15 crop. The latest projection released by University of Illinois and Ohio State University economists last week projected the average ARC-County payment in Iowa, Minnesota, Nebraska and Ohio would be more than $70 an acre.

    “For most of the Corn Belt, outside of Illinois, ARC-County payments for corn farmers would be anywhere from five to 10 times greater than the PLC payment. Along with that, the way ARC-County is structured using five-year averages that exclude high and low prices, the ARC-County payment for the 2015-16 crop is likely to be comparable.”

    Mr. Clayton also pointed out that, “Under the Congressional Budget Office forecast, more farmers would enroll their soybeans in ARC-County, according to the Congressional Budget Office forecast. Soybean payments under PLC would average $291 million a year for the next five years while ARC-County payments would average $727 million a year. That implies far more soybean acreage would enroll in ARC-County than in PLC.

    CBO projects 62.5% of soybean acres would enroll in ARC-County and thus 37.5% of soybean acres would be enrolled in PLC. CBO estimates the market-year average price for soybeans would fall to $8.19 a bushel for the 2015 crop and remain below $10 a bushel throughout the rest of the farm bill.”

    “The latest estimates by University of Illinois and Ohio State University economists show farmers in only seven states would receive an ARC-County payment for the 2014-15 soybean crop, ranging from a low of $1 per acre in Alabama to a high of $20 an acre in New York. The analysis shows prices remain high enough currently that there would be no PLC payments for soybeans nationally,” the DTN article said.

    An update yesterday at the farmdocDaily blog (“Expected Payments from ARC-CO and PLC“) by agricultural economists Gary Schnitkey, Jonathan Coppess, Nick Paulson and Carl Zulauf stated that, “Differences in expected payments between Agricultural Risk Coverage – County Coverage (ARC-CO) and Price Loss Coverage (PLC) will be an important factor when making the program choice decisions offered under the 2014 Farm Bill. (See Step 4 on Farm Bill Toolbox for other factors – type of risk covered and availability of SCO -that influence the ARC-CO and PC decision). Realization of Market Year Average (MYA) prices and county yields from 2014 through 2018 will affect differences in payments. Much of the focus will be on price levels.

    “General rules of thumb are:

    1. Corn: ARC-CO has higher expected payments when MYA corn prices exceed $3.30 per bushel from 2014 through 2018.
    2. Soybeans: ARC-CO has higher expected payments than PLC when prices exceed $7.80 per bushel.
    3. Wheat: ARC-CO has higher expected payments than PLC when prices exceed $5.50 per bushel.

    “These break-even prices vary across counties and also will be influenced by 2014 county yields, which have not been released yet. Break-even prices can be fine-tuned after release of 2014 yields in late February. On average, break-even prices likely will be close to those given above.”

    The farmdoc update noted that, “For corn, ARC-CO usually will have higher expected payments than PLC when the 2014-2018 prices are above $3.30 per bushel. In 2014, ARC-CO likely will pay more than PLC in many counties, except for those counties with exceptionally high yields. Many high-yielding counties will be located in central Illinois and Missouri (see Figure 1 in farmdoc daily January 22, 2015 for state estimates).

    “For soybeans, ARC-CO usually will have higher expected payments than PLC when 2014-2018 prices are above $7.80 per bushel. For 2014, most areas as are projected to have low ARC-CO payments and no PLC payments (see Figure 2 in farmdoc daily January 22, 2015).”

    Also yesterday, Marcia Zarley Taylor reported at DTN that, “While growers throughout the Midwest routinely purchase 80% or 85% Revenue Protection policies, 50% to 65% is the norm in higher-risk regions like Texas or the Great Plains. Farm bill architects designed SCO for growers outside the Midwest who couldn’t afford or couldn’t even acquire Revenue Protection coverage above 75%. In effect, the new law will let them buy area revenue coverage up to 86% of their insurable revenue for the first time — but only if they combine it with Production Loss Coverage under the new farm program. Unfortunately, SCO’s high cost remains a deterrent even for operators likely to opt for Production Loss Coverage.”

    With respect to nutrition issues, USDA’s Economic Research Service released a report yesterday titled, “The WIC Program: Background, Trends, and Economic Issues, 2015 Edition,” which stated in part that, “The Healthy, Hunger-Free Kids Act of 2010, which authorized funds for WIC, is set to expire on September 30, 2015. The reauthorization process provides an important opportunity to reexamine the operation and effectiveness of the program and to consider improvements.”

    The report included this interesting graphic illustration, “USDA expenditures for food and nutrition assistance programs, FY 2013,” and stated that, “Since the program’s initiation in 1974, nominal (i.e., not adjusted for inflation) Federal expenditures for the program increased each year before peaking at $7.2 billion in FY 2011 (fig. 5). These annual increases resulted from congressional appropriations, which were stimulated, in large part, by program evaluations that showed WIC to be successful and cost effective” (at page 16).

    Economic Matters

    AP writer Candice Choi reported earlier this week that, “The milk industry is fed up with all the sourness over dairy.

    “As Americans continue turning away from milk, an industry group is pushing back at its critics with a social media campaign trumpeting the benefits of milk. The association says it needs to act because attitudes about milk are deteriorating more rapidly, with vegan groups, non-dairy competitors and other perceived enemies getting louder online.

    “Julia Kadison, CEO of Milk Processor Education Program, which represents milk companies, says the breaking point came last year when the British Medical Journal published a study suggesting drinking lots of milk could lead to earlier deaths and higher incidents of fractures. Even though the study urged a cautious interpretation of its findings, it prompted posts online about the dangers of drinking milk.”

    The article added that, “On Tuesday, the ‘Get Real’ social media campaign will be announced at a dairy industry gathering in Boca Raton, Florida in conjunction with the National Dairy Council and Dairy Management Inc., which represent dairy farmers. The campaign is intended to drown out milk’s detractors with positive posts about milk on Facebook, Twitter and elsewhere. Milk brands, their employees and others in the industry will post the messages and direct people to a website where they can get more information.”

    Regulations

    Reuters writer Tom Polansek reported yesterday that, “The U.S. Commodity Futures Trading Commission aims to approve by the end of this year proposed rules to crack down on speculation in energy, grain and metals markets, the agency’s chief of staff said on Tuesday.

    “New regulations on ‘position limits’ in commodity markets will not go into effect immediately once they are approved, Clark Ogilvie, chief of staff to CFTC Chairman Tim Massad, told a commodities conference in Miami.

    “‘The chairman’s goal is to try to get approval finalized for position limits before the end of this year,’ he said.”

    Political Note

    An update yesterday at the Minneapolis Star-Tribune Online indicated that, “Democratic Rep. Collin Peterson says he has two fundraisers scheduled and he’s ‘running at this point’ for re-election next year.

    “‘They energized me last time, they got me fired up,’ said Peterson, in a phone call this week.

    “By ‘they’ Peterson is referring to national Republicans who, sensing Peterson’s Republican-leaning district in a Republican-leaning year, decided to pour more than $8 million into the 2014 race in attempts at unseating the popular 24-year incumbent.”




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