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Analyzing the Forms of a Farm Bill

 

According to an Ohio State University economist the farm bill that is progressing through Congress contains several major differences in the House and Senate versions.

Carl Zulauf, an agricultural economist in the college'sDepartment of Agricultural, Environmental and Development Economics, recently offered a comprehensive update of the 2013 farm bill process in a policy brief that he co-authored with Jonathan Coppess, clinical assistant professor at the University of Illinois at Urbana-Champaign.

The conference process involves select members of the House and Senate working together to resolve differences in their two versions of a bill, Zulauf says. These differences must be resolved because the U.S. Constitution requires that the House and Senate pass the same bill before it can be sent to the president for approval or veto.

In the brief, Zulauf and Coppess highlight some of the key differences in the House and Senate versions of the bill including:

* Nutrition assistance programs: The biggest spending difference between the House and Senate versions of the farm bill is in relation to nutrition benefits, mostly in the form of the Supplemental Nutrition Assistance Program, or SNAP, formerly known as food stamps. The House version of the bill calls for $39 billion in cuts to nutrition benefits over a 10-year timeframe, largely by reducing the number of eligible beneficiaries. Meanwhile, the Senate version calls for $4 billion in cuts over the same period.

* Type of multiple-year crop programs: Experts believe the most divisive of these differences is whether crop payments should be based on historical base acres planted to the crop or on current planted acres, followed by whether the reference price and income targets should be fixed by Congress over the life of the farm bill or whether they should follow the market up and down.

“Both of these issues revolve around a broader issue, the degree of distortion that farm programs can introduce into farmers’ crop planting decisions,” the brief says. “In particular, how much does distinction increase when current planted acres and fixed reference prices are used?”

*Crop insurance: While both bills increase spending on crop insurance, the House bill increases spending by more. The Senate version also requires farms to comply with a conservation plan in order to receive the crop insurance subsidy, and a farm”s insurance subsidy level is reduced by 15 percentage points if the farm”s yearly gross income exceeds $750,000. Neither requirement is in the House version.

* Dairy program: Both versions of the draft legislation include provisions to replace the current farm bill dairy programs with a risk management program focused on the margin difference in the price of milk and feed. However, the Senate bill includes a provision to control supply by encouraging supply reductions when margins are low, while the House version does not feature a supply control provision.

Though the cuts to the nutrition programs in the farm bill have received extensive media attention, Zulauf and Coppess write that there are many components of the legislation that are likely to cause debate among members of the conference committee.

“It is easy to point to nutrition programs as the likely reason that a new farm bill will not occur,” they wrote. “However, we think the farm safety net issues are just as, and maybe more divisive.”

To read Zulauf and Coppess' full policy brief, “2013 Farm Bill Update – N​ovember 2013,” visit http://go.osu.edu/YAg.

 

NPPC Responds to Latest Farm Video

NPPC Responds to Latest Farm Video

An undercover video from an Oklahoma hog farm released today shows workers abusing animals, actions that violate the high standards of the U.S. pork industry.

The National Pork Producers Council (NPPC) does not condone and, in fact, strongly condemns practices that are not in accord with U.S. pork industry best practices.

NPPC calls on Oklahoma authorities to conduct a thorough investigation and to bring criminal charges against workers who abused animals.

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NPPC is concerned, however, that the video was held for more than a month after the abuse occurred before being made public; it also appears that the video was not provided to Oklahoma law enforcement authorities although it was given to an NBC News reporter earlier this week.

Providing humane and compassionate care for their pigs at every stage of life is one of the ethical principles to which U.S. pork producers adhere. U.S. pork producers are committed to caring for animals in a way that protects their well-being. Just as it is to others, abuse of animals is appalling to pork producers. Farmers do not defend and will not accept abuse of animals.

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Developing 11 Findings on Antibiotic Resistance

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Developing 11 Findings on Antibiotic Resistance

Developing 11 Findings on Antibiotic Resistance

Attendees at the National Institute for Animal Agriculture’s recent “Bridging the Gap Between Animal Health and Human Health” symposium, Nov. 12-14, in Kansas City, MO,  provided some insight into the issue of antibiotic resistance.

“Antibiotic resistance has been called the single most complex problem in public health, and this symposium provided respective health communities and disciplines a platform where they shared their latest research findings,” states Nevil Speer, co-chair of the symposium and a professor at Western Kentucky University. 

“This year’s antibiotic use and resistance symposium not only shed additional light on this often polarized topic but we identified common ground so a collective path forward that serves the best interests of all parties can be forged,” he observes.

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The 170-plus symposium participants from across animal, human and environmental health heard a wealth of information, including the following 11 points:

  1. The science behind the emergence, amplification, persistence and transfer of antibiotic resistance is highly complex and open to misinterpretation and misuse. If you think you understand antimicrobial resistance, it hasn’t been explained properly.
  2. The extremely complex relationship between animal health, human health and environmental health is driven by two premises: 1) Antimicrobial resistance is a naturally occurring phenomenon that is present with or without the use of antimicrobials; and 2) Anytime an antibiotic enters the ecosystem, it contributes to the presence of antibiotic resistance.
  3. Antibiotic resistance is not just transferred from animals to humans; resistance is also transferred from humans to animals.
  4. Antibiotic resistance is not just a U.S. challenge; it’s an international issue that requires a strategic global One Health approach.
  5. Evaluating antimicrobial resistance involves balancing risks vs. needs while constantly recognizing the importance of maintaining an efficacious arsenal of human antibiotics.
  6. New tools that address food animal infectious diseases must be developed, whether they are in the field of prevention or new molecules for therapeutics.
  7. Research studies and findings are often viewed through different lenses. Individuals can look at the same study and obtain different interpretation of the results and what the study infers based on their own biases.
  8. Decisions should be based on science and policy should be based on science.  The question, however, is who decides what constitutes evidence that is considered when making those decisions and policies.
  9. Significant efforts are being led by the public health community to reduce inappropriate antibiotic prescribing in human health and reduce hospital-acquired infections. Agriculture needs to be open to change as well.
  10. Change will happen. Open dialogue must continue, with animal agriculture at the table or change will be drastic and by statute and will not be a deliberative policy change.
  11. Solving antibiotic resistance requires collaboration and raises the question, “How does human medicine, environmental health and animal medicine work together to address antibiotic use and resistance?”

You can hear and view “Bridging the Gap between Animal Health and Human Health” symposium presentations —PowerPoints® with voice-over—online within the next two weeks at www.animalagriculture.org. A White Paper summarizing the symposium will be released and available online around Dec. 31.

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Call for PRRS Research Proposals Opens

 

Boehringer Ingelheim Vetmedica, Inc. has announced its annual call for proposals for PRRS (porcine reproductive and respiratory syndrome) research to further knowledge on this “costly, frustrating challenge to the global swine industry,” the company says.

The deadline for submissions is Jan. 1 of each year.

Boehringer Ingelheim will provide three, $25,000 awards to the winning proposals for PRRS research in North America. Candidates include graduate students, academic researchers, company or private researchers and practicing veterinarians.

Announcement of the 2014 Advancement in PRRS Research Award recipients will be made at the American Association of Swine Veterinarians annual conference on March 3, 2014 in Dallas, TX.

Once the three winning year-long research projects are completed and submitted for peer review, the PRRS Research Review Board will conduct a second evaluation. Once accepted for publication, the first place recipient will receive an additional $5,000; second place, $3,000 and third place, $1,000.

For more information, visit http://us.boehringer-ingelheim.com.

 

     

 

Harvest Nears the Finish Line

Corn and soybean farmers are making major gains toward completion of this year’s harvest.

Monday’s Crop Progress report from the U.S. Department of Agriculture (USDA) reflects that growing trend – harvest is nearing the finish line in a number of the 18 top states for corn and soybean production.

Corn harvest is officially 91% completed as of Nov. 17, 2013, with many states reporting close to 95% completion. States still far behind include Michigan (75%), North Dakota (78%) and Wisconsin (74%), according to USDA survey statistics. North Carolina reports it has completed the corn harvest.

The corn harvest was 99% completed as of Nov. 17, 2012; the rate of harvest exceeds the five-year average for 2008-2012 of 86% completed by this time of the year.

The soybean harvest is 95% completed in the 18 top-producing states, compared to 98% completed as of Nov. 17, 2012 and just shy of the 96% average completion rate for 2008-2012.

Individually, states citing completed soybean harvest consist of Louisiana, Nebraska, North Dakota, Ohio and South Dakota. Many other states are close to completion. Lagging well behind are Kentucky (78%), Missouri (86%), North Carolina (50%) and Tennessee (75%).

Read the full report at www.usda.gov.

  

Pork Exports Continue to Struggle in September

Pork Exports Continue to Struggle in September

U.S. pork exports continued to struggle in September, according to data released last week by USDA’s Foreign Agricultural Service and Economic Research Service (ERS). 

September pork exports totaled 394.9 million pounds, carcass weight equivalent.  That figure is down roughly 2% from August but is 8.9% lower than one year ago.  It brings year-to-date pork exports to 3.649 billion pounds, carcass weight, a figure 8.6% lower than one year ago.  September’s export figure is the lowest monthly total thus far in 2013.

Note that USDA still has higher exports in their forecast for 2014 (Figure 1).  They did lower that figure from 5.31 billion pounds, carcass weight, to 5.27 billion pounds in the November World Supply and Demand Estimates (WASDE) Report, but their revised number still represents an increase of 4.3% from their current annual 2013 forecast of 5.054 billion pounds.

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Among major markets, only Japan (+1.3%) and Mexico (+1.9%) have purchased more U.S. pork this year through September.  Shipments to the Caribbean and “Other” markets have grown by 35% and 13% this year, respectively.  It should be noted that the “Other” markets used by ERS in compiling these data now account for more than 15% of total U.S. exports. So while each individual country may be small, they have a significant collective impact on our industry’s export performance.

The drivers of the lower performance are both easy to identify and familiar to pork producers and market observers – China/Hong Kong, Russia and South Korea.  While exports to China/Hong Kong are significantly lower (-20.8%) for 2013 to date, those markets have taken 15% and 20.5%, respectively, more product vs. one year ago in August and September.   As can be seen in Figure 2, those values are the highest since May 2012 and represent a continuation of the long-term uptrend in exports to these markets.  I still expect the Smithfield-Shuanghui deal to tilt this trend line upward in 2014 and beyond.

Shipments to Russia remain at zero with no improvement in sight.  This year’s poor exports to South Korea are a bit of a mystery since we have begun to enact the Korea Free Trade Agreement.  September exports to Korea were down 68% from last year and bring the year-to-date total to -30.8%.  Tariff reductions are admittedly small so far. But one would have thought that they would have provided some stimulation to 2013 sales, especially with the Korean won strengthening slightly since June.    

The only major markets to which our exports are higher this year are Japan (+1.3%) and Mexico (+1.9%). Those rates are obviously small but those are still our two largest volume markets so their growth is one encouraging sign.

September’s muscle cut exports were valued at $413.5 million, 4.1% lower than the value of August shipments and 3.3% lower than one year ago.  Year-to-date export value stands at $3.749 billion, 7% lower than last year. 

U.S. packers/processors shipped 31.9 million pounds of pork variety meats valued at 54.336 million in September.  Those figures are 10.2% and 9.7% lower than last year.  Variety meat exports are still up 10% year-to-date.  The value of those higher January-September shipments is up 11.7% vs. 2012.

If Russia, China and South Korea were at year-ago levels through September, our exports would be 1.8% higher than one year ago.

Are there any lessons from this?  I think the largest one is confirmation that the days of continuous record years are over.  Our exports are now so large that increasing them year after year is very difficult and making those increases significantly large is virtually impossible.  Further, many of these leading markets are large enough so that any problem will have a significant impact on the total.  Finally, all of those little items that we think are not critical can become critical in a heartbeat.  That is especially true for countries just looking for an excuse to protect a domestic market.  And make no mistake: there are still plenty of them out there.  

 

Cheaper Corn Fuels Hog Industry Growth

Cheaper Corn Fuels Hog Industry Growth

If fed to hogs, corn is worth an estimated $6.85 per bushel when the profits from hog production are assigned to the value of corn, says Chris Hurt, Purdue University Extension economist. That’s good to know for grain farmers who are seeking new ways to add value to corn.

Hurt explains that livestock was historically the way to add value to abundant corn supplies on Midwest farms. During the first-half of the 1800s, what is now the eastern Corn Belt became the center of hog production. Cincinnati was nicknamed “Porkopolis” in 1835. By the end of the Civil War in 1865, public monies were being used to open terminal markets farther west with the Chicago Union Stockyards the most famous. The center of the hog industry has continued to move farther west to Missouri, Iowa, Minnesota and Nebraska in the past 50 years.  

“Today most corn growers cannot add hogs to their farm enterprises,” Hurt says. “Modern hog production is large-scale, high-tech, high-investment and highly coordinated. So the hope for most corn growers is that large hog production corporations will expand rapidly and thereby expand the corn usage base.”

How big is the incentive for hog expansion?

“At first glance, it appears to be very large,” Hurt says. “During the period that spans the 2013-14 corn marketing year, live hog prices are expected to average about $67 per hundredweight with costs of production closer to $56. That means an expected profit of $32 per head and relates to the $6.85 per bushel for corn marketed through hogs. Unfortunately, it takes time to get into hog production, and gilts retained now will not have market-ready pigs until late 2014 when much of the profit incentive will be eroded. That profit erosion is due to the expected expansion already underway and to somewhat higher corn prices for the 2014-15 marketing year,” he says.

According to Hurt, the best news for the hog industry and other animal industries is that feed prices will probably moderate for a series of years, not just this one year. “If so, that means an extended period of lower feed prices and expansion of animal production,” Hurt says. “Over the next three to five years, expect a ‘mini-boomlet’ for animal industries in which three positive demand drivers will occur: higher U.S. per capita consumption, modest domestic population growth and continued growth of exports,” he says.

For hog production in the coming year, Hurt says that this means a 1-3% expansion of the breeding herd that has already begun. Increased pork production from this expansion will begin by late summer of 2014, and prices will move below year-previous levels at that time. As an example, hog prices in the last quarter of 2014 are expected to be $58 per live hundredweight compared with $65 during the last quarter this year.

Hurt says that the big profits will come during the 2013-14 corn marketing year, reaching $37 per head of profits on average during the second and third quarters of 2014.

Hog prices are expected to average around $65 in late 2013 and the first quarter of 2014. Then record-high hog prices are anticipated in the second quarter with an average near $72, followed by $67 for the third quarter. As pork supplies begin to rise into the fall of 2014, hog prices are expected to drop $9 per live hundredweight to around $58.

“While hog prices are strong, it is really lower feed costs that are providing the strong profitability forecasts,” Hurt says. “In the peak of the 2012 drought, hog production costs were near $73 in the third quarter of 2012. Those have dropped to about $56 for the coming year. 

“While selling corn at $6.85 per bushel is appealing to cash grain farmers, it is important for them to recognize that the high feed prices resulting from the 2012 drought caused large losses,” Hurt continues. “In the current profitable period, it will take until June 2014 to recover the losses that were suffered from drought-induced high feed costs. After many years of often high and very volatile feed prices, the future appears brighter for all of the animal species with feed prices moderating over the coming years. With moderation should also come less volatility. The pork industry is well positioned to take advantage of several years of favorable consumer expansion driven by improving domestic consumption and foreign demand,” Hurt says.

Hurt concludes that the hog industry expansion will not be large enough to return corn prices to the previous lofty levels. However, when all animal industries are included, it will be a period of growing feed-use base for corn growers. Thus, it is anticipated that in coming years there will be a better balance between the crop production sector and the animal sector.

“Assuming ethanol use is relatively level in the future, this means that corn farmers have achieved the goal of providing sufficient production for both food and fuel,” Hurt says.

 

 

USDA Comments on EPA Ethanol Plan

USDA Comments on EPA Ethanol Plan

Agriculture Secretary Tom Vilsack has issued the following statements on EPA's proposal of 2014 Renewable Fuel Standards (RFS):

“The Obama Administration remains committed to the production of clean, renewable energy from homegrown sources, and to the businesses that are hard at work to create the next generation of biofuels.

“It's important to take a long-term approach to the RFS.  Clearly, as governor of Iowa and as U.S. Secretary of Agriculture, my support for the RFS has been steady and strong.  But I also believe that improved distribution and increased consumer use of renewable fuels are critical to the future of this industry.

“We are proud of our record to support increased demand for renewable fuels. USDA has invested in the creation of advanced biorefineries across the nation; developed a unique partnership with the U.S. Navy and Department of Energy to create new biofuels for marine and aviation use; and boosted markets for nearly 3,000 U.S. companies that are creating biobased products from homegrown materials.

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“I am pleased that EPA is requesting comments on how we can help the biofuels industry expand the availability of high-ethanol blends, and I hope the industry uses the comment period to provide constructive suggestions. Together, we will be able to chart a path forward that maintains President Obama’s strong commitment to an ‘All of the Above’ energy strategy for our nation.”

 

 

NCCR Comments on EPA’s RFS Proposal

The National Council of Chain Restaurants (NCCR) has issued the following statement from NCCR Executive Director Rob Green on the Environmental Protection Agency’s (EPA) proposed Renewable Fuel Standard (RFS) volume mandate for 2014:

“The Environmental Protection Agency’s adjustment to the Renewable Fuel Standard volume mandate is an implicit recognition that the ethanol mandate is out of sync and out of touch with current market realities. With this proposal, the EPA is essentially saying, ‘if you like your 15-billion- gallon corn ethanol mandate, you can keep it.’

“Even though the EPA proposal purports to address long-term and lingering concerns about hitting the ethanol ‘blend wall,’ which would increase fuel and gasoline prices, it does nothing to alleviate the economic distortions the corn ethanol mandate has inflicted on commodity and food costs paid by America’s small businesses and consumers. The EPA, in effect, is hamstrung by current law.

“The Renewable Fuel Standard has wrought havoc on food retailers, restaurants, franchisees and operators, as well as food producers and suppliers. However, the ultimate losers are consumers. Study after study has shown that the corn ethanol mandate has artificially driven up commodity costs by billions of dollars annually, and with it, consumer prices.

“Today’s proposal by the EPA reaffirms our steadfast belief that Congress needs to repeal the RFS mandate once and for all. The time has come to end the federal government’s failed experiment with the RFS and the corn ethanol mandate.” 

The National Council of Chain Restaurants (NCCR) is the leading trade association exclusively representing chain restaurant companies. For more than 40 years, NCCR has worked to advance sound public policy that best serves the interests of restaurant businesses and the millions of people they employ. NCCR members include the country's most-respected quick-service and table-service chains. NCCR is a division of the National Retail Federation, the world's-largest retail trade group.

 

 

Livestock Insurance Offers Producers Safety Net

Pork producers have largely overlooked safety nets, which have been popular with crop farmers for a long time.

But that may be changing, says a University of Missouri Extension agriculture economist.

Two forms of livestock insurance have been available for a number of years through the USDA Risk Management Agency, said Ray Massey at the recent 2013 Missouri Swine Institute in Columbia.

Livestock Risk Protection (LRP) guards producers against a drop in livestock prices. Livestock Gross Margin (LGM) insurance protects producers from losses of gross margin, from either falling livestock prices or rising feed costs.

“It is a price protection. It has nothing to do with yield,” Massey says. “When you talk about crop insurance, we frequently assume that it is insuring yield. But when you go with livestock insurance you are really buying price protection on your livestock.”

Massey says these types of insurance would not pay producers for a disease outbreak or high death rate. Rather, they lock in a price for the livestock and, in the case of LGM, a price for the feed.

With feed prices highly variable right now, LGM might be a good way for producers to reduce that variability, Massey says.

Producers also can lock in livestock prices through the futures market, but that requires a contract for a large number of animals. One advantage of LGM and LRP is that they offer price protection similar to what producers would get from futures contracts, but for any number of animals they want.

Another advantage of these programs, Massey says, is that they are federally subsidized, which makes them less expensive than other forms of insurance.

Massey notes that livestock insurance is based on the national market price, not the actual price producers receive.

“That is really critical to understand,” he says. “Your price may be above or below what the national market was on the Chicago Board of Trade, but your cost of production or revenue is not what the insurance policy is going to use. They will calculate with the national market price from the Chicago Board of Trade reports.”

For more information on livestock insurance, visit www.rma.usda.gov/livestock.