Washington Insider-- Monday

By DTN's Washington Insider

Here's a quick monitor of Washington farm and trade policy issues from DTN's well-placed observer.

USDA 2016 Food Prices: Grocery Store Price Forecasts Revised Down Again

Consumers are now expected to see grocery store prices steady to up 1% in 2016 compared to an outlook in July for an increase of 0.25% to 1.25%, as USDA's Economic Research Service (ERS) made further downward revisions to forecasts for several products including meat & poultry and fruits and vegetables, according to USDA's monthly food price outlook.

Overall, USDA forecasts food prices to rise 1% to 2% in 2016, with food away from home prices seen up 2.5% to 3.5%. For 2017, ERS forecasts the overall food price increase at 1.5% to 2.5%, putting in still below the historical 20-year average of 2.6%. Food away from home prices are seen rising 2% to 3%, slightly below the level expected for 2015 and the 20-year average of 2.7%.

As for the shifts in the outlook for 2016, ERS noted that beef and veal prices decreased 1.4% from June to July and are 7.7% lower than this time last year. Declining U.S. beef exports have increased domestic supplies, putting downward pressure on beef prices at the store. "Additionally, favorable pasture conditions in some areas in 2015 and lower feed prices have allowed cattle producers to feed cattle longer and to hold cattle for herd expansion," USDA noted. "Aided by a strong (though somewhat weaker) dollar, lower prices have led U.S. beef to become more attractive abroad."

ERS predicts beef and veal prices will decrease 5% to 4% in 2016 and increase 2% to 3% in 2017.

In the first forecast for 2017, ERS expects supermarket prices to rise between 1% and 2%. Despite the expectation for declining prices in 2016, beef and veal, poultry, and dairy prices are expected to rise in 2017.

"These forecasts are based on an assumption of normal weather conditions throughout the remainder of the year; however, severe weather or other unforeseen events could potentially drive up food prices beyond the current forecasts," ERS said. "In particular, the drought in California could have large and lasting effects on fruit, vegetable, dairy, and egg prices. Also, a stronger U.S. dollar could continue to make the sale of domestic food products overseas more difficult. This would increase the supply of foods on the domestic market, placing downward pressure on retail food prices."

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USDA's APHIS Confirms Highly Pathogenic H5N2 Bird Flu in Wild Mallard in Alaska

The presence of highly pathogenic H5N2 avian influenza (HPAI) in a wild mallard duck from a state wildlife refuge near Fairbanks, Alaska, has been confirmed by USDA's Animal and Plant Health Inspection Service (APHSI).

H5N2 HPAI was last found in the U.S. in June 2015. Anyone involved with poultry production from the small backyard to the large commercial producer should review their biosecurity activities to assure the health of their birds.

The wild mallard duck was captured and a sample tested as part of ongoing wild bird surveillance. Since July 1, 2016, USDA and its partners have tested approximately 4,000 samples, with a goal to collect approximately 30,000 samples before July 1, 2017. Approximately 45,500 samples were tested during wild bird surveillance from July 1, 2015-June 30, 2016.

CDC considers the risk to the general public from these HPAI H5 infections to be low, APHIS said, noting no human infections with Eurasian H5 viruses have occurred in the United States. "As a reminder, the proper handling and cooking of poultry and eggs to an internal temperature of 165°F kills bacteria and viruses, including HPAI," APHIS said.

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Washington Insider: GOP Spending Endgame Strategy in Flux

Capitol Hill's quiet time ends on Labor Day and this year the Congressional leadership is expecting "tough fights" to develop stop spending remedies, Bloomberg is reporting this week. Work on a new continuing resolution to avoid any of the 2013 crisis is expected to dominate the September session of the House and Senate.

Negotiations over the resolution's details are expected to consume the first half of the month with the remainder used to push it through the House and then the Senate.

The resolution is necessary because none of the fiscal year 2017 appropriations bills have been finalized and sent to the President's desk yet. The bills are required to keep the government running after Sept. 30.

A short-CR extending funding a few weeks past the election is the favored strategy of both House and Senate appropriators, who said they want to write an omnibus combining the eight regular bills cleared in committee this summer. They reflect the $1.070 trillion cap in last fall's budget deal but essentially represent a freeze in discretionary spending for the new fiscal year that begins Oct. 1.

Still, major changes cloud the outlook. House Appropriations Committee Chairman Harold Rogers, R-Ky., and Senate Appropriations Committee Chairman Thad Cochran, R-Miss., could both lose their chairmanships at year's end. Rogers will lose his position under House term-limit rules, while Cochran could lose his if Democrats retake the Senate.

A this time, the House has passed five bills complying with the bipartisan budget deal, but the outlook for the others is mixed at best, Bloomberg says, since they are heavily loaded with controversial policy riders that Democrats and the White House oppose. House Speaker Paul Ryan, R-Wis. only plans for lawmakers to be in session 17 days during the session and only nine of those are full working days.

Overall, Bloomberg says Senate Majority Leader Mitch McConnell's, R-Ky., attempt at "regular order" has been less successful than similar efforts in the House. The chamber has passed one stand-alone bill and two others as part of a "minibus" that also included $1.1 billion in supplemental funds to address the Zika virus.

Aides in both chambers expect McConnell to try again to force action on the massive Department of Defense appropriations bill over Democratic objections while Ryan has considered following McConnell's strategy to combine measures. However, a Democratic aide told Bloomberg that, "The idea of a minibus is fading, and instead it seems more to be something simple just to get them through the election," the aide said.

But while the aim may be to do a straight CR, leaders will be under new pressure to attach Zika funds that earlier were included in the Military Construction and Veterans Affairs bill, the aide said.

A simple CR is seen as Republicans' best bet to avoid a prolonged fight that could resurrect the specter of previous government shutdowns that jeopardized political support for the party. Ryan, in particular, has to negotiate the competing demands of appropriators wanting to finish their work this year and the House Freedom Caucus calling for matters to be held over until March or even later when a new president will have a say in spending decisions.

Conservatives also are opposed to extending funding in a CR at current levels or the $1.070 trillion level agreed already negotiated for 2017. They have proposed cutting the total by $30 billion. However, a senior Republican aide said that GOP leaders already are set to push rank-and-file members to back the funding already called for in the budget deal.

Negotiators on the CR also are preparing for a new fight over Zika virus funding and Reid and House Minority Leader Nancy Pelosi, D=Calif., have stepped up calls for passage of the $1.1 billion Zika spending plan approved by the Senate last summer—rather than the Milcon-VA bill with its "poison pill" riders targeting funding for birth control programs and promoting the display of the Confederate flag.

So, there is plenty for this polarized Congress to fight about—as the equally polarized election campaign proceeds. If there is anything reassuring about this outlook, it is that no one is now predicting a new government shutdown, much as some members may desire one. Beyond that, the fight likely will be increasingly bitter and should be watched closely as it proceeds, Washington Insider believes.

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(GH/CZ)

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