Washington Insider -- Friday

Beef Label Problems

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

USDA Announces Second Round of Farmer/Agriculture Aid

USDA will provide up to $16 billion in efforts to help US agriculture impacted by "unjustified regulatory tariffs" on U.S. ag products and other trade disruptions, the agency announced Thursday.

As with the initial farmer aid effort announced in 2018, the program announced by USDA today will have three components – payments to farmers, commodity purchases and trade promotion efforts.

The first payments will go out in late July to early August, USDA said, with a second round of payments potentially in late fall to November and a third installment would potentially come in 2020.

The Market Facilitation Program (MFP) for 2019 will be done via Commodity Credit Corporation (CCC) Charter Act authority and will be up to $14.5 billion. Producers of alfalfa hay, barley, canola, corn, crambe, dry peas, extra-long staple cotton, flaxseed, lentils, long grain and medium grain rice, mustard seed, dried beans, oats, peanuts, rapeseed, safflower, sesame seed, small and large chickpeas, sorghum, soybeans, sunflower seed, temperate japonica rice, upland cotton, and wheat will receive a payment.

The payments will be based on a single county rate multiplied by a farm’s total plantings to those crops in aggregate in 2019. Those per-acre payments are not dependent on which of those crops are planted in 2019, and therefore will not distort planting decisions. And the total payment-eligible plantings cannot exceed total 2018 plantings.

Dairy producers will receive a per hundredweight payment on production history and hog producers will receive a payment based on hog and pig inventory for a later-specified time frame.

There will also be payments to tree nut producers, fresh sweet cherry producers, cranberry producers, and fresh grape producers will receive a payment based on 2019 acres of production.

The first installment will come in late July or early August. USDA will announce.

More details will be provided by USDA in terms of what those payment levels will be.

One Small Refiner Waiver Withdrawn/Declared Ineligible for 2018 Compliance Year

EPA now says that there are 39 pending small refiner exemption (SRE) petitions relative to Renewable Fuel Standard (RFS) obligations for the 2018 compliance year.

EPA notes 40 petitions have been received, but their data now shows that one exemption petition has been declared ineligible or withdrawn.

Meanwhile, Sen. Tammy Duckworth, D-Ill., has requested the EPA acting Inspector General Charles Sheehan investigate the increased use of the small refiner exemptions.

"Recent document disclosures reveal that the EPA misled members of Congress, industry and the public in regard to the agency's motivations and justifications for its SRE policy," the letter stated. "This deception by EPA political appointees may indicate improper motives and conflicts of interest and it warrants a thorough review by the EPA OIG."

Washington Insider: Beef Label Problems

In an eyebrow-raising report this week, Bloomberg says that if you’ve eaten grass-fed beef over the past few years, chances are it wasn’t raised in the U.S., even if the package says “Product of USA.” The article highlighted meat producer Perdue Farm’s plan to remedy that concern.

The report says that as consumers seek out premium animal products, grass-fed beef is riding a wave of popularity, hitting $480 million in supermarket sales for the 52 weeks ending April 20, up about 15% year-over-year – compared with 3% for the rest of the sector. Restaurants have also jumped on the bandwagon, with shipments from distributors to independent and small chain restaurants increasing 15% last year.

Mainstream retailers such as Kroger, Walmart and Safeway carry beef with “grass-fed” labels, Bloomberg says, as do casual restaurant chains as Panera and Chipotle, among others.

But as appetites for more “naturally raised” beef have grown, so have cheaper imports. Bloomberg cites Stone Barns Center for Food & Agriculture data that show much lower cost for imported grass-fed beef, due largely to the fact that most U.S. young cattle that could be slaughtered off grass produce higher returns when sold for finishing in feed lots.

In addition, many countries lack abundant stocks of competitively priced grain for cattle feed and so Australia, New Zealand and many South American operators sell their beef after being fed on grass. As a result, less expensive grass-fed beef from these countries has been flowing into the U.S. for some time. By value, 75% to 80% of grass-fed beef sold in the U.S. comes from abroad, according to the Stone Barns report.

In 2015, the US government repealed its highly controversial “country of origin” labeling requirements. Under current rules, imported meat products that are “processed” in the United States (which could mean simply cutting a large piece into smaller ones in a USDA-inspected plant, Bloomberg says)—and receive a “Product of USA” stamp.

Bloomberg says the labeling is “even trickier” than it seems, since the designation “grass-fed” lacks any official definition in contrast to USDA’s official “organic” label with its specific rules and standards. In fact, “grass-fed” does not even mean animals are mainly held on pastures.

Some “grass-fed” beef comes from “grass feedlots,” where they are confined in pens and fed grass pellets, according to Stone Barns. Other products are labeled “grass-fed, grain-finished,” a shorthand for the standard industry practice of raising calves on grass and then fattening them on grain.

Bloomberg thinks this “vague and misleading” labeling extends “up and down U.S. supermarket aisles” and makes many consumers skeptical when they read claims on food packages.

Now Perdue—more famous for selling chickens than beef—says it is “building a market for grass-fed beef that’s truly made in America,” even if it costs more than the imported kind. Led by Jeff Tripician, president of Perdue’s premium meat division, the company said it is acquiring Panorama Meats, the largest U.S. producer of grass-fed, certified organic beef fed from USDA-certified organic grasslands in Northern California, Southern Oregon, Montana, South Dakota, Nebraska, Wisconsin and Colorado, Perdue said.

However, Bloomberg notes that “truly grass-fed cattle” take longer to raise than conventional beef, “contributing more methane to the atmosphere” and expects that some environmentalists will argue that this will “further fuel global warming.” American cattle are typically “finished” and marketed after a 16- to 20-month life including several months on concentrated grain feeds, Bloomberg thinks. “Organic and grass-fed cattle” need 20 months to 28 months to reach market weight.

Beef labels have considerable recent U.S. history, it turns out. In 2008, Congress required the industry to use labels that described the product’s “country of origin” — and which gave a superior rating only to products of animals born, raised, fed and slaughtered in the United States.

Because much of the U.S. supply chain depended on young animals from Mexico or Canada, the policy was quite controversial and highly criticized by many—and, considered a violation of international rules. In response, a much smaller share of “domestic content” is now required to qualify as a “domestic” product.

In addition, the benefits of even well-managed grazing systems may prove elusive, Bloomberg thinks although advocates of grass-feeding claim very broad benefits. For example, Tripician argues including better animal welfare, soil and reductions in grain transportation and a reduced carbon footprint. Now, with Perdue’s backing, the hope is that market access for Perdue’s American grass-fed beef will expand and that consumers, at least, will know what they’re buying.

The U.S. beef industry tends to be highly competitive and traditional grain-finished beef is widely considered very high quality — so, Perdue’s efforts likely will encounter growing competition from other producers.

Also, it is likely that the charge that USDA labels are misleading will be unwelcome for much of the beef industry and for the USDA policies that faced storms of criticism during the “country of Origin” fight. Clearly, social norms for complex industry operations that have narrow margins and are extremely difficult to define or police will continue to be difficult to provide in spite of industry efforts to satisfy potentially lucrative markets, Washington Insider believes.

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