Washington Insider-- Thursday

Shipping Delays Continue to Impact Ag

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

USDA Aid Announcement Comes With Details Awaited

As USDA Secretary Tom Vilsack was set to testify on USDA's Fiscal Year (FY) 2022 budget this week, USDA announced aid for producers that it said will be issued over the next 60 days, mostly from the $1.9-trillion COVID aid plan approved in March and other aid efforts.

USDA said the latest round of aid will be dispatched over the next 60 days, "which will continue to be focused on filling gaps in previous rounds of assistance and helping beginning, socially disadvantaged, and small- and medium-size [farms] that need support most."

The funds include $200 million for small, family-owned timber harvesting and hauling businesses, $700 million for biofuels producers, support for dairy farmers and processors that includes $400 million for the coming Dairy Donation Program along with additional $580 million in supplemental Dairy Margin Coverage for small and medium farms and assistance for poultry and livestock producers left out of previous rounds of pandemic assistance, including contract growers of poultry. Plus the aid would include help for livestock and poultry producers forced to euthanize animals during the pandemic (March 1, 2020, through December 26, 2020).

But some of the efforts outlined in the announcement are for programs that have not yet been finalized or have not yet been completed on the regulatory front.

Republicans Lay Out Issues with Tax Plans

Republican House and Senate Ag Committee leaders Tuesday unveiled a study detailing negative impacts that proposed changes to capital gains and estate taxes could have on intergenerational farm transfers, though the report does not consider potential exemptions the Biden administration has insisted would insulate farmers from some of the shifts.

Economists from the Agricultural and Food Policy Center (AFPC) at Texas A&M University modelled effects the Sensible Taxation and Equity Promotion (STEP) Act -- which would eliminate stepped-up basis for capital gains taxes -- and the 99.5 Percent Act -- which would lower the estate tax exemption to $1 million per individual -- would have on a set of 94 "representative farms" included in a database maintained by AFPC. The policy center simulated how the two bills, either in isolation or together, would have based on asset information furnished in a survey of operators included in the AFPC database.

If both tax measures were enacted, AFPC's analysis found 92 of 94 (98%) of the representative farms would see higher taxes, with an average liability of $1,431,408.

Washington Insider: Shipping Delays Continue to Impact Ag

U.S. agriculture is experiencing a boom in exports as China has scooped up large quantities of U.S. farm goods like corn, meat and more. But those shipments could potentially be even more, according to testimony delivered to Congress this week.

The House Transportation Coast Guard and Maritime Transportation Subcommittee held a hearing on shipping issues, including many that have affected agriculture such as supply chain constraints that started in the COVID pandemic.

A rise in consumer demand has prompted shippers to opt to snub U.S. ag exports and instead opt to ship empty containers to Asian destinations so they can be loaded up with consumer goods and sent back to the U.S. with its expanding economy.

The North American Meat Institute (NAMI) told lawmakers that the shipping issues have carried a price tag of $1.5 billion in lost revenue. That is certainly a negative. But, a bigger worry for agriculture? Long-term loss of markets. If countries are unable to get products from the U.S., they will simply turn to other buyers. Once those supply chain links are established, they are hard to break.

Container shortages are just one of the woes, but demurrage fees -- costs linked to delays when shipments sit longer and longer before being unloaded -- are also hurting U.S. ag exports.

National Pork Producers Council (NPPC) President Jen Sorenson said there are "hundreds of documented instances of ocean carriers declining or canceling export bookings, often at the last minute, when the cargo is loaded in a container, already on train to the ports."

Not only are the issues creating extra costs and delays, it is also tying up equipment at ports that is badly needed, a situation which Sorenson said backs supplies up "all the way to the farm."

The Federal Maritime Commission (FMC) is aware of the situation and has opened up an investigation into the situation and opened an investigation. And that investigation focused on the decisions by carriers to opt to send empty containers to destinations rather than carry agricultural products.

So far, the FMC has released little about what they are finding in their exam of the situation.

Lawmakers pledged to help, with Rep. John Garamendi, R-Calif., noting, "We have a problem where the shipping industry is able to discriminate against American exporters." He has come up with legislation to amend the Shipping Act to require ocean carriers to include a statement of compliance with Shipping Act regulations. The legislation would also bar ocean carriers from declining all cargo bookings for exports, require FMC to disclose findings of false certifications and encourage the commission to ensure export opportunities for U.S. exporters and promote reciprocal trade.

The FMC held a closed-door meeting in April on the fact-finding investigation, the first meeting presided over by FMC Chairman Daniel Maffei after being named to head the agency.

FMC Commissioner Rebecca Dye has been the Fact Finding Officer for the investigation since it was launched in March 2020.

"While most participants in the supply chain are doing their best to cope with the unprecedented import boom, there are reports of container ship lines and terminal operators unfairly taking advantage of the situation or denying service to exporters in a way that may violate the Shipping Act. We must get to the bottom of this situation ASAP and that's why Commissioner Dye's investigation is crucial," Maffei said. "Just yesterday, Commissioner Dye and I met with the leaders of two important House subcommittees. These issues clearly have their attention and companies providing ocean transportation services would be well served to voluntarily take steps that address these challenges."

So we will see. The advent of using containers to ship agricultural products has been expanding in recent years even as bulk shipments are how large quantities move, but this issue is one that must be watched closely as it progresses, Washington Insider believes.

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