Here's a quick monitor of Washington farm and trade policy issues from DTN's well-placed observer.
Several Ag Issues Cited in Exam of USMCA After Year One
\The Senate Finance Committee held a hearing Tuesday to examine the status of the U.S.-Mexico-Canada Agreement (USMCA) one year after the trade pact started. Canada's inadequate implementation of new market access for U.S. dairy, Mexico's foot-dragging on agriculture biotech approvals, and the lack of a chief agriculture negotiator nominee were some of the key ag-related issues.
The U.S. dairy industry has expressed exasperation at what they charge is a lack of Canada implementing the dairy provisions in the USMCA that were supposed to bring more market access for U.S. dairy products into Canada.
And the issues aren't just with Canada. Another big concern among lawmakers and the ag industry is Mexico's lack of action on biotech crop approvals -- despite USMCA provisions requiring the approvals process to be science-based.
Biotechnology Innovation Organization (BIO) President and CEO Michelle McMurry-Heath told lawmakers the failure of Mexico to approve several new GMO crop varieties has no basis in science, calling the situation "particularly disturbing to not only our innovative agricultural businesses, but also to the investors that really support their work."
So far on the agriculture front, dairy is the only case pursued by the U.S. under USMCA procedures, but pressure is clearly rising on the key GMO issues with Mexico.
Groups Lay Out Goals for WTO Reforms
A group of U.S. ag and commodity organizations has penned a letter to U.S. Trade Representative Katherine Tai, outlining what they would like to see done in terms of WTO reforms.
"WTO reform should focus on further market-based and sustainable trade liberalization, institutional improvements that help members better prevent or address trade problems, and a more effective and efficient dispute settlement system," the groups said. They urged action on "creative new approaches" including a modest outcome for the 12th Ministerial meeting in November relative to agriculture, one that is focused on "improved transparency and notifications" that "lays the groundwork for a more ambitious work plan for MC13."
And the groups also brought up a long-standing issue that the sector has urged administration after administration involved in WTO negotiations and the General Agreement on Tariffs and Trade (GATT) before that: Agriculture's long-term goals "should not be used as a trade-off for non-agriculture outcomes."
Washington Insider: US Cattle Market Examination
If there has been an issue in recent years that sparks an active discussion and lots of finger pointing, it's the U.S. cattle market. While the origins of the current discourse in Washington on the topic didn't come from a fire at a cattle processing plant in Holcomb, Kansas, it exposed the challenges in the U.S. cattle industry.
Rarely have lawmakers met a problem they didn't love. But they are finding out that the solutions to addressing issues in the cattle market are not easy, and are many and varied.
Many have complained about the fluctuations in the cattle market after the 2019 Kansas fire, searching for solutions on how to make the cattle market work better.
There are clear camps on the issues. One is the four major cattle packers that control some 80% of the slaughter capacity in the U.S. Officials from two of the four companies -- JBS USA and Tyson Foods -- testified before the Senate Judiciary Committee. Shane Miller of Tyson Foods blamed the "law of supply and demand" for the price swings that have been seen. He said there have been "unprecedented market shocks" that have hit the markets the past 18 months.
But National Farmers Union President Rob Larew, often a critic of the big cattle packers, countered that "market manipulation by multinational meat companies like those represented here today" were to blame. He called on the panel to "push for much more vigorous antitrust enforcement to rein in the unchecked power of the packers, and if need be, bust 'em up."
When the Kansas fire took the plant out of operation, that backed up cattle in the system as they had to be moved to other locations for slaughter. That sent cattle prices down while meat prices rose at the store. Critics note that was repeated during the pandemic when plant workers caught COVID and facilities couldn't keep operating with staff. And then JBS was hit with a cyberattack and the same situation evolved on a smaller scale.
President Joe Biden signed an executive order which urged that the meatpacking industry be scrutinized for anticompetitive behavior.
That resulted in an announcement from USDA Secretary Tom Vilsack that the Agriculture Department was going to spend $500 million to get more cattle processing capacity. And they also announced another $155 million that was aimed at helping small and very-small processors stay in business and expand.
But even those dollars aren't going to come right away. Vilsack was hopeful things would be happening by the end of the year, expressing confidence the federal dollars would prompt even more private-sector investment.
Meanwhile, on the other side of the Hill, a House Ag subcommittee looked into the issue, bringing market analysts and academics in to given feedback to lawmakers. But even they raised issues with some of the suggested solutions, like the USDA effort to expand slaughter capacity.
Perdue University ag economics chair Jayson Lusk emphasized that lawmakers should not focus to heavily on the ripple effects from things like the Kansas plant fire and the pandemic. "Make policies for the future," he urged, noting new government investments in processing capacity to improve prices paid to farmers "may be fixing yesterday's problem."
Plus, he noted that the cost of building a plant is not the only issue as labor availability and regulatory issues also are a challenge.
Rabo AgriFinance vice president and animal protein analyst Dustin Aherin chimed in that there are cycles in the cattle market and focusing just on boosting slaughter capacity may still not address issues. "There is a point where industry capacity goes too far to withstand cyclical periods of high cattle supplies--drought risks and cyclical fundamentals must be considered," he cautioned.
Several lawmakers have pushed legislation that would require a certain percentage of cattle are sold on a cash basis in the market as opposed to via formula pricing that is sometimes less than clear. There too, Lusk cautioned, "An important distinction needs to be made between price levels and price volatility. And even if all cattle were traded on a negotiated basis, the price level would not necessarily improve."
Aherin noted that mandating cash market mandates could end reducing innovation in the cattle market. "Any mandate that would dictate that we have to price a certain number of cattle off of cattle cash transactions certainly hinders the ability to adapt to maybe some new opportunities to price cattle off of beef itself, sometime down the road," he observed.
So we will see. Once again, lawmakers are finding out that a solution is not as simple as passing a law. That's not to say action isn't needed. It is. But it has to be carefully considered and as the unintended consequences need to be watched very closely as they could create even more problems, Washington Insider believes.
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