Washington Insider-- Wednesday

By DTN's Washington Insider

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

Got Milkweed?

Alarmed by recent reports that the population of monarch butterflies in the United States has declined by approximately 90 percent in the past 20 years, the Department of Interior's Fish and Wildlife Service is joining with two conservation groups in a series of projects to restore the insects' dwindling population and habitat, with hopes of avoiding having to place them on the endangered species list

Among other things, the service is granting $1.2 million to the National Fish and Wildlife Foundation and will spend an additional $2 million itself this year to encourage the planting of milkweed, one of the butterflies' primary food sources. The service's strategy is to encourage the general public to plant milkweed anywhere and everywhere they can.

One potential obstacle to the solution is that the price of milkweed seeds is very high, Julie Sibbing, the National Wildlife Federation's agriculture and forestry director, told the press. She said it is a simple issue of supply and demand — though the environmental benefits of the plant are coming into focus, seed companies aren't prioritizing the production of a product that was until recently thought of as a nuisance. The prospect does raise several questions: will milkweed become a niche market for some landowners? what is the per-acre cost of production for milkweed? And will there be a premium paid for organic milkweed?

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Ireland Launches High-End Beef Marketing Campaign in U.S.

An Irish trade mission headed by Agriculture Minister Simon Coveney is in the United States this week to kick off a beef sales campaign aimed at high end restaurants, especially steak houses. The beef is grass-fed, rather than grain-fed, and the company that is processing and exporting the Irish beef already supplies premium quality beef to highly rated restaurants across Europe.

The Irish move is possible because the United States recently dropped its 16-year-old ban on imports of beef from the European Union following concerns over Bovine Spongiform Encephalopathy (BSE, or mad cow disease). Ireland is out in front among the 28 nations that comprise the EU and cattle producers and processors there hope to lock in customers before any other European competitors join the fray.

The continuing tight market and accompanying high prices for U.S. beef provide another reason for the Irish optimism that the marketing campaign will be successful.

The first shipments of Irish beef are scheduled to hit the U.S. market next month, just in time for St Patrick's Day.

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Washington Insider: New Meat Consumption Trends

Recently, the press has been making much of USDA's estimates that pork may eclipse beef consumption this year, an event that actually harks back to things as they were in the 1950s. Recently, chicken has outranked beef as the most widely produced meat, but, the hog production rebound from last year's deadly virus is news. It likely reflects record-high meat prices and cheaper feed that are being generally overlooked in the usual press focus on the bumper crops.

There are a number of factors at work, observers say. As pork output in 2015 jumps 4.6% to a record, cattle ranges and many ranchers have yet to recover from a 2012 drought and beef production will reach a 22-year low, USDA says.

Producers vividly remember the epidemic of porcine diarrhea virus that killed millions of pigs across the country in 2014 and pushed prices for bacon and pork chops to all-time highs as supplies tightened. Now, hog numbers are up and demand is strong. "A year ago, it looked like the sky was going to fall," Ed Juhl, a farmer in Hudson, Iowa, told the press last week.

Juhl said he lost about 2,400 pigs to the virus last June. His herd is now healthy; he expects output by next June will be back to its annual sales pace of 36,000 animals. With each passing week, the industry's "confidence that we're going to increase pork supply is rapidly going up."

That's reflects the expansion of the breeding herd, during the three months that ended Dec. 1, which grew at the highest rate since 1998 and now is the largest it has been for the past five years. The total hog population jumped 2 percent from a year earlier to 66.05 million, the most in five quarters.

After two years of bumper corn and soybean crops, feed is much cheaper, which means producers feed slaughter hogs to heavier weights. On average, pigs for slaughter weighed 216 pounds last year, touching a record 222 pounds in May, compared with 208 pounds in 2013.

Pork production will climb this year to a record 23.9 billion pounds, pushing per-capita consumption to the highest level in five years, USDA says. Beef output will drop 1.7 percent to 23.9 billion pounds. Chicken will jump to an all-time high of 39.2 billion pounds, government data show.

With wholesale pork already down more than 40% from a record in July, prices for the meat on average will be down "significantly" this year, said Jim Robb, director of the Livestock Marketing Information Center in Denver.

Disease still poses a risk to hog supply because PEDv thrives during cold winter months, said Paul Sundberg, vice president of science and technology for the National Pork Board in Des Moines. While immunity and prevention have improved, "I don't think anybody wants to say, 'Boy, we dodged a bullet,'" just yet, he said.

To some extent, the robust demand for pork reflects less competitive beef prices which are pushing some consumers to seek cheaper meats. "There's a good chance more and more consumers will go the way of pork and chicken," said Will Sawyer, Atlanta-based vice president of U.S. animal-protein research for Rabobank International.

Pork costs have "come down dramatically" at Ann Arbor, Michigan-based Domino's, the largest U.S. pizza chain after Yum Brands Inc.'s Pizza Hut, Chief Financial Officer Michael T. Lawton said in mid-January. "That's got a big impact on us because it goes into our pepperoni and our sausage."

So, while the press has been in a heavy-duty dither over falling grain prices recently, a broader view indicates that agriculture as a sector has broader interests — and, that medical technology has helped the pork sector rebound from a serious threat, all good news for consumers.

In addition, these trends are substantial reminders about how responsive agriculture is to prices and markets — and, how dangerous it may prove to be for bureaucrats who attempt to intervene to impose some theoretical standard of stability on an efficient and responsive sector, Washington Insider believes.

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(GH/CZ)

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