Washington Insider -- Tuesday

By DTN's Washington Insider

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

Iowa Farm Bureau Study: Bird Flu Outbreak Costing Iowa Nearly 8,500 Jobs

The avian (bird) flu outbreak, which forced the depopulation of 34 million birds on 77 Iowa farms, won’t just raise the price for eggs and poultry for up to the next three years; it also is costing the nation’s largest egg-producing state nearly 8,500 jobs; some of which, may never be replaced. Those are the findings from a new study, commissioned by the Iowa Farm Bureau Federation (IFBF) and conducted by Decision Innovation Solutions.

The study shows besides job losses, the bird flu outbreak will cost Iowa more than $425 million in lost additional value, more than half of which is income for Iowans. IFBF Director of Research and Commodity Services Dave Miller said the ripple effects of the lost jobs and revenue could last for up to three years, which will also impact egg and poultry prices, since it takes months to get the birds and the staff back in place.

“Egg prices are likely to peak out this summer, but the “elevated” price for eggs is likely to linger for a minimum of 12 months and could last for two to three years. Recovery from this outbreak which devastated Iowa egg and poultry farms will not be swift,” said Miller. “It’s really astounding that we could lose half of our poultry flock in a couple of months,” Miller added.

While the avian flu outbreak was first discovered in a small, backyard chicken flock in another state, it cost Iowa the most damage, particularly in the northwest part of the state, since it has the highest population of birds and bird farms.

It is not just bird farms and bird farm workers who are at a loss; as poultry farms cut back, other Iowa businesses up and downstream were affected, including veterinarians, trucking companies, processors and lenders.

It also means nearly $427 million in value-added income was lost, because grain farmers and other businesses that sell their feed and other goods and services to poultry farms couldn’t continue to make and sell products and services like they did before the outbreak.

Miller also said that many of the egg farm workers who lost their jobs are moving away to seek employment in other towns or other industries. That means replacing the labor pool won’t be easy.

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Maritime Officials Expect Some Port Activities at Tianjin to Resume

Chinese authorities have ordered the evacuation of everyone within two miles of the Tianjin blast site after fires reignited and several additional explosions rocked the area on Saturday. Media reports have now confirmed the presence of more than 100 tons of deadly sodium cyanide stored at two separate sites at the location. Highly toxic sodium cyanide was stored at the scene of the blast that killed at least 112 people and concerns over unhealthy air have triggered evacuations.

Several manufacturers, including John Deere, have suspended operations in the vicinity, in part because several buildings were damaged, logistics difficulties in getting parts moved around Tianjin but also because their workers live in areas affected by the blast. Deere also suspended operations near Tianjin after some of its workers were injured and several buildings were damaged.

A Deere spokesman said a small number of employees were injured, and windows and doors at some of the company's plant had been blown out, a spokesman said. The full scope of the damage is not yet established as the evacuation has blocked staff from returning to assess the plant.

The John Deere plant in Tianjin primarily manufactures agricultural and construction equipment as well as engines for the Asian market.

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Washington Insider: Highway Funding Options

Little by little, the issue of meeting growing infrastructure requirements across the United States seems to be working its way into the national spotlight. For example, almost everyone agrees that the roads and bridges are crumbling fast and need extensive repairs. This makes the lack of agreement about how to fund that work a painful, worsening national problem—especially as the Highway Trust fund scrapes bottom. It was expected to drop below $4 billion by day's end on July 17, a trigger for the department to begin cash management measures.

That means “we have to ration out the receipts as they come in,” Transportation Secretary Anthony Foxx said in April. Officials estimate the fund will drop below $1 billion on August 21, and project a zero balance by Sept. 4 ahead of the recent, temporary “patch”.

Increasingly, the politics are nearly as opaque as the finances. Highway bills use a formula to allocate each state’s share of the federal gas tax, currently at 18.4 cents per gallon for gasoline and 24.4 cents per gallon for diesel. Until recently, the system worked relatively well, with the feds paying 90% of the cost to build the interstate highway system and states footing bills for maintenance. A separate mass transit account of the highway trust fund was created in 1983 and receives 16% of gas tax revenues.

However, the combination of increased vehicle fuel efficiency and the recession-induced decline in driving cut gas-tax contributions to the highway fund and filling the resulting gaps have become a continuing challenge for the Congress. While there is pressure to raise the fuels tax, there also are those who prefer use-based alternatives such as a vehicle miles tax or highway tolls.

Without longer-term solutions, Congress has periodically extended transportation authorization and shifted money from the general fund to the highway fund. Since 2008, lawmakers have transferred $53.6 billion in this manner. Emergency cash infusions are expected to continue unless Congress agrees on a long-term funding formula.

Another part of the funding problem is that federal gas taxes have not been raised since 1993, and so have been declining in real terms as construction and repair costs have increased. Boosting it to its real 1993 level would mean a jump from 18 cents to just over 30 cents—without adding any real financial muscle to infrastructure maintenance.

In this context, Sen. Tom Carper, D-Del., is proposing a plan to raise the tax four cents a year for four years, then peg to inflation to keep it at about 34 cents per gallon — nearly double the existing rate.

While nobody likes higher taxes, advocates of new funding are pointing out that US fuel tax rates are almost at the bottom of those charged by other OECD countries, except for Mexico. Considering both State and federal taxes, the US rate of 53 cents a gallon is far below the nearly $4 per gallon in the UK and other EU nations.

Such comparisons are attracting attention but seem unlikely to make much of an impression on the anti-tax folks in Congress, of which there are many. At the same time, highway upkeep needs are boosting costs for important Congressional constituencies and increasingly have the attention of important members, so the struggle to find ways to afford a longer-term fix for the trust fund is expected to intensify as temporary fixes continue to fall short, Washington Insider believes.

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(GH/CZ)

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