Washington Insider -- Monday

FDA Finalizes First Federal Safety Rules for Produce

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

USTR and Commerce Dept. Continue to Highlight TPP Benefits

Each of the 50 states currently trades with one or more Trans-Pacific Partnership (TPP) countries and stand to benefit greatly from lowering of tariffs contained in the deal, according to new reports from the Commerce Department, U.S. Trade Rep. Michael Froman said in a conference call last week, joined by Secretary of Commerce Penny Pritzker.

The Commerce Department reports show the current levels of trade between each of the 50 states and TPP countries and outline how TPP tariff reductions will benefit their major export sectors. Around 80% of U.S. imports from TPP countries are duty-free, but U.S. exporters must pay tariffs on a much higher percentage of goods they send to TPP countries. Among TPP countries, the U.S. does not currently have preferential market access to Brunei, Japan, Malaysia, New Zealand and Vietnam, but would under the TPP deal, Froman noted.

“TPP reflects the highest standards on labor, the environment, and the digital economy ever to be included in a trade agreement, which will ensure that our businesses and workers can compete on a level playing field globally,” Pritzker said.

Highlights of the Commerce Department state-level reports include:

· Nearly 35% of Virginia’s goods exports went to TPP partners in 2014.

· California’s total goods exports to TPP countries in 2014 equaled $71.6 billion.

· Twenty-one percent of Florida’s goods exports went to TPP countries in 2014.

· Forty-one percent of Alabama’s goods exports went to TPP countries in 2014.


Fed District Bank Surveys Note Concerns on Rise in Ag Loan Demand

Loan demand from agricultural borrowers is rising in the Midwest, with the St Louis, Kansas City and Chicago Federal Reserve banks all noting increases and they are also expressing caution at the potential for repayment issues to arise from their farmer borrowers.

Chicago Fed: Credit conditions have deteriorated vs year-ago. While conditions are viewed as deteriorated compared to year-ago levels, “agricultural bankers expected to work through the turbulence with most of their farm clients,” the report noted. “Repayment rates on non-real-estate farm loans moved lower in the July through September period of 2015 compared with the same period of a year earlier. The index of loan repayment rates slipped to 60 in the third quarter of 2015, as no responding bankers reported higher rates of loan repayment relative to a year ago and 40% reported lower rates.”

Further, the reported noted, “loan renewals and extensions on non-real-estate agricultural loans were up sharply in the third quarter of 2015 relative to the same quarter of 2014, with 34% of the responding bankers observing more of them and just 1% observing fewer.”

St Louis Fed: Uptick in loan demand but decline in loan repayment rates. Lending conditions “exhibited few stresses in the third quarter, although loan demand and availability of funds were modestly lower than bankers had expected three months earlier” even though they reported increases in loan demand, the report said, adding that “bankers expect a modest upswing in loan demand in the fourth quarter but a more sizable drop in the rate of loan repayment. They further expect little change in the availability of funds in the fourth quarter compared with a year earlier.”

KC Fed: Rise in operating loan volumes boost concerns about sector liquidity. “The increase in operating loan volumes in the past two years has coincided with a period of declining farm incomes,” the report said. “One gauge of liquidity, then, or a general ability to service short-term debt obligations, is the ratio of operating loan volumes to US net farm income.” The report detailed that ratio “has reached a level last seen in the mid-1980s, suggesting the farm sector, and the commercial banks that lend to the farm sector, are more exposed to short-term debt obligations and cash flow difficulties than in recent years.”


Washington Insider: FDA Finalizes First Federal Safety Rules for Produce

There has been something of a bureaucratic war among food safety factions for years on just how to find and remove contaminants from the food supply. For meats, the gold standard is constant inspection by medical experts who watch and test every carcass, supposedly and also check water and facilities, as well as the live animals before slaughter.

The number of operations that handle processed and fresh food products is much larger than those that handle meats, and, many fresh vegetable and fruit hazards are not visible, even to experts. So, the system has for years simply concentrated on tracking down pollution outbreaks after the fact, a very effective approach but generally thought to be “not good enough for American consumers.”

Congress defined standards to establish the first federal standards for how fruits and vegetables are grown, harvested and packed in the United States and the administration is now moving to put the new rules into effect, the Washington Post reported last week.

Growers subject to the new regulations will in the future face an array of new responsibilities -- ensuring the safety of water used in irrigation, for example, or making sure workers practice good hygiene while harvesting and packing, or keeping deer and other wildlife away from planted fields so their waste doesn’t contaminate crops.

The produce rule is a key piece of a far-reaching law, signed by President Obama in early 2011, that marked the first major overhaul of the nation’s food-safety system in generations. It is intended to reduce foodborne illnesses that sicken an estimated 48 million Americans each year, and kill several thousand, according to the Centers for Disease Control and Prevention.

In addition to the produce rule, the food-safety law mandated a series of other reforms. Among them: manufacturers must create plans to identify and prevent contamination risks in processing plants, and food importers must verify that their foreign suppliers are producing food at a level that meets U.S. standards. The FDA also finalized the details of this latter requirement on Friday.

Michael Taylor, the FDA's deputy commissioner for foods and veterinary medicine, said the produce rule in particular is meant to prevent the type of high-impact outbreaks that have become commonplace in the United States in recent months. Those episodes have involved spinach tainted with E.coli, cantaloupes contaminated with Listeria and a recent multistate outbreak of salmonella in imported cucumbers that has killed four Americans and sickened hundreds of others.

The FDA exempted a lengthy list of fruits and vegetables that it said are usually cooked or processed prior to being consumed, and therefore are less likely to harbor pathogens. That means pecans, peppermint, potatoes and pumpkins are exempt, while papayas, parsnips, passion fruit, peaches, pears, peas and peppers are covered.

Disagreements remain, especially around how, and how often, farmers must test their water supplies for contamination. “It’s a very touchy issue, water,” said Jim Gorny, vice president of food safety and technology for the Produce Marketing Association. Gorny noted that irrigation water can come from wells, rivers, reservoirs and any number of other sources, making it difficult and costly to take the ongoing number of samples being required by regulators. “FDA has taken an approach we’re concerned about; it’s pretty prescriptive. We’re concerned about the total number of samples, the costs and the standards they’ve chosen.”

Still, Gorny and others said the agency has solicited widespread input from the industry, and Taylor on Friday said the FDA would continue to evaluate how best to ensure the safety of water supplies on farms.

How well and how quickly the new rules take hold will depend, at least in part, on how much money Congress provides FDA to implement them. The Obama administration requested nearly $110 million for the coming year to fund the implementation of the new food-safety legislation. The Senate and House draft budgets currently call for no more than $45 million, reflecting sharp cuts that concern food safety advocates. For example, Sandra Eskin, director of food safety at The Pew Charitable Trusts, said it’s more important than ever for lawmakers on Capitol Hill to actually fund the legislation they passed five years ago.

“It’s crunch time,” Eskin said, noting that FDA needs to hire more food-safety experts and train state regulators who will help implement the new rules. “This is prevention-based regulation, and it costs money ... But these rules are ultimately going to benefit society.”

So, it seems that the system is largely turning from what should be done to whether funding is adequate, a fight that almost never ends. It is quite clear that something needs to be done, and that it will be costly to achieve the standards of protection consumers demand. This is a fight in which producers have high stakes, and which should be watched closely as it emerges, Washington Insider believes.

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