Washington Insider -- Friday

Food Safety and Social Themes

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

Cotton Growers Keeping Up Push on Cottonseed Safety Net

U.S. cotton growers want USDA Secretary Tom Vilsack to approve their request to use what they say is discretionary authority in 2014 Farm Bill to allow cottonseed be eligible for farmer safety net programs – the Ag Risk Coverage (ARC) or Price Loss Coverage (PLC) programs – by designating it an “other oilseed.”

But Vilsack has raised several issues, including the need for legal counsel to see if he does have authority, and whether or not any change would have trade policy implications with countries like Brazil, which successfully challenged prior US cotton programs and helped move cotton policy in a different direction.

On the legal question, USDA lawyers are examining whether the specific exclusion of cotton as being eligible for the safety-net programs in the 2014 law covers cottonseed as well and that such a decision could run counter to congressional intent since they specifically excluded cotton from the safety net programs. Further, contracts note the other question is whether cottonseed can be considered another crop. Language in the farm bill defines “other oilseed” as being one or several crops, with cotton interests specifically noting that it can also be “any oilseed designated by the Secretary.”

The cost of any cottonseed safety net program is the main hurdle, sources inform. Payouts could total from $500 million to $1 billion annually. If so, Vilsack wonders if such costs would need to be offset elsewhere, and if so, where. The White House Office of Management & Budget (OMB) quickly raised concerns.

Contacts note the U.S. cotton industry believes the cost of making cottonseed an “other oilseed” would result in payouts of $300 million to $700 million, and they also note that there would be a degree of savings from the move as producers would most likely opt to convert current “generic” base acres into cottonseed base acres, potentially saving outlays that producers can earn by planting other crops on that generic base.

Plus, contacts note that OMB could waive the paygo budget requirements, with cotton interest noting that a 2005 determination from OMB that indicated exceptions to the paygo rules could be granted when there is an extraordinary need or some other compelling circumstances.

On the trade side, cotton industry sources note that only 5 percent of US cottonseed is exported, so that should not create a major impact relative to trade.


NAFTA Countries Ink Letter of Understanding on Bird Flu

A working group on avian influenza (bird flu) was created by North American Free Trade Agreement (NAFTA) members to share and discuss information on programs and processes associated with the prevention, preparedness and control of notifiable avian influenza (NAI), according to a letter of understanding (LOU) signed by officials from each NAFTA member state.

The U.S., Canada and Mexico formed the working group in order to better prepare for potential bird flu outbreaks and to facilitate a coordinated response in the event one occurs. The working group will meet on an annual basis at meetings hosted in a rotating fashion by the Mexican National Service for Agro-Alimentary Public Health, Safety and Quality (SENASICA), the Canadian Food Inspection Agency (CFIA) and USDA.

The egg and poultry industry groups hailed the move. “The LOU recognizes that the spread of [bird flu] by migratory birds is one of greatest challenges facing the global poultry industry, and that the three countries need to harmonize their methods for dealing with [bird flu] to keep their poultry production systems safe and sustainable, and to minimize trade disruptions that can result from [bird flu] detections in commercial poultry,” the USA Poultry & Egg Export Council said in a Jan. 19 statement.

“Mexico and Canada represent the lion’s share of our poultry and egg trade. Together, these two markets account for more than two-thirds of all US turkey exports, nearly two-thirds of our egg trade, and a third of our broiler exports – an annual value of almost $2 billion. That’s about one-third of the value of all US poultry and egg exports in any given year,” President of the USA Poultry & Egg Export Council Jim Sumner said.

The LOU was signed by, the Executive Director of National Import-Export Services at USDA’s Animal and Plant Health Inspection Service (APHIS) Dr. Rick Hill, (on behalf of Dr. John Clifford, US chief veterinary officer), Dr. Harpreet Kochhar of the CFIA, and Dr. Enrique Sanchez Cruz of SENASICA.


Washington Insider: Food Safety and Social Themes

It is clear by now that the press does not know exactly how to react to the Chipotle phenomenon. For example, the Jan. 15 New York Times business page carried a long story describing the company’s rise from a Denver burrito stand to a gigantic restaurant chain with more than 2,000 locations that by August, 2015 had a market value of some $23 billion.

Much of the credit for the firm’s success was its health themes that emphasized fresh, locally sourced ingredients and prominently rejected genetically modified ingredients.

So it was a severe shock all around when customers began to report illnesses last summer. First, five customers became ill with the E. coli bacterium in July after eating at a Chipotle restaurant in Seattle, the first food-borne illness connected to the chain since 2009. More recently, Chipotle has been confronted by a rash of outbreaks, including “at least six incidents that have occurred over the last six months,” the Times says.

How severe was the problem? “I’ve been involved in every [US] food-borne illness outbreak, small and large, since 1993,” said Bill Marler, a Seattle-based lawyer who specializes in representing victims of food-borne illnesses and has filed several recent cases against Chipotle. “I can’t think of any chain, restaurant or food manufacturer who’s ever reported that many outbreaks in just six months. Underlying that has to be a lack of controls.”

It is the latter suggestion than may mean even greater troubles for Chipotle, observes say. The implications could be both financial and legal, NYT says.

The financial cost of the outbreaks already has been enormous, the Times says. By last week, Chipotle share values were down 47 percent from the August high.

And now, federal authorities report that they are investigating. Chipotle said it received a grand jury subpoena related to an outbreak in Simi Valley, Calif., indicating that the Justice Department and FDA are pursuing a possible criminal case.

Under the Food, Drug and Cosmetic Act, there is broad criminal liability for food “prepared, packed or held under insanitary conditions whereby it may have become contaminated with filth, or whereby it may have been rendered injurious to health.” This year, the feds have prosecuted several food company executives and won severe sentences for those guilty of ignoring contamination threats.

How deep are Chipotle’s problems? No one is sure. A single outbreak wouldn’t have drawn much scrutiny. “But the spate of incidents is impossible to ignore,” the Times says.

Mr. Marler is arguing that in its enthusiasm for trendy, buzz-inspiring concepts like no ingredients containing GMOs, “the chain may have lost its focus on basic principles of food safety, like making its employees wash their hands. He said he’d like to see Chipotle hire a high-level executive whose sole responsibility would be food safety,” the Times reported.

As the firm struggles to impose stronger safety measures, it must deal with the question of whether its business model actually adds risk. Both Mr. Arnold of Chipotle and Mr. Marler attempted to dismiss the idea that Chipotle was inherently more vulnerable to food-borne illness because of its emphasis on locally grown, fresh ingredients.

In a strange sort of defense, Mr. Arnold told the Times, “We may be a little more vulnerable than many fast-food chains, because they don’t do much cooking in their restaurants,” Mr. Arnold said. “But we’re no more vulnerable than innumerable restaurants in every city in the country that deal with fresh ingredients.”

And, Marler’s view seemed to contain something of a threat. “The Chipotle business model is a good one,” he said. “There’s nothing incompatible about being local, organic and fresh and also safe. I just think they haven’t yet figured out how to embrace food safety with the same zeal they’ve shown for the other things they’re striving for.”

The Times concludes that Chipotle’s success and brand image may have made it uniquely vulnerable to safety issues and the company can hardly risk another incident. Arnold added, “While none of the food safety issues “are unique to us, we recognize that we’ve become a very high-profile and high-visibility company. When bad things happen to us, that becomes a compelling story.”

Still, observers are probing deeper regarding the role the company’s extravagant health claims played in its food safety strategy. Clearly, the absence of GMOs and the assignment of “integrity” did not make the firm’s food safer. And, the impact of heavy reliance on small suppliers and local ingredients also is being questioned.

Chipotle has already paid a high price for its dependence on the “quality” claims foodies frequently use to boost sales, perhaps along with its insufficient attention to the risks involved with its supply chain and ingredients. Thus, it will be important to see what the federal investigators conclude, and what these verdicts require, Washington Insider believes.

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