Washington Insider - Tuesday

Vilsack's Job

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

Upcoming TTIP Session to Focus on Energy, Procurement

Ongoing negotiations over procurement provisions in the Transatlantic Trade and Investment Partnership (TTIP) will feature prominently in an inter-sessional meeting between U.S. and European Union (EU) officials Feb. 15-19 ahead of the 12th round of TTIP talks scheduled for a Feb. 22-26.

Ag issues including an EU proposal for some liberalization for dairy and poultry trade, as well as whether chlorinated U.S. chicken will be allowed to be imported into the EU will be discussed. Other ag issues which remain include beef, pork, sugar and flour. The EU is hesitant to liberalize beef and pork trade, while they favor liberalization of flour and sugar after a transition period. Ag issues are not the main focus, however, of the inter-sessional talks.

The issue of whether to include an energy chapter in TTIP is likely to take up much of the time spent during the inter-sessional meeting, particularly in light of the recent lifting of a decades-long crude oil export ban in the U.S. Procurement issues also remain a sticking point in TTIP talks, with the U.S. resisting EU requests to open up federal, state and local contracts to EU bidders.

Prospects are dim for the congressional approval of TTIP before President Barack Obama leaves office. White House Press Secretary Josh Earnest told reporters “we do not believe that we will be in a position to finish the congressional approval process for TTIP and sign it into law before the President leaves office.” Earnest still expressed optimism for at least concluding TTIP talks, however, noting that “concluding the TTIP negotiations is a priority for the Administration, and that’s why we are going to push to complete negotiations this year.”


SNAP Error Rate Questioned

Focus is on the Food and Nutrition Service’s calculation of the error rate for the Supplemental Nutrition Assistance Program (SNAP), formerly known as food stamps, may be flawed. The rate measures incorrect payments.

Republicans question the 3.66% national payment error rate, believing it to be higher. Democrats argue that the Obama administration has stepped up efforts to reduce fraud and to run the program efficiently. The rate reflects a 2.66% error rate in benefit overpayments and a less than 1% error rate in benefit underpayments, according to the Food and Nutrition Service website.

Rep. Rosa DeLauro, D-Conn., said that Food and Nutrition Service officials disagreed strongly with some audit findings. “I think it is important that we understand the issue of SNAP errors and fraud in the broader context of other programs under USDA’s jurisdiction. I understand that OIG has completed several significant fraud investigations in USDA’s farm programs,” DeLauro said.


Washington Insider: Vilsack’s Job

Old ideas die hard, it seems, but it was a little surprising to see an article by Alan Bjerga carried by Bloomberg criticizing Secretary Vilsack for his handling of the “crop-price bust that this year may bring the lowest U.S. farm profits since 2002.” Vilsack, Bjerga said, had turned “to an old standby -- trade -- to argue that bleak times will end.”

“There’s an anticipation and an expectation that we continue to see exports rebound,” Bjerga reported that the Secretary told reporters on Tuesday. The Secretary was, Bjerga said, discussing ways to push profits up and farm subsidies down.

Bjerga seemed to fault Secretary Vilsack for his lack of ability to correct the current market correction. “There’s certainly no help coming from Washington,” he says and comments somewhat sarcastically that “the big ag subsidy proposal in President Obama’s Fiscal 2017 budget was an $18 billion cut in crop-insurance aid, a proposal that agriculture lobbies will now have to spend time and money trying to kill.”

His main point, though, was that it is a bad bet, of sorts, to look to overseas markets for help. “Trade is always seen as elixir for the U.S. farm sector, one of the few that runs a surplus. Soviet grain purchases in the 1970s and China soybean buys in the past decade both fueled record agricultural profits. But this time, export hopes are running into the reality of a strong dollar, making further struggles more likely than a near-term rebound.”

Even the USDA expects that the strong dollar will continue to make U.S. commodities less competitive, Bjerga says. Wheat shipments this year are expected to “fall to their lowest since 1972 …competitors including Russia, Ukraine, Brazil, Argentina and Canada -- weak currencies all -- are finding their products more competitive.”

And there isn’t much the government can do about it, Bjerga says, and “that makes optimism that’s encouraging to hear, tougher to justify.” The surplus of crops and shortage of buyers will take time to work through, he says, and then adds, “The government won’t bail farmers out of this. Neither will trade partners.”

If you think this is an odd criticism, you would be right. It seems that Bjerga missed a few key words in USDA’s outlook and likely has misunderstood a very large fact. The first key word missed in the USDA outlook is “expected” and that weather or economic policies or many other things can change things dramatically. The fact that could happen even this year is so obvious that most aggies take it for granted.

The second missed phrase likely is “this year.” The outlook Bjerga is reacting to is short term and likely to change—expected to change—over time. The global fundamentals are for stronger global markets as populations and incomes grow and while Bjerga may be right and Vilsack wrong about aspects of the metrics, the Secretary doesn’t deserve the reaction he got on this point.

The third comment, and it’s a big one, is the fact that Vilsack is not the Secretary of Prices but of Agriculture and he doesn’t often attempt to intervene in markets to “improve” them as former Secretaries once did. Markets and prices are much more sensitive to supply and demand factors these days as they have become increasingly global.

Furthermore, overseas sales are a normal, healthy part of that complex, especially as foreign competition increases. The term “bailout” certainly doesn’t apply here.

So, there are plenty of people who disagree with Secretary Vilsack’s views and priorities but the day is past when his counterparts had the responsibility to intervene in markets to set most ag prices, Washington Insider believes.

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