Washington Insider - Monday

By DTN's Washington Insider

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

USDA Lowers Forecast Increase in 2016 Grocery Store Food Prices

The rate of food price inflation for food at home has been revised down to 1.5% to 2.5% for 2016 from a prior outlook for grocery store prices to rise 2% to 3% in 2016 compared to 2015, according to USDA’s Economic Research Service (ERS). However, the overall level of food price inflation and the level for food away from home (restaurants) were kept the same at 2% to 3% and 2.5% to 3.5%, respectively.

Reductions were made to several categories for food at home or grocery store prices, primarily for meats, fish and poultry where those prices are seen up 1% to 2% from 2015, with downward adjustments to the increases for meats, poultry and fish and seafood. Meat was revised down to an increase up to 1% with that also the forecast range for pork price inflation in 2016, down from the prior mark.

“Due to an expectation of lower price inflation for pork, poultry, and fish and seafood, the meats forecast has been lowered,” ERS noted.

As for pork, ERS noted that following elevated prices in 2014 linked to the PEDv situation, prices in 2015 fell “as there were signs of industry expansion and a lower volume of pork exports due to the strength of the US dollar. This pattern has continued into 2016." ERS now predicts pork prices to increase up to 1% in 2016.

Poultry prices at the grocery store are now seen rising 1% to 2% in 2016 compared to 2015. ERS noted that trade interruptions related to the bird flu situation “resulted in more chicken broilers remaining on the US market which, in turn, places downward pressure on retail chicken prices. Chicken prices fell 0.1% from January to February and are 4% lower than they were at this time last year. Prices for other poultry, including turkey, were up 0.4% from January to February. ERS now forecasts poultry prices to increase 1% to 2% in 2016.”

USDA economists also offered the same cautions on their 2016 food price forecasts that they have previously – weather and crop output could alter the level of increase, that energy prices could impact the final results and a stronger U.S. dollar could weigh on the level of increase for food prices.

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More Groups Seek Full 6th Circuit Rehearing on WOTUS Rule

States and industry groups petitioned the U.S. Court of Appeals for the Sixth Circuit in Cincinnati, Ohio, for a full panel rehearing, after a three-judge panel ruled original jurisdiction to hear challenges to the Waters of the U.S. (WOTUS) rule properly lies in the court of appeals.

In their petitions for rehearing, the Utility Water Act Group, Texas Alliance for Responsible Growth, Southeastern Legal Foundation Inc., a group of states, led by Ohio, and the Washington Cattlemen’s Association and Chamber of Commerce wrote that full court review is necessary because the issue presented is of national significance, and the panel’s decision conflicts with those handed down by other circuits.

The petitions were due by March 23.

They join the National Association of Manufacturers and American Farm Bureau Federation, which filed their petition on Feb. 29. Another group of states, led by North Dakota, has previously filed a petition.

The court’s response to the petitions is due April 1.

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Washington Insider: Study Says Farmers Doing Too Little to Stop Erie Algae

The Associated Press has a report out that says that more effort by agriculture will be required to effectively limit phosphorus runoff into Lake Erie. In fact, it could require sweeping changes on the region’s farms and convert thousands of acres of cropland into grass.

The study released by the University of Michigan Water Center assessed current efforts to keep phosphorus, which is found in livestock manure and artificial fertilizers, on fields instead of flowing into the lake and found them drastically short of results needed to achieve a 40% drop in runoff — a target set by the US and Canada in February.

Excessive levels of the nutrient are the leading cause of increasingly massive blooms, which in 2014 left more than 400,000 people in Toledo, Ohio, and southeastern Michigan unable to consume tap water for two days because the bacterial algae produce a toxin. Another bloom last year was the largest on record. Phosphorus also causes a “dead zone” in Lake Erie’s central basin with so little oxygen that fish cannot survive.

The scientists modeled different combinations of best-management practices that could help control the algae under control, and noted that some already are being used such as planting vegetation buffers between cultivated fields and waterways or applying phosphorus-based fertilizers beneath the land’s surface instead of on top, where it’s more likely to wash away, and planting cover crops such as winter wheat.

Ohio and Michigan currently rely largely on voluntary compliance, but complain that too few farmers are participating, the report found.

“Our results suggest that for most of the scenarios we tested, it will not be possible to achieve the new target nutrient loads without very significant, large-scale implementation of these agricultural practices,” said Don Scavia, a University of Michigan ecologist who led the study.

The study focused on the Maumee River watershed, which includes 17 counties in northwestern Ohio and smaller sections of Michigan and Indiana. High phosphorus runoff from farms in that area is the primary cause of toxic algae in western Lake Erie, it said.

Policy alternatives described as “most promising” by Jay Martin of Ohio State University, the report’s co-author, included widespread use of the best-management practices and conversion of some croplands to switchgrass or other grasses. One called for removing nearly 30,000 acres in the watershed from production. That’s the equivalent of 6,300 farms, as the average farm in the area consists of 235 acres.

Jeff Reuter, past director of Ohio Sea Grant and a Lake Erie specialist who wasn’t involved with the study, said some cropland is so overloaded with phosphorus that turning it into grassland or wetlands is the only way to stop runoff.

Such a requirement could drive some farms out of business, said Joe Cornely of the Ohio Farm Bureau Federation, who criticized the study for focusing only on the Maumee basin and agriculture instead of other phosphorus sources such as sewage treatment plants.

“Yes, agriculture’s got some things we need to do,” Cornely said. “But to give the idea that a single sector of our economy or a single geography is the only way to attack this ... runs the risk of raising unrealistic expectations among the public.”

Government could pay subsidies to farmers who convert their land to protect water quality, Scavia said.

“This study is a strong affirmation that we can once again restore the health of Lake Erie, but it cannot be done with half-measures and a piecemeal approach,” said Jack Schmitt, deputy director of the Michigan League of Conservation Voters.

Right now, this fight for better water quality seems likely to include agriculture in a major way, and to require some significant management practice shifts, including some that producers may oppose bitterly as they are considered and implemented. At the same time, it is unlikely that the issue will go away or decline in importance, especially as algae threats continue to appear. Certainly, a policy that idles large number of farms seems unnecessarily severe, so producers would seem well advised to work with USDA and state programs to define effective practices that can be applied, Washington Inside believes.

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