Washington Insider-- Thursday

Global Biotech Acreage Declines

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

Fed's Beige Book Notes Ag Struggles

It's not often that the Federal Reserve focuses on agriculture, but in the "Beige Book" report, an anecdotal recap of economic conditions in the 12 Federal Reserve districts, agriculture is one of the sectors that is broken out on its own.

The report is issued two weeks prior to the next Federal Open Market Committee (FOMC) meeting and is based on information compiled on or before April 7. In the recap of agriculture conditions, the report noted the struggles facing farmers with low prices.

The report, prepared by the Chicago Fed Bank, said conditions in agriculture were "mixed," as Chicago, St. Louis, Minneapolis, Kansas City, and Dallas "reported poor prospects for agricultural profitability because product prices remained low and input costs remained relatively high."

Prices were lower across all districts compared to year-ago for cotton, corn, soybeans, wheat, hay, rice, cattle, chickens, eggs, hogs, and milk, the report said.

While some noted "relief in input costs since the previous period, with lower costs for diesel, fertilizer, and farmland rents," others noted that "costs for chemicals went up and seed costs remained elevated."

Flooding was noted in Richmond and Atlanta districts.

The only mention of the U.S. dollar in the general summary of economic conditions by sector came from the San Francisco district where they noted the "elevated dollar held back agricultural exports." But San Francisco also reported "improved agricultural activity as ample rains enhanced growing conditions and reduced the impacts of the ongoing drought in California."


Ag Groups Urge Congress to Ratify TPP

Congress should pass legislation to implement the Trans-Pacific Partnership (TPP) trade pact so U.S. farmers can garner the benefits the trade deal is expected to provide via lower tariffs and improved market access for U.S. farm products, according to a letter sent by 255 farm and commodity organizations and ag companies to congressional leaders.

U.S. beef exports to Japan could benefit from ratification of the TPP. Competition with Australian beef would be boosted by the reduced trade barriers continued in the TPP. "Due to the Australia-Japan Economic Partnership Agreement, U.S. beef faces a tariff that is 11% higher than Australian beef, our leading competitor," the National Cattlemen's Beef Association said in a release accompanying the letter.

Net farm income could increase by $4.4 billion annually with the passage of TPP, according to the American Farm Bureau Federation. Further, a one-year delay in implementing the pact could result in a permanent loss of $94 billion to the entire U.S. economy, the groups stated, citing estimates from the Peterson Institute for International Economics. "With net farm income at its lowest level since 2002, the costs of inaction are too high for us to ignore," the groups said in the letter. "We must act now."

A bill to implement TPP is still being drafted by the Obama administration and officials have said there is no timeline for the ultimate submission of an implementation bill to Congress. Congressional leaders have indicated that they are unlikely to take up any implementing legislation before the Nov. elections.


Washington Insider: Global Biotech Acreage Declines

It seems that developments concerning ag technology are of considerable interest to the urban press these days, but that reporters and editors have trouble deciding what some of them actually mean. For example, on Wednesday, the New York Times carried a large headline just below the fold on the first business page to note that plantings of biotech crops declined last year, based on a report by the non-profit group the International Service for the Acquisition of Agri-biotech Applications.

The Times story led fairly breathlessly with the observation that, “The world’s farmers have increased their use of genetically modified crops steadily and sharply since the technology became broadly commercialized in 1996. Not anymore,” it said.

Other observers were less impressed. Val Giddings, a proponent of biotech crops, called the small yearly decline a sign of a maturing market and told NYT that, “I’m completely unsurprised to see this slight evidence of cycles, which are normal in agriculture.” Gidddings is a senior fellow at the Information Technology and Innovation Foundation, an organization that advocates for policies that enable innovation.

Giddings sees the market for biotechnology as still strong, and thinks that the main cause of the small decline the “low commodity prices,” which led farmers to plant less corn, soybeans and canola of all types.” Another factor is the fact that for the last few years the existing market for the crops has become nearly saturated, ISAAA said, leaving little room for expansion.

Globally, the acreage planted with biotech seeds in 2015 fell 1% to 444.0 million acres, from 448.5 million acres in 2014. The crops were grown in 28 countries and used by up to 18 million farmers, most of them small and in developing countries, the ISAAA said.

Critics counter that despite the expansion over the last two decades, biotech crops still account for a small fraction of global farmland and are grown by a small percentage of the world’s farmers. The United States had the highest acreage, followed by Brazil.

Biotech crop production technology has been eagerly adopted by farmers from the moment it first became widely commercialized in 1996, particularly in the United States. Global acreage grew year over year, in many years by double digits, until the recent slowdown.

The United States still is the largest biotechnology user with 175.2 million acres planted, although that is down 5.4 million acres from 2014. That decline was largely offset by an increase of nearly five million acres in Brazil, bringing its total to 109.2 million acres. Acreage in Argentina, the third-largest grower, increased 1% to about 60.5 million acres.

Plantings in India, whose only genetically engineered crop is cotton, were flat at about 28.7 million acres while cultivation in Canada fell by about 5% to 27.2 million acres because of lower overall cultivation of canola, the report said.

Efforts to introduce different traits and different crops in the United States have been slow to take hold, the Times says. It notes that two genetically engineered crops were approved since late 2014, apples that do not turn brown when sliced and potatoes that produce less of a potential cancer-causing chemical when fried. Still, activists oppose these products and some food companies like McDonald’s, Wendy’s and Gerber have said they do not intend to market either of those products at present. It will be especially important to note how consumers react to the new potato’s claims for lower cancer risk.

The Times also notes that the food industry is designing strategies to deal with Vermont’s requirement for mandatory biotechnology labels. Some big food companies like Campbell, General Mills, Mars and others told the Times that they will start labeling all their foods nationwide raising a key concern about the potential impact of the labels on food costs. Label advocates deny that such impacts will be significant.

A key question is whether producers drop efficient technologies to avoid toxic market effects from biotech labels. In its acreage report, the Times ventured into strategies of some companies that are planning to label products broadly, rather than just in Vermont—and noted that Del Monte Foods, “went even further, saying it would eliminate ingredients from genetically modified crops in many of its products.”

So, maybe the biotech labeling war just got a little hotter. If big producers scrap technologies and efficiencies just to avoid labels, concerns about higher consumer costs certainly will intensify, possibly significantly, suggesting that war over biotech labels has many rounds to go, and should be watched carefully as it proceeds, Washington Insider believes.

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