Washington Insider--Thursday

Food Stamp Program Eligibility Declines

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

China's Commerce Ministry May Announce DDG Investigation Results

Results of an investigation by China into the potential dumping of U.S. distiller's dried grain (DDG) into that country is expected to come soon from the Chinese Commerce Ministry, according to signals from U.S. trade and industry sources.

"The ball is in MOFCOM's court," according to U.S. Grains Council President and CEO Tom Sleight, referring to China's Ministry of Commerce (MOFCOM). U.S. companies have filed requested paperwork with the Chinese agency which allows for the investigation to be completed, he noted.

DDG exporters have had "superb" communication with both USDA and the Office of the U.S. Trade Representative on the matter, Sleight observed, as the companies have responded to what he labeled a complex questionnaire. China's Commerce Ministry is currently reviewing the information provided relative to the antidumping (AD) and countervailing duty (CVD) investigations.

While an investigation on this front in 2010 did not result in a formal determination by China on U.S. DDG shipments to the country, Sleight indicated this time China is going "all the way" on the investigation. Some 50 to 60 firms submitted a joint response to the Chinese ministry, something Sleight said was deemed inadequate and could mean those companies would be subject to "punitive" duty rates if AD or CVD duties are imposed.

The investigation this time, as it did in 2010, resulted in a downturn in U.S. DDG shipments to China. USDA data indicate DDG exports to China dropped 25% between September 2015 and June 2016. But the U.S. industry opted to expand their export efforts to other markets, resulting in a 6% rise in total DDG exports over that period.

The decline in U.S. DDG prices makes them more competitive on the world market, helping to offset the fall in the level of U.S. DDG exports to China. However, Sleight said it's not clear the rise in shipments has made up for the value downturn in the shipments to China.

Given that U.S. ethanol producers have access to corn priced cheaper than domestic Chinese supplies available to their ethanol producers, the resulting DDGs are still competitive in the Chinese market.

Ag Seed & Chemical Industry Consolidation to be Investigated by Judiciary Committee

Consolidation in the seed and chemical industries will be examined at a Senate Judiciary Committee hearing in late September, Chairman Chuck Grassley, R-Iowa, said. "The seed and chemical industries are critical to agriculture and the nation's economy, and Iowans are concerned that this sudden consolidation in the industry could cause rising input costs in an already declining agriculture economy," Grassley said.

The hearing will focus on transactions currently being reviewed by antitrust regulators and the trend in consolidation in the industry, Grassley said.

The announcement comes after China National Chemical Corp. said a multi-agency U.S. review board cleared its proposed $43 billion acquisition of Swiss agrochemical and seed firm Syngenta AG, which has significant assets in the U.S. That board, the Committee on Foreign Investment in the U.S. (CFIUS), reviews the national security implications of major merger and acquisition deals involving foreign entities.

The shareholders of Dow Chemical Co. and DuPont Co. approved a $59 billion merger in July.

Grassley previously called the ChemChina-Syngenta deal "concerning" and called for close CFIUS scrutiny. In July, he introduced the Securing America's Food Equity Act (S 3161) that would permanently add USDA to CFIUS. Currently, USDA does not sit on the panel, but can be brought in on an ad hoc basis. The bill would also clarify that agricultural assets are considered critical national security infrastructure when considering the sale of any major US food and agriculture companies.

USDA Secretary Tom Vilsack praised Grassley's efforts to include the USDA on the review panel. "I appreciate the senator's efforts on the part of the Department of Agriculture and I think that it's consistent with the growing recognition within Washington and within national security circles that agriculture does have a role to play in national security," Vilsack said, following a speech at the U.S. Chamber of Commerce.

Grassley on Tuesday commented on his panel's upcoming hearing on AgriTalk radio. He said various government and industry officials would be testifying. Of note, Grassley revealed he would not be pushing any legislation on the matter following the September hearing.

Washington Insider: Food Stamp Program Eligibility Declines

One of the most controversial numbers in Washington concerns food stamp eligibility. The Supplemental Nutrition Assistance Program (SNAP), formerly known as the food stamp program, is a key effort by the U.S. government to offset the effects of poverty by enhancing access to food. It is costly and faulted by both the left and the right for either promoting economic dependence or ignoring assistance needs.

The Hill reported this week that 43.5 million Americans received SNAP benefits in May. That number is down from 45.5 million a year earlier and from a peak of 47.8 million beneficiaries in December 2012.

The Hill says the decline reflects a recovering economy after the worst recession in generations as well as the reimplementation of work requirements for program eligibility in some states.

The 1996 welfare overhaul implemented by then-President Bill Clinton limited childless, able-bodied adults to three months of SNAP benefits every three years, if they weren't working, volunteering or earning an education. The 2009 federal stimulus bill allowed states to waive the work requirement in areas with high unemployment, and several did that.

Now some of those waivers are ending, either because the federal government has not extended them or because state governors are opting out as 15 states have done. In 2016, 22 more states will implement work requirements for the first time since the recession.

Several states that voluntarily ended their waiver program have seen a precipitous drop in enrollees in the last year: Between May 2015 and May 2016, food stamp enrollments dropped more than 10 percentage points in Florida, Arkansas, Indiana and Mississippi.

The federal government has ended waivers to other states as their economies improved. Kentucky dropped 118,000 people, or 15.6% of their total SNAP enrollees, after federal officials ended the state's waiver in January. Tennessee lost its waiver in January and its SNAP enrollment decreased 10% year over year, The Hill says.

All told, 38 states and the District of Columbia have seen SNAP enrollment decline in the last year, The Hill says.

Average monthly benefits have also been reduced. The program currently provides an average of $125.67 per person, and $254.73 per household. That's less than the $133.07 per person and $274.98 per household average in fiscal 2013, when participation in the program reached its peak.

The 12 states where program rolls have expanded in the last year include several hit by falling oil and gas prices, including Louisiana, Wyoming and New Mexico, all of which have seen their rolls expand by more than 4 percentage points.

North Dakota, Texas, Oklahoma and Alaska, all states where energy companies have shuttered as prices drop, also have seen SNAP participation rise. Texas's SNAP rolls have grown by 88,000, more than any other state in the nation, The Hill notes.

Nationally, the drop in enrollment was particularly steep in April, when participants who faced the three-month time limit began losing their benefits. The Center for Budget and Policy Priorities, a think tank that supports SNAP and other nutrition assistance programs, said 773,000 people dropped out of the SNAP program in a single month, the largest monthly decline since 2005 when hundreds of thousands of recipients of temporary food aid after Hurricane Katrina began losing benefits.

The Congressional Budget Office says it expects the continued economic recovery will further reduce the number of Americans eligible for SNAP benefits until, by 2026, it estimates that only 33 million Americans will be eligible for the program, down from 44.5 million in fiscal 2016.

The SNAP program is important to agriculture for both economic and political reasons. The program boosts food consumption during economic downturns, a fact that is not often discussed in agricultural circles but which has been evaluated frequently over the years. In addition, the program provides a strong political reason for urban lawmakers to support farm subsidies in the face of declining farm and rural voter numbers.

The farm bill coalition that attempts to unite producers, conservation advocates and urban anti-poverty supporters behind expensive farm bills has been under growing pressure from budget hawks and others in recent years. It is now widely seen in considerable disarray even as producers are worry that safety nets are falling short as low commodity prices persist and budget hawks continue to criticize even the recently modified programs.

Certainly, the next farm bill will be at least as controversial as the last and all aspects of the programs will face political pressure once again. In this environment, the performance of the large SNAP program will be important and should be watched carefully as these debates proceed, Washington Insider believes.

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