Washington Insider--Tuesday

Protecting a Diversified Food Chain

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

India to Ask US to Drop Penalties in WTO Poultry Dispute

India will ask the U.S. to drop plans for $450 million in penalties for failing to comply with a World Trade Organization ruling on poultry imports. Indian Commerce and Industry Minister Nirmala Sitharaman is expected to raise the issue with U.S. Trade Rep Michael Froman, an Indian trade official told Bloomberg BNA.

The two officials will discuss the issue during a phone call this week, a senior official at the Department of Commerce, Ministry of Commerce and Industry said on the condition of anonymity. The date of the call has yet to be determined, the official said.

The penalty is in response to a dispute over poultry imports from the U.S., which asked the WTO dispute settlement body (DSB) in July to allow $450 million in annual retaliatory trade measures against India until they comply with a 2015 WTO ruling to lift the poultry ban.

India previously agreed to modify its trade restrictions on U.S. poultry imports by June 19, but the U.S. contends India still has not brought its measures into compliance with WTO rules. For its part, India objected to the level of U.S. retaliation, and the measure was automatically referred to WTO arbitration.

The Indian government also revised its import policy for poultry products, a measure it said could allow large-scale import of U.S. poultry. But the U.S. said the revised regulations do not comply with WTO's dispute ruling, according to a transcript of the September 5 DSB meeting.

Vilsack Urges Congress to Provide More Aid

USDA is doing all it can for farmers to help ease the downturn in commodity prices, but it is up to Congress to change existing aid programs, USDA Secretary Tom Vilsack said.

Congress should reduce restrictions on the USDA-owned Commodity Credit Corporation's ability to purchase surplus agriculture products to raise prices, Vilsack told an audience at the National Farmers Union's (NFU's) annual fall fly-in September 12. Vilsack also raised the idea of changing the way USDA's dairy margin protection program calculates costs when deciding whether to distribute aid. Some dairy farmers want the program to calculate costs on a regional basis rather than nationwide.

Vilsack also called on NFU members -- who will meet with lawmakers over the next few days -- to press Congress for more funding for aid programs in the next farm bill. Lawmakers are expected to begin farm bill debate in early 2017.

Washington Insider: Protecting a Diversified Food Chain

We always knew food safety rules and inspections were a huge deal, but Food Safety News (FSN) is running a series of Monday reports on how big a deal it actually is, and how the industry is coping -- or not -- with the challenge.

First, FSN notes that reports of foodborne illnesses are more widespread these days and "across the globe, we hear about people being sickened by contaminated milk, flour, fresh produce, raw seafood, frozen entrees, and myriad other products." U.S. Centers for Disease Control and Prevention estimate that about 48 million people become ill each year from a foodborne pathogen acquired in this country. Of those, about 128,000 are hospitalized and 3,000 die.

FSN notes that CDC has linked some 9.4 million episodes of foodborne illnesses each year to 31 identifiable pathogens, and further estimates that 95% of those are caused by only 15 pathogens.

It says the personal costs from medical expenses and lost productivity is estimated by USDA to be about $15.5 billion in 2013 dollars, or more; Ohio State says the price tag is between $56 billion and $93 billion per year, so the problem is serious.

There are costs for food companies, too. According to a 2011 Grocery Manufacturers Association survey of 34 international firms, more than half had been affected by food recalls in the previous five years. Of those, 18% reported lost sales of $30 million to $99 million, and 5% lost $100 million or more.

FSN links food illness threats to the fact that today's food supply chain has lengthened, to stretch across continents. "As our food supply becomes more globalized, so do the chances for problems," which become increasingly difficult to find and eliminate, FSN said.

Today's food chain involves "countless partners and interfaces, requiring logistics that are complicated and are growing more so by the day," FSN said. Our pantry is global and so are the chances for contamination. "Americans want certain food products available year-round and we want them cheap." The global supply chain has given us wide choices and has cut costs.

The downside is it has made preventing food-borne contamination more difficult. "By the time milk tainted with melamine produced in China was detected, it had already been exported to 47 countries by way of milk-containing products," FSN noted.

For industry, the costs of recalls inevitably impact the bottom line, but the damage to customer trust in a given brand name is harder to quantify. FSN points to surveys that show large groups of consumers mistrust food company's safety information -- but notes a March 2016 analysis from Sullivan, Higdon & Sink, an ad agency based in Kansas City, Missouri, that reported "the level of trust has gone up in recent years, mainly due to better and more concerted efforts at consumer education to fill the gap."

FSN said the reason is consumers increasingly share their information and sentiments on social media sites and elsewhere and, for companies, "social legitimacy" is based on values collectively shared among stakeholders. When contamination makes people sick or recalls are announced, the fragile trust between producers and consumers must be re-earned laboriously over time.

FSN sees the improved trust as due to transparency, inclusiveness and informed consent. It thinks that there is now "an opportunity for stakeholders to make the food industry more democratic, more accessible and relevant to the broader public."

How companies adjust their operations to handle technology, traceability, and new federal regulations, among other management decisions, increasingly can determine how well they weather those challenges, FSN said.

We will see. It certainly seems true that more information about illness-causing pathogens is readily available now and that consumers can better deal with such situations. But, what about "social brand" information, for example about the GMO products that very large numbers of consumers think are health threats -- and which the vast majority of scientists say are not threats at all? What will be the impact on the industry of this development?

There is some evidence it could reduce the availability and boost the cost of some products and some markets and could damage some low income consumers. Certainly, it is an issue that has significant potential impacts for at least some consumers and, although it may not be in the crosshairs of FSN's food safety series, it may well be important enough for them to consider as their series continues, Washington Insider believes.

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