Washington Insider-- Thursday

Understanding Brexit

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

Tyson Foods Invests in Plant-Based Protein Maker Beyond Meat

Tyson Foods Inc. announced that it has taken a 5% ownership stake in the privately held plant-based startup Beyond Meat.

"We're enthusiastic about this investment, which gives us exposure to a fast-growing segment of the protein market," Monica McGurk, Tyson Foods executive vice president of strategy and new ventures, said in a statement. "It meets our desire to offer consumers choices and to consider how we can serve an ever-growing and diverse global population, while remaining focused on our core prepared foods and animal protein businesses."

Tyson is one of the world's largest producers of chicken, beef and pork. The move follows a shareholder proposal from Green Century Capital Management asking Tyson to weigh business risks and opportunities from consumers eating less meat and more plant proteins, often out of perceived concern for the environment, animal welfare or their own health.

Beyond Meat founder and chief executive officer Ethan Brown acknowledged that having Tyson as a minority investor may "unsettle" vegans and animal rights activists who support the brand. "I don't expect to change Tyson. Nor does Tyson expect to change me," he wrote. "Instead, we both intend to serve the changing consumer."

The investment could help Beyond Meat expand its reach. Its plant-based burger patties, which are designed to look, cook and taste like ground beef, are currently available in the meat case at some Whole Foods Markets. Tyson, meanwhile, touches two of every five plates in the U.S., Brown said.

Past investors in Beyond Meat's fundraising rounds include The Humane Society and Bill Gates. The terms of the Tyson agreement are not being disclosed.

Possible Brazilian Purchases of US Corn

Reuters now reports limited interest by Northeast Brazilian poultry farmers in U.S. corn. Poultry farmers in Brazil's northeast are not clamoring to make purchases of U.S. corn even after the Brazilian government decision to clear some biotech corn varieties from the U.S. for import, according to a report from Reuters.

Reuters on Monday reported BRF, the country's largest poultry exporting firm, was examining imports of U.S. corn, but the news service now is quoting poultry operations in the northeast part of the country as not ruling out imports, but also not actively seeking those supplies. Instead, it appears Argentina will be the source for much of the corn coming into Brazil.

A Bloomberg item notes that Brazilian chicken producers plan to combine forces to jointly purchase a "huge" cargo of corn from the US in an effort to control feed costs that have soared this year, according to the country's largest processed-food company. BRF's Chief Executive Officer Pedro Faria confirmed the plan in an interview with Bloomberg on Monday after a presentation in Sao Paulo. He declined to provide further details, although the company outlined to investors and reporters at the event the impact of higher grain costs. "We're still uncomfortable with domestic corn prices," CFO Alexandre Borges said.

Any substantial purchase of U.S. corn would be the first by Brazilian buyers since 2002, when 38,898 metric tons was imported, according to USDA data. Volumes since then have been almost negligible -- just 245 metric tons in 2015, for example.

The importation of U.S. corn, if it happens, will not come immediately. Brazil's regulators gave 30 days for companies and industry groups to appeal against the move to allow GMO corn into the country. The exemption of corn imports from tariffs has been extended until Dec. 31.

Washington Insider: Understanding Brexit

Trying to figure what Britain's vote to leave the European Union (EU) might mean has become increasingly difficult now, partly because of Britain's chaotic politics. The suspicion that the initial vote was based on wild promises and unreal threats lingers, but some initial concerns of rising risks of recession were countered, the New York Times says, by surveys that showed both the manufacturing and service sectors comfortably expanding in August and September.

Now, however, the Times thinks that events of the last couple of weeks suggest that British leaders may have been misled by those early results. The British currency is plummeting again, "most immediately because of comments from French and German leaders suggesting they will take a tough line in negotiating Brexit," the Times says.

The British pound fell to about $1.24 on last Friday from $1.30 a week earlier and continued edging down earlier this week. "Sterling," as traders refer to the currency, is acting as the global market's minute-to-minute referendum on how significant the economic disruption from Brexit will end up being.

The political upheaval included top political posts and included the resignation of Prime Minister David Cameron, who had advocated for the country's remaining part of the EU. Theresa May won the internal battle to become the next prime minister, which was to markets and business decision makers a relatively benign result.

That led to a resurgence of hopes that some of the worst-case possibilities of how Brexit might go wouldn't materialize and that exporters would retain access to European markets and London could remain the de facto banking capital of Europe. This benign view was supported, despite the inflationary pressures created by a falling pound, when the government cut interest rates and started a new program of quantitative easing to try to soften the blow.

Now, however, "the tenor has shifted," the Times says, as the May government appears to be taking a hard line in negotiations with European governments. At a recent conservative party conference the Prime Minister told her party that government's negotiators would insist that Britain would assert control of immigration and not be subject to decisions of the European Court of Justice.

That position almost certainly will lead to confrontational negotiations between the British government and its EU counterparts, since European leaders are unlikely to allow Britain continued free access to its markets, which the May government wants, without similarly free movement of people across borders.

And beyond the substance of the negotiations, the British government has signaled in recent days that it is looking inward and will be hostile to those who are not British citizens.

The Times thinks this means that Britain's trading relationship with the EU is in limbo, leading many companies to reassess their long-term investments in Britain." Part of the reason for that is comments by the home secretary, Amber Rudd, that companies should be required to disclose how many non-British employees they have, a policy meant to shame companies that employ foreigners to "take the jobs that British people should do." And The Guardian reported that the London School of Economics had been told that non-British citizens would not be allowed to advise on Brexit.

This means the confidence that Brexit will not mean Britain is shutting itself off from Europe and the world is starting to dissipate, the Times says.

It also noted that at the recent party conference, Ms. May indicated skepticism of the role the Bank of England and other central banks have played in the economy in recent years, saying that while low interest rates and quantitative easing provided necessary help after the financial crisis, "we have to acknowledge there have been some bad side effects."

While Mark Carney, the Bank of England's governor, quickly played down the idea of any "meaningful schism," the prospect that the government would seek to constrain the ability of the Bank of England to play a further role in guarding against economic slumps provided yet another shock to the outlook. The Times called it, "helping foam the economic runway after the Brexit vote." And, it thinks Ms. May's comments were the equivalent of "complaining about the mess created by all that foam."

So, the question of what economic impacts of Britain's newly isolationist economic policies will eventually be has become increasingly complicated. At the same time, Britain's struggles with trade and economic policies highly similar to those proposed in the current U.S. election debate should provide insight as the United States decides whether to implement or abandon the Trans-Pacific Partnership (TTP) agreement in the coming months, an issue producers should watch closely as it evolves, Washington Insider believes.

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