Washington Insider-- Wednesday

Water Infrastructure Bill Cleared

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

Monsanto Shareholders Approve Acquisition By Bayer

A proposed $66 billion takeover bid by Bayer AG was approved Tuesday by Monsanto shareholders. The companies expect the deal to close by the end of 2017 and are currently seeking regulatory approval.

Bayer first offered to buy Monsanto in September 2016. Under merger terms, shareholders will receive $128 per share in cash after the deal closes. The merger agreement also stipulates Bayer will provide a $2 billion reverse termination fee to mitigate regulatory risk to Monsanto and shareholders.

"My view hasn't changed since November, I'm still confident," said Hugh Grant, Monsanto's CEO and chairman, in an interview with the Wall Street Journal. "This is another building block that makes the Midwest a biotech hub for the planet." Grant said he has not engaged with the Trump transition team on the Bayer deal. Monsanto officials, he said, have been spending their time talking to farm groups, some of whom worry that a cascade of mergers uniting some of the world's largest suppliers of critical farm supplies — seeds and pesticides — could translate to higher prices and a narrower range of products to choose from.

Combining Monsanto's prowess in engineering seeds with Bayer's much broader pesticide portfolio will "intensify" the companies' research and development operations, Grant said, benefiting farmers and adding jobs.

"The resources will increase over time. This isn't about skinnying down," he said.

South Korea Bird Flu Culls Rise

South Korea quarantine officials have slaughtered more than 9.81 million head of poultry this winter, according to officials, with another 2.53 million chickens and ducks across the country to be culled in coming days, said Lee Yong-jin, deputy director handling the issue at the Ministry of Agriculture, Food and Rural Affairs.

That would raise to more than 12 million the total number of poultry culled since November 16, when the first outbreak was reported at a chicken farm in Haenam, south of Seoul.

The outbreak, the first in nearly seven months, was caused by the highly pathogenic H5N6 strain of bird flu, a new type of virus that was first detected in South Korea.

The quarantine authorities said migratory birds are a source of the outbreak of bird flu as there have been no reports of infections through the movement of people or livestock.

This is nearing the level of bird culls that South Korea undertook in 2014 in another outbreak of bird flu. Key will be whether or not this reduction of more than 10% of their poultry flock will translate into reduced feed demand. That could impact demand for U.S. corn but so far South Korean buyers have not backed away from the market.

Washington Insider: Water Infrastructure Bill Cleared

Congress completed action early Saturday on legislation to address the tainted water supply in Flint, Michigan, after a tough struggle with Democrats over demands that it include expanded preferences for American-made iron and steel.

The Senate voted 78-21 to send the bill to President Obama for signature.

The legislation would authorize an emergency infrastructure program for drinking water projects, lead pipe removal, contamination testing and lead poisoning monitoring programs, all needed especially in Flint, Michigan. A different bill would provide $170 million to pay the tab.

Iron and steel jobs became an issue since the water bill would authorize funding for upgrades to drinking water systems, along with ship-channel dredging and port improvements. The "buy American" part of the legislation is written to last for only one year. Minority Democrats unsuccessfully tried to strike the expiration date to make the preference permanent.

Another issue surfaced in California, where the state's two Democratic senators disagreed over the bill's drought relief response to the state's drought.

House Majority Leader Kevin McCarthy, R-Calif., and Senator Dianne Feinstein, D-Calif., negotiated the provision that would allow more water to be moved from the northern part of their state to the drought-parched Central Valley. Barbara Boxer, D-Calif., making a last environmental stand before she retires from the Senate, opposed that provision, on the grounds that it was a "backroom deal" that would erode the Endangered Species Act.

"We are fulfilling our commitment to help the people of Flint and communities affected by contaminated drinking water. In addition, we are taking steps to deliver much-needed water relief to Californians, who are experiencing their worst drought in a century," House Speaker Paul Ryan, R-Wis., said in a statement after House passage of the bill on Thursday.

Utilities such as Duke Energy Corp., Southern Co. and American Electric Power Co. have a significant stake in the legislation because it would effectively preempt a U.S. Environmental Protection Agency rule for handling of coal ash. The legislation would allow states to regulate the coal ash.

Construction companies, equipment manufacturers and shipping companies also stand to benefit.

Deepening shipping channels would benefit businesses that use inland waterway transportation, including agricultural producers, energy companies and retail groups, because dredging would reduce shipping delays and increase shipping capacity.

Construction and materials companies such as Granite Construction Inc. and NCI Building Systems Inc. could benefit from new construction projects and additional project financing options.

Among the groups, municipalities and companies that lobbied on the water projects bill were Dow Chemical Co., Coca-Cola Co., Waste Management Inc., the Boat Owners Association of the U.S., the American Farm Bureau, Dredging Contractors of America, Earthjustice Legal Defense Fund, and the city of Valdez, Alaska, according to third quarter 2016 lobbying reports filed with the Senate.

The fight over the buy American provisions in the bill seems almost an anachronism in these days of intensifying anti-trade policies, but it nearly killed the bill, observers said. Clearly, this fight is one of many expected on trade related issues in the coming Congress, that should be watched closely by producers as they emerge, Washington Insider believes.

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