Washington Insider-- Tuesday

Georgia Chicken Index to Return

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

Future of Glyphosate Unclear After EPA Panel Review

The future of glyphosate -- the most widely used herbicide in the world -- is uncertain after a four-day review of the Environmental Protection Agency's (EPA) scientific evaluation of the chemical's cancer-causing potential.

The 15 scientists were assembled by the EPA to analyze glyphosate, the active ingredient in Monsanto's Roundup and dozens of other weed killers. The researchers struggled to reach a consensus amid a plethora of conflicting and, in some cases, flawed data on the health and environmental effects of the chemical.

The scientists now have three months to make a formal recommendation to EPA. That recommendation could strongly influence the agency's decision on whether it should impose new restrictions on how glyphosate is used.

Given the widespread use of glyphosate in US agriculture, any restrictions on its use could have wide-reaching effects. The amount of the chemical used has grown exponentially over the past 30 years and now approaches 300 million pounds annually, according to data the EPA presented to the scientists.

Monsanto insists that glyphosate is safe. "The overwhelming conclusion of experts worldwide, including the EPA, has been that glyphosate can be used safely. No regulatory agency in the world considers glyphosate to be a carcinogen." Charla Lord, a Monsanto spokeswoman, said.

However, the scientists assembled by EPA were not as certain. They spent four days analyzing scientific studies on links between glyphosate and cancer. The event included one and a half days devoted solely to hearing comments from the public. The scientists especially looked at a type of immune system cancer called non-Hodgkin's lymphoma (NHL) that farmers suffer at higher rates than other occupational groups.

Many on the panel were hesitant to say that glyphosate definitively does not cause cancer, as EPA had done previously. But they also noted data showing the chemical is a carcinogen are far from conclusive.

"There's been 30 years of study on this chemical, and I'm surprised we're still at this level of uncertainty on this," panelist Kenneth Portier, a statistician with the American Cancer Society, said.

Donald Trump To Nominate Rep. Mick Mulvaney As Budget Director

President-elect Donald Trump said Saturday he would nominate Rep. Mick Mulvaney, R-S.C., as his budget director in charge of the Office of Management and Budget (OMB).

Mulvaney is a fiscal conservative who has warned against larger deficits. He would be in charge of putting together Trump's initial budget proposal to Congress, expected to include campaign promises such as the repeal of the Affordable Care Act, an overhaul of the tax code and an infrastructure-spending program. The position also coordinates major new executive-agency regulations.

"Right now we are nearly $20 trillion in debt, but Mick is a very high-energy leader with deep convictions for how to responsibly manage our nation's finances and save our country from drowning in red ink," Trump said in a statement.

Mulvaney was elected to Congress in 2010 as part of the tea party wave. Before going into politics, Mulvaney worked as a lawyer and started a small home-building company.

Mulvaney has been a leader in recent efforts to shut down the government over spending in areas conservatives oppose, such as Planned Parenthood and Obamacare. Mulvaney is a founding member of the House Freedom Caucus. He was a leading player in the debt ceiling fights, pushing Congress to deeply cut spending.

Washington Insider: Georgia Chicken Index to Return

It certainly is unusual for the press to pay the kind of attention seen recently over a price series for chicken. Still, chicken is an increasingly important food in the United States and Georgia is an important, concentrated production location. So millions of consumer dollars are involved in each small price shift.

The details involved in the recent redesign by the Georgia Department of Agriculture concerning the accuracy of its chicken price index have been watched closely across the country, especially after the series was suspended for the last three weeks. Bloomberg is reporting now that it is likely to return in some form and cites information from the third-largest U.S. poultry producer, Sanderson Farms as its source.

Georgia's ag department says it is still evaluating changes to the formula for the new Georgia Dock index. The old one had been based on price reports from poultry processors across the state since 1972. In the future, the index may also include data from retailers and food distributors, Sanderson Farms Inc. Chief Executive Officer Joe F. Sanderson Jr. said, although the department hasn't provided a timeline for the measure's revival, Bloomberg reported.

The accuracy of the index, considered an industry benchmark, came under serious scrutiny recently after it began to reflect far different industry supply and demand conditions than other leading price reports. Subsequently, the biggest U.S. chicken producers were named as defendants in a series of lawsuits alleging collusion in efforts to control supply and drive up prices, something the companies deny.

In addition, the index was criticized severely by an author, the director of the Georgia Department of Agriculture's weekly chicken-price report, who complained of inadequate resources and a lack of cooperation from the poultry companies.

"They are going about their review of their service in the right way," Sanderson told industry analysts last week. The department "will seek input" from all constituencies "impacted by the benchmark," and they will periodically review and revise their formula as appropriate in a transparent way, he said.

"The formula will be a departure from the dock methodology and will include a process to verify information collected with all users," Julie McPeake, a spokeswoman for the Georgia Department of Agriculture told Bloomberg.

The index for whole birds was used as the base for formulas negotiated and used to price about 10.2 percent of Sanderson Farms' total poultry poundage sold during fiscal 2016, while Urner Barry was used as a base for 3.3 percent of chill pack pounds, according to a company filing Thursday.

Regardless of which price benchmark is used to price retail or grocery tray-pack products "negotiations with customers ultimately determine the price," Sanderson said. "We're confident our prices fairly and accurately reflect supply and demand dynamics."

Others in the industry agreed. "We were encouraged by Sanderson's comments on its exposure to Georgia Dock chicken prices," Zain Akbari, a Chicago-based analyst for Morningstar Inc., said last week. "Statements that Dock prices are merely starting points for client negotiations and not used as absolute levels align with our views."

While chicken producers are mostly concerned about the accuracy of the new index, many are interested in information about who gained and who lost during the period when inaccurate prices were reported. This may be a hard estimate to make, since industry representatives are firm in their conviction that the index served mainly as "a starting points for client negotiations and was not used to set actual bids or offers." However, the index was widely seen to reflect strange patterns and to suggest that chicken supplies were more nearly balanced with demand than was indicated by other price series.

So, it likely will take some time for the industry to sort out the procedures needed to effectively monitor its market conditions and what, if any, liability can be assigned for past reporting shortcomings, beyond some pretty severe embarrassment. Clearly, well documented trends and implications are important for an efficient industry and producers should watch closely as the price reporting reforms are defined and implemented, Washington Insider believes.

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