Washington Insider -- Tuesday

China and African Swine Fever

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

Trump Voices Familiar Themes in Remarks to Farm Bureau Convention

President Donald Trump used his second appearance before the American Farm Bureau Federation (AFBF) annual meeting to sound what are becoming common themes for the White House — pushing the need for border security – including a barrier along the southern U.S. border — and the government shutdown, trade and cutting down the level of regulation faced by agriculture and other industries.

Opening his remarks by noting this was his second address to the group's annual meeting, Trump said, "What can I do? I like farmers!" From there he launched into remarks that touted the gains in trade that are expected to be realized by U.S. agriculture via the U.S.-Mexico-Canada Agreement (USMCA), noting farmers will be faced with the choice of how much to grow.

He lauded the progress scored in USMCA for access to the Canadian market for U.S. dairy products as an example of the benefits U.S. agriculture will see from the trade deal.

He spent much of his time, however, focused on border security and said the partial government shutdown was due to Democrats being unwilling to provide the $5.7 billion in funds for a border wall that he has requested. "They are only doing this because of the 2020 election," Trump declared.

While Democrats have decried the wall as ineffective, outmoded and immoral, Trump labeled it "common sense," noting that, “Wheels work and walls work... you know there are some things you can't beat!"

Trump touted the actions to cut regulations on agriculture and other industries, like replacing the Waters of the U.S. (WOTUS) rule, telling farmers their ditches and more would not be subject to government regulation.

He returned to trade later in his remarks, telling the audience, "The greatest harvest is yet to come," and stated that the U.S. "was founded and built by farmers." Farmers, he noted, "have always led the way" when it comes to respecting and upholding the U.S. flag, drawing huge applause from the crowd, and stresses farmers and ranchers have been loyal to the U.S. "You now have a government that is loyal to you," Trump proclaimed.

State Ag Officials Urge End to The Shutdown

State agriculture officials are urging the Trump administration and Congress to strike a deal to re-open the government, warning that the partial shutdown is having "immediate and cascading effects" on farmers and ranchers.

“The impacts of this shutdown are real," said New Mexico Secretary of Agriculture Jeff Witte, president of the National Association of State Departments of Agriculture (NASDA). "Not only are farmers and ranchers unable to use a host of existing USDA programs they depend on, they also can’t use important programs they need now from the recently enacted Farm Bill. Without them, the financial stress and challenges farmers are facing will keep accumulating.”

Much of USDA is closed because of the impasse between the White House and Congress. Of major concern to farmers is the shuttering of the Farm Service Agency (FSA), which provides farm payments via commodity support and price support programs, along with other loans and grants. The county offices of the FSA were closed Dec. 28. The agency also disperses payments through the Market Facilitation Program, which is being used to cushion farmers who have suffered because of the trade war with China.

“Some producers are dependent on FSA loans, and it is vital that they are processed in a timely manner,” said North Dakota Agriculture Commissioner Doug Goehring.

The shutdown has also derailed implementation of the 2018 farm bill, including a new program crafted to help dairy farmers suffering from low prices. Dairy farmers are currently left without a safety net until USDA reopens and revives the margin coverage program, according to NASDA.

Washington Insider: China and African Swine Fever

China's Ministry of Agriculture and Rural Affairs has said that the country has culled 916,000 hogs as a result of African swine fever (ASF) as the disease has reached 24 provinces and regions in the country.

The announcement comes as the country has been pressured by other countries to step up their information about the disease, with Taiwan in particular calling on China to be more open about the situation. Their stepped-up interest came in no small part due to a dead pig being found on the shore of a Taiwanese island and that pig was found to have ASF.

China, for its part, insists it is being forthcoming. "China has always followed the principles of 'being timely, open and transparent' when reporting the cases," said Guang Defu, a ministry spokesman.

China in 2017 slaughtered some 700 million pigs and is home to the world's largest hog population. So the official number being confirmed by China is a small, small portion of their hog herd.

But there are already signs of impacts showing in the country.

Their soybean trade data for December indicated a drop in imports of the oilseed that is used as a feed ingredient for hogs. China imported 5.72 million metric tons of soybeans in December, down 3.8 mmt from December 2017. It took their calendar year imports to a total of 88.1 million metric tons, down 7.47 mmt from 95.5 mmt in 2017, marking the first year-over-year decline in soybean imports since 2011.

Hog farmers in China have sent animals to slaughter early in a bid to escape the market impacts from the disease where prices have fallen. Chinese inflation data recently showed that food prices had risen 2.5% in December but pork prices were down 1.5%. Clearly that is a sign the market is well supplied with pork.

But the attention remains on the extent of ASF in China. The country in 2017 slaughtered 700 million hogs, so the nearly 1 million head confirmed by the Ag Ministry is a small amount. However, the impacts to the country's pork supply will eventually start showing.

Chinese soymeal futures dropped over the weekend as reports indicated that a breeding farm had been infected with ASF. That situation could become a big key for future hog supplies in China. That has the potential to broaden the impacts from the disease.

Indeed, many believe the actual number of hogs impacted by ASF is higher to considerably higher than China has officially said, with some indicating it could trim the country's hogs herd by around 20% in 2019.

While much attention has been focused on commodities like U.S. soybeans to China in the trade situation with China, U.S. exports of pork to China have suffered due to the tariffs. If the ASF situation in China is as serious as some believe it is, China may be forced to turn to the outside world for even more pork supplies. The situation is one that U.S. producers need to monitor closely, Washington Insider believes.

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