Washington Insider --Wednesday

African Swine Fever Outbreak Threatens China's Hog Herd

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

Business Groups Warn Trump Against Keeping Tariffs On Chinese Goods

U.S. business and farm groups are warning President Donald Trump against keeping tariffs on Chinese goods if he reaches a trade deal with Beijing. In a letter, companies called for the "full and immediate removal of all added tariffs" on Chinese goods in a deal, saying anything less would be a "loss for the American people... American businesses and farmers... were promised that tariffs were merely a means to an end, and that all this damage would be worth it," they wrote to Trump. "A deal that fails to lift tariffs would represent a broken promise to these hardworking Americans."

The letter noted that, "To date, Americans have paid over $21 billion in taxes due to the imposition of new tariffs. Furthermore, every single second the tariffs remain in place, Americans are paying over $1,500 in added tariffs," The groups said the figures do not reflect the "impact of retaliatory tariffs on U.S. farmers, manufacturers and exporters."

Commenting on a major topic of ongoing negotiations, the business groups wrote the administration "must avoid any enforcement mechanism that would trigger future tariffs and result in long-term economic uncertainty."

They added: "We agree that enforcement must be part of a final deal. However, coming home from the bargaining table with a deal that results in perpetual tariffs would be a failure."

Risk Management Agency Changes Livestock, Dairy Insurance

Ranchers can insure more of their cattle and hogs using Livestock Risk Protection, which shields against drops in market prices, based on changes announced by USDA's Risk Management Agency (RMA) that become effective July 1.

Coverage has expanded to all states, and the federal government will cover up to 35% of premiums, compared with 13% under prior rules.

The updated Dairy Revenue Protection removed the 70% and 75% coverage levels and modified the minimum declared butterfat from 3.5 to 2.5 pounds. The program insures for unexpected declines in the quarterly revenue from milk sales compared with a guaranteed coverage level.

As for the Livestock Gross Margin program, livestock individual capacity limitation was removed for cattle, swine, and dairy which was previously limited to $20 million per fiscal year.

Plus, dairy producers will be able to utilize LGM and the new Dairy Margin Coverage program from FSA on the same production via a change contained in the 2018 Farm Bill.

Washington Insider: African Swine Fever Outbreak Threatens China’s Hog Herd

There have been reports for some time about disease problems in the Chinese swine herd. The New York Times is reporting this week that government is having significant problems dealing with the outbreak. It says that African swine fever (ASF), which does not attack humans, has swept across the country, the world’s largest pork producer. Perhaps the worst news, the Times says, is that “the government knows about only some of the cases.”

By China’s official estimates, the present outbreak has already been catastrophic. More than a million animals have been culled, according to the Chinese government. As a result, “a billion-plus pork-loving people are facing much tighter supplies. The need to fill the gap is influencing meat markets worldwide,” the Times says.

Furthermore, the Times thinks the “reality of the epidemic may be grimmer still.” Several hog producers reported that they had not declared potential infections among their animals to the local authorities.

As a result, many farmers and livestock analysts say they assume that the highly contagious disease has infected more animals in more places than Chinese officials have acknowledged.

The article cites a number of producers who said they “did not tell the authorities” when the disease struck, and that some have severe “doubts that the government can afford to keep its promise to compensate farmers who have been affected by the outbreak.”

The need to “get a grip” on African swine fever could not be more urgent for China, the world’s largest producer and consumer of pork, NYT says. Yet the official response seems to fit a pattern from previous crises involving public health and safety in the country, including an AIDS epidemic in the 1990s, an outbreak of severe acute respiratory syndrome in the early 2000s and a widespread tainting of baby formula in 2008.

In the current crisis, the distrust is being felt not just by farmers and industry specialists, but by consumers as well. Some Chinese shoppers, skeptical of assurances that the disease does not harm human health, are starting to shun pork, the Times report noted.

The fever, which is extremely difficult to treat, has spread to every Chinese province and region, and has also jumped the border into Cambodia, Mongolia and Vietnam. Analysts at the Dutch bank Rabobank, which lends heavily to the global agriculture industry, have predicted that China will produce 150 million to 200 million fewer hogs this year because of deaths from infection or culling. That would be a hefty chunk of the 700 million head of swine slaughtered in China in 2018, the article said.

Also, the Chinese economy, already slowing, is starting to feel the effects. Higher pork prices helped push inflation to a five-month high in March. The nation’s stock of live pigs has fallen by a fifth from a year ago. The government, anticipating shortfalls, has bought frozen pork to build up its strategic reserve. Hog futures in the United States have rallied as traders bet that China will buy more American-produced meat.

China has introduced new hygiene requirements, imposed quarantines and restricted the transporting of swine. But such measures will be of limited use if the authorities have an incomplete picture of the problem — or if they have more a complete picture that they do not make public.

“There’s no way to control something that you don’t acknowledge exists,” said Christine McCracken, a Rabobank analyst. In places where infections were not reported or acknowledged, farmers and pork producers might not be taking adequate safety precautions, she said. They may even be selling and processing infected animals. African swine fever can linger for weeks or months in uncooked and frozen pork.

“It only takes one infected piece of meat entering the chain to muck it all up again,” McCracken said.

Financial pressures may be shaping local officials’ response to the epidemic, NYT concluded. China is promising around $180 for every pig a farmer culls from an infected herd. This cost is split between the national and local administrations. But the central government pays a bigger share in poorer provinces, which might give wealthier provinces like Shandong an incentive to avoid reporting suspected outbreaks to higher authorities. The national government ultimately decides which outbreaks to confirm.

The ASF outbreak in China is a disaster that will have global impacts and could lead to infections in other hog producing countries. USDA says it has three steps it uses to avoid similar outbreaks, including continuing qualitative assessments of the likelihood of an outbreak, as well as a “non-animal origin feed ingredient risk evaluation framework,” and detailed reviews of “non-animal origin feed ingredients and the transmission of viral pathogens of swine.”

In addition, USDA reports that it is working closely with other federal and state agencies, the swine industry, and producers to take the necessary actions to protect our nation’s hogs and pigs and to keep this disease away from U.S. herds. Clearly, this disease is a continuing global threat and should be monitored closely at all times, Washington Insider believes.

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