Washington Insider -- Thursday

Growth Drug Use Under Pressure

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

Focus Continues On Purchases of US Ag Goods By China

More doubt and questions surface on China’s potential buys of $40 billion to $50 billion in U.S. farm products, with questions on how much, the time frame for purchases, and what the U.S. might have to give in return for China committing to purchase a quantity of US farm products.

Chinese negotiators continue to say purchases must be based on actual demand and at fair-market prices. It will take up to five weeks to see the official language of any conclusion to Phase One agreements, as both sides meet and work on language to be hopefully signed by President Donald Trump and Chinese President Xi Jinping on the sidelines of the November 16-17 APEC meeting in Chile.

Sen. Chuck Grassley, R-Iowa, said Tuesday he wanted to get more details on what the agreement entails.

Chinese Foreign Ministry spokesman Geng Shuang told reporters Tuesday that Beijing would step up purchases of US agricultural products but provide details. He said that China’s understanding of the latest trade talks was “consistent” with what the U.S. described.

Some indicate that China could attach conditions to a written pact that would allow it to buy less farm products than the US expects, such as by stretching out the time frame for purchases. China could also insist on language saying that prices for US goods are reasonable and that Chinese purchases comply with the rules of the World Trade Organization, which bans managed trade.

This is why the official Phase One language regarding farm product purchases will be key.

USDA Mulling Adding Revisions to Corn Crop in Sept. Stocks Update

USDA is considering adding revisions of the previous year’s corn crop to its September quarterly stocks report, beginning in 2020, Lance Honig, crops branch chief for USDA’s National Agricultural Statistics Service. He made the remarks on the sidelines of a meeting for USDA data users.

USDA currently updates its corn crop estimates in an annual crop production summary released in January. Honig also said USDA rarely makes big revisions to a previous year’s corn crop.

USDA already makes revisions of the previous year’s soybean crop in the September stocks report. In fact, revisions are the norm. It has revised its estimate of the previous year’s soybean crop in 18 of the past 20 September stocks report.

Washington Insider: Growth Drug Use Under Pressure

In a development largely below the radar for most urban media, Food Safety News says this week that a mega Pork Producer JBS USA has banned the use of growth drug ractopamine in the hogs it purchases because it sees a growing trade opportunity with China “where the drug remains prohibited.”

Ractopamine is used by many producers to raise leaner pigs. However, that practice remains highly controversial and is banned in the EU and China who neither allow its use of or tolerate residues in imported meat.

JBS, owned by JBS SA based in Brazil, hopes to help China fill a huge gap created by the African swine disease by shipping it ractopamine-free pork. Other companies have similarly limited the drug’s use to allow competition in more export markets.

JBS, based in Greeley, Colo., limited its use of the growth drug on its own in 2018. The company now says it won’t buy hogs from any farm that uses it. FSN notes that China, the world’s leading pork producer and consumer, is being hammered by African swine fever—a disease that “is not harmful to humans but is always deadly to pigs.” And, by dropping use of the feed additive entirely, the company expects to accelerate competition for pork exports there.

There is no vaccine for African swine fever, which broke out in China a year ago. The World Organization of Animal Health reports it has since spread to more than 50 counties, which normally account for about 75 percent of the planet’s pork production.

FSN expects that the dramatic decline in the global supply of hogs will create enough demand to pay JBS to drop ractopamine to compete more broadly. JBS USA sells pork under brands including Swift and Swift Premium and until now has focused mainly on the domestic market, leaving China mainly to Smithfield Foods which is owned by China’s WH Group and bans ractopamine on company-owned and contract farms.

“We are confident this decision will provide long-term benefits to our producer partners and our industry by ensuring U.S. pork products are able to compete fairly in the international marketplace,” JBS USA said.

Tyson Fresh Meats, the beef and pork subsidiary of Tyson Foods, Inc. (NYSE: TSN), today announced plans to prohibit the use of ractopamine in the market hogs it buys from farmers beginning in February 2020.

Ractopamine is a feed ingredient that helps increase the amount of lean meat in hogs. While it is FDA-approved and considered safe for use, some countries such as China prohibit the import of pork from hogs that have been given the product.

Tyson Fresh Meats has been offering a limited amount of ractopamine-free pork to export customers by working with farmers who raise hogs without it, and by segregating the animals and products at processing plants. However, these programs no longer adequately meet growing global demand.

"We believe the move to prohibit ractopamine use will allow Tyson Fresh Meats and the farmers who supply us to compete more effectively for export opportunities in even more countries," stated Steve Stouffer, President, Tyson Fresh Meats.

Most of the hogs delivered to the company's pork plants are purchased from about 2,000 independent farmers.

The growth additive has frequently been in the news. It was approved by FDA in 1998 to improve the rate at which animals convert feed to lean meat and is used in other countries, including Canada and Brazil, for livestock production. However, China, Russia, the European Union and several other countries continue to question its safety and refuse to accept meat from animals that use the drug.

Since 2012, the standards-setting Codex Alimentarius Commission, the UN food standards-setting body, has established residue limits for the drug but animal rights and food safety groups have frequently petitioned FDA to lower the residue limits and have called for more study of the drug’s effects on human health and animal welfare.

However, trade disputes have continued in recent years and a number of politicians including Sens. Chuck Grassley, R-Iowa and Amy Klobuchar, D-Minn., have urged the U.S. to “demonstrate to Russia that its newfound commitment to WTO membership includes adherence to science-based standards, such as the CODEX MRL for ractopamine.”

And, the growth drug continues to be controversial both in export markets and among American activists groups such as the Center for Food Safety, the Center for Biological Diversity, and the Sierra Club who argue that the FDA has not done enough to test the potentially harmful effects of it on people, animals, and the environment.

So, we will see. The decisions by JBS and other US companies, as well as pressure from potential export markets certainly is upping the ante on the US industry, if not on the FDA. In addition, the meat industry is under increasing political and social pressure from many directions these days, and it would seem prudent to continue to undertake hard-nosed evaluations of product quality as fights for competitive position continue both domestically and abroad, Washington Insider believes.

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