Washington Insider -- Friday

Booming Meat Market Expectations

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

Trump, Chinese Again Commenting on US-China Trade Deal

The U.S. and China are in close contact relative to signing the phase-one trade agreement, Chinese Commerce Ministry spokes Gao Feng said at the regular Thursday briefing.

Gao said the two sides are still going through needed procedures relative to the Phase One agreement.

This comes as President Donald Trump on December 24 said the deal was "done" but was being translated. Asked if there would be a signing ceremony with Chinese President Xi Jinping, Trump told reporters, "I will be, probably, doing that. Yeah. At the right time, we will be doing a smaller ceremony. Ultimately, we will be having one. The China deal — we will be having a signing ceremony. Yes." Asked further if it would be signed by himself and Xi, Trump said, "We will probably, yes. We will sign it. When we will get together."

However, Trump did not say when it would be signed, noting it will be a "quicker signing, because we want to get it done."


MFP Payments Continue to Rise

As of December 23, USDA’s Farm Service Agency has paid out $10.707 billion in 2019 Market Facilitation Program (MFP 2) payments to farmers under the first two installments of MFP 2 payments.

The top five states for the payouts were Iowa, Illinois, Texas, Minnesota and Kansas.

Signup for MFP 2 ended December 20. The watch now is on whether USDA will announce the third installment of the MFP 2 payments will be issued in early January.

Sources indicate they expect the payments will be made and that the decision has already likely been made but not yet announced.


Washington Insider: Booming Meat Market Expectations

Well, the urban media are paying more than usual attention to ag matters these days, especially to the outlook for meat sales. Bloomberg notes this week that for most of the important meats – poultry, beef and pork, U.S. supplies are surging. The hog herd is the biggest it’s been since the series began in 1943, while egg and chicken production also rose in November, USDA says. Also this week reports also showed the most cattle in U.S. feedlots since 2011.

The reason for this optimism is anticipation of increased export demand in China where African swine fever has devastated the hog herd, as it has elsewhere.

With Beijing and Washington reaching a first-phase trade deal that includes increased purchases of ag products, U.S. livestock producers are hoping to start shipping big cargoes soon. While prices for some meat cuts have started to rise, the ample supplies have helped keep gains in check for consumers, Bloomberg says, noting that USDA expects “continued expansion next year.”

Also this week, the New York Times focused on China’s food production policies and charged that it “bungled the effort to contain African swine fever, a mistake that could result in higher Chinese food costs for years and shows the limits of Beijing’s top-down approach to problems.”

The magnitude of the losses is breathtaking, NYT said—claiming that it has cost the world roughly one quarter of its pigs as the “disease has spread from China, “reshaping farming and hitting the diets and pocketbooks of consumers around the globe.”

Even worse, China’s “unsuccessful efforts to stop the disease may have hastened its spread—and extended its impacts, the Times said.

To halt African swine fever, authorities must persuade farmers to kill infected pigs and dispose of the carcasses properly. But its “frugal incentives” and requirements that farmers jump through hoops to seek compensation from often cash-poor local governments are causing farmer reactions that “make things worse.”

The Times concludes that the epidemic also “shows the limits of China’s emphasis on government-driven, top-down solutions to major problems, sometimes at the expense of the practical. It has also laid bare the struggle of a country of 1.4 billion people to feed itself,” the Times said.

China has long viewed food security as tantamount to national security, and had become essentially self-reliant in pork, rice and wheat thanks to subsidies and aggressive farmland management—but this epidemic will “test that commitment to its increasingly affluent people, who more often expect meat at the dinner table,” the Times says.

The disease—a highly contagious and untreatable outbreak that is not fatal to humans but can be spread by them – has now extended swiftly out of China and across nine other Asian countries, particularly Vietnam, the world’s fifth-largest pork producer which lost much of its herd this year. Before reaching China, the disease had been slowly infecting occasional farms in Russia and elsewhere in Eastern Europe.

Powered by pork, China’s overall food prices last month were one-fifth higher than they were a year ago, after seven years of little change. Large purchases of pork by China are driving up live hog prices in the United States, Europe and around the globe, pushing up costs for everything from German sausages to Vietnamese pork meatballs.

Beef and lamb prices have risen as families worldwide seek alternatives, so much so that overall meat prices in international commodity markets have increased nearly 20 percent in the past year. Brazil is now ramping up beef and chicken production to meet demand, partly by burning forests in the Amazon to clear land for agriculture, the Times said.

The epidemic is leading to “broad and deep economic impacts at the global level,” said Boubaker Ben Belhassen, the director of trade and markets at the United Nations’ Food and Agriculture Organization in Rome. “We don’t think there’s enough pork in the world to offset China’s shortfall.”

NYT also said that the “hog problem” was an important factor in Beijing’s acceptance of a partial trade deal with the U.S. last month--in part to resume imports of American food. Pork prices have climbed so high that one livestock company, Guangxi Yangxiang, printed red banners to recruit potential farmers that read, “Raise 10 sows and drive a BMW next year.”

China’s leadership has focused on remaking farming to stop the spread. Using subsidies and generous credit, Beijing has pushed industrial-scale farms with safeguards like quarantine areas for new arrivals and incinerators for diseased pigs, but the Times criticized that effort as inadequate.

Chinese officials have tried to be reassuring and frequently claimed the disease was under control – only to see signs of further spread. Most recently, the agriculture ministry said that it only hoped production at the end of next year would be four-fifths of normal levels – a shortfall equal to the entire pork production of the United States, the world’s second-largest pork-producing nation, the Times said.

So, we will see. U.S. producers tend to recognize the threat from over responding to the outlook, but still willing to invest to expand production, observers say. This means that objective outlook data will be increasingly important in the coming months, trends producers should watch closely as new trends develop Washington Insider believes.


Want to keep up with events in Washington and elsewhere throughout the day? See DTN Top Stories, our frequently updated summary of news developments of interest to producers. You can find DTN Top Stories in DTN Ag News, which is on the Main Menu on classic DTN products and on the News and Analysis Menu of DTN’s Professional and Producer products. DTN Top Stories is also on the home page and news home page of online.dtn.com. Subscribers of MyDTN.com should check out the US Ag Policy, US Farm Bill and DTN Ag News sections on their News Homepage.

If you have questions for DTN Washington Insider, please email edit@dtn.com

(GH/KR/ES)