Washington Insider -- Friday

Public Service Talk

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

Trump Addresses H-2 Farm Worker Situation

President Donald has committed to continue admitting large numbers of H-2A foreign visa workers to take agricultural jobs in comments on the eve of the biggest rise in new jobless claims on record.

During a press briefing on Wednesday, Trump suggested U.S. farms would not survive without a continuous flow of H-2A foreign visa workers who are brought to the country by farmers.

“We want the farmers to be able to get people that have been working those farms for years, or we are not going to have farms,” Trump said. “So they are going to come in. And they are going to be given a certain pass and we are going to check them very, very closely — especially over the next month, because remember after a month or so once this passes, we are not going to have to be, hopefully, worried too much about the virus. But we want them to come in. We are not closing the border so that we cannot get any of those people to come in. They have been there for years and years, and I have given a commitment that they are going to continue to come or we are not going to have any farmers.”

Acting Department of Homeland Security (DHS) Secretary Chad Wolf said his agency is considering “a number of different options with the H-2A workers” at the direction of Trump and Vice President Mike Pence.

“Nothing to announce here today, but again, at the direction of the President and Vice President, we are looking at a variety of different options that I think we will have soon and be very beneficial,” Wolf said.

The State Department recently announced they are waiving the in-person interview requirements for H-2A applicants that do not present a risk.

USDA Boosts Sugar Imports to Ease Tight Supplies

USDA announced a series of actions relative to the U.S. sugar supply that will increase the tariff-rate quota (TRQ) for sugar imports in Fiscal Year (FY) 2020 by 550,000 short tons, raw value (STRV), including 350,000 tons of far sugar and 200,000 tons of refined sugar.

The actions on the domestic front would transfer allocations from beet sugar processors with surplus allocation to those with deficit allocation. USDA is also reassigning 750,000 STRV in raw cane sugar imports already anticipated and said that the domestic cane sugar supplies are “inadequate to fill the FY 2020 cane sugar marketing allocations.”

However, USDA emphasized “These FY 2020 sugar program actions will not prevent any domestic sugarcane or beet sugar processor from marketing all of its FY 2020 sugar supply.”

Washington Insider: Public Service Talk

Sometimes the urban media try to push public spiritedness, and sometimes it helps. For example, Bloomberg reported this week that it thinks that “there’s no good reason for the COVID-19 pandemic to cause food shortages since the virus isn’t foodborne and supplies are generally adequate and the world’s appetite hasn’t abruptly increased.”

This kind of hoarding happens and it can cause shortages, Bloomberg asserts, if only because some people needlessly buy too much food or sell too little out of concern about possible future threats. For example, look at what’s happened with toilet paper supplies in parts of the U.S., Bloomberg says.

The report worries that shortage fears can be self-fulfilling, an idea it attributes to the sociologist Robert Merton in 1948. Hoarding is rational if you expect others to do it, the report says.

Bloomberg goes so far as to worry that “bad talk” about shortages could trigger panic buying. The report notes and repeats that the world has plenty of food, but “a few trouble spots have appeared nonetheless.”

For example, Kazakhstan, a supplier of wheat and flour to global markets banned exports of several products in mid-March including flour, carrots, sugar, and potatoes. Vietnam temporarily suspended new rice export contracts. Serbia has stopped the flow of its sunflower oil and other goods. Russia said it is “leaving the door open to shipment bans” and said it’s assessing the situation weekly. Other nations, from Cambodia to Ukraine, have also throttled food exports according to a senior researcher at the Peterson Institute for International Economics.

Bloomberg opined that supply-restriction policies hurt local farmers far more than they do global buyers because they “damage shippers’ reputations for reliability.” The Kazakh Agriculture Ministry changed course on March 30, announcing that quotas would replace the ban for wheat and flour.

In the meantime, the EU turned to jawboning to prevent suppliers from hoarding. “There is no global supply shortage at this time, and such measures are completely unjustified,” EU Trade Commissioner Phil Hogan told counterparts in the Group of 20 nations on March 30. The ministers promised to keep trading despite the pandemic and vowed to “guard against profiteering and unjustified price increases.”

The International Food Policy Research Institute followed suit with a blog that said “COVID-19: Trade Restrictions Are Worst Possible Response to Safeguard Food Security.” The four authors warned of a repeat of 2008, when poor harvests, exacerbated by hoarding, caused shortages and contributed to a “serious price crisis.”

Cargill, the U.S.-based food giant, said that “a standstill of any new protectionist measures and a rollback of existing barriers to trade would benefit farmers, ranchers, and consumers alike.”

There’s no sign of panic buying so far in wheat, corn, soybeans, hogs, or cattle, Bloomberg said, but the price of rough rice rose on the Chicago Board of Trade, to 14.1 cents per pound, from 13 cents at the start of the year. It’s still way below the 24 cents a pound it reached in April 2008, the report said.

Reliable information about the adequacy of supplies is another tool, in addition to peer pressure, to discourage hoarding, says Maximo Torero Cullen, chief economist at the United Nations-affiliated Food and Agriculture Organization in Rome. He’s been getting out the word that stocks of staple commodities are high and harvests have been good.

To be sure, COVID-19 could cause greater numbers of the world’s poorest to go hungry, usually for reasons having nothing to do with hoarding, Bloomberg thinks. It points out that the COVID-19 outbreak has made clear is how finely-tuned food supply chains are. The demand for most products, from oranges to toilet paper, is quite steady and predictable, so supermarkets order just enough to meet the demand.

When there’s a demand spike, such as the recent one, the shelves go bare quickly, says Rachel Croson, a supply chain expert who’s the new chief academic officer for the University of Minnesota system. Food shortages can emerge, she says, when people “seek to guarantee availability in a world where that guarantee isn’t really available. They order and order and order.” We’ve all seen the result of that.

In general, the article identifies key vulnerabilities at the same time it reassures most U.S. consumers of the adequacy of food supplies. It also focuses on the need for reliable information and clear interpretation of trends in production, stocks and distribution -- services producers know well and understand. These are key characteristics of a well-organized, modern food system that producers should watch closely and support strongly as this crisis intensifies, Washington Insider believes.

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