Washington Insider -- Tuesday

The Food Chain's Weakest Link

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

USDA Unveils Ag Aid Package But Some Sectors Not Pleased

The $19 billion in ag aid announced by USDA late Friday includes $16 billion in payments to producers and $3 billion for the purchase of food products by USDA.

Questions have already come relative to pay caps on the aid, $125,000 per commodity or $250,000 per person. Many believe that dairy producers will quickly run up against those limits.

The National Pork Producers Council (NPPC) welcomed the aid, but warned it was not enough for the sector. There was no help announced for the ethanol sector.

The Renewable Fuels Association (RFA) also complained they got no assistance in the effort. “While we appreciate that USDA’s new program provides needed assistance to the nation’s farmers and ranchers, it is unfortunate and disappointing that the 350,000 workers supported by America’s ethanol industry were left behind,” said RFA President Geoff Cooper. “USDA missed a crucial opportunity to lend a helping hand to an industry that is suffering the worst economic crisis in its history. Roughly half of the ethanol industry is shut down today, as fuel demand has collapsed in response to COVID-19. Corn demand and prices have plummeted as plants across the country are idling. Jobs are being lost, grain markets are being ravaged, rural communities are being destabilized, and the long-term future of homegrown renewable fuels hangs in the balance.”

US, Brazil Agree on Accelerating Work on Trade

High-level representatives from the Office of the U.S. Trade Representative (USTR) and from Brazil’s Ministries of Foreign Affairs, Economy, and Agriculture discussed the implementation of an ambitious economic and trade agenda between Brazil and the United States, according to a statement from USTR.

“Both countries agreed to accelerate their ongoing trade dialogue under the Brazil-U.S. Commission on Economic and Trade Relations (ATEC) with a view to concluding in 2020 an agreement on trade rules and transparency, including trade facilitation and good regulatory practices,” USTR said. “They also agreed to engage in domestic consultations, consistent with each country’s domestic procedures, to solicit input on how best to expand trade and develop the bilateral economic relationship.”

USTR said that the ATEC Commission will remain the route for further engagement, “through frequent contacts and meetings, in order to advance in the short-term agenda as well as in the preparatory work towards a deeper partnership.”

Washington Insider: The Food Chain’s Weakest Link

Livestock slaughterhouses are under scrutiny now, accused by some critics of being the food chain’s weakest link, despite being “sleek refrigerated assembly lines, staffed mostly by unionized workers under constant oversight of government inspectors,” The New York Times says this week.

In large part, the reason is that they have become “hot spots” for the coronavirus pandemic and are “posing a serious challenge to meat production.”

After decades of consolidation, there are about 800 federally inspected slaughterhouses in the U.S. and a relatively small number of them account for most production. For example, in the cattle industry, “a little more than 50 plants are responsible for as much as 98% of slaughtering and processing in the U.S.,” according to Cassandra Fish, a beef analyst.

The Times notes that shutting down one plant, even for a few weeks backs up hog and beef production across the country, crushes prices paid to farmers and eventually can “lead to months of meat shortages.” Ripple effects of the virus are now being felt across the entire meat supply chain, all the way to grocery store freezers, NYT says.

More than a dozen beef, pork and chicken processing plants have closed or are running at greatly reduced speeds because of the pandemic. By last week, the number of cattle slaughtered dropped nearly 22% from the same period a year ago, while hog slaughter was down 6%, USDA said. The declines have caused a “major disruption, leaving many ranchers with nowhere to send their animals,” the report says.

Also, even as one prominent meat executive warned that the nation was “perilously close” to a meat shortage, state and federal regulators have been sending mixed signals about how to deal with the crisis.

In South Dakota, Gov. Kristi Noem requested publicly that Smithfield Foods close its pork facility in Sioux Falls after testing revealed that it accounted for nearly half the coronavirus cases in the city and the surrounding county.

At the same time, federal officials had been repeatedly urging meat producers to find ways to keep their plants running because of their importance to the food supply, the Times said.

By Thursday, tests had revealed that the Sioux Falls pork plant was the nation’s single largest “hot spot,” with about 19% of its 3,700 employees testing positive for the virus. The hospitalization rate among the workers has been relatively low because they tend to be younger, said Dr. David Basel, a vice president at the Avera Medical Group in Sioux Falls.

Dr. Basel praised Smithfield for encouraging its employees to get tested. Doctors made instructional videos in Nepalese and Spanish and tracked down and tested workers who had been in close contact with infected employees.

Still, the high infection rate raised questions about whether enough had been done to carry out social-distancing protocols and use protective gear.

Last Thursday, officials from the Centers for Disease Control and Prevention toured the Sioux Falls plant, a facility that produces 5% of the nation’s pork. The agency is expected to release recommendations in the next few days on how to prevent another outbreak when the plant reopens.

Before the plant closed, the company had provided employees with face shields and masks and installed plexiglass barriers in some areas to separate employees. Still, the Times thinks it may be difficult for any meat plant to accommodate social distancing and remain profitable,

“It is not going to be easy to get workers six feet apart,” said Dr. William Schaffner, a professor of infectious diseases at Vanderbilt University’s medical school.

Officials in the meat industry also have argued that South Dakota’s decision to not issue a stay-at-home order may be contributing to the outbreak because it has left relatives and neighbors of plant employees free to mingle. South Dakota officials have said residents should exercise “personal responsibility” and practice social distancing.

“Everybody wants to test meatpacking employees but nobody is testing the communities around them to show what’s the baseline,” said Steve Stouffer, the president of the fresh meats division at Tyson Foods. “And until we know the baselines, my question has always been: Are we the cause or are we just the victim of our surroundings?”

In some places where the company operates, Stouffer said, it has faced pressure to “shut down at all costs.” “It’s very frustrating,” he said. “We’ve been tried and convicted already in certain spaces.”

Large numbers of employees have become infected in other businesses where people work close together, like grocery stores and e-commerce warehouses. But the pandemic has caused more serious disruption in the meat industry, where decades of consolidation have given outsize importance to a relatively small number of plants, the Times said.

“When you get to this kind of size, it increases risk,” said Ben Lilliston, who helps run the Institute for Agriculture and Trade Policy, a farm advocacy group. “When something goes wrong in a really big plant like this, you have a really big problem. These are vulnerable systems.”

So, we will see. The meat industry is fundamental to the economy and to the ag sector, but the health concerns are real and formidable—and the ongoing debate should be watched closely by producers as it intensifies, Washington Insider believes.

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