Washington Insider-- Wednesday
Other Developments of Interest, Including Hemp
Here's a quick monitor of Washington farm and trade policy issues from DTN's well-placed observer.
CFAP 2 Payments Rise To More Than $6 Billion
Payments under the Coronavirus Food Assistance Program 2 (CFAP 2) have reached $6.1 billion as of October 18, with 349,747 applications approved.
Acreage-based payments total $3.2 billion, livestock payments are at $1.7 billion, dairy at $626 million, sales commodities are at $599 million and eggs/broilers are at $13.0 million.
By commodity, the payouts have reached $1.8 billion for corn, $1.4 billion for cattle, $688 million for soybeans, $626 million for milk, $559 million for sales commodities, $315 million for hogs/pigs and $303 million for wheat.
Iowa leads all states with $604 million, followed by Illinois at $433 million, Nebraska at $428 million, Minnesota at $428 million, Wisconsin at $331 million and Kansas at $311 million.
Payments under the CFAP 1 program are at $10.3 billion as of October 18, including $5.0 billion for livestock, $2.6 billion for non-specialty crops, $1.8 billion for dairy, $784 million for specialty crops and $111 million for aqua/nursery/ flora crops.
As with CFAP 2, Iowa leads all states with a total of $969.7 million.
Potential US Corn, Soybean Exports to Brazil Unlikely
The Brazilian import tariff waiver for corn and soybeans is not expected to result in major purchases of either commodity from the U.S., according to a report from the U.S. Foreign Agricultural Service (FAS) office in Brazil.
A report from the office outlines “several hurdles” for the imports, including that “U.S. soybeans may remain too expensive to make sense for Brazilian importers given the U.S. FOB price and ocean freight costs” despite a $20 to $25 discount to Brazilian prices.
Plus, there are some nine GMO corn and soybean varieties approved in the U.S. that have not been approved in Brazil. For importers to bring those in, the attaché said they would have to submit a special approval request to the National Technical Commission on Biosecurity (CTNBio) and there are only two more scheduled meetings of that body the rest of 2020.
The FAS also pointed out that Brazilian ports are geared for exports, “and reverse engineering the setup is time and resource-intensive.”
However, the report said there is “potential for the tariff-free time frames to be extended” beyond the January 15 for soybeans and oy products and March 31 for corn.
Politico is reporting this week that it's been nearly two years since the 2018 Farm Bill was signed into law, legalizing industrial hemp production nationwide and fueling hopes of a hemp farming boom. However, the report says “that hasn't panned out yet, with growers around the country still struggling to reap the benefits of the burgeoning crop sector.”
USDA has approved hemp programs for 29 states and is negotiating with another 12. That means a patchwork of inconsistent state regulations and unclear federal guidance for the industry, Politico thinks. And, after millions of acres of hemp were planted in 2019, production is way down this year; many growers gave up because of a steep drop in prices and the lack of a market for their crops.
Some state agricultural officials were so unsatisfied with the regulatory framework that USDA proposed last year that they decided not to move forward with hemp initiatives. Among the biggest complaints are the strict limits on THC that can be present in hemp crops and the stringent testing requirements to certify those levels of the psychoactive chemical.
Another major hurdle: The FDA has yet to put forth regulations on cannabidiol, the widely popular compound derived from hemp that's increasingly found in products from pills to pet foods. The agency's CBD guidance has been awaiting approval from the White House since July.
As a result, while hemp was expected to breathe new life into the industry, after a steady agricultural downturn since farm earnings peaked in 2013 compared to other corners of agriculture, hemp growers held up relatively well early in the pandemic. But even then, advocates worried that the slow-moving regulatory process would stifle what was promised to be a bountiful new frontier in farming — a warning that's increasingly proving true with harvesting now underway.
In another controversial area, Politico says that the North American Meat Institute and the Alliance for Meat, Poultry and Seafood Innovation, the trade group representing the burgeoning cell-based protein industry, joined forces today to back a mandatory labeling requirement for cell-based meat and poultry products.
“Although these products have not yet come to market in the U.S., market entry is fast approaching, and there is significant interest in the regulation of these products, particularly regarding applicable labeling requirements,” the groups wrote in a letter to USDA.
The groups emphasized that they are “committed to supporting and complying with principles that ensure labeling is truthful and not misleading, does not disparage cell-based/cultured or conventional products, enables consumers to distinguish between such products, and is consistent with the safety and nutritional qualities of the product.”
The groups also recommended that USDA's Food Safety and Inspection Service issue an Advance Notice of Proposed Rulemaking to get more info and data on the products to help the agency work on the labeling issue.
Also this week in yet another development below the radar of most agricultural groups, the Federal Reserve Chair Jerome Powell told the International Monetary Fund meeting last week that the Fed hasn't made a decision to issue a digital currency, citing the need for further work and “extensive” public consultation with stakeholders before doing so.
“It's more important for the United States to get it right than to be first,” Powell said Monday on a panel during the IMF annual meeting. “We are committed to carefully and thoughtfully evaluating the potential costs and benefits of a central bank digital currency for the U.S. economy and payments system. We have not made a decision to issue a CBDC.”
Fed officials have swerved sharply from their previous approach to digital currencies, embracing a full-scale study on whether one might be suitable for the U.S. Powell said about 80% of central banks around the world are exploring the idea.
“There are a number of ways that a CBDC might improve the payments system, and it is mainly this area that motivates our interest,” Powell said.
The central bank announced in August that it was expanding experimentation with technologies related to digital currencies. In addition, the Boston Fed is working with researchers at the Massachusetts Institute of Technology to build a hypothetical digital currency oriented for central bank use. Many of the policy questions are unresolved, but those efforts are indicative of how seriously the Fed now regards the project.
U.S. central bankers were slow to warm to the idea of a digital currency, but their interest picked up after Facebook proposed its own unit of exchange for its users. Digital money could change the way monetary policy works in the economy, as well as speed up a payment system that remains slow and taxing for consumers and behind many other nations.
Central banks from Sweden to Canada and China are studying whether their money should have a digital counterpart. Sweden began an e-krona project in 2017 and has issued two reports on the topic. The Bank of Canada has launched a formal research project that has partnered with other monetary authorities. The Bank of Japan said earlier this month that it aims to start early phase experiments next year.
So, we will see. Certainly, neither the ag sector nor the banking sector is the same as it was a few decades ago, and not only are pressures from new threats growing but new approaches to consumers and the sector are changing quickly as well. These are developments producers should watch closely as they emerge, Washington Insider believes.
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