Washington Insider -- Tuesday

Global Food Prices Rising

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

FDA Eyes July 2022 Guidance on Labels For Plant-Based Dairy Alternatives

The Food and Drug Administration said it plans on releasing guidance on the issue of labeling plant-based dairy alternatives by July 2022, an action that will no doubt be a matter of contention for both dairy and plant-based food interests.

The dairy industry has opposed allowing plant-based dairy alternatives to use terms like "milk," "yogurt," or "cheese" on their labels and has called on FDA to enforce standards of identity for milk which states that the term "milk" should only apply to a beverage derived from cows.

FDA in 2018 issued a request for information to determine whether consumers are confused by plant-based products that are labeled as "milk."

The National Milk Producers Federation petitioned FDA to make a distinction between dairy and plant-based products, but the plant-based food industry has fought the proposal. It is not clear where FDA will land on the issue, but the timeline released by the agency indicates a timeline for addressing the matter.

Another Federal Judge Puts Hold on USDA Debt Forgiveness

Another preliminary injunction has been issued on USDA's debt forgiveness effort for socially disadvantaged farmers, with the U.S. District Court for the Northern District of Texas also granting a motion for class certification in the matter.

Judge Reed O'Connor rejected the government's arguments in the case and issued the second preliminary injunction on the matter with a judge in Wisconsin expected to issue a decision yet this month on a case filed there.

The Texas judge ruled that USDA has failed to provide evidence of how socially disadvantaged farmers have been discriminated against.

In a frequently asked question section, the Farm Service Agency said the payments are for "decades of well-documented discrimination against socially disadvantaged farmers and ranchers by USDA." USDA has acknowledged the court action in Florida on the debt relief effort but has continued efforts to get ready to make the payments.

"Borrowers should continue to submit paperwork (signed offer letters) and USDA will continue to accept these letters and process them," the agency noted. "USDA will be prepared to provide the debt relief authorized by Congress at the earliest opportunity, depending on the ongoing litigation." But USDA said the payment timeline would be updated once they have "received updates regarding this litigation."

USDA's initial expectation was that when a signed offer letter was received by the agency, it would take three weeks to pay off a loan and issue a payment to a borrower.

The Farm Service Agency (FSA) has also issued guidance to state and county offices for the debt forgiveness effort relative to Farm Storage Facility Loans (FSFLs) but said that guidelines for action relative to the Farm Loan Program (FLP) would be provided at a later date.

Washington Insider: Global Food Prices Rising

Food prices are always a hot-button topic and they have reemerged as one this year. As the global economy emerges from the pandemic, food prices in several countries have posted sizable increases, with the Washington Post highlighting the situation in Russia, Nigeria and Argentina.

The UN Food and Agriculture Organization (FAO) will update its global food price index this week after the month-ago increase sent global food prices according to their Food Price Index to the highest level since 2011.

"A variety of factors are to blame, including a surge in orders from China, fluctuating oil prices, a sliding U.S. dollar, and looming above all: the pandemic, and in some places, reopening," the Post noted. However, they also noted, "Global prices, like the FAO index tracks, and the price that a consumer pays are rarely in sync."

And more are starting to mention climate change as a potential long-term factor for the food price outlook.

In Nigeria, the Post details the prices for a pot of jollof rice have risen, with the rice component up 10%, the price of a small tin of tomatoes used to make the dish is up 29% and onion prices are up by one-third, according to a Nigerian research firm. In fact, the item notes that the price of onions in Lagos, Nigeria, has doubled in price and there have been heists targeting onions.

Border closures enacted during the pandemic tightened food supplies along with the devaluation of Nigeria's currency.

In Russia, the world's top exporter of wheat, pasta prices have gone up dramatically. This has pushed up the vegetable, meat, dairy and pasta staple borscht. In all, prices for ingredients have risen some 12% since before the pandemic hit. But pasta prices caught the attention of President Vladimir Putin who decried people eating "navy-style pasta" which is a Soviet-era dish eaten during hard times. "This is unacceptable," Putin said, "with such large harvests."

The situation has seen export limits put on wheat and other grains along with price controls on pasta. But even those actions have not made consumers in Russia feel any relief as the post noted poll results this spring rated food prices as the country's biggest issue by 58% of Russians.

But those government actions can only work so long and the heavy hand of government often times leads to problems returning and potentially becoming even more severe.

Enter Argentina, where the country's beef has been a key example of the food price situation. Over the past year, the price per kilogram of short ribs is up over 90%, according to the Institute for Promotion of Argentine Beef.

The situation reached a point where the country opted to halt all beef exports for a month and they have come to agreement on resuming those exports, but only at 50% of the prior volume through the end of the year.

But developing countries in particular are wary and sometimes outright scared of food-price increases. Hungry citizen become unhappy citizens and those can lead to great pressure on governments for actions to address those rising costs.

Here in the U.S., commodity prices have risen this year on a surge in Chinese demand for corn and other grains as the country seeks to make sure it has enough feed to produce meats and other proteins for their expanding economy. Couple that with dry conditions in areas like the Northern Plains where hard red spring wheat and durum, the latter being the main wheat used to make pasta, and wheat prices have soared on the Minneapolis futures market.

Indeed, consumers here are facing higher costs. USDA has raised its forecast for overall food price inflation and its outlook for food at home (grocery store) and food away from home (restaurant) prices. Overall food price inflation is now seen at 2.5% to 3.5% in 2021, up from their month-ago outlook that food price inflation would be 2% to 3%. Grocery store prices are now seen rising 2% to 3% in 2021 compared with their month-ago outlook that grocery store price would rise 1.5% to 2.5%. Restaurant prices are now seen up 3% to 4% from 2020 levels, an increase from the prior outlook that they would increase 2.5% to 3.5%.

The updated forecasts also mean that prices are seen rising for all three categories by more than their 20-year average. Those averages are 2.4% for all food prices, 2.8% for restaurant prices, and 2% for grocery store prices.

Even with the latest increase in USDA's forecasts, food prices in 2021 are not yet seen rising as much as they did in 2020. The pandemic obviously is factoring into the price situation. But, in the U.S., leading up to 2020 and now 2021, consumers saw grocery store prices either increasing at less than the 20-year average or decreasing over the 2015 to 2019.

So we will see. The food price situation in the U.S. is rising, but other countries are seeing even greater impacts. But the situation needs to be watched closely, especially if major trading partners opt to try and keep more supplies at home as that could open market opportunities for U.S. producers, Washington Insider believes.

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