Washington Insider-- Friday

Washington Post on Peanut Subsidies

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

US, Taiwan Hold First Rice Technical Meeting

The Taiwanese government's Agriculture and Food Agency (AFA) hosted a U.S. rice industry delegation Thursday for the inaugural joint technical meeting. "We are pleased to be in Taiwan and appreciate AFA'S support for this meeting," said Alex Balafoutus, chair of the U.S. delegation and vice president at PGP International in Woodland, California.

Both sides provided information on rice production, consumption, and trade in their countries and discussed technical issues of joint interest such as rice grading and quality specifications, and rice inspection in the United States. A representative from the Overseas Marketing and Inspection Co. provided an overview of third party rice inspection in the United States.

"Taiwan is an important market for California and the mid-South and (today's) meeting is an important opportunity to exchange information and discuss issues of mutual concern. We look forward to continuing our dialogue at next year's meeting in the U.S.," concluded Balafoutis.

Representatives from the US Department of Agriculture office in Taipei accompanied the U.S. delegation that also included Todd Burich, ADM Rice; Ken Cox, Farmers Rice Mill, Inc.; Chris Crutchfield, ACC. Ltd.; Jess Errecarte, SunWest Foods, Inc.; Terry Harris, Riceland Foods, Inc.; Jim Higa, Sun Valley Rice Co, LLC; Steven Michel, Farmers' Rice Cooperative; Michael Rue, California producer; and USA Rice's Bob Cummings.

Prior to the technical meeting Rue and Cummings visited with staff from the American Institute in Taiwan (the U.S. government's office in Taiwan) and visiting staff from the USDA's Foreign Agricultural Service and the Office of the U.S. Trade Representative about rice market access.

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Move into Organic Chicken Announced by Pilgrim’s Pride

An effort to move into organic chicken production was announced by meatpacking giant Pilgrim’s Pride Chief Executive Bill Lovette during a conference call discussing first-quarter earnings.

Slower growth in the traditional chicken market and relatively faster growth in the organic chicken market were cited by Lovette as drivers of the move. Pilgrim’s Pride is the second-largest US chicken processor by number of birds processed.

Perdue Foods, the third-largest US chicken processor, already established its presence in the organic chicken market through its 2011 purchase of Coleman Natural Foods. Currently, Perdue is estimated to be the largest organic chicken producer in the nation.

Pilgrim’s Pride joined a slew of food companies in eliminating antibiotics from its chicken, announcing it plans to expand the practice to cover a quarter of its chicken production by 2019. As part of the move into organic production, the firm said it plans to convert one of its existing processing plants for production of USDA-certified organic chicken.

Organic chicken production is expected to total 3% to 4% of Pilgrim’s total U.S. chicken production following the processing plant conversion. Organic chicken currently represents 2% of all U.S. chicken production, but it’s growing around 31% annually, according to Lovette. The firm's plans are expected to bring it one-fifth of the US organic chicken market.


Washington Insider: Washington Post on Peanut Subsidies

Historically, the Washington Post has not exactly been a fan of U.S. farm programs -- even after they were changed from direct payments to subsidized insurance in the 2014 farm bill. The Post still thinks they are too interventionist and protective. However, the peanut program criticism has reached the point now, The Post says, that there is a petition on the White House website to push USDA to call off the peanut aid to protect Haiti’s farmers.

The immediate problem concerns surplus peanuts owned by USDA that it wants to donate to Haiti through the UN World Food Program. The “intent is noble: to feed protein-rich peanut snacks to some 140,000 Haitian schoolchildren who might otherwise suffer malnutrition.”

Still, the proposal is being criticized as “subsidized foreign competition for Haiti’s peanut growers,” who are supported by charities including the Clinton Foundation and the US Agency for International Development.

USDA points out that the amount being considered is small, just over 1% of annual production, and that local farmers cannot meet the school lunch program’s needs in the short run anyway. Nevertheless, some Haitians are arguing that they have seen this before and that they remember how U.S. rice imports displaced their once-flourishing local farms in the 1980s.

One might suspect that there is considerable reliance on preconceived opinions at play here and that USDA is mainly doing what it is directed to do under the programs it runs. However, the Post really has bigger targets in mind -- the US farm programs.

The Post says the clearest aspect of the confused situation is the irrationality of U.S. farm subsidies, which skew U.S. government options to begin with. It says the 2014 farm bill incentivize growers in several Southern states to increase land devoted to peanuts rather than other crops, even when peanut prices dip. The result has been production of a large, unmarketable surplus, which the government is committed to take off farmers’ hands at a “hefty loss” to taxpayers.

The USDA accumulated 113,000 tons of peanuts in 2015 and still holds 16,000 metric tons. Since storage is costly, USDA is looking to reduce its stocks.

The real culprit is the high crop subsidies, the Post says, which could total between $960 million and $1.9 billion for peanuts through 2018, the last year of the farm bill -- depending on whether you accept Congressional Budget Office or USDA numbers. Either estimate would mean a large increase in peanut-subsidy spending over levels under the previous farm bill.

The Post seems to particularly dislike the peanut program, and says US peanut farmers are sophisticated business owners who are “perfectly capable of coping with a free market.” In fact, the Post says programs that coddle and protect farmers at taxpayer expense set a poor example for Haiti’s struggling farmers.

Well, the Post is not exactly a power center of U.S. farm policy issues so its editorial views may not have much impact--but charges of uniformed and wasteful management often resonate, especially with other critics who see program costs for the 2014 programs exceeding expectations in some cases.

Most of all, this seems like a self-inflicted wound, especially given USDA’s many, many years of experience in managing similar programs. Part of the criticism likely is self-serving from groups who seek to capitalize on overstated local criticism. Still, tough critiques like this one from the Post are damaging and should be dealt with seriously by USDA and the administration as quickly as possible, Washington Insider believes.


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(GH/CZ)