Washington Insider- Friday

More Chicken Price Shenanigans Reported

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

HOUSE REPUBLICANS TO PUSH FOR CR THROUGH MARCH 2017

House Republicans said that they will push for a continuing resolution (CR) to fund the government through March 2017, a strategy requested by President-elect Donald Trump's transition team.

Some GOP members met behind closed doors with Vice President-elect Mike Pence. House Speaker Paul Ryan, R-Wis., presented a plan to punt final funding decisions into March to give the incoming Trump administration a say in final Fiscal 2017 spending decisions.

House Appropriations Chairman Harold Rogers, R-Ky., said after the meeting that his committee would begin drafting a Fiscal 2017 CR running through March 31, 2017. Congress must pass additional funding before December 9, when a 10-week stopgap expires, to avoid a partial government shutdown.

In a statement, Rogers said Senate GOP leaders were also on board with the strategy.

Oklahoma Rep. Tom Cole, a senior GOP appropriator, said the case for a short-term CR was made by Ryan, rather than Pence, though Pence and the Trump team were fully supportive of the plan. "Would you rather negotiate with Harry Reid and Barack Obama, or Donald Trump?" Cole asked, relaying the argument leadership made to members. "It's a pretty easy choice."

Of note, Cole also said the CR would be "more complex than normal" and there would be add-ons. "It will not be a clean CR," he said.

"There will be a lot of anomalies," he said, referring to spending and policy provisions that allow some degree of flexibility for certain federal agencies or programs. "Chairman Rogers' staff is already working on that. We'll work it through."

Several members have called for more defense spending as well as additional relief for flood victims. Rogers said Thursday he would personally push to complete the president's request for supplemental war spending, which the chairman called "terribly important."

Other members have pushed for language making cottonseed eligible for farm program safety net participation while others want an extension to tax incentives that expire at the end of the year, including one for biodiesel.


APPEALS COURT REJECTS STATES' SUIT AGAINST CALIFORNIA EGG LAW

Six states lack the legal right to challenge a California law that bars the sale of eggs from chickens that are not raised in accordance with space guidelines contained in a California law, according to the 9th US Circuit Court of Appeals.

Missouri, Nebraska, Oklahoma, Alabama, Kentucky and Iowa argued the California law would force their farmers to stop selling eggs in California or spending substantial amounts of money to comply with the law.

Ninth Circuit Judge Susan Graber said that argument did not give the states standing to file suit, upholding a lower-court decision to throw out the suit. However, Graber said, "Large egg producers certainly could file an action like this one on their own."


WASHINGTON INSIDER: MORE CHICKEN PRICE SHENANIGANS REPORTED

There has recently been significant concern about chicken pricing in the United States. The industry, including extremely large producers and retailers, relies heavily on a single index, the Georgia Dock Price. That makes many observers nervous since the estimating process is so opaque. In addition, the index has recently drawn attention to what seems strange behavior.

For example, the Washington Post says that for the past two years, the index has drifted significantly upward from other chicken price averages, "rising about 20% or more out of line with a separate but lesser known index maintained by the USDA." The deviation, the Post says, likely "cost U.S. grocery shoppers billions of dollars."

Well, that's some charge, but the Post says it has a "smoking gun."

The root of the trouble, it thinks, has been identified in a memo by Arty Schronce, director of a bulletin published by the Georgia Department of Agriculture. For his estimate, he surveys eight anonymous chicken companies in the state--and charges now they "may be misleading him." He did not attempt to document the company reports, the Post says.

"I have come to question the validity of some of the information provided," Schronce wrote in September in preparation for a meeting at the Georgia Department of Agriculture. "I do not think I am getting actual weighted average prices from some companies."

Schronce indicated that he had been contacted by an investigator from the antitrust division of the Florida attorney general. Moreover, in recent months, the USDA discontinued publishing the Georgia figures, citing its inability to verify the information.

Poultry is very important in Georgia, with sales exceeding $4 billion annually. Some of the nation's largest producers including Tysons, Pilgrim's Pride, Perdue and Sanderson Farms have plants in the state.

The Georgia Department of Agriculture defended the accuracy of its price estimate, the Post says and GDA claims to be addressing the issues raised by Schronce. The Department's spokesperson, Julie McPeake also noted that the index reflects prices of a distinct type of bird and customer and so could have "rightfully" diverged from other chicken prices.

"We trust the companies we work with," Alec Asbridge, director of regulatory compliance at GDA told the Post. "We don't see any reason they would submit information that wasn't truthful."

The Georgia Dock, which has been around for decades, is influential because so many grocery chains use it as one factor in their contracts with chicken companies. Among supermarkets, Walmart, Safeway and others confirmed using the Georgia Dock, as well as other factors, when negotiating chicken prices.

For all of its influence, however, the way the index is calculated appears to have been somewhat haphazard, WaPo reports. In the three-page document, entitled "Notes for meeting," Schronce portrays himself as someone who was poorly prepared for the job of producing the index and who was treated contemptuously by the chicken companies.

Schronce says he came into his job just a few years ago. He previously wrote a gardening blog, "Arty's Garden," for GDA and is seen in a Youtube video extolling the virtues of a native vine known as Carolina Jessamine. The blog describes him as "a lifelong gardener and a horticulture graduate of North Carolina State University."

"My training was inadequate, inconsistent and sometimes in error," Schronce wrote. He called the companies he was required to survey surly and sometimes unresponsive and sometimes rude and evasive. Sometimes, the companies even responded with "just keep 'em the same," the Post said. However, companies claimed to have provided accurate information when surveyed.

There's more, the Post says and suggests that Schronce felt that the chicken industry may have too much sway over the chicken price index since the current Georgia Agriculture Commissioner was formerly president of the Georgia Agribusiness Council and lobbied for the agriculture industry for years.

McPeake told the Post that a review process began in December 2015 after "serious concerns" emerged. A spokeswoman said that while Schronce's training "may have been abridged due to unfortunate and unforeseen circumstances, every effort was made to ensure that he was indeed trained on some level."

The weird trends by the index have been noted by USDA, which told Georgia officials to start verifying the prices reported, among other changes. However, the State officials were seen as reluctant to attempt to verify company reports and last August USDA dropped the index from its weekly report and now provides only a link to its website.

However, the Georgia Agriculture Department recently claimed to be "vetting a new model to serve as a trend analysis of demand." Other reports by urban dailies have discussed the information problems, but the new Post report certainly adds urgency to the situation.

Potentially, the biggest loser in the current questioning of industry prices is the food industry and its credibility. The Post report also raises questions for USDA which should take the necessary steps to reform the price collection and reporting process if the Post report stands scrutiny, Washington Insider believes.


Want to keep up with events in Washington and elsewhere throughout the day? See DTN Top Stories, our frequently updated summary of news developments of interest to producers. You can find DTN Top Stories in DTN Ag News, which is on the Main Menu on classic DTN products and on the News and Analysis Menu of DTN's Professional and Producer products. DTN Top Stories is also on the home page and news home page of online.dtn.com. Subscribers of MyDTN.com should check out the US Ag Policy, US Farm Bill and DTN Ag News sections on their News Homepage.

If you have questions for DTN Washington Insider, please email edit@dtn.com

(CC)