Washington Insider-Wednesday
Georgia's New Poultry Index
Here’s a quick monitor of Washington farm and trade policy issues from DTN’s well-placed observer.
Trade Enforcement Priority for New Commerce PanelA new panel will advise the Commerce Department on ways trade enforcement and compliance policies can better support a strong trade and manufacturing agenda, Commerce said.
The Advisory Council on Trade Enforcement and Compliance (ACTEC) will also provide advice on seeking foreign government compliance with U.S. trade agreements, according to a Federal Register notice published January 10.
The ACTEC, established under the Federal Advisory Committee Act, will be a forum for input regarding current and emerging issues in trade enforcement and compliance matters, according to the notice.
Trade cases targeting sales at less than fair value and unfair subsidies have been trending upward in recent years. President-elect Donald Trump's designee for Commerce Secretary, financier Wilbur Ross, said in a tweet that he looked forward to working with Trump to restore fair trade and stand up for U.S. jobs if confirmed by the Senate.
Commerce's assistant secretary for enforcement and compliance will be the ACTEC's executive director. Commerce will publish another notice soliciting nominations for membership. Members will serve for two years, according to the notice.
The council will provide the Commerce Secretary with recommendations regarding trade enforcement and compliance efforts. The ACTEC should recommend specific solutions to the problems and needs it identifies, according to the notice.
House to Target Position Limits Rules on Commodities Trading
House Republicans are poised to approve legislation making it harder for the Commodity Futures Trading Commission (CFTC) to complete long-delayed rules limiting speculation in commodities like oil and gold.
The House is expected to vote as early as Wednesday on legislation that would make it harder for the commission to complete so-called position limits, House Republicans said.
P[L1] D[0x0] M[300x250] OOP[F] ADUNIT[] T[]
The rules would cap the size of trading positions firms could take in more than two dozen core commodity contracts, applying to a variety of energy and precious-metals commodities and are designed to curb a trader’s influence on that market.
Opposed by Wall Street, the trading caps are a longtime Democratic priority that were authorized by the 2010 Dodd-Frank financial overhaul. The CFTC has yet to complete the controversial and complex restrictions after repeated tries. It voted unanimously in December to propose the caps for the third time since 2011, leaving the final version of the rule to a new commission under the incoming Trump administration.
Lawmakers are expected to attach the restrictions on position limits as an amendment to legislation setting the CFTC’s regulatory powers for five years that cleared the House in the prior Congress but failed to advance through the Senate.
Under an amendment advanced by House Agriculture Committee Chairman Mike Conaway, R-Texas, the CFTC would not be able to complete such limits until they first determine that any new trading caps are necessary to reduce excessive speculation.
The House is also poised to vote on a measure, sponsored by Rep. Sean Duffy, R-Wis., that would require the CFTC to first obtain a subpoena before it could collect computer source code from algorithmic trading firms.
The measure is a win for industry groups that have chafed under a CFTC proposal to expand its access to the computer code that drives automated trading strategies. CFTC Chairman Timothy Massad, who is preparing to step down this month, has maintained a subpoena is not necessary because source code is not different from traditional records that firms must make available to regulators.
Washington Insider: Georgia’s New Poultry Index
The state of Georgia says it is offering a new “Premium Poultry Price Index” to replace the Georgia Dock index that came under intense criticism when it had difficulty explaining trends it reported that were counter those reported by other market information providers.
State officials say the service will include price discovery data for all those involved in production, processing, selling and purchasing poultry products. The new Georgia Premium Poultry Price Index was developed by the Georgia Department of Agriculture.
"As the poultry industry has evolved and adapted to changing production techniques, buying practices and a general increase in demand for the product, the GDA must do the same," the agency said. The Department says the new index will include a series of producer price indexes meant to measure the aggregate change in the price of poultry sold on contract over three periods of time. It also says the Department will report a percent change of sales volume for premium poultry on contract, which it says will “indicate the weekly change in demand."
In fact, selection and use of indexes to indicate prices and market changes is not for the faint hearted. Georgia says it will use “the methodology behind Fisher's Ideal Price Index formula” and make available three producer price indexes “reflecting changes in prices over one month, six month and twelve month base periods."
The Department said that under the voluntary structure, poultry producers every Tuesday will submit information “representative of poultry processed in Georgia and sold on contract during the prior week.” GDA said that “voluntary” information will incorporate a complete list of quantities in pounds and price in cents of all sales of poultry on contract for the prior week.
This information will be used to produce "a weighted geometric mean price and a total volume of pounds sold. The weighted geometric mean price and total sale volume collected from each company will be used to calculate the three price indexes to be reported each Wednesday." Those indices will measure the aggregate change in prices over each of the prescribed periods.
"By measuring the change in price rather than the price itself, the model is able to reflect a greater variability of products," GDA said in unveiling the index. "The model measures the proportional change in price and combines that with the proportional change in price of all other companies resulting in an accurate reflection of the change in poultry prices over the given periods of time."
Commonly produced products used in the index include whole bird, boneless skinless breast, bone in breast, wings and leg quarters, among others.
However the Department also said further-processed products such as marinated product would should not be included. "By limiting the reporting specifically to products that are chicken only, the indexes will not be impacted by increases and decreases in input prices that are not directly related to the production of poultry," the agency said.
In addition, it promises that a “random review” will be used to verify the data using a "prescribed process that will confirm submitted prices and quantities with the buyers. All formulas and forms utilized in the calculation of the price indexes will be open source and available to all parties to allow for the opportunity for any individual or company to track their own price indexes in relation to the industry aggregate index. Company specific proprietary information will not be available to the public."
The Department also said the new index will remove any “independent discretion” on the reported price for poultry.” This week the agency says it will hold a pre-recorded webinar and answer questions about the new service.
Well, the new index certainly will be more complex than the old one, and it certainly will be tested and challenged quickly, especially by large poultry buyers who were most critical of the old system. For the state and the industry, the flaws that plagued the old Georgia Dock price were a significant embarrassment, and the State seems serious about fixing those problems, especially by better defined and better verified data. How well the new system serves the industry at all levels will be important for producers to watch as the index begins operation, 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)
Copyright 2017 DTN/The Progressive Farmer. All rights reserved.