Washington Insider-- Wednesday

Organics and the Checkoffs

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

Cargill Ignores Climate-Change Deniers, Invests in Weather-Ready Infrastructure

Cargill's new strategic bricks and mortar investment plan will factor in anticipated changes in weather patterns in an attempt to meet future challenges posed by extreme weather events, according to Cargill Executive Chairman Greg Page. One example of this planning, Page told Bloomberg News, is that the company recently added adjustable spouts at its Mississippi River facilities, allowing them now to reach barges when the water is exceptionally low or high.

Page said Cargill was not alone in this process, "Increasingly, weather extremes have become a more important part of the planning and capital spending thought process of businesses," Page said.

Rising temperatures brought on by climate change may mean crop yields decline in the U.S. Midwest and growing patterns shift north, according to a report released Friday by the Risky Business Project, a group that seeks to quantify and publicize the economic consequences of such changes. Cargill is a member of the project and Page sits on the project's risk committee.

Apparently, if a business's future economic success depends on anticipating the effects of climate change, the smart ones are doing so. Meanwhile, institutions that are insulated from the forces of supply and demand and unconcerned about turning a profit have the luxury of ignoring climate forecasts.

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Expanded Trade with India Will Provide Major Boost to Economy

During President Barack Obama's recent visit to India, he told the CEO's of a number of major U.S. corporations that initiatives that he and Indian Prime Minister Narendra Modi are undertaking will generate more than $4 billion in trade and investment. Currently, only about 2% of U.S. imports come from India, and U.S. exports there amount to about 1% of the U.S. total, Obama said.

During the Cold War, India was one of a number of "neutral" nations that were courted by both the United States and the Soviet Union. A somewhat similar courting is now taking place, this time with the United States and China as potential suitors.

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China and India, the world's No. 1 and 2 most populous countries, have a largely peaceful relationship that goes back nearly 2,000 years. The United States thus has some catching up to do, but early signs indicate that India is welcoming of U.S. efforts.

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Washington Insider: Organics and the Checkoffs

Federal "check-off" programs always have been political hot potatoes. They are authorized by law and monitored by USDA to collect funds from all producers of a particular agricultural commodity. Those funds then are used for limited purposes like promotion and research. The law allows advertising, but it must be generic, without reference to a particular producer. Advocates say the programs benefit the covered commodity by expanding markets, increasing demand and developing new uses and markets.

Opponents have long argued that the programs force spending that some producers oppose and which may go against some individual interests. The Supreme Court has ruled on both sides of the issue, finding in 2001 that the mushroom check-off violated free speech provisions. But later, in 2005, the court found that the beef check-off supported "government speech" and that citizens "have no First Amendment right not to fund government speech."

When the programs were first proposed, they were challenged by economists on the grounds that it was not in the public interest to promote consumption of one commodity over others, an argument that did not prevail. However, it is clear that the challenges to the program are intensifying as the definition of an individual commodity becomes increasingly complicated. In the latest example, "organic" producers are suggesting that they should not be forced to support checkoff programs for traditional commodities.

Congress seems enthralled by the programs. The most recent farm bill includes several marketing and promotion order provisions sought by organic growers, including a program devoted to promoting organic foods. Proponents are preparing to submit a formal proposal to USDA in the next several months, setting the stage for an industry referendum for a $40 million-a-year research and promotion program.

Presumably, the USDA's Ag Marketing Service would police these programs as it does others to insure that no politics or lobbying are involved. But, given the efforts of "organic" and "natural" products to force labels that stigmatize traditional producers, that may be a difficult task.

In any case, hundreds of organic growers and their supporters are urging USDA to grant them broader fee exemption from industry fees used to promote the likes of "conventional" almonds, beef and raisins. This has the potential to cut some conventional agriculture advertising budgets, in some cases, significantly.

This is not a problem with an easy solution, and USDA officials, as usual, are giving all sides more time to comment on the proposed fee exemption.

"The organic producers should be in control of their own money," Laura Batcha, executive director and CEO of the Organic Trade Association, told the press. "Organic is distinctive and it has distinctive needs."

Others disagree. "As organic products receive the benefit of promotional efforts generated by non-organic assessments, such an exemption would be entirely unfair to those that are being assessed," Dennis Housepian, a Fresno, Calif.-based raisin industry official, declared in a public comment.

However, Wenatchee, Wash.-based grower Roger Pepperl advised USDA that "Our organic world is too large and diverse to have an organization work on our behalf. We grow organic tree fruit and have nothing in common with organic cotton, organic beef and etc."

One option is that growers can vote the programs down, and USDA may consider smaller, more focused, narrower programs. However, it seems almost inevitable that the more commodities compete for the same markets, each boost in the demand of one will mean taking something away from another, especially when certified products are trying to build markets now supplied by conventional producers.

It is an enormously complicated issue, one that may tie USDA in knots for the foreseeable future as highly aggressive groups attempt to carve out and protects their markets at the expense of others.

The issue is of major importance to producers and should be watched carefully as it emerges, Washington Insider believes.


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(GH/CZ)

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