Washington Insider - Wednesday

By DTN's Washington Insider

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

President Said to be Planning Executive Action on Immigration Reforms

Reports have circulated in recent weeks that President Barack Obama will soon announce a number of changes to immigration policy. And administration officials have told Hispanic groups that if Congress failed to act this summer, the president would take action on his own, a vow the president earlier made himself.

It is possible that the president will modify the priorities used to determine which illegal immigrants are pursued for deportation. Another possibility would be to expand an existing program that shelters from deportation some 700,000 people brought to the United States as young people.

Measures are also possible that would ease restrictions that businesses and farmers say are hurting their workers. This would be important for the agribusiness sector since around 60 percent of people hired on farms are undocumented. Businesses have been pushing proposals such as giving work permits to spouses of workers with high-skilled job visas and freeing up green cards by not counting dependents under the current cap on work permits.

The president has said he is preparing executive actions on immigration because House Republicans have refused to pass immigration reforms on their own. White House officials insist the president would not take any action that exceeds his authority, but his Republican opponents can be expected to dispute that view if and when the president acts.

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U.S. Reportedly Preparing Anti-Dumping Duties for Sugar Imports from Mexico

Sources at the Mexican Sugar Chamber are telling the press that the United States plans to impose anti-dumping duties on imports of sugar from Mexico based on a preliminary determination by the U.S. Department of Commerce.

Sugar Chamber officials have been in talks with their U.S. counterparts in recent months in an attempt to find a resolution to the problems involving trade in sugar and sweeteners between the two nations. The officials told Reuters that they believe a deal can be reached on sugar trade before the United States resolves the anti-dumping quota issue in October. Chamber representatives also said it was possible that they may agree to a deal that would limit Mexican sugar exports to the United States.

While details of the coming proposal are lacking, one publication, Inside U.S. Trade, reported that Mexico may seek a base quota upward of 1 million metric tons (roughly 1.17 million short tons, raw value) as an annual base import quota. Other observers in the United States believe that a managed market program, such as the one outlined above, is unlikely to be supported by the majority of U.S. sugar growers and their lobbyists.

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Washington Insider: Grain and Pain

Well, it is a challenge to figure out how things are going in agriculture just now. The reason is that while farming is big local and national news, and there is a world of details about everything agricultural, many members of the local or urban press don't appear to want to sort through that mass of insider data, at least most of the time. So, we mostly get a partial view intended to generate headlines, a process that has gotten more than a little ugly recently.

In general, the situation is this: we had a really tough drought in 2012, with unusually low yields, especially for spring planted crops in some important regions. This tight supply boosted prices, and the crop insurance program in place at the time kicked in for many producers who were worst hit. Net farm income dropped modestly from the previous year's record high and then jumped sharply the following year, 2013. So, that weather disaster was really not much of a setback for the industry overall.

This year, however, the weather gods have smiled on the crops and by all reports, we have a fine harvest coming up. Pretty good outlook, right? Wrong. The press is predicting disaster as far as the eye can see.

Look at these reports from an ordinary day's clips last week: Reuters writer Naveen Thukral reported that, "Chicago corn fell around 1% on Monday to snap a two-session rising streak while new-crop soybeans slid to a contract low as forecasts of near-record production in the United States continued to drag prices lower." Bloomberg writer Phoebe Sedgman reported that, "Soybeans slumped to the lowest level since 2010, extending a second weekly loss, on expectations farmers in the U.S. will harvest a record crop."

Then, to top it all, Julie VerHage reported at FoxBusiness Online that, "A sharp decline in corn prices is leading to job cuts at big agricultural corporations, and pain on the family farm.…While the massive production might be good for consumers, lowering prices on a range of consumer staples, it has had a devastating impact on corn producers. Large agricultural companies and farm equipment makers are slashing jobs." Breathless, yes? Realistic, not so much.

In fact, the gloom got so deep recently that even Agriculture Secretary Tom Vilsack, who tends to emphasize dark ag trends, thought a little reality might be in order. He spoke recently after touring Iowa Choice Harvest, a Marshalltown company that processes Iowa-grown food. Press reports picked up selected Q & A's from the Associated Press that began with that old bugaboo, the price/cost squeeze. The question was: "With corn and soybean prices largely below the cost of production are you concerned about farm profitability?

Vilsack didn't answer the "cost of production" part, but he did note, "Many farmers throughout the United States have forward contracts where they're going to get paid maybe $4 or $5 for a bushel of corn, maybe $13 or $14 for a bushel of soybeans so I think you have to be careful not to conclude that because prices have come down that there isn't going to be profitability in agriculture."

He went on, "You also have to recognize as these prices have come down it has created opportunities for other producers, livestock producers in particular, who have been challenged over the course of the last many years with high feed costs now see their cost of doing business coming down. They're looking at record prices for beef and for pork and we're also seeing an expanded export market."

And, he added, "Also, that's precisely the reason we have a farm bill. It creates the safety net that if the prices come down below the price of doing business we have mechanisms in place to ensure that folks can still stay in business."

The secretary is right. USDA is forecasting what actually might be a pretty good for year for producers with the fourth largest net farm income since 2003. Get this: crop cash sales are expected to be below 2011, 2012 and 2013 — but above the previous eight years. Livestock sales, as the secretary noted, could be the highest in history. Some disaster.

Ag observers are increasingly concerned about the failure no only to keep current economic trends in perspective — especially, the recent long run of strong prices and incomes –– but also the strong sector balance sheet and the relatively high median farm household income that now exceeds that of non-farm households by a significant margin. And, many observers worry that that the current price hysteria, along with the highly interventionist new programs, have the potential to change both production and marketing patterns and prevent adjustment to shifting markets.

It is rarely beneficial for the press to distort economic conditions, either to cry "wolf" or emphasize some rosy scenario. That suggests there is considerable work to be done to build perspective — work that likely will win no popularity contest for university experts and others who have command of the facts. However, such an introduction to reality might serve better in the longer run, Washington Insider believes.

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