Washington Insider-- Friday

School Lunch Rules and Big Food

Editor's Note: Washington Insider will not be updated on Labor Day, Sept. 7. Have a great holiday!

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

NFGA: Congress Urged to Pass Highway Bill

Congress needs to pass a multi-year transportation funding bill to keep food costs down and maintain competitiveness for the US ag industry, the National Grain and Feed Association (NFGA) urged in a letter sent to members of the US House.

The letter comes as Congress grapples with a transportation funding shortfall estimated at $16 billion per year, and dueling proposals from the House and Senate. The Senate passed a six-year transportation funding bill in July, but opposition in the House lead to Congress instead passing a three-month extension with a price tag of $8 billion.

The Safe Trucking Act, positive train control, commercial driver access, and motor coach regulation were issues with legislation pending, noted as NFGA priorities. They note that trucks move 64 percent of grains and oilseeds from warehouse-to-end user, and that the Safe Trucking Act is vital to continued growth.

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Australia Hits 85 Percent of US Beef Quota

Australian beef exports to the US hit 85% of the 418,214 tonne US beef quota on Aug. 31, starting the shift from a first-come, first-served process on the beef quota to one that will be allocated proportionately based on exporters’ shipments averaged over the previous 2 years, according to Meat and Livestock Australia (MLA).

All eligible Australian beef exporters participating in the quota received notification from the Department of Agriculture on how much revised Provisional Trigger Entitlement they can utilize, MLA said. The 10-day period starting from the trigger day is the only timeframe when the quota can be transferred or traded and during this time, no US beef quota certificates will be issued.

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The information from exporters between the trigger and notice day will be used to finalize the allocation of the quota entitlements, and exporters are to receive notification of the final allocation, MLA said. Any uncommitted quota may be available to those exporters that did not receive an allocation or those that have exhausted their allocation, MLA said.

Should exporters opt to keep exporting outside the quota, they will pay a tariff of 21.12 percent.

The quota will return to a first-come, first-served basis as of Jan 1, 2016.

Australian beef exports to the US had already hit 56% of their quota level as of June 1 and our sources had signaled this event was likely to unfold soon. The MLA also noted that cattle markets in Australia have remained “relatively buoyant” the first two days of this week but are expected to potentially become more volatile as exporters adjust to the changes. The rise in Australian beef shipments to the US has come on a combination of currency and demand for beef in the US as the US beef supply has been somewhat constrained by herd expansion.

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Washington Insider: School Lunch Rules and Big Food

In a somewhat unusual development, at least some parts of the Republican war against the administration’s school lunch standards seem likely to get underway later this month without some of the larger warriors, Politico reported recently.

Five years ago, when the school nutrition standards established by the Healthy Hunger Free Kids Act of 2010 were passed many food companies fought vigorously against their reductions in sodium, fat and calories from school menus. Now, however, many of those same companies say they have been able to accommodate the changes and, as a result, are better positioned in competition for this $10 billion market.

Furthermore, now that they have won acceptance for retooled recipes such as whole-grain rich Pillsbury breakfast cinnamon rolls, reduced-sodium Schwan’s Big Daddy’s pizza and reduced-fat Doritos, among others, they don’t want Congress to change the rules back as it reauthorizes the law that expires Sept. 30.

In this year’s debate, the rules are still creating fury among congressional Republicans who call them an overreach. However, they seem to have facilitated shifts in recipes food companies already had under consideration in efforts to take advantage of changes in consumer preferences. USDA and other experts contend that millions of American students are eating healthier because of the changes.

Now, the House Education and the Workforce Committee is said to be drafting a bill aiming to give schools more flexibility, although staff have released no details. Senate Agriculture Committee staff say they are seeking a bipartisan, middle ground on reauthorization and aiming to mark up a bill mid-September.

So, it will be interesting to see how food companies react to these proposals, especially those that suggest that they have done well under the new rules. Domino’s, Schwan’s and General Mills all increased their K-12 food service sales last year even through more than a million students have dropped out of the program after the nutrition changes kicked in.

“When the regulations came out, we were really well-positioned,” said Lesa Tieszen, channel marketing director for food service at General Mills’ headquarters in Minneapolis. She points to an array of products that meet the new guidelines, from Trix Yogurt, without artificial colors or flavors, to an Old El Paso bean and cheese gordita that kids can eat with one hand with little mess. It’s even designed so the beans and cheese don’t stick to the plastic packaging.

The company also sells Pillsbury Maple Burst’n Mini Pancakes, which are tailor-made to be easy for a child to hold, with the syrup infused into the pancakes so they don’t leave desks or hands sticky. School officials like them because they come in individual plastic packages featuring the Pillsbury Doughboy that are oven-safe and can be heated up hundreds at a time. And they contain about as much fiber as oatmeal.

Domino’s, meanwhile, actually got into the K-12 school food business because of the opportunity it anticipated in the shift in nutrition requirements. The company’s Smart Slice, a whole grain-rich, lower-fat and lower-sodium pizza, was developed just for school cafeterias. This year, the company expects its pizza, which is made at local Domino’s locations, will be served in 5,000 schools in more than 44 states. That’s up from last year’s 3,000 schools in 29 states.

Now, the emphasis in the fight over the new standards seems to have shifted to sodium, which faced strict limits in 2014 and even tougher rules for 2017 and 2022. This is an increasing problem for foods that kids love, particularly for makers of frozen pizza, which tends to be high sodium. The final targets would be a roughly 50% lower than they stand today.

This means a new fight over sodium limits is expected to bubble up this fall—and food executives are telling the press they’re concerned that if the sodium regulations go too far, the future of the National School Lunch Program could be in jeopardy.

While the fight over nutrition standards is far different than it was earlier, it still is likely to be both bitter and contentious and has increasingly important implications for the structure of the food industry. It should be watched closely by producers as it proceeds, 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.

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