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.

2015 Net Farm Income Forecast Adjusted

U.S. net farm income is forecast at $58.3 billion for 2015, down 36% from 2014, according to USDA's Economic Research Service. That's also below the March outlook of $73.6 billion, while net cash income is forecast at $100.3 billion, down 21% from 2014 but up from a prior outlook of $89.4 billion.

"Across nearly all measures, farm sector profitability is forecast to decline for the second straight year," ERS said. "Net cash income is forecast at $100.3 billion, down about 21% from 2014 levels. Lower crop and livestock receipts are the main drivers of the change in 2015 net cash farm income from 2014, while cash production expenses are projected down by 1.1%."

The net farm income forecast would be the lowest since 2006 (since 2002 in inflation-adjusted terms) and a drop of nearly 53% from the record high of $123.7 billion in 2013.

ERS said the difference in net farm income and net cash is net cash farm income is generally less variable over time than the broader net farm income measure. "It is possible to exercise greater control on the timing of cash receipts and expenses and thereby moderate large swings from year to year," ERS said.

The farm income outlook is notable in that the net farm income forecast is down from ERS's February outlook while net cash income is actually forecast higher than what USDA saw six months ago.

Debt-to-asset and debt-to-equity ratios are forecast to rise, no surprise given the downturn in crop prices. The key, however, is that those ratios are still at historically low levels, which still leaves U.S. agriculture on solid ground financially.

Lenders have been noting the increased use of operating capital for this year and given the financial pressures as forecast by this USDA outlook, that is a trend that will continue.

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Trans-Pacific Partnership Close to Done: USTR

The Trans-Pacific Partnership (TPP) negotiations among 12 Pacific Rim countries are nearly concluded and the congressional approval process will likely be completed during President Barack Obama's term, U.S. Trade Representative Michael Froman said Aug. 24.

"It is close to being done now and the trade promotion authority is critical to that process," Froman said. The U.S. trade promotion authority (TPA), enacted in June, is providing impetus to the negotiators, he said. TPA provides for streamlined voting procedures for congressional consideration of trade pacts, including a 50% vote threshold and exclusion of amendments to the legislation that would implement TPP. Malaysia, Brunei, Singapore and Vietnam are members of both ASEAN and TPP. The other eight TPP countries are Australia, Canada, Chile, Japan, Mexico, New Zealand, Peru and the U.S.

"Given the TPA in the past, we are all highly motivated to get this done," Froman said. "We are collaborating with everyone to do so." Froman traveled to Malaysia Aug. 22-24 to attend the Association of Southeast Asian Nations (ASEAN) Economic Ministers Meeting and for TPP-related meetings.

Froman said negotiators are now focused on finding "landing zone," or potential areas of agreement that take into account must-have demands, likely concessions and red-lines that cannot be crossed, with each of the trade partners. Once those zones are identified, the goal is "then to reach a final agreement as soon as possible."

Remaining issues include rules of origin for autos, market access for dairy and non-patent intellectual property protections for biologic drugs.

No announcement has been made regarding the next TPP ministerial meeting. Many TPP leaders will be in New York the week of Sept. 22 for meetings of the United Nations General Assembly, so a TPP ministerial meeting could take place around that time.

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Washington Insider: Food Scares and Food Threats

For more than a century, there has been a battle underway over ways to best insure U.S. food safety. Still, today a number of so-called "foodie" groups believe and advocate that all "consumer threats" should be removed from the food chain -- a practical impossibility, most experts say. They traditionally urge consumers -- especially, home food preparers -- to take appropriate precautions including washing and cooking foods.

Recently, Consumer Reports told the press it found threats in most types of stores after it bought and sampled 300 packages -- 458 pounds -- of conventionally and sustainably produced ground beef from grocery, big-box, and natural food stores in 26 cities across the country. CR said they tested for five common types of bacteria associated with beef—Clostridium perfringens, E. coli (including O157 and six other toxin producing strains), Enterococcus, Salmonella, and Staphylococcus. According to CR, 18% of the beef samples from conventionally-raised cows (their word) contained "superbugs" resistant to three or more classes of antibiotics used to treat illness in humans. They found 9% of beef from samples that were "sustainably produced" had such bacteria.

In response to the findings, CR says it recommends that "no matter what ground beef consumers buy, cooking it to 160 degrees Fahrenheit should kill harmful bacteria."

So, is this a crisis, or not? The meat industry points out in its review of the CR report that actual "pathogenic bacteria is rarely found in meat." The North American Meat Institute said, "the bacteria identified in the Consumer Reports tests are types that rarely cause foodborne illness. Bacteria such as Staphylococcus aureus, Enterococcus, and generic E. coli are commonly found in the environment and are not considered pathogenic bacteria."

Industry experts offered other criticisms of the CR study, as well. NAMI Vice President of Scientific Affairs Betsy Booren, Ph D., suggested, "The real headline here is the bacteria that Consumer Reports doesn't report finding in their testing -- shiga toxin-producing E. coli and Salmonella -- which are the foodborne bacteria of greatest public health concern in beef."

Further, Booren said, "Bacteria occur naturally on all raw food products from beef to blueberries so finding certain types on some foods in a grocery store is not surprising and should not be concerning. She said the meat industry focuses attention on bacteria which are most likely to make people sick, particularly Shiga toxin-producing E. coli and Salmonella. "It is telling that Consumer Reports did not highlight finding these bacteria on products they tested, which is a strong indication of the overall safety of beef."

The industry also points to data from USDA's Food Safety and Inspection Service, the agency responsible for inspecting U.S. beef, shows E. coli O157:H7 occurs at a rate of less than one tenth of one percent in ground beef products. Other Shiga toxin-producing E. coli have been found by USDA in just one percent of raw ground beef components so far this year.

Perhaps the most basic problem with CR's report is its acknowledgement that bacteria were present in all samples they checked -- as expected -- but they did not attempt to identify the source of those or eliminate those that would not be toxic or of harm to humans.

So, is the CR report helpful, or merely alarmist? If its main effect is to convince consumers to invest more care in handling and cooking, that is positive. Still, the methodology used and the selected conclusions it presents appear to raise more questions than they answer and will require stronger evidence to make much of a food-safety case, Washington Insider believes.

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(GH/CZ)

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