Featured Agriculture News

07/20/2018 - When Drift Hits Home

When dicamba damages trees, vegetables, fruits, flowers and other private property in rural communities, victims find little to no justice or compensation.

07/20/2018 - House Sends Farm Bill to Conference

The U.S. House of Representatives on Wednesday voted to proceed to conference on the farm bill. House leadership also named conferees on the farm bill.

07/20/2018 - China Stocked With Soymeal

Both soybean meal and soybean oil markets in China have remained relatively calm over the past two weeks after China started taxing U.S. soybeans with a 25% punitive tariff on July 6.

07/20/2018 - RFS Testifiers Hammer on Waivers

Although the EPA made it clear it wasn't asking for testimony on the agency's small refinery waiver program in the Renewable Fuel Standard, farmers and biofuels producers called for changes anyway during a public hearing in Michigan on Wednesday.

07/19/2018 - Kub's Den

Soybean prices are at nine-year lows in nominal terms, but 2008 was a long time ago and the value of a dollar changes from one timeframe to the next. In real inflation-adjusted terms, today's soybean values present a historically favorable buying opportunity.

07/19/2018 - Trade Complicates Ag Economy

Farmers are caught in the middle of a multi-front trade war, and bankers worry damage to farm incomes could put a dent in farmland values, especially as the Federal Reserve moves forward with higher interest rates.

07/19/2018 - Ear Tag Tech Boom

A unique monitoring system for beef producers sets a new threshold for what technology can do.

07/18/2018 - USDA's Not So Equal Access

DTN has been asking more questions about what drove the decision to eliminate us and several other news agencies from early access to major crop reports such as the monthly World Agricultural Supply and Demand Estimates. While USDA argues everyone will have equal access to crop reports, Ag Secretary Sonny Perdue often goes around the country talking about the need for better internet access.

07/18/2018 - Will Regulate Lab Meat?

The Food and Drug Administration, jumping ahead of USDA, used a hearing Thursday to highlight the agency's extensive scientific history working with cell-culture technology, something USDA is lacking, even though USDA has authority over meat products.
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07/20/2018 When Drift Hits Home

By Emily Unglesbee
DTN Staff Reporter

Editor's Note: DTN/The Progressive Farmer's reporting on non-soybean dicamba damage uncovered the uneasiness this issue has caused in rural communities as damage pits neighbor against neighbor and farmers and applicators against the non-farming public. Because of that conflict, this article includes an anonymous source, a rare allowance at DTN, as some rural citizens want to share their stories but do not want the community fallout that can occur when someone speaks out against neighbors.

**

ROCKVILLE, Md. (DTN) -- Images of cupped soybean fields have come to symbolize the dicamba injury crisis underway in farm country in the U.S. But what happens when chemicals like dicamba move beyond the soybean fields of commercial farmers onto the property of rural homeowners, business owners and organic and specialty crop farmers?

In South Dakota, a vegetable farm that was destroyed by dicamba in a matter of weeks last year was hit again this June by another cocktail of herbicides, including dicamba.

An elderly Illinois homeowner has watched her carefully landscaped yard wither for two years in a row from dicamba injury.

A resort owner in Tennessee is fighting to save his gardens, plants, trees and a nearby historic state park after the second consecutive year of dicamba damage.

Over the course of two months, DTN conducted dozens of interviews on non-soybean dicamba injury and found that injured property owners like these face an uphill battle to justice.

State departments of forestry, natural resources and agriculture pass responsibility for non-soybean dicamba injury back and forth between each other, like a hot potato. State regulators are struggling to keep up with the pace of complaints, leading to long delays and unresolved investigations. Even state investigations that find a pesticide applicator at fault can only fine the applicator -- not compensate the victim. Laboratories are still learning how to test for dicamba residue effectively, and at what levels. Unless an applicator was flagrantly off label, insurance companies maintain that they are not responsible when dicamba volatilizes and moves off-target. The companies who manufacture the new dicamba herbicides insist that volatility is rare and dicamba injury unusual.

At the end of the day, most of the property owners interviewed face serious financial losses that they will never recover. Some wonder if they will ever be able to grow vegetables or trees in their patch of countryside again if dicamba-tolerant soybean acres and their accompanying dicamba use continues to swell.

"At what point do these rural audiences say I've had enough?" said Bill Johnson, a weed scientist with Purdue University. "This is giving all of agriculture a black eye."

The situation is likely to affect the future registration of the new dicamba herbicides, which are under review by EPA. The agency is watching the situation closely, an EPA spokesperson told DTN.

"EPA is aware of field reports of off-field and non-target crop damage related to the use of dicamba," the agency said in an email. "Past reports claim damage is mostly to non-dicamba-resistant soybean, but also include peaches, melons, tomatoes, cantaloupe, grapes, pumpkins, alfalfa, non-dicamba-resistant cotton, peanuts, peas, organic crops, residential/ ornamental gardens and other non-target crops. We are actively collecting this information from states and EPA regional personnel in order to fully understand the circumstances and scope of the issues."

FINANCIAL LOSSES WITH NO COMPENSATION

In Aurora, South Dakota, John Seward runs Little Shire Farm, a farm that grows 415 varieties of vegetables. The farm sells Community Supported Agriculture (CSA) shares, wherein a customer pays a set amount each season and receives weekly deliveries of vegetables.

Starting in early August last year, Seward noticed his eggplants looked odd. Then the sunflowers and tomato plants started to curl and wilt. Lettuce crinkled up, and sweet pea pods became deformed and inedible.

Samples taken by the South Dakota Department of Agriculture confirmed that his vegetables had been hit by dicamba. Seward estimates he lost more than $11,000 in unharvested crops, destroyed seed, and lost fall and winter CSA crop shares.

With the state's laboratory results, he thought he had a good case with his neighbor's insurance company for full compensation. But Nationwide Mutual Insurance Company found that his neighbor had applied the dicamba product on label and thus was not liable for any damage that occurred -- a common conclusion among damaged soybean claims last year, as well. The volatility that produced that damage is, according to liability insurers, a defect of the product and the fault of the manufacturer, not the applicator. (See a DTN story on this issue here: https://www.dtnpf.com/…)

Seward joined a class-action lawsuit against the dicamba manufacturers last year, but has no expectation of ever recovering his losses. "These lawsuits will drag on for years, and there's no guarantee they'll result in anything," he said.

This year, buoyed by seed and monetary donations from the community, Seward replanted his usual mix of vegetables. By mid-June, the crops started to show signs of chemical damage, once again. Tests run by the South Dakota Department of Agriculture came back positive for a cocktail of dicamba, atrazine, 2,4-D, metolachlor and glyphosate.

Seward's experience is an increasingly common one in soybean-producing states, where 40 million acres of dicamba-tolerant soybeans have been planted this year, university weed scientists told DTN. There is no mandatory reporting system in place for all non-soybean dicamba injury, but at least 10 states in the Midwest, South and West have reported official dicamba injury complaints to non-soybean acres to the Association of American Pesticide Control Officials (AAPCO). Missouri, for example, is reporting dicamba injury to hundreds of acres of peaches, watermelons, grapes, berries, alfalfa, residential trees, fruit trees, personal and commercial gardens, shrubs, flowers and greenhouse vegetables.

In one way, Seward is fortunate to be able to monetize most of his losses, noted Johnson. Damage to other plants, such as trees or ornamentals, aren't as easily measured.

The Illinois homeowner, who spoke on the condition of anonymity to protect her from reprisals in her community, has suffered severe damage to a wide variety of trees -- oak, Bradford pear, blue spruces and catalpas -- as well as ornamental plants, shrubs and a vegetable garden. She sent samples to a private laboratory last year, which found dicamba in them. Between lab testing, dead branch and tree removals, and rescue fertilizer and soil conditioning treatments, she and her husband have spent $10,000 already, she said.

In Tennessee, Mike Hayes runs the Blue Bank Resort on the shores of Reelfoot Lake, a natural wonder formed when a series of massive earthquakes struck at the New Madrid Fault between 1911 and 1912 and temporarily forced the Mississippi River to flow backwards, filling this 15,000-acre lake.

For the past three years, Hayes has spent half-a-million dollars turning his hunting and fishing outfitter business on the lake into a polished, professional resort.

Last year, Hayes experienced wave after wave of dicamba exposure. It wiped out the resort's garden -- which supplies the on-site restaurant -- three times before Hayes gave up. He estimates it killed 20% of the young trees he planted, mostly crape myrtles and conifers, as well as a butterfly garden he built as an added attraction. This year, he estimates he has been hit eight separate times by dicamba. He expects five cypress trees to die this year and worries about the birds that nest in the lake region, namely ospreys and bald eagles.

Nearby, the Reelfoot Lake State Park has experienced two years of similar damage to its cypress trees, many of which grow within the lake itself after they were flooded more than a century ago. Since the trees can't sprout at the current lake depths, replacements aren't an option, Hayes noted.

"Once they die, those trees can't grow back," he said.

The Tennessee Department of Agriculture sampled both Hayes' property and the state park's and produced positive dicamba tests last year. But Hayes will receive no compensation from the state investigation, and neither he nor the state regulators have determined exactly where the dicamba came from. The Blue Bank Resort and state park are surrounded by fertile Mississippi Delta bottomlands, where thousands of acres of soybeans are planted regularly. Dicamba damage can take anywhere from 10 days to a month to show up, which makes for a murky timeline, Hayes noted.

"And the big problem is that it could have come from anywhere, so how do you prove where the damage came when there are eight different farms using it around you?" he said.

Chemical trespass has always been a problem for professional nurseries, even when tree death doesn't occur, added Becky Thomas, co-owner of Spring Grove Nursery in northern Illinois. Three years ago, Thomas's 90-acre nursery was hit by 2,4-D, a herbicide in the same chemical class as dicamba. Only a handful of trees died, but the damage set her business back years.

"It's a multiple-year crop," she explained. "We plant and don't harvest until five to six years later. Depending on species of tree, I lost one to two years of growth across all 90 acres." This dynamic baffled her neighbor's liability insurer, and Thomas finally had to reach out to a Texas A&M horticultural economist to quantify her losses.

After a year and a half of bitter, exhausting legal battles, Thomas eventually settled with the insurer for an amount that covered only a quarter of her losses.

And the applicator, who was found guilty of breaking pesticide regulations by the state of Illinois?

He was fined $750.

THE EMOTIONAL COST TO CHEMICAL INJURY

The rise in off-target dicamba injury has strained the social fabric of rural communities, said University of Illinois weed scientist Aaron Hager. "It's pitting neighbor against neighbor," he said. "Farmers threatening others farmers. I've never seen this before over the use of technology."

"It is an incredibly divisive topic," added Karen Corrigan, an independent agronomist who works in central Illinois. "Either you're for it or you're against it. You either like the technology and want to use it, or you've been hit by it and hate it."

Nearly every property owner DTN interviewed stressed the emotional toll chemical trespass had taken on them.

The Illinois homeowner said watching the plants and trees she has cultivated for decades slowly die has sunk her into a depression.

"These are 100-year-old oaks," she said. "We're senior citizens and we don't have the time left in our lives to plant new trees and watch them get even halfway to maturity."

Just as painful has been the sense of betrayal she feels from neighboring farmers responsible for the damage.

"We are farmers, too, so I can see both sides of this," she said. "We live in a rural area with generations of families that have been here for years and years. We've known them all our lives. But when we talk to the farmers, they don't seem to care that much. There's no apologies, no offers to help, nothing."

Since filing his complaint with the state, Seward's relationship with his neighbor has deteriorated. Friendly neighborly gestures have vanished and in their place are hostile text messages and mocking signs posted near his property boundaries.

He is furious with every level of the agricultural industry that he believes allowed this situation to unfold.

"There are a whole lot of people responsible," he said. "State agencies for not banning it. Farmers for using it even knowing what it was doing. Scientists for not speaking up, and the companies and the seed dealers."

TO CATCH A HERBICIDE

Although the ag industry has used and studied dicamba for decades, there is a lot we don't know about how the herbicide affects trees and vegetation, said Johnson.

State laboratories are dealing with an overwhelming number of dicamba injury samples, said David Scott, pesticide program manager for the Office of Indiana State Chemist. Last year, the Indiana state lab processed 2,577 herbicide-injury samples, more than four times its normal amount.

There is no uniform methodology in place across laboratories to test for dicamba residue and no official guidance on what levels of exposure to test for, Scott added. That means positive dicamba tests will vary from lab to lab, depending on the screening method used, the detection level used, other chemicals tested for within the sample and the analyst's experience. Even the type of equipment used during the dicamba application in the field can affect what sort of residue results a laboratory will find, Scott said.

Although last year gave the Indiana state lab a good crash course in how to test soybean leaves for dicamba residue, they don't have much experience yet with trees and other vegetation, he added.

"What we do know is it's very hard to find and it's very short-lived in the environment," Scott said. "That short-livedness -- that is one of the reasons a lot of states are just going based on symptomology because they know they're going to be unsuccessful finding residues in the lab."

Scientists from the Universities of Missouri and Georgia have done field trials in recent years testing the sensitivity of numerous tree, vegetable and fruit species to varying amounts dicamba and 2,4-D -- but the research is new and still mostly un-replicated.

"With any type of perennial, especially woody plants, you're dealing with a continued, sub-lethal cumulative effect, and the only way to track that is to track the number of trees that die each year," Johnson said. "Do oaks and redbuds have a higher rate of mortality since dicamba-tolerant soybeans were introduced? Well, no agency will ever pay to do that, so we're never going to know."

The University of Missouri is compiling biweekly surveys from state weed scientists on estimated soybean acreage injured by dicamba, but no such estimates exist for non-soybean vegetation. Moreover, as more soybeans are planted with the dicamba-tolerant trait each year, the number of dicamba-injured soybeans will likely drop, Thomas noted.

"I feel like the complaints for soybean acres might be down, which might lead state regulators to believe this is not a problem," she said.

The Association of American Pesticide Control Officials (AAPCO) is doing weekly surveys for official reports of dicamba injury, including non-soybean, but state responses are voluntary and often inconsistent -- some report acreage numbers, others only the number of complaints.

Most importantly, the AAPCO numbers only present official complaints logged with state agriculture departments -- which rarely give a full picture of damage, Johnson said.

Many cases of dicamba injury go unreported due to the hassle of a state investigation and the fact that it does not result in any compensation for the victim, he said. He estimates that fewer than 20% of dicamba injury cases were actually reported in Indiana last year.

Nor do state departments outside of agriculture seem keen to take responsibility for herbicide-damaged trees and plants. University of Missouri foresters direct all inquiries about dicamba-damaged trees to the state's department of agriculture and do no tracking of it themselves, said Hank Stelzer, a University of Missouri Extension forester. Likewise, in Arkansas, inquiries to the forestry department and forestry industry groups about dicamba-injured trees were redirected to the state's agriculture department.

Various state agencies, such as the Tennessee Department of Agriculture and the Tennessee Wildlife Resources Agency (TWRA), have passed full responsibility for the damage investigation into Reelfoot Lake State Park back and forth for two years now, said Hayes. After TWRA insisted it was not the agency in charge of the lake, Hayes had to step in this year and ferry state agriculture agents out onto the lake in his private boat to examine suspected dicamba injury to the lake's cypress trees and lily pads.

"I personally had to investigate, discover and then provide transportation for the department of agriculture when no one else would take them out," he said. "Right now, no state agency is saying they're officially in charge of dicamba drifting onto Reelfoot Lake. Every agency is putting it on someone else. Everyone is so scared of the political clout of [dicamba manufacturers]."

Hayes worries that this lack of clear authority has given farmers in his state no real incentive to keep dicamba from moving beyond soybean fields.

"The Tennessee Department of Agriculture has put some hard rules about dicamba out there, but they don't have the agents to actually be out there looking," he said. "It's like having a speed limit on a highway but no state troopers."

Corrigan said she has been discouraged by the lack of accountability for dicamba injury in the agricultural industry.

"It's like a hot potato that no one wants to take control over," she said. "The manufacturers say it's not a problem. The applicators say they sprayed on label, so it's not their fault. The liability insurers say that the grower sprayed on label, so it's not their problem either. And the growers who are damaged have no recourse. Even if they file a state complaint, it logs their damage but doesn't get them any recourse for what has happened. No one wants to take responsibility for what's happening."

THE FUTURE OF DICAMBA-TOLERANT TECHNOLOGY

Don Rone, a member of the Missouri House of Representatives representing the state's southeast corner, understands why farmers chose to plant 40 million acres of Xtend soybeans in 2018 -- and spray them.

"I will tell you this -- we need the chemistry," he said. "We've got to find a way to keep it, because it's one of two arsenals that we have -- this and Liberty."

A former farmer himself, Rone has seen how well the new dicamba herbicides -- Monsanto's XtendiMax, BASF's Engenia and DuPont's FeXapan -- can clean up soybean fields infested with herbicide-resistant weeds like Palmer amaranth and waterhemp.

"But we need to learn how to use the chemistry and how to keep it in the field it goes in," he added. "And that's very hard to do when you have 60-degree nights and 90-degree days."

The new dicamba herbicides were designed to have less volatility -- the ability of a chemical to turn into a gas -- than older formulations. However, university scientists have confirmed that the compounds do still have the ability to volatilize, particularly in hot conditions. Last year, in field trials, the University of Missouri found that dicamba remained in the air for up to 96 hours after most applications.

The herbicide could move miles in that timeframe, Hager noted. Both he and other university weed scientists said they have seen many fields with uniform dicamba injury that runs from one end of a soybean field to the other, with no pattern of dilution or drift. "Turn row to turn row," Hager said. "Of course we're talking volatility."

Monsanto has continually denied that volatility is playing a significant role in off-target dicamba injury and has downplayed dicamba injury reports. During a media call, Monsanto representative Ty Witten told DTN that complaints about dicamba injury to non-soybean acres were "really kind of random across the area" this year and sometimes proved to be another type of problem altogether. "We have been on a few non-agricultural crops that have called in, and we really appreciate some of those callers call in," Witten said.

Gary Schmitz, BASF technical service regional manager, told DTN that the company was getting "a few calls" on non-soybean injury, but "probably 99% of our calls are on soybeans."

By refusing to address the off-target dicamba non-soybean damage in a serious way, many farmers and company representatives are jeopardizing the very tool they are fighting so hard to keep, Hager said.

"Is this technology truly worth what it's going to cost agriculture?" he said. "Because if we don't fix this problem, someone will come in and do it for us."

Johnson agreed.

If the companies can't redesign the current dicamba formulations to stay where they are applied, he foresees a future with an even more restrictive label or an outright ban on dicamba use in row crops. Either way, soybean growers will lose out in their battle against herbicide-resistant weeds, he added.

EPA said it is receiving and weighing multiple sources of information on this situation, including "state narrative feedback, grower experiences, incident and acre damage reporting, regulatory compliance review, data from USDA, commodity experts and others."

The agency hopes to make a decision on the dicamba registrations this summer. "With advice from state and industry agriculture experts and university crop scientists, we will use a weight-of-evidence approach to evaluate whether the new restrictions are successfully preventing damage to neighboring crops and other sensitive plants," the agency said. "Our goal is to make a decision in time for growers to make informed seed purchase decisions for the next planting season."

Meanwhile, in Illinois, Thomas is heading into a hot July spray season like a soldier arming for battle.

She has purchased her own weather stations to monitor spray conditions. She has registered her nursery -- once again -- with Driftwatch. She has spoken to every grower who farms near the nursery and purchased and posted large black-and-yellow signs online that state, "SPECIALTY CROP."

But she also wonders if any of it will help.

"We have actively wondered if we wanted to continue in this business if it is going to involve this kind of risk we have no control over," she said.

Seward said he and his wife are seriously reconsidering their dream of farming in the Midwest.

"We are pretty resilient, but there comes a time when the 'dream' is just a 'dream,'" he said.

Emily Unglesbee can be reached at Emily.unglesbee@dtn.com

Follow her on Twitter @Emily_Unglesbee

(CC/CZ)

07/20/2018 House Sends Farm Bill to Conference

By Jerry Hagstrom
DTN Political Correspondent

WASHINGTON (DTN) -- The House on Wednesday passed by voice vote a motion to proceed to conference on the farm bill, which is numbered HR 2 and titled the Agriculture Improvement Act of 2018.

The House also passed a Democratic motion to instruct conferees to insist on 10-year permanent funding for an animal vaccine program. The House bill has permanent funding, but the Senate bill has only an authorization for appropriations.

That recorded vote was 392 to 20.

House leadership also named House conferees on the farm bill Wednesday afternoon. The Senate must now also proceed to conference and appoint conferees.

In a statement prepared for delivery on the House floor on the animal vaccine amendment, House Agriculture Committee ranking member Collin Peterson, D-Minn., said, "... Following an outbreak of avian influenza in 2013 and 2014, it is estimated that poultry producers in my state lost $113 million in existing production, approximately $3 billion nationally, and it cost taxpayers almost $1 billion.

"Hungry consumers are affected too. The price of a dozen eggs in 2015 was double what it was before the outbreak.

"This isn't just a poultry problem. Foot and Mouth Disease, PEDv, Cattle Fever Tick and other diseases present a serious threat to the viability of livestock operations and the communities and supply chains across the country that depend on them. Outbreaks mean culling animals and suspending production, and because fewer animals come into processing facilities, layoffs in local communities.

"Disease outbreaks also impact farmers who grow feed. One study estimates that a future outbreak of Foot and Mouth Disease could cost corn growers $44 billion and soybean growers nearly $25 billion."

Peterson said the House bill provides $450 million in mandatory funding over five years for programs including the National Animal Health Laboratory Network, the National Animal Disease Preparedness and Response Program, and the National Animal Vaccine Bank. The Senate provides an authorization for appropriations, but no mandatory funding.

"Animal disease programs are important investments in the health of our nation's animals, our people, and the security of our food supply," Peterson said. "As part of their work on the farm bill, conferees should insist on 10-year, mandatory funding for Animal Disease Preparedness and Response Programs to provide the certainty that both farmers and consumers need."

HOUSE FARM BILL CONFEREES NAMED

House Speaker Paul Ryan, R-Wis., and House Minority Leader Nancy Pelosi, D-Calif., on Wednesday also named the House conferees on the farm bill.

The Republican list consists of 29 members and seems to reflect the fact that 2018 is an election year and that Ryan has made nutrition programs a priority in the bill. In a statement accompanying the list, Ryan ignored the agricultural sections of the bill and emphasized the bill as a piece of social legislation

"We see this farm bill as pivotal for building a sturdier ladder of opportunity in America," Ryan said.

"With all this momentum in our economy, there could not be a better time to help more people move from welfare to work. This is a chance to close the skills gap, better equip our workforce, and support much-needed development in rural communities. I look forward to working with [House Agriculture] Chairman [Michael] Conaway [R-Texas] and all of these lawmakers on these vital reforms."

Conaway said in a news release: "Today, we move one step closer to delivering a strong, new farm bill to the president's desk on time as he has called on Congress to do."

"America's farmers and ranchers and rural America are struggling right now and they deserve the certainty of a strong farm bill to see them through to better times," Conaway said.

"The House has pulled together a solid team of conferees from across the country who are committed to working with our Senate colleagues to reach a final product that helps millions of low-income Americans climb the economic ladder while standing by the hard-working farm and ranch families who put food on our tables and clothes on our backs."

House Minority Leader Nancy Pelosi, D-Calif., named 10 Democrats to the conference committee.

"With America's farmers, producers and ranchers facing plummeting prices, rising retaliatory tariffs and a struggling farm economy, we need a real robust, bipartisan farm bill more than ever," Pelosi said.

"While House Republicans chose to advance a destructive and partisan bill that fails farmers and hungry families, this conference will provide an opportunity to return to the grand bipartisan tradition of robust farm bills.

"Our diverse and dynamic House Democratic conferees will bring the strength of their values and wide-ranging expertise to the work of hammering out a bipartisan farm bill that honors our responsibility to the men and women of agriculture and hungry families."

For the full list of House Republican conferees, visit https://agriculture.house.gov/…, and for the full list of House Democratic conferees, visit http://democrats.agriculture.house.gov/….

(AG)

07/20/2018 China Stocked With Soymeal

By Lin Tan
DTN China Correspondent

BEIJING, China (DTN) -- Both soybean meal and soybean oil markets in China have remained relatively calm over the past two weeks after China started taxing U.S. soybeans with a 25% punitive tariff on July 6.

The Dalian Commodity Exchange (DCE) closed at RMB 3168 per ton ($471.57 a ton), $2.68 a ton lower, on the day when the U.S. and China started the tariff dispute, and then closed at $461.90 per ton on Friday, a drop of $9.68 in one week.

"Many market analysts believed that the market should be jumping higher after the news, but it did not happen," said Jun Wang, a professor at China Agricultural University. "A tariff on U.S. soybeans will restrict the import of U.S. soybeans to China, hence impacting on meal and oil supply in the next crop season, which will bring a supply shortage and higher price."

Jim Sutter, CEO of the U.S. Soybean Export Council, said Wednesday at a United Soybean Board meeting near Omaha that he's heard the same information.

"The market went way up and everybody (in China) bought up a lot," Sutter said. "They still have ships arriving, and the crush plants have beans and are producing meal. That's something to watch carefully because that could begin to tell us when a shortage could be felt, but right now they aren't feeling any shortage in China."

Not only is the futures market down -- the cash market is also showing pressure. Soybean processors did not increase their crushing volume, because both meal and oil demand was slow.

"When we were facing the trade dispute the first time in March and April, people were confused with panic and tried to buy more meal and oil for their stockpiles," said Dongping Lu, a purchasing manager for Yangxiang Stock Co. "However, when the two countries started to slap tariffs on imported goods from each other, the market got calm. Many people are getting tired of following the dispute."

Yangxiang Stock Co. is one of the largest feed and livestock companies in southeast China's Guangxi Province. Some companies bought more soybean meal in March and April in fear of higher prices after the tariff. To their surprise, prices did not go up, but these companies are locked in to the higher-priced stockpiles.

At the beginning of the year, most of the feed companies had a one-month supply of soybean meal in storage; now they have a more than two-month supply in storage.

"We believe China will lack around 10 million metric tons (40.4 million bushels) of soybean supply next crop year because of the tariff dispute, but so far, the market is not reacting on it yet," Lu said. "Feed companies either do not want to buy, or they cannot buy because of their high storage in higher prices."

U.S. soybean prices have dropped roughly 20% since the tariff dispute began heating up in May. On the surface, that almost offsets the impact of the tariff, but the Chicago Board of Trade is a benchmark for soybean prices globally.

"So as the futures have come down, the competing soybean values have also come down," Sutter said.

Basis in South America, though, has strengthened. On an equivalent price, Brazilian soybeans are about 15% more expensive than U.S. soybeans right now. It's now a question of whether that 10% spread between the Brazilian beans and the 25% tariff will hold.

"I sure hate to think of that, but if Brazil is truly going to run out of soybeans to supply China, as people predict, they are going to have to turn to the U.S. to buy some soybeans on a limited quantity," Sutter said. "We're watching that carefully."

Like people in other industries, Sutter is looking for signs that the U.S. and Chinese governments may begin some formal talks to cool down tensions. Once talks occur, Sutter thinks agricultural trade will likely be one of the easier issues to resolve between the two countries.

The Chinese feed industry was facing volatility in the first half of this year. Business was good after the Chinese New Year in February and March, then feed demand declined after that. The market shrank 20% to 30% in many areas after April. It still hasn't recovered, though seasonal demand should improve this summer.

"Pork prices are still at the bottom now while hog farms are losing money," said Lu. "Many hogs are finished earlier at a small size to reduce feed consumption. In the meantime, hog and poultry farms did not rebuild their stock to a normal level."

"It is both risky for feed companies to buy or not buy," said Professor Wang. "We do not know when China and the U.S. government can make a deal -- it could be next week or next year. If the two governments can reach an agreement before the U.S. harvest, it is possible that China will buy 30% more U.S. soybeans in the next crop season. Then, the big supply of soybeans to the Chinese market will flood the soybean meal market and soybean meal price may decrease 10% from the current level."

"We are waiting and observing how the market goes and not stepping in," added Lu.

**

Editor's Note: DTN Ag Policy Editor Chris Clayton contributed to this report.

(CC/AG)

07/20/2018 RFS Testifiers Hammer on Waivers

By Todd Neeley
DTN Staff Reporter

OMAHA (DTN) -- EPA had not planned to address small-refinery waivers in a public hearing on Wednesday, but farmers and biofuels groups had other ideas as they unloaded on the agency.

EPA is seeking comments on the latest proposed Renewable Fuel Standard volumes, which across the board show increases in nearly every biofuel category. However, testifiers at the hearing in Ypsilanti, Michigan, said the numbers are just window dressing.

EPA waived 2.25 billion gallons of biofuels from the RFS in 2016 and 2017, and is still on the hook for reinstating 500 million gallons to the RFS as a result of a court ruling. In all, the actual corn ethanol gallons blended in 2016 and 2017 fell below the 15-billion-gallon RFS cap.

"We've had a lot of stumbling blocks along the way," said Michigan farmer Don Morse. "EPA has handed out waivers of 2.25 billion gallons. At 1 billion gallons waived, that equals 700,000 acres of corn, the same as all of the corn acres in Michigan.

"EPA does not have unlimited authority to grant waivers retroactively. This is a big deal for us. This RFS is one of the key things to help us make a profit."

The EPA was set to reallocate gallons lost to RFS waivers, but that proposal was pulled within days after a series of meetings and phone calls that then EPA Administrator Scott Pruitt had with lawmakers from oil states and RFS stakeholders.

"The criteria for exemptions must be reasonable and transparent, and any exemptions must be reallocated to the remaining obligated parties," Iowa Republican Gov. Kim Reynolds said. "Correcting the small-refinery exemption excesses need to be in the final rule. Fifteen billion gallons must mean 15 billion gallons."

James D. Carstensen, federal government affairs manager for DuPont, said EPA should reverse course.

"The proposed volumes lack credibility with the waivers expansion," he said. "Struggling farm families cannot sustain another year of lost demand to waivers. Volumes should be reinstated."

REFINER CONCERNS

Kary Taylor, vice president of marketing and renewable fuels at refining company HollyFrontier Corp., a company that received an EPA waiver, told EPA his company has struggled to cover the costs of compliance with the RFS.

"Since EPA first established an RVO (renewable volume obligations) above the blend wall, RINs (renewable identification numbers) have been very expensive -- costing HollyFrontier hundreds of millions of dollars per year," he said.

"Last year, HollyFrontier spent more on RINs than the entire payroll for my 2,700 fellow employees across this country. That means less money to spend on our workers, upgrading facilities and investing in our communities."

D. Scott Hayes, manager at Toledo Refining Co. in Toledo, Ohio, said his company finds it difficult to manage RFS costs, as well.

"We don't have the capacity to blend, and we are burned by RINs costs," he said. "We know EPA can prevent RIN price hikes without hurting biofuels consumption. We know the market is being manipulated, and we're asking for reform. We're delaying capital projects. This is a very real threat to us."

Patrick Kelly, project manager for the American Petroleum Institute, said the so-called blend wall is "limiting the use of ethanol to below E10." The blend wall is where total ethanol production exceeds the available gasoline market for E10.

"The RFS is a burden on all refiners regardless of size," Kelly said. API is requesting that the EPA lower biofuel volumes "for all obligated parties," he said.

EPA "WENT ASTRAY" ON RFS

American Coalition for Ethanol Senior Vice President Ron Lamberty, told EPA the agency went astray on implementing the RFS with the previous leadership.

"With the departure of the previous EPA administrator, I hope EPA will take this opportunity to return to implementing the RFS as intended by Congress, Lamberty said.

"(Scott) Pruitt's seemingly sole focus on helping merchant refiners ignore or skirt their longstanding obligations under the RFS has further shaken the rural farm economy while undermining Congress' goal of increasing renewable fuel use in the United States."

Samantha Slater, vice president of government affairs for the Renewable Fuels Association, said the agency needs to assure ethanol producers and farmers the RFS will require the mandated corn ethanol volumes.

"Given the recent wave of secret small-refiner exemptions granted by the Environmental Protection Agency, we unfortunately do not trust that the rule will actually require 15 billion gallons of conventional renewable fuel blending in 2019," Slater said.

"And, by failing to remedy the harm done by other recent EPA actions on the Renewable Fuel Standard, the proposal rule for 2019 RFS blending requirements is yet another blow to America's farmers and ethanol producers."

BIODIESEL REQUEST

On June 26, EPA announced a proposed increase in overall biofuel volumes from 19.29 billion gallons in 2018 to 19.88 billion gallons in 2019. That includes leaving corn ethanol at 15 billion gallons. There are questions as to whether the 15-billion-gallon level can be reached in light of an increasing number of waivers being issued.

The agency also proposed an increase in biomass-based diesel volume from 2.1 billion gallons in 2018 and 2019 to 2.43 billion gallons in 2020. In addition, cellulosic ethanol would be increased from 288 million gallons to 381 million gallons in 2019, and the advanced biofuel number from 4.29 billion gallons to 4.88 billion gallons in 2019.

Though biodiesel volumes would see a proposed 330-million-gallon increase, several biodiesel industry officials pressed the agency Wednesday to more than double that increase.

Thomas Brooks, chairman of the Iowa Biodiesel Board and general manager of Western Dubuque Biodiesel, said the number should be set at 2.8 billion gallons, as Iowa producers are operating at just 25% capacity.

"The proposed volumes at face value seem good," he said. "But they effectively hold us flat. The impact of these (waivers) is like wiping out a year's worth of production in the nation's top biodiesel-producing state."

Donnell Rehagen, chairman of the National Biodiesel Board, said the industry always has had more than enough capacity to produce above the volumes set by EPA.

"The proposal for a small increase does not provide certainty," he said. "The biodiesel industry has consistently produced above the volumes."

REFINING PROFITS

Chris Bliley, vice president of regulatory affairs for Growth Energy, said the waivers have effectively set blending levels back to 2013 levels, "destroying biofuel and associated farm demand" while refinery profits continue to grow.

"What kind of signal does that send to farmers who plant their crops based on demand?" Bliley said. "Make these numbers real and encourage the type of investment that we've seen over the last decade by reducing the number of unfounded refinery waivers and then by reallocating any lost gallons to remaining oil refiners, so that demand is not lost."

Iowa Renewable Fuels Association Managing Director Lucy Norton called the use of waivers a "cancer that is eating into the credibility of the EPA" and said the agency swayed from President Donald Trump's wishes on the RFS.

"The EPA going rogue makes a mockery of the interagency process and highlights how the EPA under its former leadership was out of step with the Trump administration and President Trump himself," she said. "Restore the integrity of the RFS and, by doing so, the trust of rural America in this agency and in this administration."

Kevin Skunes, president of the National Corn Growers Association and a North Dakota farmer, said farmers need a "level playing field" at a time when farm incomes are depressed.

"The certainty of a strong RFS would go a long way to restoring confidence in the agriculture economy," he said.

"The EPA should end the practice of granting unjustified RFS waivers behind closed doors and uphold the strong biofuel targets promised by President Trump."

Todd Neeley can be reached at todd.neeley@dtn.com

Follow him on Twitter @toddneeleyDTN

(AG)

07/19/2018 Kub's Den

By Elaine Kub
DTN Contributing Analyst

"Nine Year Low," are what the headlines are saying about soybeans. And it was an almost uninterrupted freefall that got us here, starting with the month of March, when the front-month soybean futures chart topped out at $10.71 per bushel. It drifted lower for a while, but ever since Memorial Day the August soybean contract seemed to be hurtling toward earth at terminal velocity, losing an average of 7 cents per session over 33 trading sessions.

The old-crop soybean market has finally shed a full 25% off the March highs. Those highs were established back when producers and end users were looking forward to a world with eager global oilseed demand, and back when they assumed the world's two largest economies would effectively negotiate their trade concerns without dragging soybeans into the fray. Further losses may certainly be justified as time goes on, especially for the new-crop November soybean contract, which is only down 20% in that timeframe. It may also need to reflect bearish 2018 production potential if Midwestern U.S. weather remains favorable through July and August.

But I don't think the 25% fall is just a coincidence.

The Chinese tariff now in place for imported U.S. soybeans is set at -- that's right -- 25%.

It always rains after a dry spell and commodity prices always go up after a fall. There is always going to be some moment when the market's traders decide the chart has fallen sufficiently low, and there is always some price below which no one is willing to sell. The soybean meal market has demonstrated this over the past month. Even while the broader oilseed market has been wringing its hands about trade bearishness, meal traders were confident about robust domestic feed demand. There has been almost no one willing to sell nearby soybean meal futures below $328 per ton.

So, while additional bearishness may still come filtering in to the soybean market, for now there appears to be buying interest, and a moment to pause and reflect.

How bad are those nine-year lows, really? A cash soybean price tag that's $2.40 per bushel lower now than it was in March isn't great news for producers, of course. It's a vivid illustration of how much value they have at risk at any time. However, a significant portion of the 2017 crop of U.S. soybeans was likely already sold at better prices and much of the 2018 crop of U.S. soybeans may have a revenue-based crop insurance product as a financial backstop. Only if this grim trade scenario persists throughout a full marketing season will it entirely shift farm income levels.

On the other hand, these lows don't feel like nine-year lows at all when one considers how different the world was nine years ago, or 18 years ago, or 36 years ago, or more. The most recent low on the continuous soybean futures chart, $8.10 1/2, is a nominal price tag that we haven't seen since December 2008, when the entire world economy was in financial crisis and the soybean chart hit a low of $7.76. But $7.76 in December 2008 had the same buying power as $9.30 in the summer of 2018. So the $8-plus price of soybeans today definitely feels worse, in terms of the value of those dollars, than the prices received even during the nadir of the 2008 global recession.

How far back would we really have to go to find a comparable low? I collected the monthly closes of the front-month soybean futures contract and adjusted them all to reflect inflation since the year 2000 (which was an arbitrary choice, but also a pretty normal year for soybean trade. I didn't want to make everything really depressing by comparing current inflation-adjusted prices to the wild times of the 1970s).

Receiving $8.40 per bushel for soybeans today feels like receiving $5.62 per bushel in 2000. (That would have been nice, at the time! The market's low in August 2000 was actually $4.33 1/2.) The most recent time that the inflation-adjusted price of soybean futures matched today's level was during harvest in 2006, when the apples-to-apples Year-2000-inflation-adjusted price of soybean futures would have been $5.27. The actual price tag in October 2006 was $6.30 per bushel. So we may have hit a nine-year low on the chart, but it feels like an 11 1/2-year low in our hearts.

Inflation, as measured by the Consumer Price Index for All Urban Consumers (the Bureau of Labor Statistic's CPI-U for all items, including food items and energy costs), is basically a measure of how the purchasing power of a dollar changes over time. As the prices of audio equipment, pet food or eyeglasses increase from one month to the next, it takes relatively more dollars to buy those items. It's generally good for the economy when prices rise (preferably slowly and steadily) over time, because that means the economy is active, dollars are churning through hands and investing in businesses makes sense.

But if you're the one producing the stuff and receiving the price listed on the price tag, you need the price tag of your product to climb higher at the same rate as the price rises in all the other items you yourself need to buy. Soybean farmers, who are seeing real inflation-adjusted soybean prices lower than at any time in the past 11 1/2 years, must buy gasoline, audio equipment, pet food, eyeglasses with today's U.S. dollars. Not mentioning the need to buy diesel, farm machinery, grain bins and tires.

But really, inflation hasn't been too bad in recent years. Here's one way to look at it: In the year 2006, a brand new GMC Sierra 1500 SLE Extended Cab pickup had a manufacturer's suggested retail price of $30,855. In October 2006, the nominal price of soybeans was $6.30 per bushel. It would have taken 4,879 bushels of soybeans to buy that truck. That same value today, adjusted for inflation, would be $38,529, which is conveniently pretty close to the price tag for a 2019 GMC pickup. Paying for a pickup today with today's $8.40 soybeans would require only 4,500 bushels of soybeans and farmers tend to get more soybeans per acre now than ever before.

It's the threat of future inflation that should really keep the agriculture industry worried, particularly if it pulls input costs higher during a timeframe when product prices (grain prices) are depressed by artificial economic challenges (that is to say a trade war). It all depends on how long this exceptionally low price environment lasts.

Speaking of exceptionally low prices, a quick look at the futures board shows traders currently have soybeans priced under $9.00 per bushel all the way through 2018, all the way through 2019 and all the way up to summer 2020. We might expect something -- anything -- to change and pull prices back up eventually before we actually reach the summer of 2020. But in the meantime, are these historic lows perhaps historically magnificent opportunities for end users to lock in prices?

Elaine Kub is the author of "Mastering the Grain Markets: How Profits Are Really Made" and can be reached at elaine@masteringthegrainmarkets.com or on Twitter @elainekub.

(BE/CZ)

07/19/2018 Trade Complicates Ag Economy

By Katie Dehlinger
DTN Farm Business Editor

KANSAS CITY, Mo. (DTN) -- Kansas City Federal Reserve president Esther George, a sixth-generation farmer, remembers the 1980s, and comparatively speaking, the economic situation doesn't look all that bad.

There's been a lot of farm consolidation, but banks have been minding their underwriting standards carefully.

"That said, I don't want to underestimate the stress that I think exists today or could come," she told an audience of farmers and bankers at the Federal Reserve Bank of Kansas City's annual agricultural symposium.

As a member of the Federal Open Markets Committee, George said she supports the Fed's shift from accommodative monetary policy to a more neutral stance through gradual increases in the Fed Funds Rate. While that will help keep the overall economy in check, she acknowledged it could cause pain in some parts of farm country.

"This does not help when you have marginal borrowers or borrowers that are struggling," she said. "It doesn't help with, perhaps, young farmers that incurred a lot of debt for the purchase of land or equipment. And so, there are pockets of stress as we look around. I don't think anything is at the point that we think is alarming at this stage, but the question is: How much longer will we experience this continuation of low commodity prices, low farm incomes?"

Agriculture's role in a global economy -- the symposium's theme -- is increasingly uncertain amid renegotiation of the North American Free Trade Agreement, the U.S.'s steel and aluminum tariffs based on controversial national security rationale and tit-for-tat tariffs with China over intellectual property concerns.

"You hear all the time that there are no winners in trade wars, only casualties, and I think it's also the case that trade wars aren't easy to win because of that," said Joe Glauber, a senior research fellow at the International Food Policy Research Institute and former chief economist for the USDA. "Every time you say, 'I'll punish them, I'll show them. I'm going to raise tariffs,' someone on your side is also being hurt by that. And I think that's particularly difficult when you launch a trade war on multiple fronts."

Several panelists at the symposium from Canada and Mexico said they expect a renegotiated NAFTA agreement will be finalized before U.S. elections, but there are still difficult issues to resolve, like automobiles, dispute settlement and a sunset clause.

Glauber said U.S.'s trade dispute with China could have concerning consequences in the long run. In 1973, the U.S. imposed an embargo on soybean sales that only lasted a few weeks, but it was enough to encourage Japan to begin buying soybeans from Brazil and the European Union to institute new supports for oilseeds, policies the U.S. later challenged at the WTO.

Brazilian soybean prices are $60 per metric ton higher than in the U.S., Glauber said. "If these differentials continue, Brazil producers will have strong incentives to plant more beans, and take most, if not all, market expansion expected over the next few years. I think this is the real serious thing."

U.S. producers could receive some price protection in the short term through revenue insurance since spring price guarantees were set before the trade disruptions caused significant declines in prices. However, if trade uncertainty continues into next year, all bets are off.

Since the trade battles began, President Donald Trump has said farmers would not be hurt. Agriculture Secretary Sonny Perdue has said an aid package for farmers could be proposed sometime early this fall, after prices for fall crops are better known. While there's talk of helping farmers through USDA's Section 32 programs to buy surplus commodities and the Commodity Credit Corporation, it's a concept Glauber struggles with.

"I think while some want to be sympathetic to farmers as pawns in a trade war, I fear this diminishes the cost of such actions and creates a moral hazard, if you will, for policy makers," Glauber said. "These are painful decisions, and it's one thing to start spreading a lot of money around, but where do you stop? Do you stop with farmers? Do you stop with consumers? Do you go with other producers? That list could get really long in a hurry."

He said such assistance would disguise the long-term costs of trade disruptions, even though farm incomes and profitability would still suffer. And there's a bigger risk: Farm profitability is one of the key factors underlying and supporting farmland values. After five years of falling farm incomes, Glauber said he's surprised farmland values have been so resilient.

"I would have thought with the softness in prices that you would see that come down. I think good farmland still captures really good prices," he said. The debt situation is much different than in the 1980s farm crisis, and interest rates, while on the rise, remain low from a historical perspective. "One of the bigger questions I've had is what happens when interest rates go up? Do you start to see softness in land?"

Many bankers at the symposium found the confluence of trade disputes and higher interest rates concerning.

"If this persists, it does worry me," Glauber said.

Katie Dehlinger can be reached at Katie.dehlinger@dtn.com

Follow Katie Dehlinger on Twitter @KatieD_DTN

(CC/CZ)

07/19/2018 Ear Tag Tech Boom

By Victoria G. Myers
Progressive Farmer Senior Editor

A group of high-powered, seedstock beef producers from across the country met in Bruning, Nebraska, to learn about a new type of ear tag from Allflex. Designed specifically for beef operations, this battery-operated monitoring device marks a technological leap in cattle production.

At its core, the Allflex SenseTime Beef system is a detection product for cattle estrus and health. It tracks individuals, but is also able to provide group reports.

Bruning Farms, a fourth-generation seedstock and commercial Angus cattle operation, is one of only a handful where the monitoring system has been implemented to date. As part of its development, Allflex SenseTime Beef system has been in place here since 2015.

Reiss Bruning said they focused on using the system with heifers they develop, which average around 150 head each year. During this public launch event, Reiss shared his experiences, noting he saw an 8% increase in AI conception rates the first year; with rates holding about 5% above average for the last two years. He also narrowed down the first-cycle calving window by 10 to 14 days.

With roots in a collar-type monitoring system for the dairy industry, this technology has been tailored for beef producers. Andy Dorn, beef business manager, Allflex USA, Inc., said all the algorithms this system uses, and the detection methods, are beef-centric. The research to develop the system, which he noted included some 20,000 hours of visually evaluating beef cattle behavior, included various types of operations, from pasture to confinement.

At this point Dorn noted there are 10 ranches using the new system, all of which have helped in its development. Those ranches are based in Idaho, Nebraska, Georgia, Kansas, Canada and Mexico. They represent over 3,000 beef cows on the system.

For producers who love to know what their cows are doing every hour of the day, that level of information is certainly available with SenseTime. But this isn't about reams of data. The focus is on simplicity, with all of that data refined down to an actionable point. It's simple to understand and clear as to follow-through.

Essentially the system tracks movement of the animal, which those algorithms interpret. Cows in estrus, for example, change their normal behavior -- often eating and ruminating for shorter periods of time. Antennae pick up movements from the battery-powered monitoring tag, they are interpreted and the producer is sent an alert.

In the case of estrus, the alert will notify a producer which cows need to be bred within a given window of time. The system can detect which cows have aborted, and provide early detection of anestrous cows. On the health side, it can deliver alerts for distress cases, and help monitor recovery after calving as well as after weaning. Group routine can also be tracked, helping to raise early awareness that heat stress or nutrition issues are developing.

The tags themselves are small and light, with a battery that lasts three years. Each antenna's coverage area can vary with the terrain. While the literature notes a coverage area of 656 feet by 1,640 feet for an antenna, Dorn says real-world use shows the coverage can be anywhere from 10 to 80 acres.

Initial adoption of the technology is expected to be strongest in the seedstock side of the beef industry, Dorn added. There are two system levels available: premium and starter. The premium level includes estrus detection, health detection and group reporting. Tags for this level cost $72 each. The standard level is strictly for estrus detection, and that cost is $56 per tag. In addition to tag cost, initial set up for the software, reader (antenna) and maintenance is $2,700. The system will run on both Macs and pcs, and Dorn noted it's recommended computers be less than 5 years of age. Additional readers are $800 each.

Reiss said he continues to find new uses for the system. For example, if a cow breaks her behavior pattern, it may be because her calf is in distress. Getting an alert to check her, can keep a problem like BRD or scours from snowballing and affecting a lot more calves.

He added he's also picking up more silent heats with the system, and is interested to see if the estrus detection component will let him eliminate the CIDR on some cows and have more of a one-shot protocol. That would save money and time.

(SK)

07/18/2018 USDA's Not So Equal Access

By Chris Clayton
DTN Ag Policy Editor

OMAHA (DTN) -- When USDA announced changes in its crop reports last week, Agriculture Secretary Sonny Perdue boasted that modern technology ensured everyone had equal access and a level playing field when it comes to tapping USDA's major market reports.

Yet, earlier this year, Perdue said poor internet access is one of the worst problems in rural America.

DTN has been asking more questions about what drove the decision to eliminate us and several other news agencies from early access to major crop reports such as the monthly World Agricultural Supply and Demand Estimates. DTN also has been questioning the market benefits by taking away early reporter access.

DTN is one of a handful of news services that have attended the lockup for more than a decade to provide thousands of market-driven customers the latest world supply and demand estimates in a swift, readable format once USDA allows news outlets to transmit that data.

Everybody, according to USDA's new plan, will just go to USDA's website at 12:00 p.m. Eastern Time and download key market reports such as the monthly World Agricultural Supply and Demand Estimates (WASDE).

"Everyone who has interest in the USDA reports should have the same access as anyone else," Perdue said about the change in crop report procedures. "Modern technology and current trading tactics have made microseconds a factor. This change addresses the 'head start' of a few microseconds that can amount to a market advantage. The new procedures will level the playing field and make the issuance of the reports fair to everyone involved."

Last January, USDA and Secretary Perdue released the results of a Trump administration study, the "Interagency Task Force on Agriculture and Rural Prosperity." Perdue said at the time the lack of rural broadband is the "one overarching challenge that we must overcome to ensure rural prosperity." The task force's first recommendation was to expand e-connectivity in rural and tribal areas.

The issue of bad internet access in rural America was effectively dismissed by USDA leaders who believe that everyone will have "equal access" to crop reports at 12:00 p.m. ET on report days.

According to a Federal Communications Commission report on broadband earlier this year, 30.75% of Americans in rural America and 35.4% in tribal lands lack access to broadband internet, defined as 25 Mbps. That compares to 2.1% of Americans in urban areas. Dozens of U.S. senators and some trade associations have argued the FCC is actually low-balling just how poor internet access is in rural America.

USDA made its change in report access for the Aug. 10 WASDE and Crop Production reports because of what USDA officials point to as a two-second volume of trade that happens right at noon Eastern when the crop report is released. That's become part-and-parcel of the high-frequency trading game, and USDA offered no explanation how exactly that would change by sending everyone to a USDA server at 12 p.m. Eastern to get the crop report.

Last week, the November soybean contract at 11:59 a.m. EDT had 222 contracts trades. At exactly noon EDT, the volume spiked to 3,140 contracts traded with a 10-cent price spread that ranged from $8.42 1/2 to $8.52 1/2. Over the next 20 minutes, the range of contracts moving fluctuated from a few hundred to nearly 2,000 contracts before prices settled. By 12:30 p.m. EDT, trading had settled down to a few hundred contracts and the price settled at $8.46.

HIGH-SPEED TRADE WILL CONTINUE

USDA, questioned about the new report policy, told DTN, "Evidence suggests that clients of news agencies receive faster access to USDA data than the public." The inference is that without the headlines and keywords that early access by media creates, high-frequency trading and the profits made from it will end.

The Congressional Research Service says high-frequency traders employ a range of tactics that may have nothing to do with actual numbers in a crop report. In an April 2016 report on high-frequency trading, the non-partisan CRS highlighted aggressive trading strategies meant to generate profits on spreads and rapid trades. Those included "order anticipation" and "momentum ignition" strategies. The CRS report noted, "In fact, corn, the largest grain futures market, averaged more than five such events per year over the last five years," according to comments by former CFTC Chairman Timothy Massad. At the time, Massad noted these increased flash events would continue in commodities.

Joseph Janzen, a professor of agricultural economics at Montana State University, said it's unclear whether high-frequency traders are moving based on rapid headlines or if some simply start momentum strategies in the milliseconds following report release time to quickly move the market the way they want. There hasn't been enough study done on high-frequency traders to understand motivations at these firms, Janzen said.

He added that there are a growing number of firms focused on high-frequency trades. These companies are trying to make money on fractions of pennies instantaneously on the market.

"For anyone who has some sort of automated or algorithmic trading system where they are essentially letting a computer trade based on some instructions, how USDA puts out the report is meaningless," Janzen said. "It doesn't matter."

Janzen added, "I see sort of the motivation that one way to access the report is the most fair, but some traders will have a speed advantage. We know that and there are guys who will have made the investment to get a speed advantage. That will always be the case."

READY FOR THE LOAD?

USDA maintains that it is improving its ability to provide the information to the public, handle the increase in load volume on its website, and keep the data secure. But USDA officials gave no details on what they've done to stress-test their system, nor when that work was completed.

While high-frequency traders will change their game, more than 4,000-plus local grain elevators and thousands more brokers, farmers and livestock producers are going to be searching for that WASDE data on USDA's website while often relying on internet service that Secretary Perdue says isn't good enough for the modern world.

Angie Setzer, known on Twitter as @GoddessofGrain, lives in Iowa but works for a Michigan grain company. Setzer typically gets her WASDE information directly off USDA's website after seeing early flash data come across Twitter just after the report is released. She then attempts to pull the actual report off USDA's website. Setzer has a problem downloading that data off USDA's website "just about every time I do it."

"I would say nine times out of 10 I'm not able to access the actual website info for a couple of minutes, at least," Setzer said. "It's almost a guarantee I'm not going to get it right away. Twitter is actually faster than using their website."

"You already see the market react prior to the report coming out. Now it will be even further because everyone will be trying to access it," she said.

Chris Clayton can be reached at Chris.Clayton@dtn.com

(GH/AG)

07/18/2018 Will Regulate Lab Meat?

By Chris Clayton
DTN Ag Policy Editor

COLLEGE PARK, Md. (DTN) -- In the debate over which agency should take the lead in regulating cell-cultured proteins -- or meats -- the Food and Drug Administration on Thursday laid out its long history overseeing cell cultures for products ranging from pharmaceuticals to yogurt.

FDA and USDA share duties on food inspection with FDA overseeing as much as 80% of food products, but USDA's Food Safety and Inspection Service is taking charge of traditional meat products such as beef, pork and poultry. The advent of cell-cultured meat has created a regulatory turf battle as cell-cultured companies want FDA in charge while traditional livestock groups want USDA in charge.

Opening up Thursday's hearing, FDA Commissioner Scott Gottlieb alluded to the notion that agricultural technology has outpaced regulators' understanding of the science.

"Innovation in American agricultural production dwarfs the technology progress in almost any industry," Gottlieb said. He added that cell-cultured food will be making its way to retail shelves in the near future.

Gottlieb also noted that the risks of cell-cultured meat products differ from traditionally harvested meat products.

Susan Mayne, director of food safety and applied nutrition at FDA, said FDA already has been working with the cell-cultured meat industry for several years as these startup firms start prepping for regulatory approval and market access.

"These are still early days, but make no mistake, FDA has been preparing for this for quite some time," Mayne said. "This is not our first rodeo, so to speak. We have multiple authorities and programs that can support efforts to bring products with new ingredients in the market."

These start-up meat companies, working primarily right now on beef and chicken products, made it clear in the hearing that they see FDA as the appropriate agency for this work.

Meanwhile, traditional livestock groups have a different take. Just before Thursday's hearing, the National Pork Producers Council characterized the FDA's move as "regulatory land grab." NPPC called on USDA "to assert its proper oversight on two emerging issues critical to the future of animal agriculture: laboratory-produced cultured protein and gene editing in livestock production."

Livestock groups are concerned about the emerging cell-cultured industry, which is already receiving venture capital money from traditional meatpackers, taking market share away from livestock producers over time as the price of cell-cultured meat eventually comes down to a competitive price level with meats from animal-raised livestock.

While FDA hosted the daylong event offering various players in the meat industry as panelists or for public comment, USDA officials did not publicly participate.

DTN Political Correspondent Jerry Hagstrom also obtained a letter from House agriculture leaders to White House Director of Management and Budget Mick Mulvaney, complaining that FDA was moving forward with the meeting with no USDA involvement, even though the White House Domestic Policy Council held a meeting with the two agencies to discuss the regulation of cell-based foods.

A USDA spokesman replied to DTN, "As these new products begin to emerge in the marketplace, we look forward to working with the FDA and the public to tackle these issues." The USDA spokesman added, "We have nothing further to add."

At the hearing, Paul Mozdziak, a poultry science professor at North Carolina State University, pointed out that animal enzymes are already used to make vaccines, noting this is a "very routine cell culture." Still, Mozdziak said the issues with converting cells to marketable meat products come downstream after the actual lab meat is produced.

"Once you get cells down, how are they going to be able to treat downstream and how are they going to treat the final integrity of the product?" the professor said. "In the post-harvest, there is the opportunity to contaminate all the way through to packaging."

Eric Schulze, the vice president of product for Memphis Meats, said that his company had designed its production to conform with FDA's approach, including identifying and managing potential differences between its products and existing meat products. Memphis Meats uses the cells to grow meat in a lab without animals, yet at the moment, Memphis Meats has not begun to market its products.

Rhonda Miller, a Texas A&M meat scientist who is also a former president of the American Meat Scientist Association, stressed there are still many questions about food safety as the cell-based meat is harvested and becomes available for human consumption.

DTN was unable to remain for the entire hearing, but interviews this week with representatives from livestock groups highlighted the FDA-USDA turf battle.

"This is building up to be a turf battle between USDA and FDA over who has regulatory authority over cell-cultured meats," said Danielle Beck, director of government affairs at the National Cattlemen's Beef Association. "It is starting to be a little bit concerning, I think, from our perspective, or a lot bit concerning," Beck said.

NCBA supports USDA's Food Safety and Inspection Service (FSIS) taking the lead on regulating cell-cultured meats and sees USDA as having authority over such products based on law.

"At the end of the day, regardless of the production method, any product that is compositionally meat, or a meat food product or a meat byproduct as designed through the CFR (Code of Federal Regulations) under the Meat Inspection Act, all fall under the same jurisdiction which is USDA FSIS," Beck said.

NCBA's take, representing cattle producers, is that FDA is considering some of the right risk-based issues, "but, ultimately, they are putting the cart before the horse because the question that first needs to be addressed is jurisdiction," Beck said.

Lobbyists told DTN that FDA had gotten approval from the Department of Justice citing that FDA had oversight on the issue of cell-cultured meats.

However, Jennifer Corbett Dooren, a senior adviser in FDA's press office, said in an email, "Our response is that it is mischaracterization of what was discussed at a stakeholder meeting earlier this year." She did not respond to a request to relay what was said at the meeting.

FDA sees the broad definition of food giving them the authority to claim the primary position of regulation and moving forward on this.

"Legally, we don't believe your justification is there," Beck said. "We believe USDA FSIS is the best agency out there equipped to regulate these products from a safety perspective, but also from the labeling perspective because of the mandatory labeling pre-approval process. That is a powerful regulatory tool that FDA just doesn't have. At the end of the day there needs to be fair, accurate product labels for any product out there regardless of the enforcement method."

Beck said FDA has not responded to labeling demands, pointing to a push in the dairy industry going back 18 years to get FDA to enforce accurate labeling for imitation milk products, such as almond and soy products.

By and large, even the sellers of cell-cultured meat said they believe USDA is the best venue to regulate their products.

Still, lobbyists who had worked with USDA on the oversight of cell-cultured meats said USDA staff "were just as surprised as we were about the FDA hearing." There's a notion that FDA staff "literally stole" USDA's plans for a public comment period and guidance moving forward.

Then there is the prospect that farm bill conferees could also add a provision in the farm bill conference report to provide a clear statement on who should have oversight.

Lia Biondo, a spokesperson for the U.S. Cattlemen's Association, said USCA "is working the congressional angle pretty hard, but, yeah, there is definitely an opportunity in the farm bill to provide some clarification over who has jurisdiction."

USCA also filed a petition earlier this year seeking clear labeling that would require sellers of cell-cultured proteins not to use the words "meat" or "beef" on their products. The state of Missouri also has approved a law that makes similar requirements. Right now, USCA is waiting for USDA to respond to the petition.

"We have got to find a way to get out ahead of this and provide some clear rules for how they will management these products," Biondo said.

DTN Political Correspondent Jerry Hagstrom contributed to this report.

Chris Clayton can be reached at Chris.Clayton@dtn.com

Follow him on Twitter @ChrisClaytonDTN

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