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WPI Spotlight

WPI Spotlight

The WPI Spotlight showcases the best analysis recently written by our analysts.

We've chosen to share these articles so you can see how we approach market and policy analysis and see the value for yourself.

Enjoy reading this collection of "best of" articles and feel free to contact us with any questions.
In my near 40 years in the business, no truer words have been spoken that what I've read in Ag Perspectives. WPI Client and Risk Manager

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Comprehensive Feasibility Study: U.S. Beef Cattle Identification and Traceability Systems

In response to the 2016-2020 Beef Industry Long Range Plan’s key strategic objective, “Secure the broad adoption of individual animal ID traceability system(s) across the beef community to equip the industry to effectively manage a disease outbreak while enhancing both domestic and global trust in U.S. beef and ensuring greater access to export markets,” WPI researched and wrote the industry’s most foundational analytical document on animal identification and traceability. The report offers a series of conclusions based on, among other methodologies, a 600-plus respondent quantitative survey, 90-plus interviews with industry participants from all sectors), and a deep-dive review of 9 global systems supported by direct interviews with foreign industry association and government officials.

Since the report’s initial rollout at the 2018 NCBA Convention in Phoenix, AZ, WPI has presented findings to and led constructive discussion with over 30 audiences of stakeholders from across the industry and beyond.

Updated Analysis: Exporting Corn through U.S. Beef and Pork

On behalf of the U.S. Meat Export Federation (USMEF), in 2018 WPI delivered the results of an updated study aimed at quantifying the value red meat exports deliver to U.S. corn producers. The original 2016 study, as well as the 2018 follow-up, also quantified the impact that red meat exports have on select corn co-products such as distiller’s dried grains with solubles (DDGS). The updated 2018 study concluded that 2018 beef and pork exports will use a combined total of 14.9 million tons of corn and DDGS, which equates to an additional 459.7 million bushels of corn produced – an increase of 29 percent over the 2015 projections.

USG – Next Steps; Trump’s Art is Variable; Science Winning

This article originally appeared in the 25 January 2019 issue of Ag Perspectives. 

By Gary Blumenthal

USG – Next Steps

President Trump blinked in the face of a record-long government shutdown, and it is for the better. As we noted more than a week ago (click here), one key option is to open the government and get workers paid. But how does he proceed now without facing a complete loss? He could use sarcasm. Demand instead money to tear down the hundreds of miles of border walls that were built previously with money backed by the Democrats. He could declare a national emergency, redirecting military funds to build the wall, although that would get bogged down in lawsuits. Alternatively, he could be presidential and spend the time and effort to negotiate with Democrats on a broader fix to immigration.


Trump’s Art is Variable

If Mr. Trump’s “art of the deal” is brinksmanship and it failed in the border wall effort, is it baseless in its myriad other applications? Ultimately, all deals are the result of leverage points, although they need not be as course and visible as Mr. Trump likes them to be. Capitol Hill did not capitulate to his government shutdown, and it will not concede to Mr. Trump’s desire for even more punitive tariff authority via the proposed U.S. Reciprocal Trade Act legislation, which only has 18 cosponsors. Yet, leverage is needed in international trade.

WTO Director General Roberto Azevedo acknowledges the Ottawa Group and the need for WTO reform but says he is looking for “cooperation” to move forward. There is not enough cooperation to push reforms through the system; thus, the necessity for hostage-taking in appellate judges to force an outcome. Trump’s capitulation on the wall also does not mean conceding to China. On this issue, he has broader political support. Even investor/philanthropist and anti-Trumpian George Soros recognizes the China problem, telling the White House to keep the pressure on Beijing.


Science Winning

All democracies are burdened by advocacy groups but none more so than the EU. Now politicians are starting to push back. The Commission is considering reinstating the use of certain neonicotinoid pesticides that were pushed out of use for political reasons. France has backed away from banning glyphosate with recognition from President Emmanuel Macron that certain parts of agriculture could not survive in its absence. Too bad there is a concurrent recognition that it is among the most sustainable herbicides available and has simply been the victim of political victimization. And EU Commissioner for Agriculture Phil Hogan is now reacting to the International Court of Justice’s (ICJ’s) placement of mutagenesis techniques within the Novel Foods Directive by saying Europe must decide “whether we accept science or not as the basis for making decisions…”


Nutrition Guidelines; State Meat Labeling

This article originally appeared in the 25 January 2019 issue of Ag Perspectives. 

By Dave Juday

Canadian Nutrition Guidelines and the DGA

In the U.S., USDA and the Department of Health and Human Services (HHS) are responsible for the update of the Dietary Guidelines for Americans (DGA) that occurs every five years and will next be published in 2020 (although the government shutdown has delayed that process). However, Canada released a new nutrition guide this week.

During the 2015 U.S. DGA deliberations, meat consumption was explicitly discouraged in lieu of a plant-based diet. Any reference to consuming “lean meat” was dropped from the first draft; a major political fight that drew in then-Secretary Tom Vilsack and congressional hearings restored recommendations on meat toward the end of the process.

The new Canadian guide eliminates serving recommendations (e.g., 2-3 servings of lean meat or poultry per day) and portion sizes (e.g., 75 grams of beef) as well as any mention of meat as a food group. It now recommends the consumption of “protein foods,” lumping together plant-based proteins, dairy and meat. While “lean meats and poultry” are included in that category, the guide also advises to “choose protein foods that come from plants more often” and includes tips on “how to eat more protein foods that come from plants.” Even though dairy is included in the protein group, water is recommended as the default beverage choice.

The Canadian guide will build momentum for the U.S. process. Soon after the federal government reopens, the DGA advisory panels will be picked, begin their deliberations and then publish a report next year. To date, meat industry efforts to nominate nutritionists with more background in low-carbohydrate diets have proven unsuccessful. The DGA’s biggest impact is in federal feeding and nutrition programs such as school lunches, which are governed by the nutrition recommendations.


State Meat Labeling

Unfolding at the state level are several bills that would regulate the labeling of plant-based meat substitute products. In all, there are about 10 such state initiatives. Missouri passed and implemented a law that is being challenged in federal court because it provides a stricter standard than federal labeling laws. A recent proposal to require the labeling of plant-based products as “imitation” was defeated in the legislature.

Brazilian Soy Crop Forecasts; Lower U.S. Soy Plantings; Global Soybean Stocks

This article originally appeared in the 24 January 2019 issue of Ag Perspectives. 

By John Baize

Brazilian States' Reduced Soy Crop Forecasts

The government of the Brazilian state of Parana today forecast its 2019 soybean crop at 16.8 MMT, down from its December estimate of 19.1 MMT. The reduction was a result of a significant drought that has impacted yields. The state’s agricultural research agency (Deral) estimates 15 percent of the soybeans have been harvested. It also indicated that 7 percent of the remaining crop is in bad condition with 23 percent in average condition and 70 percent in good condition. Parana is the second-largest soybean producing state after Mato Grosso.

Rio Grande do Sul’s agricultural research agency has also lowered its forecast for that state’s production by 340,000 MT to about 18.36 MMT because of excessive rainfall that has affected yields there. It said that if the rains do not stop soon, there will likely be another decrease. The same situation exists in neighboring northern Argentina.

Traders have begun to pay much more attention to the ongoing weather problems in South America, and there could be further declines in other crop forecasts if such conditions persist. At this point, there is no reason to believe the shortfall in soybean production will significantly influence global supplies. China is likely monitoring the situation since a substantial drop in Brazil’s crop will force it to look to the U.S. for a larger share of its imports. Unlike last year, Brazil is going to have a limited supply of soybeans to export in its new marketing year that officially begins 1 February.


Lower U.S. Soybean Plantings Predicted

This week two organizations released forecasts for lower U.S. soybean plantings in 2019. Given the decrease in exports because of the U.S.-China trade dispute, such a drop would not be surprising. IEG Vantage, previously known as Informa Economics, is forecasting the soybean plantings at 86.204 million acres, a 1.1 million acre increase over its December forecast but down almost 3 million acres from 89.145 million acres in 2018. Meanwhile, a Farm Futures survey of farmers found they intend to reduce their soybean plantings in 2019 by 5 percent to 84.6 million acres.


Adverse Weather Needed to Lower Global Soybean Stocks

While the ongoing drought in Brazil is a negative development for farmers there, more adverse weather is needed around the world to bring down global stocks. Alternatively, prices need to fall substantially to cause farmers to cut back on their soybean plantings. USDA’s December forecast for global soybean stocks on 31 August 2019 was 112.08 MMT (4.118 billion bushels). Those have built up even as world soybean demand has grown approximately 13 MMT annually and are by far the highest amount of global stocks. Even if Brazil’s crop is no greater than 100 MMT, this year’s global soybean supply would still be close to a record high.

The last time soybean yields were reduced in the U.S. because of unfavorable weather was 2012, and Brazil has not had a bad soybean crop since then either. Argentina had a poor crop last year because of a severe drought, but it had good yields in the four preceding years. Add much better seed varieties to the good weather, and it is understandable why global soybean stocks are so large.

The odds favor the U.S. having a less-than-stellar soybean crop in 2019 after six consecutive good years, but that is not a certainty. If yields are good once again this year, the market will most likely send a strong signal via lower prices to South American farmers that they should cut back or at least not expand their plantings. Otherwise, stocks will become so enormous that it will take years to bring them down to a level of good profitability.

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