WorldWatch:

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Friday, December 23, 2011
Groups Warn Poultry & Dairy Sectors 'Face Disaster'
INDIA - Advocacy groups in India say the proposed deal between India and the EU at the World Trade Organization (WTO) would violate the right to food of a vast segment of the Indian population, particularly those who rely on the poultry and dairy sectors.

As the Eighth Ministerial meeting of the World Trade Organization (WTO) kicked off in Geneva last week, a group of non-government organisations exposed the devastating potential of a free trade agreement currently being negotiated between the European Union and India, reports Asia Times. If passed, they say the deal would make a mockery of all WTO rules and regulations.

A recent impact assessment on the right to food of the EU-India FTA, researched and compiled by leading advocacy groups including the Delhi-based Third World Network (TWN), the Indian non-governmental organisation (NGO) Anthra and Germany charities Misereor, Glopolis and the Heinrich Boll Foundation, concluded that the proposed deal would violate the right to food of a vast segment of the Indian population, particularly those who rely on the poultry and dairy sectors.

Additionally, the zero-tariffs clause of the free trade agreement (FTA) could lacerate the retail sector by stripping small retailers of any protection against corporate giants.

Having sat on the table since 2007, the agreement could be sealed as early as next year, an outcome that many experts see as "disastrous" for the local economy.

"The EU is asking India to cut its tariffs to zero on at least 92 per cent of all imports, including industrial and agricultural goods," Ranja Sengupta, senior researcher at TWN told Inter Press Service (IPS). "Considering that trade with EU represents 60% of India's total international trade, this would be a disaster, particularly in hitherto protected sectors, like agriculture."

"Our [impact statement] focuses on the dairy and poultry sectors because they employ a large number of very small farmers, many of them operating in their backyards in order to subsist," Sengupta said.

Given that the dairy sector provides 90 millions jobs, slashing tariffs will likely result in a repeat performance of the 1999 milk crisis in India, when EU imports of skimmed milk powder rose from 600 tonnes to 25,000 tonnes, effectively destroying the country's "white revolution" for milk self-sufficiency. Similarly, the pending FTA will flood the market with imports, depress producer prices, reduce incomes and eventually increase debt.

The poultry sector, which consists of 96 million small, landless agricultural households that manage 85% of the poultry stock, is currently guarded by a 100 per cent tariff that actually prohibits imports.

But the FTA could kill these protections, according to Asia Times. According to Sengupta, Indians consume more poultry legs than breasts and vice versa in Europe. If the EU dumped its poultry legs on the local market, India would not be able to retaliate by exporting poultry breasts to European markets because of the latter's strict health and safety standards.

The WTO advocates lowering tariffs, not removing them altogether. Additionally, the agenda for the ministerial meeting this week includes the question of industrialized countries eliminating government subsidies.

"In sharp contrast, FTAs like the one being negotiated between India and the EU insist on the complete elimination of tariffs but contain no binding clauses about eliminating subsidies," Sengupta said.

Experts are also concerned about the FTA's impact on the retail sector, the second-largest employer in India after agriculture. In the WTO, services trade liberalization is a relatively flexible mechanism because it allows countries themselves to decide which sectors to open up to foreign competition.

"This is a very sensitive issue in the country but unfortunately the public is unaware of the serious impact of the FTA because negotiations are often conducted in secret. Contrary to the WTO, the FTA does not need to be ratified by the national parliament and state governments are not even consulted," Sengupta told IPS, according to Asia Times.

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Agricultural Incomes - Not as Bright as They First Appear
ANALYSIS - The figures released by Eurostat this week on farm workers incomes and farm production in the EU on the surface appear to make happy reading, writes Editor in Chief, Chris Harris

Farm workers are largely earning more and both crop and livestock production is up, the Eurostat estimates say.

However, the picture might not be as rosy as it appears.

For while agricultural producer prices rose by 7.5 per cent with crop production up by 5.4 per cent and livestock production up by 6.7 per cent in value and 1.1 per cent in volume, the cost of production is expected to rise by 9.7 per cent.

The reasons for this steep rise in input costs is down to an increase in feed costs of 16.8 per cent, fertilisers and improvers by b14.6 per cent, energy and fuels by 11.8 per cent.

The rise in input costs is only kept down because the costs of seeds and planting stocks which rose by 4.3 per cent and maintenance of building which rose by 3.8 per cent were below the average.

Feed fertilisers and energy are expected to keep on rising and this is going to put an increasingly heavy strain on production costs.

If the costs of labour, which on average rose by 6.7 per cent, are then added to these costs, the cost of production is going to go up even more and more sharply.

This in turn can only lead to one thing, higher food inflation and a rise in prices for meat and cereals in the EU.

The rise in farm worker incomes is also patchy and not even across the EU.

Some of the largest rises can be found in the new member states - Romania, Hungary, Slovakia, Poland, Estonia and Latvia - where rises of more than 40 per cent are seen in some cases.

This is because the farm incomes are starting from a low base and are rising rapidly to match incomes in the older member states.

However, Germany with a 14.7 per cent increase in incomes, Denmark with 20.2 per cent and Austria with 12.2 per cent, are leading the way for the countries not only with a developed agricultural sector but also with a reasonably stable economy.

How some of the countries will sustain large rises in incomes with production prices rising more slowly than production costs is going to be one of the great challenges for the agricultural sector in Europe in 2012.

This challenge is going to be made even more acute by what happens to the Euro zone economies and the survival or otherwise of the Euro itself.

How sustainable the Irish agricultural sector will find its 30.1 per cent rise in agricultural wages has yet to be seen, particularly as the country is entering into a period of severe belt-tightening with large rises in taxes and cuts in expenditure.

While the Irish rise in wages brought the average wage back over 2005 levels, Italy, which faces similar challenges, saw an agricultural wage rise of 11.4 per cent but this has still kept the farm workers well below 2005 levels.

Greece, Portugal and Spain - all countries that have been the subject of either bail-outs or deep concern over their economic survival - all saw cuts in their agricultural wages and each of them has wages that are on average below 2005 levels.

In these countries as the Euro austerity measures start to bite, the agricultural sector could be hit hardest.

France, which has agricultural wages 10 points above the 2005 levels saw cuts in wages of 2.6 per cent this year. With an election around the corner in 2012, President Sarkozy can be expected to throw out some enticing financial bones to the vociferous rural electorate along with endeavouring to gain some concessions in CAP negotiations.


Chris Harris, Editor-in-Chief

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NAB Rural Commodities Wrap – December 2011
Agricultural commodities are weakening as the result of the Euro sovereign debt crisis and rising production prospects, according to Michael Creed, Agribusiness Economist at the National Australia Bank in the Economic Report for December 2011.
 
Source: NAB Group Economics
These forecasts represent year-on-year average changes in A$ price and production between 2010-11 and 2011-12 financial yearsPrices across the broad commodities complex have fluctuated sharply over the past month and are generally lower than levels seen a month ago. Escalating concerns over European sovereign debt and a more uncertain global economic outlook have overshadowed slightly more positive economic data out of the United States. Market volatility has been rising following a reprieve over the first half of November. Coordinated central bank action and prospects for a new European compact may have helped to restore a degree of calm in financial markets, by way of providing renewed hope for the resolution of sovereign debt problems. However, significant political hurdles remain along with continuing financial instability and fears of a European credit crunch.

As the global growth outlook has become increasingly uncertain, a broad range of commodity prices has generally declined over the past month, although there is considerable variation within the commodities complex. Commodities perceived to have safe haven properties, such as gold, should continue to benefit from market fragility and the prevailing risk-off attitude. In contrast, commodities reliant on industrial production and global trade, such as bulk commodities and base metals, are likely to continue to come under pressure, although the scale of recent falls may provide some upside risk. Oil prices are being pressured by competing drivers, although worries around the global economy appear to be winning out. Nonetheless, geo-political tensions surrounding Iran and a still tight stocks situation in Europe have provided some support to prices.

Agricultural commodities have not been immune from the sell-offs, with prices for almost everything grown having weakened since mid-November. While a weakening global economy is having an impact, there is also a very strong production response hitting agricultural commodity markets. Australia is on track for a massive winter crop while sugar and cotton production has generally responded to high prices seen earlier in the year. In contrast, livestock prices have held up reasonably well, as the structural lags between prices and production are generally longer than for broad-acre crops.

Market volatility will continue to set the tone for commodity prices entering 2012. Markets will remain focussed on European sovereign debt issues, although attention has also been shifting towards emerging economies as scepticism grows over their capacity to weather the global headwinds. This will pose considerable risk for agricultural commodities, where any sign of weakness in the emerging economies will have considerable impacts on demand. This has already been evident in some commodities, where upward revisions to forecasts of stocks levels have come at the expense of weakening demand. With prices already responding to improved production prospects, any weakness in the emerging economies is likely to expose prices to considerable downside risk.

While global prices for agricultural commodities are weaker, conditions within the Australian farm sector remain very strong overall. According to recent ABARES forecasts, the volume of Australian farm production in 2011-12 is forecast to increase four per cent, while export earnings from farm commodities are expected to rise to $34.5 billion in 2011-12, up from $32.4 billion in 2010-11. With record winter and summer crops on the cards, good pasture conditions and ample feed boosting livestock production, the sector remains on the right side of the multi-speed economy. However, some risk is posed by recent rainfall across southern Queensland and New South Wales, which has frustrated the harvest and is raising concerns around crop quality.

Currency Movements
 The A$/US$ pulled back below parity again due to the global risk-off attitude brought about by the Euro sovereign debt crisis as well as the impact on weakening commodities prices. Looking into 2012, however, NAB expects the A$/US$ to return to parity after a brief fall to around the mid-90-cents level. It expects to see a trading range of around US¢15 through 2012, roughly similar to 2011, with the extremes being between 0.90 and 1.05. Our strongest view is that the A$/US$ peaked at 1.10 in August this year. The forecast for the A$/US$ is for parity in the second half of 2012 but NAB now forecasts a decline to around 0.95 over the next quarter as global growth slows and the RBA cuts rates again. The Euro-zone muddling through, a soft landing in China and no slashing of official interest rates by the RBA suggests a modest rebound in the A$/US$ from around mid-2012 as worst fears are not realised.

NAB Rural Commodity Index
Prices for rural commodities continued to ease back in November, with the NAB Rural Commodity Index falling 1.3 per cent in A$ terms in November while the US$ index was up 1.1 per cent in the month. Driving the monthly result were price falls in sugar, wheat, cotton, lamb, dairy and barley. Beef prices, on the other hand, were up in the month. Looking ahead, agricultural commodity markets are facing considerable headwinds over the near term. The run up in commodity prices in 2010-11 has well and truly passed as the balance sheets of most commodities are reverting to more comfortable positions. This is taking place against a back-drop of a weakening outlook for the global economy and heightened volatility in financial markets. As such, agricultural commodity prices are exposed to significant downside risk over the near term. Offsetting this to some degree, will be continued strength in livestock prices over the coming months, still buoyed by dwindling global flock and herd numbers.

NAB Farm Input Indices
Fertiliser prices weakened in November, with the NAB Weighted Fertiliser Index falling 4.7 per cent in month average terms. Driving the fall in November were price falls across the board, with diammonium phosphate leading the charge (down 5.5 per cent) while natural gas prices were down 4.3 per cent. A strengthening month average A$ saw urea prices rise to a more modest extent. Given the extent of price falls for a number of key agricultural commodities in recent weeks, we anticipate continued weakness in fertiliser prices. A degree of caution is likely to persist in fertiliser markets while prices for agricultural commodities are weakening and the Euro zone debt crisis continues to throw up financial market volatility. Reflecting the decline in fertiliser prices, the fuel price index also declined in November, down 2.8 per cent.

NAB Weighted Feed Grains Price
 Feed grain prices pulled back sharply for a second consecutive month in November, with the NAB Weighted Feed Grains Price falling 4.1 per cent on October levels. Driving the monthly movement were falls across the board, with prices of sorghum (down 9.1 per cent) and barley (down 6.4 per cent) feeling the brunt of the price falls. Price falls for maize (down 2.3 per cent), feed wheat (down 2.2 per cent) and triticale (down 0.9 per cent) were modest while oats prices remained unchanged. At $217.40 per tonne, the NAB Weighted Feed Grains Price now sits at its lowest level since June 2010, prior to the run up in global grains prices. With a massive winter crop being harvested, huge carry-over stocks of feed grains from last season and the supply squeeze in the global coarse grains being eased, prices for feed grains are likely to continue to fall. This is likely to be exacerbated by recent rainfall frustrating the east coast harvest and potentially adding to already abundant stocks of feed grains.

Key Commodity Prices





NAB Rural Commodities Wrap – December 2011
Agricultural commodities are weakening as the result of the Euro sovereign debt crisis and rising production prospects, according to Michael Creed, Agribusiness Economist at the National Australia Bank in the Economic Report for December 2011.
 
Source: NAB Group Economics
These forecasts represent year-on-year average changes in A$ price and production between 2010-11 and 2011-12 financial yearsPrices across the broad commodities complex have fluctuated sharply over the past month and are generally lower than levels seen a month ago. Escalating concerns over European sovereign debt and a more uncertain global economic outlook have overshadowed slightly more positive economic data out of the United States. Market volatility has been rising following a reprieve over the first half of November. Coordinated central bank action and prospects for a new European compact may have helped to restore a degree of calm in financial markets, by way of providing renewed hope for the resolution of sovereign debt problems. However, significant political hurdles remain along with continuing financial instability and fears of a European credit crunch.

As the global growth outlook has become increasingly uncertain, a broad range of commodity prices has generally declined over the past month, although there is considerable variation within the commodities complex. Commodities perceived to have safe haven properties, such as gold, should continue to benefit from market fragility and the prevailing risk-off attitude. In contrast, commodities reliant on industrial production and global trade, such as bulk commodities and base metals, are likely to continue to come under pressure, although the scale of recent falls may provide some upside risk. Oil prices are being pressured by competing drivers, although worries around the global economy appear to be winning out. Nonetheless, geo-political tensions surrounding Iran and a still tight stocks situation in Europe have provided some support to prices.

Agricultural commodities have not been immune from the sell-offs, with prices for almost everything grown having weakened since mid-November. While a weakening global economy is having an impact, there is also a very strong production response hitting agricultural commodity markets. Australia is on track for a massive winter crop while sugar and cotton production has generally responded to high prices seen earlier in the year. In contrast, livestock prices have held up reasonably well, as the structural lags between prices and production are generally longer than for broad-acre crops.

Market volatility will continue to set the tone for commodity prices entering 2012. Markets will remain focussed on European sovereign debt issues, although attention has also been shifting towards emerging economies as scepticism grows over their capacity to weather the global headwinds. This will pose considerable risk for agricultural commodities, where any sign of weakness in the emerging economies will have considerable impacts on demand. This has already been evident in some commodities, where upward revisions to forecasts of stocks levels have come at the expense of weakening demand. With prices already responding to improved production prospects, any weakness in the emerging economies is likely to expose prices to considerable downside risk.

While global prices for agricultural commodities are weaker, conditions within the Australian farm sector remain very strong overall. According to recent ABARES forecasts, the volume of Australian farm production in 2011-12 is forecast to increase four per cent, while export earnings from farm commodities are expected to rise to $34.5 billion in 2011-12, up from $32.4 billion in 2010-11. With record winter and summer crops on the cards, good pasture conditions and ample feed boosting livestock production, the sector remains on the right side of the multi-speed economy. However, some risk is posed by recent rainfall across southern Queensland and New South Wales, which has frustrated the harvest and is raising concerns around crop quality.

Currency Movements
 The A$/US$ pulled back below parity again due to the global risk-off attitude brought about by the Euro sovereign debt crisis as well as the impact on weakening commodities prices. Looking into 2012, however, NAB expects the A$/US$ to return to parity after a brief fall to around the mid-90-cents level. It expects to see a trading range of around US¢15 through 2012, roughly similar to 2011, with the extremes being between 0.90 and 1.05. Our strongest view is that the A$/US$ peaked at 1.10 in August this year. The forecast for the A$/US$ is for parity in the second half of 2012 but NAB now forecasts a decline to around 0.95 over the next quarter as global growth slows and the RBA cuts rates again. The Euro-zone muddling through, a soft landing in China and no slashing of official interest rates by the RBA suggests a modest rebound in the A$/US$ from around mid-2012 as worst fears are not realised.

[Mustang Sally Farm]

Tuesday, January 10, 2012
CME Economist Upgrades 2012 US Outlook
ANALYSIS - According to the CME Group's Chief Economist, Blu Putnam, US economic improvements in 2012 will start with real GDP forecast to grow around 3.5 per cent to 4.0 per cent, writes Sarah Mikesell, ThePigSite senior editor.

Mr Putnam also estimates the unemployment rate will decline below eight per cent by the end of 2012 and core inflation, excluding food and energy, will creep higher to 3.5 per cent by December 2012.

This is a substantial upgrade from Mr Putnam's previous 1.5 per cent to 2.0 per cent forecast for 2012, in terms of real GDP. He and the CME Group are not, however, revising their expectation that the US will average around two per cent annual real GDP growth for the decade but rather that 2012 will be considerably above average.

Looking a few years out, Mr Putnam expects 2013-2014 will be troubled with fiscal and monetary policy risks that may bring the economic growth rate back down toward the expected average for the decade.

He and the CME Group offer this optimistic perspective on 2012 real GDP growth for the US despite expectations for a recession in Europe and a significant growth deceleration in China.

If the forecast for the US goes as predicted, there are important implications. Mr Putnam said the US long-term bond yields could come under considerable upward pressure as the year develops, and a debate over Federal Reserve policy in the second half of the year could destabilize shorter maturities, such as the two-year Treasury note.

While this economic growth forecast might appear to be good news for US equity markets, S&P 500 companies get half their cash flow from outside the US on average. According to Mr Putnam, the forecast for China and other emerging markets is for slower growth and for Europe the estimate is for a decline in real GDP.

Regardless, strong US growth could offer a calming influence on world equity markets, resulting in lower risk premiums and higher price-to-earnings ratios, which might also mean reduced equity market volatility as the year progresses.

[Mustang Sally Farm]

Tuesday, January 10, 2012

Chicken and Flour Subsidies End in Argentina

ANALYSIS – On 31 December 2011, the government of Argentina stopped paying subsidies to the poultry and flour milling industries – subsidies intended to keep prices at an acceptable level – writes Chris Wright, senior editor.


 


The subsidies to the Argentine agribusiness sector started in 2007, with the justification that they were trying to break internal food prices away from the rising international costs of feedstuffs.
 
The government created the National Office of Commercial Agribusiness Control (ONCCA) to run the subsidy programme.
 
The government subsidized wheat for the flour mills in order to contain bread prices; corn for chicken and pig producers as well as feedlots; and sunflower for the oilseed crushers. Small grain and pig producers also received subsidies.
 
Between 2007 and February 2011, when ONCCA was dissolved, the state gave out 10.5 billion pesos in compensation, half of which went to the poultry industry and the flour millers, reported Nosis.
 
The broiler and flour sectors were the only two sectors that kept receiving subsidies in 2011, even though the payments got very far behind, partially because the management of this program changed hands between government departments.

'Chicken for Everyone'

While the impact on the price of chicken has yet to be determined, some estimates say that it will rise by 14 per cent. Producers feel they have no choice but to raise prices.
 
The government worked out a deal with broiler and flour producers to maintain lower prices of these foods delivered to certain strategic places, such as the Buenos Aires Central Market. In exchange, these sectors will be able to raise their prices elsewhere.
 
The government was also working on a new plan called 'Chicken for Everyone' where 10 trucks will sell chicken at low prices in certain under-served neighborhoods in Buenos Aires, the Central Market and certain parts of the rest of the country. This strategy has been used before successfully with other products in Argentina.

Chris Wright, Senior Editor

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Thursday, January,13,2012
China's Food Safety Suffers 'Feeble Foundation'
CHINA - A senior Chinese official admitted Tuesday that the nation's food safety still suffered from a "feeble foundation."


Despite achievements made in 2011, the nation will continue to have a hard time ensuring food safety for a quite long time, said Zhang Yong, director of the executive office of the food safety commission under the State Council, the Cabinet.

He said problems remained at deep administrative levels, as a large number of food producers and catering operators are running small-scale businesses and some consumers lack knowledge and safety awareness.

New risks emerged with the use of new technology and materials in food production, and environmental pollution in producing areas also posed new challenges to traditional safety standards and tests, he said.

The director said remarkable progress had been made in improving the nation's food safety supervision network but the current system still does not fit in with actual demand, noting that supervision at grassroots levels is extremely weak and that more efforts are needed to improve supervision and emergency handling capabilities.

Food safety scandals erupted in great number in 2011. Authorities busted farmers for adding clenbuterol, a known carcinogen, to pig feed in order to grow leaner pigs, for example.

In late December, milk products made by the nation's leading dairy company, Mengniu, were found to contain high levels of aflation, a cancer-causing toxin.

To make the nation's food supplies safer in 2012, the authorities will carry out campaigns targeting six sectors: the rural food market, dairy products, edible oil, liquor, seasonal and festive food as well as food additive management, according to a statement released after Tuesday's national work conference on food safety supervision.

By latest official count, a total of 62,000 cases concerning substandard food were spotted in the first 11 months of 2011, underscoring the severity of China's food safety problem.

The authorities ordered 43,000 businesses found illegally operating without licenses to cease production, while revoking the business licenses of 576 operators during the period, according to the State Administration for Industry and Commerce.

A total of 251 cases were handed over to judicial organs during the period.

[Mustang Sally Farm]

Friday, January 13, 2012
Food Safety Check Ahead of Spring Festival
CHINA - China will make "all-out efforts" to step up safety overhauls of food necessities in the production and logistics chains to prevent mishaps during the upcoming Spring Festival shopping season.


Authorities of agriculture, quality inspection, commerce and public security will enhance joint patrols and secret inspections of the food market.

Rice, cooking oil, meat, egg, dairy products and frozen food will be put on the target list, the State Council Food Safety Commission said in a circular on Thursday.

Efforts will be made to prevent any fake farm produce or harmful pesticide residue affecting the health of consumers, the circular said.

Several food safety scandals rattled the nation in 2011, including meat processors adding cancer-causing clenbuterol to pig feed to produce lean meat and restaurants serving food cooked with recycled oil known as "gutter oil."

China's Spring Festival, or Lunar New Year, falls on 23 January.

[Mustang Sally Farm]

Friday, January 13, 2012
FAO Food Price Index Ends Year with Sharp Decline
GLOBAL - Food prices fell in December 2011 with the FAO Food Price Index dropping 2.4 per cent, or five points from November, FAO said yesterday.


At its new level of 211 points, the Index was 11.3 per cent (27 points) below its peak in February 2011.

The decline was driven by sharp falls in international prices of cereals, sugar and oils due to bumper 2011 crops coupled with slowing demand and a stronger US dollar. Most commodities were affected.

However, although prices dropped steadily in the second half of 2011, the Index averaged 228 points in 2011 — the highest average since FAO started measuring international food prices in 1990. The previous high was in 2008 at 200 points.

A period of uncertainty
Commenting on the new figures, FAO Senior Grains Economist Abdolreza Abbassian said that it was difficult to make any firm prediction on price trends for the coming months.

"International prices of many food commodities have declined in recent months, but given the uncertainties over the global economy, currency and energy markets, unpredictable prospects lie ahead," Dr Abbassian said.

Among the principal commodities, cereal prices registered the biggest fall, with the FAO Cereal Price Index dropping 4.8 per cent to 218 points in December. Record crops and an improved supply outlook sent prices of major cereals declining significantly. Maize prices fell 6 per cent, wheat 4 per cent and rice 3 per cent. In 2011, the FAO cereal price index averaged 247 points, up some 35 per cent from 2010 and the highest since the 1970s.

Oils and fats down
The FAO Oils and Fats Price Index stood at 227 points in December, down 3 per cent from November and well below the level of 264 points one year ago. Larger than expected overall supplies of vegetable oil led to a rise in stocks (notably palm and sunflower oil), which, together with poor global demand for soybeans, deflated prices.

The FAO Meat Price Index averaged 179 points, slightly down compared with November. The decline was mainly driven by pig meat, whose price dropped by 2.2 per cent, with sheep meat also receding somewhat. By contrast, poultry and bovine meat prices recorded mild gains. On an annual basis, meat prices in 2011 were 16 per cent higher than in 2010.

Dairy products mostly up
The FAO Dairy Price Index averaged 202 points, almost unchanged from November. All dairy products were up slightly with the exception of butter, which dropped by 1 per cent. Over the whole year, dairy products were on average 10 per cent dearer than in 2010, with particularly strong gains witnessed for skim milk powder and casein, which gained 17 per cent each. More modest increases were seen for butter and whole milk powder prices, which progressed by 11 per cent, and cheese, by 8 per cent.

The FAO Sugar Price Index declined for the fifth consecutive month to 327 points in December, down 4 per cent from November and 18 per cent from its July 2011 peak. The Index’s weakness in recent months mostly reflects expectations of a large world production surplus over the new season, on the back of good harvests in India, the European Union, Thailand and the Russian Federation.

[Mustang Sally Farm]

Tuesday, January 17, 2012
Record 2011 Farm Profits Could Spill into 2012
US - Against a backdrop of economic uncertainty, US agriculture last year stood as a shining example of growth.


2011 set records, with net farm income topping $100 billion for the first time ever.

“Prices are up across the board for all the major crops, and while we’ve seen cost of production increases overall, they haven’t increased as rapidly as the prices of crops people are selling,” said Pat Westhoff, director of the University of Missouri Food and Agricultural Policy Research Institute (FAPRI). “Even corrected for inflation, farm profits are at or near the highest levels since the 1970s. That is indeed a very good outcome overall.”

US farm income rose 28 per cent in 2011 compared to the previous year, according to USDA reports. Record agricultural exports topped $137 billion, while crop receipts rose 16 per cent and livestock sales receipts averaged 17 percent more than in 2010.

For livestock producers, this year offers welcome relief from some tough times. When the economic recession hit, prices dropped sharply as demand for meat slumped, and high feed prices meant many livestock producers lost money. In response, some producers stopped raising livestock and others scaled back expansion plans. Mr Westhoff said we’re seeing a turnaround.

“We’ve seen higher prices for both hogs and cattle this year in a pretty sharp way after really tough years in 2008-2009,” he said. “Now we’re seeing a bit stronger demand for our meat overseas and at the same time we’ve got less supply.

“Events like the drought in Texas have reduced cattle numbers, so there will be less beef to be sold in 2012. That will help keep cattle prices high ahead of us for the next several years.”

Going into 2012, chicken producers won’t be as lucky. Demand for chicken has not kept pace with the appetite for red meat, and there is an expectation that chicken production will consolidate soon.

“That’s causing talk of lower chicken production in 2012, and that’s something that doesn’t happen very often,” Mr Westhoff said.

Crop exports likely will fall short of last year. With less droughts and floods affecting foreign yields, competition will ramp up once again.

“Less soybeans, less corn, less wheat almost certainly will be exported in the current marketing year than last year,” Mr Westhoff said. “It’s not that demand is necessarily weak, it’s just lots of other countries are supplying those foreign markets.”

It’s hard to guess whether 2012 will bring another round of high prices, but higher yields, weaker exports and even the European debt crisis could hinder a repeat.

“There are lots of things that could go wrong in front of us, and instead of $5-$6 corn, $3-$4 corn could return,” Mr Westhoff said. “We’re very much in a volatile situation, and what people think about the markets today will be different than six months or a year from now.”

[Mustang Sally Farm]

Thursday, January 19, 2012
Minister Urges Greater Efforts to Boost Farm Exports
SOUTH KOREA - South Korea's agriculture minister on Thursday urged increased efforts to boost the country's food and agricultural exports, stating the country's free trade agreement (FTA) with the United States will offer new opportunities.


Yonhap News Agency reports that the call came as South Korea is striving to increase its agriculture exports by 30 per cent to over US$10 billion for the first time in its history this year. The country's food and agricultural exports surged 30.8 per cent on-year to a record high of $7.7 billion in 2011, according to the Ministry of Food, Agriculture, Forestry and Fisheries.

Minister Suh Kyu-yong said conditions for the country's agricultural exports were worsening this year while the growth of Seoul's total exports, including industrial products, is expected to slow down from 19.6 per cent last year to about 6.7 per cent.

"Food and agriculture exports will also face great difficulties as the global economic downturn deepens this year, but the growing presence of hallyu (Korean wave) and the country's new FTAs could provide new opportunities that will foster rapid growth in the local food industry," Minister Kyu-yong was quoted as saying in a meeting with officials from local governments and exporting companies.

South Korea is soon expected to implement its FTA with the United States following its ratification by the South Korean and US legislatures last year.

The minister also pledged additional support for exports to developing countries in Southeast Asia and China, which, he said, will likely continue high levels of economic growth this year.

"The $10 billion in foodÌ, agricultural exports may be an aggressive goal, but it is attainable if the government and private companies work together," he said.

To help increase exports, the government plans to provide a total of 576 billion won ($507 million) in loans and subsidies to private companies in 2012 alone.

[Mustang Sally Farm]

Friday, January 20, 2012
Meat, Milk, Eggs, Fish Not on Deflation Diet
INDIA - Food inflation has remained in negative territory for a third week, though the rate of decline has slowed quite a bit in the first week of 2012. Though prices of most articles continued to fall, there was pressure from protein-based goods.


Food inflation was a negative 0.42 per cent for the week ended 7 January, up from minus 2.9 per cent in the last week of December.

Headline inflation was down for the first time in a year to below nine per cent, at 7.47 per cent in December, mainly on the back of the sharp decline in food inflation.

The decline in the rate of fall in food prices for the first week of January can be partly credited to the base effect, as food inflation eased to 16.18 per cent in the corresponding week of last year from 19.09 per cent the previous week.

Protein-based items such as eggs, meat and fish continued to put pressure on inflation, mainly due to seasonal factors. Their rate of price rise was 4.42 per cent up, to 19.64 per cent. Milk, too, saw inflation rising to 11.48 per cent from 10.79 per cent last week.

Finance minister Pranab Mukherjee said last week that the moderation in food prices would help bring down headline inflation to six to seven per cent by March 2012.

Food products have a 14 per cent weight in the wholesale price index, the movement of which determines the inflation rate.

"Inflation will stabilise at the current level before taking an upward move in the second quarter of the current calendar year," said Siddharth Shankar, director, KASSA.

[Mustang Sally Farm]

McDonald's Works to Mainstream Sustainability

GLOBAL - McDonald's Corporation has released its 2011 Sustainability Scorecard and says it has reinforced its commitment to mainstreaming sustainability for customers through the company's actions and collaboration with suppliers, experts and the food industry as a whole.


The 2011 Scorecard highlights the company's progress in five priority areas, including significant advancements related to menu evolution and sustainable sourcing. For example:
 •By the end of March 2012, fruit will automatically be included in every Happy Meal served in U.S. and Latin America restaurants. Additional changes, including a new smaller size of French Fries only available in Happy Meals, will result in reductions in calories and fat for the most popular Happy Meals
•More than 95 per cent of McDonald's restaurants around the world offer Happy Meals with sides of fruit, vegetables, or low-fat dairy as an option
•As part of the Sustainable Land Management Commitment, which outlines the company's commitment to sourcing all of its food and packaging from sustainable sources over time, McDonald's has made measurable progress in its five initial focus areas of beef, poultry, coffee, palm oil and fiber
•All fish for McDonald's Filet-O-Fish sandwich is wild caught, and currently 99 per cent is sourced from Marine Stewardship Council (MSC)-certified fisheries

These actions are aligned with the company's focus on leveraging its brand recognition and core competencies as a food company to influence wide-reaching and sustainable change.
 
"We will continue to use our size, scope, and talent to make a positive difference for children, families and communities around the world," said Jim Skinner, McDonald's CEO. "Doing so creates value for both our company and our stakeholders."
 
In addition to food and food sourcing, McDonald's continues to focus on, and achieve measurable progress in, three other areas central to its sustainability strategy - Environmental Responsibility, Employee Experience and Community.
 
Environmental Responsibility
 
In 2011, McDonald's developed stronger energy-related metrics, with a focus on company-owned restaurants. McDonald's top nine major markets made significant improvements in energy data gathering and reporting capabilities.

The company made available for purchase more than 90 pieces of more energy-efficient equipment to the McDonald's system, as well as introduced "energy bundles" - packages of recommended restaurant improvements that combine simple changes like energy-efficient lighting with newer tools such as occupancy sensors.
 
Across all markets, these reduction efforts are enabling our restaurant energy use to remain steady, despite increases in restaurant hours, equipment and menu items.
 
Employment Experience
 
McDonald's continues to focus on developing its people through a wide array of education, job training and life skills opportunities. For example, in the US, the average restaurant manager completes the equivalent of approximately 21 credit hours - one semester of college - that can be transferred to many public and private schools and applied toward a two- or four-year degree. Similarly, 96 per cent of company-operated restaurants have a restaurant manager who has trained at the company's world-class learning center, Hamburger University.
 
The company's long-standing leadership stance in the area of diversity and inclusion continues to be a competitive strength. For example, more than 50 percent of company-operated restaurant managers and nearly 30 percent of the worldwide top management team are women.
 
Community
 
For almost 40 years, Ronald McDonald House Charities (RMHC) has been the charity of choice for McDonald's. Since 2002, countries around the world have raised nearly $170 million during McHappy Day/Give a Hand events, which benefit RMHC and other children's causes.
 
In 2010, participating restaurants in the U.S. began making a contribution from the sale of each Happy Meal and Mighty Kids Meal. In 2011, RMHC Donation Boxes in the US are projected to reach more than $27 million in customer contributions.
 
Looking toward 2012, McDonald's will continue to advance goals and targets for mainstreaming sustainability in all five focus areas and reporting progress along the global journey.
 
"We will continue to mainstream sustainability into our day-to-day business, bring value to the communities we serve, and value to our company through efficiencies, innovations and consumer relevance," said Bob Langert, McDonald's global vice president of Sustainability.

[Mustang Sally Farm]

Scientists to Pause Research on Deadly Strain of Bird Flu
 
By DENISE GRADY
 
Published: January 20, 2012


The scientists who altered a deadly flu virus to make it more contagious have agreed to suspend their research for 60 days to give other international experts time to discuss the work and determine how it can proceed without putting the world at risk of a potentially catastrophic pandemic.
 

Suspensions of biomedical research are almost unheard of; the only other one in the United States was a moratorium from 1974 to 1976 on some types of recombinant DNA research, because of safety concerns.

A letter explaining the flu decision is being published in two scientific journals, Science and Nature, which also plan to publish reports on the research, but in a redacted form, omitting details that would let other researchers copy the experiments. The letter is signed by the scientists who produced the new, more contagious form of the flu virus, as well as by more than 30 other leading flu researchers.

“We recognize that we and the rest of the scientific community need to clearly explain the benefits of this important research and the measures taken to minimize its possible risks,” the letter states. At an international meeting next month in Geneva, participants selected by the World Health Organization will consider what to do next. Dr. Anthony Fauci, head of the National Institutes of Health, said the gathering would “address some of these difficult issues on an international scale instead of something restricted to the United States government.”

The scientists say their work has important public health benefits, but they acknowledge that it has sparked intense public fears that the deadly virus could accidentally leak out of a laboratory, or be stolen by terrorists, and result in a devastating pandemic. A national biosecurity panel in the United States has already taken the unusual step of asking the scientists to keep part of their data secret to prevent others from reproducing their work.

Scientists are split regarding the research, with some praising it as important and urging that it be published, and others saying the experiments are so dangerous that they should never have been done.

The experiments involve a type of bird flu virus known as H5N1, which rarely infects people but is highly deadly when it does. The work, paid for by the National Institutes of Health, was done by two separate research teams, at Erasmus Medical Center in Rotterdam, the Netherlands, and at the University of Wisconsin, Madison.

Ron Fouchier, a virologist who conducted the research at Erasmus Medical Center, explained why he and his colleagues decided to pause the research. “It is unfortunate that we need to take this step to help stop the controversy in the United States,” he said. “I think if this were communicated better in the United States it might not have been needed to do this. In the Netherlands we have been very proactive in communicating to the press, politicians and public, and here we do not have such a heated debate.”

Dr. Fauci said that he had never seen the scientific world so polarized, and that led him to urge the researchers to show good faith and flexibility by declaring the moratorium themselves. A concern “looming in the background,” he said, was that biosecurity experts might overreact and impose excessive restrictions on the research.

“I think it’s important research that needs to go forward,” Dr. Fauci said. “I think we need to get greater input on the conditions in which it goes forward.”

Dr. Fauci and others who support the research say it may help explain how flu viruses that start out in animals adapt to humans and become transmissible, and therefore able to cause pandemics. That information, the researchers say, could help them recognize viruses on the way to developing pandemic potential.

Richard H. Ebright, a molecular biologist at Rutgers, is among those who oppose the research because of its risks, and doubts that it could be used to predict pandemics. He said that a moratorium was a good idea, but that this one did not go far enough. He said that the letter did not acknowledge the need for improved “biosafety, biosecurity and oversight,” and that in any case, 60 days would not be enough time to put the needed safeguards in place. The letter noted a “perceived fear” among the public, Dr. Ebright said, and seemed to suggest that the debate would cool down if people would just let the researchers explain that they had done the experiments safely.

Dr. Ebright said experiments with this virus should be done only in laboratories with the highest biosafety rating, BSL4, not in the “enhanced BSL3” in which the work was actually done.

Dr. Fouchier disagreed. He also said that his center did not have BSL4 labs.

Dr. Fauci said various expert groups, including the Centers for Disease Control and Prevention, had determined that enhanced BSL3 was good enough for bird flu research.

Since 1997, when the H5N1 virus was first identified, about 600 people have been infected, and more than half died — an extraordinarily high death rate. The saving grace of H5N1 is that when people do become infected — nearly always from contact with birds — they almost never transmit the disease to other people. But the virus has persisted in the environment, infecting millions of birds, and scientists have warned that if it mutates to become more contagious in people, disaster could ensue.

But what mutations would make the virus more easily transmissible? And how hard, or easy, would it be for those mutations to occur? Hoping to answer those questions, some researchers began experimenting with bird flu, working with ferrets, which are considered the best model for studying flu, because they contract it and get sick in much the same way that people do. Recently, the teams in Rotterdam and Madison announced that they had produced a form of H5N1 with mutations that allowed it to “go airborne,” meaning that it spread through the air from one ferret to another. Presumably, though not certainly, the virus could spread in the same way among people.

Dr. Fouchier said he was surprised by how easy it was to change the virus into the very form that the world has been dreading. Now, scientists around the world will have to grapple with what to do with Dr. Fouchier’s creation.

[Mustang Sally Farm]

Monday, January 23, 2012
Drought and Floods Hitting Agricultural Production
GLOBAL - A strange mixture of drought and foods appears to be affecting agricultural and livestock production across the Americas - both North and South.

In the US, crop lands in the Mississippi were devastated earlier this year when they were flooded - deliberately flooded by breeching the levees to avert potential disaster.

It appears that while it may have stopped uncontrolled damage, the destruction to farm land, washing away fertile soil, was far higher than at first was expected.

The details of the destruction and the impacts of the induced levee breeches have been outlined in a report on agricultural lands of Mississippi River Valley can be seen in a research published in the January - February 2012 issue of the Journal of Soil and Water Conservation.

However, while these floods caused destruction to crop lands with a knock-on effect to corn and cereal production, lately areas of the southern states have been struck by drought.

In Texas rainfall this winter has varied from five inches in some East Texas counties to one to three inches in Central and North Texas.

Official statistics show that as of 10 January, about 62 per cent of the state was rated as being under severe to extreme drought.

This is an improvement from a week earlier when more than 70 per cent of the state was under drought conditions and a vast improvement from October when 97 per cent of the state was experiencing severe to extreme drought.

Scott Strawn, AgriLife Extension agent for Ochiltree County in the north eastern Panhandle said that wheat was in better condition thanks to moisture received in December, but while fields are up to a good standard, subsoil moisture below six inches is very dry.

The drought has meant that cattle farmers are having to supplement feed in some areas and in others as calving is starting, herds are being reduced because of lack of pasture.

The Livestock, Dairy, and Poultry Outlook report from the USDA published last week showed how the drought is now hitting beef production in the southern states of the US.

It says that while pastures and ranges have improved with recent rain and if it continues it could alleviate the [present drought situation, the La Niña effect is expected to continue at least into spring of 2012 and could affect precipitation patterns in 2012 as it did in 2011.

These conditions have led to an increased cow slaughter - largely beef cows - almost five per cent up on last year and 14 per cent up on 2009.

"Total annual commercial cow slaughter has been observed at current levels only one time since 1987-in 1996, also a drought year," the report says.

Further details of the drought impact are expected at the end of the month in the USDA's National Agricultural Statistics Service (NASS) semi-annual Cattle inventory report, however, the atypically large cow slaughter has fuelled speculation that there will be a year-on-year decline in beef cow inventories, especially in Southern States, and a decline in heifer inventories as well.

Despite this, high feed prices have held prices up for beef farmers in the US.

While in the US, the Livestock, Dairy, and Poultry Outlook report shows a slight rise in pig meat production and a drop in poultry production, South American farmers are being hit similarly to those in Texas by drought.

The drought in Argentina, Brazil and Paraguay is forcing grain prices up and having almost crippling effects on the poultry industry in particular.

A report in El Pais in Argentina shows that high temperatures are not only affecting grain and milk production but also poultry farmers who have seen a 15 per cent loss of boilers in their shed because of the heat.

The poultry market in South America has closely followed the rise in grain prices in the international market.

The USDA has forecast that there are going to be new lows in corn and soybean production in South America and this will eventually drive up prices as shortages bite.


Chris Harris, Editor-in-Chief

[Mustang Sally Farm]

Wednesday, January 25, 2012
Findings on Safety of Genetically Modified Food
GLOBAL - A three year feeding study has shown no adverse health effects in pigs fed genetically modified (GM) maize. The maize, which is a Bt-maize bred for its insect resistant properties, was sourced from Spain.


The results were one of the key findings of trials conducted as part of the GMSAFOOD consortium undertaking post market monitoring: long term, generational and food chain studies to test food safety.

The research team conducted short-term (31 days), medium-term (110 days) and generational pig feeding studies where the health of piglets of sows fed Bt-maize is measured. No adverse effects were observed, suggesting that feeding Bt-maize to pigs of different ages is safe. "These findings can offer some assurance to consumers as to the safety of consuming Bt-maize," Peadar Lawlor, senior researcher at Teagasc, Animal and Grassland Research and Innovation Centre, Moorepark, Ireland, said: "The pig is considered to be an excellent model for humans due to similarities in gastrointestinal anatomy and physiology. Similar responses to Bt-maize consumption could be expected in humans."

In addition to testing for any unforeseen adverse effects, the researchers were also looking for biomarkers (fragments of DNA) associated with immune responses which could be used for predicting immune response to future genetically modified organisms (GMOs). The GMSAFOOD consortium, funded by the European Commission, brings together researchers from Austria, Ireland, Norway, Hungry, Turkey and Australia.

These results and findings from other GMSAFOOD research teams will be presented at the GMSAFOOD conference at the Medical University of Vienna, Austria 6-8 March 2012. These include:

Salmon feeding trials (Norway)
Investigation of protracted allergenic response in mice feeding trials (Austria)
Food chain trials where rats were fed pork and fish which had been raised on Bt-maize (Norway and Hungary)