Meat purchase planned to assist producers impacted by drought

Aug 17, 2012

USDA last week announced its plan to purchase $170 million of pork, lamb, chicken and catfish to help drought-stricken communities.

According to the USDA release, it is part of the “Obama Administration’s commitment to do everything it can to help farmers, ranchers, small businesses, and communities being impacted by the nation’s persistent drought.”

According to CME Group, lean hogs futures traded up more than $1/cwt pretty much across the board following the news last Monday, but only October and December were able to hold those gains.

While not wanting to appear unappreciative of US- DA’s continued help, some analysts are still pointing out the realities.

According to CME, the purchase is rather small, in the grand scheme.

“While $100 million sounds like a huge number, it will only buy about 107 million pounds of carcass weight pork and we produced 408 million pounds last week! And USDA will not be buying carcass-weight pork. They will be buying value-added products such as precooked sausage patties that will almost certainly cost more than [last week’s] cutout value of $92.36/cwt — meaning the quantity purchased will actually be less than 107 million pounds,” CME reported.

In addition to being a small blip on the financial monitor, it does not address future feed costs and possible feed shortages, CME continues.

“USDA is doing “everything it can,” of course, except altering the renewable fuel standard requirement that 13.8 billion gallons of ethanol be blended into gasoline in 2013—a move that many believe is necessary if feed supplies are to be sufficient,” CME added.

But Agriculture Secretary Tom Vilsack said the purchase will help relieve pressure on American livestock producers during the drought, while helping to bring the nation’s meat supply in line with demand while providing high quality, nutritious food to recipients of USDA’s nutrition programs.

“President Obama and I will continue to take swift action to get help to America’s farmers and ranchers through this difficult time,” said Vilsack. “These purchases will assist pork, catfish, chicken and lamb producers who are currently struggling due to challenging market conditions and the high cost of feed resulting from the widespread drought. The purchases will help mitigate further downward prices, stabilize market conditions, and provide high quality, nutritious food to recipients of USDA’s nutrition programs.”

According to the release, USDA will purchase up to $100 million of pork products, up to $10 million of catfish products, up to $50 million in chicken products, and up to $10 million of lamb products for federal food nutrition assistance programs, including food banks. Through the Emergency Surplus Removal Program, USDA can use Section 32 funds to purchase meat and poultry products to assist farmers and ranchers who have been affected by natural disasters.

USDA’s Agricultural Marketing Service (AMS) purchases a variety of high quality food products each year to support the National School Lunch Program, the School Breakfast Program, the Summer Food Service Program, the Food Distribution Program on Indian Reservations, the Commodity Supplemental Food Program and the Emergency Food Assistance Program. USDA also makes emergency food purchases for distribution to victims of natural disasters. Government food experts work to ensure that all purchased food is healthful and nutritious. Food items are required to be low in fat, sugar and sodium. The commodities must meet specified requirements and be certified to ensure quality. AMS purchases only products of 100 percent domestic origin.

Colorado U.S. Sen. Michael Bennet said it is a step in the right direction, but passage of the 2012 Farm Bill would offer more drought relief.

“The administration’s decision today will help Colorado farmers and ranchers, who are already suffering financial losses due to this summer’s severe drought. It also underscores the need for the House of Representatives to pass the 2012 Farm Bill. The Farm Bill contains a number of provisions that will provide immediate relief as well as tools to help plan for the future.”

Last week in Washington, Obama convened his White House Rural Council to review Executive Branch response actions and to develop additional policy initiatives to assist drought-stricken Americans. Following the meeting, the White House announced a number of new measures the administration is taking, including USDA’s assistance for livestock and crop producers, the National Credit Union Administration’s increased capacity for lending to customers, including farmers, and the U.S. Department of Transportation’s emergency waivers for federal truck weight regulations and hours of service requirements to drought-stricken communities. Obama also stressed the need for the entire administration to continue to look at further steps it can take to ease the pain of this historic drought.

Within the last month, USDA has opened the Conservation Reserve Program (CRP) to emergency haying and grazing, has lowered the borrower interest rate for emergency loans, and has worked with crop insurance companies to provide more flexibility to farmers. USDA has also announced the following:

• Authorized $16 million in existing funds from its Wildlife Habitat Incentive Program and Environmental Quality Incentives Program to target states experiencing exceptional and extreme drought.

• Authorized the transfer of $14 million in unobligated program funds into the Emergency Conservation Program to help farmers and ranchers rehabilitate farmland damaged by natural disasters and for carrying out emergency water conservation measures in periods of severe drought.

• Authorized haying and grazing of Wetlands Reserve Program easement areas in drought-affected areas where haying and grazing is consistent with conservation of wildlife habitat and wetlands.

• Lowered the reduction in the annual rental payment to producers on CRP acres used for emergency haying or grazing from 25 percent to 10 percent in 2012.

• Simplified the Secretarial disaster designation process and reduced the time it takes to designate counties affected by disasters by 40 percent.

During the 2012 crop year, USDA has designated 1,628 unduplicated counties across 33 states as disaster areas—1,496 due to drought—making all qualified farm operators in the areas eligible for low-interest emergency loans.

Visit drought for the latest information regarding USDA’s drought response and assistance. — Traci Eatherton, WLJ Editor