Rice Industry Triparty Meeting Supports Establishment of CAFTA-DR Agriculture Review Commission
On Friday May 3, Dwight Roberts, CEO and President of US Rice Producers Association and Alice Gomez of Cornerstone Government Affairs met with Central American and Dominican Republic rice producers and processors represented by FECARROZ along with USA Rice Federation to discuss the proposal to modify terms of the Dominican Republic-Central America Free Trade Agreement (CAFTA-DR) affecting trade in rice.
The parties met specifically to discuss Article 3.18 of CAFTA-DR, which provides that CAFTA-DR countries shall establish an Agriculture Review Commission this year to review the implementation and operation of the Agreement as it relates to trade in agricultural goods. Among its responsibilities, the Agriculture Review Commission shall evaluate the effects of trade liberalization under CAFTA-DR and developments in world agricultural markets. As part of the meeting, USRPA, FECARROZ, and USARF agreed to issue a joint statement supporting the establishment of the Agriculture Review Commission. Moreover, USRPA and USARF agreed to jointly petition the U.S. Government to take the necessary steps to establish the CAFTA-DR Agriculture Review Commission.
“USRPA views the Agriculture Review Commission process as an opportunity to ensure that U.S. rice farmers will continue to enjoy the strong partnership we currently experience with our Central American business partners,” Roberts commented. “We take the proposal to modify CAFTA-DR duty free trade in rice with all seriousness and will work collaboratively with the Dominican Republic-Central American rice industry to find a solution that maintains a win-win for both sides.”
USRPA plans to meet with members of FECARROZ next at RMTC in New Orleans on June 5.
"CAFTA-DR” meeting in Miami last week between the Central American Rice Federation (FECARROZ), US Rice Producers Association and USA Rice produced positive discussions. The USRPA and FECARROZ have maintained a strong, unique relationship since both organizations were first formed.
Enrique Lacs from the Guatemala Rice Council and a member of FECARROZ makes a valid point during a discussion of the importance of the Central American market for the U.S. rice industry.
Lawmakers Take Positions on USMCA as White House Calls Passage a Top Priority
The Trump Administration issued its annual trade policy report to Congress on March 1, including approval of USMCA, the revised North American trade pact, as a key goal for 2019. In its report, the Administration refers to USMCA as a new regime and the most advanced trade agreement ever negotiated by the U.S.
Congress has yet to see the draft text of the USMCA implementing bill, and lawmakers are taking positions on certain aspects of the trade agreement that would govern North American commerce. Some Democrats have expressed concerns with the enforceability of the agreement’s labor and environmental provisions. Lawmakers want confidence that the Administration will effectively enforce the agreement, including Mexico’s commitments to enact new labor laws. Another concern is whether USMCA would lock in higher drug prices.
The timeline for congressional consideration of USMCA remains unclear. An economic analysis of the agreement’s impacts on industry sectors is forthcoming from the U.S. International Trade Commission, the results of which could influence lawmakers on their decision to support or oppose the agreement. Given the approaching 2020 presidential campaign, others would like to see a successful vote on the deal before summer to deliver another campaign promise achievement for President Trump.
U.S. tariffs on steel and aluminum and the President’s threat to withdraw from NAFTA loom over the USMCA ratification process. The U.S. temporarily delayed tariffs on Canadian and Mexican imports during USMCA negotiations but later imposed the tariffs to pressure the countries to sign a deal. Now that USMCA has been finalized, calls to remove the tariffs on steel and aluminum have heightened, especially as Canada and Mexico have retaliated in kind by placing tariffs on numerous U.S. products including pork, cheese, and potatoes. Shortly after signing USMCA, President Trump announced that he would withdraw from NAFTA very soon. Many lawmakers disagree with this negotiating tactic and question the President’s authority to withdraw from NAFTA without approval from Congress.
USRPA will continue to engage on behalf of U.S. rice farmers as congressional approval of USMCA advances.
USRPA Urges Timely Farm Bill Implementation
This week, USRPA joined 21 other farmer organizations on a letter to U.S. Secretary of Agriculture Sonny Perdue. The letter supports timely implementation of the farm bill as well as a request to update several farmer decision tools.
The letter requests that USDA provide the financial resources needed to modernize and update the web-based decision tools and conduct training and outreach initiatives in light of the recent changes to Agriculture Risk Coverage and Price Loss Coverage. The 2018 farm bill provides U.S. farmers with necessary flexibility in their risk management tools by allowing producers of covered commodities to choose between ARC and PLC on a commodity-by-commodity and farm-by-farm basis. With this flexibility, farmers need risk management and decision aids, as well as training and outreach, to help make these coverage decisions.
The letter closes respectfully encouraging USDA to quickly allocate funding to support the tools and education efforts farmers need to be successful. To read the full letter, click here.
FSA Provides Limited Services While Shutdown Continues
As the partial government shutdown continues without an end in sight, U.S. Agriculture Secretary Sonny Perdue announced that many of the Farm Service Agency (FSA) offices will temporarily reopen on Thursday, January 17, Friday, January 18, and Tuesday, January 22 to perform certain limited services for farmers and ranchers.
FSA offices will be temporarily open to help producers with existing farm loans, 1099 tax documents, continuing expiring financial statements, and processing payments.
“Until Congress sends President Trump an appropriations bill in the form that he will sign, we are doing our best to minimize the impact of the partial federal funding lapse on America’s agricultural producers,” Perdue said. “We are bringing back part of our FSA team to help producers with existing farm loans. Meanwhile, we continue to examine our legal authorities to ensure we are providing services to our customers to the greatest extent possible during the shutdown.”
In addition, Secretary Perdue has extended the deadline for producers to apply for trade assistance under the Market Facilitation Program (MFP) for a period of time equal to the number of business days FSA offices have been closed, once the shutdown ends.
The list of FSA Service Centers open for farm loan activities on January 17, 18 and 22 can be found here.
CAFTA-DR Focus of Meeting in Costa Rica
Since December of 2017, the US Rice Producers Association (USRPA) has conducted a series of meetings with the Central American Rice Federation (FECARROZ) in an effort to analyze the effects of full implementation of the Central American Free Trade Agreement-Dominica Republic to the rice industries of both the U.S. and Central America. Last month at the USA Rice Outlook Conference this process included a meeting between FECARROZ and USA Rice including representation of the USRPA.
This week in San Jose, Costa Rica all three groups met to continue discussions and a proposal submitted by FECARROZ last month. Dwight Roberts, President & CEO of the USRPA was very clear in expressing what the second largest market for U.S. long grain rice means to U.S. farmers while stating, “as we understand the proposal from our customers in Central America, the USRPA supports the efforts of FECARROZ to help maintain this vital market”. Roberts added, “we realize there are some hurdles that need to be resolved and ironed out.”
The USRPA also announced their intention to have a third-party, independent U.S. contractor, conduct an economic impact study that will assist in the evaluation process. USA Rice agreed to this USRPA initiative. The leadership of FECARROZ was positive about the results of the meeting and are looking ahead to the next step as Mario Solorzano, President of FECARROZ from Guatemala stated, “we want to go forward with the next step and preparations for a meeting in late February or early March assuming we have done our homework in the meantime.”
The USRPA also met with Indarroz leadership and will be hosting this Costa Rican rice milling group at the National Conservation Systems Cotton & Rice Conference in Baton Rouge, Louisiana, January 31-February 1st.
Texas Rice Council Meets in Katy
Texas Rice Council held their regular October planning meeting in Houston this week with Tommy Turner of El Campo presiding as President of the organization. Rice farmers from the various counties of the Texas rice region participated and commented on their harvest results and conditions. Of particular concern to everyone was the lack of market demand for rice and the lack of storage available with the second crop harvest approaching. A lengthy discussion followed related to an on-going Texas rice industry sustainability project effort. Hopefully, the results of this project will be available for January 16, 2019, Texas Rice Council/Western Rice Belt Conference that will take place in El Campo.
Several board members commented on their recent trip to Guatemala, an important rice market for the U.S. Tommy Turner, Galen Franz (Victoria), Scott Savage (Bay City), Casey Smith (Hitchcock) and Trey Barker (Katy) traveled to Guatemala to observe rice promotional efforts conducted through a joint agreement of the USRPA and the Guatemala Rice Council (ArrozGua). The group also visited the farm of Alvaro Padilla and the ALCSA rice mill in addition to meetings with other leaders of the Guatemala rice industry. The Texas farmers also visited Todd Drennan and Sean Cox of the USDA’s Foreign Agricultural Service in the US Embassy. Dr. Thomas Wynn and Dennis DeLaughter gave a World/US/Texas marketing report that as usual, generated considerable discussion among the farmers on the board. The group reviewed by-laws, the board election process and a financial report was given among other administrative issues.
USMCA Includes Significant Support for Biotech
The new trilateral trade agreement between the U.S., Mexico, and Canada (USCMA) takes a very forward-looking approach to support agricultural innovation. A new Agricultural Biotechnology Section confirms “the importance of encouraging agricultural innovation and facilitating trade in products of agricultural biotechnology, while fulfilling legitimate objectives, many are pointing to the biotechnology provisions as a key achievement for agriculture that will serve as a model for future trade agreements. “The USMCA sets important new standards for U.S. trade policy by ensuring trading partners establish policies that protect, respect, and advance the hard work and investment needed to bring new biotechnology innovations from the lab to the marketplace,” said the Biotechnology Innovation Organization (BIO).
The agricultural biotechnology section aims to minimize trade disruptions. The agreement lays out a path for how to cut down approval time for new biotech traits and deal with imports of genetically modified crops that have not been approved, so-called “low-level presence occurrences.” The section also includes the establishment of a Working Group for Cooperation on Agricultural Biotechnology. The Working Group will provide a forum for Parties to exchange information, discuss any policy and trade-related matters, and work to advance trade policies and science and risk-based regulatory approaches with other countries and international organizations. These provisions are expected to facilitate innovation and ultimately approval of future technologies.
Looking forward to ratification, there is a possibility that government leaders will sign the Agreement at the upcoming G20 Summit in November. After signing, the government leaders will submit USMCA to the various legislatures for ratification. Trade Promotion Authority (TPA) determines how quickly a U.S. Congressional vote on the agreement could happen. At least 30 days prior to the introduction of implementing legislation, the President must submit to Congress the final agreement text and draft Statement of Administrative Action. 105 days after signing, the International Trade Commission submits a related report to Congress. These requirements assist Congress in its consideration of whether USMCA meets TPA’s negotiating objectives. U.S. lawmakers have also stated they will be looking at the impact of USCMA on trade liberalization as well as the domestic manufacturing sector.
Rice Market Update: Near Term Market Outlook Has Positive Scenarios
The rice industry continues to move along with even more news to digest since the last report. The weekly export sales report indicated another boost in net sales nearing a total of 58,000 MT for the week. This number remains far from optimal but is still enough to be considered healthy for the industry. Additional sales to Iraq or even a few thousand metric tons to Central or South America would be highly welcomed at this time in an effort to alleviate the current glut of rice in the marketplace. Vessel loadings were notably higher than last week with volumes nearing 95,000 MT. Some of this is reflective of the recent high-volume sales but the remainder is an indication that old sales on the books are beginning to be filled. Both of these scenarios are positive for the near-term market outlook.
In Asian markets, the benchmark origins were mostly sideways over the week with some price weakening in key areas. The magnitude and direction of the changes seem to suggest that changing currency valuations had the lion’s share of the action as opposed to true supply and demand fundamentals.
USDA released its world market price this week and ultimately lowered the indicator for both long and medium/short grain classes of rice. This comes as a minor surprise, but optimism remains for an upward adjustment to occur in the coming weeks. The futures market had a rollercoaster ride over the week after last week’s massive gains. The trading action started out bullish with a continued rally, but the interest rate increase on Wednesday sent the financial markets into freefall and ultimately dampened the momentum in the rice market. Thursday’s WASDE report was more neutral to bullish than anything else, but the futures contracts had a different take and the resulting decrease brought the open contracts on the board back into negative territory for the week.
The domestic cash markets continue to soften as harvest pressure from the Upper Delta weighs into the equation and has the expected effect of suppressing prices down river. Along the Gulf Coast, storage is still an issue (especially in Texas) which is having a similar impact in those areas. The harvest in Mississippi is in the final throes while Arkansas and Missouri report well over two thirds of the rice having been harvested at this time. Quality reports indicate lower milling yields in those areas than was hoped for.
In other news this week, the UDSA released its monthly World Agricultural Supply and Demand Estimate (WASDE) with no significant surprises. The revisions for this month were exclusively on the supply side of the equation and consisted primarily of a decrease in average yield by 24 pounds per acre. This decrease led to a downward revision in the overall supply number by 700,000 hundredweights. With no demand side revisions (the Iraqi sales having seemingly been already incorporated into the estimate) the ending stocks estimate was adjusted accordingly by 700,000 hundredweights with no impact on the season average farm price projection.
Market Update: Rice Sales to Iraq Help Alleviate Harvest Pressure
Things have become more lively in the rice industry over the week as more information becomes available and the market factors appear to be more favorable to movement. The export sales report for the week reported low volume for the current installment, a roughly 70% decrease over the volume of the previous report. Of note is the sale to Iraq that should show up on the next week’s report of a much needed 90,000 MT. This sale, while much anticipated, will help to alleviate some of the pressure on the industry resulting from a large 2018 crop. Vessel tonnage was up from the previous report, and as a percentage increase looks to be very positive. From a tonnage perspective, the increases were marginal but as additional sales show up to be shipped, in addition to the volume already on the books, this figure should be stronger in the weeks to come.
Asian pricing generally appreciated over the week for the benchmark origins. Most, if not all, of the changes, were due to currency valuation changes but the firmness at current levels indicates that there is some stability at this time. The USDA World Market Price estimate for the week saw increases for both long and medium/short grain classes. Given the general direction of the market over the past weeks, this adjustment was somewhat predictable. Again, given the stability of the market currently, the probability of further significant increases is limited.
In the domestic cash markets, very little has changed in most areas with bids remaining in stagnation due to harvest and storage pressure in the various regions. From a production standpoint, the harvest in the Upper Delta continues to roll in and estimates peg that it is almost three-quarters complete in aggregate. Along the Gulf Coast, unseasonably heavy rainfall has delayed the second crop progress to the point that quality and yield are becoming seriously affected. The futures market has had an extremely good with the advent of positive marketing news. All of the open contracts on the board posted positive gains nearing 9% over last Friday’s close. The reasoning for the positive movement is multifold. The finalizing of the USMCA agreement early in the week set the market off to a positive start and the eleventh-hour sales in the export market went on to further the gains. Next Thursday sees the monthly WASDE report from USDA that will have some market changing impacts. Some expectations in the report include revisions to the projected yield numbers as well as export and stock projections.
Farm Bill Update
The 2014 farm bill will expire on Sunday. Latest reports indicate that none of the 12 titles of the farm bill have been resolved. Although Conference leadership expresses their desire to finalize the farm bill in October in order to quickly approve a final agreement in November, without a final deadline imperative there is little possibility of resolution by then.
The main issues remain centered around the commodity, conservation, and nutrition titles, with the nutrition title being the largest obstacle. Budgetary issues, such as spending offsets needed to provide funding to other areas, complicate all these issue areas.
In the commodity title, a House provision to end payments on unplanted base acres remains a difficult issue. Consolidation of programs in the conservation title is encountering opposition. Of course, disagreement over work requirements in SNAP is the most politically charged between Democrats and Republicans.
The expiration of the farm bill will have little impact on the operation of the commodity programs. There are other programs, lacking a funding baseline, that are affected. Conference leadership is discussing implementation of these “orphan” programs with USDA in the hope of utilizing discretionary authority to minimize disruption.
