Transcript Economics of Irrigation of Field Crops

2008 Farm Bill:
Livestock and M-COOL
Geoff Benson
Dept. of Agricultural & Resource
Economics
NC State University
2008 Farm Bill
GEOFF BENSON, ARE, NCSU
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2008 Farm Bill Dairy Provisions
 Program areas
Price support program
Milk Income Loss Contracts (MILC)
Federal milk marketing orders
Mandatory price reporting
Forward pricing contracts
Dairy Export Incentive Program
Dairy promotion and research
Dairy Indemnity Program
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Price Support Proposals
 Program was changed to directly set dairy
product prices at existing levels -- No “farm
milk” support price.
 Cheese: $1.13 per pound for block cheese, $1.10 for
barrel cheese
 Butter: $1.05 per pound
 Nonfat Dry Milk Powder: $0.80 per pound
 Price s may be reduced if CCC purchases become
excessive
 Effectively leaves the level of support
unchanged but dramatically reduces the
estimated WTO producer subsidy equivalents
calculated for the program
 This is a very low producer safety net relative
to current cost of production
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MILC Proposals
 Continues the program through 9/30/2012
 Payments = (Actual Milk Price – Trigger) X
Payment Rate%
 Trigger price: Modified by adding a feed cost adjuster.
Base is a Class I price of $16.94/cwt in the Boston
market. The base price is increases by the same
percentage as the increase in estimated feed cost
above $7.35/cwt through 8/31/12 and $9.50 thereafter
 Payment rate: Remained at 34% initially but increases
to 45% from 10/1/08 thru 8/31/12, then it reverts to 34%
 Payment cap: Maintained at 2.4 million pounds initially
but increases it to 2.985 mil. lb from 10/1/08 through
8/31/12, after which it reverts to 2.4 million
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Federal Dairy Support and Class III (Cheese) Milk
Prices, Monthly, 1975-2007
22.00
20.00
18.00
16.00
$/100 lb
14.00
12.00
10.00
8.00
6.00
Milk Support
4.00
Class III Milk
2.00
MILC Trigger
0.00
1/75
1/78
1/81 1984 1/87
1/90
1/93
1/96
1/99
1/02
1/05
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1/08
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Federal Milk Market Orders
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Federal Orders
 Orders
Classify milk according to use (I = fluid, II
= soft product, III = cheese, IV = butter &
powder)
Establish monthly minimum producer
prices for each class that are derived
form wholesale product prices
Pay producers under pooling
arrangements
Audit processors
 Widespread dissatisfaction with how
FOs are “working” and the time it
takes to get changes made
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Federal Milk Marketing Orders
 Secretary to issue rules to speed up
the amendment process within 60
days of farm bill passage
 Federal Order Review Commission
To conduct a comprehensive review of
milk marketing options -- both Federal
Orders and non-Federal order systems
14 appointed members
Report back within 2 years
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Forward Pricing Contracts
 A substitute for federal order
pricing
 Establishes a permanent program
until 9/30/2012
 Participation is voluntary – if you
opt out, federal order pricing
applies
 Applies to producers, Coops and
Associations of Coops
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2008 Farm Bill
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Livestock Provisions
 Program areas
Country of origin labeling (COOL)
Mandatory price reporting, evaluation
and education programs
Forward pricing contracts for hogs &
poultry
State-inspected meat & poultry
processing plant rules
Livestock health and disease
initiatives
Food Safety
Study bio-energy from livestock
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Country of Origin Labeling
 2002 Farm Bill created a COOL program
 Implementation was delayed until
September 30th, 2008 except for fish
 2008 version applies to the following :
 Muscle cuts of beef, pork, goat, and lamb
 Ground beef, pork, goat, and lamb
 Poultry, whole and parts
 Peanuts, pecans and macadamia nuts
 “Perishable agricultural commodities” – fresh
fruits, vegetables, herbs
 Fish and shellfish (implemented 4/4/2005)
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COOL
 Retailers must clearly label or
provide signage for covered
products
 For covered meats there are four
labels:
U.S. Origin (Born, raised and
slaughtered in the US)
Multiple Countries of Origin that
include the United States (list all)
Imported Direct for Slaughter (Both
countries)
Imported meat (Country of origin)
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COOL
 Exemptions:
Foodservice sales
Small retailers’ sales. Defined as less
than $230,000 of perishable product
sales per year
Processed meats. Defined as
“substantially changed in character
or combined with other products”.
The rules of the Tariff Act of 1930
may apply, however.
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COOL
Photo courtesy of Nate Jaeger, NCBA GEOFF BENSON, ARE, NCSU 16
Scope of M-COOL
Item
Beef1
Pork1
Poultry2
US Production, MMT
60.9
97.1
80.0
US Consumption, MMT
60.5
96.9
75.4
Exports, MMT
7.7
5.5
8.3
Imports, MMT
7.2
5.2
7.6
11.8%
5.3%
9.5%
Imports, % of consumption
1
Carcass weight.
2
Ready to cook weight
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Scope of M-COOL
 Pork:
~60% processed & 40% fresh
~80% consumed at home, 40% is fresh
= 33% falls under M-COOL
 Beef:
~75% fresh & 25% processed
~65% consumed at home, 75% is fresh
= 50% falls under M-COOL
Source: ERS, USDA reports
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M-COOL
 For covered livestock products, the
packer, processor or importer provides
labeling information to the retailer
 Producers in the supply chain with “first
hand knowledge” can provide an affidavit
to the buyer to certify the country of
origin of an animal
 US producers are not required to
undertake additional record keeping
other than “records maintained in the
course of the normal conduct of the
business”
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Summary
 Dairy
 Continues to be subject to heavy government
intervention through farm bill and other
legislation but the impact on prices, price
volatility and industry trends likely is limited
 Other livestock
 Little intervention in prices and incomes
through farm bill provisions
 Mostly concerned with market power and
price transparency issues
 M-COOL is a major new initiative
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Geoff Benson
 Phone: 919.515.5184
 Fax: 919.515.6268
 E-mail: [email protected]
 Web page:
http://www.ag-econ.ncsu.edu/
faculty/benson/benson.html
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