Update on Country Of Origin Labeling by Professor Brown

PROFESSOR BROWN UPDATE ON COUNTRY OF ORIGIN LABELING CRISIS

Quick Take Away:  Its back to court for the whole issue.  30 TIMES  MORE than ACTUAL damages:  That’s what the USA is saying about the claims of Canada and Mexico of $3 BILLION in economic damages.   USA says its more like $90 MILLION in damages, MAYBE.  Looks like a major difference of opinion that will keep this tied up in court for a long long long time.

Status:  There are two bills in the US Senate that have been proposed to deal with COOL.  One (The Roberts Bill) has the support of the meat packers industry and the other (The Stabenow-Hoeven Bill) has the support of consumer groups.

The first bill, proposed by Senator Roberts, would repeal COOL completely. This bill was proposed as an amendment to a Senate transportation bill.  The bill DID NOT have enough support to even come to a vote on the floor.  So it is dead.  No more possibility here.  Further, the bill was proposed as an amendment to a long-term transportation bill that had ZERO  chance of passage in the House of Representatives, so it was a non-starter from the beginning.

The second bill proposed by Senators Stabenow and Hoeven is a stand alone bill with support from both Republicans and Democrats.  This bill proposes a repeal of the current COOL law and replaces it with a VOLUNTARY COOL law.  While consumer groups support this, Canada, Mexico, the meat packing industry and other farm groups strongly OPPOSE this approach.

Political note:  The major damages claimed against the USA are from Canada.  These damages are from the WESTERN (Alberta, Saskatchewan, British Columbia) provinces, and are not an EASTERN (Ontario, Quebec) political priority.  Canada has recently called elections and its not probable that a new government is going to immediately go to war with the their largest trading partner (the USA) over something that is not important to a majority of the electorate.

CONCLUSION:  There is no conclusion, as this whole issue is way up in the air, and now that its back in the World Trade Court for further litigation, no one has any incentive to change anything.

LATEST AG NEWS JULY 31 2015

CORN: $149.67 mt

Soybeans:  $344.67 mt

Milk: $0.36 liter

Beef:  $3.31 kg live weight

QUICK TAKE AWAY:  The warm weather and ideal growing conditions across the US in the past 2 weeks are driving crop prices down down down.  Corn went below its 50% retracement level from its previous high.  Reports are coming in from all over the US corn belt of potential record yields.  Same for soybeans.  Hot weather made everything grow and mature. 

Look for further declines in corn and soybean prices.  And wheat is falling completely out of bed.  Record yields in the northern wheat belt will continue to drive wheat prices lower.

Avian flu continues to scare everyone to death.  No one can agree on a vaccine to prevent the disease.  On the one hand, a vaccine might prevent another devastating outbreak this fall when the migratory birds travel south from Canada to Mexico.  On the other hand, a national vaccination program could severely curtail US chicken exports to countries that will not allow in US chicken meat if its vaccinated. 

$3.3 BILLION in losses so far.  And that does not include the $500 million that USDA has spent to control the disease and euthanize birds this year alone.  More to follow.

US milk markets remain stubbornly resistant to the world price collapse.  Farm gate milk prices have suffered, but class III futures prices remain stuck in the $16 range for the current and future months.  Butter continues to support the US market, but USDA predictions this week are for 12 months of excessive supply, at least.

Cattle prices hit their seasonal lows, both fats and feeders.  The semi-annual cattle on feed report showed record heifer numbers added to the breeding herd for expansion, 7%.  But we are at least 24 months away from any measurable increase in cattle numbers caused by this heifer expansion.  But it will come.

Oil continues cheap.  Gasoline prices are declining across the US which is unusual for the summer driving season.  That means pressure on the ethanol price, which in turn puts downward pressure on corn prices.  No one in the ag media really wants to talk about how low corn prices will go, because that is not what their readers want to hear.  But nothing on the near term horizon points to a higher corn price.  And the news about the huge unsold Chinese corn stocks in storage removes another possible support for corn.  This could get ugly.

Dairy cattle prices remain steady, with springer heifers selling for about the same price for slaughter or milk production.  Fortunately, slaughter prices are high or springer prices would go even lower.

One notable exception is the price for baby BULL calves.  This price has declined by at least 50% since mid-July.  The high was over $700 and this week a good supply of bull calves was available for $350-400. This is a reflection of lower feeder cattle prices and also a reflection of one major buyer having financial issues and being forced to leave the market.  Heifer calf prices remain constant in the $350-400 range.