Posted March 11, 2014 by IATP
A minimum of 23,000 people die in the United States due to antibiotic resistance, according to the Center for Disease Control. Yet, antibiotic resistance—the rise of so-called “super bugs”—is on the rise because of overuse and abuse of antibiotics in our food system. Eighty percent of antibiotics sold in the U.S. go toward food animal production—mostly for the corporate meat industry that uses it for growth promotion and to keep a large number of animals alive in confined spaces. While doctors, nurse practitioners and pharmacists are required to write prescriptions for antibiotics to treat sick people, anyone can buy them over the counter in animal feed stores. This lack of regulation is creating a public health crisis that is entirely possible to avert.
After years of delay, FDA is finally attempting to address this major gap by requiring animal drug makers to have veterinary supervision of antibiotics in feed. Veterinary supervision is critical to slow the overuse of these drugs and the related spread of antibiotic resistance. However, the FDA (in order avoid resistance from drug companies) is watering down what “veterinary supervison” means, and therefore, undermining the ability of government agencies to effectively track how drugs in animal feed are used.
The existing rule (called the Veterinary Feed Directive, or VFD), which is stronger, only applies to two drugs. But the FDA is weakening this rule in order to apply it to many more antibiotic drugs. While regulating a broad range of antibiotics under the VFD is absolutely critical for public health, the FDA should create a strong and comprehensive rule that requires the drug industry to change its practices.
To read the proposed FDA rule, click here.
We are asking you to help make our food system healthy and safe. Take action right now by submitting comments to the FDA before March 12—the deadline for public comments.
Send a personal message and demand that FDA address the following concerns:
Write FDA Commissioner Hamburg today by submitting comments directly to the FDA, here. Here is a sample letter:
I am concerned about the spread of antibiotic resistance and its potential devastating effects on the health of my family. Given that the bulk of antibiotics used in the United States are given to animals in feed without any veterinarian supervision, I am encouraged to learn that FDA is trying to at least require that a veterinarian be involved. This is the right thing to do, but I believe that the FDA is going about it in the wrong way. I ask you to strengthen the current FDA rule on VFDs in feed in the following way:
- Require that all medically important antibiotics in feeds only be used under veterinary supervision and not wait for voluntary action by drug companies to make the change.
- Keep the current federal requirement that a valid relationship (VCPR) is maintained between the veterinarian and his / her animal clients. In other words, veterinarians writing a feed directive should have recently laid eyes upon the animals to be treated, or at least visited the farm where they are kept.
- Require veterinarians and feed companies to submit VFD orders to the FDA, so that the Agency can track how these drugs are being used.
- Maintain the current two year record keeping requirement.
- Don’t allow illegitimate re-ordering of feed antibiotics: Ensure that the VFD expires no later than the actual end of life of the animals it was intended to benefit -- or six months after it is written, or the label directions—whichever is shortest.Without these improvements, the VFD will not fully ensure that antibiotics which are important to humans—such as penicillins, tetracyclines, erythromycins and steptogramins—remain effective for treating future generations of both sick people and sick animals.
Because of the critical importance to public health, I further urge you to take two important steps that go beyond the purview of the VFD:
- On FDA’s books, there are many approvals for livestock antibiotics delivered in feed or water that do not address a specific illness and have no limits on the duration of their use. FDA must discontinue them. So long as these approvals remain, there is little to prevent medically important antibiotics from continuing to be used routinely for non-sick animals.
- The public, including public health researchers, must have data granular enough to track whether the Agency’s new rules designed to end routine antibiotic use in food animals are in fact working. Given the nearly 30 million pounds of antibiotics used in food animals today and the growing problem of antibiotic resistance, stewardship of these drugs is vital.
Thank you for your time and consideration.
Posted March 10, 2014 by Shefali Sharma
Trade negotiators from the United States and the European Union are meeting in Brussels this week behind closed doors to inch towards a transatlantic free trade agreement, benignly referred to as the TransAtlantic Trade and Investment partnership (TTIP). Twenty-nine U.S. based community, farm, environmental, animal welfare and consumer organizations sent a letter today to United States Trade Representative Michael Froman voicing strong concerns about prominent corporate meat industry demands in TTIP. The aim of the agreement is to “harmonize” standards between the European Union and the U.S. on a wide range of issues that touch our lives, including how our food (meat in particular) is produced and processed and who controls that system.
Over 20 corporate meat and feed industry associations and representatives submitted public comments to USTR last May. Together, their comments demonstrate how these interests seek to weaken standards on meat and animal products that could undermine food safety, public health, animal welfare, worker safety and environmental regulations.
Across the U.S. and the EU, citizens, farmers and civil society organizations are advocating for a fairer, healthier and more humane form of meat production that eliminates the use of chemicals, hormones and antibiotics and which allows independent and local producers to flourish. The letter states:
The growing movement in the United States to rebuild local food systems relies heavily on leveraging local, state and federal procurement dollars to increase the aggregate demand for locally farmed crops and livestock, as well as value-added production of local foods. There can be climate, health, environmental, agricultural, and consumer benefits to such procurement approaches.
The TTIP negotiations could undermine these efforts.
The groups strongly criticized the secrecy of the negotiations where the negotiating text is not even available for our elected officials, let alone concerned citizens and organizations. The groups call on USTR to “to immediately publish negotiating texts on these and other important issues in the trade agreement to foster an informed public debate.”
Posted March 7, 2014 by Dr. Steve Suppan
This September, it will be five years since President Barack Obama and other Group of 20 leaders committed to regulating the over-the-counter (OTC) derivatives markets jointly and in each of their jurisdictions. The world’s largest banks would have defaulted in 2008–2009 on their bets in the nearly unregulated $700 trillion global OTC market had it not been for publicly funded bailouts, above all the $29 trillion U.S. Federal Reserve Bank emergency loan program of 2007–2010.
Fulfilling the G-20 commitments has been a political, legislative, budgetary, regulatory and technological struggle, due in part to the opposition of those same publicly rescued banks. For example, the International Swaps and Derivatives Association (ISDA), which represents OTC broker dealers and their largest corporate clients, is one of three parties suing the Commodity Futures Trading Commission (CFTC) to prevent the application of the Dodd-Frank financial reform legislation to the foreign affiliates of U.S. OTC broker dealers. Losing foreign affiliate trades, booked to their U.S. headquartered firms, triggered the 2008-2009 default cascades.
Nevertheless, persistent national and international financial regulators have been hard at work to agree on how to prevent circumvention of national regulations by the cyber-world of global banks. The G-20 leaders assigned much of the work to the Financial Stability Board (FSB), a body of central bankers and top regulators, coordinated by a small secretariat housed in the Bank for International Settlements in Basel Switzerland. In a February 17 letter to G-20 Finance Ministers and Central Bank Governors, FSB Chair Mark Carney outlined OTC derivatives reform as one of four crucial regulatory objectives.
In January, the Senior Supervisors Group of financial regulators reported to the FSB that “Five years after the financial crisis, firms’ progress toward consistent, timely and accurate reporting of top counterparty exposures fails to meet both supervisory expectations and industry self-identified best practices. The area of greatest concern remains firms’ inability to consistently produce high-quality data.” So regulators are still not getting accurate and comprehensive data on the risks (“counterparty exposures”) posed to the financial system from OTC trades. The potential for another financial market failure remains as regulators are still in the dark about much of the OTC universe. As Thomas Hoenig, vice president of the Federal Deposit Insurance Corporation (FDIC), noted on February 24 of the OTC trade-leveraged mega-banks, “If even one of the five largest [U.S.] banks were to fail, it would devastate markets and the economy.”
In February, the FSB released for comment a consultation paper on the feasibility of a global mechanism to aggregate OTC trade data that could be computer monitored by regulators both to prevent excessive risk-taking and violations of national regulations. The Aggregation Feasibility Study Group (AFSG) will make a recommendation to the FSB in May on which, if any, of three proposed OTC data aggregation options should be adopted for implementation.
IATP had submitted comments to the CFTC on data aggregation rules to prevent excessive speculation in agricultural derivatives contracts, which contributes to food insecurity in net import dependent developing countries. IATP’s comment on the FSB consultation paper first explained our interest in data aggregation. As of June 2013, OTC commodity derivatives contracts accounted for just $3 trillion of the reported $693 trillion global OTC gross notional value [an estimate of total risk exposure]. However, commercial hedgers, commodity prices, and hence food and energy security, are affected not only by prices, but by the foreign exchange, interest rate and other derivatives data that will be aggregated for regulator surveillance by the approaches discussed in the Consultation Paper (CP). Therefore, effective agricultural commodity derivatives regulation and financial stability require effective data aggregation practices.
The AFSG presents the FSB with three options for aggregating OTC trade data across borders. First, Option 3 is a status quo data aggregation model for regulators to compile and analyze data outside their jurisdictions. Regulators would access OTC trade data from foreign Trade Data Repositories (TDR), after filing a case-by-case petition for data with the regulator in whose jurisdiction the TDR resides. The AFSG remarked that Option 3 was vulnerable to unjustified refusals of access data that could result in the building up of risk exposures far beyond the capital reserves of banks to pay back in the event of losses.
Option 2 concerns a logical index or catalogue of TDRs in all jurisdictions, defined in terms of FSB agreements on uniform financial product and transaction identity codes, and uniform rules on regulator access to data. Because work on such agreements is already somewhat advanced, the regulator software platform of the logical index for regulator access to foreign TDRs could be built in the near term.
Option 1 would involve the centralized storage of OTC data from TDRs in all FSB jurisdictions. That option would require the agreements to build the standards and computer infrastructure of Option 2, plus hardware and security to protect the centrally stored OTC data from all jurisdictions. While the third option represents the most efficient and comprehensive mechanism for aggregating data and facilitating foreign regulator access to that data for monitoring and enforcement activities, it also presents problems of political feasibility not considered in the AFSG’s analysis of the legal and technical feasibility of the options.
A decision on the location, staffing and financing of a centralized data storage facility will require legislative decisions, as well as diplomatic negotiations. Given the heated nationalistic rhetoric about who’s to blame for the big bank meltdown, the location, staffing and financing decisions could become political flashpoints. We fear that nationalistic rhetoric used by bank lobbyists and some regulators to argue against cross-border application of national market laws will manifest itself in the debate about where to locate the centralized storage of OTC data. The result of a prolonged debate over the location of centralized data storage could be a financially fatal delay in the implementation of political commitments to effective and comprehensive cross-border regulatory cooperation.
IATP urged the AFSG to recommend Option 2 as the best platform for the intensive intergovernmental cooperation necessary to regulate the global banks and OTC corporate clients who otherwise will continue to elude nationally defined regulation. If Option 2 is successfully implemented, it may be possible to agree later on centralized data storage as a further step in regulating the global cyber-markets of finance.
Option 3, i.e., a continuation of the status quo offers an insufficient basis for cross border cooperation to regulate global OTC traders and markets. It is no exaggeration to say that if the Financial Stability Board fails to agree on an effective and comprehensive aggregation mechanism, the Group of 20 Leaders’ commitments to regulate OTC derivatives will remain unfulfilled. Furthermore, continued circumvention of national rules by global banks and OTC corporate clients will leave us vulnerable to another financial services mega-default, even as we still are trying to recover from the economic and fiscal consequences of the 2008-09 default.
Posted March 5, 2014 by Karen Hansen-Kuhn
One of the most controversial provisions in free trade agreements is the Investor-State Dispute Settlement (ISDS) mechanism, which gives corporations the right to sue governments over public measures that undermine their expected profits. It’s a pretty outrageous assault on democratic structures. In fact, when I tell people new to the trade debate about it, at first they often don’t believe me.
But it is a fact. ISDS is included in bilateral and regional trade and investment pacts around the world. The supposed justification is that legal systems in many countries don’t adequately protect foreign investments, so it creates a special tribunal just for them. For example, under NAFTA, three U.S. agribusiness firms sued the Mexican government over restrictions on high-fructose corn syrup, and won $169 million in compensation. Tobacco giant Phillip Morris, operating through its Hong Kong subsidiary, has sued the Australian government over new rules on cigarette labels that highlight fthe health dangers. If that one seems a bit convoluted, it’s because when the Australian government signed a free trade agreement with the United States, it refused to include ISDS, saying its legal system was perfectly able to handle any disputes. But Australia was already bound by an investment pact with Hong Kong.
This expansion of corporate rights has become a big issue in the public debate on the Transatlantic Trade and Investment Partnership (TTIP, also known as TAFTA). The EU announced in January that it would pause the negotiations on that mechanism in TTIP so it could hold a public consultation on the issue. But the Obama Administration has not followed suit, so a group of 43 U.S. organizations (including IATP, along with labor, environmental, faith and farm groups), led by the AFL-CIO, sent a letter to the U.S. Trade Representative Michael Froman demanding a similar pause in the U.S., to get more public input.
Even without ISDS, there are many very real problems with TTIP, including a drive for “regulatory coherence” that could push health and environmental standards down to the lowest common denominator on both sides of the Atlantic. But if they can at least stop and talk about the wisdom of this dubious proposal for new corporate rights in the EU, why not here as well? What is the Obama Administration afraid of?
Posted March 4, 2014 by Andrew Ranallo
Busy hands make for busy minds—that’s the theory behind experiential, or hands-on learning. IATP’s new high school–level Farm to School Youth Leadership Curriculum, released today, is designed with this in mind: Beyond learning about sourcing local food and the research that goes into localizing their school lunch, students actually participate in creating or expanding a Farm to School program, assisting their school lunchroom staff and administration with the nitty gritty of sourcing local foods for lunch.
From the press release:
The Farm to School Youth Leadership Curriculum is comprised of six lessons that can be taught consecutively over a semester or as single lessons or activities to complement other classes. Each lesson contains a lesson summary, facilitator preparation notes, activities, worksheets, recommended optional work and further resources for students and teachers. Lessons include themes such as “School Lunch: How Does it Really Work?” and “Communicating with Producers of Local Foods.”
Development of the Farm to School Youth Leadership Curriculum was a collaborative process, including consultation with educators, food service professionals and Farm to School experts, supported by the Center for Prevention at Blue Cross and Blue Shield of Minnesota, the John P. and Eleanor R. Yackel Foundation, the Minnesota Agricultural Education Leadership Council and the Minnesota Department of Agriculture.
Posted February 26, 2014 by Shiney Varghese
The food crisis of 2008 led to a broad agreement in the agricultural development community that the lack of appropriate investment in agriculture had been a key contributing factor to unstable prices and food insecurity. The crisis coincided with an increase in land grabbing in many parts of the world, but especially in Africa. It is in response to these events that the idea of developing some criteria on agricultural investments came up in international policy and governance arenas.
The food crisis also led the United Nations in 2008-09 to reform its Rome-based Committee on Food Security (CFS) to address both the short term food crisis, and the long-term structural issues that led to it. It involved bringing new people to the table where decisions were being made, and this included a new Civil Society Mechanism (CSM).
In October 2010, the newly reformed CFS was faced with a challenge: Should it endorse the international Principles for Responsible Agricultural Investment that Respect Rights, Livelihoods and Resources (PRAI) developed by the Inter-Agency Working Group (IAWG), composed of FAO, UNCTAD, IFAD and the World Bank, or refuse to endorse it in response to the CSM position rejecting the PRAI?
To the credit of the CFS, the majority of the stakeholders, including most governments agreed with the CSM in October 2010 that the PRAI was inadequate to protect vulnerable communities from land grabbing. Rather, in the CSM view, PRAI would have helped facilitate the large scale investments which were already depriving people of their livelihood sources. Unfortunately, at its November 2010 Summit, the G-20 continued to endorse that flawed process, encouraging "all countries and companies to uphold the Principles for Responsible Agricultural Investment."
But the debate continued at the CFS, which, while 'taking note of the ongoing process of developing' the PRAI, agreed that there needed to be a more inclusive process if these principles were to protect communities from getting displaced from their lands. It initiated the development of Terms of Reference that were endorsed by the CFS Plenary in October 2012. The current Zero Draft of the Principles for responsible agricultural investment (also referred to as CFS-rai) is the outcome of an almost year-long inclusive consultative process on those principles.
We believe there is much scope for strengthening these principles. Over the last six months the zero draft was discussed around the world through regional consultations processes and e-consultation. Civil society groups that advocate for the rights of small-scale producers and workers are actively engaging in this process to make sure that the final draft principles presented to the CFS in October 2014 are indeed strong enough to protect the resource rights of the communities; leads to the progressive realization of the right to food, right to water, and the protection of the genetic, bio diversity as well as enhancement of ecosystem functions. Thus our comments stress that responsible agricultural investments should address the specific needs of small-scale food producers and workers: this entails investors assessing the specific needs of small-scale producers and workers and identifying how they can be supported to strengthen their food sovereignty, rather than seeking to make them part of the industrial food system, with its concentrated value chains. Those investments would support agroecological approaches to food production and the development of locally appropriate technology to reduce their drudgery and postharvest losses. Such investments will help retain wealth in their communities, contributing to ecosystem regeneration and rural economic development.
The first draft of the CFS-rai principles, based on the feedback received through the consultation process, will be developed in March-April 2014. There is a very small window of opportunity for civil society to comment on this first draft by contacting their CSM regional focal points, before it is negotiated in May 2014 by the Open Ended Working Group (OWEG) that include CSM representatives. The negotiated text will be presented for endorsement to the 41st session of the CFS in the fall of 2014.
Even when rai principles are strengthened according to the civil society inputs and endorsed by the CFS, there is still a real danger that those principles would be rendered ineffective by legally binding provisions in trade and investment agreements. We hope that the CFS-rai principles, if finalized with these inputs received from small-scale producers, workers and those advocating for their rights, come to govern national and international agricultural investments, and pave the way for ensuring that bilateral and multilateral investment agreements do not violate small-scale producers’ right to livelihoods, and result in biodiversity protection and ecosystem restoration.
Posted February 18, 2014 by Andrew Ranallo
IATP is excited to announce the release of a series of new reports looking in-depth at China’s feed, pork, poultry and dairy sectors, the past and future trajectory of the industry, and global impacts of China’s efforts to balance grain self-sufficiency and the desire to provide cheap meat.
China's transition to an industrial, resource-intensive model of livestock production could have major implications around the world, impacting farmers, public health and the environment.
Posted February 12, 2014 by Dr. Steve Suppan
Economists are still struggling to quantify the trillions of dollars of costs to the global economy of collapse and bailouts of the world largest private banks. Three Federal Reserve Bank of Dallas economists “conservatively estimate” $6-14 trillion dollars of damage to the U.S. economy alone from the 2007-2009 financial and commodity market crisis. At the upper end of their estimate, that’s $120,000 for every man, woman and child in the U.S. The global damage caused by the global bank near defaults, publicly funded bank rescues, and fiscal crises that followed the rescues, has yet to be estimated.
International cooperation on the regulation of global banks is required because of the global trading practices and corporate structure of the largest banks, most of which are major commodity traders. For example, according to another Fed study, the seven largest U.S. headquartered bank holding companies have about 5,700 foreign subsidiaries in dozens of foreign jurisdictions. To judge by the geographic distribution of these subsidiaries, the largest banks are structurally transatlantic institutions that require intensive U.S. and EU regulatory cooperation to prevent another 2007-2009 debacle.
In the U.S., commodity market reform is outlined in the 2010 Dodd Frank Wall Street Reform and Consumer Protection Act. Three and a half years after the passage of Dodd Frank, U.S. financial regulators still are working on rules to implement that legislation. Budget cuts to financial regulators and lawsuits to impede implementation are among the tools that the publicly bailed out financial institutions and their Congressional allies have employed to shrink reforms to their liking.
Market reform is no less complex and the opposition no less persistent and well financed on the other side of the Atlantic. Much of the opposition comes from the lobbyists representing the European offices of U.S. banks, hedge funds, exchanges and corporate users of financial instruments. Indeed, so intense was the bank lobbying on bank structure reform legislation that European Commissioner Michel Barnier announced a six week ban on meetings between bank lobbyists and EC regulators, so that the Commission could finish its work before a new Commission is selected in 2014.
On January 14, after a four-year struggle, the European Parliament, Council and Commission came to an informal agreement about a large and complex piece of legislation, the revision of the Market in Financial Instruments Directive (MiFID 2). Following translation from English into the 22 other EU Member State languages, MiFID 2 will be likely voted on in a plenary of the European Parliament in March. The EU rulemaking process, called Level 2, by the European Securities and Markets Authority (ESMA) and the European Commission, together with EU member state implementation, is scheduled for completion by the end of 2015.
As the Brussels based NGO Finance Watch noted, most of the European civil society organizing and lobbying on MiFID 2 concerned financial speculation on agricultural derivatives contracts. The main articles designed to curb financial speculation are the current Article 59 (position limits/’position management) and 60 (position reporting). Position limits are quantitative limits of the share of contracts that ‘a person’ may own during a specified time period. Each EU member state will use position data from Trade Data Repositories to calculate limits for contracts traded on markets in its jurisdiction, according to a methodology to be developed by ESMA. Adherence to the methodology should prevent member states from setting high and permissive limits to attract trades on exchanges in their jurisdictions.
One of the Level 2 debates to come is, of course, over the terms of this methodology. The Financial Times reported that most exchanges and financial institutions were “miffed by MiFID.” They believe that the current “position management controls,” i.e. market self-regulation, suffice to prevent market manipulation. However, MiFID does not concern simply market manipulation, but the prevention of “price distortion” by all means, whether intentional or not. Because the vast majority of commodity contracts are traded by Automated Trading Systems, demonstration of intentional manipulation is becoming less relevant for rule enforcement.
Another Level 2 debate will concern the frequency of position reporting. Reform advocates battled to require exchanges to report positions traded in “near real time” (exchanges report to the Commodity Futures Trading Commission within 15 minutes after a trade is settled). Market participants will report trades to exchanges and other trading venues in near real time. However, he Article 60 position reporting requirement of “at least on a daily basis” from exchanges to regulators will be subject to various interpretation by member state authorities. If a contract traded on several member state exchanges reports more frequently than on other exchange, traders in the less frequently reporting jurisdiction will have more information about the contract position and price than trades in jurisdictions that require more frequent reporting. Such information is a huge competitive advantage for traders.
The rules over which “persons” must report and aggregate positions likewise will be hotly contested. In a major Article 60 exemption, traders of Over the Counter (non-exchange traded) “wholesale energy products,” will not have to comply with position limits nor have to report until three and a half years after the anticipated implementation of MiFID in member states, i.e. in 2018. It is not at all clear how or whether this exemption from regulation will present difficulties for CFTC staff attempting to determine whether MiFID provides the “comparable comprehensive oversight” that Dodd Frank requires of foreign jurisdictions whose “persons” trade in U.S. markets.
But as Finance Watch also noted, commodity market regulation is just a small part of MiFID. Equally important are measures on consumer financial protection, cross-border implementation of MiFID, and rules to prevent price distortion as a result of High Frequency Trading (HFT) practices. HFT positions are held for just milli-seconds before being traded in response to computer trading algorithms. Because HFT positions are closed out before the end of the trading day, HFT traders and exchanges elude position limits and position reporting requirements of Dodd-Frank. However, MiFID will slow down HFT’s propensity to crash through provisions for emergency trading halts, requirements for minimum price increments and measures to prevent destabilizing volumes of orders that do not result in trades, but distort prices. The Level 2 battle over HFT implementing rules will be fierce, and in our view, requires at least as much European NGO lobbying as that which will be devoted to position limits and position reporting.
In a response to the Commodity Futures Trading Commission’s request for comment on its HFT and ATS concept release, a preliminary step towards possible rule-making, IATP assumed that the CFTC would regulate HFT, at least to the extent of complying with MiFID’s cross-border application of HFT rules. Although the vast majority of HFT trades concern interest rate contracts, the sharp increase in HFT trading in commodity contracts since 2007 has exacerbated price volatility across commodities. The costs of trying to manage that volatility, together with HFT fees, are among the costs that inflate both the wholesale cost of raw materials and the retail cost of consumer goods, including food.
Orthodox agricultural economics, as reflected in a recent U.S. Department of Agriculture report, continues to explain agriculture prices within traditional terms, as if HFT and commodity index funds had not and do not affect agricultural prices. The USDA report adopted the Chicago Mercantile exchange explanation, given to the CFTC in 2010, for the failure of contract prices to converge to a reliable reference price for farmers to use when forward contracting sales. That USDA/CME explanation concerns a failure of contract design to take into full account storage fees and delivery points for physically deliverable contracts.
In view of the orthodox explanation for agricultural prices and the downward price trend, should we conclude that the agricultural market has “self-corrected” and that traders should continue to “self-regulate,” as they did by and large before the 2007-2009 market collapse? The temporary exit of investors from commodity index funds in 2013 has reduced the excessive financial speculation in commodities that took place during 2004-2012. In anticipation of Dodd Frank regulation of Over the Counter trades, which pre-Dodd Frank were dark to regulators and the public, trades have migrated to what the Europeans call “lit venues”, i.e. regulated exchanges. However, some trading venues remain dark, e.g. when trading large positions (bloc trading) would cause the price to move against the trader because of exchange grade pre-trade transparency requirements.
This trade migration has improved price formation transparency. Price transparency and reduction of financially induced volatility will have a direct bearing on the cost of crop insurance for U.S. farmers under the just passed Farm Bill. For example, corn insurance premiums will be calculated according to the February average price of the Chicago Board of Trade (CBOT) corn futures contract.
Fundamental supply and demand factors also have helped to reduce price levels. For example, the globally influential CBOT price for a No. 2 Yellow Corn Futures contract, at $4.36 a bushel on February 3, is about 50 cents below the estimated cost of producing a bushel of corn in Iowa under a high-yield scenario. In the absence of regulation to prevent agribusiness monopoly input pricing, tax payer financed revenue assurance programs in the just passed U.S. Farm Bill will make up for the prices the market doesn’t yield.
Notwithstanding improvements in price formation transparency that are a result of the Dodd Frank requirements on price reporting, a fully implemented position limits regime and regulation of HFT are urgently needed. Just as the European institutions have taken a big step towards creating a position limits regime to reduce excessive financial speculation, the CFTC is now challenged to write an HFT rule that can be harmonized with the HFT rules that will result from MiFID 2. A financial speculator tactical retreat from commodities as an investment asset class is no sound reason to abandon the struggle to regulate the commodity markets and traders on both sides of the Atlantic and beyond.
Posted February 7, 2014 by Tara Ritter
It’s a big week in the agriculture world. Just days before Obama signed the new Farm Bill into law, Agriculture Secretary Tom Vilsack announced the locations of seven regional hubs for climate change adaptation and mitigation. These hubs will attempt to address the risks that farmers increasingly face due to climate change—including fires, pests, droughts and floods—by disseminating research on ways landowners can adapt to and adjust management strategies to build resilience.
This is a notable step forward in climate policy and has important implications for rural communities. Many rural communities tend to view large governmental agencies negatively, especially those agencies that regulate the agricultural activities that dominate many of those communities’ economies. However, farmers feel the direct impacts of extreme weather more than anyone. The climate hubs will help by linking a diverse network of partners, including universities, nongovernmental organizations, federal agencies, state departments, native nations, farm groups and more. Broadcasting climate change research and information from this wide array of sources, including sources that farmers trust and regularly interact with, could make climate change adaptation and mitigation a more accepted and commonly desired goal.
Encouraging action on climate change is paramount not only from an environmental perspective, but from an economic perspective as well. The drought of 2012 cost the American economy an estimated $50 billion between 2011 and 2013. It’s too early to assess the costs of the current drought punishing California, which produces nearly half of the country’s fruits and vegetables. Clearly, the risks posed by volatile weather events have implications not only for farmers, but for the economy and society as a whole.
Increasing farm resiliency to climate change will be critical to realizing the new Farm Bill’s projected $23 billion in savings. Most of these savings are due to the elimination of direct payments, but this figure does not take into account the likelihood that crop insurance payments could skyrocket as the climate continues to fluctuate. Unfortunately, the Farm Bill does not acknowledge climate change, and actually cuts programs like the Conservation Stewardship Program that could help support farmers building climate resilience. Therefore, encouraging on-farm climate change adaptation could bring significant savings by decreasing reliance on crop insurance.
These climate hubs have the potential to advance a comprehensive suite of agroecological farming practices. Practices such as reduced tillage, cover crops and crop rotations serve multiple purposes by increasing soil nutrients and water-holding capacity and decreasing erosion and the prevalence of pests and disease (adaptation), as well as helping sequester more carbon in the soil by building soil organic matter (mitigation). Despite the start-up and transition costs of some of these practices, they save farmers money in the long run by boosting yields and decreasing reliance on synthetic chemicals. The hubs should focus on helping farmers implement these practices and support them in the transition years.
There is no single initiative that will provide the answer to the challenges that climate change presents, but the establishment of these regional climate hubs is a step in the right direction.
Posted February 5, 2014 by Ben Lilliston
Was it just exhaustion from two-plus years of negotiations that finally produced the Farm Bill that is expected to be signed by the President this week? Or, was it the sense that “it could have been a lot worse” when compared with a mean-spirited, destructive Farm Bill passed by the House of Representatives last year. For whatever reason, there is a sense that a deeply flawed Farm Bill—the terms of which were dictated largely by austerity fanatics from the start—is the best we’ll get under the current political environment.
That’s a problem for all of us. It’s definitely a problem for the growing number of working age Americans who rely on food stamps. This Farm Bill cuts food stamp benefits (about 80 percent of the Farm Bill costs) by $8.6 billion.
It’s a problem for the environment and the urgent need to help farmers shift toward more climate resilient production systems to deal with extreme weather events. The bill cuts about $6 billion from conservation programs, the first time conservation funding has been cut since it became part of the Farm Bill in 1985 (excellent analysis by the National Sustainable Agriculture Coalition). Those cuts reduce the number of acres for the Conservation Reserve Program (which takes sensitive land out of production to protect habitat and wildlife) from 32 million to 24 million acres. It also limits the new acres of enrollment into the Conservation Stewardship Program (which support conservation measures on working farms) to 10 million per year—a cut of 2.8 million acres per year over the next decade.
It’s also a problem for a host of other smaller Farm Bill programs, including the outreach focused on Disadvantaged and Minority Farmers, which was slashed in half from $20 million to $10 million.
Democratic decision-making and transparency saw major setbacks, too. Breaking a promise for an open public vote, the Farm Bill conference committee instead cut a deal in secret and unveiled a final bill early last week.
Like all Farm Bills, it is not all good or bad, and there was some good. Many advocates (including IATP) succeeded in beating back efforts by the meat industry to weaken Country of Origin Labeling and undermine enforcement of fair competition rules for poultry and hog producers. The bill relinks crop insurance programs with requirements for farmers to take conservations measures like wetlands protection and stops incentives to expand cropland into native grasslands. It also renews commitments to Beginning Farmer programs, local foods programs, requires the development of a whole farm insurance program (benefitting diversified farms) and improves options for insurance for organic producers. It expands organic research and provides mandatory funding to important energy programs like the Renewable Energy for America Program and the Biomass Crop Assistance Program.
While the champions of this Farm Bill tout an estimated $23 billion in savings over 10 years, we are skeptical. Much of the savings come from the elimination of direct payments to commodity crop farmers regardless of price, and a shift toward government-subsidized revenue insurance programs. The agricultural services (crop insurance) and crop production (i.e., Monsanto) industries spent more than 57.5 million lobbying the Farm Bill, according to Open Secrets, and they got what they wanted in these programs. But given the extreme price volatility of the agricultural marketplace (the price of corn saw the largest single year drop in 60 years last year), combined with a continued series of climate-related weather events, it’s quite possible that the new farm programs will cost more than the old ones in the end.
Just as important as what’s in this Farm Bill, is understanding what isn’t. In fact, many of the biggest challenges in agriculture and food are not currently addressed in this Farm Bill:
We badly need strong food and farm policy if we’re going to take on these challenges, and that must include a reformed Farm Bill that is more true to its critical legacy of empowering farmers over agribusiness and protecting nature coming out of the New Deal. We don’t need to wait another five years for the next Farm Bill to get started; we can start now on the road to reform. More and more groups around the country are working on creative policy approaches to reform our food and farm system. New political alliances are being developed that not only focus on short-term battles but could pay dividends for the next Farm Bill. This is why we’ve launched Beyond the Farm Bill initiative. We’re engaging with policy experts around the country and highlighting the best policy approaches at the local, state and national level to bring about a fair, sustainable and healthy food and farm system. Join the conversation and stay informed at beyondthefarmbill.org.