Does not matter: Vilsack takes another shot at meat industry concentration

Oct 04, 2021

Presented by The American Forest Foundation

With help from Gavin Bade and Emma Anderson

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Quick Fix

— Agriculture Secretary Tom Vilsack is expected to announce another step toward addressing consolidation in the meat and poultry sector, an issue that's become a bipartisan priority since the start of the pandemic.

— U.S. Trade Representative Katherine Tai is set to lay out the Biden administration's China strategy, including enforcement of the Phase One trade deal and its impact on U.S. agricultural goods.

— House Democrats are limping into yet another week of negotiations over how to advance a bipartisan infrastructure plan and social spending package — and President Joe Biden is telling them not to rush.

HAPPY MONDAY, OCT. 4! Welcome to Morning Ag, where your host is ready to spend what looks like a rainy week with a good chai tea. Send tips for a rainy day to xbustillo@politico.com and @ximena_bustillo, and follow us @Morning_Ag.

A message from the American Forest Foundation:

Across the U.S. 1 in 4 rural Americans owns forestland. An often-overlooked demographic, family forest owners, like farmers and ranchers, provide a significant opportunity to help address our climate challenges. In fact, with the right actions, forests can double the amount of carbon they sequester and store. Reaching this potential will take more than one solution. Learn more about family forest owners and the tools that can empower them to support America's climate efforts.

DRIVING THE WEEK

ANOTHER STEP TO ADDRESSING CONSOLIDATION: Vilsack is expected to announce a new loan guarantee program this afternoon aimed at expanding capacity for meat and poultry processing and addressing bottlenecks in the food supply chain created by the pandemic.

The Agriculture Department, along with the White House, has been targeting the meat and poultry sector for months, blasting the industry for heavy concentration that contributed to supply chain disruptions during the pandemic and following other shocks, such as the recent hack of JBS beef plants by Russian cybercriminals.

MA readers may recall that the consolidation among meatpacking companies meant that there was no alternative backup system when a major plant shut down that served an entire region of producers.

Farmers were forced to euthanize animals to deal with the huge backlog of livestock ready for processing. The pork industry was arguably hit the hardest, reported Liz Crampton for POLITICO's Recovery Lab series.

Going small: One of the solutions the Biden administration and many state agriculture officials have focused on is expanding and investing in small and independent meatpacking plants.

Per our Ryan McCrimmon's recent Recovery Lab feature, propping up small processors is seen as a way to make the supply chain more resilient to disruptions than continuing to rely on the giant meatpacking firms.

A chart showing the percentages of meatpacking and processing sectors that are controlled by the top four companies.

The meatpacking industry is highly concentrated. | Annette Choi/POLITICO

Bookmark it: The White House launched a website for its Competition Council to outline what agencies are doing to increase competition across sectors including agriculture.

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WHAT BIDEN'S NEW CHINA TRADE POLICY MEANS FOR AG: Today, USTR Katherine Tai will lay out the Biden administration's long-awaited strategy to take on Beijing economically after an eight-month interagency policy review. One of the first steps is holding China to its commitments under the Phase One trade deal signed between the nations last year.

Some gripes from the ag world: Although China is further ahead on meeting its required agriculture purchase benchmarks than they were last year, they are still not up to the required levels.

Vilsack has previously told reporters that there are ways the Phase One deal with China could be improved upon, since there is no enforcement mechanism and China is able to use market conditions as a justification for not meeting its trade commitments.

"Our objective is not to escalate trade tensions or double down on the previous administration's flawed strategy," a senior administration official told reporters in a preview call on Sunday. "At the same time, where China continues to pursue its unfair and coercive practices, we will use the full range of our tools to ensure that U.S.-China relationship works for American workers."

The U.S. won't look to trash the entire Phase One deal. Instead, American negotiators will try to preserve parts of the deal they say have benefitted Americans, like Chinese agricultural purchase commitments that have resulted in record U.S. sales to the country.

"There's real world evidence that some businesses covered by the Phase One trade deal have done better," an official said. "So for American industries like agriculture that have benefitted from Phase One, President Biden is going to continue doing things that work."

No Phase Two: The negotiations are still limited in ambition. Officials said the U.S. would not seek to expand the existing pact into a "Phase Two" trade deal to address industrial subsidies and other structural economic issues in China. That was a priority for former President Donald Trump's trade officials, and the hope of some agriculture industry groups, but White House officials said they had little expectation that new talks would convince China to change its behavior.

How the administration will align those priorities remains to be seen. The U.S. could seek a narrower deal with China that covers agricultural goods, but USTR did not respond to questions on whether that's a possibility.

Read more from Pro Trade's Gavin Bade.

A message from the American Forest Foundation:

INFRASTRUCTURE MOVING ALONG, SLOWLY: Democrats are entering another week of negotiations on the bipartisan infrastructure framework that never reached the House floor for a vote last week and a multitrillion-dollar social spending package — two pieces of legislation that would provide billions in funding for agriculture, including conservation, forestry, research and debt relief. But all timelines, even loose ones, have been thrown out the window as Democrats struggle to reach an internal agreement on how to move forward with the two measures.

View from the White House: Biden administration officials do not have a timeframe in mind for passage of President Joe Biden's legislative agenda after a House vote on the bipartisan infrastructure bill was delayed last week, reports POLITICO's Quint Forgey.

Dems infighting stalling progress: House moderates — buoyed by new reluctance from Sens. Joe Manchin (D-W.Va.) and Kyrsten Sinema (D-Ariz.) about Biden's social spending plan — are still pushing for an immediate vote in their chamber on the infrastructure bill that the Senate passed in August.

But House progressives are refusing to back the infrastructure bill until they secure further assurances from their moderate colleagues on Biden's broader spending plan — and a commitment from Democratic leaders that both pieces of legislation will reach the president's desk in tandem.

Biden's warning: The president took to the Hill on Friday to help broker negotiations. But he warned progressives they would likely have to accept a significantly curtailed spending plan of between $1.9 trillion and $2.3 trillion (much less than the current price tag of $3.5 trillion). He also disappointed moderates by stressing that there was no rush to hold a vote on the infrastructure bill.

"It doesn't matter whether it's six minutes, six days or six weeks," Biden told reporters. "We're going to get it done."

Ag groups getting antsy: The National Association of State Departments of Agriculture sent a letter to members of the House late last week calling for a speedy passage of the infrastructure package, which includes funding for broadband expansion they say is critical to many of the organization's members.

HOW TO AVERT A TRANSATLANTIC FOOD FIGHT: As Washington and Brussels plow ahead with their vastly different views on the future of farming, one trade expert says the key to quelling the emerging transatlantic food fight could be food labeling and putting "power back into the buyers' hands."

"What we really need is better labeling at the very minimum, and then let the consumers decide," Christine McDaniel, a trade expert at George Mason University's Mercatus Center and former U.S. government official, told our colleagues at POLITICO Europe.

More transparency in the supply chain "is going to mean a little more work for everybody along the way," she said. "If that's the cost we have to pay to avoid this transatlantic food war that could have ripple effects across the global economy, then I would think that's worth it."

Worst-case scenario: "Once you have these two behemoths starting to try to strong-arm other countries and accepting their standards and not other standards," McDaniel said, "then we get into these tensions that are way outside the scope of the WTO, and that's where trade economists start to worry that this could end up really restricting trade."

For example, American officials and industry groups are wary of the EU's plans to slash pesticide usage and rapidly expand organic farming across the continent — a goal that the U.S. fears would crush crop yields, raise food prices and lead to higher hunger rates.

Asia could be key: "If you start to see countries like China, India, Japan, South Korea, starting to adopt the EU standards, then that I think would be a big push for the U.S. to change some of its inputs," she said.

Healthy competition: At the same time, McDaniel said it's good to have a certain amount of competition and debate. "I think it's kind of healthy for the U.S. and the EU and others to be having discussions about what kind of standards we should have," she said. "But once you start wanting to set standards for the world, I would argue that's overreach on both sides of the Atlantic."

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Movers and Shakers

— The Senate confirmed Tracy Stone-Manning as director of the Bureau of Land Management. Read more from our Pro Energy colleagues.

"The BLM is an important partner to ranchers across the West, and it is our expectation that Director Stone-Manning uphold the law, support multiple use management, and recognize the important role ranchers play in managing and conserving these large landscapes," said Kaitlynn Glover, executive director of the Public Lands Council and executive director of natural resources at the National Cattlemen's Beef Association.

— Rishi Banerjee is now regulatory and industry affairs manager at Amazon. Banerjee was formerly a senior manager at the Global Food Safety Initiative at the Consumer Goods Forum.

Row Crops

— The Biden administration reached a deal with Vietnam to resolve concerns about illegally harvested or traded timber. Pro Trade's Doug Palmer reports.

— The restaurant industry is struggling to recover because of soaring food prices and labor costs, despite economies reopening and customers returning to eat in person. Bloomberg has more.

— Due to a growing backlog in applications, Louisiana's social services agency received federal approval to stretch out the application period for disaster food stamps. The AP has the story.

— New tax liabilities could impact nearly 20 percent of farms and up to 65 percent of total agricultural production if the federal government were to eliminate a tax break known as stepped-up basis, according to a recent study by USDA's Economic Research Service. More from Farm Progress.

THAT'S ALL FOR MA! Drop us a line: xbustillo@politico.com; hbottemiller@politico.com; gmott@politico.com and pjoshi@politico.com.

A message from the American Forest Foundation:

The opportunity across rural America to address our climate challenges is significant. And no more so than in partnership with family and private forest owners. Family forest owners, with properties ranging from 20 to 2,000 acres, collectively own the largest portion of forests in the U.S. Yet most struggle with the high cost of management that comes with keeping a forest healthy and productive. If policymakers want to scale up climate action, while also bringing economic opportunities to rural communities, they need to jumpstart carbon markets for these small forest owners. Carbon markets appeal to landowners because they offer a voluntary option for action. They also complement other government tools and leverage private-side investment, getting to scale without a large government price tag. Learn more about family forest owners and how Congress can catalyze forest carbon markets for small forest holders today.