June 7, 2002

The upward pressure comes from the unexpectedly strong pace of the economic rebound that began 2002. Because agricultural credit is only a small proportion (0.7 percent in 2001) of total credit, interest rates on agricultural loans are determined primarily by factors outside agriculture in national and international credit markets. Changes in demand for credit on the part of consumers, non-farm business, and government, as well as the supply of credit funds from consumers and depository institutions, all strongly influence interest rates on farm loans.

Interest rates are composed of real return (in terms of purchasing power of real goods and services) and an inflationary expectations return (to compensate lenders for changes in a dollar's purchasing power over time). The real rate of interest represents a return to the lender for forgoing current consumption of goods and services in exchange for the opportunity to consume more goods and services in the future.
Source: ERS/USDA, Agricultural Outlook, May 2002

Safeway to conduct animal welfare inspections
Safeway announced that they will be the first supermarket chain in the nation to conduct unannounced animal welfare inspections at their suppliers. Safeway operates approximately 1,700 stores in the U.S. and is one of the nation's largest food retailers. This follows similar announcements made by several fast-food restaurants during the past year.

PETA (People for the Ethical Treatment of Animals) is taking credit for this action. PETA claims to have been working with Safeway and the Food Marketing Institute (FMI), the trade association that represents grocery stores, in developing the inspections. However, contacts indicate that PETA has not had contact with FMI. Safeway indicates they are waiting on the guidelines being developed by FMI to institute an inspection program.

FMI is working with various commodity organizations in developing species specific animal welfare guidelines. The guidelines are not yet complete. However, the first draft is expected to be released in the next four weeks.

At a recent meeting of the Animal Ag Alliance, several speakers warned companies not to get into the business of trying to "out-humane" others for marketing purposes—i.e. one company trying to set different, stricter humane animal standards for their suppliers than something previously announced. The speakers warned that such a tactic would reduce consumer confidence in meat products.
Source: AFBF—Speedlines; Public Policy Bulletin, May 20, 2002

Veneman: Farm subsidy funding shows little change
With foreign leaders gasping at the level of funding for American farmers in the new farm law, Agriculture Secretary Ann Veneman and other U.S. officials said last week that the level is actually very similar to that of the past four years.

According to USDA figures, direct subsidies to farmers from 1998 to 2001 totaled $67 billion, including $30.5 billion in extra payments. The new farm law estimates spending levels for 2002-2005 at $68.8 billion.

Veneman said the money being spent in the farm law does not reach the high level of government subsidies for farmers in the EU and Japan. Further, U.S. Trade Representative Robert Zoellick recently said on CNBC-TV that the United States would no longer play "Uncle Sap" in a world where subsidies run rampant under existing rules.
Source: AFBF—Executive Newswatch, May 20, 2002 Speedlines

India now major force in wheat, rice markets
India has become a major force in the global wheat and rice export markets, and new strategies are designed to expand their position. Though India has stepped up its export pace, it continues to be plagued by mounting stocks due to rising production and attractive procurement prices that encourage farmers to sell their crops to the government.

However, as part of a new strategy to continue export expansion and surmount some of the problems faced with marketing low quality product, the government plans to implement export promotion policies, supplemental to selling stocks at reduced prices. In addition to counter trade, long-term credit, and food aid, the government plans to remove export restrictions, establish Agri Export Zones, and give transportation subsidies for exports of wheat and rice from government warehouses.

With these new policies, India has the potential to export even more and gain market share from competitors such as Vietnam and Pakistan for rice and the United States for wheat. However, the government needs to overcome a week infrastructure, the lack of uniform grades and standards, and quality problems.
Source: USDA/FAS—Grain: World Markets and Trade

Internal dispute disrupts Venezuelan corn market
Between 1996 and 2000, Venezuela imported an average of 1 million tons of U.S. corn annually—making it one of the U.S. top 10 markets. The imports are needed to meet the demand of the growing pork and poultry industries.

Venezuela produces about 1.2 million tons of corn annually, but most of it is white corn destined for human consumption. After a record crop in 2000 left producers with a surplus of 150,000 tons, the pork and poultry industry reached an agreement with the government to purchase the surplus at a large premium to imported corn with the understanding that it would be reimbursed for much of the extra cost. Following another bumper harvest in 2001, farmers were left with a 400,000-ton surplus because the industry refused to pay the "target" price, $235/ton, since it had yet to be reimbursed from the previous year.

Last September, frustrated by the industry's refusal to buy the local production, the government published a statement saying that it would not issue any corn import licenses until the domestic crop was completely sold. The pork and poultry producers responded by drawing down frozen meat stocks and reducing corn consumption by using non-grain feed ingredients, which are not subject to the import-licensing requirement. Now, eight months into the import ban, the industry has just about absorbed the domestic corn surplus. If Venezuela lifts the ban, purchases of lower priced imports should surge in an attempt to build up stocks before the domestic crop is ready this summer.

However, because of the interruption in trade, USDA estimates that Venezuela will import 900,000 tons this year, down 300,000 tons from last year.
Source: Grain: World Markets & Trade, April 2002

Cuban trade expectations high
According to recent trade figures, Cuba has purchased $31.5 million in U.S. agricultural products during the first three months of 2002.

When added to the $4.3 million purchased in November and December of 2001, recent agricultural purchases from Cuba now total almost $36 million. This figure is expected to rise to over $100 million by the end of the year, not including transportation charges.
Source: AFBF—Speedlines: May 21, 2002