April 1, 2016

Our Top Customers: How Soybeans and Animal Agriculture are Linked

By Tamara Hinton, American Soybean Association

With roughly two percent of the population feeding the remainder, the need for farms ectors to work together on a variety of policy issues is critical for the survival and success of American agriculture.

"When you're that small, you have to stick together," said John Heisdorffer, a soybean grower and contract hog feeder from Iowa. "If you don't, you're going to get run over."

Sticking together is what soybean growers and poultry and livestock producers have been doing for a number of years on a variety of issues. And, for good reason: their livelihoods are strongly intertwined. Just consider that the livestock industry is the largest consumer of soy meal as roughly 98 percent of it goes to feed pigs, chickens, and cows. Moreover, many soybean growers are also livestock producers as diversification on the farm helps reduce risk in a down economy.

"We know we need soybean growers," said Dave Warner, the communications director for the National Pork Producers Council (NPPC), which is a trade association representing 43 state pork producer organizations. "Otherwise, we don't have a pork industry. It's the same way on the other side."



This sentiment applies within the political and policy realm, too, where activist groups and farm policy critics can gin up so-called problems where none exist to be addressed in Washington or on the state level. There are a number of policy areas where the American Soybean Association (ASA) and its state counterparts have teamed up with all or parts of the animal agriculture industry to advance shared goals and protect American agriculture.

Davie Stephens, a soybean grower and poultry producer from Kentucky, describes one regional example from a few years ago. Growers in his state saw a need to band together when they felt like the Humane Society of the United States (HSUS), which has not been a friend to farmers, was pushing an activist agenda and misrepresenting producers in the process. As a result, Kentucky Livestock Coalition with eh mission of protecting and promoting the state's livestock industry.

"When an issues comes up, we're all on the same page and it's a collaborative effort," Stephens said. "The way we want to more is with one solid voice."

Indeed building coalitions and speaking with one solid voice is key to helping lawmakers understand what is at stake for America's farmers and ranchers when it comes to environmental regulations, free trade agreements and the importance of a farm bill.

EPA's Waters of the U.S. Rule (WOTUS)

If there is one issue that has secured the ire of nearly everyone in the agricultural community, it's the Environmental Protection Agency (EPA) Waters of the United States rule, otherwise known as WOTUS. The EPA and the U.S. Army Corps of Engineers (Corps) issued the rule two years ago in response to alleged uncertainty over the jurisdiction of U.S. waterways.

Although the Clean Water Act (CWA) created a federal and state partnership to preserve water quality in the U.S., there have been disputes regarding statutory authority over it the PA and the Corps pushing for greater controls. In recent years, a series of Supreme Court cases have ruled to limit their regulatory reach, but the effect has created ambiguity regarding the defined universe of jurisdictional waters. Although the EPA claims the WOTUS rule is only for clarification purposes, the language makes it simple for the federal government to assert that anything that is water is jurisdictional. "The burden to prove otherwise would on the landowner."

"It is bothersome to think about how it will be enforced from Washington to boots on the ground  because you can have different interpretations," Stephens said. "We don't know if a dry ditch in the middle of a soybean field is subject to the EPA jurisdiction and requires a Water Act permit just to plant soybeans."

For this reason and others, ASA has opposed the rule from the outset because of its impact on farmers and ranchers. In a Nov. 14, 2014 letter to the EPA, then-ASA president Ray Gaesser wrote "We believe that this rule creates new legal jeopardy for individual farmers, causes uncertainty where none existed and produces substantial problems for agriculture that will not achieve benefits to our nation's waters."

ASA was joined by a host of other groups pushing back.

"We've been all along urging the EPA to withdraw the rule," Warner said. "What the agency has come up with is not clear at all. Beyond the direct impact on farmers, this law could be used by activist groups to create a whole lot of mischief."

While the president of the National Cattlemen's Beef Association (NCBA), Philip Ellis stated, "The WOTUS regulation is one of the worst onerous land grabs undertaken by any regulator."

Legislative attempts in Congress have fallen short of stopping the implementation of the rule, but farmers and ranchers received a reprieve last fall when the U.S. Court of Appeals for the Sixth Court issued a nationwide stay with a final ruling expected in due course.

"Farmers are first and foremost wanting to improve the environment," Stephens said. "That is evident through different efforts that are being implemented on the farm right now. Another regulation isn't going to help us."

Trade

In contrast, maintaining strong export markets and creating new marketing access opportunities for American goods is hugely important and helpful for America's farmers and ranchers, especially for the soybean and animal agriculture industries.

This is why ASA has been a proponent of free trade agreements as a way to expand market access by eliminating tariffs and other trade barriers for soy and meat. In fact, only weeks ago members of ASA were visiting legislators during their annual meetings in Washington, D.C. to encourage Congress to pass the Trans-Pacific Partnership (TPP) trade agreement this year.

TPP is a trade agreement between the United States and 11 other countries that includes Australia, Brunei, Canada, Chile, Japan, Malaysia, New Zealand, Peru, Singapore, and Vietnam. In February, the U.S. along with the other negotiating parties signed the agreement, but right now it awaits action in Congress, which must pass legislation implementing the provisions of it.

"TPP is a no-brainer," ASA President Richard Wilkins stated in a release earlier this year, calling on Congress to consider the agreement. "It means increased demand at home and abroad, which drives exports, which supports jobs and economic activity all across the country."

The countries included in the agreement are some of the top exporting  markets for soybeans, pork, beef, and poultry and collectively represent 40 percent of the world's gross domestic product. A recent analysis by the American Farm Bureau Federation predicts new farm income would increase by $4.4 billion with U.S. ratification of TPP.

"We're going to sell more soybeans," Heisdorffer said. "We're going to sell more meat. Everything that's involved with agriculture has a possibility to expand."

Although soybean growers would benefit from the elimination or reduction of tariffs as a part of the agreement, they would also gain rom the expanded market access for U.S. protein, especially in Japan, which is at top export market for pork and beef. The greater demand for animal protein imports would boost the demand for animal feed like soy meal.

With the presidential election dominating the conversation in Washington and dictating, in many respects, the congressional agenda, it remains to be seen if consideration and passage this year. One thing is for certain: ASA will continue to push fir the agreement, because failure to do so puts the U.S. at a distinct competitive disadvantage.

"We ate absolutely committed to the full-court press that we'll need to move across the finish like this year," Wilkins said. "We know that the election makes everything harder, but this is important enough that we're ready to do whatever it takes."

Country of Origin Labeling (COOL)

Meanwhile, one thorny trade issue–mandatory country of origin labeling (COOL) –was finally resolved late last year when its repeal was included in the omnibus spending bill that Congress approved and the president signed into law.

COOL is an issue that perfectly demonstrates the interconnectedness between soybean growers and animal agriculture as cetain implications of the law–those geared towards the livestock industry–would have negatively impacted soybean growers from nearly every angle.

Created as a part of the 2002 Farm Bill and amended in the 2008 Farm Bill, COOL was designed to identify the source of certain foods. It went into full force in March of 2009, only to be challenged in the World Trade Organization (WTO) less than a year later by Canada and Mexico, which charged that the U.S. law was discriminatory against imported livestock. The WTO ruled in favor of Canada and Mexico settling off a long and tortured process where a U.S. appeal was rejected, along with a 2013 revision to the original COOL language to comply with international trade obligations. In each case, the WTO upheld earlier findings of discrimination and authorized Canada and Mexico to retaliate- should they choose- by imposing tariffs on U.S. goods going to those countries.

The ASA supported repeal of the COOL law based on these potential retaliatory tariffs on U.S. soy exports, and on adverse impacts to the livestock industry, which is stated previously is the largest consumer of domestically produced soybean meal.

"COOL would have had a primary and secondary impact on soybean growers," explained Heisdorffer.

"Let's be clear, these two countries are critically valuable trading partners," Gaesser said in a June 10, 2015 statement that praised the U.S. House of Representatives for voting to repeal COOL with 300 votes. "Mexico is the United States' top export customer for U.S. meat products, and Canada is our third largest customer. In 2014 the United States exported nearly $7 billion worth of U.S. pork, poultry, and beef to these markets–all fed on diets of U.S. soybean meal."

Although the House had acted, the Senate was at an impasse on the issue with some Senators pushing to replace COOL with a voluntary program.


With fears of trade retaliation growing by December, NPPC along with ASA, state soybean associations, NCBA, the National Chicken Council and more than 200 other groups sent a letter to the Senate urging full repeal. In the Dec. 7, 2015 letter they wrote, “the damage that the U.S. would suffer in lost trade and jobs resulting from such retaliation is a price too high to experiment with any action short of full repeal of the offending provisions in the Country of Origin Labeling (COOL) law…It’s too late for the COOL law to be tweaked.”


Ultimately, lawmakers included the repeal provision in the FY2016 omnibus federal spending bill that passed both bodies of Congress and was signed into law. It was a victory for livestock producers and American soybean growers. It was also a strong reminder that there is strength in numbers when it comes to pushing policy solutions through Capitol Hill.


“We need to work together on a lot of issues even if it’s not directly affecting your particular industry,” added Warner.

‘We are all farmers’

Another provision that ASA worked to include in that yearend tax and spending package that Congress passed was an extension of the biodiesel tax credit through 2016.

“The extension of the biodiesel tax credit is integral to the continued growth and expansion of the biodiesel industry in  the U.S.,” Wilkins said as Congress was considering the package.


Soybean oil is the primary feedstock used to produce biodiesel–a renewable clean-burning diesel replacement used in existing diesel engines. Although a relatively young industry, it has grown tremendously over the last decade increasing its production from 112 million gallons in 2005 to 2.1 billion gallons in 2015.


The growth of the industry can also be beneficial for poultry and livestock farmers. Biodiesel creates a demand for soybeans, growing the supply of soybean meal, which helps lower the cost of animal feed and creates an additional market for animal fats, which are also used for biodiesel production. Some estimate that biodiesel has lowered soybean meal prices by at least $20 per ton over the last decade.


“The relationship between pork producers, livestock farmers and soybean growers is important,” said Warner. “We need to stay close with the people providing our feed and we need to work together on issues whether it’s free trade agreements or environmental regulations or other policy matters.”


Indeed, recognizing that one part of American agriculture relies upon the success of another is a powerful message to remember, especially as Congress soon gears up for another farm bill reauthorization.


“We are all farmers,” added Stephens. “We’re all in this together.”

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