For the Week Ending January 28, 2022

CALIFORNIA COURT DELAYS IMPLEMENTATION OF PROPOSITION 12
The Superior Court in Sacramento Co., CA, this week delayed enforcement of the state’s Proposition 12 prohibition on the sale in California of pork from hogs born to sows raised anywhere in housing that does not meet the state’s arbitrary standards. Several California business groups, including the Hispanic Chamber of Commerce and ones representing restaurants and grocery stores, asked the court to postpone the initiative, which took effect Jan. 1, until after implementing regulations are finalized. The California Department of Food and Agriculture has yet to issue rules for Prop. 12 despite a Sept. 1, 2019, statutory deadline. The judge in the case delayed Prop. 12’s effective date to 180 days after regulations are finalized. In the meantime, NPPC and the American Farm Bureau Federation are still waiting for a decision from the U.S. Supreme Court on whether it will consider their case challenging Prop. 12. The agricultural organizations argue that the voter initiative violates the U.S. Constitution’s Commerce Clause, which limits states’ ability to regulate commerce outside their borders. A decision is expected soon.

CONCENTRATION NOT AN ISSUE IN PORK PACKING INDUSTRY REPORT FINDS
A report issued this week by economists with Iowa State University, North Carolina State University and NPPC found that pork prices have risen because of strong demand for U.S. pork, higher input costs and labor shortages throughout the supply chain, not concentration in the meatpacking industry. The report’s authors, Iowa State’s Dermot Hayes, NC State’s Barry Goodwin and NPPC’s Holly Cook, also found that pork prices in the United States are still lower than in many other countries. The pork packing industry is made up of fewer and larger plants than it was 50 years ago, but the structure of the industry has changed little in recent decades, the report stated, and concentration levels today are about 7 percent lower than they were five years ago because of new packing plants that opened from 2017 to 2020. Four of those five plants are at least partially producer-owned. In fact, more than 100 industries had a greater concentration level, according to a commonly used calculation, the report noted. The same economists in December examined retail pork price inflation, finding no evidence that significantly higher profits are being captured at the wholesale level during this time of higher retail prices. The farm-to-wholesale price spread – which consists of packers’ costs and profits – has been shrinking while the wholesale-to-retail spread has increased over the past six months. Packer gross margins also are estimated to be within their 5-year average range, according to that report, which cited increased transportation costs, supply bottlenecks, a temporary loss in pork packing capacity that resulted from a federal court order stopping faster harvesting line speeds, higher energy costs and rising feed costs, among other factors, causing higher pork prices.

SUPREME COURT TO HEAR ‘WOTUS’ CASE?
The U.S. Supreme Court this week agreed to hear a case involving “waters of the United States” (WOTUS) and the U.S. Environmental Protection Agency’s jurisdiction over private lands that contain “wetlands.” Idaho landowners Michael and Chantell Sackett in 2004 were prevented by EPA from building on their land because of the presence of wetlands the agency ruled were “navigable waters,” or WOTUS, under the Clean Water Act. The Sacketts are asking the Supreme Court to clarify EPA’s jurisdiction by adopting a test – proposed by four of the justices in a 2006 plurality opinion – that only would subject wetlands to regulation if they have a “continuous surface water connection to regulated waters.” NPPC has sought to check any expansion of EPA’s jurisdiction over waterways, which, based on several high court decisions, includes navigable waters and waters with a significant hydrologic connection to navigable waters. The 2015 WOTUS rule, for example, would have allowed the agency to regulate, among other water bodies, upstream waters and intermittent and ephemeral streams such as the kind farmers use for drainage and irrigation. It also would have covered lands adjacent to such waters.

BIDEN ADMINISTRATION TO INCREASE H-2B VISAS TO FIGHT LABOR SHORTAGE
To address the country’s ongoing labor shortage, the Biden administration this week announced it will allow an additional 20,000 foreign workers into the country under the H-2B visa program. That program permits employers to temporarily hire such workers for non-agricultural labor or services, including meatpacking. Employers requesting H-2B visas must attest to the U.S. Department of Labor that they will offer a wage that equals or exceeds the higher of the prevailing wage, applicable federal minimum wage, the state minimum wage or local minimum wage. Most of the visas will be available only to workers who received H-2B visas in the last three fiscal years, but 6,500 will go to laborers from El Salvador, Guatemala, Haiti and Honduras. NPPC continues to ask congressional lawmakers to expand the current H-2A visa program to year-round agricultural laborers, including meatpacking workers.

TRANSPORTATION GROUP ASKS SENATE TO CONSIDER OCEAN CARRIER REFORM BILL
The Agriculture Transportation Coalition (AgTC), of which NPPC is a member, in a letter sent Tuesday asked Senate leaders to take up legislation to address “unreasonable ocean carrier practices that are undermining U.S. export competitiveness.” Sens. Amy Klobuchar (D-MN) and John Thune (R-SD) are crafting a bill similar to the “Ocean Shipping Reform Act of 2021” (H.R. 4996), which the House approved in December by a 364-60 vote. “The transportation crisis for U.S. agriculture products has become increasingly dire,” the AgTC said in its letter to Senate Majority Leader Chuck Schumer (D-NY) and Minority Leader Mitch McConnell (R-KY). The group also noted that a recent survey found that, on average, 22% of U.S. agriculture export sales could not be completed because of ocean carrier practices, including exorbitant freight rates, declined booking requests, unreasonable freight and demurrage and detention charges and failure to communicate schedules in a timely manner. (Click here to read the letter.)

NPPC PRESSES THAILAND FOR BETTER PORK MARKET ACCESS AS IT BATTLES ASF
Because of African swine fever (ASF), Thailand is predicting as much as a 40% decline in hog production this year, and NPPC is hoping the country finally will give the U.S. pork industry more access to the Thai market. Thailand’s pork imports are minimal, with 2021 volume at just over 26,000 metric tons, 99% of which was from the European Union. The country has a de facto ban on U.S. pork imports through high tariffs and several non-tariffs barriers. Import duties are 30% or 40% on most products, and it imposes a license fee for imported pork equal to about $220 per metric ton compared with $7.50 per metric ton for domestically produced pork. U.S. pork exports to Thailand must be cooked and/or prepared. Thailand maintains these obstacles to U.S. pork despite the United States being its No. 2 export market and despite receiving – until late 2020 – duty-free access to the U.S. market for many of its goods under the Generalized System of Preferences (GSP). In November 2020, the Office of the U.S. Trade Representative suspended more than $800 million in GSP trade preferences for Thailand for its failure to grant the United States “equitable and reasonable market access” for U.S. pork products. The decision followed a 2018 petition by NPPC, asking USTR to review Thailand’s eligibility for the GSP program. NPPC is continuing to work with USTR and the government in Bangkok to further open the Thai market to U.S. pork.

REPORT FINDS U.S. PORK STILL LACKS ACCESS TO JAMAICAN MARKET
A report on the operation of the Caribbean Basin Economic Recovery Act, a U.S. trade preference program for the 17 countries that make up the Caribbean Basin Initiative, showed a lack of access for U.S. pork in Jamaica. Issued late last week by the Office of the U.S. Trade Representative, it noted that Jamaica maintains unscientific barriers to U.S. pork while granting market access to pork products from other countries. The trade obstacles also exist despite a 2013 risk assessment conducted by the country’s Veterinary Services Division that determined U.S. pork poses only a negligible risk to Jamaica’s swine herd and is safe for human consumption. NPPC has been working with USTR and the Jamaican government to get better access to the island nation’s market. It is waiting for completion of a new risk assessment.

WHAT’S AHEAD

NPPC’s ZIEBA TO SPEAK AT INTERNATIONAL TRADE CONFERENCE
NPPC Assistant Vice President of International Affairs Maria Zieba will speak on trade issues at the Washington International Trade Association’s 2022 conference, which will be held 1 to 5 p.m. Jan. 31 and 9 a.m. to noon Feb. 1. With the theme “Managing a New Era in Trade,” the virtual event will look at, among other topics, multilateral trade, U.S.-China trade, supply chain disruptions and the Biden administration’s trade agenda. In addition to Zieba, among other scheduled speakers are the ambassadors to the United States from Canada, the European Union and Japan and Deputy U.S. Trade Representative Sarah Bianchi. NPPC is a sponsor of the event. (For more information on and to purchase tickets for the conference, click here.)