For the Week Ending April 10, 2009

April 10, 2009

Washington, April 10, 2009 


NPPC is insisting that the Obama administration study the economic impact of an expansion of corn-ethanol production and usage. In a letter sent Wednesday to Agriculture Secretary Tom Vilsack, Energy Secretary Steven Chu, Environmental Protection Agency Administrator Lisa Jackson and Carol Browner, who is assistant to the president for energy and climate change, NPPC asked that the administration lead an effort to examine the effects of such an expansion on corn availability, the price elasticity of corn, the users of corn and rural work forces and industries associated with corn. Recently, there have been growing calls from lawmakers and ethanol stakeholders for raising the cap on blending ethanol into gasoline to 15 percent from its current 10 percent. There also have been signals that the corn-ethanol industry is seeking to increase production in the face of reports that the cellulosic ethanol production mandate of 100 million gallons by 2010 likely will not be met. NPPC wants the administration to bring stakeholders together to consider all possible impacts of corn-ethanol expansion, including the extent to which increasing blend limits will further increase market speculation, affect grain and commodity markets and actually help the ethanol industry. While the U.S. pork industry has not opposed the use of ethanol and the country’s goal of producing 15 billion gallons of corn ethanol by 2015, it has paid a price, literally, in the form of much higher feed costs. Due mostly to those higher costs, pork producers since October 2007 have lost an average of $20 on each hog marketed; the industry has lost between $3 billion and $3.5 billion in equity over the past 18 months.



NPPC and its state affiliate organizations are asking the Obama administration to “slow the WTO accession process” for the Russian Federation until U.S. pork plants are relisted and Russia signs an “equivalence” agreement with the United States. Over the past year, Russia has “delisted” or failed to relist 34 U.S. pork production, processing and storage facilities, meaning 40 to 50 percent of all U.S. pork production is ineligible for export to the country. Russia did not identify any health or sanitary reasons for its actions, which are contrary to obligations contained in a 2006 side agreement that is part of World Trade Organization bilateral negotiations between Russia and the United States. The agreement established specific criteria and methods for Russian approval of U.S. pork plants. The actions also are inconsistent with the WTO’s Sanitary and Phytosanitary (SPS) Agreement, which requires WTO trading partners to recognize the SPS measures of other countries as equivalent to their own. (Russia does not adhere to the WTO principle of equivalence and approves U.S. meat facilities on a plant-by-plant basis.) The U.S. government and the U.S. pork industry have demonstrated to Russian government officials the effectiveness of the U.S. pork plant inspection system in ensuring a high level of product safety. In a letter to the president, NPPC and 31 state pork organizations urged the Obama administration to press Russia to relist all U.S. pork facilities as a condition for U.S. approval of its accession to the WTO. The organizations also urged the president to withhold Permanent Normal Trade Relations status from Russia until the country recognizes the U.S. plant inspection system as equivalent to its system. Russia is a top destination for U.S. pork. Since the United States and Russia signed a 2005 agreement establishing quotas with low tariffs for U.S. pork entering Russia, pork exports to the country have increased by nearly 560 percent to $476 million in 2008. That made Russia the No. 5 market for U.S. pork last year.


An ad hoc coalition, which includes NPPC and 140 other business, manufacturing, food and agricultural organizations, Tuesday sent a letter to President Obama urging him to quickly resolve a dispute with Mexico over allowing its trucks to transport goods into the United States. Mexican trucks now are prohibited from entering the United States despite a North American Free Trade Agreement provision that called for allowing them starting in December 1995 and a February 2001 NAFTA dispute-settlement panel ruling that excluding Mexican trucks violated U.S. obligations under the trade deal. In retaliation, the Mexican government last month imposed higher tariffs on an estimated $2.4 billion of U.S. goods. While many U.S. products, including pork, poultry and beef, were not on the retaliation list, they remain vulnerable to reprisal as long as the trucking issue is unresolved. Mexico is an important destination for U.S. pork. In 2008, the United States exported more than 873 million pounds of pork worth more than $691 million to the country, making Mexico the No. 2 value market and the No. 3 volume market for U.S. pork exports. Mexico took action against the U.S. after Congress failed to renew a pilot program that allowed a limited number of Mexican trucking companies to work beyond a 25-mile commercial zone in the United States. The Cross-Border Trucking Pilot Program was started by the U.S. Department of Transportation in September 2007 as a way to begin implementing the NAFTA trucking provision.



With Congress out next week – the second week of its two-week recess – Capital Update will not be issued next Friday. It will resume April 24.