Vilsack Expected to Announce $500 Million to Expand Meat Processing Capacity

Bottom-line update on key economic and policy issues

In Today’s Digital Newspaper

Today’s dispatch will be a different format due to travel and speaking commitments later today. It provides an opportunity to comment on what many readers and listeners to my podcast, Signal to Noise, and Agri-Talk listeners, as well as Pro Farmer newsletter readers, have asked about: Bottom-line assessments on some key issues. Here goes: 

• What will USDA Sec. Tom Vilsack announce today in Council Bluffs, Iowa, near Omaha, Nebraska? USDA has self-billed the event as an “important” announcement. Assuming no change of plans (recall the aborted dairy announcement in Wisconsin), this one may be multifaceted. But among the potential “big” news is an announcement that $500 million will be available starting in fiscal year (FY) 2022 (which begins Oct. 1) to expand meat processing capacity, most likely via grants to small and medium operations, however they will be defined. Even in today’s Washington, that’s a lot of taxpayer revenue funding. Let’s hope there is not loads of red tape involved in participating, like current grants. As for when the funds will be available, waiting until FY 2022 makes sense because one would assume it will take regulations to be proposed and issued for public comment. That takes time. Small meat processing plants can cost $1 million to $3 million depending on their parameters. Medium-sized operations more.
  
  Vilsack’s event this afternoon is being staged at the Rustic Cuts Butcher Shop in Council Bluffs. Could it be more obvious what the topic is going to be? And why Council Bluffs? Nebraska doesn’t have any Democratic lawmakers representing them in either the House or Senate. But Vilsack will have a spirited and knowledgeable Democratic House member with him, Rep. Cindy Axne (D-Iowa). She has been on Agri-Talk several times and is adept at discussing several complex topics. One of them was when she told us that she got far-left Rep. Alexandria Ocasio-Cortez (D-N.Y.) to help fight against the Biden proposed language dealing with stepped-up basis. She told AOC how that would impact New York City bodegas and said it did not take long for AOC to see the negative impacts.
  
  Alternative approach. Read this article (link) to see how state and industry officials expanded a meat processing facility in Princeton, Kentucky.
   
• Other announcements from Vilsack may include the much-talked-about Product of the USA label for meat products. Again, another worthy topic depending how it unfolds. If not done right, Canada will not hesitate to retaliate. And perhaps Vilsack will provide needed details on another frequent topic: putting more teeth (enforcement) in the Packers and Stockyards Act.  

• Meat industry concentration will be linked with today’s announcements. Recall the recent Senate Ag Committee hearing on this topic in which the largest cattle industry group, NCBA, did not even testify. That’s a definition of a tilted hearing even though participants at the hearing had some revealing testimony. Some meat industry lobbyists have noted four processors have been the rule in the industry for decades. And on Thursday when I searched for when the Senate Judiciary Committee would have a hearing on meat industry concentration, up came a letter from Sen. John Thune (R-S.D.) requesting such a hearing — but the dateline was 2002. Point: This has been a topic and allegation for a long time. 

• The key coming event today will be the latest of President Joe Biden’s many executive orders (EO). Biden today will sign a sweeping EO designed to promote competition across American industries in a ceremony at the White House. The president’s action will prompt the federal government to set new regulations on everything from airline luggage fees to non-compete clauses. Read that EO very carefully because impacted companies will too, and the easiest prediction will be court challenges ahead. Biden is expected to sign his EO today addressing concentration in agribusiness, transportation and other sectors. One element of the order would ask the Justice Department to work with regulatory agencies against foreign-owned shipping alliances and monopolized rail routes that the administration believes have driven up shipping costs nationwide. “It doesn’t sound right to most people that there are three shipping companies that are dominating the market and upping and increasing costs for suppliers, small businesses, people across the country,” White House press secretary Jen Psaki said. “And on domestic freight railroad, the executive order urges the Surface Transportation Board to allow shippers to more easily challenge inflated rates when there is no competition between routes.” If you want to know how gov’t can really muck up things, read an article (link) in the Wall Street Journal related to a potential railroad merger/purchase. The American Association of Railroads says the coming competitive switching rule “would roll back the foundational market-driven principle that keeps the industry viable, reduce network fluidity, and ultimately undermine railroads’ ability to serve customers at a time when freight demands have dramatically increased.” Ask the gov’t to manage the area with the most rainfall and it would likely turn into a desert in a few years, the saying goes. And as I reported on Thursday, the Federal Maritime Commission will be ordered to deal with the fees and surcharges of ocean carriers. Sick ‘em.  

• Populist and other lawmakers and various lobbyists/groups wanting “big changes” will take all this as an opportunity to seek changes they have wanted for years. Regarding livestock industry issues such as pricing transparency and other matters, just look at some of the pending legislative initiatives which include:
  
    Sens. Fischer, Wyden: Cattle Market Transparency Act

Sens. Grassley, Tester: Spot Market Bill

Reps. Hartzler, Cleaver: Optimizing Cattle Market Act of 2021

Reps. Johnson, Spanberger: Butcher Block Act… Increase grants for small/medium processors

Sens. Rounds, Tester and Reps. Miller-Meeks, Spanberger: Meat Packing Special Investigator Act

• What about cattle pricing? Talk about a complex topic for lawmakers and other bureaucrats to dig into. The current leaders in Washington like to talk about transparency when it suits them. But asked about the science involved in reducing the line speeds in pork processing, well the science is defined with two words: labor unions. So much about transparency. But there should be some change relative to the current system, many say. So be it. However, as is so typical when Congress and the executive branch get involved, watch for unintended consequences.
• Ethanol and the RFS and EPA. Some veteran observers of Washington are starting to wonder if EPA Administrator Michael Regan, who won mostly applauds when he was announced, just may not be the person they thought. He will have to put “meat” on the coming Biden administration update of the Waters of the U.S. (WOTUS) rule. Another EPA hot topic is the RVOs for the 2021 and 2022 Renewable Fuel Program (RFS). Growth Energy CEO Emily Skor gave us an excellent update of this and other biofuel issues on Monday (link).
• Where are the promised payments to contract hog producers? In the past, Vilsack has said the answer needs a regulatory review. The promised payments were made in December. Was a similar review done for the now-court-challenged $4 billion (at least) to selected socially disadvantaged farmers? While some are taking potshots at the inability of the NPPC to get the payments announced, I am not in this camp. It appears someone for some reason is slow walking this topic.
• What about WHIP+ for 2020 and perhaps 2021 crop and other disasters? Stay tuned. Lawmakers want to see how the current season unfolds, and most sources expect this issue to be included in the final FY 2022 Ag appropriations measure, whenever that is finalized. And it could include additional funding to make the remaining 10% of second-half 2019-crop WHIP+ payouts.
• U.S. economy. With the gov’t now intervening in so many topics, the focus is on whether the Federal Reserve is making a big mistake when it keeps saying recent inflation is “transitory.” Have you bought a steak lately? Have you filled your car up with gasoline lately? Have you tried to buy lumber even with the recent “downturn” in prices? Have you sold your house or tried to buy a new one? (One of my neighbors recently sold their house at $66,000 above their asking prices… in just two days on the market. Another frequent question is the impact on the U.S. economy if tax increases proposed by President Biden and Democratic congressional leaders, if approved — by no means a certainty. Take away incentives for businesses and what usually happens is higher prices (inflation) and less business expansion… that means a slowdown in the economy.
• 2022 elections. If the midterm elections were held today, which they are not, law-and-order issues would have more than a few Democrats losing office. The topic is so significant that in recent weeks some Democrats and the White House have even tried to blame defunding the police on Republicans! Even for Washington, that's like a Democratic version of former President Donald Trump.