Feed the World

As president of the American Feed Industry Association (AFIA) Joel Newman has a lot on his plate. From sharply rising ingredient costs to global food safety concerns the industry is facing some of its biggest challenges yet.

As president of the American Feed Industry Association (AFIA) Joel Newman has a lot on his plate. From sharply rising ingredient costs to global food safety concerns the industry is facing some of its biggest challenges yet. While he represents members of the US feed industry, many of the issues he is grappling with are global concerns and by-products of the international trade the industry now engages.In particular the importing of feed ingredients into the US from other parts of the world, including Asia, brings with it heightened contamination risks as seen with the recent contamination of food products imported from China with melamine. Newman says the incident forced the US feed industry to re-assess the levels of protection it has in place to prevent such contaminated ingredients affecting its feed products: "We do have a very sound system in place and a very conscientious  industry so from the potential hazards we are aware of we do a very good job of protecting against those. But when you get an unknown substance such as melamine introduced into the system that makes it a lot more difficult."
Newman describes the melamine contamination incident as a "significant learning experience," and adds: "It's going to change the level of inspection, compliance, representation and warranties that will be required for ingredients being imported into the country." This is particularly true, he adds, as melamine remains a significant threat to food safety in the US: "It's still going on. It's gone from feed products to food products. It (melamine) isn't going away. There's no question that the whole globe is worrying about it not just the US."

In order to help facilitate more stringent inspection procedures the AFIA has develop its own third party food safety food safety programme for the US industry and hopes to gain government recognition of the regulation. Because this is a global concern, Newman advocates that the only way to minimise the impact of the current contamination issues, and prevent such contamination reoccurring is to establish regulations that are evenly applied across the food industry, and to ensure uniformity in terms of the food safety standards applied by different countries: "Our primary aim is to make sure that the feed products that we put into the food system are the safest and of the highest quality that we can possibly achieve on a global basis. In doing that we must also make sure that the various regulations and so forth tat we need to comply with are science based and practical and evenly applied across the industry."
This also extends, he goes on to say, to the application of regulations across the global feed and food products industry. "I think we need more equivalency and standards between the different nations that are trading with each other so we have assurances that that the standards we hold our own industry to are being applied to companies that would like to export into the US."

As well as greater equality in terms of international food safety regulations, Newman's organisation is calling for a reform of trade agreements been the US and its trade partners to prevent situations whereby US feed exporters are hit by sky high tariffs - the likes of which are not applied to their foreign counterparts. This, says Newman, would have the effect of creating a "level playing field". "The effects would be fairly significant for the industry. These are agreements with very important trade partners which currently impose tariffs of between 42% and 52% and some even as high as 100%. If these governments would remove a large portion of these tariffs in the first two or there years, it would then create a level playing field. On most of these products, these countries can import into the US with little or no tariffs. To remove the tariffs would benefit all the agricultural sectors from beef and grains to pet foods."
Newman goes on to say that trade agreements should be reformed not just to reduce trading tariffs but also to remove barriers posed by beuracracy and bring about greater uniformity of food safety inspection procedures: "In addition it would eliminate some non tariff barriers such as equivalency in food safety inspection systems and also reducing some of the significant paperwork that's required. These could relate to environment and labour standards. Sometimes those types of criteria are used as a non tariff barrier that can make it more difficult to accept products into a country."
It is all the more important to facilitate good international trade for US feed producers given the current economic decline and the shortage in the availability of credit for business, large and small.
This, says Newman, has hit the industry hard: "Industry banking and credit is a huge issue for our industry at the moment. Not only in the US but on a global basis there's a freeze of capital flowing banks so a shortage of capital is available to businesses.

"Our members of our business customers are all working diligently together to make sure they have enough capital to operate their businesses at an affordable cost."

He says the industry as a whole is "very concerned" about the situation: "I think they are very concerned. It doesn't matter what size you are, if you are looking for lines of credit they are not only tighter but more expensive and you have to have additional sources available to you."

Exacerbating feed producers' financial situations, is the fact that the cost of ingredients has risen sharply in the past two years. "We've just gone through  an era of significant increase in the cost of grains and oil seeds and all ingredients that go into feed manufacturing," says Newman "The price of ingredients has gone up anywhere between 5% and 400% based on the specific ingredients but the average price of feed has gone up between 75% and 100% in the last 12 to 15 months," he goes on to say..

With the environmental implications of farming and industry high on the global agenda, ensuring their operations are sustainable is also a key concern for members of the US feed industry. Newman says his organisation's members must not only ensure that their operations are conducted in a sustainable way but that they seen the be so: "One concern of our industry is helping to define and communicate issues about the environment and carbon footprints properly outside our industry. This also includes the area of animal rights and making sure all the facts are understood by our industry. This involves education and basically getting the word out to consumers n the value and integrity of our systems and the quality of our agricultural food systems in the US."
With so complex issues on its agenda the AFIA has a tough year ahead, admits Newman, describing its top priorities for 2009 as: "feed and food safety, energy policy, global competitiveness, industry banking and credit."

And while this may be a wide remit by anybody's standards Newman says that he is determined to ensure his members get a fair deal and a good press.

NOTE TO DESIGN

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The AFIA has published its Energy Policy which outlines the main challenges facing farmers from rising feed ingredient costs and how the use of these ingredients as a biofuel has greatly increased these costs:.

Energy Policy

Issue and importance:  The feed and livestock industries in the U. S. are experiencing significant financial challenges due to the dramatic increases in the cost of feed grains and oil seeds.  The inability of the livestock sector to transition quickly (reduce herd/flock sizes) is threatening the viability of this industry segment and its feed suppliers.   

Status: It is clear that feed and food price increases in recent months are a result of several factors; including:

• Increased global crude oil demand,
• Global population expansion and animal protein demand,
• Record low grain and oilseed inventories,
• The explosive growth of the U. S. biofuels industry, currently utilizing corn and soybeans as the primary feedstock for these biofuels,
• Index fund speculative effect on commodity markets, and
• The value of the U.S. dollar.

AFIA Position and Action:  AFIA's has developed the following position and action plans to address the above inflation factors, which are the industry's control:

Global crude oil demand:  The Administration and Congress must develop and implement a comprehensive U.S. energy policy that will significantly reduce the U.S. dependence on foreign oil, and include the feed industry's positions on various options for alternative fuel sources, conservation and environmental protection. The feed industry supports environmentally off-shore (50 miles) and Alaskan National Wildlife Refuge (ANWAR 200 ac. site) drilling to increase domestic crude oil in the short term; and a focus on the research and development of energy efficiency and alternative energy sources through combined corporate/government research programs (including but not limited to: cellulosic & algae biofuels, nuclear power plant expansion, wind farms, solar, clean liquid coal, automotive natural gas, and hydrogen cell technologies)   

Record low global grain & oilseed inventories:  AFIA actively supports increased production capabilities through seed technology and farming practice enhancements and global acceptance of these.  The Administration must use its authority to refocus the Conservation Reserve Program (CRP) to accept only environmentally fragile acreage, while releasing non-environmentally sensitive acres ("early out") without penalty.  

Biofuels competition for available grain and oilseeds: AFIA strongly supports the development and commercialization of financially viable alternative, farm-based biofuels as one part of comprehensive U.S. energy policy.   However, the government must recognize food security is at least as important as energy security, so there must be an even, fair playing field for both components of our national security.  Thus, energy policy must ensure that common inputs of energy and livestock producers, and the feed industry, will be allocated by market demand vs. government mandates.  The government should take the following actions:

• Maintain the federal Renewable Fuel Standard (RFS - which mandates the yearly minimum amount of biobased alternative fuels which gasoline refiners must blend - RFS) at the 2007 level through 2009, to relieve current price and supply pressures on corn, soybean, other feed grains and wheat. This would allow the feed and livestock industries a realistic period to reduce herd sizes and find new nutrition options during this difficult time of transition.

• Expedite mandated studies by USDA, the Department of Energy and others on the impact of the RFS and the use of feed/food crops as biofuel feedstocks on crop/feed/livestock and poultry production and consumer prices.
• Expedite expanded federal research investment into non-food crop feedstock development for biofuels.

To overcome the hurdles associated with increased DDGS in livestock feed program usage, AFIA is committed to bringing the feed and ethanol industry partners together to maximize the research, education and adoption of DDGS nutrition and refinement opportunities in livestock feeding programs

Commodity market regulation:  The disruptive effects of speculator activity should be expeditiously corrected by Congress as follows:

• Remove the exemption from speculative position limits granted to Wall Street banks by Congress/CFTC in 2000.  This would, in one step, return all speculative investors to the same limits and close the loopholes for swaps and electronic exchanges. 
• Bring all commodity trades under the CFTC authority and enforcement.  This would ensure over-the-counter (OTC) and foreign exchanges, which are trading on US exchanges, are reporting all positions and held to the same established limits.
• Re-establish speculative position limits for all commodities and across all contracts, reversing a 1998 decision to eliminate large and liquid market position limits, with enforcement by the CFTC, not the exchanges.
• Establish a process where speculative position limits are set by the actions of physical producers and consumers of these commodities, rather than the exchanges.
• Provide CFTC appropriate funding and staffing to fulfill its responsibilities and uniformly enforce controls over all markets.

AFIA is committed to work within or organize coalitions of other industry segments where there is a shared viewpoint and objectives to achieve the above positions and action plans

Opposition Issues:    Governments and consumers are skeptical of new seed varieties developed through genetic modification. Several groups encourage expansion of the CRP. The biofuel industry is committed to government policy support (including the RFS) to attract capital for expansion. The CFTC and some members of Congress are not in agreement that speculator position limit exemptions should be reversed.

Outlook:  There is a united demand by U.S. citizens to develop and implement a comprehensive energy policy.  The current Administration and Congress generally don't support changes to the RFS, but are aggressively supporting research for cellulosic biofuel options.  Three of AFIA's five commodity market regulation recommendations are being included in the finance package, but they do not include reversing speculative limit exemptions.  The November election and the ensuing new Congress and Administration may provide some potential for a more positive shift to support of AFIA's outstanding recommendations.   Efforts have begun to coordinate efforts with other agriculture organizations which share similar positions, and these efforts have met with good progress.

Bottom line:  The significant price increases affecting the feed and livestock industries are a result of many global factors.  To achieve the necessary changes, returning reasonable profits to these industries and maintaining the U.S. strength in our food system, requires a multifaceted approach and plan, as outlined above.