Agriculture and Government Policy: When worlds collide

No one can claim government policies do not have an effect on the food industry. Beginning with passage of the Jones-Costigan Act of 1934, the U.S. government has been heavily involved in managing U.S. agriculture in one form or another. Government subsidies for producers and processors have been around since the 1970s, when former Secretary of Agriculture Earl Butz lobbied for the expansion of commercial farms and grain exports.

This year is no exception as two major issues involving agricultural policies are being discussed in court and in the halls of Congress. The first issue is ongoing: the debate over genetically modified (GMO) seeds. An organic vegetable producer in Oregon filed a lawsuit against USDA arguing the agency failed to require an Environmental Impact Statement for genetically modified sugar beets; the plaintiff cites the possibility of cross-contamination between their organic products and neighboring farms growing GMO crops. The issue has made its way to the United States District Court for the Northern District of California in San Francisco where opponents are arguing protocol was not followed during the FDA approval process.

Repercussions of the ruling could be far-reaching. If the court rules against USDA, GMO beet seed may be banned until proper approval is granted. This would force farmers to scramble for non-GMO beet seed, raising its price and, consequently, the price of sugar. An injunction against the use of GMO beet seed, should the court decide one is warranted, could possibly come as early as March of this year.

In other news, the soybean-processing industry suffered a major drop in oil demand due to trans-fat labeling requirements. In addition, oilseed crushers had hoped demand for biodiesel would provide another high-margin outlet for soybean oil. Instead, domestic biodiesel capacity utilization is near 30 percent and the biggest export market has been virtually closed by European Commission-imposed import duties. Now the $1-per-gallon biodiesel blending credit has been allowed to expire and may not be renewed until March.

As these situations unfold over the next six months, the future roles of genetic science and alternative energy will be tested. Future investors in both will watch closely for signals of the government’s role in regulating or promoting their respective industries.

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McKEANY-FLAVELL COMPANY, INC.