FOOD AND AGRICULTURE OUTLOOK WHAT S IN STORE FOR 2016: A LOOK AT 5 KEY ISSUES AND TRENDS

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1 FOOD AND AGRICULTURE OUTLOOK WHAT S IN STORE FOR 2016: A LOOK AT 5 KEY ISSUES AND TRENDS

2 FOOD AND AGRICULTURE OUTLOOK WHAT S IN STORE FOR 2016: A LOOK AT 5 KEY ISSUES AND TRENDS A FORWARD ANALYSIS Low Prices and Incomes for U.S. Agriculture Commodity prices and incomes for growers and for most agribusinesses along the agriculture/food marketing chain have come down from the highs of several years ago. Commodity markets can of course change very quickly, and unexpectedly, but most observers believe the low prices and low incomes of 2015 will continue in 2016 with no significant recovery, possibly for several years Election and Transition to a New President In an election year, especially a presidential election year, congressional activity slows down and eventually comes nearly to a complete stop. This year will be no different although there are several important food, agriculture, trade and environmental issues that will likely receive significant attention from Congress before activity wanes after Memorial Day. Regardless of which presidential candidate or political party wins the White House, the new administration will have new ideas and new priorities on big and smaller issues. The run-up to the 2016 election offers the opportunity for businesses to prepare for changes coming from a new administration, but also to attempt to influence a new administration as it develops policy and program ideas. This can mostly be accomplished by working with campaign staff and the transition staff put together by both major party candidates as they prepare to take office and then following up to influence the Senate confirmation process of the senior political appointees for the new administration.

3 KEY ISSUES 1. CUBA, NORMALIZATION OF RELATIONS On December 17, 2014, President Obama announced the beginning of normalization of relations between Cuba and the United States. Although there are no immediate prospects for legislative action, Congress will lift the trade embargo. Much already has been done by the president using executive authority to build upon the trade embargo exception for food, agriculture and medical products approved by Congress in The Opportunities u Embassies have reopened in the respective countries u Travel by Americans to Cuba has been expanded with no specific license required so long as the travel activity fits within 12 broad categories u Direct mail service is being restored u An aviation agreement allowing tens of daily scheduled flights between the two countries is nearly finalized u Direct banking with Cuba is now possible u For authorized goods, including food and agriculture products, U.S. businesses can now do business in Cuba What This Means for 2016 Cuba is a small, poor country of about 11 million people, but there is now a much improved opening for trade and investment for U.S. food and agriculture companies to consider exploring in Strategy for Impacted Businesses Cuba will eventually become a 21st century country, and those food and agriculture companies developing relationships today will likely benefit compared to those who begin later. 3

4 2. TRANSPACIFIC PARTNERSHIP AGREEMENT In early October 2015, the United States and eleven other Pacific Rim nations reached final agreement on the landmark Transpacific Partnership (TPP) trade agreement. TPP is the largest regional trade agreement ever negotiated, comprising nearly 40 percent of the world s economy and accounting for more than 42 percent of U.S. agricultural exports in It is projected to increase world incomes over time by billions of dollars, which in turn, will increase the demand for U.S. agricultural products across the board. Who s Involved Australia Brunei Darusslam Canada Chile Japan Malaysia Mexico New Zealand Peru Singapore United States Vietnam Check our TPP At-A-Glance Reference Guide for key trade agreement details on tariffs and other export barriers and the path from agreement to legislation. The agreement also includes provisions that will improve sanitary and phyto-sanitary (SPS) measures to help establish and preserve stability in the global trade of commodities and food products. The Challenge Senate Majority Leader Mitch McConnell has already very publicly stated to President Obama he does not believe Congress can approve TPP during the presidential election season. This is a direct warning to the president not to risk defeat of TPP by forcing Congress to take action during the election season. What This Means for 2016 There is much to be gained by U.S. agriculture from Congressional approval and the implementation of this trade agreement. Even though congressional consideration may need to be pushed back into a lame-duck session of Congress following the 2016 elections, or even into a new presidential administration in 2017, the efforts of U.S. agriculture trade associations and businesses to influence Congress during 2016 will be critically important to gaining approval of TPP, whether in the spring of 2016, or later. 4

5 3. GENETICALLY MODIFIED ORGANISM (GMO) FOOD LABELING A Vermont law to require mandatory labeling for food products containing GMO ingredients sold within the state takes effect July 1, Other states in the Northeast have approved similar laws that could take effect if their neighboring states approve mandatory GMO food labeling laws. The Challenge This threat of a patchwork of state laws on food labeling has caused the food and agriculture industry to ask Congress to approve legislation to preempt states from labeling GMO-containing food products. The House of Representatives has approved a federal preemption, but the Senate so far has been unable to do the same. What This Means for 2016 The Senate is expected to continue its strong effort to approve a federal preemption early in 2016 to prevent the Vermont law from taking effect. 4. PRECISION AGRICULTURE AND DRONES The use of drones (unmanned aerial vehicles) as tools of precision agriculture to gather timely information for crop production holds great promise. Although the Federal Aviation Administration (FAA) has granted many individual exemptions for agriculture and other industries, the use of drones for commercial applications remains prohibited. The Opportunity The ability to collect and analyze large amounts of agriculture production data and use the analysis to fine tune the production process to minimize input use/maximize profit is accelerating rapidly. This is of course good for business and good for the environment. How Things Ended in 2015 The FAA finalized a rule in December 2015 requiring all drones to be registered so that drone operators causing safety and privacy concerns could be identified by the FAA. 5

6 What This Means for 2016 Public concerns over safety and privacy may continue to grow, especially if the information obtained by the FAA through the registration rule confirms public safety and privacy concerns. It is conceivable the FAA will not issue a final commercial use rule in 2016, delaying the expected rapid development of drone use in commercial agriculture. 5. FOOD SAFETY MODERNIZATION ACT (FSMA) RULE IMPLEMENTATION Congressional approval of the FSMA in late 2010 was the first major rewrite of food safety laws in more than 70 years. It changed the approach from responding to food safety problems to preventing the problems. How Things Ended in 2015 The Food and Drug Administration (FDA) finalized five major rules. These rules include: u Preventive controls for human food u Preventive controls for animal food u The produce safety rule u The third party accreditation rule u The foreign supplier verification rule What This Means for 2016 The effective date for the rules on preventive controls for human food and livestock feed was generally November 16, 2015, with compliance dates phasing in over several years and the largest companies needing to be in compliance one year after the effective date. The effective date for the produce rule is January 26, 2016, once again with compliance phasing in over several years and the largest produce firms needing to be in compliance by January 27, Strategy for Impacted Businesses In coming months, food, feed and produce companies will need to make any changes necessary for compliance with these FDA FSMA rules. 6

7 ON THE RADAR There are a number of other issues that will be important to food and agribusinesses in Congress will likely continue efforts to overturn the Environmental Protection Agency (EPA) Waters of the U.S. rule and complete a reauthorization of the National School Lunch Program and the Commodity Futures Trading Commission. The Department of Agriculture and the Department of Health and Human Services will issue revised Dietary Guidelines this year, and the U.S. Trade Representative s office will continue in negotiations with Europe on the Trans-Atlantic Trade and Investment Partnership Agreement, although a final conclusion in 2016 seems unlikely. The FDA is likely to finalize changes to the nutrition facts labels on food products, including a new category for added sugars. Additionally, many believe FDA will announce new guidelines for reducing sodium levels in food products. CONCLUSION With continued lower incomes expected for U.S. food and agriculture businesses, important ongoing congressional activity, and a new presidential administration taking shape later in the year, it will be critically important for food and agriculture companies to be knowledgeable about key issues and to be ready to influence government decision-makers in 2016, looking ahead to FaegreBD Consulting professionals have the education, knowledge and experience to serve as trusted advisors and advocates on the key issues raised in this 2016 outlook, as well as the broad array of government actions, developments and trends impacting food and agribusiness companies domestically and internationally. The FaegreBD Consulting food and agriculture team partners with, and is supported by, Faegre Baker Daniels over 150 food and agriculture attorneys. The firm s food and agriculture industry team comprehensively counsels leading food and agribusiness companies on legal and federal issues impacting their businesses in the U.S. and abroad. CONTACT: David C. Lyons Senior Director, Government Advocacy & Consulting T: david.lyons@faegrebd.com 7

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