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July 2019, Volume 25, Number 3

Trade, Roundup, Cannabis

Midwestern states received heavy rains in April and May, delaying the planting of corn and soybeans. However, USDA reported in June 2019 that farmers planted 92 million acres of corn, up from 2018, and 80 million acres of soybeans, down from 2018. Wheat acreage of 46 million acres was also down from 2018. Some 14 million acres of cotton were planted.

The China-US trade war is testing farmers, many of whom voted for President Trump. China stopped buying US soybeans in retaliation for US tariffs on Chinese goods, prompting USDA in May 2019 to offer farmers a $16 billion aid package to offset lower prices. The Trump Administration provided $12 billion in direct payments to farmers in 2018 to soften the effects of retaliatory tariffs.

China has turned to Brazil and Argentina for soybeans. Some US farmers worry that they will find it difficult to regain Chinese customers when China-US trade resumes.

USDA is moving the Economic Research Service and the National Institute of Food and Agriculture to Kansas City on September 30, 2019.

Roundup. Roundup is the world's most widely used herbicide, and the development of seeds resistant to its active ingredient, glyphosate, is a $9 billion a year business for Germany's Bayer, which bought Monsanto in June 2018. Most Roundup is sold in the US and South America, where Bayer sells seeds that are genetically engineered to resist glyphosate.

Over 13,000 lawsuits have been filed against Bayer alleging that the weed killer causes cancer. California juries returned two verdicts awarding about $80 million each in Spring 2019 to persons who used Roundup and developed non-Hodgkin lymphoma.

Bayer is appealing these verdicts, and the EPA and most regulatory agencies agree with Bayer that glyphosate does not cause cancer. The California verdicts were based in part on emails and documents that suggest outside researchers who found no links between glyphosate and cancer were closely allied with Monsanto, possibly tainting their results. Bayer's shares have fallen in value by half since it acquired Monsanto.

The EU has approved the use of glyphosate until 2022, but Austria in July 2019 enacted a law banning its use. The European Commission has three months to object to the Austrian ban.

Cannabis. Medical marijuana can legally be sold in 33 states, and 10 states allow recreational marijuana. By one measure there are 200,000 to 300,000 jobs in the US cannabis industry, including production and marketing.

Morocco is the world's largest producer of cannabis, producing over 35,000 tons in 2016. Canada in October 2018 became the first major industrial country to legalize recreational marijuana. Illinois in June 2019 became the 11th state to legalize recreational marijuana.

Colorado legalized recreational marijuana for persons 21 and older in 2014, and five years later twice as many Colorado residents report using cannabis as adults in the other states. The value of retail sales was $1.5 billion in 2018.

Over 57 percent of California voters approved Proposition 64 to legalize recreational marijuana in November 2016. The implementing regulations gave discretion to the state's 487 cities on whether to allow retail marijuana sales, and 80 percent of cities have said no. One result is that there were only 920 licensed retail pot shops in California in May 2019, compared with 560 in far smaller Colorado.

California's legal marijuana sales in 2018 were $2.5 billion, a third of the $7.5 billion projected by backers of legalization. With taxes averaging 14 percent, Yes on Prop 64 anticipated $1 billion a year in new tax revenue for local social services. The state projects less than $300 million in marijuana taxes in 2018-19, and will spend $50 million to regulate the cannabis industry.

California consumes only a fifth of the 14 million pounds of cannabis grown in the state each year.

Fair Trade. Chobani in July 2019 announced an agreement with Fair Trade USA to pay a small premium of two to four percent for milk from dairies that treat cows and workers humanely. Fair Trade auditors will check labor, environmental and animal welfare conditions on dairy farms that supply Chobani with milk.

Paul Rice founded Fair Trade USA in 1998 to help coffee farmers. More recently, it has certified farms in Canada, Mexico and the US, and now certifies 40 commodities. Buyers pay premiums for Fair Trade certified commodities that totaled $105 million in 2018. Fair Trade USA collected $15 million in fees in 2018 from farmers and buyers who pay for the certification process and the right the use the label.