Minimal corn and other feed grain reserves are a major concern
Joel Newman was elected president and CEO of the American Feed Industry Association in July 2004. He previously served as chairman of the board and as a director for four terms. He completed a Bachelor of Science in animal science at West Virginia University and a Master of Business Administration in finance at Syracuse University. His experience in the agribusiness sector extends over three decades serving as CEO of United Cooperative Farmers, Maple Leaf Foods, and 23 years with Agway Inc. He is a director of the International Feed Industry Federation and is an appointed member of U.S. Department of Agriculture Technical Advisory Committee to the Secretary.
FM : Can you please provide an overview of the activities of the AFIA?
JN : The AFIA is the only national trade association devoted exclusively to representing the interest of the animal feed industry and its suppliers. Our membership includes commercial feed manufacturers, integrators, pet food manufacturers, ingredient and allied suppliers and state organizations. We characterize our membership as “The Total Feed Industry.” We have over 500 corporate members who collectively manufacture over 75 percent of the nation’s primary commercial feed.
FM : How does the AFIA assist its membership?
JN : The AFIA is the only organization representing the total feed industry in legislative matters and regulation development. Our services are directed at enhancing the technical and financial success of our membership. Our services include educational programs, webinars, seminars and national meetings, and we maintain a website for the benefit of our membership and stakeholders. We also offer an industry search engine called feedsearch.com to promote our industry members.
FM : What are some of the issues facing the U.S. feed industry?
JN : Currently we are focused on FDA rulemaking following passage of the Food Safety Modernization Act. As we work through the details of this new legislation in the rulemaking process, we are aggressively presenting the opinions and perspective of the industry to regulators. The AFIA and its members are totally committed to the Safe Feed/Safe Food Certification Program. This program was established in 2004 and has enjoyed strong participation and support. The program has attained FDA recognition and is responsible for upgrading standard operating procedures in cooperating plants. The AFIA is also involved in providing comments relating to the FDA review of Generally Regarded as Safe compounds and additives as well as working closely with the Commodity Futures Trading Commission on the implementation of the Dodd-Frank Act.
FM : Could you expand on the international connection?
JN : Through participation with the International Feed Industry Federation, headquartered in the UK, AFIA is promoting the interest of exporters and importers through harmonization of regulations. AFIA also actively participates in the U.S. Food Industry Codex Coalition and serves as a member of the U.S. Delegation to Codex, to ensure international food safety standards are science-based and do not become trade barriers for U.S. products.
FM : Could you comment on some of the issues facing the U.S. feed industry?
JN : Minimal corn and other feed grain reserves are a major concern. We established an Energy Policy Task Force in 2008, which has developed the industry position on various factors that are affecting the rising prices and shortage of feed commodities. The same Task Force is updating our position based on the factors that are contributing to the current shortage and price increases. AFIA contends that the U.S. must develop and implement a comprehensive energy policy. We must increase grain and ingredient production capabilities, through adoption of technology and releasing non-environmentally sensitive CRP acres. Food security is at least equally as important as energy security, and thus there needs to be a fair playing field for both components of our national security. AFIA supports a financially viable biofuels program, as long as grains are allocated between feed and energy production by market demand rather than by government mandates. AFIA strongly supports research to develop commercially viable non-food source biofuels production. In addition, AFIA is playing a leadership role in maximizing the research, education and adoption of DDGS nutrition.
FM : What other factors are affecting commodity supply and prices?
JN : We have determined that there were six factors leading to the price spike in 2008. While we have found that the same six factors are driving this current situation, they are in a different balance than in 2008. One factor that is certainly a consistent in both spikes is the significant increase of unregulated speculation in commodities. Currently, three Wall Street banks represent 94 percent of all index fund positions held in agricultural commodities, with one bank holding 61 percent of the total. And the total dollars held by index funds exceeds $200 billion today, almost the same level as in 2008. This has occurred because in 2000, the Commodity Futures Trading Commission and Congress granted Wall Street banks an exemption from speculative position limits. The passage of the Dodd-Frank Act authorizes CFTC to remove this exemption, and AFIA is working through the rulemaking process to ensure that all commodity speculators, on all exchanges and the OTC market, are subject to speculative position limits and transparency of their positions.
Other factors contributing to the escalation in ingredient cost include the global demand for both fuel and food, climatic factors and the growing demand for animal protein in the diets of many developing nations. This is reflected in low inventory levels, which have an impact on price.
FM : How do you view future developments in the U.S. feed industry?
JN : We foresee continued expansion for the U.S. industry as global demand continues to grow for meat, milk, eggs and fish. This growth will lead to the expansion of many companies, both domestically and globally. There will also continue to be some consolidation in the industry, which is primarily driven by the costs of regulatory compliance, the need for continued capital investment and the significantly increasing cost of working capital to maintain inventory and accounts receivables. It is obvious that the industry will need to continue improving efficiency and productivity, especially with respect to the conservation of water, land and power.
FM : Sustainability is a widely used term that probably means different things to different people. What is the AFIA position on this concept?
JN : AFIA has established a Task Force within our membership to identify key factors to attaining sustainability, as it relates to the feed industry. Our industry recognizes this is an important factor, both in terms of our responsibility to current and future generations, and our future success. Our Task Force is looking forward to introducing our initiative to our members and the industry in the near future, which will include initiatives to be undertaken by our industry as well as in collaboration with the broader food industry.
FM : Do you have any final messages for our readership?
JN : We believe that it is important to promote the positive image of feed and food production, and the tremendous, diverse, safe food supply we enjoy in the U.S. Our food system and this security for our nation is the envy of much of the world. AFIA members support and participate in initiatives to educate food distributors and consumers, which is important in projecting our message. We have an opportunity and an obligation to the rest of the world, as a leading producer of agricultural commodities and food, to contribute to feeding the one billion people worldwide that go to bed hungry every day. As a leader in new technologies, we need to ensure that they are safe, accepted and applied to meet the growing demand for food. Application of technology will be a significant factor in overcoming the constraints we face, and it will be necessary to work together to ensure that our efforts are coordinated and effective.
FM : Thank you.