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USDA will spend more than $4 billion to focus on diversifying “critical supply chains” after examining lessons learned from the coronavirus pandemic, and tie at least part of the funding to transforming livestock markets.

The USDA announcement came as the White House released a 100-day examination of supply chains across key parts of the country’s economy. The White House sees the focus on supply chain resilience as a way to “reimagine and rebuild a new American economy, not go back to the way things used to be.” The report highlights the president’s focus to pass a large, encompassing infrastructure bill to help position infrastructure to help U.S. companies compete globally.

The initiative looks to leverage billions more in investments by the private sector to “transform critical parts of the U.S. food system” and shift away from heavy reliance on a small number of large processors. USDA stated it will use its supply-chain spending to “increase transparency and competition” in the livestock markets and the meat processing sector that “have resulted in thinly-traded markets and unfair treatment of some farmers, ranchers and small processors.”

Certain investments from USDA through grants, loans and loan guarantees “will specifically address the shortage of small meat processing facilities across the country” as well as focus more attention on local and regional food systems to support them, USDA stated.

USDA will spend $4 billion from the American Rescue Plan to “strengthen the food system, support food production, improved process, investments in distribution and aggregation, and market opportunities,” the department stated, tying the investments to the Biden administration’s “Build Back Better” initiative.

“The COVID-19 pandemic led to massive disruption for growers and food workers,” Agriculture Secretary Tom Vilsack said. “It exposed a food system that was rigid, consolidated, and fragile. Meanwhile, those growing, processing and preparing our food are earning less each year in a system that rewards size over all else.”

Vilsack added the goal of the supply chain investment will be to help the food system better absorb market shocks and provide more value to both farmers and workers, with more attention on sourcing food grown and processed more locally and regionally. Details were thin on just how this will be accomplished with USDA’s programs.

Beyond the food-system details from USDA, a key component to Biden’s economic plan highlighted in the supply chain review focuses on domestic semiconductor manufacturing, research and development. Semiconductors were the top supply chain challenge highlighted by the administration. Along with that comes the realization the U.S. relies heavily on China for the minerals needed to make more chips.

“These tiny chips are vital to virtually every sector of the economy—including energy, healthcare, agriculture, consumer electronics, manufacturing, defense and transportation,” the White House stated.

With most pieces of industrial and consumer equipment requiring more semiconductors, the global shortage of chips has affected nearly every industry. Within agriculture, major machinery retailers have reported delays getting equipment and informed customers to plan ahead for combines, tractors, planters and other equipment. Increasingly, the U.S. also is getting more chips overseas, especially from Taiwan, which now produces as much as 92 percent of the worlds most advanced logic chips.

Commerce Secretary Gina Raimondo will stress the challenges the country faces with semiconductor needs, pointing out domestic production is essential to national security and economic competitiveness.

“We know government alone cannot fix this problem. The private sector plays a central role in addressing this crisis, and the Department of Commerce will redouble its engagement with industry to facilitate information flow between semiconductor producers, suppliers and end users,” Raimondo said.

The White House wants Congress to spend $50 billion specifically directed towards boosting semiconductor production and development. “We must build resilient and competitive semiconductor supply chains for the long-term,” the White House stated. “Our strategy must include taking defensive actions to protect our technological advantages. But we must also proactively invest in domestic production and [research and development].”

With the president’s focus on electric vehicles, the supply chain plan proposes Congress spend $5 billion to electrify federal vehicles with U.S.-made electric vehicles and spend another $15 billion to expand charging stations nationally. The Department of Energy also should use its authorities to support domestic production of electric battery cells.

Vilsack, Raimondo and Transportation Secretary Pete Buttigieg also will be part of a new long-term Supply Chain Disruptions Task Force. The task force “will focus on areas where a mismatch between supply and demand has been evident: homebuilding and construction, semiconductors, transportation, and agriculture and food.”

The administration also plans to set up a “trade strike force” to propose enforcement actions against unfair trade practices that have affected critical supply chains. The strike force will also look at ways trade agreements can help improve the resiliency of supply chains for the U.S. and trading partners. The administration also pointed to the importance of an ongoing review of supply chains and trade policy towards China.

The White House report notes China has taken over the global market for several critical minerals. The White House stated China used “state-led, non-market interventions” to capture a large part of the value chain of rare earth minerals and refining capacity for those minerals.

The Department of Commerce will initiate an investigation under Section 232 of the Trade Expansion Act of 1962 to look at neodymium magnets. The magnets are considered critical for certain motors and electronics. A large percentage of neodymium magnets come from China, the largest producer of rare earth magnets. Even before the pandemic, U.S. officials were raising concerns over the country’s reliance on China for rare earth magnets.

Also tied to exports, the Biden administration will examine the U.S. Export-Import Bank authorities to finance new U.S. manufacturing facilities and infrastructure projects that would expand exports.

While the Biden administration resists increased mining for fossil fuels, the government also will work to develop standards for extracting minerals such as lithium, cobalt, nickel, copper, rare earth elements and other materials. That includes putting more resources into mapping these minerals and their reserves, the White House stated. The administration also will use financial tools to help boost the manufacturing and mining of minerals and rare earth elements globally.

Along with semiconductors and rare earth minerals, the White House also spotlighted the need to boost domestic production of key pharmaceutical products and the primary ingredients for generic drugs. About 87 percent of the facilities that produce ingredients for generic drugs are now located overseas, leaving U.S. pharmaceutical supply chains vulnerable. — Chris Clayton, DTN ag policy editor

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