France Backs Compensation for Food Producers as E. Coli Crisis Hits Demand

France, the European Union’s largest agricultural grower, is backing a plan to compensate farmers in the 27-nation bloc after the deadliest outbreak of E. coli ever recorded decimated demand.

As much as 80 percent of vegetable supplies are being destroyed in some areas because there is no market for them, Copa-Cogeca, a farm lobby group based in Brussels, said in a report today. “Unprecedented” losses are running into millions of euros a day, and “paralyzed” trade is extending into the fruit market, it said.

EU agriculture ministers are meeting in Luxembourg today to discuss their response to the outbreak, which has killed 23 people and sickened 2,429. They are also contending with an international trade crisis afterRussia banned imports June 2 and Prime Minister Vladimir Putin said he won’t “poison people” to meet international trade rules.

“It is fair to try to define the way of compensating the loss of the producers,” French Agriculture Minister Bruno Le Maire said in an interview in London today, adding that its scale had yet to be decided. “There has been a great failure, and we have to take that into account and try to improve our safety system so that it will never happen again.”

The Netherlands, the world’s second-largest agricultural exporter after the U.S., said yesterday it is asking for “broad support measures” for vegetable growers, including buying up of produce that can no longer be sold to consumers. The origin of the outbreak is still unknown.

Emergency Fund

A proposal by the Netherlands for an emergency fund is backed by Germany and Spain, farm organization LTO Nederland said in a statement yesterday. State Secretary for Agriculture Henk Bleker will also ask for measures to promote vegetables, the Dutch government said. The proposal has support from nine other member states, LTO said in a statement today.

The proposed fund is gaining support, Bleker said today before the meeting. “I’m not so good in counting, but it’s going well,” he said.

The EU should spend as much as 55 million euros ($80 million) on a three-week media campaign to promote fresh produce, Freshfel Europe, which represents the industry, said today. Sales of cucumbers fell 80 percent to 100 percent in some member states, tomatoes 50 percent to 80 percent and lettuce more than 50 percent, it said in a statement.

Cucumbers slumped to 5 cents a unit from a five-year average of 21 cents, while tomatoes now cost 13 cents a kilogram (2.2 pounds), compared with an average of 60 cents, Copa-Cogeca said. Prices are “well below” production costs, it said.

Spanish fruit and vegetable producers are losing 225 million euros a week because of the outbreak, said Jose Maria Pozancos, director general of trade group FEPEX. The Dutch vegetable industry is losing 80 million euros a week as orders are canceled, LTO said yesterday. www.bloomberg.com

Treasury Yields Approach This Year’s Low Before Report on U.S. Housing

Treasury yields approached the lowest level this year before an industry report that economists said will show confidence among homebuilders is at recession levels.

Yields indicate traders are cutting bets on inflation. The difference between rates on 10-year notes and Treasury Inflation Protected Securities, a gauge of expectations for consumer prices over the life of the debt, narrowed to a 12-week low of 2.32 percentage points on May 13.

“The market has priced in an economic slowdown,” said Takuya Yamamoto, who helps oversee the equivalent of $118.3 billion as a portfolio manager in Tokyo at Diam Co., a unit of Dai-Ichi Life Insurance Co., Japan’s second-biggest life insurer. “Housing will take a long time to recover.”

Ten-year yields declined two basis points to 3.16 percent as of 9:56 a.m. in Tokyo, according to Bloomberg Bond Trader prices. The 3.125 percent note maturing in May 2021 rose 1/8, or $1.25 per $1,000 face amount, to 99 23/32. The rate fell to 3.13 percent on May 13, the lowest since December.

The National Association of Home Builders/Wells Fargo sentiment index was 17 this month from 16 in April, according to the median forecast in a Bloomberg News survey of economists before the report today. Numbers lower than 50 signal more respondents view conditions as poor.

Federal Reserve Bank of Atlanta President Dennis Lockhart said it’s too early to consider an exit from record stimulus, a process that’s likely to begin only when the recovery becomes “more clearly sustainable.”

Questions Arising

“Even if they are a bit premature in my view, questions are already arising about the specifics of the Fed’s exit strategy,” Lockhart said yesterday in a speech in Atlanta. A change in the Fed’s public statements “would actually start the process” of tightening, he said.

Lockhart has backed the Federal Open Market Committee’s plans to complete a $600 billion Treasury-securities purchase program by June aimed at boosting the recovery. Fed ChairmanBen S. Bernanke and other policy makers last month reduced their forecasts for U.S. growth this year after the economy slowed in the first quarter, while increasing estimates for inflation excluding food and energy prices. www.bloomberg.com

Dollar Falls to 16-Month Low Versus Euro on Fed Rate Pledge; Kiwi Declines

The dollar fell to a 16-month low against the euro after the Federal Reserve renewed its pledge to keep interest rates near zero to stimulate economic growth.

New Zealand’s dollar dropped for the first time in three days after Reserve Bank Governor Alan Bollard left interest rates at a record low and said the economic outlook “remains very uncertain.” The yen touched the lowest in two weeks against the euro as Asian stocks extended a global rally in shares, damping demand for Japan’s currency as a refuge.

“The Fed is being perceived as very dovish, with rates likely to stay low for a long time,” said Michiyoshi Kato, senior vice president of foreign-currency sales in Tokyo at Mizuho Corporate Bank Ltd., a unit of Japan’s second-largest bank by assets. “Everyone is taking on risk, which is leading to selling of the dollar and the yen.”

The dollar dropped to $1.4825 per euro as of 9:38 a.m. in Tokyo from $1.4788 in New Yorkyesterday, after earlier touching $1.4838, the weakest since Dec. 8, 2009. The U.S. currency declined to $1.6676 per pound from $1.6627, after reaching $1.6686, the lowest since Dec. 3, 2009. The yen rose to 81.97 per dollar from 82.16. Japan’s currency was at 121.48 per euro from 121.47, and touched 121.64, the least since April 13.

2 1/2 Year Low

The Dollar Index, which tracks the greenback against the currencies of six major U.S. trading partners, fell to 73.091, the lowest level since July 31, 2008, before trading at 73.143 from 73.324 yesterday.

The MSCI Asia Pacific Index of shares climbed 1 percent today after the Standard & Poor’s 500 Index advanced 0.6 percent yesterday.

Fed Chairman Ben S. Bernanke signaled yesterday in his first press conference after a policy decision that the central bank will maintain its record monetary stimulus.

Fed policy makers kept the target rate for overnight lending between banks at zero to 0.25 percent, as forecast by all of the economists in a Bloomberg News survey. The rate has remained at that level since December 2008.

“The Fed is clearly not thinking about tightening policy anytime soon and, from this perspective, there was nothing in the Fed’s language to arrest the dollar’s recent decline,” Spiros Papadopoulos, a senior economist in Melbourne at National Australia Bank Ltd., wrote in a note today.

The New Zealand dollar fell from a three-year high as Bollard said monetary policy won’t change for some time and called the currency’s recent advance “unwelcome.”

The so-called kiwi slid 0.3 percent to 80.54 U.S. cents after climbing to 81.08 cents yesterday, the strongest since March 19, 2008. www.bloomberg.com