Report says Phase One Trade Deal Signing May Happen This Weekend

Reports surfaced early on Monday that the Chinese Vice Premier will lead a delegation to Washington, D.C., to sign the Phase One trade deal. A source close to the situation tells the South China Morning Post that Liu (Lou) He will fly to Washington on Saturday to sign the agreement. The source said the U.S. extended the invitation and Liu has accepted. Farm Futures reports that Beijing and Washington haven’t confirmed the trip yet. China is already buying larger amounts of U.S. agricultural products, including soybeans, which was a big part of the agreement for U.S President Donald Trump. The possibility of making the deal official this weekend will mean increased purchases by China, as well as a partial end to the trade war that’s dominated headlines for the past 18 months. China’s soybean imports from the U.S. recently hit a 20-month high at 2.6 million tons, the highest number since March of 2018, when the trade war between the world’s largest economies began to pick up steam. Reports of higher food prices in China will likely mean a need for increased imports of U.S. agricultural goods in the months ahead to bring down those prices.

White House Adviser says Agreement with China is a Done Deal

White House Trade Adviser Peter Navarro said on Monday afternoon that the Phase One trade deal with China is wrapped up. “That’s a done deal,” Navarro says. “You can put that one in the bag.” The one thing he didn’t do was confirm a report by the South China Morning Post that China’s Vice Premier will be in Washington to sign the deal this weekend. Navarro giving his affirmation to the deal with China shows that President Trump doesn’t face pressure from conservatives to negotiate more favorable terms for the U.S. Navarro’s hostility toward China and its global trade and economic practices is well known in Washington, as he published a book during his career titled “Death by China.” Under the agreement announced on December 13, the U.S. put off implementing new tariffs on Chinese imports while reducing some existing duties. China agreed to bigger purchases of American agricultural products and made new commitments on intellectual property projections and forced technology transfers. As of now, the exact terms of the agreement haven’t been announced. 

Ag Negotiator; $80 Billion in Purchases “Doable” for China

The Phase One trade agreement between China and the U.S. has the two nations in “close contact” as they work toward getting the deal finally signed. U.S. Chief Ag Negotiator Gregg Doud says the agreement between the world’s two largest economies will mean big numbers of Chinese agricultural purchases of U.S. ag commodities. He tells Farm Journal that, “China’s purchase commitment is built upon a base year of $24 billion in ag purchases, which occurred in 2017. What China has agreed to do is buy an additional $32 billion over the next two years on top of that $24 billion mark.” Doud did acknowledge there are those people who say China’s potential purchase levels will be hard to reach. However, he says that it doesn’t take into account some of the new structural changes in the agreement. “China imported $124 billion in ag products last year from around the world,” he says. “What we’re asking China to do is to commit to $40 billion out of that $124 billion total.” He thinks because of the structural changes in the deal, China will be more than able to accomplish that.

U.S. Farm Exports to Philippines Hit Record

The United States has seen a lot of benefits from the Philippines’ growing demand for imported agricultural products. The USDA’s Foreign Ag Service says agricultural exports to the Philippines will reach a record of $3 billion by the end of this year as shipments continue to arrive. The U.S. currently commands 28 percent of market share in the nation, making it the largest supplier of agricultural products. Last year, the Philippines was the 11th-largest market for U.S. ag exports. The top five products included soybean meal, wheat, dairy products, pork and pork products, as well as poultry. Last year, ag exports to the Southeast Asian nation reached a record of $2.9 billion. U.S. soybean meal was the highest-value export, worth $884 million in 2018. USDA data shows that “While sales were down four percent from January to October year-on-year, Manilla officials still expect a record $3 billion as shipments picked up ahead of the holiday season.” U.S. food and beverage products alone will reach a record $1.2 billion by the end of 2019, which amounts to more than 29,000 container trucks.

USDA Sets Requirements for Meat and Poultry Labels

The U.S. Department of Agriculture released a clarification on its requirements for accuracy in labeling of meat and poultry products. An Agri-Pulse report says the Food Safety and Inspection Service says the only way beef can be labeled “grass-fed” is if they fed on grass or forage 100 percent of the time after they were weaned. Because cattle would then have to have access to pasture until slaughter, they can’t ever be put into a feedlot. Products that come from animals with less than 100 percent access to grass or forage before slaughter can’t use the term grass-fed. The only way that can happen is if the label makes it clear that at least some of the animal’s dietary needs came from grain. As an example, the report says an acceptable label could be “Made from cows that are fed 85 percent grass and 15 percent corn.” The guidance that came out late last week also says certified organic products can be labeled legally as “raised without antibiotics” or “no added hormones” with no documentation required. The farm that produced the organic livestock or poultry, as well as the processor, have to be certified organic under USDA standards.

USB Sets Goals for 2020

United Soybean Board CEO Polly Ruhland recently announced her group’s priorities for the year ahead. 2020 goals will include improving farmer profitability by focusing in on meal, oil, and sustainability. One of the things they’re researching this year is to prove the amino acid profile, as well as how valuable it can be to livestock producers that feed soy to their animals. That’s why they’re looking further into both their meal and protein quality improvements in the soybean. Another area of focus for USB is enhancing and communicating the sustainability of soy. Improvements in technology over the years have allowed soybean farmers to grow more soybeans and use fewer acres of land to do it. They want the public to know that the sustainability of soy can help the planet and put profit into a farmer’s operation at the same time. Another 2020 objective is to focus their research on the benefits of soybean oil, more specifically in high oleic soybean oil. The objectives were highlighted this month during the United Soybean Board meeting in December.

Washington Insider: Challenges to Trade Policy Authorities

Bloomberg is reporting this week that a number of international trade cases are expected to be decided next year and could change the president's "unlimited authority" to force U.S. importers to pay steep tariffs on steel and other goods that the administration says threaten national security.

While courts are largely deferential to the executive on national security, a recent case involving steel tariffs on Turkey is sending a message that the president doesn't have "carte blanche" when he uses a Cold War era law to impose tariffs, according to Clark Packard, trade policy counsel at the R Street Institute, a research organization promoting free markets.

The case, brought by Transpacific Steel LLC, could have wide-ranging impacts, including undermining the administration's threats to impose auto tariffs, R. Will Planert, a partner in Morris Manning and Martin LLP's international trade practice, told Bloomberg.

In addition, Ford Motor Co. is expected to make a bid for a U.S. Supreme Court review of steep tariffs on imports of Transit Connect vans in 2020, while a solar firm will fight to preserve a tariff exclusion the administration is trying to nix.

Transpacific Steel's challenge focuses on so-called "double tariffs" and could shed light on how courts may limit the president's use of a basic law, Section 232 of the Trade Expansion Act, Devin Sikes, an international trade attorney at Akin Gump Strauss Hauer & Feld, said. The U.S. Court of International Trade, in denying the government's bid to toss the case last November, rejected its argument that the president can modify tariffs without following the statute's procedures.

Transpacific would get a hefty tariff refund if it wins this challenge, which is expected to proceed with the steel importer's brief due Jan. 21, 2020. The company, which bought steel from Turkey for rebuilding after major hurricanes, alleges the administration flouted the law by singling out Turkey for 50% tariffs five months after the original 25% tariff was imposed.

A constitutional challenge to the tariff law is set for a Jan. 10 oral argument at the U.S. Court of Appeals for the Federal Circuit, Bloomberg notes and a decision in American Institute for International Steel v. United States could follow between 90 and 120 days later.

If the appeals court strikes the law down, current steel and aluminum tariffs would be eliminated -- however, a ruling upholding the law could embolden the administration to seek more tariffs.

The American Institute for International Steel argues the current law violates the non-delegation doctrine by ceding lawmaking authority to the president. In Gundy v. United States, which involved a non-delegation challenge to a sex offender law, four justices in June signaled an interest in revisiting the doctrine. Justice Brett Kavanaugh, who didn't participate in Gundy, said Nov. 25 in a matter unrelated to the steel case that the court may want to reconsider the doctrine.

Trade law firms are telling industry clients there could be an "avalanche" of claims if the Court of International Trade backs JSW Steel in a separate challenge to a Commerce Department tariff exclusion decision according to Adams Lee a trade lawyer with Harris Bricken. The court in JSW Steel (USA) Inc. v. United States could order Commerce to revisit its decisions and give importers who want to escape steel tariffs "new clarity," Lee said.

In addition, industry challenges are appearing from several other directions, Bloomberg said. For example, the newest steel tariff challenge in Universal Steel Products Inc. v. United States questions whether the Commerce report forming the basis for the levies met the law's standards.

Universal Steel and other importers joining the challenge say Commerce didn't explain the likely impact of the recommended remedies on downstream industries that manufacture products critical to national defense readiness. If the Court of International Trade agrees, it could force Commerce to re-evaluate.

So, we will see. While many observers indicate hopes for a diminution in trade tensions following the expected phase one deal with China, there are indications the administration intends to continue to push forward with its "managed trade" initiatives in China and in numerous other countries.

Growing industry pushbacks on this policy indicate a "political pause" during the coming election could be undertaken, but it is clear that not all administration policy advisers agree on such a policy decision -- so a significant policy fight can be expected to continue, possibly even after the approaching 2020 elections shift the government into "all politics, all the time." As always, the trade debate should be watched closely by producers as it intensifies, Washington Insider believes.

USDA Approves First State, Tribal Hemp Plans

Hemp production plans submitted by three states and four Indian tribes have been approved by USDA, the Agricultural Marketing Service (AMS) announced Dec. 27.

Louisiana, New Jersey, and Ohio are the first set of state hemp production plans approved under the U.S. Domestic Hemp Production Program, AMS said, while those submitted by the Flandreau Santee Sioux, Santa Rosa Cahuilla, and La Jolla Band of Luiseno Indian tribes were also given the green light.

Under the 2018 farm bill USDA was directed to develop a regulatory oversight program for hemp, including approval of hemp production plans submitted by states and Indian tribes.

Currently, 17 states have submitted plans to USDA that are under review, while another eight are working on plans to submit for review.

Report Indicates China's Liu to Arrive in US Saturday for Signing of Phase One Deal

Chinese Vice Premier Lui He will lead a delegation to Washington to sign the phase one trade agreement between the U.S. and China, with the South China Morning Post reporting the delegation will arrive in Washington Saturday and be in the U.S. a "few days." President Donald Trump on Dec. 24 said he and Chinese President Xi Jinping would meet to sign the phase one deal, "but China has yet to confirm this."

U.S. Trade Representative Bob Lighthizer said earlier this month that representatives from both the countries would sign the phase one trade deal agreement in the first week of January.

Meanwhile, China's Ambassador to the U.S. Cui Tiankai told China state television CGTN that there is no problem for the country to live up to the commitments it has made in the phase one trade deal. "We will always implement what we promised. There is no problem with that," Cui said. "The U.S. has made commitments to the one-China policy. I just hope they will honor their commitment."

Tuesday Watch List

Markets

Consumer confidence index and home price index will be out early on Tuesday. We will also be watching for CFTC's Commitment of Traders report findings on fund activity last week. Also, any confirmation of Chinese trade delegates coming to Washington for the trade deal signing will be important.

Weather

Snow squalls and blustery winds are in store for the northern and eastern Midwest Tuesday. Dry conditions will be in effect elsewhere for New Year's eve. Temperatures will be milder after last weekend's storm. However, heavy snow cover in the Northern Plains will have a notable chilling effect.

Skepticism Remains Over China’s Ag Purchases

An Associated Press report says there are still people on both sides of the Pacific Ocean who remain skeptical about the actual amount of farm goods that China committed to buy in the “Phase One” trade agreement with the U.S. Trade Representative Robert Lighthizer said the amount will total $40 billion a year. However, President Trump says the total is actually “much more than $50 billion.” Is it realistic? Even in the best of times, exports to China has never been higher than $26 billion in any year. Beijing may be locked into contracts with other suppliers like Brazil and Argentina it lined up after the trade war broke out with the U.S. Chad Hart, an Ag Economist with Iowa State University, says, “History says we’ve never been close to that level. There’s no clear path to getting us there in one year.” However, the skepticism actually works both ways. A trade specialist at the University of International Business in Beijing says the figure is $40 billion and he wonders if the U.S. can ensure the full supply of products to equal that value. At this point, farmers that talked to the AP say they’re hopeful but guarded in their expectations. Iowa farmer Jeff Jorgeson says, “At this point, we have to see more details.”

Don’t Forget about Wheat in the Phase One Trade Deal

When news broke about the Phase One trade deal between the U.S. and China, it made the soybean industry especially happy. A Bloomberg report says don’t forget about wheat, which could also be a big winner in the agreement. Speculation is rising that China will work to fill its wheat-buying quota as part of the agreement. That will likely create new demand for wheat because China has failed to live up to its wheat-purchasing promises in the past. Soybean purchases are likely to be somewhat more limited because of the African Swine Fever outbreak across the country, which will lower typical demand levels. If Chinese wheat purchases were to reach the quota mark of 9.6 million tons, that would represent a huge demand jump. In the six years prior to and up through 2017, buying has averaged less than 50 percent of that allotment. The timing could be good for U.S. farmers. Tighter corn supplies in Brazil and wheat supplies in Russia, the world’s top wheat exporter, have made American grain more competitively priced in the world market. That’s already causing Chinese importers to begin to boost their purchase levels from the U.S.

China Changing Hog Production After AFS Outbreak

The Chinese Ag Ministry says large hog farms are lining up with the smaller family-owned farms as part of a state-initiated investment worth about $7.1 billion dollars. The goal of the new initiative is to boost hog operations across the country that were hit hard by the African Swine Fever outbreak. A Reuters report says fifteen of the country’s leading pig farms signed 19 agreements with local governments in 16 Chinese cities to raise pigs together. The Ministry of Agriculture and Rural Affairs says these projects should produce over 22 million hogs for slaughter every year and will involve 33,000 poor rural families. While announcing the plan, the ministry didn’t give a specific timeline on when this would take place. Bigger farms are being encouraged to purchase a stake in or lease medium and smaller farms. They’re also being asked to make these arrangements as quickly as possible by building a number of standardized household-based farms, slaughterhouses, and refrigerating centers. China’s hog herds, once the biggest in the world, has dropped almost 40 percent since the ASF outbreak began in mid-2018. China is the world’s biggest producer and consumer of pork.

USDA; Climate Change May Increase the Cost of Federal Crop Insurance

The USDA’s Economic Research Service looked into the ways that climate change could affect the cost of the Federal Crop Insurance Program. Researchers worked with statistical models to predict crop yields from historical weather data. They used weather simulations from climate models to build scenarios showing how yields might respond to climate change. Economic models then simulated how farmers and markets might respond to changes in weather and yield. The study explored the potential impacts in the year 2080. It compared climate scenarios arising from different projections of greenhouse gas emissions levels to a hypothetical future with a climate similar to that of the past several decades. Under that scenario with moderate emissions reductions, in which farmers adapt to changes in climate with adjustments to what they plant, where they plant it, and how they manage it, the cost of today’s Federal Crop Insurance Program would average about 3.5 percent higher than under a future with a climate similar to that of the recent past. Under the scenario in which emissions trends continue, the cost of the FCIP would increase by an average of 22 percent.

Brazil Soybeans Taking Much of U.S. Market Share in China

While China has been the world’s largest importer of soybeans for some time, Brazil and the U.S. have been competing for the top spot as the world’s largest exporter to China. Back in the 1990s, the U.S. was the top soybean exporter. During the end of that decade, both the U.S. and Brazil increased their exports to answer a growing demand for soybeans in China. Brazil’s exports grew more quickly than the U.S. During the ‘90s, the U.S. supplied as much as 50 percent of China’s soybean imports, but that number gradually declined further into the 2000s. Brazil’s share first matched the U.S. total in 2002 when each country supplied about 35 percent of China’s imports. Between 2002 and 2011, each country’s share of soybean exports to China totaled between 35 and 50 percent. Brazil’s share jumped to 50 percent of all exports to China between 2012 and 2016 as the U.S. share dropped to about 40 percent. That number would drop to 30 percent in 2017 as China’s tariff on U.S. soybeans took effect later in the marketing year. During the first nine months of China’s 2018/19 marketing year, Brazil’s share of the soybean import levels rose to 77 percent, while the U.S. share was just 10 percent.

Ten Signs of Farm Financial Stress to Watch Out For

Things have been hard in agriculture and more specifically, it’s been hard to be a farmer. Wet weather, low crop prices, as well as trade disputes have put some farmers on the edge. Financial stress is taking a toll and Successful Farming has put together a list of signs that may indicate a farmer is suffering from significant financial stress. Signs include isolation or withdrawal, as well as talking in a monotone voice or lacking facial expressions, and outbursts of anger or abrasive behavior toward others, including children. After that, they list confusion, forgetfulness, and difficulty concentrating. Also on the list is blaming others such as banks or spouses, binge eating, gambling, or drinking. Sleeping too much or not enough is also on the list, as is a lack of pride in the appearance of the operation, including the buildings and grounds. Not caring for livestock is another sign to watch for, as are more farm accidents.

Washington Insider: Growing Trade Policy Angst

The media are increasing their focus on trade policy now and pointing out that for years America’s trade agreements have tried to break down economic barriers and remove tariffs and other impediments to cross-border commerce. However, the newly emerging deals “have turned that approach on its head” the New York Times reported last week.

For example, while the phase one China deal promises to lower some of the walls Beijing has erected for foreign companies -- including opening its financial markets, streamlining imports of American agriculture and offering greater protection for intellectual property -- it leaves in place tariffs on the bulk of Chinese imports, more than $360 billion worth of goods.

And it requires some $200 billion of additional purchases of U.S. products over the next two years, according to the Trump administration, but also “moves trade policy away from promoting free markets and back toward an earlier era of managed trade.”

The Times notes the new NAFTA similarly contains provisions that open up markets for dairy, digital services and other industries. But its most “transformative changes” tighten the rules for North American automotive manufacturing to try to spur more production within the continent, a move some Republican lawmakers say will weigh on trade.

The New York Times sees these modifications as “the product of the administration’s 'transactional trade approach,' one that aims to wield America’s economic power to force other nations to buy more American products. President Trump's 'America First' philosophy looks with suspicion upon global supply chains and free trade deals and seeks to force sprawling multinational companies to move operations to the United States in an effort to lower the trade deficit.”

The Times also charges the administration has little use for the type of multilateral organizations that have tried to lift economic growth around the world by promoting free trade. Last week, the administration effectively crippled the World Trade Organization’s ability to resolve trade disputes after a sustained campaign against a critical part of the body.

Doug Irwin, a trade historian at Dartmouth College, said the pacts were a substantial departure from those enacted under previous U.S. presidents -- both Republicans and Democrats. “Most trade agreements that we’ve seen in recent history are agreements to liberalize markets,” he said.

In a TV interview last week, Robert Lighthizer, the administration’s top trade negotiator, acknowledged the agreements were not likely to please those who prioritized free markets.

“I understand the people that believe in just protecting investors and pure market efficiency,” Lighthizer said. “They’re not going to be happy because we are making it more expensive to operate in some other areas and less expensive in the United States.”

President Trump’s aggressive approach to reworking the global trading system has been praised by some parts of industry as an attempt to fix a situation they say has been disastrous for American workers.

“Trump and team have what appears to be a strong deal,” Daniel DiMicco, a former steel industry executive, who leads the Coalition for a Prosperous America, said of the China trade pact.

Still, many economists and trade experts fear the approach could backfire on the United States, by degrading the international trading system and raising the cost of manufacturing -- resulting in lower productivity and economic growth.

In a recent analysis, Mary E. Lovely and Jeffrey J. Schott, two economists at the Peterson Institute for International Economics, projected that the provisions in the U.S.-Mexico-Canada Agreement would hurt American industry by driving up the cost of making cars and dampening growth.

Analysts at Fitch Ratings said Tuesday the China deal had raised their estimates for global growth but does less to lower trade barriers than anticipated. The trade truce leaves the effective American tariff rate on Chinese products at 16%, below the 25% level that the president had threatened, but up from roughly 3% before the trade war, they said.

The North American and China pacts, which together cover countries responsible for more than half of America’s trade, are the first translation of the administration’s trade ideals into policy.

But they also bear U.S. Trade Representative Lighthizer’s imprint and his long history of favoring a “managed trade approach” as a Reagan administration official, the Times said. The WTO later banned agreements that seek to restrain a country’s exports.

That history has direct parallels to China, where American officials have been urging the government for decades to reduce its role in the economy.

Administration officials, including Lighthizer, have also criticized Beijing for using preferential policies, subsidies and central planning to give its businesses an advantage over American ones. But the trade deal announced this month appears to make little progress on those issues. Instead, its largest feature appears to be purchases that are likely to be beneficial for American businesses but may wind up further strengthening the hand of the Chinese state.

So, we will see. Competitive prices for U.S. goods and increasing access to developing-country markets are fundamentally important to U.S. producers and the newer administration approaches should be watched closely by U.S. producers to determine their likely longer-term impacts on ag industries -- along with potential implication for government interventions in both the U.S. and its trading partners, Washington Insider believes.

Trying To Gauge Products In US Exports To China Under Phase One Deal Not Just a US Exercise

The effort of trying to determine what products are expected to be involved in the phase one deal with China is also going on within China.

The China Daily reported Zhang Xinyuan, a researcher at Huatai Securities, said “increased imports from the U.S. will mainly include crude oil, semiconductors, gas, soybeans, consumer goods, automobiles, ethanol and tourism services.”

From a macro perspective, the paper said that the phase-one deal will reduce downside risks to the global economy, with Ding Shuang, chief economist of Greater China and North Asia at Standard Chartered predicting 2020 “should be a year of soft but stabilizing growth for the global economy.”

Xinhua: US Pecan Growers Eye Regaining Chinese Market Via Phase One Trade Deal

The state-run Xinhua News Agency reported U.S. pecan growers are eager to get back into the Chinese market. In 2017, U.S. pecan in-shell exports reached more than $300 million with more than 76% going to China.

The report noted U.S. growers indicate the trade battle with China has prompted a 40% decline in prices via oversupply from the loss of exports to China.

Meanwhile, early this week Bloomberg reported U.S. chicken firm Sanderson Farms has kick-started exports to China after a ban on American poultry supplies was lifted last month. The company earlier this month sent its first container of chicken feet to China since the 2015 ban and is loading more this week, said Chief Executive Officer Joe Sanderson. The third-largest U.S. chicken producer expects the 35% tariffs will be removed next year, helping accelerate exports.

Green Plains Ethanol expects the corn-based fuel will also be in the mix, predicting there could be one billion gallons of the product moved to China.

Monday Watch List

Markets
As far as reports go, Monday is fairly quiet with USDA's weekly grain inspections due out at 10:00 a.m. CST. Traders will be checking the latest forecasts, including those for South America, and any comments about the pending trade agreement with China. CFTC releases its Commitments of Traders report at 2:30 p.m. CST.

Weather
Moderate to heavy snow and rain are in store for the Northern Plains and northern through eastern Midwest Monday, causing safety and transportation hazards and livestock stress. These conditions also will end corn harvest efforts until spring. Other areas will be drier. Temperatures will be seasonally cold north and central and warm south and southeast.

Chinese Soybean Purchases Rise in November

Soon after China announced a partial trade agreement with the U.S., their purchases of American soybeans in November jumped higher. November imports jumped to 5.4 million tons, which was almost 54 percent higher than last year. An Associated Press report says U.S. soybean imports into China more than doubled from the previous month’s 2.6 million tons. That number comes from AWeb.com, a news website that serves the Chinese farming industry. China cut off purchases of U.S. soybeans as the trade war with Washington, D.C., kicked into high gear. While the two countries announced the “Phase One” deal back in October, they haven’t released any specific details regarding the agreement. The AP report says U.S. officials now think the agreement could be signed as early as January. As a part of the agreement, U.S. officials say Beijing will be buying a lot more U.S. farm products. However, Chinese officials have yet to confirm how big the purchases will be. Chinese government spokespeople did confirm that importers were already placing orders in September but didn’t give out any details of those purchases. Chinese buyers use a lot of soybeans as animal feed and to crush for their cooking oil. 

First U.S. Shipment of Chicken to China Arrives in January

USA Poultry and Egg Export President Jim Sumner tells Agri-Pulse that the first U.S. chicken shipment to China in a long time will enter the Asian country next month. It marks a resumption of those shipments after China lifted a ban on U.S. chicken just over a month ago. The Chinese ban was initially implemented after an avian influenza outbreak in the U.S. While that outbreak was stamped out a long time ago, China finally lifted its ban after the U.S. approved the importing of Chinese chicken, something Beijing had demanded for a long time. “The first shipment heading to China is chicken paws from Georgia that will head out from the Port of Savannah,” says Sumner. “We’re thrilled that the first shipment in years is coming from Georgia, the number one chicken producer in the nation.” The first shipment is expected to contain about 50,000 pounds of chicken paws and is the start of what should be a quick ramp-up in chicken shipments to China. The U.S. industry got Chinese approval for shipments from 172 facilities, but most of those cold storage units weren’t included. That should be rectified soon as 177 applications came in from cold storage facilities that should be approved any day now.

USMEF Looks to Expand Pork Opportunities in Hong Kong

The U.S Meat Export Federation is planning to fill the fresh pork supply shortfall in Hong Kong with U.S. chilled pork. The African Swine Fever Virus caused the number of live hogs coming into Hong Kong from China to drop by fifty percent, with the numbers running below 2,000 head per day. “This has caused a shortage of local, fresh pork, and the fresh pork product that is available is being sold at much higher prices,” says Joel Haggard, USMEF senior vice president for the Asia Pacific. He says the opportunity could benefit the U.S. industry in both the short and long term, as more Asian consumers get used to chilled pork. “The opportunity for more pork supplies has never been better,” Haggard adds. It does take a bit more time shipping to Hong Kong than it does to Japan and Korea. Also, the wet market vendors in the country will need to be taught the proper way to handle the vacuum-packaged chilled product. “The product will initially be sold in supermarket chains,” Haggard says. “More than 100 supermarkets in Hong Kong are selling U.S. chilled pork, along with some of the city’s traditional wet markets.” Haggard says this is the largest chilled pork distribution that USMEF has ever seen, calling it, “satisfying to see it finally come to fruition.”

Farmers Union Wants Improvements to USMCA

Back on December 10, Speaker of the House Nancy Pelosi announced that the White House and her chamber of Congress had reached an agreement on the U.S.-Mexico-Canada Trade Deal. While the National Farmers Union was happy to see an effort to update the old North American Free Trade Agreement, the group says that effort didn’t go far enough. They’re calling on the Senate for improvements to the deal before the final passage. “The free trade framework established by NAFTA has dominated international trade deals for 2.5 decades, to the detriment of American workers,” says NFU President Roger Johnson. “It’s contributed to the movement of rural manufacturing jobs overseas, caused our national deficit to skyrocket, lowered wages, and eroded national sovereignty.” Johnson says the deal doesn’t go far enough to specifically protect family farmers and the rural communities they live in. U.S. neighbors Canada and Mexico are the largest export markets for U.S. food and agricultural products, totaling more than $39.7 billion in 2018. A USDA report says those exports support over 325,000 jobs. Ag Secretary Sonny Perdue says the agreement is a big win for American workers, the economy, and farmers and ranchers.

High Stakes, High Rewards Ahead for Hemp Production

Many farmers across the country are spending time thinking about the potential pitfalls and the possible opportunities that hemp production can offer them. Farm Journal’s Ag Web Dot Com says many are taking the leap into hemp production. Colorado farmer Dion Oakes says, “Hemp has a very promising outlook for farmers as a rotational cash crop that can be very viable for them.” Looking ahead to the new year, only four states, including Idaho, South Dakota, Mississippi, and New Hampshire, haven’t made it legal to grow industrial hemp within their borders. U.S. Hemp Growers Association Executive Director Caren Wilcox says she expects those four states to move toward legalizing it sometime next year. Wilcox says farmers will need time to relearn how to grow the crop. She says it will be important to get advice and counsel from those farmers who have hemp growing experience. Make sure to source where your seed comes from. She says farmers have to know their state’s regulations. The other big piece of advice is to have a customer lined up before planting their first crop.

Have Action Plan in Place in Case of ASF

The National Pork Board put out an end of the year reminder about safeguarding the country’s pork farms against African Swine Fever and other Foreign Animal Diseases. U.S. pork farmers know full well that the virus is wreaking havoc on the international pork industry. While ASF isn’t in the United States at this time, the NPB says the possibility of it or another foreign animal disease means American pig farmers should be taking steps to protect the domestic pork industry. Last year, U.S. pork exports totaled 5.37 billion pounds and were valued at more than $6.3 billion. If a disease like ASF entered the country, the U.S. would lose valuable export markets for some time. NPB says anyone who works with pigs should know the signs of ASF in their animals. Those signs are high fever, decreased appetite and weakness, red and blotchy skin or skin lesions, diarrhea and vomiting, as well as coughing or difficulty breathing. To help farmers make sure they don’t miss those signs, the National Pork Board has free hard copies of Foreign Animal Disease barn posters and fact sheets available in English or Spanish. Get them free by going to the Pork Store at www.pork.org.

Washington Insider: Booming Meat Market Expectations

Well, the urban media are paying more than usual attention to ag matters these days, especially to the outlook for meat sales. Bloomberg notes this week that for most of the important meats – poultry, beef and pork, U.S. supplies are surging. The hog herd is the biggest it’s been since the series began in 1943, while egg and chicken production also rose in November, USDA says. Also this week reports also showed the most cattle in U.S. feedlots since 2011.

The reason for this optimism is anticipation of increased export demand in China where African swine fever has devastated the hog herd, as it has elsewhere.

With Beijing and Washington reaching a first-phase trade deal that includes increased purchases of ag products, U.S. livestock producers are hoping to start shipping big cargoes soon. While prices for some meat cuts have started to rise, the ample supplies have helped keep gains in check for consumers, Bloomberg says, noting that USDA expects “continued expansion next year.”

Also this week, the New York Times focused on China’s food production policies and charged that it “bungled the effort to contain African swine fever, a mistake that could result in higher Chinese food costs for years and shows the limits of Beijing’s top-down approach to problems.”

The magnitude of the losses is breathtaking, NYT said—claiming that it has cost the world roughly one quarter of its pigs as the “disease has spread from China, “reshaping farming and hitting the diets and pocketbooks of consumers around the globe.”

Even worse, China’s “unsuccessful efforts to stop the disease may have hastened its spread—and extended its impacts, the Times said.

To halt African swine fever, authorities must persuade farmers to kill infected pigs and dispose of the carcasses properly. But its “frugal incentives” and requirements that farmers jump through hoops to seek compensation from often cash-poor local governments are causing farmer reactions that “make things worse.”

The Times concludes that the epidemic also “shows the limits of China’s emphasis on government-driven, top-down solutions to major problems, sometimes at the expense of the practical. It has also laid bare the struggle of a country of 1.4 billion people to feed itself,” the Times said.

China has long viewed food security as tantamount to national security, and had become essentially self-reliant in pork, rice and wheat thanks to subsidies and aggressive farmland management—but this epidemic will “test that commitment to its increasingly affluent people, who more often expect meat at the dinner table,” the Times says.

The disease—a highly contagious and untreatable outbreak that is not fatal to humans but can be spread by them – has now extended swiftly out of China and across nine other Asian countries, particularly Vietnam, the world’s fifth-largest pork producer which lost much of its herd this year. Before reaching China, the disease had been slowly infecting occasional farms in Russia and elsewhere in Eastern Europe.

Powered by pork, China’s overall food prices last month were one-fifth higher than they were a year ago, after seven years of little change. Large purchases of pork by China are driving up live hog prices in the United States, Europe and around the globe, pushing up costs for everything from German sausages to Vietnamese pork meatballs.

Beef and lamb prices have risen as families worldwide seek alternatives, so much so that overall meat prices in international commodity markets have increased nearly 20 percent in the past year. Brazil is now ramping up beef and chicken production to meet demand, partly by burning forests in the Amazon to clear land for agriculture, the Times said.

The epidemic is leading to “broad and deep economic impacts at the global level,” said Boubaker Ben Belhassen, the director of trade and markets at the United Nations’ Food and Agriculture Organization in Rome. “We don’t think there’s enough pork in the world to offset China’s shortfall.”

NYT also said that the “hog problem” was an important factor in Beijing’s acceptance of a partial trade deal with the U.S. last month--in part to resume imports of American food. Pork prices have climbed so high that one livestock company, Guangxi Yangxiang, printed red banners to recruit potential farmers that read, “Raise 10 sows and drive a BMW next year.”

China’s leadership has focused on remaking farming to stop the spread. Using subsidies and generous credit, Beijing has pushed industrial-scale farms with safeguards like quarantine areas for new arrivals and incinerators for diseased pigs, but the Times criticized that effort as inadequate.

Chinese officials have tried to be reassuring and frequently claimed the disease was under control – only to see signs of further spread. Most recently, the agriculture ministry said that it only hoped production at the end of next year would be four-fifths of normal levels – a shortfall equal to the entire pork production of the United States, the world’s second-largest pork-producing nation, the Times said.

So, we will see. U.S. producers tend to recognize the threat from over responding to the outlook, but still willing to invest to expand production, observers say. This means that objective outlook data will be increasingly important in the coming months, trends producers should watch closely as new trends develop Washington Insider believes.

MFP Payments Continue to Rise

As of December 23, USDA’s Farm Service Agency has paid out $10.707 billion in 2019 Market Facilitation Program (MFP 2) payments to farmers under the first two installments of MFP 2 payments.

The top five states for the payouts were Iowa, Illinois, Texas, Minnesota and Kansas.

Signup for MFP 2 ended December 20. The watch now is on whether USDA will announce the third installment of the MFP 2 payments will be issued in early January.

Sources indicate they expect the payments will be made and that the decision has already likely been made but not yet announced.

Trump, Chinese Again Commenting on US-China Trade Deal

The U.S. and China are in close contact relative to signing the phase-one trade agreement, Chinese Commerce Ministry spokes Gao Feng said at the regular Thursday briefing.

Gao said the two sides are still going through needed procedures relative to the Phase One agreement.

This comes as President Donald Trump on December 24 said the deal was "done" but was being translated. Asked if there would be a signing ceremony with Chinese President Xi Jinping, Trump told reporters, "I will be, probably, doing that. Yeah. At the right time, we will be doing a smaller ceremony. Ultimately, we will be having one. The China deal — we will be having a signing ceremony. Yes." Asked further if it would be signed by himself and Xi, Trump said, "We will probably, yes. We will sign it. When we will get together."

However, Trump did not say when it would be signed, noting it will be a "quicker signing, because we want to get it done."

Friday Watch List

Markets

USDA's weekly export sales report will be released at 7:30 a.m. CST Friday, followed by weekly energy inventories from the Energy Department at 10:00 a.m. The Friday after Christmas will likely be a day of quiet trading, but any trade news concerning China will be examined and a surprise is always possible. This week's holiday also pushes CFTC's Commitments of Traders report to Monday afternoon.

Weather

An intense storm system in New Mexico Friday will move to the Great Lakes during the weekend. This system will bring rain to the Southern Plains Friday, with western through north-central Plains moderate to heavy snow and south-central Plains through western Midwest rain and mixed precipitation Saturday and Sunday. Blizzard and whiteout conditions are possible along with river basin flooding. Moisture favors winter wheat, but snow and cold will stress livestock along with causing transportation and safety hazards.

Rural Mainstreet Index Rises Again

The Creighton University Rural Mainstreet Index remained above growth-neutral in December. It’s the fourth-straight month that’s happened and the tenth time in the past 12 months. The index is a monthly survey of bank CEOs in rural areas of a 10-state region that depends on agriculture and/or energy. While it’s still above growth-neutral, the index did drop from 54.2 in November to 50.2 in December. A Creighton University news release says, “Federal agriculture crop support payments and somewhat higher grain prices gave a boost to the Rural Mainstreet Index.” The index shows bank CEOs, on average, expect about 12 percent of grain farmers to experience financial losses in 2020. “However, this is down from last year at this time, when bankers expected about 15 percent of their grain farmers to have a negative cash flow during 2019,” says Dr. Ernie Goss of Creighton University. For example, Jeff Bonnett is president of the Havana National Bank in Illinois, who says, “If grain prices remain where they are today, we will have a small percentage of borrowers who will struggle with their cashflow.” There was some good news as the farmland and ranchland price index soared to 52.8 from a weak 40.4 in November.

Ag Lenders Talk Economic Conditions During DC Testimony

Agricultural lenders were on Capitol Hill this week to talk to legislators about the current credit conditions in farm country. An Agri-Pulse report says the lenders appeared before the House Agricultural Subcommittee on Commodity Exchanges, Energy, and Credit. Steve Handke of the First Option Bank in Kansas, says agricultural portfolios are remaining stable but showing signs of deterioration. “Many bankers are concerned about low commodity prices and their negative impact,” he said during testimony. “While credit is plentiful, competition for loans is intense as interest rates remain near historic lows. All that is beneficial to farmers.” However, what’s not beneficial is the fact that $22.4 billion of the total farm income in 2019 came from government payments, which is not sustainable income. Shan Hanes of Heartland Tri-State Bank in Kansas told legislators that net farm income dropped an average of 85 percent in just six years. “I dare say, many of us wouldn’t survive if our paychecks were cut 85 percent,” he said during testimony. Other bankers testified that working capital levels, the difference between current assets and current liabilities, have declined sharply since 2013. A North Dakota banker says it’s the cushion against tough times that just isn’t there anymore.

Israel is Latest Country to Chase a Trade Deal with China

A close ally of President Donald Trump and his biggest economic rival are looking at a possible trade relationship in 2020. Israel is another U.S. ally that’s now looking to conclude a free-trade agreement with China as early as next year. A senior Israeli official anonymously tipped off Bloomberg because the discussions aren’t public. The two countries first began talking back in 2016. The latest round of discussions is causing other countries to closely scrutinize the potential cooperation between a U.S. ally and adversary. The U.S. is pressuring Israel to be cautious when talking about China playing a role in its economy. From a trade perspective, it’s a balancing act for Israel, who faces a “more assertive China” as the United States takes a different military posture in the Middle East. Israeli and Chinese officials met about a month ago for their seventh round of talks. The official who spoke with Bloomberg says it’s still not yet a sure thing that Israel will be able to wrap up a deal next year. A political deadlock is preventing the establishment of a new government in Jerusalem.

U.S. Won’t Implement Steel, Aluminum Tariffs on Brazil Imports

The president of Brazil, Jair (Jayr) Bolsonaro (Bowl-soh-NAH-roh) said late last week that U.S. President Trump won’t implement a new tariff on Brazilian steel and aluminum imports as threatened earlier in December. “I had a phone conversation with President Trump,” Bolsonaro said during a Facebook Live session. “He was convinced by my arguments and I decided to tell all Brazilians that our steel and aluminum won’t be hit by additional tariffs.“ A U.S. source confirmed to Reuters that the administration won’t be implementing the tariffs talked about by Trump earlier this month. Trump announced the possibility of tariffs on Brazil and Argentina during a Tweet on December 2, accusing the two countries of devaluing their currencies, a move that hurts U.S. farmers by making their agricultural commodities more expensive on the world market when compared to those from Brazil and Argentina. The U.S. had originally exempted steel and aluminum imports from Brazil and Argentina from the sweeping metal tariffs implemented in March of 2018.

USDA Sends Livestock Dealer Trust Study to Congress

The USDA sent Congress details on a study to determine whether a Dealer Statutory Trust would improve the recovery of livestock sellers in cases of dealer payment defaults. The Hagstrom Report says the study, which was required under the 2018 Farm Bill, was undertaken by the Ag Marketing Service’s Packers and Stockyards Division. “Based on its analysis of industry data, public input, and experience with the livestock industry, USDA finds it would be feasible to implement a Livestock Dealer Statutory Trust,” says the Livestock Marketing Association in a news release. “Under current law, farmers, ranchers, and livestock auctions have been devastated when livestock dealers default on payments.” They say the sellers don’t often get the livestock back that they weren’t paid for. The producers also recover little from the dealer’s bond. The USDA report analyzes 83 dealer defaults that occurred between October of 2013 and June of 2019. The LMA says, “A Dealer Statutory Trust would give unpaid livestock sellers the legal right to reclaim the animals, or if they’ve been resold, proceeds from the livestock in the unfortunate event of a livestock dealer payment default.” The report found that existing statutory trusts in other segments of agriculture have been effective in improving financial recoveries and LMA says similar results could be expected in the livestock industry.

U.S. Hog Inventory Climbs Higher

As of December first, U.S. farms contained 77.3 million hogs and pigs. That’s a three percent jump from December of last year, but down slightly from September first of this year. Those were some of the numbers released in the Quarterly Hogs and Pigs report this week, published by the National Agricultural Statistics Service. Other key findings in the report said of those 77.3 million hogs and pigs, 70.9 were market hogs while 6.46 million were kept for breeding purposes. Between September and November of this year, 35.1 million pigs were weaned across U.S. farms, which is up two percent from the same time in 2018. From September through November, U.S. hog and pig farmers weaned an average of 11 pigs per littler. U.S. producers intend to have 3.13 million sows farrow between December of this year and February of 2020. They’ll also have another 3.15 million sows farrow between March and May of next year. Iowa has the largest inventory among the states, coming in at 24.8 million head. North Carolina and Minnesota tied for second, with each having 9.2 million head of hogs in inventory.

Washington Insider: Bloomberg’s Expectations for Central Banks

Well, there’s lots going on in Washington these days, but at least some of the earlier hot spots seemed to have cooled a little. For example, there are growing rumors of trade overtures from China.

In the meantime, Bloomberg has published its review of what it expects the world’s central banks to do next year — it labels this year as the time central banks jumped back into the fray, cutting interest to deal with a trade slowdown and subsequent declines in manufacturing.

Some, central banks, like the Federal Reserve, had made rate hikes before 2019, creating “room” to loosen policies amid weaker growth. At the same time, others, like the European Central Bank, “found themselves in a more difficult position and had to cut benchmarks further below zero, stoking resentment about subzero rates.”

Looking ahead, Bloomberg says it thinks that 2020 “might be a quieter year for monetary policy—and that fiscal [policy] “may take up some of the lifting work as growth prospects are looking a little brighter.”

Still, it sees the economic numbers as “mostly mixed” rather than positive. On balance, while the big guns are set to hold fire, others, especially in the emerging markets, are projected to cut interest rates again.

There is a danger, Bloomberg thinks, that the current “moment of calm in the global economy is obscuring a serious challenge for the world's central banks.”

Low rates for most and negative for some means “policy space is severely depleted.” At the same time, the report concludes that “we don't think the next downturn is coming in 2020—but that when it does come, central banks won't have all the answers.”

With regard to the United States, Fed Chairman Jerome Powell “has left no doubt that interest rates are on prolonged hold — based on his earlier comment that the current stance “likely will remain appropriate” unless the Fed's favorable outlook for the economy sees a “material reassessment.”

He spoke after policy makers kept interest rates steady in a 1.5% to 1.75% target range “following three consecutive cuts” and published forecasts showing 13 of 17 officials are projecting no change in rates through 2020. That would keep them on the sidelines during a presidential election year, Bloomberg thinks.

However, the report cautions that the U.S. central bank “isn't entirely fading into the background.” Strains in money markets has pushed it to buy Treasury bills to restore ample reserves in the banking system and some investors argue it will need to broaden the scope of those purchases to short-dated coupon-bearing securities. Powell said they are not yet ready to take such a step, but “would do so if necessary.”

In conclusion, Bloomberg reports that its experts see the Fed “comfortably on hold for the foreseeable future,” as policy makers are less concerned by the risks which justified their ‘insurance cuts’ in the latter half of 2019 including trade tensions, below target inflation and sluggish global growth.

Bloomberg says this outlook makes the threshold high for policy adjustments in the near term, particularly for rate hikes. It also thinks that “the impetus to stand pat will increase as the U.S. election draws nearer.”

The report is extensive and emphasizes the uncertainty it sees, especially in areas like the UK where major policy changes are under consideration following Boris Johnson’s decisive win in December's election that “cleared the way for his government to take the nation out of the European Union at the end of January.”

For now, concern about the outlook means two of the Bank of England’s nine policy makers want to cut interest rates, the report says, and notes that all eyes will be on whether Johnson’s win, as well as Brexit developments which could change the picture.

Still, Bloomberg expects the combination of looser fiscal policy and reduced Brexit uncertainty could “lift growth next year,” and that in response, “the central bank’s tone could change leading to a rate increase in fourth quarter 2020.”

Bloomberg also sees the People’s Bank of China is disappointed in the results of the beginning of its “large-scale monetary easing.” And suggests that “if weakness in the economy worsens, the central bank likely will continue to release cash into the system via cuts to the reserve ratio, which has been a preferred method to shore up output this year.

China is battling a form of “stagflation” now which includes consumer price gains driven beyond the target of 3% by food, amid factory price declines and could well encounter economic growth below 6%, depending significantly on whether trade conflicts continue to cool.

The report runs through its quarterly review of 23 of the world’s top central banks, which together set policy for almost 90% of the global economy, and finds several of those are worth noting, along with Bloomberg’s overall assessment. It concludes that while 2020 looks like a quieter time, there are still a considerable number of potential trouble spots in a mostly mixed picture.

These signals reflect significant global economic trends should be watched very closely in the weeks and months ahead, Washington Insider believes.

Doud Comments On US-China Phase One Trade Deal

The phase-one U.S.-China trade deal “is done” and is currently going through a legal scrub, chief U.S. ag trade negotiator Gregg Doud said in an interview with Pro Farmer.

Doud elaborated on expected U.S. ag buys by China, saying the average $40 billion in purchases over two years represents the $24 billion baseline of purchases seen in 2017 plus an additional $16 billion in purchases above that. “Now in the first year, it'll be a little less, and the second year will be a little more,” he noted.

On the U.S. ag products China might purchase, Doud said “I think you're going to see a lot in demand for meat. And China's just extraordinary right now because of the African swine fever thing.”

Though the phase-one U.S.-China deal does not specify China ag purchase levels beyond 2021, Doud said U.S. ag exporters will still see benefits from “structural changes that were negotiated in this deal,” including reduced sanitary and phytosanitary non-tariff trade barriers.

Doud also touted the initial U.S.-Japan trade deal, saying it puts “over 90% of the ag products that we send to Japan” at tariff parity with those from competitors covered under other trade agreements.

Though many rice producers were disappointed in the U.S.-Japan accord, Doud suggested a welcome development could be around the corner. “I've got a huge deal for them that I can't talk about yet here just for another few days,” he said.

USDA Announces Crop Insurance Pilot for Hemp

USDA announced a pilot Multi-Peril Crop Insurance (MPCI) product for hemp producers in select counties in 21 states will be available for the 2020 crop year.

USDA created the new program in partnership with the U.S. Hemp Farming Alliance and AgriLogic. Eligible producers may participate in certain counties in Alabama, California, Colorado, Illinois, Indiana, Kansas, Kentucky, Maine, Michigan, Minnesota, Montana, New Mexico, New York, North Carolina, North Dakota, Oklahoma, Oregon, Pennsylvania, Tennessee, Virginia and Wisconsin.

“We are excited to offer coverage to certain hemp producers in this pilot program,” said USDA Risk Management Agency (RMA) Administrator Martin Barbre. “Since this is a pilot program, we look forward to feedback from producers on the program in the coming crop year.”

MPCI coverage under the pilot program is available for hemp grown for fiber, grain or CBD, according to USDA. To be eligible for coverage, producers must meet various requirements including compliance with applicable state, tribal or federal regulations for hemp production, having at least one year of history producing the crop and having a contract for the sale of the insured hemp.

Meanwhile, beginning with the 2021 crop year, hemp will be insurable under the Nursery crop insurance program and the Nursery Value Select pilot crop insurance program, USDA said.

Thursday Watch List

Markets
U.S. grain and livestock futures resume trading Thursday at 8:30 a.m. CST. U.S. weekly jobless claims will be out at 7:30 a.m. CST with a new U.S Drought Monitor. The U.S. Energy Department will issue weekly inventories, starting at 9:30 a.m. Note USDA's weekly export sales report will be released Friday morning, due to this week's holiday schedule.

Weather
Snow squalls will move across the far Northern Plains and northern Midwest Thursday, hindering late-harvest efforts. Other primary crop areas will be dry. A large storm system with rain and snow is indicated for the Southern Plains during the end of the week.

China Can Fulfill Pledge to Purchase $40 Billion in U.S. Farm Goods

China’s top agriculture consultancy said last week that it believes China can and will make good on a promise to purchase more than $40 billion in U.S. agricultural products per year. That pledge is part of a Phase One trade deal the two countries recently signed. Reuters says China will increase its agricultural purchases to anywhere between $40 and $50 billion over the next two years. The deal isn’t signed yet and that’s led to skepticism over whether China can handle purchases that large. Shanghai-based consultant group JCI released a document saying that most foreign media don’t believe China can fulfill that level of commitment. “As a Chinese consultant company on the agricultural market, JCI strongly believes that China has the ability and will fulfill its promise,” the company says. JCI estimates that China can buy approximately $41.3 billion worth of U.S. farm products every year, including around $18.7 billion worth of soybeans, which would amount to 45 million tons. The projections from JCI were based on what they say was a “careful study” of China’s import volume of U.S. farm products in the past and does assume favorable weather and pricing throughout the term of the agreement.

China Lowering Tariffs on Goods from Around the World

China announced a change in tariff rates on imported goods from around the world that will start on January first. The country will lower tariffs on global imports in a move that’s designed to give domestic consumers some support, even as a trade truce with the U.S. takes some pressure off the Chinese economy. The New York Times says the move comes less than two weeks after China and the U.S. reached a Phase One trade deal. It also helps China by showing that the country is continuing to open up its market in spite of the more than yearlong conflict with the U.S. However, China’s economy still has some question marks to deal with as it tries to recover from a slowdown brought on by the tariff conflict. The deal with the U.S. hasn’t been signed yet and that means a lot of tariffs on American imports are still in place. China is opening its market to other countries to help satisfy consumer demand. A list of 859 products will face lower tariffs in 2020. Among the goods are frozen pork, which China has to have after its pig herds were decimated by African Swine Fever. Tariffs will also fall on grocery items like avocados, orange juice, and seafood.

Pilot Insurance Coverage Available for Hemp Growers

The Risk Management Agency announced its offering a new crop insurance option for hemp growers in select counties across 21 states next year. The pilot insurance program will provide Actual Production History coverage (APH) under 508(h) Multi-Peril Crop Insurance. The offer is for eligible producers who raise the crop in certain counties throughout states like Alabama, California, Colorado, Illinois, Indiana, Kansas, Kentucky, Michigan, Maine, Minnesota, Montana, New York, North Carolina, North Dakota, Oklahoma, Oregon, Pennsylvania, Tennessee, Virginia, and Wisconsin. The MPCI coverage applies to hemp grown for fiber, grain, or CBD oil for the 2020 crop year. This is in addition to the Whole-Farm Revenue Protection coverage available to hemp growers that was announced earlier this year. “We are excited to offer coverage to certain hemp producers in the pilot program,” says RMA Administrator Martin Barbre. “Since it’s a pilot program, we look forward to feedback from producers in the program during the upcoming crop year.” To be eligible for the program, producers must meet several requirements, including complying with applicable state, tribal, or federal regulations for hemp production, they must have at least one year’s history of producing the crop, and they must have a contract for the sale of the insured hemp.

NASS Looking for Survey Responses

The 2019 Census of Horticultural Specialties and the 2019 Organic Survey are both underway now, with the National Ag Statistics Service looking for as many responses as possible. They’d also like producers to respond online if they can. Online responses are more user-friendly, accessible on most electronic devices, and can save time by calculating totals and automatically skipping questions that don’t apply to an individual operation. “Horticulture and organic agriculture are important segments of U.S. agriculture and our economy,” says NASS Administrator Hubert Hamer. “When producers respond to the surveys, they’re helping associations, businesses, and policymakers advocate for their industry, influence program decisions, and educate others about the importance of these agriculture segments.” The Census of Horticultural Specialties is conducted once every five years to give a comprehensive picture of U.S. horticulture. The deadline for responding is February fifth of 2020. The Organic Survey asks more than 22,000 U.S. producers involved in certified or transitioning to organic farming questions about 2019 production, marketing practices, income, and expenses. The deadline to return the questionnaire or answer online questions is January tenth, 2020.

“Beef. It’s What’s for Dinner” Campaign Reaches Over One Billion Consumers

The “Beef. It’s What’s For Dinner” campaign relaunched two years ago. Over that time, the campaign has reached more than one billion consumers with informative digital marketing and social media content. The campaign was developed by the National Cattlemen’s Beef Association and funded by the Beef Checkoff. The campaign is designed to encourage families to make more meals with nutritious and delicious beef, as well as to connect consumers with stories of the farmers and ranchers who raise real beef. The “Beef. It’s What’s For Dinner” brand is reaching consumers more frequently and effectively than it ever has. Market research shows people who are aware of “Beef. It’s What’s For Dinner,” are more likely to eat beef, do so more often, and they feel good about buying and preparing beef for their families. Laurie Munns is a cattle rancher from Utah and NCBA Federation Division Chair. She says, “For a brand to have a reach of more than one billion people in today’s crowded marketing environment is a major milestone. It’s clear that consumers want more information about beef, it’s nutrition profile, and the hardworking farmers and ranchers who raise the beef they eat.” The NCBA first introduced the “Beef. It’s What’s For Dinner” campaign 25 years ago.

EPA, Justice Department Want Glyphosate Ruling Reversed

The U.S. government jumped into a California court case that found glyphosate, the active ingredient in Roundup, causes cancer. The Environmental Protection Agency filed a friend of the court brief last week that said it reviewed and approved the label on the weed-killing product and that a jury finding based on California law should be reversed. Even the Department of Justice joined the EPA in weighing in on the ruling in the long-running court battle over Roundup. Over the summer, the judge in the case cut the jury award to $25 million in the case of a man who claimed his non-Hodgkin’s lymphoma was caused by years of Roundup use. However, the judge didn’t reverse the jury finding in the case, saying in his opinion that Roundup was defective because the label didn’t include a cancer warning. Back in May, the EPA issued a statement saying it “continues to find no risks associated with glyphosate if it’s used following the current label and that glyphosate is not a carcinogen.” Bayer, which acquired Monsanto, the company that originally produced Roundup, was optimistic after the latest legal turn in the case, saying the company is encouraged after the U.S. government and other parties opted to support the company’s appeal.

Tuesday Watch List

Markets

There are no official reports scheduled for Tuesday, Christmas Eve and federal employees have been given the day off. Most U.S. grain futures close at 12:05 p.m. CST and livestock futures finish 10 minutes later. Traders will also remain interested in any trade details with China that may emerge over the holiday. U.S. grain and livestock futures resume trading Thursday at 8:30 a.m. CST.

Weather

Rain and high-elevation snow during Tuesday from northern California through the western portion of the Pacific Northwest. Snow and rain through the central and southern Rockies mountain region. Mainly dry elsewhere in the key U.S. crop and livestock areas. Favorable conditions for any late fieldwork and for travel during Christmas Eve, outside of the western U.S. In South America the key growing areas of southern Brazil, central and southern Argentina will be dry and hot Tuesday. Somewhat stressful for developing corn and soybeans, especially in Argentina.

USMCA Senate Prospects, Markup January 7, 2020

Following a landslide vote to pass the U.S.-Mexico-Canada Agreement in the House last week, the trade deal heads to the Senate. A vote, expected in January, could come early in the month, pending how the impeachment articles are handled. House Speaker Nancy Pelosi last week elected to hang on the impeachment documents, rather than send them off immediately to the Senate. Pending on how long she chooses to hold them, the action could clear a window for the Senate to consider USMCA. Senate Finance Chair Chuck Grassley Friday announced his committee intends to hold a markup hearing on January 7, 2020, based on the expectation that the Senate will have received the legislation beforehand from the House of Representatives. Grassley says, “This markup will move us closer to ratifying USMCA in early 2020. Senate leadership expects they could quickly consider and pass the agreement within a couple of days. However, if the Senate must start the year with impeachment trials, then a vote will come near the end of January, following the hearings.

USCA Disappointed in Lack of COOL in USMCA

The U.S. Cattlemen’s Association expressed disappointment last week because country of origin labeling was not included in the U.S.-Mexico-Canada Agreement. The group penned a letter to President Donald Trump following House passage of the USMCA implementing legislation. Leo McDonnell, USCA Director Emeritus, writes, “This administration promised to "Make America Great Again," but it is becoming evident this does not include U.S. ranchers." He calls the lack of COOL in USMCA "disheartening at best." The letter presented years of data, dating back to 1988, as evidence of unfair trade in the beef sector by Canada and Mexico, in making a case for the necessity of COOL. However, COOL, which is illegal by World Trade Organization standards, was in place, but repealed by the U.S. Congress after Canada and Mexico planned trade retaliations. McDonnell concludes, "I appreciate that USMCA may be too far along to address some of these measures, but I feel it is important that, at the minimum, the record needs to be set straight.”

Ernst Will Call for Wheeler Resignation if RFS Doesn’t Reach 15 Billion Gallons

Republican Senator Joni Ernst of Iowa says she will call for Environmental Protection Agency Administrator Andrew Wheeler’s resignation, if the Renewable Fuel Standard doesn’t meet the statute requirement of 15 billion gallons. Her comments follow Wheeler’s final supplement rule released by his agency last week. In a joint statement with Iowa Republican Senator Chuck Grassley, Ernst says, “We will keep holding EPA’s feet to the fire to ensure they truly uphold the RFS as intended.” Ernst alleges that the industry was “guaranteed a deal” earlier in the year that would appease biofuels producers. The agreement would account for all lost gallons to small refinery exemptions. However, the industry says EPA’s plan to reallocate exempted gallons based on a three-year rolling average won’t make up for the four billion lost gallons. The agreement that the Iowa Senators say made earlier in the year would have based the three year average on actual gallons waived.

Iowa Ag Secretary: RVO Ruling Hurts Rural America

Iowa Secretary of Agriculture Mike Naig (Nayg) says the Environmental Protection Agency’s final rule regarding Renewable Fuel Standard volumes for 2020 “creates unnecessary uncertainty in our markets,” and is “detrimental to so many across rural America.” The EPA proposal did not follow a request from the biofuels industry. Naig calls the rule flawed, adding, "We must continue to work together to hold the EPA accountable for ensuring the 15 billion gallons mandated by the Renewable Fuel Standard are met." He made additional calls to invest in biofuels infrastructure. The Iowa Department of Agriculture and Land Stewardship administers the Iowa Renewable Fuel Infrastructure program, which offers cost-share grants to help fuel retailers install infrastructure to increase the availability of ethanol and biodiesel. Secretary Naig has requested $3 million in the fiscal year 2021 to continue supporting the program. To date, the program has distributed or obligated over $33 million, with $200 million added in private economic activity.

Seven Sue USDA Over Pork Processing Revisions

Seven organizations last week jointly filed a lawsuit against the Department of Agriculture over its decision to reduce oversight at pig slaughterhouses and eliminate limits on slaughter speeds. The groups claim the changes ”expose pigs to greater suffering,” and defy federal slaughter, meat inspection, and environmental protection laws. The lawsuit was filed in the U.S. District Court for the Western District of New York on behalf of Farm Sanctuary, Animal Equality, the Animal Legal Defense Fund, the Center for Biological Diversity, Compassion Over Killing, Mercy For Animals, and North Carolina Farmed Animal Save. In a statement, a spokesperson from the law firm filing the suit says the revised regulation “reads like a joint venture between big business and the federal government.” The lawsuit challenges USDA's revocation of limits on the number of pigs that can be slaughtered per hour. The lawsuit also challenges USDA's decision to remove and relocate federal inspectors in slaughterhouses.

Broadband Map Fix Will Reveal Needs

The House of Representatives passed legislation last week that will improve the accuracy of broadband coverage maps to better identify needs. The Broadband Deployment Accuracy and Technological Availability Act requires broadband providers to report more specific data to create a significantly more accurate and granular National Broadband Map. With more precise data, federal agencies can target funding to areas that need it most. American Farm Bureau Federation President Zippy Duvall says, “it’s critical” to do so, adding “broadband is a necessity.” Current broadband coverage maps are inadequate, according to AFBF, because they rely on census block data to determine which areas are covered. Census blocks "are too large in rural and remote locations to accurately determine need."  In addition to creating more accurate maps, the bill requires the FCC to establish an audit process that ensures internet service providers are providing accurate data used to create the maps. It also would create a user-friendly process to challenge the data.

Washington Insider: Brazilian Metal Tariffs Lifted

Amid all the chaos and anger in Washington these days, the New York Times reported on Sunday that President Jair Bolsonaro of Brazil said “Mr. Trump decided not to pursue tariffs on Brazilian steel after a phone call on Friday.”

The Times said the development represented a decision to “back off a threat made this month to impose tariffs on Brazilian metal,” a move that would have broken a previous agreement with the country and risked reigniting trade tensions.

The news came in a somewhat unusual way — NYT said that President Bolsonaro “wrote in a post on Facebook Friday that he had spoken with Mr. Trump who decided not to make good on his plan to impose tariffs on our steel/aluminum. Our commercial relations and friendship are getting stronger every day,” he added.

President Trump appeared to confirm Friday night that he would not be pursuing tariffs, writing on Twitter that he had just had a “great call” with Bolsonaro. “We discussed many subjects including Trade. The relationship between the United States and Brazil has never been Stronger!” he said.

President Trump has routinely threatened—and imposed— tariffs to punish trading partners over practices he has deemed unfair to the United States, NYT said. On Dec. 2, President Trump tweeted that he would impose metal tariffs on Brazil and Argentina, accusing the countries of weakening their currencies and hurting American farmers.

“Therefore, effective immediately, I will restore the tariffs on all steel & aluminum that is shipped into the US from those countries,” President Trump said.

The tariffs have not gone into effect. Last week Larry Kudlow, the president’s economic adviser, told The Wall Street Journal CEO Council meeting that the Trump administration might not proceed with the tariffs. “No decisions have been made,” Kudlow said.

The Dec. 2 announcement appeared to surprise Bolsonaro, a populist president who had gone to great lengths to strengthen personal ties with Trump.

“Aluminum?” Bolsonaro asked when reporters presented him with President Trump’s tweet. “If that’s the case, I’ll call Trump. I have an open channel with him.”

That same day, Brazilian authorities started calling the White House, the Commerce Department and the Treasury Department, as well as some lawmakers, to argue that Brazil does not manipulate its exchange rate.

The Brazil Steel Institute said in a statement at the time that it was shocked by the announcement and warned that the decision would hurt the American steel industry which needs semi-finished products exported by Brazil to operate its mills.

It is unclear if Trump has also backed off his threat to impose metal tariffs on Argentina, the Times said.

The United States had initially exempted Brazil and Argentina from the tariffs placed on global steel and aluminum in March 2018, as the countries continued to negotiate over trade terms. In May 2018, the United States announced that it had reached an agreement with both countries that would cap their metal shipments at a specific volume each year.

Trump and his advisers have lamented the negative effects of a strong dollar which makes American goods more expensive to purchase overseas. Administration officials have accused a wide range of governments of manipulating their currencies, including China and the European Union.

The Treasury Department, which issues an official determination on which countries are currency manipulators, has not placed that label on Brazil or Argentina and neither country is on its list of nations that warrant monitoring. The most recent report, which was due in October, has yet to be released. Administration officials have not clarified when it will be published or the reason for the delay.

Economists say that the value of the Brazilian and Argentine currencies have recently fallen, but that the countries are not intentionally devaluing them, despite what President Trump said. Instead, the two governments have actually been selling foreign currency and buying their own money to try to prop up its value.

Still, the falling value of both currencies has made Brazilian and Argentine products cheaper to purchase abroad — especially in China, where the president had been waging a protracted trade war.

As China imposed tariffs on American farm goods like soybeans and halted purchases in retaliation for President Trump’s tariffs, Beijing switched to buying Brazilian and Argentine products instead. That hurt American farmers and rankled Trump. Those tensions have now eased after the announcement last week that China and the United States had reached a Phase 1 trade deal, in which China has committed to buying large amounts of American farm goods.

Brazilian officials have already made some trade concessions to the United States, including improving the terms of trade for wheat and ethanol. Brazil has also agreed to forgo a special status for developing countries at the World Trade Organization, dropped visa requirements for visitors from the United States and granted permission for United States companies to launch satellites from a Brazilian base.

Carlos E. Abijaodi, director of industrial development at Brazil’s National Confederation of Industry, said he believed tariffs would not be imposed and that the threat mainly served as a signal to administration supporters in the upcoming election.

So, we will see. This trade decision, if it holds, likely will be welcomed by U.S. farm equipment manufacturers and others. Clearly, decisions that support free-market relationships are important to producers and should be watched closely as political fights multiply, Washington Insider believes.

EPA Releases More SRE Data

The Environmental Protection Agency (EPA) released refreshed data on Small Refinery Exemptions (SREs), showing 16 waiver petitions had been filed for the 2019 compliance year as of Nov. 21. The 2019 SRE total is up six from the agency’s previous report.

So far, all 16 petitions remain pending and there are no petitions pending for any earlier compliance years.

For 2018, EPA granted 31 of 42 SRE petitions it received, while in 2017 it granted the largest number ever at 35 of the 37 total petitions it received.

Biofuel proponents remain focused on EPA’s granting of SREs and whether it follows through on a promise to accurately account for exempted volumes when setting renewable volume obligations (RVOs) in coming compliance years.

Many biofuel groups voiced concern last week after EPA released its final rule for 2020 biofuel and 2021 biodiesel RVOs. EPA’s rule retained language relying on Department of Energy (DOE) SRE recommendations when accounting for the waivers.

In the past the agency has not always followed DOE’s suggestions, particularly in situations calling for only partial exemptions. While the agency said it is “committed to following the DOE recommendations” going forward, many biofuel proponents remain skeptical.

Trump, Xi Speak by Phone on U.S.-China Trade Deal

President Donald Trump and Chinese President Xi Jinping spoke by telephone Friday about the phase-one U.S.-China trade deal, with Trump describing the exchange as “a very good talk,” in a tweet following the call.

Trump said China “has already started large scale purchases of agricultural product & more,” and added a formal signing of the phase-one trade deal is “being arranged.” Late last week, Treasury Secretary Steven Mnuchin indicated the signing will take place in early January.

For his part, Xi also spoke positively after speaking with Trump, saying the trade deal would benefit both countries and help advance the world economy, Chinese state-run media outlet Xinhua reported. At the same time, Xi warned that China has “serious concerns” about what it views as U.S. interference in Taiwan, Hong Kong, Xinjiang and Tibet.

Monday Watch List

Markets

Monday before Christmas will have more reports than usual, starting with U.S. new home sales at 9 a.m. CST and grain export inspections at 10 a.m. At 2 p.m. CST, USDA will release a monthly cold storage report and quarterly Hogs and Pigs report. Any news on trade with China will also get attention.

Weather

Dry and mild conditions will cover all major crop areas Monday. Precipitation will be confined to the northwestern and southeastern U.S. Southern Plains areas have moisture indicated at the end of the week.

House Passes U.S.-Mexico-Canada Agreement Implementing Legislation

Agriculture groups are calling on the Senate to “finish the job” and pass the U.S.-Mexico-Canada Agreement following approval in the House of Representatives Thursday. The U.S. House overwhelmingly passed implementing legislation for USMCA, sending the trade agreement to the Senate. The vote came following a delay of more than a year to make changes and reach an agreement between House Democrats and the Trump administration. Representative Richard Neal, who led the House efforts to modify the agreement, says the transformed trade deal approved Thursday “closes important loopholes and enables the United States to ensure our trading partners live up to their commitments.” Senate leader Mitch McConnell last week stated the Senate would not consider approving the agreement until after the Senate completes an impeachment trial in January. Members of the National Corn Growers Association were in Washington this week, urging the Senate to quickly consider and pass the trade agreement in the new year.

House, Senate, Pass Ag Spending Package

The House and Senate this week came together in passage of spending bills for fiscal year 2020. Senate Appropriations Committee Chairman Richard Shelby, an Alabama Republican, says, "bipartisan cooperation has made this possible.” The spending package for agriculture includes $23.5 billion in discretionary funding, $451 million above fiscal year 2019 enacted levels. It also includes $1.5 billion in disaster funding for farmers and ranchers that was set to expire at the end of this year. Additionally, the bill includes $550 million for the rural broadband ReConnect Pilot program, along with fulling funding the Farmer and Rancher Stress Assistance Network, and reinstating the expired biodiesel tax credit retroactively through 2022. As farm groups welcomed the spending package, the National Milk Producers Federation applauded the legislation for including direction on dairy imitating products using labels containing dairy terms. The Food and Drug Administration provisions include language reaffirming bipartisan congressional concern with mislabeled imitation dairy products, directing FDA to enforce its own rules on labeling.

EPA Maintains SRE Supplemental Rule as Proposed

The Environmental Protection Agency Thursday finalized renewable volumes under the Renewable Fuel Standard for 2020. Through the action, EPA says it has “fulfilled yet another key promise" to farmers, however, corn and biofuel producers disagree. The EPA did not make changes to the proposal, as requested by the biofuels industry. The final rule will use a three-year rolling average of recommended small refinery exemptions by the Department of Energy to account for waived gallons. Farm groups told the EPA during the comment period to account for the actual number of waived gallons, rather than the DOE recommendations. The EPA says conventional biofuel volumes, primarily met by corn ethanol, will be maintained at the 15 billion gallon target set by Congress for 2020. Cellulosic biofuel volumes for 2020, and thus advanced biofuel volumes, will increase by almost 170 million gallons over the 2019 standard. Biomass-based diesel volumes for 2021 will be equivalent to the standard for 2020, and total RVO gallons for 2020 is 20.09 billion gallons.

Corn, Biofuels Groups, Disappointed in EPA Decision

Corn and biofuels groups expressed disappointment in the Environmental Protection Agency’s decision to finalize a rule relating to small refinery exemptions under the Renewable Fuel Standard. The final rule uses a three-year average of the Department of Energy recommended waivers as an estimate for 2020 waivers rather than an average of actual gallons waived by the EPA, as requested by biofuel supporters. The National Farmers Union says President Donald Trump broke a promise to farmers. The Trump administration in October promised to fully account for waived volumes due to small refinery waivers. NFU’s Rob Larew says, “farmers are sick and tired of this biofuels bait and switch.” Growth Energy CEO Emily Skor says more action is needed on the proposal to restore growth under the RFS, adding “this rule leaves important work unfinished.” National Corn Growers Association President Kevin Ross says the final rule “falls short of adequately addressing the demand destruction caused by EPA’s abuse of RFS refinery waivers.”

EPA Approves Hemp Pesticides, Proposes Atrazine Reregistration

The Environmental Protection Agency Thursday approved ten pesticides for use on hemp crops for use during the 2020 growing season. The much-needed action allows hemp growers to protect their crops with approved products.  Kentucky Agriculture Commissioner Ryan Quarles says the action “is a step in the right direction” for hemp growers, adding “it is important our growers have new technologies and tools to better help protect their crops and increase their yields.” While EPA oversees pesticide registrations for hemp, other federal agencies are working to streamline their separate regulatory implementation processes for the newly legalized crop. The agency also advanced the reregistration of atrazine, a widely used product for weed control. Missouri Corn Growers Association CEO and Triazine Network Chair Gary Marshall says, "We appreciate" the proposal, adding atrazine is "tremendously important to farmers across the country.” The agency is proposing a reduction to the maximum application rate for atrazine used on residential turf, and other updates to the label requirements, including mandatory spray drift control measures.

USDA, USTR, Seek Trade Advisory Committee Applications

The U.S. Department of Agriculture and the Office of the United States Trade Representative are accepting applications for new members to serve on seven agricultural trade advisory committees. Members of the Agricultural Policy Advisory Committee advise USDA and USTR on operating existing U.S. trade agreements, on negotiating new agreements, and on other trade policy matters. Members of six Agricultural Technical Advisory Committees provide technical advice and guidance on international trade issues that affect both domestic and foreign production in specific commodity sectors. The committees focus on trade for Animals and animal products, Fruits and vegetables, grains, processed foods and sweeteners, along with a committee on tobacco, cotton and peanuts. To be considered for candidacy, applicants must have significant expertise in both agriculture and international trade matters. The committees hold frequent conference calls and generally meet in Washington, D.C., twice a year. Committee members serve four-year terms. Application instructions are available at fas.usda.gov. Applications must be received by 5 p.m. ET on January 31, 2020.

Washington Insider: Trade War Costs

While nearly everybody is happy to see reduced tensions between the U.S. and China over trade, new questions are being raised by many in the media regarding what the current deal means and what are the longer-term costs of the recent battle.

The administration claims that the current deal “promises” to double U.S. exports to China and sees a “two-year spending spree on everything from airplanes to pork chops and chicken feet.”

Still, Bloomberg argues that the “inescapable reality” is that even this extraordinary splurge – if it happens – may not make up the economic cost of the trade war it seeks to defuse.

Not surprisingly, the report says what everybody knows – that “the precise toll of an economic conflict that is far from over is difficult to isolate.”

Currently, however, economists are busily calculating the impact of the fight and notes that most U.S. tariffs will remain in place. These, along with China’s retaliatory measures, along with the impact of the resulting uncertainty – range from 0.3% to 0.7% of real gross domestic product this year alone.

But even with the phase-one trade deal, many economists expect the “tariff drag” to extend for years and to continue to “stymie business investment” and to take a toll on future growth.

While a few tenths of a percentage point may not seem like much, it’s consequential in the world’s biggest economy. In 2019 dollars, Bloomberg estimates the cost in lost U.S. GDP has reached $134 billion to date and will rise to a total of $316 billion by the end of 2020.

Bloomberg also cites a study by researchers at the New York Fed and Princeton and Columbia universities who estimated the cost to consumers of the tariffs that will remain in place at $831 per household per year – with “an annual cost of more than $106 billion for the U.S. economy as a whole.”

That alone could more than wipe out the gains from the Chinese buying surge the administration says has been negotiated, Bloomberg says.

The report says that the costs are also “not one-time” and are likely to build up for years “even as businesses get used to the tariffs, or to adjusted supply chains.” For example, the International Monetary Fund’s estimates are that the U.S. tariffs will subtract from real GDP in every year to 2023, when real GDP will be 0.5% lower than it would have been had the duties not been imposed.

The administration and its supporters argue they are “in a bigger fight to address longstanding American complaints regarding Chinese investment policies” and that the current agreements “will be to the long-term benefit of U.S. businesses and workers,” but that has been a difficult argument to make on the basis of the Phase One deal, critics say.

The administration also points to a U.S. economy growing faster than its peers and continuing to generate jobs as vindication of its trade policies, and expect today’s report to confirm the U.S. economy grew at a 2.1% annualized rate – or perhaps better – in the third quarter.

Larry Kudlow, the head of the administration’s National Economic Council, this week said he expected the combination of the deal with China and the imminent Congressional passage of an update of the North American Free Trade Agreement will mean an addition of 0.5% to U.S. growth – but didn’t release any details regarding the White House analysis.

A challenge facing critics of Trump’s trade policies is the fact that the economic effects of recent trade fights have been largely countered by strong national-level data and a robust economy, driven by domestic consumption that largely offsets negative trade impacts on the manufacturing and farm sectors, Bloomberg says.

Still, the negative effects are real, argues economist Mark Zandi, chief economist at Moody’s Analytics and others.

From the third quarter of 2018 to the same quarter this year – the period in which the trade war really started to bite – Zandi calculates the U.S. lost 0.4% of real GDP to various trade measure impacts, or $88 billion. It also lost 340,000 jobs to the trade wars, he contends, via a mix of stalled investment and higher costs due to new import duties.

The uncertainty affecting business decisions isn’t evaporating, Zandi thinks, and “that will continue to weigh on business investment, hiring and wage growth and will have continued negative consequences for the economy.”

So, we will see. Skeptics of the administration trade objectives have been increasingly vocal recently, across most economic sectors. These intense debates likely will continue and should be watched closely by producers as they evolve, Washington Insider believes

China, US Details on Phase-One Deal Not Coming Just Yet

China is signaling the details of the phase-one trade agreement with the U.S. will not be made public until the deal is signed, according to Ministry of Commerce spokesman Gao Feng.

The two sides are in close communication, but said there was no specific information he could provide on the deal. "After the official signing of the deal, the content of the agreement will be made public," Gao said.

Sen. Chuck Grassley, R-Iowa, echoed the situation, saying he has only had “very general conversations” with U.S. Trade Representative Robert Lighthizer on the specifics of the phase-one deal with China. “The reason why he would not want to be very specific to us is these texts are still being translated and we have got to know that they say what was agreed to before we talk,” Grassley told reporters on Wednesday.

He said the only detail on the benefit for agriculture is the U.S. claim that China has agreed to purchase between $40 billion and $50 billion worth of U.S. farm goods next year.

EPA Releases Final 2020 Biofuel, 2021 Biodiesel Plan

EPA has released their final rule for the 2020 biofuel and 2021 biodiesel levels under the Renewable Fuel Standard (RFS), but biofuel backers remain unhappy with the result.

In a release accompanying the final rule which is yet to be published in the Federal Register, EPA said they were “committed to ensuring a net of 15 billion gallons of conventional biofuel is blended in 2020.” EPA stated that by “By proposing effectively 15.8 billion gallons for 2020 we will ensure meeting our target of 15 billion gallons.”

However, the 172-page final rule from EPA does not mention the 15.8 billion gallon figured referenced in the release, a figure apparently generated by the percentage standards the agency will set for the various biofuels for 2020.

EPA’s final rule will adopt the plan to account for small refinery waivers (SREs) that they proposed in October, “based on a three-year average of the relief recommended by the Department of Energy (DOE) for 2016–2018. In this action, we are finalizing these proposed changes.”

Sen. Chuck Grassley, R-Iowa, expressed disappointment on Twitter, saying he will keep EPA Administrator Andrew Wheeler’s “feet to the fire” to make sure the 15 billion gallons for conventional (primarily corn-based) ethanol is blended.

Friday Watch List

Markets

On Friday, the U.S. Commerce Department releases its latest estimate of U.S. GDP in the third quarter at 7:30 a.m. CST. USDA's cattle on-feed report for December 1 is due out at 2 p.m. CST with on-feed inventory expected up 1.9% from a year ago. Traders will be watching for news on any last minute Congressional bills or trade agreement developments with China.

Weather

Another dry day is in store across the primary crop areas Friday. Temperatures will continue to show a warming trend going into the weekend. This combination favors livestock and transportation along with offering some late harvest progress.

Republicans, Democrats Battle to Claim Credit for Final Version of USMCA

While the U.S-Mexico-Canada Trade Agreement is set for a vote in the House on Thursday, Republicans and Democrats both claimed credit for the final version of the pact on Wednesday. Agri-Pulse says Republican lawmakers piled their praise upon President Trump for demanding that the North American Free Trade Agreement be renegotiated. However, Democrats say the changes they demanded were what made the agreement work. During the early days of negotiations, Democrats said they wouldn’t support the agreement unless it discouraged U.S. companies from relocating to Mexico. “The Trump Administration’s initial agreement fell short, but House Democrats fought hard for greater accountability in the final draft,” says California Representative Linda Sanchez. Republican Kevin Brady of Texas says, “President Trump and Ambassador Lighthizer delivered on their promise for a pro-growth and modern trade pact. We now have a trade deal that will deliver historic wins for our economy.” Democrats say the new measures in the USMCA will allow for unions nationwide in Mexico and will eventually push wages higher within that country. Republicans point out that it’s been over a year since the new agreement was signed, saying Democrats’ obsession with impeachment has kept a vital agreement from getting approved.

China Appears Set to Buy U.S. Ethanol

Some details are starting to emerge on how China would increase imports from the U.S. by as much as $200 billion over the next two years. That would meet its commitments under the phase one trade deal announced last week. Bloomberg says the still-unsigned deal includes Chinese purchase levels of $40 to $50 billion in U.S. ag commodities, a level which many experts think isn’t reachable. To help get closer to that figure, sources close to the matter tell Bloomberg that Beijing plans to restart purchases of ethanol by lifting or waiving trade war tariffs on the fuel. China is also considering taking U.S. trade from Hong Kong into its mainland ports, which would enable about $10 billion a year in U.S. goods to go directly to the mainland, which would boost the tally. The U.S. doesn’t count the shipments that go through Hong Kong as a part of its trade with China. China will also grant more regular waivers on retaliatory tariffs to local buyers of U.S. farm products like soybeans and pork. Back in November, China had lifted its ban on U.S. poultry shipments as a part of trade negotiations. U.S. officials estimate poultry exports will top $1 billion a year.