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Friday, August 30, 2019
Trump Says Farmers will be Happy with Ethanol Package
President Donald Trump says “the farmers will be so happy” when they see what the White House is doing for ethanol. On Twitter, Trump says “it will be a giant package, get ready.” Agriculture Secretary Sonny Perdue at the Farm Progress Show this week said President Trump would announce details within the next couple of weeks. Perdue declined to offer any details, other than he pushed for easier access to higher blends of biofuels. Trump says that while the package will be welcomed by farmers, it also saved “the small refineries from certain closing.” Ethanol groups have charged that small refinery waivers are killing demand for biofuels, because they exempt refiners from complying with volume requirements in the Renewable Fuel Standard. The Environmental Protection Agency recently announced 31 waivers for small refineries in 2020. In the last year of the Obama administration, the EPA issued seven waivers. Trump has held several White House meetings with cabinet members over the last two weeks, working a mitigation package.
Weekly Ethanol Production Increases as More Plants Close
Weekly ethanol production increased 1.6 percent this week, according to the Energy Information Association. The slight increase comes as ethanol producers say they are struggling due to small refinery waivers that are diminishing demand for ethanol. POET, the world’s largest biofuels producer, announced last week it has reduced production at half of its biorefineries, with the largest drops taking place in Iowa and Ohio. As a result, numerous jobs will be consolidated across POET’s 28 biorefineries and corn processing will drop by an additional 100 million bushels across Iowa, Ohio, Michigan, Indiana, Minnesota, South Dakota and Missouri. This week, the leadership of the Minnesota Corn Plus ethanol plant in Winnebago announced its closure. The plant was expected to halt production as early as this week. The shareholder-owned plant is laying off about 40 employees. The Renewable Fuels Association and Growth Energy both say the waivers are causing the closures are harming rural America's economy. The Trump administration fix to the ethanol market is expected in the next couple of weeks.
USDA Plans Foreign Animal Disease Exercise in September
The Department of Agriculture and the pork industry will hold a foreign animal disease exercise next month. The industry is working on a “full function” exercise that will be conducted the week of September 23. The effort will focus on a fictional outbreak of African swine fever and the subsequent response by federal and state authorities, along with the rest of the pork industry. Industry leaders say the exercise should better prepare the U.S. pork industry and its stakeholders in the event of an outbreak. The drill will focus on exercising plans, policies, procedures and staff members involved in management, direction, command and control functions. National Pork Board senior vice president of science and technology, Dr. Dave Pyburn, says, “We're trying to create a realistic scenario of a confirmed foreign animal disease in this country to see how each stakeholder reacts and to find the gaps that need more work.” To find out if your state is participating, contact your state pork association office.
FAPRI Releases U.S. Baseline Outlook Report Update
Excessive spring rain, trade disputes and African swine fever have disrupted agricultural markets in 2019. Despite reduced 2019 United States corn and soybean production prospects, prices for many commodities are under downward pressure because of the many factors that have weakened demand. Economists with the Food and Agricultural Policy Research Institute at the University of Missouri just released an update to its baseline price report. Assuming a return to more normal weather conditions in 2020, “projected corn and soybean production should rebound,” according to researcher Pat Westhoff. Projected 2020-21 marketing year average prices for corn fall to $3.39 per bushel and soybean prices fall to $7.94 per bushel. This year’s update was prepared the week of August 19. Policies in place at that time, including China’s 25 percent retaliatory tariff on U.S. soybeans and other farm products, are assumed to remain in place. The update uses 2019 acreage, yield and production estimates included in United States Department of Agriculture’s August 2019 Crop Production report
American Dairy Coalition Seeks Scientific Review of EPA Nitrate Study
The American Dairy Coalition wants a scientific review of the Environmental Protection Agency’s 2013 nitrate report. In a letter to EPA Director Andrew Wheeler, the coalition says the 2013 report never received a proper scientific review, and is a “flawed and damaging” report. The EPA Yakima Nitrate Report began in 2010 and was published in 2012 and 2013. The coalition says the report has been proven false by fifteen national agricultural science experts, and was developed without the peer-review required on "influential science information" as the study was categorized. Laurie Fischer, CEO of the American Dairy Coalition, says, "It is vital that the administration demonstrate their commitment to maintaining the integrity and transparency of science." The coalition is concerned for farmers that have already been severely affected by the report and believes EPA must stop a "dangerous precedence" from being set which could impact other farmers throughout the United States. Usage of the study led to highly disciplinary enforcement and threats of federal litigation, which has devastated four large dairy farms.
Deere Appoints New CEO
Deere & Company announced the appointment of John C. May as CEO. May, who has served as Deere's president and chief operating officer since April 2019, will assume the CEO role on November 4, 2019. May will take the place of Samuel Allen, who will continue as chairman after he steps down from the CEO role. Allen says May’s experience in precision agriculture, information technology, and overseas operations “will be instrumental in driving the company's digitalization journey and extending its success in agricultural and construction equipment." May becomes the 10th chief executive in the company's 182-year history. The 50-year-old May joined Deere in 1997 and became part of the senior management team in 2012 as president, agricultural solutions and chief information officer. Last year, he was named president, of the Worldwide Agriculture & Turf Division. Earlier in his career, May headed the company's China operations, served as factory manager at an Iowa Deere facility and was vice president of the turf and utility platform.
Washington Insider: Economic Growth and Spending, Broken
There is a lot of angst around the country just now regarding the prospects for the medium-term economic outlook. In that context, the Washington Post is carrying an Op-Ed by Jared Bernstein, senior fellow at the Center on Budget and Policy Priorities and former advisor to Vice President Joe Biden, who writes that the large and growing budget deficit for FY 2018 of $779 billion is a huge jump over the prior year’s level and a particularly large deficit considering the strong underlying economy.
Bernstein says that the Trump administration, with its tax cut, has broken a key fiscal function. In the past when employment was high tax revenues as a share of the economy were expected to rise significantly, deficits were expected to fall. Instead, revenues recently have gone way down, and deficits have climbed.
He argues that this is primarily because the recent tax cuts have significantly cut the amount of federal tax revenue being spun off for any given growth rate. Increased spending also played a role, he says, but “not as large a one as the tax cuts.” If this sounds out of sync with Republican claims that “tax cuts will pay for themselves,” that’s because it is. They don’t … never did … never will, he asserts.
Bernstein presents data back to the mid-1940s and calculated the average deficit as a share of GDP. In every year since the late 1940s when unemployment rate was at or below 4.5% (it’s currently 3.7%) the average deficit was 0.4%, as opposed to the 3.9% for 2018.
This shows, he says, a shift in the heretofore “tight correlation between deficit and unemployment rates.” For example, he notes that in both fiscal 2000 and 2018, the unemployment rate was 4%. In 2000, the strong economy teamed up with the structure of the tax code generated revenues to the Treasury of 20% of GDP. This year, that share fell to 16.5%.
Bernstein expects that advocates of the tax cuts will point to the difference in the spending between the two years, but uses projections by Congressional Budget Office to compare the two periods. The CBO projected in the summer of 2017, before the tax cuts and this year’s spending deal, that we’d spend 20.5% of GDP this year, almost exactly what happened (20.3%). But CBO also thought, ahead of the tax cut that we’d collect 17.7% of GDP in revenues when the actual was, as shown, 16.5%. This diminished revenue figure is the key difference between what CBO expected then and what occurred, he says.
He sees this difference as highly important. Based on our aging demographics alone, we will need more revenue over the next decade, not less. Add in geopolitical threats, climate change and the damage from increasingly intense storms, infrastructure, the need to push back on poverty and inequality, as well as counter-cyclical fiscal policy that will be needed for the next downturn and he concludes that “it’s not hard to understand why a rising deficit at full economic capacity is so ill-advised.”
These observations lead him to conclude that it is necessary to take steps to claw back the lost revenue, as well as to look for reasonable savings on the spending side.
He thinks this will be hard, given claims from administration officials who believe that expected strong economic growth, combined with proposals to cut wasteful spending, will lead America toward a sustainable financial path. He calls that “magical thinking” and also argues that the red ink we learned about this week is merely the beginning of a tide that will only, absent corrective action, get larger.
Here it seems we have the basis for an intense debate, both between the parties and within them. The administration wants a bustling economy and it seems completely unwilling to be deterred by implications of growing deficits and debt.
At the same time, many of the Democratic contenders are proposing large, strong government programs to do many things and have been willing to argue that “modern economics” leads to less prominent concerns about debt levels and deficits—although their spending priorities are very different than most of those proposed by the administration.
That raises the question of who will focus on the debt, and whether that concern will—or won’t—constrain ambitions for government programs, given the many, many concerns regarding urgent public needs. It still seems that debt worries have not disappeared entirely, and that possibly Bernstein’s former link to a top democratic contender may mean new policy efforts from that direction.
So, we will see. The Post carried the Bernstein note but did not weigh in on the intensity and potential political impact of the debt issue—or of its absence. Nevertheless, this is a fight that can be expected to emerge at some point and which should be watched closely by producers and others as it does, Washington Insider believes.
Bernstein says that the Trump administration, with its tax cut, has broken a key fiscal function. In the past when employment was high tax revenues as a share of the economy were expected to rise significantly, deficits were expected to fall. Instead, revenues recently have gone way down, and deficits have climbed.
He argues that this is primarily because the recent tax cuts have significantly cut the amount of federal tax revenue being spun off for any given growth rate. Increased spending also played a role, he says, but “not as large a one as the tax cuts.” If this sounds out of sync with Republican claims that “tax cuts will pay for themselves,” that’s because it is. They don’t … never did … never will, he asserts.
Bernstein presents data back to the mid-1940s and calculated the average deficit as a share of GDP. In every year since the late 1940s when unemployment rate was at or below 4.5% (it’s currently 3.7%) the average deficit was 0.4%, as opposed to the 3.9% for 2018.
This shows, he says, a shift in the heretofore “tight correlation between deficit and unemployment rates.” For example, he notes that in both fiscal 2000 and 2018, the unemployment rate was 4%. In 2000, the strong economy teamed up with the structure of the tax code generated revenues to the Treasury of 20% of GDP. This year, that share fell to 16.5%.
Bernstein expects that advocates of the tax cuts will point to the difference in the spending between the two years, but uses projections by Congressional Budget Office to compare the two periods. The CBO projected in the summer of 2017, before the tax cuts and this year’s spending deal, that we’d spend 20.5% of GDP this year, almost exactly what happened (20.3%). But CBO also thought, ahead of the tax cut that we’d collect 17.7% of GDP in revenues when the actual was, as shown, 16.5%. This diminished revenue figure is the key difference between what CBO expected then and what occurred, he says.
He sees this difference as highly important. Based on our aging demographics alone, we will need more revenue over the next decade, not less. Add in geopolitical threats, climate change and the damage from increasingly intense storms, infrastructure, the need to push back on poverty and inequality, as well as counter-cyclical fiscal policy that will be needed for the next downturn and he concludes that “it’s not hard to understand why a rising deficit at full economic capacity is so ill-advised.”
These observations lead him to conclude that it is necessary to take steps to claw back the lost revenue, as well as to look for reasonable savings on the spending side.
He thinks this will be hard, given claims from administration officials who believe that expected strong economic growth, combined with proposals to cut wasteful spending, will lead America toward a sustainable financial path. He calls that “magical thinking” and also argues that the red ink we learned about this week is merely the beginning of a tide that will only, absent corrective action, get larger.
Here it seems we have the basis for an intense debate, both between the parties and within them. The administration wants a bustling economy and it seems completely unwilling to be deterred by implications of growing deficits and debt.
At the same time, many of the Democratic contenders are proposing large, strong government programs to do many things and have been willing to argue that “modern economics” leads to less prominent concerns about debt levels and deficits—although their spending priorities are very different than most of those proposed by the administration.
That raises the question of who will focus on the debt, and whether that concern will—or won’t—constrain ambitions for government programs, given the many, many concerns regarding urgent public needs. It still seems that debt worries have not disappeared entirely, and that possibly Bernstein’s former link to a top democratic contender may mean new policy efforts from that direction.
So, we will see. The Post carried the Bernstein note but did not weigh in on the intensity and potential political impact of the debt issue—or of its absence. Nevertheless, this is a fight that can be expected to emerge at some point and which should be watched closely by producers and others as it does, Washington Insider believes.
USDA Again Cuts FY 2019 US Agricultural Export Outlook
U.S. agricultural exports are now forecast at $134.5 billion for Fiscal Year (FY) 2019, down $2.5 billion from May's forecast of $137 billion, according to USDA's August 2019 Outlook for U.S. Agricultural Exports.
If those export numbers hold they would be the lowest since FY 2016 when U.S. agricultural exports were valued at $129.6 billion. It would also mark first year since FY 2016 that exports have not reached at least $140 billion.
The value of U.S. agricultural imports held steady at a record $129 billion, the same as the May forecast. If the forecast comes to pass, it would mark three years in a row of record import values.
The decline in ag exports is forecast to put the U.S. agricultural trade surplus at just $5.3 billion, down $2.8 billion from May's forecast of $8 billion and around one third of the $15.8 billion surplus registered for FY 2018. If realized, it would be the smallest U.S. agricultural trade surplus since FY 2006 when it stood at $4.6 billion.
If those export numbers hold they would be the lowest since FY 2016 when U.S. agricultural exports were valued at $129.6 billion. It would also mark first year since FY 2016 that exports have not reached at least $140 billion.
The value of U.S. agricultural imports held steady at a record $129 billion, the same as the May forecast. If the forecast comes to pass, it would mark three years in a row of record import values.
The decline in ag exports is forecast to put the U.S. agricultural trade surplus at just $5.3 billion, down $2.8 billion from May's forecast of $8 billion and around one third of the $15.8 billion surplus registered for FY 2018. If realized, it would be the smallest U.S. agricultural trade surplus since FY 2006 when it stood at $4.6 billion.
China Mulls Next Moves After Latest Trade War Escalations
China Ministry of Commerce spokesman Gao Feng said Thursday (August 29) Beijing "firmly reject[s] an escalation of the trade war," adding that it remains "willing to negotiate and collaborate in order to solve this problem with calm attitude."
China will not immediately retaliate over the duties announced by President Donald Trump that are set to take effect this weekend, Gao stated. "China has ample means for retaliation but thinks the question that should be discussed now is about removing the new tariffs to prevent escalation of the trade war," he said.
Gao noted that the U.S. and China have maintained "effective communications" since the last set of face-to-face talks in Shanghai in July. He added that the two sides are "still discussing" whether Chinese negotiators will travel to Washington for more in person talks in September.
On the U.S. side, Treasury Secretary Steven Mnuchin said officials still anticipate additional talks, but would not confirm whether the previously planned September meeting is still on tap. "We continue to have conversations. We’re planning for them to come," he told Bloomberg in an interview.
China will not immediately retaliate over the duties announced by President Donald Trump that are set to take effect this weekend, Gao stated. "China has ample means for retaliation but thinks the question that should be discussed now is about removing the new tariffs to prevent escalation of the trade war," he said.
Gao noted that the U.S. and China have maintained "effective communications" since the last set of face-to-face talks in Shanghai in July. He added that the two sides are "still discussing" whether Chinese negotiators will travel to Washington for more in person talks in September.
On the U.S. side, Treasury Secretary Steven Mnuchin said officials still anticipate additional talks, but would not confirm whether the previously planned September meeting is still on tap. "We continue to have conversations. We’re planning for them to come," he told Bloomberg in an interview.
Friday Watch List
Markets
Early Friday we'll be watching personal income, consumer spending and core inflation reports to be released. DTN will also be watching for deliveries on expiring September futures contracts, updated longer term weather outlooks and any news regarding new biofuel incentives and U.S.--China trade talks.
Weather
Heavy rain and flash flooding are in store for the southeastern Plains Friday. Other crop areas will be dry. Temperatures will be seasonal to below normal north and central, keeping crop progress slow. Meanwhile, Hurricane Dorian in the western Atlantic Ocean is forecast to reach major hurricane status during Friday.
Early Friday we'll be watching personal income, consumer spending and core inflation reports to be released. DTN will also be watching for deliveries on expiring September futures contracts, updated longer term weather outlooks and any news regarding new biofuel incentives and U.S.--China trade talks.
Weather
Heavy rain and flash flooding are in store for the southeastern Plains Friday. Other crop areas will be dry. Temperatures will be seasonal to below normal north and central, keeping crop progress slow. Meanwhile, Hurricane Dorian in the western Atlantic Ocean is forecast to reach major hurricane status during Friday.
Thursday, August 29, 2019
Perdue Calls for Investigation Into Cattle Markets After Kansas Fire
U.S. Ag Secretary Sonny Perdue has been monitoring the impact of a fire at the beef processing facility in Holcomb, Kansas. As a part of that monitoring effort, Perdue says, “I have directed USDA’s Packers and Stockyards Division to launch an investigation into recent beef pricing margins to determine if there is any evidence of price manipulation, collusion, restrictions of competition, or other unfair practices.” Perdue says if any unfair practices are found, his agency will take quick enforcement action. The USDA remains in close contact with plant management and other stakeholders to understand the fire’s impact on the industry. The National Cattlemen’s Beef Association was pleased with Perdue’s announcement. NCBA President Jennifer Houston says the announcement demonstrates the government’s understanding of the extreme strain placed on the cattle industry by the plant fire in Kansas. “We encourage USDA to look at all aspects of the beef supply chain and to utilize internal and external expertise in the investigation,” she says. “We believe it adds transparency that will help build confidence in the markets among cattlemen and women.”
The List of Asian Countries Battling ASF Continues to Grow
African Swine Fever has now claimed another country in Asia. The disease is now in Myanmar (ME-yahn-mar), a country west of the previous known outbreaks. A National Pork Board release says if eastern Russia is included, that makes eight Asian countries that are struggling with the disease. The World Organization for Animal Health says two provinces in far-eastern Russia that aren’t far from the Chinese border have recently reported new outbreaks of the disease on multiple farms. While ASF cases have been found in eastern Russia before, these provinces hadn’t been affected by outbreaks until recently. The United Nation’s Food and Agricultural Organization says Myanmar’s Ministry of Agriculture, Livestock, and Irrigation confirmed the first ASF outbreak occurred on August 1. It’s in the northwest part of the country near the Chinese border. Other outbreaks then occurred on August 10 and 11, respectively, also in the northeast part of the country. Elsewhere, officials in the Philippines have seen suspiciously high mortality in backyard pigs recently. As a result, the multi-island nation is setting up animal inspection points and a quarantine area so officials can check pigs for signs of African Swine Fever. Many cities and provinces within the country are taking additional action to help prevent the spread of ASF.
Michigan Lawmakers Ask Trump to “Stop Choosing Oil”
Michigan Senators Debbie Stabenow and Gary Peters recently joined five other senators in asking the Trump Administration to support a strong Renewable Fuels Standard. The administration recently took more action to benefit oil companies and undercut American-grown biofuels. The Environmental Protection Agency issued 31 small refinery hardship waivers, which allows oil companies to blend less biofuel into gasoline. The August 8 announcement effectively cut demand for biofuels by over 1.4 billion gallons. Stabenow says, “The President needs to stop putting the interests of big oil companies ahead of farmers who are already struggling thanks to the administration.” The effect of the 31 small refinery waivers is compounded by the 54 additional waivers the EPA has granted over the last two years.” “I’m disappointed that our farmers continue to be undermined by the Trump Administration’s waivers for big oil companies,” Peters says. “The RFS was created to reduce our reliance on foreign oil sources and shift us to homegrown biofuels that we grow and produce domestically.” The Administration’s use of waivers has increased 370 percent, with some of them going to the world’s largest oil companies. Recently, more than 13 ethanol plants and eight biodiesel plants have idled their production or shut down entirely across the country.
Hemp Production and Processing Rules Expected in September
The USDA is expected to issue new rules for growing and testing hemp sometime next month. Capital Press reports that has farmers feeling anxious about establishing consistent standards for producing the booming crop. Senator Ron Wyden of Oregon tells the Capital Press that he expects the USDA to issue those regulations sometimes within the next two to four weeks. Wyden was one of the sponsors of legislation decriminalizing hemp in the 2018 Farm Bill. The Hemp Farming Act of 2018 passed with bipartisan support and classified hemp as an agricultural product. “I think it’s pretty obvious that you are on the right side of history,” Wyden said during remarks to a crowd at the Western U.S. Hemp Growers Conference and Expo on August 19 in Portland, Oregon. “You don’t have thousands of farmers moving into this space for nothing. Hemp can be used to make multiple products like paper, textiles, clothing, and building materials. The primary use in the market today is for an extract called CBD Oil, which companies put into everything from cosmetics to beverage, touting health benefits.
Coalition Says Tariff Increases “Come at the Worst Possible Time”
Americans for Free Trade has a lot to say about the pending U.S. tariff increases on Chinese goods. The coalition of over 160 businesses set a letter to President Trump asking him to postpone tariff increases that are scheduled to take effect next week. The association says the proposed tariff increases come as consumers draw nearer to the holiday shopping season, which means costs will rise in the coming months. The letter says, “These tariff rate increases, some starting as early as Sunday, come at the worst possible time, right in the middle of the busy holiday shopping period. U.S. consumers are driving the growth of the U.S. economy and we want to ensure that their confidence remains high.” Americans for Free Trade represents many of the sectors and products that will be hit hardest by recent trade war escalation. Starting on September 1, approximately $112 billion in goods will be hit by a 15 percent tariff, including products that range from clothing and footwear to televisions and Christmas decorations. “We want to ensure that economic prosperity continues for the American families, farmers, and workers we employ every day.”
Conagra Teams With HSUSA on Chicken Welfare Standards
Conagra Brands recently announced steps it will implement when it comes to company treatment of broiler chickens in its supply chain sourcing practices. The company worked with the Humane Society of the U.S. on the new goals, which add higher standards to the company’s existing broiler policy. Conagra says it will work with suppliers, peers, and external stakeholders to implement several improvements in its treatment of chickens by 2024. Among the improvements, Conagra says it will provide birds with more space to perform natural behaviors, including a stocking density of no greater than six pounds per square foot and no use of broiler cages. They’ll also be tracking supplier compliance with the new standards through third-party auditing. In a statement, Conagra says it’s proud to work with the Humane Society of the United States, as well as others in the food industry, to take meaningful steps toward positive change in broiler chicken welfare practices. HUSU says, “We applaud Conagra for addressing the most pressing concerns related to chicken meat production.”
Washington Insider: Collateral Issues and the China Trade Battle
A political factor in the U.S.-China trade war is attracting the attention of the urban press this week. For example, the New York Times gave front-page coverage to a story about farmer concerns over President Trump’s trade war. Also, The Hill highlighted a quote from “Iowa corn farmers” charging that the government put us in “one hell of a bad situation.”
At least one trade association was hammering the President for approving what it called 31 “unjustified” refinery waivers tied to ethanol, along with his growing trade war with China. It said those two issues, combined with the effects of climate change, are forcing the value of Iowa corn to drop ahead of harvest season.
The farmer group also charged that while the President has sought to cast himself as a staunch supporter of American farmers, the U.S. agricultural community has been disproportionately harmed as China targets farm products in an apparent attempt to hit some of Trump’s main backers.
Meanwhile, the President is continuing to argue that while the trade war may cause some “short term” pain,” farmers will be “big winners.”
The Times article emphasized a sophisticated aspect of this issue, the fact that in the current fight American farmers’ woes are collateral damage in a war that the administration is using to help manufacturers and others it believes were hurt by China’s trade practices—although the issues involved are not mainly agricultural.
More than a year into the dispute, sales of American soybeans, pork, wheat and other ag products to China have dried up as Beijing retaliates against U.S. tariffs, the Times notes. Lucrative contracts that farmers long relied on for significant sources of income have evaporated, with Chinese buyers looking to other nations like Brazil and Canada to get the commodities they need.
While the Times focuses on farm market pressures, it also thinks they have generally “remained resolute,” as the President continues to argue that his trade policies will help the agricultural industry in the end—even as questions grow regarding what those benefits may turn out to be.
“We’re not starting to do great again,” Brian Thalmann, the president of the Minnesota Corn Growers Association told Ag Secretary Perdue at a recent event. “Things are going downhill and downhill quickly.”
On Monday, after a 72-hour period during which Trump twice escalated his trade war with China, Thalmann said he could no longer support the President as he did in 2016.
Losing the world’s most populous country as an export market has been a major blow to the agriculture industry. Total American agricultural exports to China were $24 billion in 2014 and fell to $9.1 billion last year, the Times says and exports of farm products to China fell by $1.3 billion in the first half of the year.
The administration also has tried to mollify farmers by rolling out two financial aid packages totaling $28 billion—and is looking for other ways to help farmers, including additional trade deals such as the one recently described between the U.S. and Japan.
Last Thursday, President Trump summoned Perdue and Andrew Wheeler, who heads the EPA, to the White House to discuss options for increasing ethanol demand. The three came up with a package of policies that Trump plans to unveil at a White House ceremony in the next week that the Times expects to keep the waivers for ethanol refineries in place, while slightly increasing federal mandates for production of corn-based ethanol and biodiesel and allowing vehicles that use high-ethanol blends of gasoline to qualify for special EPA credits.
Perdue is a somewhat unlikely lieutenant in the administration’s trade war, the Times says because as Georgia’s governor, he worked to strengthen ties between the state and Chin. But as a member of the administration, he has been a staunch backer of the President’s policies, publicly defending tariffs, working to shrink the federal government and expressing doubts about the science behind climate change.
At Minnesota’s recent Farmfest, it was clear that Perdue’s Southern charm could go only so far. His answers to questions about how the trade war with China would end were curt the Times said.
Last week, USDA staff members in Nebraska left the Pro Farmer Midwest Crop Tour after receiving a threat from an angry farmer. An organizer of the event told the Times that farmers have been venting to government employees about depressed crop prices, falling farm income and lack of access to credit. “This is a stressful time in agriculture,” said Joel Jaeger, the general manager of Pro Farmer. “There’s certainly a lot of stress in the farm community.”
The fact is that one of the reasons trade negotiations are so tough is that they typically involve significant “collateral issues.” Thus, ag producers now are increasingly arguing that the trade fight that risks well established, lucrative ag markets in an effort to strengthen non-ag sectors like manufacturing are unfair and that government trade aid payments are greatly insufficient. In fact, collateral issues always involve very difficult issues—and almost always provide very attractive targets for the “other side” to exploit, as the Chinese are doing now.
So, what this debate may mean for future U.S. policies remains to be seen, but the fight appears to be growing increasingly confrontational and difficult, and should be watched closely as it intensifies Washington Insider believes.
At least one trade association was hammering the President for approving what it called 31 “unjustified” refinery waivers tied to ethanol, along with his growing trade war with China. It said those two issues, combined with the effects of climate change, are forcing the value of Iowa corn to drop ahead of harvest season.
The farmer group also charged that while the President has sought to cast himself as a staunch supporter of American farmers, the U.S. agricultural community has been disproportionately harmed as China targets farm products in an apparent attempt to hit some of Trump’s main backers.
Meanwhile, the President is continuing to argue that while the trade war may cause some “short term” pain,” farmers will be “big winners.”
The Times article emphasized a sophisticated aspect of this issue, the fact that in the current fight American farmers’ woes are collateral damage in a war that the administration is using to help manufacturers and others it believes were hurt by China’s trade practices—although the issues involved are not mainly agricultural.
More than a year into the dispute, sales of American soybeans, pork, wheat and other ag products to China have dried up as Beijing retaliates against U.S. tariffs, the Times notes. Lucrative contracts that farmers long relied on for significant sources of income have evaporated, with Chinese buyers looking to other nations like Brazil and Canada to get the commodities they need.
While the Times focuses on farm market pressures, it also thinks they have generally “remained resolute,” as the President continues to argue that his trade policies will help the agricultural industry in the end—even as questions grow regarding what those benefits may turn out to be.
“We’re not starting to do great again,” Brian Thalmann, the president of the Minnesota Corn Growers Association told Ag Secretary Perdue at a recent event. “Things are going downhill and downhill quickly.”
On Monday, after a 72-hour period during which Trump twice escalated his trade war with China, Thalmann said he could no longer support the President as he did in 2016.
Losing the world’s most populous country as an export market has been a major blow to the agriculture industry. Total American agricultural exports to China were $24 billion in 2014 and fell to $9.1 billion last year, the Times says and exports of farm products to China fell by $1.3 billion in the first half of the year.
The administration also has tried to mollify farmers by rolling out two financial aid packages totaling $28 billion—and is looking for other ways to help farmers, including additional trade deals such as the one recently described between the U.S. and Japan.
Last Thursday, President Trump summoned Perdue and Andrew Wheeler, who heads the EPA, to the White House to discuss options for increasing ethanol demand. The three came up with a package of policies that Trump plans to unveil at a White House ceremony in the next week that the Times expects to keep the waivers for ethanol refineries in place, while slightly increasing federal mandates for production of corn-based ethanol and biodiesel and allowing vehicles that use high-ethanol blends of gasoline to qualify for special EPA credits.
Perdue is a somewhat unlikely lieutenant in the administration’s trade war, the Times says because as Georgia’s governor, he worked to strengthen ties between the state and Chin. But as a member of the administration, he has been a staunch backer of the President’s policies, publicly defending tariffs, working to shrink the federal government and expressing doubts about the science behind climate change.
At Minnesota’s recent Farmfest, it was clear that Perdue’s Southern charm could go only so far. His answers to questions about how the trade war with China would end were curt the Times said.
Last week, USDA staff members in Nebraska left the Pro Farmer Midwest Crop Tour after receiving a threat from an angry farmer. An organizer of the event told the Times that farmers have been venting to government employees about depressed crop prices, falling farm income and lack of access to credit. “This is a stressful time in agriculture,” said Joel Jaeger, the general manager of Pro Farmer. “There’s certainly a lot of stress in the farm community.”
The fact is that one of the reasons trade negotiations are so tough is that they typically involve significant “collateral issues.” Thus, ag producers now are increasingly arguing that the trade fight that risks well established, lucrative ag markets in an effort to strengthen non-ag sectors like manufacturing are unfair and that government trade aid payments are greatly insufficient. In fact, collateral issues always involve very difficult issues—and almost always provide very attractive targets for the “other side” to exploit, as the Chinese are doing now.
So, what this debate may mean for future U.S. policies remains to be seen, but the fight appears to be growing increasingly confrontational and difficult, and should be watched closely as it intensifies Washington Insider believes.
USDA Releases Study Showing Waterway Investment Benefits to US Ag
USDA unveiled a new study detailing the importance of inland waterways to U.S. agriculture and the economic benefits that additional investments could yield.
The study, prepared by Informa Agribusiness Intelligence, found the U.S. inland waterways system employed nearly 256,000 Americans and contributed $27.2 billion to U.S. gross domestic product (GDP) in 2016. It determined that additional investments totaling $6.3 billion over the next 10 years and $0.4 billion per year thereafter would see inland waterways contribute $64.6 billion to U.S. GDP by 2045, and employ some 472,000 people.
The study considered the impact of dredging the lower Mississippi River from Baton Rouge through New Orleans and the Southwest Pass into the Gulf of Mexico. It found the project - along with other waterway investments - would increase the market value of corn and soybeans by $39 billion by 2045 compared with the status quo of no additional investments, including new dredging.
“Water transport is the most efficient, cost-effective transportation for our producers, and our waterways keep the American exporter the most competitive in the world," USDA Secretary Sonny Perdue said in a statement accompanying the report.
"President Trump has made it a priority to revitalize our nation’s infrastructure and invest in our rural communities, and his goal to reestablish America’s economic prowess on the global stage can be furthered by rebuilding our waterways to support agriculture exports. We must continue to invest in modernizing our lock and dam infrastructure that flows through the heartland of agricultural production," he concluded.
The study, prepared by Informa Agribusiness Intelligence, found the U.S. inland waterways system employed nearly 256,000 Americans and contributed $27.2 billion to U.S. gross domestic product (GDP) in 2016. It determined that additional investments totaling $6.3 billion over the next 10 years and $0.4 billion per year thereafter would see inland waterways contribute $64.6 billion to U.S. GDP by 2045, and employ some 472,000 people.
The study considered the impact of dredging the lower Mississippi River from Baton Rouge through New Orleans and the Southwest Pass into the Gulf of Mexico. It found the project - along with other waterway investments - would increase the market value of corn and soybeans by $39 billion by 2045 compared with the status quo of no additional investments, including new dredging.
“Water transport is the most efficient, cost-effective transportation for our producers, and our waterways keep the American exporter the most competitive in the world," USDA Secretary Sonny Perdue said in a statement accompanying the report.
"President Trump has made it a priority to revitalize our nation’s infrastructure and invest in our rural communities, and his goal to reestablish America’s economic prowess on the global stage can be furthered by rebuilding our waterways to support agriculture exports. We must continue to invest in modernizing our lock and dam infrastructure that flows through the heartland of agricultural production," he concluded.
USDA Announces Hemp Crop Insurance Coverage For 2020 Production
Crop insurance for hemp production will be available for the 2020 crop year via the Whole-Farm Revenue Protection (WFRP) program, according to USDA’s Risk Management Agency (RMA).
Producers can obtain WFRP coverage for hemp now if they are part of a Section 7606 state or university research pilot as authorized by the 2014 Farm Bill. Other producers cannot obtain coverage until a USDA-approved plan is in place. But USDA has not completed the rulemaking process on the hemp provisions in the 2018 Farm Bill, with plans to finalize the rules this fall.
WFRP allows coverage of all revenue for commodities produced on a farm up to a total insured revenue of $8.5 million. The 2018 Farm Bill amended the Controlled Substances Act to address how industrial hemp is to be defined and regulated at the federal level.
Producers can obtain WFRP coverage for hemp now if they are part of a Section 7606 state or university research pilot as authorized by the 2014 Farm Bill. Other producers cannot obtain coverage until a USDA-approved plan is in place. But USDA has not completed the rulemaking process on the hemp provisions in the 2018 Farm Bill, with plans to finalize the rules this fall.
WFRP allows coverage of all revenue for commodities produced on a farm up to a total insured revenue of $8.5 million. The 2018 Farm Bill amended the Controlled Substances Act to address how industrial hemp is to be defined and regulated at the federal level.
Thursday Watch List
Markets
Personal income, consumer spending and core inflation will be closely watched for signs of a slowing economy. DTN will be watching U.S. export sales on especially corn and soybeans, along with updated weather forecasts and any news on U.S. trade deals with China and Japan.
Weather
Light rain or showers will develop in the northern Midwest during Thursday. Heavier showers and a few thunderstorms may occur late Thursday or during Thursday night in the southwest Midwest and the east-central Plains area. This activity may become locally heavy. Mainly dry elsewhere in the key U.S. and Canada crop areas Thursday. Temperatures continue to average below normal today over the Canadian Prairies and the Northern Plains while the Midwest should see near to below normal temperatures. Hurricane Dorian will move towards the northwest east of the Bahamas today and Friday. A turn towards the west after that with a threat to Florida's east coast by Sunday night.
Personal income, consumer spending and core inflation will be closely watched for signs of a slowing economy. DTN will be watching U.S. export sales on especially corn and soybeans, along with updated weather forecasts and any news on U.S. trade deals with China and Japan.
Weather
Light rain or showers will develop in the northern Midwest during Thursday. Heavier showers and a few thunderstorms may occur late Thursday or during Thursday night in the southwest Midwest and the east-central Plains area. This activity may become locally heavy. Mainly dry elsewhere in the key U.S. and Canada crop areas Thursday. Temperatures continue to average below normal today over the Canadian Prairies and the Northern Plains while the Midwest should see near to below normal temperatures. Hurricane Dorian will move towards the northwest east of the Bahamas today and Friday. A turn towards the west after that with a threat to Florida's east coast by Sunday night.
Wednesday, August 28, 2019
Beijing “Not Aware” of Weekend Calls with Trump
President Donald Trump claims China is ready to return to the negotiating table, but China says they don’t know who the President talked to over the weekend. A spokesperson for China’s Foreign Ministry told reporters “I am not aware of the phone calls over the weekend.” Trump claims Chinese officials called top U.S. trade officials to say, “let’s get back to the table.” However, China refutes the claim, and hopes the U.S. will “remain calm, return to reason, and immediately stop its wrong approach,” referring to the trade war escalation and Trump’s order against U.S. companies doing business in China. However, the order met pushback from the stock market and the U.S. business sector. China replied, “We hope the U.S. will heed the views from various sectors, calculate its gains and losses, and come to prudent rather than hot-headed decisions.” Over the phone negotiations were set to resume this week and Chinese officials are scheduled to meet in Washington with the U.S. for negotiations next month.
RFA: EPA Rejected White House Recommendation on Waivers
The Renewable Fuels Association claims White House documents show the Environmental Protection Agency ignored Trump Administration recommendations on small refinery waivers. Documents obtained by the association apparently show the EPA ignored strong recommendations from within the Trump Administration to redistribute Renewable Fuel Standard blending obligations lost to small refinery exemptions in the proposed rule for 2020 volumes. According to the documents, which detail the White House Office of Management and Budget’s interagency review of the 2020 RVO proposal, some reviewers within the administration raised concerns about EPA’s failure to redistribute exempted biofuel blending volumes to non-exempt parties. The documents recommended that EPA include prospective redistribution of waived volumes in the 2020 proposal and suggested a method for addressing a court order to restore 500 million gallons of blending obligations inappropriately waived in 2016. RFA President and CEO Geoff Cooper says the documents “will only exacerbate the outrage and anger in farm country over EPA’s abuse of the small refinery waiver provision.” Cooper says the EPA “must adopt the prospective reallocation approach.”
Hemp Crop Insurance Coverage Available for 2020
Certain industrial hemp growers will be able to obtain insurance coverage under the Whole-Farm Revenue Protection program for crop year 2020. The Department of Agriculture’s Risk Management Agency Tuesday announced coverage for hemp grown for fiber, flower or seeds. The coverage will be available to producers who are in areas covered by USDA-approved hemp plans or who are part of approved state or university research pilot programs. RMA Administrator Martin Barbre says producers “are anxious for a way to protect their hemp crop,” adding that the policy will “provide a safety net for them.” Producers can obtain the coverage for hemp now if they are part of a Section 7606 state or university research pilot as authorized by the 2014 Farm Bill. Other producers cannot obtain coverage until a USDA-approved plan is in place. The program allows coverage of all revenue for commodities produced on a farm up to a total insured revenue of $8.5 million. It is popular for specialty crops, organic commodities and non-traditional crops.
Vilsack, Grassley, Tout USMCA in Iowa
Senator Chuck Grassley and former Agriculture Secretary Tom Vilsack touted the U.S.-Mexico-Canada Agreement this week while touring an Iowa dairy processor. Grassley, the chair of the Senate Finance Committee and a prominent Agriculture Committee member, says “There’s going to be tens of thousands of jobs created” stemming from USMCA. The two toured AE Dairy in Des Moines, Iowa, a dairy plant that will benefit from the trade agreement, once signed. Vilsack of Iowa, who served as Agriculture Secretary for President Obama, is the current CEO of the U.S. Dairy Export Council. Speaking during the event, Vilsack stated, “USMCA makes vital improvements to NAFTA and its passage is necessary to modernize trade in North America.” According to a recent International Trade Commission Report, USMCA could mean up to $314 million in additional dairy sales. Agriculture remains hopeful lawmakers will consider the agreement when they return from the August recess. Washington insiders expect Congress won’t consider the agreement until November or December of this year.
National Pork Board to Host First-Ever Swine Innovation Summit
The National Pork Board will host the inaugural Swine Innovation Summit in Indianapolis on September 17, 2019. NPB bills the Summit as a special event, prior to the Forbes AgTech Summit in Indianapolis. The program seeks to help pork producers and food influencers better understand emerging technology trends facing today’s food production systems. NPB says today’s food production systems are undergoing explosive change and the animal agriculture industry needs to prepare in order to keep pace. The Swine Innovation Summit will focus on three key drivers of change including emerging technology, new and dynamic business models and consumer behaviors which impact shopping preferences and food choices. An NPB spokesperson says, “In the span of a few short hours, we intend to educate today’s pig farmers on what they need to know and how they must adapt to the changing world in which we live.” NPB is offering the conference free of charge to pig farmers, swine veterinarians, authorized academics and allied industry. Learn more at pork.org.
KFC Testing Beyond Fried Chicken
KFC announced the brief introduction of Beyond Fried Chicken in a trial run, a meat-free alternative to its staple products. In partnership with Beyond Meat, the fast food chain tested the new offering briefly Tuesday at an Atlanta, Georgia, location. Customer feedback from the Atlanta test will be considered as KFC evaluates a broader test or potential national rollout. Beyond Fried Chicken is fried to order. It is available as a nugget or as a boneless wing. The products are 100 percent plant-based, and Beyond Meat says they are prepared in a dedicated fryer. In a news release, , KFC president and chief concept officer Kevin Hochman stated, “our customers will find it difficult to tell that it’s plant-based.” Beyond Meat continues to grow its line of meat-imitating products through fast food restaurant chains. Within the last month, Beyond Meat announced product offerings at Subway and Dunkin Donuts, along with including in meal delivery companies Hello Fresh and Blue Apron.
Washington Insider: The President’s Stark Choice
It seems that the world of trade and economic policy has gotten quite a lot more challenging in recent days, and the urban press has noticed. For example, the New York Times says that the administration has recently sent numerous conflicting signals on trade policy — and that in addition to the impact of protectionist policies themselves, the uncertainty and anxiety from conflicting policy moves are also negative market factors.
Overall, the Times says, the president can try to sever the deeply intertwined American commercial relationship with China, or he can prod economic growth to assuage the fears of investors around the planet. “But he cannot do both at the same time,” the report asserts.
The Times waxes a little poetic about all of this—it proclaims that the President “can disregard the admonitions of news outlets he derides as fake news. He can simply consult the one source whose verdicts he tends to celebrate: the stock market.”
There’s proof, NYT says — among those who control money, portents of further trade hostilities lead to stock sales “with abandon” while amplifying talk of recession. By contrast, intimations of a deal reverberate as a clarion call to buy, sending share prices higher while easing worries about a potential global economic downturn.
Talk of a trade deal with China makes for happy stock markets. However, thunderous threats of fresh tariffs on Chinese goods and efforts to push American industry to forsake China damage share prices and shrink economic growth prospects — even as they bring approval from Trump’s most ardent political supporters who portray the trade war as a tough but necessary piece of business, too long avoided by the cowards who resided at the White House before.
NYT recounts that on Friday the president unleashed furious threats toward China and vowed to raise tariffs on $550 billion of Chinese goods and declared China’s president, Xi Jinping, whom he had previously called a “good man,” an “enemy.” And he commanded American companies to abandon China and start making their products in the United States.
In markets around the globe, investors reacted to these developments as powerful signals to yank their money to safety. They reacted as if much of the globe suddenly appeared riskier, the Times said. The Times also notes that the trade war that has escalated over the last year has already produced distress.
For much of the world, countries that are innocent bystanders will actually suffer “even more than the United States and China,” said Louis Kuijs, the Hong Kong-based head of Asia economics at Oxford Economics. “There is not going to be any de-escalation any time soon.”
While the U.S. is still growing, with an unemployment rate lower than it had been in half a century, companies are deferring investments as they puzzle over the impact of trade hostilities. Such a slowdown in investment could eventually prompt households to curb their spending and lower growth, the Times says.
Long before Trump took office, American governments complained about China and its failed promises to open its markets—and on its lavish subsidies for state-owned companies. It turned itself into an export juggernaut while ignoring labor and environmental standards.
The administration sees no solution in slow-moving cases at the WTO but often pushes for a fundamental redrawing of commercial geography. In that view, the American economy should “decouple” from China, the Times says.
The president’s recent pronouncements appear to underscore that he is truly “willing to see Americans accept the costs”—plunging stock markets, weakening investment—for a wholly new sort of relationship with China as adversary. “The potential outcomes are many, but none of them involve the world’s getting richer, the Times said.
So, by Sunday morning, at the Group of 7 summit in France, the President was expressing “second thoughts” about his new tariffs and by Monday he was calling Xi a “great leader” and reporting that China was interested in resuming trade talks. Stock markets were buoyant. At least for a few hours, the bewildering notion that the United States and China were dissolving ties could be forgotten.
Throughout the administration’s tenure, trade experts have struggled to separate its real policy aims and beliefs from negotiating ploys. Many administration positions are seen as perpetually flexible, depending on which advisers have the President’s ear — and on the tenor of television conversations about economic growth prospects and—especially — the stock market.
In addition, key advisers — like USTR Robert Lighthizer and chief trade adviser, Peter Navarro, author of a book called “Death by China” — urge the president to untether the American economy from China.
At the same time, other advisors such as Larry Kudlow, who leads the National Economic Council and Treasury Secretary Steven Mnuchin tend to focus on areas of interest to investors, not least share prices.
While President Trump is famously adept at maintaining positions that seem mutually exclusive, the Times says, the trade war threatens to force him to choose between it and economic growth.
In Beijing and Washington alike, hard-liners have dug in, shrinking room for a compromise. In both capitals, a sense of permanent alteration has transpired, a deepening assumption that — whatever comes next — China and the United States will proceed with profound wariness. The Times concludes that for the global economy, that could entail grave uncertainties and perils.
So, we will see. So far, it seems as if policy uncertainty has been worsening, rather than clarifying — but it also seems that pushback from the Congress and the industries is growing. These are key trends and will affect both economic and political trends—and which should be watched closely by producers through the coming months, Washington Insider believes.
Overall, the Times says, the president can try to sever the deeply intertwined American commercial relationship with China, or he can prod economic growth to assuage the fears of investors around the planet. “But he cannot do both at the same time,” the report asserts.
The Times waxes a little poetic about all of this—it proclaims that the President “can disregard the admonitions of news outlets he derides as fake news. He can simply consult the one source whose verdicts he tends to celebrate: the stock market.”
There’s proof, NYT says — among those who control money, portents of further trade hostilities lead to stock sales “with abandon” while amplifying talk of recession. By contrast, intimations of a deal reverberate as a clarion call to buy, sending share prices higher while easing worries about a potential global economic downturn.
Talk of a trade deal with China makes for happy stock markets. However, thunderous threats of fresh tariffs on Chinese goods and efforts to push American industry to forsake China damage share prices and shrink economic growth prospects — even as they bring approval from Trump’s most ardent political supporters who portray the trade war as a tough but necessary piece of business, too long avoided by the cowards who resided at the White House before.
NYT recounts that on Friday the president unleashed furious threats toward China and vowed to raise tariffs on $550 billion of Chinese goods and declared China’s president, Xi Jinping, whom he had previously called a “good man,” an “enemy.” And he commanded American companies to abandon China and start making their products in the United States.
In markets around the globe, investors reacted to these developments as powerful signals to yank their money to safety. They reacted as if much of the globe suddenly appeared riskier, the Times said. The Times also notes that the trade war that has escalated over the last year has already produced distress.
For much of the world, countries that are innocent bystanders will actually suffer “even more than the United States and China,” said Louis Kuijs, the Hong Kong-based head of Asia economics at Oxford Economics. “There is not going to be any de-escalation any time soon.”
While the U.S. is still growing, with an unemployment rate lower than it had been in half a century, companies are deferring investments as they puzzle over the impact of trade hostilities. Such a slowdown in investment could eventually prompt households to curb their spending and lower growth, the Times says.
Long before Trump took office, American governments complained about China and its failed promises to open its markets—and on its lavish subsidies for state-owned companies. It turned itself into an export juggernaut while ignoring labor and environmental standards.
The administration sees no solution in slow-moving cases at the WTO but often pushes for a fundamental redrawing of commercial geography. In that view, the American economy should “decouple” from China, the Times says.
The president’s recent pronouncements appear to underscore that he is truly “willing to see Americans accept the costs”—plunging stock markets, weakening investment—for a wholly new sort of relationship with China as adversary. “The potential outcomes are many, but none of them involve the world’s getting richer, the Times said.
So, by Sunday morning, at the Group of 7 summit in France, the President was expressing “second thoughts” about his new tariffs and by Monday he was calling Xi a “great leader” and reporting that China was interested in resuming trade talks. Stock markets were buoyant. At least for a few hours, the bewildering notion that the United States and China were dissolving ties could be forgotten.
Throughout the administration’s tenure, trade experts have struggled to separate its real policy aims and beliefs from negotiating ploys. Many administration positions are seen as perpetually flexible, depending on which advisers have the President’s ear — and on the tenor of television conversations about economic growth prospects and—especially — the stock market.
In addition, key advisers — like USTR Robert Lighthizer and chief trade adviser, Peter Navarro, author of a book called “Death by China” — urge the president to untether the American economy from China.
At the same time, other advisors such as Larry Kudlow, who leads the National Economic Council and Treasury Secretary Steven Mnuchin tend to focus on areas of interest to investors, not least share prices.
While President Trump is famously adept at maintaining positions that seem mutually exclusive, the Times says, the trade war threatens to force him to choose between it and economic growth.
In Beijing and Washington alike, hard-liners have dug in, shrinking room for a compromise. In both capitals, a sense of permanent alteration has transpired, a deepening assumption that — whatever comes next — China and the United States will proceed with profound wariness. The Times concludes that for the global economy, that could entail grave uncertainties and perils.
So, we will see. So far, it seems as if policy uncertainty has been worsening, rather than clarifying — but it also seems that pushback from the Congress and the industries is growing. These are key trends and will affect both economic and political trends—and which should be watched closely by producers through the coming months, Washington Insider believes.
Bankruptcy Filings in Farm Country Climb
Farm bankruptcy filings in the year through June were up 13% from 2018, and loan delinquency rates are on the rise, according to the American Farm Bureau.
A challenging growing season, low prices, liberal use of Renewable Fuel Standard waivers and, of course, trade policy, are straining the ag sector, the group noted. President Donald Trump signed into law a measure that would more than triple the debt cap on Chapter 12 bankruptcy to $10 million from a prior $3.237 million.
While the level of bankruptcies is up, they still are well below the levels seen during the farm crisis in the 1980s. This also puts more attention on the Friday update from USDA on U.S. farm income.
A challenging growing season, low prices, liberal use of Renewable Fuel Standard waivers and, of course, trade policy, are straining the ag sector, the group noted. President Donald Trump signed into law a measure that would more than triple the debt cap on Chapter 12 bankruptcy to $10 million from a prior $3.237 million.
While the level of bankruptcies is up, they still are well below the levels seen during the farm crisis in the 1980s. This also puts more attention on the Friday update from USDA on U.S. farm income.
Perdue Refutes EPA Claim On Small Refiner Exemptions
USDA Secretary Sonny Perdue delivered a strong rejection of EPA's claim small refinery exemptions (SREs) are having "zero impact" on corn ethanol producers. "I would refute the comment" as "[there is a] negative impact" on ethanol production from the waivers, Perdue told IEG Policy in a Virginia appearance.
EPA "likes to point to export totals of ethanol production, which is good and healthy" to argue the waivers are not hurting ethanol producers, he noted. While welcoming ethanol exports, Perdue stated, "the demand destruction over domestic usage has been affected by the small refinery waivers."
Perdue pointed out that with a 15 billion gallon mandate for conventional ethanol, “every time you issue a waiver, you decrease that [obligation], which decreases corn use, and that decreases ethanol capacity for the American producer.” Perdue cited a need to boost the infrastructure for E15 fuel as one way to help offset the small refiner exemptions.
EPA "likes to point to export totals of ethanol production, which is good and healthy" to argue the waivers are not hurting ethanol producers, he noted. While welcoming ethanol exports, Perdue stated, "the demand destruction over domestic usage has been affected by the small refinery waivers."
Perdue pointed out that with a 15 billion gallon mandate for conventional ethanol, “every time you issue a waiver, you decrease that [obligation], which decreases corn use, and that decreases ethanol capacity for the American producer.” Perdue cited a need to boost the infrastructure for E15 fuel as one way to help offset the small refiner exemptions.
Wednesday Watch List
Markets
There are no significant government financial reports out on Wednesday. DTN will be watching for new September weather outlooks and any news regarding trade agreements, especially with China and Japan.
Weather
Rain is expected through the northeast U.S. during Wednesday, showers through the Texas and Louisiana areas. Mainly dry elsewhere in key U.S. growing areas. Light rain through the eastern Canadian Prairies. Temperatures averaging below normal through the Canadian Prairies, the Northern and central Plains and the Midwest regions during Wednesday will slow development of filling crops. Tropical storm Erin will be southeast of the Carolinas Wednesday. Tropical storm Dorian will move through the northeast Caribbean near Puerto Rico.
There are no significant government financial reports out on Wednesday. DTN will be watching for new September weather outlooks and any news regarding trade agreements, especially with China and Japan.
Weather
Rain is expected through the northeast U.S. during Wednesday, showers through the Texas and Louisiana areas. Mainly dry elsewhere in key U.S. growing areas. Light rain through the eastern Canadian Prairies. Temperatures averaging below normal through the Canadian Prairies, the Northern and central Plains and the Midwest regions during Wednesday will slow development of filling crops. Tropical storm Erin will be southeast of the Carolinas Wednesday. Tropical storm Dorian will move through the northeast Caribbean near Puerto Rico.
Tuesday, August 27, 2019
Japan Agreement to Restore U.S. Benefits in TPP
The trade agreement announced over the weekend between the U.S. and Japan should close the tariff gap created when President Trump removed the U.S. from the Trans-Pacific Partnership. Details have yet to be announced, but agriculture groups expect the tariff levels to be comparable to those of other nations who continued the TPP negotiation without the United States. While there are details yet to be worked out, U.S. Grains Council CEO Ryan LeGrande says, "lowering market access barriers with one of our most valuable and loyal grain buyers is a critical win-win.” LeGrande says the deal will level the playing field for U.S. agriculture. The agreement is expected to be finalized and signed late next month in conjunction with the United Nations General Assembly meeting. Meanwhile, following last week’s turbulent developments in the trade war with China, President Trump Monday said the two sides would resume negotiations. China announced retaliatory tariffs Friday, including increased tariffs on U.S. ag products, prompting Trump to do the same.
U.S. Farms Paying Cost of Retaliatory Tariffs
U.S. farmers are taking the brunt of retaliatory tariffs, according to a recent CoBank report. The report confirms what the industry has pointed out over the course of the trade war, that China is targeting U.S. farm products in retaliation. In an analysis of 11 U.S. agricultural commodities representing a cross-section of agricultural exports, U.S. producers - not the importing country or its consumers - paid much of the cost of these tariffs in all but two cases. CoBank says the impact of retaliatory tariffs placed on U.S. farm products reflects the lopsided balance of power between U.S. producers and their importing customers. The nature of agricultural products, inventories with long shelf lives, and ease of identifying and sourcing suitable substitutes are among the factors that give importing customers the upper hand. The report says that with the prospect of declining bargaining power, U.S. producers of most agricultural commodities will face pressure to absorb more of the costs of retaliatory tariffs in the future.
Amazon Fires Could Alter Global Soy Trade
Fires in the Amazon are likely to alter global soy trade in the future. Jim Bower of Bower Trading points out in his daily newsletter that many of the fires are started by humans to clear the land for crops. More than 75,000 fires have been reported since January, an 84 percent annual increase. Bower suspects that China is behind the increase as the trade war between the U.S. and China is escalating. China, the world’s largest consumer of soybeans, is seeking alternate markets after blocking imports from the United States, even though China made small purchases of U.S. soybeans last week. The land clearing of the Amazon is seen as a way to capture soy demand previously filled by U.S. producers. If true, the increase in production area in Brazil could permanently change soybean trade. The fires had the attention of the G7 Summit in Europe, with some nations saying they would block a trade agreement between the European Union and Brazil until Brazil takes action.
Ethanol Plant Representatives Ask Trump to Stop EPA Waivers
The ethanol industry is asking President Trump to restore biofuel demand that was damaged by small refinery waivers. The Waivers exempt refineries from the Renewable Fuel Standard, and effectively reduce the blending targets set under the RFS, according to Growth Energy. On Monday, the group, along with several workers from ethanol plants across the county, penned a letter to Trump asking the President to restore the demand. The letter points to the billions of gallons of “lost” biofuel demand, leading to ethanol plants idling production or shutting down. Each time a plant idles production, the letter states that “farmers are notified that biofuel producers can no longer accept grain deliveries, and the impact has been devastating for communities already on the edge.” Farm income is now down by half since the start of this year alone, according to the Bureau of Economic Analysis. Growth Energy CEO Emily Skor says the EPA “must immediately repair the damage from abusive refinery exemptions and get lost gallons back into the marketplace.”
Trump Signs Family Farmer Relief Act
President Trump last week signed the Family Farmer Relief Act of 2019. The law raises the Chapter 12 debt limit from $4.1 million to $10 million. The bipartisan bill “will help family farmers reorganize after falling on hard times,” according to American Farm Bureau Federation President Zippy Duvall. The law allows more farmers the opportunity to qualify under Chapter 12 bankruptcies and gives producers and their creditors a better chance to reorganize and avoid mass liquidation. A recent AFBF analysis found the delinquency rates for commercial agricultural loans in both the real estate and non-real estate lending sectors are at a six-year high. The bill was introduced this spring and passed both chambers of Congress earlier this month. House sponsor, Representative Antonio Delgado of New York, says the changes reflect the increase in land values, as well as the growth over time in the average size of U.S. farming operations and are meant to provide farmers additional options to manage the downturn in the farm economy.
Sorghum Checkoff Hosts International Buyers
The Sorghum checkoff Monday welcomed a group of international buyers interested in grain sorghum as part of the Export Sorghum event. The one-day expo in Dallas, Texas, included more than 65 international buyers. Sorghum Checkoff executive director Florentino Lopez says the event “serves as our opportunity to share the value of U.S. sorghum.” Export Sorghum is centered around creating networking opportunities while providing buyers with information to help them make sorghum the “smart choice” for their feed grain solutions. Attendees of the event also tour parts of the U.S. to experience sorghum production and the value chain firsthand while developing relationships with U.S. sorghum farmers and suppliers. The Sorghum Checkoff says sorghum has proven to be a reliable ingredient across several industries including swine, poultry, beef, dairy and human food, increasing export opportunity. The event was held in conjunction with the United Sorghum Checkoff Program, in coordination with the U.S. Grains Council, Kansas Grain Sorghum Commission and Texas Grain Sorghum Producers Board.
Washington Insider: Breaking Ties With China
Trade issues continue to have top billing in the media this week and there is a new wrinkle — whether or not the president has the authority to force American companies to cut ties with China. He claims that he can do that and at least a couple of White House aides agree, Bloomberg says, but notes that numerous trade experts and others question such a policy.
And, the more important question is whether or not he seriously plans to assert such powers.
Treasury Secretary Steven Mnuchin, speaking on a Sunday talk show said the president would have the ability under the International Emergency Economic Powers Act but that he would first need to define and declare “an emergency.” White House economic director Larry Kudlow agreed — but went further to argue that “there’s nothing right now in the cards” to do so.”
The president cited the 1977 measure late Friday, saying it gave him the power and declaring, “Case closed!” In addition, Bloomberg noted “some China hardliners in the administration have been urging the president to invoke the law on a number of fronts over the past two years.”
Bloomberg called the approach “extreme,” but opined that it could be a way to take aim at operations of American businesses ranging from automakers General Motors Co. and Tesla Inc., to industrial companies such as Caterpillar Inc. and retail giants including Walmart Inc.
Bloomberg also said that applying the IEEPA in this fashion was never the intent of the legislation — but that this wouldn’t be the first time the administration has looked into it. The president cited the law when he threatened in May to place levies on Mexican goods as a way to force curbs on the flow of undocumented immigrants across the U.S.-Mexican border.
The intensifying trade battle between the world’s two largest economies and the potential for pushing the limits of presidential authority earlier roiled markets with the Dow Jones Industrial falling 623 points on Friday before strengthening somewhat on Monday.
Mnuchin and Kudlow fielded questions Sunday after the president said he “hereby ordered” American companies to seek alternatives to business in China, including moving operations “home and making your products in the USA.”
The president’s comments were followed hours later by tweets declaring that the U.S. would increase the rate of existing and impending tariffs on Chinese goods in response to China’s earlier announcement that it was planning to retaliate against earlier U.S. tariffs.
Trump’s Friday warning reflected the possibility of a long trade war, Mnuchin said.
Kudlow echoed the point, while emphasizing that the president wasn’t currently issuing such an order. “There’s no emergency powers being invoked right now,” Kudlow said. “Ultimately, we do have such authority, but it is not going to be exercised presently. What he is suggesting to American businesses — and it’s something he has said to many companies, in many different forms, on many different occasions — you ought to think about--to the companies — you ought to think about moving your operations and your supply chains away from China.”
Trade experts have previously questioned the president’s authority to impose tariffs under IEEPA, which has been used primarily to sanction countries in national security threats, such as Iran during the hostage crisis in 1979-1981.
“I’m not saying it’s an easy case to make, but I don’t think it’s laughable,” said Raj Bhala, a specialist in international trade law at the University of Kansas. If the president did invoke IEEPA, he would have to craft a remedy that’s proportional to the threat, Bhala said. Thus, a complete ban on doing business in China probably wouldn’t stand but restrictions on companies dealing with sensitive intellectual property might, he said.
The Information Technology Industry Council, which represents companies such as Amazon.com Inc. and Facebook Inc., responded Saturday with alarm about the prospect of invoking the law.
In Trump’s announcement Friday of another wave of higher tariffs, he said existing 25% tariffs on some $250 billion in imports from China would rise to 30% come Oct. 1, the 70th anniversary of the founding of the People’s Republic of China. Planned 10% tariffs on a further $300 billion in Chinese goods will be taxed at 15% instead of 10% starting with the first tranche on Sept. 1.
Bloomberg said that China is “seriously making” preparations for relations with the U.S. to deteriorate, according to Global Times’ editor-in-chief Hu Xijin. The Global Times is a Chinese tabloid run by the People’s Daily, which is the flagship newspaper of the Communist Party. Hu has said the paper voices opinions that official sources can’t.
So, we will see. This increase in trade tensions with China, especially if it continues to worsen, seems to imply a diminishing chance of a new China trade deal and a growing need to cultivate markets elsewhere, as Mnuchin said. The recent especially tough talk all around is not good news for ag producers and suggests that the negotiations should be watched more closely than ever as they proceed, Washington Insider believes.
And, the more important question is whether or not he seriously plans to assert such powers.
Treasury Secretary Steven Mnuchin, speaking on a Sunday talk show said the president would have the ability under the International Emergency Economic Powers Act but that he would first need to define and declare “an emergency.” White House economic director Larry Kudlow agreed — but went further to argue that “there’s nothing right now in the cards” to do so.”
The president cited the 1977 measure late Friday, saying it gave him the power and declaring, “Case closed!” In addition, Bloomberg noted “some China hardliners in the administration have been urging the president to invoke the law on a number of fronts over the past two years.”
Bloomberg called the approach “extreme,” but opined that it could be a way to take aim at operations of American businesses ranging from automakers General Motors Co. and Tesla Inc., to industrial companies such as Caterpillar Inc. and retail giants including Walmart Inc.
Bloomberg also said that applying the IEEPA in this fashion was never the intent of the legislation — but that this wouldn’t be the first time the administration has looked into it. The president cited the law when he threatened in May to place levies on Mexican goods as a way to force curbs on the flow of undocumented immigrants across the U.S.-Mexican border.
The intensifying trade battle between the world’s two largest economies and the potential for pushing the limits of presidential authority earlier roiled markets with the Dow Jones Industrial falling 623 points on Friday before strengthening somewhat on Monday.
Mnuchin and Kudlow fielded questions Sunday after the president said he “hereby ordered” American companies to seek alternatives to business in China, including moving operations “home and making your products in the USA.”
The president’s comments were followed hours later by tweets declaring that the U.S. would increase the rate of existing and impending tariffs on Chinese goods in response to China’s earlier announcement that it was planning to retaliate against earlier U.S. tariffs.
Trump’s Friday warning reflected the possibility of a long trade war, Mnuchin said.
Kudlow echoed the point, while emphasizing that the president wasn’t currently issuing such an order. “There’s no emergency powers being invoked right now,” Kudlow said. “Ultimately, we do have such authority, but it is not going to be exercised presently. What he is suggesting to American businesses — and it’s something he has said to many companies, in many different forms, on many different occasions — you ought to think about--to the companies — you ought to think about moving your operations and your supply chains away from China.”
Trade experts have previously questioned the president’s authority to impose tariffs under IEEPA, which has been used primarily to sanction countries in national security threats, such as Iran during the hostage crisis in 1979-1981.
“I’m not saying it’s an easy case to make, but I don’t think it’s laughable,” said Raj Bhala, a specialist in international trade law at the University of Kansas. If the president did invoke IEEPA, he would have to craft a remedy that’s proportional to the threat, Bhala said. Thus, a complete ban on doing business in China probably wouldn’t stand but restrictions on companies dealing with sensitive intellectual property might, he said.
The Information Technology Industry Council, which represents companies such as Amazon.com Inc. and Facebook Inc., responded Saturday with alarm about the prospect of invoking the law.
In Trump’s announcement Friday of another wave of higher tariffs, he said existing 25% tariffs on some $250 billion in imports from China would rise to 30% come Oct. 1, the 70th anniversary of the founding of the People’s Republic of China. Planned 10% tariffs on a further $300 billion in Chinese goods will be taxed at 15% instead of 10% starting with the first tranche on Sept. 1.
Bloomberg said that China is “seriously making” preparations for relations with the U.S. to deteriorate, according to Global Times’ editor-in-chief Hu Xijin. The Global Times is a Chinese tabloid run by the People’s Daily, which is the flagship newspaper of the Communist Party. Hu has said the paper voices opinions that official sources can’t.
So, we will see. This increase in trade tensions with China, especially if it continues to worsen, seems to imply a diminishing chance of a new China trade deal and a growing need to cultivate markets elsewhere, as Mnuchin said. The recent especially tough talk all around is not good news for ag producers and suggests that the negotiations should be watched more closely than ever as they proceed, Washington Insider believes.
USDA Food Price Forecasts Hold Mostly Steady
USDA made few changes to its food price forecasts for 2019 and 2020, keeping the overall food price inflation outlook for both years at 1.5% to 2.5%.
They also still see food away from home (restaurant) prices rising two percent to three percent for both years and grocery store food at home) costs are seen rising 0.5% to 1.5% both in 2019 and 2020. The grocery price increase outlook remains well below the 20-year average and comes after prices at the store rose just 0.4% compared with 2017 when they declined 0.2%.
Compared to their prior outlooks, USDA edged down expectations in 2019 for poultry, fresh fruits and cereals and bakery products. While food prices are currently forecast to rise more than the increases for 2018, grocery store costs in particular remain below trend.
They also still see food away from home (restaurant) prices rising two percent to three percent for both years and grocery store food at home) costs are seen rising 0.5% to 1.5% both in 2019 and 2020. The grocery price increase outlook remains well below the 20-year average and comes after prices at the store rose just 0.4% compared with 2017 when they declined 0.2%.
Compared to their prior outlooks, USDA edged down expectations in 2019 for poultry, fresh fruits and cereals and bakery products. While food prices are currently forecast to rise more than the increases for 2018, grocery store costs in particular remain below trend.
Rescinding Prior Small Refiner Exemptions Now Not Expected
President Donald Trump and Cabinet officials decided to retain the biofuel blending waivers granted to small refineries but take steps to make up for lost biofuel volumes, according to contacts.
The plan under development would encourage the use of gasoline that contains 15% ethanol and would increase by 500 million gallons the amount of conventional renewable fuels that have to be used in mandates, presumably for 2020.
A separate quota for biodiesel, typically made from soybeans, would get a 250 million gallon increase for 2021.
Additionally, the administration will enhance a program meant to expand U.S. fueling infrastructure and get more ethanol into the system. EPA will adopt a USDA assessment of the greenhouse gas emissions associated with renewable fuel and will expand environmental credits encouraging automakers to produce “flex-fuel” vehicles that can run on high-ethanol gasoline.
However, details could still change as the plan has not yet been finalized.
The plan under development would encourage the use of gasoline that contains 15% ethanol and would increase by 500 million gallons the amount of conventional renewable fuels that have to be used in mandates, presumably for 2020.
A separate quota for biodiesel, typically made from soybeans, would get a 250 million gallon increase for 2021.
Additionally, the administration will enhance a program meant to expand U.S. fueling infrastructure and get more ethanol into the system. EPA will adopt a USDA assessment of the greenhouse gas emissions associated with renewable fuel and will expand environmental credits encouraging automakers to produce “flex-fuel” vehicles that can run on high-ethanol gasoline.
However, details could still change as the plan has not yet been finalized.
Tuesday Watch List
Markets
The Case-Shiller Home Index and the Consumer Confidence Index will be out. DTN will also be watching for any news on the renewal of U.S.-China trade talks and more talk of a U.S.-Japan trade deal alluded to on Monday.
Weather
Light rain or showers may linger in the eastern and southeastern Midwest region early Tuesday. Showers, a few thundershowers and some rain in the southeast U.S., through the southern Delta and over the Southern Plains. Light rain or showers also for the eastern part of the Canadian Prairies and the northern part of Minnesota. Drier elsewhere in key U.S. and Canada growing areas Tuesday. Filling crops will benefit from any late-August shower activity. However, development will slow with below-normal temperatures, especially through the Northern and central Plains and western Midwest regions. Tropical depression 6 has formed well southeast of North Carolina in the western Atlantic. This system is expected to remain off shore of the U.S. East Coast.
The Case-Shiller Home Index and the Consumer Confidence Index will be out. DTN will also be watching for any news on the renewal of U.S.-China trade talks and more talk of a U.S.-Japan trade deal alluded to on Monday.
Weather
Light rain or showers may linger in the eastern and southeastern Midwest region early Tuesday. Showers, a few thundershowers and some rain in the southeast U.S., through the southern Delta and over the Southern Plains. Light rain or showers also for the eastern part of the Canadian Prairies and the northern part of Minnesota. Drier elsewhere in key U.S. and Canada growing areas Tuesday. Filling crops will benefit from any late-August shower activity. However, development will slow with below-normal temperatures, especially through the Northern and central Plains and western Midwest regions. Tropical depression 6 has formed well southeast of North Carolina in the western Atlantic. This system is expected to remain off shore of the U.S. East Coast.
Monday, August 26, 2019
U.S.-Japan Reach Trade Agreement
The United States and Japan reached an agreement over the weekend on an agriculture-related trade deal. The agreement, according to President Trump, will lower tariffs on U.S. agricultural goods, although specific details have not been announced. President Trump during a news conference on the sidelines of the G7 Summit in France, says the U.S. and Japan hope to finalize the agreement next month. The agreement is expected to increase U.S. access to Japan for beef, pork, wheat, dairy and ethanol. Agriculture Secretary Sonny Perdue says the agreement closes tariff gaps and allows the U.S. to compete on a level playing field in Japan. Perdue says, “We will be able to sell more to the Japanese markets.” Agriculture groups welcomed the agreement, as the U.S. Meat Export Federation says, “favorable access to Japan is a major win, not only for the U.S. red meat industry but for all of U.S. agriculture.” American Farm Bureau Federation President Zippy Duvall stated, “This is much-needed good news on the agricultural trade front.”
Pro Farmer's National Corn and Soybean Crop Estimates
Pro Farmer Friday released its crop estimates from the Pro Farmer Midwest Crop Tour. For corn, Pro Farmer estimates a 13.2 to 14.4 billion bushel crop in 2019, with an average yield of 163.3 bushels per acre. For soybeans, Pro Farmer estimates a 3.49 billion bushel crop, with a yield of 46.1 bushels per acre. Pro Farmer lowered corn harvested acreage 217,000 acres from USDA’s August estimate. The national estimates reflect Pro Farmer’s view on production and yields. They take into account data gathered during the Pro Farmer Crop Tour and other factors, such as crop maturity, acreage adjustments, historical differences in tour data versus USDA’s final yields, and areas outside those sampled on Crop Tour. Find state-by-state results and analysis at www.ProFarmer.com
China Purchases U.S. Soybeans Despite Boycott
The National Review Dot Com says China bought a small amount of U.S. soybeans last week. The purchase happened in spite of promising to boycott U.S. farm products because of deteriorating trade negotiations with the Trump Administration. Data from the U.S. Department of Agriculture says Beijing agreed to a purchase of 9.589 metric tons of U.S. soybeans for the current marketing year. They also agreed to a buy of 66,000 metric tons for the following year, which starts on September 1. An August 5th statement from the Chinese Commerce Ministry said Chinese companies would be boycotting American farm products as a response to the Trump Administration’s tariffs on Chinese goods. Despite breaking that boycott, China still isn’t purchasing nearly as many American soybeans as it has in the past. China is the world’s largest soybean importer and spent last year giving most of its business to South America. The administration had said it would impose tariffs on another $300 billion in Chinese goods on September 1. However, the White House later said it would delay imposing them until December.
ASA Responds to Further Trade Dispute Escalation from China
China has officially announced it will impose an extra five percent tariff on U.S. soybeans starting on September 1. They’ll also add another 10 percent in duties on other major U.S. crops grown by many American soybean farmers. The latest details come after China vowed last week that it will retaliate if the U.S. goes through with its original plan to increase tariffs on Chinese goods on September 1. ASA President Davie Stephens says, “ASA has strongly requested an end to the tariffs on U.S. beans for more than a year. This escalation will affect us not because of the increased tariff on our sales, which have been at a virtual standstill for months, but through time.” He says the longevity of the situation means worsening circumstances for soy growers who still have unsold product from this past season and new crops in the ground this season. Stephens adds that “prospects are narrowing even more now for sales to China, a market that soy growers have valued, nurtured, and respected for many years.” ASA is asking both parties to step up and stop the tariffs and find a resolution that doesn’t target soy growers trapped in the middle. Real people, including Chinese citizens and the American public, along with our soybean growers, are the ones actually feeling the effects of the trade war.
Corn Farmers Push President for More Corn Demand
Rural America is feeling the impact of the Trump Administration’s recent granting of 31 small refinery waivers to big oil companies across the country. The waivers are only adding to a list of farmer concerns about markets, trade, and crop conditions. Fifteen ethanol plants have either been shuttered or idled over the past 12 months. One of the most recent plants taken out of production is POET’s Cloverdale facility, with POET specifically citing the most recent waivers as the reason for the decision. As demand for ethanol drops because of the list of waivers, it’s more likely that other plants will follow. A National Corn Growers Association news release says President Trump appears to be reconsidering the actions of the Environmental Protection Agency. The NCGA is currently working with members of the administration and Congress to share solutions to help boost corn demand. Redistributing and accounting for the waived gallons in the upcoming Renewable Volume Obligations (RVO) rulemaking is just one of the steps that the administration can take today to help. NCGA is asking corn farmers to submit comments directly to the EPA asking them to do that. Farmers are losing patience with tariffs and trade negotiations and the NCGA says the president needs to remember his promises to American farmers.
NFU Worried Trade Aid Could Undermine Next Farm Bill
National Farmers Union President Roger Johnson says he’s concerned that billions of dollars in trade aid could have a negative impact on the next farm bill. He says the aid monies the Trump Administration is sending to farmers could undermine political support for the next farm bill. Johnson says it’s important to note that the $16 billion in aid promised to farmers this year exceeds total spending on Title 1 farm programs in a year. Politico says it’s a part of sweeping legislation that already has somewhat tenuous support as political power shifts away from rural voters. Congress also relaxed payment limits for the trade aid program, making it easier for millionaires to qualify. Johnson says, “That’s a dangerous thing. I think a lot of urban congressmen and women are going to look at this and say, ‘there was a lot of damage done in my state in this industry or that industry as a result of the trade disruption – none of them got a nickel in trade help.’” Johnson says the last time an administration used the Commodity Credit Corporation to pay aid to farmers, “their hands were immediately slapped.” He points out that Congress immediately put riders on appropriations bills and said administrations won’t do this again.
Whole Foods CEO Says Alt-Meat is “Highly Processed”
Whole Foods was the first retailer that carried Beyond Meat’s vegan “chicken strips” back in 2013. However, the CEO of Whole Foods says he can’t endorse any of today’s plant-based meat substitutes as healthy because of their ingredients. CEO John Mackey has been a vegan for more than 20 years. While he didn’t list any specific names, Mackey tells CNBC that the brands currently “taking the world by storm are highly-processed foods,” as shown in their ingredient lists. “I don’t think eating highly-processed foods is healthy,” he says. “I think people thrive on eating whole foods. As for health, I will not endorse that, which is about as big of a criticism that I’ll do in public.” Mackey believes plant-based alternatives are a more ethical choice and better for the environment. He also tells CNBC in an article that meat substitutes are considered by some as a way for meat-eaters to “re-educate” their palates. Alissa Rumsey is a registered dietitian who told CNBC early this year that, “They aren’t necessarily healthier than beef burgers. They’re totally fine to eat, but there’s no need to replace your beef burger if you don’t enjoy these.”
Federal Court Sends Water Rule Back to EPA
A federal court in Georgia says the 2015 Waters of the United States rule is unlawful under the Clean Water Act, due to its “vast expansion of jurisdiction over water and lands that typically fall within states’ regulatory authority.” The federal court for the Southern District of Georgia found that the agency overstepped both the Clean Water Act and the Administrative Procedure Act. The APA lays out the basic rules on how agencies may propose and establish federal regulations. The Georgia court kept a preliminary injunction in place that prevents the rule from becoming law in 11 states involved with the lawsuit while the Environmental Protection Agency finalizes its repeal and replacement of the Obama-era 2015 rule. The American Farm Bureau Federation says the ruling wasn’t just a victory for the plaintiff states, but also a broad coalition of more than a dozen private-sector groups. “The court ruling is a clear affirmation of exactly what we have been saying for the past five years,” says AFBF General Counsel Ellen Steen. “The EPA badly misread Supreme Court precedent and encroached on the traditional powers of the states. They simply ignored the basic principles of the Administrative Procedure Act when issuing this unlawful regulation.”
Washington Insider: White House Announces US-Japan Agreement in Principle
Bloomberg is reporting this week that the US and Japan have agreed in principle on a trade deal which will slash Japanese tariffs on U.S. beef, pork and other ag products — but will continue to impose tariffs on Japan’s auto exports.
President Trump announced the deal Sunday and said Japan also would commit to buy large quantities of U.S. wheat and corn.
Bloomberg opined that “Japanese officials may consider that a good deal if they can elicit a promise in return that its automakers will be shielded from threats of more painful tariffs in the future.”
The U.S. President and Japanese Prime Minister Shinzo Abe announced the agreement in Biarritz, France at the Group of Seven summit following a bilateral meeting earlier in the day.
“We’ve agreed in principle,” the President said. “We’ve agreed to every point.” He also referred to a “massive” purchase of wheat and a “very, very large order of corn” that he said would happen quickly.
Abe said only that agricultural product purchases, which would be conducted by the private sector, were a possibility. Bloomberg said that Japanese officials had been “spooked by threats of punitive tariffs on Japanese autos and agreed last September to start bilateral trade talks with the U.S.”
President Trump has in turn come under pressure from U.S. beef and pork farmers, reeling from the trade war with China, “who have also been hobbled by a tariff disadvantage in the Japanese market compared with competitors from signatories of the Trans-Pacific Partnership regional trade deal he rejected.”
The countries have reached consensus on “core elements” and are setting a goal to sign a deal at the end of September during United Nations meetings. Abe also noted that “there is still some work to be done by officials.” If we are to see the entry into force of this trade agreement, I’m quite sure that there will be the immense positive impact on both the Japanese as well as American economies, he said.
Bloomberg commented that “while the proposed deal may provide Trump with a fillip as he heads into his campaign for re-election, it remains to be seen how it will be received in Japan, where some officials have said the country should not give up its leverage over U.S. farmers without substantial concessions in return.” Japanese trade agreements generally have to be approved by parliament before going into effect.
Japanese media reported earlier that the U.S. and Japan had agreed to an outline deal that would lower tariffs on U.S. beef to levels offered to members of the TPP. Japan and the U.S. agreed last year this would be the maximum possible level.
U.S. Trade Representative Robert Lighthizer also commented on the content of the proposed deal, which he said would open markets to $7 billion of products including ethanol, as well as beef, pork, dairy products and wine. He said U.S. tariffs on some Japanese industrial products would be reduced—"but that these would not include cars.”
The farming provisions of the deal won some early praise in the U.S. with the National Pork Producers Council and Senate Agriculture Committee Chairman Pat Roberts among those welcoming a deal they expect “would put U.S. agriculture on an even basis with TPP-member nations.”
President Trump had teased the deal throughout the day, saying he was “very close to a major deal with Japan” and that talks had been held over five months. “Frankly, I think what’s happening with China helps with respect to Japan. But it’s a very big deal. It will be one of the biggest deals we’ve ever made with Japan,” he said.
So, we will see. The President’s heavy criticism of the U.S. Fed and his suggestions of even tougher tariff levies on future Chinese imports sharply weakened U.S. markets ahead of the G-7 meeting and it remains to be seen how that uncertainty will play out in the days ahead—and how the “agreement in principle” will be received amid all of the ongoing tension. These are fights that should be watched closely by producers as they continue, Washington Insider believes.
President Trump announced the deal Sunday and said Japan also would commit to buy large quantities of U.S. wheat and corn.
Bloomberg opined that “Japanese officials may consider that a good deal if they can elicit a promise in return that its automakers will be shielded from threats of more painful tariffs in the future.”
The U.S. President and Japanese Prime Minister Shinzo Abe announced the agreement in Biarritz, France at the Group of Seven summit following a bilateral meeting earlier in the day.
“We’ve agreed in principle,” the President said. “We’ve agreed to every point.” He also referred to a “massive” purchase of wheat and a “very, very large order of corn” that he said would happen quickly.
Abe said only that agricultural product purchases, which would be conducted by the private sector, were a possibility. Bloomberg said that Japanese officials had been “spooked by threats of punitive tariffs on Japanese autos and agreed last September to start bilateral trade talks with the U.S.”
President Trump has in turn come under pressure from U.S. beef and pork farmers, reeling from the trade war with China, “who have also been hobbled by a tariff disadvantage in the Japanese market compared with competitors from signatories of the Trans-Pacific Partnership regional trade deal he rejected.”
The countries have reached consensus on “core elements” and are setting a goal to sign a deal at the end of September during United Nations meetings. Abe also noted that “there is still some work to be done by officials.” If we are to see the entry into force of this trade agreement, I’m quite sure that there will be the immense positive impact on both the Japanese as well as American economies, he said.
Bloomberg commented that “while the proposed deal may provide Trump with a fillip as he heads into his campaign for re-election, it remains to be seen how it will be received in Japan, where some officials have said the country should not give up its leverage over U.S. farmers without substantial concessions in return.” Japanese trade agreements generally have to be approved by parliament before going into effect.
Japanese media reported earlier that the U.S. and Japan had agreed to an outline deal that would lower tariffs on U.S. beef to levels offered to members of the TPP. Japan and the U.S. agreed last year this would be the maximum possible level.
U.S. Trade Representative Robert Lighthizer also commented on the content of the proposed deal, which he said would open markets to $7 billion of products including ethanol, as well as beef, pork, dairy products and wine. He said U.S. tariffs on some Japanese industrial products would be reduced—"but that these would not include cars.”
The farming provisions of the deal won some early praise in the U.S. with the National Pork Producers Council and Senate Agriculture Committee Chairman Pat Roberts among those welcoming a deal they expect “would put U.S. agriculture on an even basis with TPP-member nations.”
President Trump had teased the deal throughout the day, saying he was “very close to a major deal with Japan” and that talks had been held over five months. “Frankly, I think what’s happening with China helps with respect to Japan. But it’s a very big deal. It will be one of the biggest deals we’ve ever made with Japan,” he said.
So, we will see. The President’s heavy criticism of the U.S. Fed and his suggestions of even tougher tariff levies on future Chinese imports sharply weakened U.S. markets ahead of the G-7 meeting and it remains to be seen how that uncertainty will play out in the days ahead—and how the “agreement in principle” will be received amid all of the ongoing tension. These are fights that should be watched closely by producers as they continue, Washington Insider believes.
NFU President Calls MFP Trade Aid 'Dangerous.’
Trade relief payments to farmers via the Trump administration's Market Facilitation Program (MFP) should have been granted by Congress, Roger Johnson, president of the National Farmers Union, told reporters. In July, the Trump administration unveiled a second aid package providing $16 billion more in federal aid for agriculture – including $14.5 billion in payments to farmers – following an 2018 trade mitigation program totaling $12 billion in aid.
But rather than basing funds on crop type, MFP 2 sets a per-county rate based on the blend of crops grown in the area, with payments ranging from $15 to $150 an acre, which critics say will cause vast disparities in aid.
“It would have made more sense for the money to come through Congress,” Johnson said during a media roundtable in Washington. He said the action is a “dangerous thing USDA did,” expressing concern it could have on the next U.S. farm bill. The group issued a statement when USDA detailed the MFP 2 effort, expressing disappointment that the agency did not include any incentives to reduce production.
Johnson said Trump's "strategy of constant escalation and antagonism" has "just made things worse." America's family farmers and ranchers "cannot withstand this kind of pressure much longer,” he observed. Despite NFU’s call, no limitations on production are expected to be implemented.
But rather than basing funds on crop type, MFP 2 sets a per-county rate based on the blend of crops grown in the area, with payments ranging from $15 to $150 an acre, which critics say will cause vast disparities in aid.
“It would have made more sense for the money to come through Congress,” Johnson said during a media roundtable in Washington. He said the action is a “dangerous thing USDA did,” expressing concern it could have on the next U.S. farm bill. The group issued a statement when USDA detailed the MFP 2 effort, expressing disappointment that the agency did not include any incentives to reduce production.
Johnson said Trump's "strategy of constant escalation and antagonism" has "just made things worse." America's family farmers and ranchers "cannot withstand this kind of pressure much longer,” he observed. Despite NFU’s call, no limitations on production are expected to be implemented.
USDA Official: China Far Short of Soybean Purchase Pledge
China has purchased about only half the U.S. soybeans it pledged to buy earlier this year, a USDA official said on Thursday, after a small sale was reported in the weekly sales recap by the agency. USDA Undersecretary for Trade Ted McKinney told Reuters that Beijing was a long way from doing that.
"Very publicly in the Oval Office, they made commitments for 20 million metric tons of purchases, and only about 9 or 10 (million tonnes) have been shipped and accepted,” McKinney said on the sidelines of a conference in Chicago, where he later shook hands with a delegation of Chinese buyers.
China's Commerce Ministry said on August 5 that Chinese companies had stopped buying U.S. farm products and that it could impose additional tariffs on them, a move that targets rural states that supported Trump in the 2016 election.
"Very publicly in the Oval Office, they made commitments for 20 million metric tons of purchases, and only about 9 or 10 (million tonnes) have been shipped and accepted,” McKinney said on the sidelines of a conference in Chicago, where he later shook hands with a delegation of Chinese buyers.
China's Commerce Ministry said on August 5 that Chinese companies had stopped buying U.S. farm products and that it could impose additional tariffs on them, a move that targets rural states that supported Trump in the 2016 election.
Monday Watch List
Markets
After Friday's new tariff news, traders will be looking any trade-related news or comments this week. Weather remains important with row crops still developing and spring wheat being harvested. USDA's weekly report of grain export inspections is due out at 10 a.m. CDT, followed by Crop Progress at 3 p.m.
Weather
Rain, showers and thunderstorms will occur Monday from the northeast and east-central Plains through the Midwest, the north and west Delta and also in the southeast U.S. areas. Rain through the central Midwest area improves soil moisture for filling summer crops. Runoff from recent heavy rainfall in parts of Nebraska and Kansas will cause flooding of small creeks and streams, country roads, farmland and other low-lying spots. Cooler weather returning to the Canadian Prairies, the Northern Plains and the Midwest regions will slow development of already delayed crops. Many crops are vulnerable to damage from an early or even an on-time fall freeze.
After Friday's new tariff news, traders will be looking any trade-related news or comments this week. Weather remains important with row crops still developing and spring wheat being harvested. USDA's weekly report of grain export inspections is due out at 10 a.m. CDT, followed by Crop Progress at 3 p.m.
Weather
Rain, showers and thunderstorms will occur Monday from the northeast and east-central Plains through the Midwest, the north and west Delta and also in the southeast U.S. areas. Rain through the central Midwest area improves soil moisture for filling summer crops. Runoff from recent heavy rainfall in parts of Nebraska and Kansas will cause flooding of small creeks and streams, country roads, farmland and other low-lying spots. Cooler weather returning to the Canadian Prairies, the Northern Plains and the Midwest regions will slow development of already delayed crops. Many crops are vulnerable to damage from an early or even an on-time fall freeze.
Friday, August 23, 2019
USDA Mailing Trade Aid Checks
Farmers are seeing payments from the first round of the latest trade aid in the mailbox. Farm Service Agency director Richard Fordyce says the first payments are being mailed out now, and farmers are reporting receiving the checks. Round one of the three potential payments is 50 percent of the overall amount farmers may receive. USDA expects up to $14.5 billion of payments will be sent to farmers, pending on the trade negotiation progress. Another 25 percent of the total would go out later this fall, if the Department of Agriculture deems the payments necessary. The final round, if needed, is planned for some time around January. The payments are meant to offset the losses stemmed from the Trump trade agenda and trade war with China. Payments range from $15 to $150 per acre, depending on location. Payments are also available for dairy and hog producers, under certain reporting parameters. This is the second time the Trump administration has used the Market Facilitation Program since the trade war with China began.
CBO: Trade War to Slow Economic Growth
The bipartisan Congressional Budget Office says the trade war will slow economic growth, adding more fears of a possible recession. The CBO says tariffs, which reduce U.S. gross domestic product through higher prices, reduces consumer purchasing power. The report predicts the economy will grow at 1.8 percent per year over the next decade, below historical average growth rates. Agriculture has already seen the impact of tariffs stemming from the trade war. Agricultural sales to China dropped more than 50 percent since the trade war began, and China recently announced it would no longer buy U.S. ag products. However, a range of developments, such as unexpected changes in international conditions, could make economic outcomes differ significantly. For example, if new trade agreements lowered trade barriers, economic growth could be faster than projected. Conversely, if trade barriers rose higher, domestic investment and output could be slower than projected. Previous private firm reports have suggested the U.S. will enter a recession within the next year if the trade war escalates.
Canada-China Relations Strain over Politics, Trade
While the U.S. continues its trade war negotiations with China, Canada's relations with China are straining, as well. Canadian Prime Minister Justin Trudeau says Canada' won't back down' to various disputes with China. Meanwhile, China, which has made a similar warning to the U.S., tells Canada comments regarding the unrest in Hong Kong are not welcome. Specifically, China says, "Hong Kong affairs are purely China's internal affairs." China hopes Canada can "reflect on its wrongdoing," regarding Hong Kong and other issues, including those that now impact agricultural trade. China has detained two Canadian citizens and halted imports of canola seed and meat products from Canada. The move was in response to Vancouver police detaining a senior Huawei (Wah-Way) executive on a U.S. arrest warrant in December. China imported 4.8 million metric tons of Canadian canola in 2018, and 1.1 million metric tons of canola oil, supporting more than 16,000 Canadian jobs. China is typically the largest market for Canadian canola, and Canada is the world's largest producer of canola.
U.S. Wheat: Trade Deal with Japan Would Ensure Competitiveness
U.S. Wheat Associates says a trade deal with Japan would allow U.S. wheat to fairly compete with wheat from other nations exported to Japan. Currently, under the Comprehensive and Progressive Trans-Pacific Partnership, Japan’s effective tariffs on Canadian and Australian wheat imports are discounted and will continue being discounted to the tariff on U.S. wheat imports. Japanese flour mills prefer and choose to source 50 percent of their annual needs, almost three million metric tons per year on average, of wheat from the United States. However, the CPTPP will grant preferential access to Canada and Australia by reducing the effective tariff on their wheat, eventually a reduction of about $70 per metric ton, or 45 percent below the current tariff on U.S. wheat. A bilateral trade agreement with Japan, which the Trump administration is working on, could reduce the tariff level on U.S. wheat, according to the organization. The U.S. lost the opportunity to level tariffs with other markets when the U.S. left the then-called Trans-Pacific Partnership.
Soy Groups Seek Meeting with Trump on Waivers
The National Biodiesel Board and American Soybean Association have requested a meeting with President Donald Trump to discuss small refinery exemptions. In a letter to the President, NBB CEO Donnell Rehagen (don-NELL Ray-HAY-gen) and ASA President Davie Stephens detail the damage the waivers have dealt the biofuels industry and farmers. The letter, noting the conditions in farm country, says that while many fear an economic recession within the next year, farmers are “already facing a severe economic downturn.” The two groups conclude the letter with a request to meet with the President: "We would appreciate an opportunity to discuss how the administration can repair the uncertainty.” President Trump held a meeting earlier this week to find ways to smooth over farmer anger, specifically related to the small refinery waivers. Biodiesel and ethanol groups start with asking for a reallocation of waived volumes, now estimated at more than four billion gallons. More than 15 ethanol plants have shut down, blaming the demand destruction caused by the waivers.
Senators Request USDA IT Review from GOA
As farmers report information technology problems with Department of Agriculture programs, two farm-state senators are asking the Government Accountability Office to investigate. Senate Democrats Debbie Stabenow and Gary Peters, both of Michigan, penned a letter to the GAO this week seeking the review. In 2017, Agriculture Secretary Sonny Perdue announced a major IT modernization at USDA to ensure better customer service to America’s farmers and ranchers. Part of the modernization was the combination of and modernization of the IT systems of three agencies which impact farmers and ranchers most directly. The letter states, “we are particularly interested in whether the changes have improved, interfered with, or added risks for the successful and timely implementation of the 2018 Farm Bill.” Michigan dairy farmers have reported to the Senators that IT problems made signing up for the new Dairy Margin Coverage program a challenge. Some farmers even report enrollment took multiple trips to Farm Service Agency offices complete because of IT challenges.
Washington Insider: Trade Fight’s North Dakota Impacts
Bloomberg is reporting this week that as economic anxiety has intensified nationwide, the ag industry in North Dakota – on the far northwestern edge of the U.S. farm belt but relatively close to Pacific ports – is reflecting on its earlier economic decisions to invest millions on grain storage and rail-loading infrastructure while boosting plantings by five-fold in 20 years.
However, now that “the world’s top soybean importer shuns the U.S. market for a second growing season, Dakota farmers are reeling from the loss of the customer they spent two decades cultivating.”
This experience underscores the uneven impact of the U.S.-China trade war across the U.S., Bloomberg says. Although Chinese tariffs target many heartland states that, like North Dakota, supported President Trump’s 2016 election, those further south and east are better able to shift surplus soybeans to other markets such as Mexico and Europe. They also have more processing plants to produce soymeal, along with larger livestock and poultry industries to consume it, Bloomberg thinks.
For North Dakota, losing China – the buyer of about 70% of the state’s soybeans – has destroyed a staple source of income. Agriculture is North Dakota’s largest industry and it “probably has taken a bigger hit than anybody else from the trade situation with China,” Jim Sutter, CEO of the U.S. Soybean Export Council, said.
China shut the door to U.S. agricultural purchases on Aug. 5 after the administration intensified the conflict with threats of additional tariffs on $300 billion in Chinese imports, some as soon as Sept. 1.
In addition, Bloomberg says that some farmers who were relying on the administration’s $28 billion in farm aid payments to compensate them for trade war losses have been disappointed with new payment rates for counties in North Dakota, which are below those for some southern states that rely much less on exports to China.
The rates were determined by USDA who said it will provide higher rates for states with higher “level of exposure” to tariffs than North Dakota – because they also depend on crops, such as cotton and sorghum which also face Chinese tariffs.”
This spring’s soy crop was planted at a time when the White House was talking up a “nearly finished trade deal with China” that collapsed in May weakening prices, Bloomberg notes.
Vanessa Kummer farms in Colfax, N.D., and has yet to sell a single soybean from this year’s harvest because of low prices. Normally, the farm would have sold 50% to 75% of the upcoming harvest. In addition, she fears the U.S.-China soy trade is now “permanently damaged” as China shifts its purchases to Brazil, uses less soy in animal feed and consumes less pork as African swine fever kills of millions of the nation’s pigs.
Options for North Dakota farmers are limited. U.S. wheat has been losing export market share for years. Demand for specialty crops such as peas and lentils, which grow well in the northern U.S., has been dampened by retaliatory tariffs imposed by India, a major importer of both products.
North Dakota’s farmers did not set out to become so dependent on a single buyer of one crop, Bloomberg says. But with wheat profits shrinking and Chinese demand for soy growing, soybeans increasingly seemed like the obvious choice.
Rail companies expanded capacity to open up a West Coast corridor and Pacific Northwest seaports expanded to handle more exports to China. Seed companies offered new varieties that thrive in the state’s colder climate and shorter growing season.
A $200 million crop two decades ago blossomed into a $2 billion crop, topping the value of wheat, once North Dakota’s top crop. The number of high speed shuttle train loading terminals tripled with investments totaling at least $800 million.
But now one of those facilities, CHS Dakota Plains Ag elevator in Kindred, North Dakota, has gone three or four months without loading a soybean train this year, said Doug Lingen, a grain merchant there. Normally the elevator would load at least one train a month with beans bound for the Pacific Northwest.
The weakened demand has soybean prices in North Dakota trading at an historic discount to the U.S. average, and farmers are putting investments on hold.
Justin Sherlock, who grows corn, soybeans and other crops near Dazey, North Dakota, had been planning to invest $100,000 to $150,000 in a grain drier this year – but now has shelved those plans.
One reason is the low level of government aid in his county – now expected to be $55 per acre, well below the maximum $150 rate offered in 22 counties nationwide. Sherlock called the latest announcement “disappointing.”
“I’m just going to defer all my investment,” he said, “and try to limp along for a few years.”
So, we will see. It is clear that the farm economy is feeling economic pressure from several directions including lost overseas sales. Reports from the farm fair circuits indicate that there is growing criticism from producers as a result – a trend producers should watch closely through the fall, Washington Insider believes.
However, now that “the world’s top soybean importer shuns the U.S. market for a second growing season, Dakota farmers are reeling from the loss of the customer they spent two decades cultivating.”
This experience underscores the uneven impact of the U.S.-China trade war across the U.S., Bloomberg says. Although Chinese tariffs target many heartland states that, like North Dakota, supported President Trump’s 2016 election, those further south and east are better able to shift surplus soybeans to other markets such as Mexico and Europe. They also have more processing plants to produce soymeal, along with larger livestock and poultry industries to consume it, Bloomberg thinks.
For North Dakota, losing China – the buyer of about 70% of the state’s soybeans – has destroyed a staple source of income. Agriculture is North Dakota’s largest industry and it “probably has taken a bigger hit than anybody else from the trade situation with China,” Jim Sutter, CEO of the U.S. Soybean Export Council, said.
China shut the door to U.S. agricultural purchases on Aug. 5 after the administration intensified the conflict with threats of additional tariffs on $300 billion in Chinese imports, some as soon as Sept. 1.
In addition, Bloomberg says that some farmers who were relying on the administration’s $28 billion in farm aid payments to compensate them for trade war losses have been disappointed with new payment rates for counties in North Dakota, which are below those for some southern states that rely much less on exports to China.
The rates were determined by USDA who said it will provide higher rates for states with higher “level of exposure” to tariffs than North Dakota – because they also depend on crops, such as cotton and sorghum which also face Chinese tariffs.”
This spring’s soy crop was planted at a time when the White House was talking up a “nearly finished trade deal with China” that collapsed in May weakening prices, Bloomberg notes.
Vanessa Kummer farms in Colfax, N.D., and has yet to sell a single soybean from this year’s harvest because of low prices. Normally, the farm would have sold 50% to 75% of the upcoming harvest. In addition, she fears the U.S.-China soy trade is now “permanently damaged” as China shifts its purchases to Brazil, uses less soy in animal feed and consumes less pork as African swine fever kills of millions of the nation’s pigs.
Options for North Dakota farmers are limited. U.S. wheat has been losing export market share for years. Demand for specialty crops such as peas and lentils, which grow well in the northern U.S., has been dampened by retaliatory tariffs imposed by India, a major importer of both products.
North Dakota’s farmers did not set out to become so dependent on a single buyer of one crop, Bloomberg says. But with wheat profits shrinking and Chinese demand for soy growing, soybeans increasingly seemed like the obvious choice.
Rail companies expanded capacity to open up a West Coast corridor and Pacific Northwest seaports expanded to handle more exports to China. Seed companies offered new varieties that thrive in the state’s colder climate and shorter growing season.
A $200 million crop two decades ago blossomed into a $2 billion crop, topping the value of wheat, once North Dakota’s top crop. The number of high speed shuttle train loading terminals tripled with investments totaling at least $800 million.
But now one of those facilities, CHS Dakota Plains Ag elevator in Kindred, North Dakota, has gone three or four months without loading a soybean train this year, said Doug Lingen, a grain merchant there. Normally the elevator would load at least one train a month with beans bound for the Pacific Northwest.
The weakened demand has soybean prices in North Dakota trading at an historic discount to the U.S. average, and farmers are putting investments on hold.
Justin Sherlock, who grows corn, soybeans and other crops near Dazey, North Dakota, had been planning to invest $100,000 to $150,000 in a grain drier this year – but now has shelved those plans.
One reason is the low level of government aid in his county – now expected to be $55 per acre, well below the maximum $150 rate offered in 22 counties nationwide. Sherlock called the latest announcement “disappointing.”
“I’m just going to defer all my investment,” he said, “and try to limp along for a few years.”
So, we will see. It is clear that the farm economy is feeling economic pressure from several directions including lost overseas sales. Reports from the farm fair circuits indicate that there is growing criticism from producers as a result – a trend producers should watch closely through the fall, Washington Insider believes.
China Signals Any New Tariffs By US Will Bring Retaliatory Response
Even though the U.S. has delayed a portion of the 10 percent tariffs set to go into effect September 1, China says any new tariffs put in place will bring a response from China.
"Despite the U.S. decision to delay tariffs on some Chinese goods .... if the United States rides roughshod over China's opposition and impose any new tariffs, China will be forced to adopt retaliatory actions,” Ministry of Commerce spokesman Gao Feng told a news briefing.
Gao would not say what response China would offer if the U.S. tariffs were put in place. He noted that the trade war is bad for the U.S. and China and would have a recessionary impact on the global economy. He also observed that U.S. and Chinese trade teams have been keeping in contact, but did not offer any guidance as the nature of those talks.
As for President Donald Trump’s statement that the U.S. would not intervene in the Hong Kong situation, Gao said, "I hope U.S. side can stick to its words.” Meanwhile, China’s Foreign Ministry also weighed in, calling on the U.S. to meet China “halfway” in the trade situation.
"We hope the United States will meet China halfway," said Foreign Ministry spokesman Geng Shuang. He said there is a hope that the two sides can “work out a resolution that is acceptable to both sides on the basis of mutual respect and equal treatment."
"Despite the U.S. decision to delay tariffs on some Chinese goods .... if the United States rides roughshod over China's opposition and impose any new tariffs, China will be forced to adopt retaliatory actions,” Ministry of Commerce spokesman Gao Feng told a news briefing.
Gao would not say what response China would offer if the U.S. tariffs were put in place. He noted that the trade war is bad for the U.S. and China and would have a recessionary impact on the global economy. He also observed that U.S. and Chinese trade teams have been keeping in contact, but did not offer any guidance as the nature of those talks.
As for President Donald Trump’s statement that the U.S. would not intervene in the Hong Kong situation, Gao said, "I hope U.S. side can stick to its words.” Meanwhile, China’s Foreign Ministry also weighed in, calling on the U.S. to meet China “halfway” in the trade situation.
"We hope the United States will meet China halfway," said Foreign Ministry spokesman Geng Shuang. He said there is a hope that the two sides can “work out a resolution that is acceptable to both sides on the basis of mutual respect and equal treatment."
Initial Round of MFP 2 Payments On Their Way
USDA has started making the initial payments to farmers under the Market Facilitation Program 2 (MFP 2).
"The process began today (August 21) for payments for producers that have approved applications so producers should be seeing that first 50% tranche of those payments very soon," Fordyce told USDA Radio. Second and third tranche payments accounting for 25% each of the total MFP payment will be sent out conditioned on continued trade challenges.
However, there are reports that glitches in USDA/FSA software regarding some components of the program will mean some producers will not get their payouts until September.
Looking forward, if trade conditions fail to improve by late fall, the second MFP payments will be made, likely in November, while a third would come "probably in January at some point" if the trade difficulties persist, Fordyce said. Those are payment timelines that USDA has signaled in public filings on the MFP 2 payments and in press releases.
"The process began today (August 21) for payments for producers that have approved applications so producers should be seeing that first 50% tranche of those payments very soon," Fordyce told USDA Radio. Second and third tranche payments accounting for 25% each of the total MFP payment will be sent out conditioned on continued trade challenges.
However, there are reports that glitches in USDA/FSA software regarding some components of the program will mean some producers will not get their payouts until September.
Looking forward, if trade conditions fail to improve by late fall, the second MFP payments will be made, likely in November, while a third would come "probably in January at some point" if the trade difficulties persist, Fordyce said. Those are payment timelines that USDA has signaled in public filings on the MFP 2 payments and in press releases.
Friday Watch List
Markets
Weather will continue to be monitored Friday with beneficial rains in the seven-day forecast for much of the Midwest. The only two reports on the docket are U.S. new home sales at 9 a.m. CDT and USDA's monthly cattle-on-feed report at 2 p.m.
Weather
Showers and thunderstorms will extend from the southeastern Plains east to the mid-Atlantic coast Friday. Heavy amounts and flash flooding are likely in the southeastern Plains. We'll also see light rain in the northwest Plains and Canadian Prairies. Seasonal to below-normal temperatures in northern and central areas slow crop development compared with the average pace.
Weather will continue to be monitored Friday with beneficial rains in the seven-day forecast for much of the Midwest. The only two reports on the docket are U.S. new home sales at 9 a.m. CDT and USDA's monthly cattle-on-feed report at 2 p.m.
Weather
Showers and thunderstorms will extend from the southeastern Plains east to the mid-Atlantic coast Friday. Heavy amounts and flash flooding are likely in the southeastern Plains. We'll also see light rain in the northwest Plains and Canadian Prairies. Seasonal to below-normal temperatures in northern and central areas slow crop development compared with the average pace.
Thursday, August 22, 2019
China Hopeful U.S. Will Meet Halfway in Trade Talks
China is hopeful the U.S. will meet them “halfway” in trade negotiations. In a daily news conference, a Chinese Foreign Ministry spokesperson expressed hope the two sides could “find a mutually-acceptable solution” through trade negotiations. China maintains that economic cooperation between China and the U.S. is “win-win in nature.” China and the U.S. are each other’s top trading partner and represent “one of the world's most important bilateral relationships.” Trade experts don’t think the U.S. sale of fighter jets to Taiwan will interfere with the talks. However, the spokesperson from China did request the U.S. “immediately cancel” the planned sales. Otherwise, “the U.S. will have to bear all the consequences.” President Trump on Twitter said the U.S. is “doing great” on trade talks with China and others, as part of a tirade against the U.S. Federal Reserve Bank. Negotiators are set to meet early next month in Washington. U.S. farm groups continue to urge a quick resolution to the trade war, as China has halted buying U.S. ag products.
USDA Pulls Employees from Crop Tour Following Threat
Farmer angst spread to Pro Farmer’s Midwest Crop Tour Wednesday. The Department of Agriculture pulled all personnel from the tour after an angry farmer allegedly threatened a USDA employee over the phone. Pro Farmer says the threat reported on the western leg of the tour was not from a tour scout or farmer that attended a crop tour meeting. The threat was reported to local authorities, and Pro Farmer announced additional security measures for the remainder of the event. Officials did not announce the nature of the threat, or who was threatened. Federal Protective Services are investigating the incident. Compounding stress in farm country continues to grow as farmers face depressed prices, trade issues and a challenging growing season, along with farmers questioning USDA data. Pro Farmer recognized that "it's clearly a stressful time right now," but that stress does not justify making threats to federal employees, or anyone on crop tour. The tour concludes Thursday night in Rochester, Minnesota, and final estimates will be released Friday.
Ethanol Industry Counters EPA “Zero Evidence” Claim
The Environmental Protection Agency says small refinery waivers have no impact on ethanol producers. However, the biofuels industry disagrees. EPA this week claimed, "there is zero evidence" the waivers have a negative impact on domestic ethanol producers. Yet, POET, the largest U.S. ethanol producer, just announced it will idle production at its facility in Cloverdale, Indiana. The Renewable Fuels Association said last week that 13 ethanol plants have been closed, three permanently, because of the waivers. POET Chairman and CEO Jeff Broin says through the waivers, EPA “has robbed rural America, and it’s time for farmers across the Heartland to fight for their future.” Growth Energy CEO Emily Skor says Closures in Iowa, Illinois, Kansas, Minnesota, Florida, Virginia, Texas, Pennsylvania, Missouri and Nebraska “are only the beginning.” Growth Energy points out that dozens of biofuel plants have cut production, and ethanol consumption fell for the first time in 20 years because of the small refinery waivers being issued to now 42 of the nation’s 48 small refineries.
EPA Seeks Public Comment on Pesticide Applications for Hemp
The Environmental Protection Agency is seeking comments on ten pesticide applications to expand their use on hemp. The requests are the result of the December 2018 Farm Bill provisions that removed hemp from the Controlled Substances Act, legalizing hemp for commercial use and production. EPA Administrator Andrew Wheeler says the comment period is the next step toward registering crop protection tools for hemp in time for use during the 2020 application and growing seasons. Hemp farmers told the Trump administration and Congress earlier this year pesticide availability is one the biggest challenges in hemp production. The ten products are existing insecticides and fungicides from Agro Logistic Systems, Marrone Bio Innovations and Hawthorne Hydroponics. Comments are due 30 days after the notice publishes in the Federal Register, expected in the coming days. Once public comments are received, EPA anticipates deciding about the possible use of the specified products on hemp before the end of 2019 to help growers make informed purchasing choices for the upcoming growing season.
U.S., Mexico, Agree to New Tomato Suspension Agreement
The Department of Commerce has announced a new draft agreement between the U.S. and Mexico on fresh tomato trade. Mexico and the U.S. have a preliminary agreement in place to suspend the ongoing anti-dumping investigation of fresh tomatoes from Mexico. The Commerce Department says the agreement will protect U.S. tomatoes from unfair trade practices. For years, the U.S. has disputed the roughly $2 billion worth of tomatoes that are imported from Mexico annually. The disputes led the Commerce Department to terminate an earlier suspension agreement. The U.S. also continued an investigation that could have led to duties of 25 percent for most Mexican tomato producers. The draft includes a brand-new inspection mechanism to prevent the importation of low-quality, poor-condition tomatoes from Mexico. The draft agreement also allows the Commerce Department to audit up to 80 Mexican tomato producers per quarter. The statute requires a 30-day notice and comment period. United Fresh says the draft agreement “will be beneficial for the entire distribution chain, most importantly growers and consumers.”
USDA Reports Farm Computer Ownership and Usage
The Department of Agriculture says computer ownership and usage among farmers increased over the last two years. The Farm Computer Usage and Ownership report released last week updated numbers from 2017, as the report is compiled during odd-numbered years and released in August. The new data shows 75 percent of farms reported having access to the internet, with 73 percent of farms having access to a desktop or laptop. Over half of the farms in the United States used a smartphone or tablet to conduct farm business, compared to 44 percent in 2017. In 2019, 26 percent of farms used satellite and 22 percent of farms used a Digital Subscriber Line, known as DSL, to access the internet. Since 2017, Satellite and DSL continue to be the most popular choices that United States farms use to access the internet. The 2019 computer usage estimates are based on responses from more than 20,000 agricultural operations, and represent all sizes and types of farms.
Washington Insider: Ag Policy Fight in Oval Office
Bloomberg is reporting this week that a “farm state uproar” reached the Oval office on Monday — but that the difficulty was not the “get tough” trade policies that have been hammering ag markets this year, but rather concerned ethanol fuel mandates.
The report said that the president not only presided over the dustup but urged officials to soften the impact of recent policy moves that angered Midwestern farm states critical to his re-election, especially the EPA’s Aug. 9 decision to give 31 refineries exemptions from annual biofuel-blending requirements. The report quoted Iowa Senator Chuck Grassley, R-Iowa, as asserting that the administration’s biofuel policy had “screwed” farmers.
Trump suggested rescinding some of the newly granted waivers during the Monday meeting, Bloomberg said, but was told the waivers may not be reversible. In response, officials offered other ideas to mitigate the political impact in Iowa, a state he carried in 2016 and needs again in 2020 to win.
Monday’s back-and-forth illustrates an intensifying clash over U.S. biofuel policy that pits two of Trump’s top political constituencies — farmers and oil interests — against each other, Bloomberg said. The administration is divided, with USDA favoring farmers and the EPA insisting the law compels them to waive the requirement for refineries facing economic harm.
The Monday meeting was organized to discuss trade with China but quickly turned into a fuels discussion because the U.S. ambassador to China, former Iowa Governor Terry Branstad, had just visited the state and was concerned about “the harm” he believed the waivers will cause rural America.
The meeting was lively and lasted roughly two hours, with at least one follow-up call. The discussion included broad policy changes designed to mollify farm-state critics and expand the market for corn-based ethanol. At one point, Branstad even questioned whether the U.S. could mandate that auto companies make all vehicles capable of running on a variety of fuels to allow consumers to choose what to use, an idea that was quickly rebuffed after warnings that it would provoke a big fight with automakers.
Among the other options discussed: fuel policy changes designed to make E15 — gasoline that contains 15% ethanol — the new nationwide standard, replacing the 10% variety that is now commonplace.
The EPA in May lifted restrictions on E15 gasoline that blocked widespread summertime sales, but fewer than 2,000 stations offer that blend. Flex-fuel vehicles are capable of using both but limited consumer interest has discouraged widespread adoption.
It is not clear that any of Monday’s ideas will materialize. Since 2017 the administration has tried to broker a compromise on biofuel policy between warring ethanol and oil industry interests, but the design of the U.S. Renewable Fuel Standard makes it nearly impossible to satisfy both stakeholders simultaneously. And many of the ideas advanced Monday would require congressional action or lengthy federal rulemaking; some even conflict with regulatory changes already under way.
Moreover, some of the proposals would benefit ethanol but do little to address concerns by U.S. biodiesel makers that use soybean oil as a feedstock and whose footprint extends beyond the corn belt.
The White House discussions center around a 14-year-old federal law that dictates oil refineries use biofuel to satisfy annual quotas set by the EPA. The statute authorizes the EPA to issue exemptions for small refineries facing a “disproportionate economic hardship,” but biofuel proponents argue the administration has handed out the waivers too freely and is undermining domestic demand for the products.
The EPA decided to grant 31 exemptions from 2018 biofuel-blending quotas — and deny six other applications — following months of internal deliberations and after the President intervened to authorize the move.
The exemptions have caused anger throughout the Midwest, where biofuel producers, their political allies and farmers view the waivers as curbing demand for their products, amid a trade war with China that has already diminished sales. Democratic candidates for the White House also have seized on the issue.
EPA officials and oil industry advocates push back against assertions that refinery exemptions are eroding demand for ethanol and point to the fact that the administration has overseen year-over-year increases in domestic fuel ethanol production to the highest level in history and that the U.S. exported a record volume of ethanol in 2018 for the second consecutive year.
The EPA said its decisions take into account direction from Congress, recommendations from the Department of Energy and recent court decisions that rapped the agency for denying some refinery waivers.
Still, participants in Monday’s meeting are highlighting the backlash in Iowa and other midwestern states, illustrating the political concern about alienating crucial swing voters. Oil industry allies, including Senator Ted Cruz, R-Texas, have made the opposite pitch during earlier administration discussions on the issue, arguing that support from refinery workers in Pennsylvania and other battleground states is also at risk if the president strengthens U.S. biofuel mandates.
So, we will see. Ethanol and biodiesel mandates have always been controversial in some quarters and those fights intensify sharply during elections — especially when other markets have already been diminished by other administration policies. These are economic battles producers should watch closely as they emerge, Washington Insider believes.
The report said that the president not only presided over the dustup but urged officials to soften the impact of recent policy moves that angered Midwestern farm states critical to his re-election, especially the EPA’s Aug. 9 decision to give 31 refineries exemptions from annual biofuel-blending requirements. The report quoted Iowa Senator Chuck Grassley, R-Iowa, as asserting that the administration’s biofuel policy had “screwed” farmers.
Trump suggested rescinding some of the newly granted waivers during the Monday meeting, Bloomberg said, but was told the waivers may not be reversible. In response, officials offered other ideas to mitigate the political impact in Iowa, a state he carried in 2016 and needs again in 2020 to win.
Monday’s back-and-forth illustrates an intensifying clash over U.S. biofuel policy that pits two of Trump’s top political constituencies — farmers and oil interests — against each other, Bloomberg said. The administration is divided, with USDA favoring farmers and the EPA insisting the law compels them to waive the requirement for refineries facing economic harm.
The Monday meeting was organized to discuss trade with China but quickly turned into a fuels discussion because the U.S. ambassador to China, former Iowa Governor Terry Branstad, had just visited the state and was concerned about “the harm” he believed the waivers will cause rural America.
The meeting was lively and lasted roughly two hours, with at least one follow-up call. The discussion included broad policy changes designed to mollify farm-state critics and expand the market for corn-based ethanol. At one point, Branstad even questioned whether the U.S. could mandate that auto companies make all vehicles capable of running on a variety of fuels to allow consumers to choose what to use, an idea that was quickly rebuffed after warnings that it would provoke a big fight with automakers.
Among the other options discussed: fuel policy changes designed to make E15 — gasoline that contains 15% ethanol — the new nationwide standard, replacing the 10% variety that is now commonplace.
The EPA in May lifted restrictions on E15 gasoline that blocked widespread summertime sales, but fewer than 2,000 stations offer that blend. Flex-fuel vehicles are capable of using both but limited consumer interest has discouraged widespread adoption.
It is not clear that any of Monday’s ideas will materialize. Since 2017 the administration has tried to broker a compromise on biofuel policy between warring ethanol and oil industry interests, but the design of the U.S. Renewable Fuel Standard makes it nearly impossible to satisfy both stakeholders simultaneously. And many of the ideas advanced Monday would require congressional action or lengthy federal rulemaking; some even conflict with regulatory changes already under way.
Moreover, some of the proposals would benefit ethanol but do little to address concerns by U.S. biodiesel makers that use soybean oil as a feedstock and whose footprint extends beyond the corn belt.
The White House discussions center around a 14-year-old federal law that dictates oil refineries use biofuel to satisfy annual quotas set by the EPA. The statute authorizes the EPA to issue exemptions for small refineries facing a “disproportionate economic hardship,” but biofuel proponents argue the administration has handed out the waivers too freely and is undermining domestic demand for the products.
The EPA decided to grant 31 exemptions from 2018 biofuel-blending quotas — and deny six other applications — following months of internal deliberations and after the President intervened to authorize the move.
The exemptions have caused anger throughout the Midwest, where biofuel producers, their political allies and farmers view the waivers as curbing demand for their products, amid a trade war with China that has already diminished sales. Democratic candidates for the White House also have seized on the issue.
EPA officials and oil industry advocates push back against assertions that refinery exemptions are eroding demand for ethanol and point to the fact that the administration has overseen year-over-year increases in domestic fuel ethanol production to the highest level in history and that the U.S. exported a record volume of ethanol in 2018 for the second consecutive year.
The EPA said its decisions take into account direction from Congress, recommendations from the Department of Energy and recent court decisions that rapped the agency for denying some refinery waivers.
Still, participants in Monday’s meeting are highlighting the backlash in Iowa and other midwestern states, illustrating the political concern about alienating crucial swing voters. Oil industry allies, including Senator Ted Cruz, R-Texas, have made the opposite pitch during earlier administration discussions on the issue, arguing that support from refinery workers in Pennsylvania and other battleground states is also at risk if the president strengthens U.S. biofuel mandates.
So, we will see. Ethanol and biodiesel mandates have always been controversial in some quarters and those fights intensify sharply during elections — especially when other markets have already been diminished by other administration policies. These are economic battles producers should watch closely as they emerge, Washington Insider believes.
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