Chinese Ag Purchases Becoming a Sticking Point in Negotiations

U.S. President Donald Trump has said China will commit to buying up to $50 billion in U.S. agricultural products as part of a Phase One trade agreement between the countries, However, Reuters says that amount is becoming a sticking point in the negotiations. That $50 billion is more than double the amount of U.S. ag commodities that China purchased during the year before the trade war began. People who’ve been briefed on the negotiations say that U.S. officials are continuing to push for that amount in talks, while Beijing doesn’t want to commit to purchasing that number of products in a certain time frame. China would like its buyers to be able to buy based on market conditions. An official of a Chinese state-owned company says China “doesn’t want to buy a lot of products that people here don’t need or something during a time when it’s not in demand. If a lot of U.S. products come into China all at once, the domestic market might not be able to digest them.” As an example, that same official points out that China wouldn’t be able to use large amounts of U.S. soybeans because of the African Swine Fever virus that’s decimated their herds.

Biofuels Groups Ask EPA to Fix Flawed Proposal

Growth Energy CEO Emily Skor testified on Wednesday before Environmental Protection Agency officials at a hearing on its proposed supplemental rule on 2020 biofuels targets under the Renewable Fuels Standard. Skor, whose organization represents more than half of U.S. ethanol producers, is asking the EPA to fix the flawed draft proposal and reverse the demand destruction that has shuttered biofuels plants across the country. “As drafted, EPA’s plan fails to accurately make up for lost gallons and betrays President Trump’s promise to rural America,” she said during testimony. “It cuts the fix we were promised in half, if not more, and destroys what may be our last chance to bring back the ethanol plants that have shut down and help to ease the burden facing American farmers.” The National Biodiesel Board also testified on Wednesday and said they appreciate the proposal to account for small refinery exemptions in the future. However, they pointed out that the EPA’s supplemental rule doesn’t do anything about small refinery exemptions before 2020. “Over four billion gallons of demand for biofuels has been lost due to small refinery exemptions from 2016 through 2018,” says David Cobb, NBB Federal Affairs Director. “The impact has been particularly significant for biomass-based diesel producers because biomass-based diesel can be used to satisfy multiple categories of fuel under the RFS.”

Another Attempt to Fix Farm Labor Problems Introduced in Congress

Representatives Zoe (ZOH-ee) Lofgren of California and Dan Newhouse of Washington introduced comprehensive legislation that attempts to overhaul the nation’s agricultural labor programs. Politico says the legislation will attempt to “thread the needle” between agriculture and labor groups that have long butted heads over the issue. The bill, called the Farm Workforce Modernization Act, would provide a way to legal status for undocumented farmworkers who’ve been working at least two years on their jobs and are planning to continue. The bill would also put into place a mandatory E-Verify system nationwide for farmers, something that would give conservatives incentive to support the bill. It will simplify the H-2A application process, cap wages for farmworkers, and it will raise funding for USDA programs that support housing for laborers. It also attempts to meet the needs of dairy farmers and others who need year-round labor. The bill offers 40,000 extra green cards for agricultural labor and creates a capped program to grant three-year visas for workers in certain sectors, including dairy. Politico says it’s the latest attempt to bring together labor and ag groups, as well as convince both Republicans and Democrats to pass major reform to the farm labor system. It’s something that has failed multiple times in the past.

House Ag Committee Reauthorizes Commodity Futures Trading Commission

The House Agriculture Committee passed legislation to reauthorize the Commodity Futures Trading Commission through 2025. H.R.Bill  4895 passed by voice vote on Wednesday morning. “The bill helps strengthen our financial market infrastructure and makes it more resilient,” says Ag Committee Chair Collin Peterson. “It also combats fraud and promotes cooperation among the regulators. What’s even more important to me is that it was put together in a bipartisan way that sends a strong message to the Senate.” Peterson says the people that look to U.S. markets for integrity don’t care about political wins and losses, but rather expect legislators to conduct the business of the committee. The bill includes system safeguard requirements for clearinghouses, trading platforms, and swap data repositories. It also clarifies provisions for relief in the event of broker bankruptcy. The bill adds whistleblower protections for employees of organizations that fall under CFTC jurisdiction, as well as enables further cooperation between the CFTC and international regulatory bodies.

Agency Partnership Designed to Reduce Food Waste

The U.S. Department of Agriculture, the Environmental Protection Agency, and the Food and Drug Administration announced they’re partnering with the Food Waste Reduction Alliance. It’s part of the “Winning on Reducing Food Waste Initiative” launched by the three agencies last year. The agencies will formalize industry education and outreach efforts with the Grocery Manufacturers Association, the Food Marketing Institute, and the National Restaurant Association, which are the three founding partners in the Food Waste Reduction Alliance. The alliance is working on three goals, including reducing the amount of food waste, increasing the amount of food donated to those in need, and diverting food waste from landfills. In the United States, more than one-third of all available food goes uneaten through loss or waste. Food is the single biggest type of waste in America’s daily trash. The agencies will contribute to the goal of reducing food waste through research, community investments, education and outreach, voluntary programs, public-private partnerships, technical assistance, and policy discussion.

NCBA Happy with Hours of Service Legislation Introduced in Congress

The National Cattlemen’s Beef Association is pleased with bipartisan legislation introduced in Congress that would provide flexible and common-sense relief from Hours of Service rules for agricultural haulers. The Responsible and Efficient Agriculture Destination Act would make sure that the current Hours of Service exemption that applies to the 150-air-mile radius from the source of an agricultural commodity adds the same radius flexibility to the back end of a trip or the destination. The bill also clarifies that this exemption would apply in every state on a year-round basis because agriculture and specifically livestock move across the country every day. “Agricultural haulers, especially those that move livestock, face very unique challenges that haulers in other industries don’t face,” says NCBA President Jennifer Houston. “This bill recognizes that need.” The bill was introduced in the House by Democrat Angie Craig of Minnesota and Republican Lloyd Smucker of Pennsylvania. “On behalf of all cattle producers, I’d like to thank everyone that signed on to this bill, which works toward needed flexibility within Hours of Service regulations for our livestock haulers,” Houston added. 

Washington Insider: Modestly Bad Trade News

There was more than a little bad economic and trade news for the ag sector this week, including a report that U.S. farm bankruptcies in September surged 24% to the highest since 2011. Bloomberg linked the bankruptcy data to “strains from President Trump’s trade war with China and a year of wild weather.”

At the same time, the American Farm Bureau Federation is reporting that growers are becoming “increasingly dependent on trade aid and other federal programs for income and that the “squeeze on farmers underscores the toll China’s retaliatory tariffs have taken on a critical Trump constituency” as the 2020 election campaign heats up.

The Farm Bureau report said that almost 40% of “projected farm profit” this year will come from trade aid, disaster assistance, federal subsidies and insurance payments, based on Department of Agriculture forecasts — as much as $33 billion of a projected $88 billion in income. AFBF noted that the trade war and two straight years of adverse weather “rattled” farmers already facing commodity price slumps.

Chapter 12 bankruptcy filings in the 12 months ended September rose to 580 from a year earlier. That marked the highest since 676 cases in 2011 under the chapter of the bankruptcy code tailored for farms. The total “remains well below” historical highs in the 1980s, the federation said.

Recent bankruptcies were concentrated in the 13-state Midwestern region, a key battleground in the upcoming election where grain, soybean, hog and dairy farms have been hit by trade disputes. More than 40%, or 255 filings, were in the region.

Another piece of bad news came as Chile announced the cancellation of the Nov. 16-17 summit where President Trump had hoped to sign the preliminary trade accord with China. The decision to cancel follows a wave of protests that overwhelmed Chilean police, Bloomberg said. It called the unrest the most extensive “in a generation.”

How and when the leaders of the world’s two largest economies will meet to resolve their trade differences appears to be the biggest question thrown up by the Chilean decision. The expected deal, which Trump had previewed in mid-October, had calmed fears of a continuing escalation in the trade war that has cast a shadow over the global economy for the past 18 months.

The new cancellation “suggests that the trade war uncertainty might be hanging over us for longer,” Torsten Slok, the chief economist at Deutsche Bank AG, told Bloomberg. “It raises the risk that we could never see a phase two or phase three.”

Chile also canceled the United Nations climate change conference, known as COP25, scheduled for December in Santiago, President Sebastian Pinera said.

“We understand perfectly the importance of APEC and COP for Chile and the world, but we have based our decision on common sense,” Pinera said from the presidential palace. “A president needs to put its people above everything else.”

The decision to cancel the meetings highlights the depth of trouble facing the Latin American nation that has seen almost two weeks of rioting and protests. It also comes as a deep embarrassment to the government that had insisted it would go ahead with the conference just two days ago.

Bloomberg also reported that the White House says it still hopes to sign a preliminary accord with Xi Jinping next month, even after the cancellation by Chile appeared to catch the White House off guard. White House spokesman Hogan Gidley said that Trump still intends to sign a partial trade deal with Xi at about the same time in November as the planned Asia-Pacific Economic Cooperation summit.

“We look forward to finalizing Phase One of the historic trade deal with China within the same time frame, and when we have an announcement, we’ll let you know,” Gidley said.

The possibility of a Trump-Xi meeting in Santiago next month had buoyed markets as investors look for signs that an end to the multi-year trade war between the two nations is in sight. The White House was working as recently as Tuesday to finish a “phase one” agreement with an eye toward the leaders signing it in Chile, according to a statement from White House spokesman Judd Deere.

Both President Trump and Vice President Mike Pence said last week they were optimistic the deal would be finalized at the summit.

So, we will see. Both parties to the proposed partial trade deal appear inclined to favor at least a modest cooling off now, thus boosting chances for something positive to happen. However, given all the political tensions affecting both sides, the process still seems fragile and one producers should watch closely as it proceeds, Washington Insider believes.

USDA Releases Hemp Rule

USDA released its interim final rule covering hemp production, with the measure coming into effect October 31. The plan would set up a nationwide regulatory framework to oversee commercial production of the newly legalized crop in time for the 2020 growing season.

USDA said the measure will be in effect for two years and the agency will accept public comments as it considers potential revisions. USDA said it will act on state plans within 60 days of submission after it publishes the rule in the Federal Register.

Some have expressed concern on the testing provisions in the plan. USDA said samples of hemp flower to be collected by a USDA - or state-approved agent within 15 days of anticipated harvest, and the sample must then be tested at a Drug Enforcement Agency (DEA) registered laboratory using one of several widely used methods, including post-decarboxylation as well as gas or liquid chromatography. However, USDA appears to have acknowledged the variance in testing methods, including a "measurement of uncertainty" for testing results that effectively bumps the legal THC level from 0.3% to 0.5%.

Under the plan, states can set stricter rules but they cannot put rules in place that have easier standards than those laid out by USDA.

House Hearing Reveals Rifts Remain on Biofuel Policy

The chasm between biofuel supporters and refiners shows now signs of being bridged based on testimony both sides delivered at a House Energy & Commerce subcommittee hearing this week on small refinery exemptions (SREs) under the Renewable Fuel Standard (RFS).

Both sides are clearly set in their positions and there was little indication that will change. The situation still remains that both biofuel supporters and refiners are not happy with EPA’s supplemental rule issued relative to 2020 biofuel requirements under the RFS which aimed at addressing the SRE issue.

Given that the comment period on the plan runs through November 29, the November 30 deadline for finalizing the 2020 biofuel standards will be missed.

And EPA has not committed to a timeline of when they will do so, only saying it will be later this year. The U.S. biofuel policy situation will remain uncertain until the final 2020 biofuel plan is in place.

Thursday Watch List

Markets
Halloween trading starts with weekly grain export sales, an updated U.S. Drought Monitor, U.S. jobless claims, personal incomes and the employment cost index -- all due out at 7:30 a.m. CDT. U.S. natural gas inventories are available at 9:30 a.m. Weather radar will be watched as rain and snow are expected to move eastward Thursday.

Weather
Thursday features rain and snow in the eastern Midwest, disrupting harvest. Dry and cold conditions elsewhere will be more favorable for harvest progress.

China, U.S., on Track to Sign Phase One Agreement

The U.S. and China are on track to sign the phase one trade agreement next month. President Donald Trump this week stated the negotiations are running “ahead of schedule.” The South China Morning Post reports Trump and Chinese President Xi Jinping (Shee Jihn’-ping) are set for a November 17 meeting in Chile to sign the interim trade deal. Trump says the agreement would “take care of the farmers,” among other things, including banking provisions. A spokesperson from China’s Foreign Affairs Ministry confirmed the progress, saying, “the two sides made substantial progress” in recent talks. Top-level negotiators met over the phone last Friday and will again very soon. The agreement includes an estimated $40-$50 billion of agricultural purchases by China over a two-year period, with $20 billion possible the first year. Market analysts say agricultural trade with China appears to be starting to normalize, ahead of the agreement. In 2017, before the trade war began, the U.S. shipped $19.5 billion worth of agricultural products to China. However, the trade war cut those exports in half.

USDA Releases Hemp Regulations

Agriculture Secretary Sonny Perdue Tuesday released the long-awaited regulation plan for hemp production. Perdue says rulemaking teams operated as “all hands on deck” over the last few months in creating a “fair and science-based” program. The Department of Agriculture says the framework makes hemp producers eligible for several agricultural programs, including crop insurance. Under the interim final rule, USDA will approve hemp production plans developed by states. The program requires documentation of the land where hemp is produced, along with testing and licensing requirements. USDA will begin accepting applications 30 days after the effective date of the interim rule. Meanwhile, all hemp production must be sampled and tested for THC concentration levels at Drug Enforcement Agency registered laboratories. If a test confirms a THC level exceeding the approved level, then the crop must be disposed of. Hemp must not contain more than .3 percent THC on a dry weight basis, as a level above .3 percent is federally considered marijuana. The complete rule is available online at ams.usda.gov.

Ethanol Industry Tells Lawmakers Biofuel Waivers Created Economic Crisis

Ethanol producers say small refinery waivers granted by the Environmental Protection Agency have caused an economic crisis for the industry. At hearing in Washington, D.C. Tuesday, Growth Energy told lawmakers “small refinery exemptions under the Renewable Fuel Standard is crippling rural America.” The ethanol industry and farm groups are not optimistic the EPA plan to restore biofuel blending to the statute of 15 billion gallons annually will be followed. Growth Energy says the regulatory attempts by EPA “give us little confidence that we will see the relief we need.” Farmers and ethanol producers are also upset the plan doesn’t make up for lost gallons over the last few years. Several biofuels and farm groups voiced support for the Renewable Fuel Standard Integrity Act of 2019, introduced by House Agriculture Committee Chair Collin Peterson. The groups say the legislation would bring transparency to the small refinery waivers. Refinery exemptions under the Trump Administration have totaled nearly six times more gallons than those under the previous Administration.

Food And Beverage Industry Urges Congress to Pass USMCA

Food and beverage industry workers recently sent more than 10,000 individual letters to Congress to urge passage of the U.S.-Mexico-Canada Agreement. The Corn Refiners Association says the letters emphasized the economic benefits USMCA will bring to the U.S. business community and consumers alike. The letters are part of a grassroots effort by the association, along with several other food and agriculture organizations. Corn Refiners Association President and CEO John Bode (Boh-dee)  adds, "the agriculture-related benefits of North American trade reach far into our economy." Bode says more than 70 percent of the agriculture-related jobs created by the North American Free Trade Agreement were outside of the farm sector. In recent weeks, members of the USMCA Coalition have been urging members of Congress to announce their support for the agreement. The Coalition reminds Congress that the food and agriculture industry "is the economic backbone of rural America" and an essential driver of the overall economy, accounting for one-fifth of American economic activity.

Fall Harvest Poses Grain Quality Challenges

Grain inspection experts warn that the 2019 fall harvest will bring quality challenges for many. Tom Dahl, president of the American Association of Grain Inspection and Weighing Agencies, this week stated quality challenges may vary by region. Some may see weathered grain, while others may see green or immature grains. Or, it could be frost damaged kernels, mold, or fungus issues. Any of these create marketing issues for producers. For users, whether they are processors, feeders, or millers, Dahl says it is a matter of understanding the quality they are receiving so it can be used for its best purpose. The organization recommends accurate measurement of crop quality, as both buyers and sellers can benefit from clearly understanding the quality of the grain or oilseeds they are handling. Consistent, accurate test results can be best assured through using an Official Grain Inspection Agency. These are agencies supervised by the Department of Agriculture’s Federal Grain Inspection Service. Farmers can learn more about accurate quality testing online at www.aagiwa.org.

Syngenta Named Top AG Employer in 2019

A Science Magazine survey names Syngenta as one of the world's leading biotech employers - and the top agriculture employer. The 2019 Science Careers Top Employers Survey ranked Syngenta ten out of 20 top employers in biotechnology, biopharmaceutical, and pharmaceutical and related industries, marking the tenth year of recognition by the global survey. The annual survey identifies companies with the best reputations as employers, based on 23 attributes, including treating employees with respect, being socially responsible and being an innovative leader in the industry. The results were compiled by a sample of 7,600 people across the applicable industries. A Syngenta spokesperson says of the ranking, "One of Syngenta's greatest strengths is our collaborative culture." The company has biotechnology and seeds research operations globally, with centers of innovation in Research Triangle Park, North Carolina, and Beijing, China. The complete rankings of the 2019 survey are available on the Science magazine website, www.sciencemag.org.

Washington Insider: Speculation About What Follows Expectations for Rate Cuts

Well, it is hard to keep up with the speculations about economic and trade policy these days. For example, Bloomberg is reporting this week that not only is the Fed projected to lower borrowing costs today for the third straight time, “a slew of economic reports this week will play a key role in whether the central bank needs to keep cutting or can take a breather.”

Figures due for release today “are projected to show gross domestic product in the July-September period expanded at 1.6% annualized pace, the second-slowest quarter under President Trump and about half the pace at the start of 2019 – as consumer spending pulled back from gangbusters growth.

Also, a couple of days later, the October jobs report may indicate that the largest strike in more than a decade pushed nonfarm payroll gains below 100,000—tepid gains even if the impacts of the General Motors Co. walkout are excluded.

The key question is whether the economy is stumbling toward a recession or merely cooling off, Bloomberg thinks. Stocks at a record high, along with a yield curve that’s turned positive again, have mitigated concern about a downturn.

Still, deteriorating global growth, administration tariffs on Chinese goods and a weakened manufacturing sector have put the record-long expansion – and the potential political impacts that implies “on the backs of consumers who are increasingly in a tougher position,” Bloomberg says.

“It has the potential to be a pretty ugly week,” said Sarah House, senior economist at Wells Fargo & Co. “We are far from out of the woods in terms of this slowdown and some of the headwinds that the economy is facing.”

While GDP and payrolls will take much of the spotlight, the widely watched Institute for Supply Management manufacturing index due Friday is expected to contract for another month in October, deepening concerns about fragile factories. Meanwhile, the employment cost index, a broad gauge monitored by the Fed, on Thursday could suggest companies remain hesitant to offer better wage gains and benefits.

“Until there’s some clarity on trade then it’s hard to see any kind of a meaningful rebound in business investment,” said Richard Moody, chief economist at Regions Financial Corp. Business spending on equipment and structures may hit bottom this quarter or continue to decline “and the two have very different implications for the course of the economy,” he said.

Bloomberg reports that its own economists say that, “economic activity in the second half of the year is poised to decelerate markedly as several drivers of growth fade and consumers are left dominating the outlook to an even greater degree than usual,” according to Carl Riccadonna, Yelena Shulyatyeva, Andrew Husby and Eliza Winger.

While there have been positive signs on trade, negotiations are far from over, the President said Monday. He noted that the U.S. is ahead of schedule with finalizing sections of the first phase of a trade deal with China that could be signed soon.

At the same time, Bloomberg claimed to see “one bright spot”: Residential investment, which has shrunk for six consecutive quarters, is poised add to accelerate its recent growth in the latest period as low mortgage rates helped boost sales. Still, the group thinks that this gain “was likely too small to make a significant impact on GDP for the period, so the onus remains on Americans to keep buying goods and services.”

As a result, Friday’s employment report, the first on the state of the labor market in the fourth quarter, is seen as increasingly important. The overall trend in payroll gains has slowed this year down to 161,000 new jobs a month versus 223,000 in 2018. While that’s still more than enough to keep up with working-age population growth, a continued pullback could dent consumer spending.

“If you see more slowing in the labor market than is already expected I think that is going to call into question whether the consumption story is going to hold up,” said Brett Ryan, senior U.S. economist at Deutsche Bank AG. “And that’s the fear.”

The now-ended walkout of 46,000 General Motors Co. workers together with its follow up implications “could complicate the headline number.” However, the strike will be concentrated in manufacturing payrolls, making it easy to separate from the overall trend. In past jobs reports, the Bureau of Labor Statistics has flagged when a strike causes large payroll declines in specific industries.

Another wrinkle could come from hiring for the 2020 census. Fewer than 30,000 of roughly 40,000 temporary hires were accounted for in official data for August and September.

Bank of America Corp. economists expect nonfarm payrolls to rise just 25,000--the low end of forecasts ranging as high as 140,000 – with wages stalling and the Fed signaling it’s open to further interest-rate cuts.

If all goes as Bank of America expects, that indicates “the economy is shaky and the Fed still perceives there to be risks,” said Michelle Meyer, the firm’s head of U.S. economics.

So, we will see. The current uncertainties are certainly significant, trends producers should watch closely as the season progresses, Washington Insider believes.

Spanish Olive Producers Call on EU to Investigate US Farm Subsidies

Spanish olive producers are calling on the European Union (EU) to hit the U.S. with stiff countermeasures over the tariffs imposed by the U.S. on a host of products in the Airbus dispute.

Olive producers face additional duties on black olives as a result of a trade action by the U.S. International Trade Commission to apply anti-subsidy tariffs on the imports.

The Airbus-related action also imposed tariffs on green olives – essentially putting tariffs on all table olive shipments from Spain.

The Spanish table olive producer group Interaceitunas is calling on the European Commission to investigate whether the U.S. unfairly subsidizes its farmers. The group is calling for the matter to be pursued at the WTO.

Mixed Signals Continue on US-China Trade Front

Developments on the U.S.-China trade front continue to see mixed reports emerge. President Donald Trump on Monday said “Phase One” trade talks with China were ahead of schedule. “We are looking probably to be ahead of schedule to sign a very big portion of the China deal, and we will call it phase one but it is a very big portion,” Trump said. “That would take care of the farmers. It would take care of some of the other things. It will also take care of a lot of the banking needs.”

The agreement is expected to be signed when Trump and Chinese leader attend the APEC summit November 16-17 in Chile.

“So we are about, I would say, a little bit ahead of schedule, maybe a lot ahead of schedule,” the president said. “Probably we will sign it.”

However, Tuesday saw Reuters quote a Trump administration official as saying that the pact may not be ready to sign by the November APEC meeting. Financial markets took the development as a negative even as the report also quoted the official as saying that if the agreement was not ready for signing, it did not mean that the talks have fallen apart.

Wednesday Watch List

Markets
At 7:15 a.m. CDT, ADP releases estimates of private job growth in the U.S., an early hint for Friday's unemployment report. The first estimate of third-quarter U.S. GDP is set for 7:30 a.m. CDT. The U.S. Energy Department's weekly inventory report is due at 9:30 a.m., followed by the Federal Reserve's next interest rate decision at 1 p.m. CDT.

Weather
Snow and mixed precipitation across the central Plains, the southwest to the north-central Midwest regions during Wednesday will affect travel, transport and seasonal fieldwork, including harvesting in Midwest areas. The heaviest snow, 2-4 inches and locally heavier, is likely to occur from east Iowa and northwest and north Illinois through southern Wisconsin. Rain, showers and thundershowers elsewhere in the east and south Midwest, the Delta and into the east-central U.S. areas is also likely to affect seasonal fieldwork today. Cold, dry conditions, will favor harvesting in the Northern Plains and for the most part in the Canadian Prairies as well.

Farm Debt Repayment Stretching Terms

Farmers need more time to pay off non-real estate loans, according to recent data. An analysis published last week by Agricultural Economics Insights, an agriculture economic analysis firm, shows repayment term length on farm loans recently reached levels not seen in decades. In 2018, the average repayment term on all non-real estate loans was 15.4 months. The report says that’s the highest annual observation noted since 1977. In recent years, even as farm income has turned higher, producers are still relying on higher levels of debt for farm machinery, livestock and all non-real estate loans. However, the analysis says longer repayment terms, coupled with historically low-interest rates, make it easier for producers to meet the annual debt service obligations of high debt levels. Terms over the last 20 years generally stayed between 12 and 14 months, with a decline in 2008 and 2009 due to the Great Recession, when the average non-real estate farm loan term dipped to 11 months.

USDA Pauses RFID Ear Tag Proposal

The Department of Agriculture has paused its effort to mandate RFID ear tags for cattle and bison. The proposal would have mandated the ear tags for animals moved in interstate commerce beginning in January of 2023. A guidance document detailing the proposal on the USDA website was recently removed, following a lawsuit against the proposal filed by R-CALF USA. USDA’s Animal and Plant Health Inspection Service says that based on industry feedback and Executive Branch policy, “APHIS believes that we should revisit those guidelines.” President Donald Trump earlier this month signed an executive order to stop federal agencies from using guidance documents to impose rules. APHIS removed the factsheet from its website, saying it is “no longer representative of current agency policy.” R-CALF CEO Bill Bullard called the proposal a federal overreach by USDA, saying the proposal would “gift RFID ear tag manufactures” more profits. USDA says it still believes “RFID devices will provide the cattle industry with the best protection against the rapid spread of animal diseases.”

Marshall, Brindisi, Introduce Real MEAT Act

A bill introduced Monday would address deceptive labeling practices in alternative protein products, such as plant-based imitators of meat. Republican Representative Roger Marshall of Kansas, along with New York Democrat Anthony Brindisi (brin-dis-see), introduced the Real Marketing Edible Artificial Truthfully, or Real MEAT Act. The legislation would codify the definition of beef for labeling purposes, reinforce existing misbranding provisions to eliminate consumer confusion, and enhance enforcement measures available to the Department of Agriculture if the Food and Drug Administration fails to take appropriate action. Marshall says alternative protein products “have confused many consumers with misleading packaging and creative names for products.” Brindisi says the bill is “about safety and transparency.” The National Cattlemen’s Beef Association applauded introduction of the legislation. NCBA President Jennifer Houston says a growing number of fake meat products are “clearly trying to mislead consumers” about what they’re trying to get them to buy, adding “consumers need to be protected from deceptive marketing practices.”

Study: Risk of ASF in U.S. has Doubled

A recent study shows the risk of African Swine Fever entering the U.S. has nearly doubled since the ASF epidemic began in 2018. Researchers at the University of Minnesota College of Veterinary Medicine say the probability of ASF already reaching the U.S. is high, but efforts to stop the virus at the borders have stopped its entry. The study measured the risk of ASF entering the United States through the smuggling of pork products in air passenger luggage. The study reports five specific airports account for over 90 percent of the potential risk: Newark-New Jersey, George Bush-Houston-Texas, Los Angeles-California, John F. Kennedy-New York, and San Jose-California. If ASF were to enter the United States, its spread would cause immense economic damage to the pork industry and food production more broadly, and could lead to billions of dollars of losses for swine producers. Since the 2018 outbreak in China, the country has slaughtered an estimated 1,170,000 animals.

Early 2020 Forecast Signals More Trouble for Missouri River Farmers

Early predictions for the 2020 runoff season suggest more flood risks for farmers along the Missouri River. Through a series of public meetings, the U.S. Army Corps of Engineers says wet and saturated soils, along with increased rainfall in the long-term forecast, means 2020 looks similar to the 2019 spring. Flooding remained common this year along the Missouri River since the so-called bomb-cyclone storm in March, where saturated and frozen soils led to a large amount of water runoff in the lower Missouri River basin. The lower basin is uncontrolled, meaning no dams regulate the flow, below the Gavins Point dam. Water releases from Gavins point remain well above average, at roughly 80,000 cubic feet per second, as the Corps tries to prepare the reservoir system for next year. However, winter weather and the risk of ice jams will soon halt those efforts. The last forecast update predicted 2019 runoff would equal the record set in 2011.

Voting Begins for 2019 Farm Service Agency County Committee Elections

The Department of Agriculture Monday announced it will begin mailing ballots on November 4 to eligible farmers and ranchers across the country for the Farm Service Agency county committee elections. Each committee has three to 11 elected members who serve three-year terms of office. One-third of county committee seats are up for election each year. Newly elected committee members will take office January 1, 2020. To be counted, ballots must be returned to the local FSA county office or postmarked by December 2. FSA Administrator Richard Fordyce says the members “play a key role in our efforts to provide assistance to producers.” Producers must participate or cooperate in an FSA program to be eligible to vote in the county committee election. Farmers can find out if their local administrative area is up for election and if they are eligible to vote by contacting their local FSA county office. Eligible voters who did not receive a ballot in the mail can pick one up at their local FSA county office. Visit fsa.usda.gov for more information.

Washington Insider: MIT Media Lab Food Project Closed

The New York Times reported this week that MIT has “mostly shut down the futuristic project known as “OpenAg” following accusations of “misleading sponsors and the public." The once-celebrated Media Lab’s micro-greenhouses were supposed to grow food under virtually any conditions — but apparently “worked under almost none,” the Times said. And now, MIT has turned off the lights, possibly for good.

The Times report said that the Massachusetts Institute of Technology confirmed Thursday that it had “mostly closed” the OpenAg project which has been accused of misleading sponsors and the public by exaggerating results. In addition, the Media Lab has been under scrutiny for its financial ties to the convicted sex offender and financier Jeffrey Epstein.

OpenAg received millions of dollars in corporate sponsorships and was promoted in glowing news features, including a “60 Minutes” segment about the Media Lab called “The Future Factory.” MIT shut down the project late last week after a sweeping assessment, it said.

The project was a favorite of Joichi Ito, the Media Lab’s director until September when he resigned under pressure after his efforts to conceal his financial connections to Epstein were disclosed. The financier killed himself in jail in August after being indicted on federal sex-trafficking charges.

The OpenAg project focused on designing and deploying so-called “food computers,” small high-tech greenhouses meant to allow crops to thrive in thin air, without soil or sunlight and under precisely controlled conditions. The project also operated larger “food servers,” which are housed in shipping containers about 15 miles north of the MIT campus in Middleton, Mass.

According to the university statement, its vice president for research, Maria Zuber, “halted OpenAg activities, pending completion of ongoing assessments.” Zuber consulted with other members of the executive committee running the Media Lab and agreed to permit some documentation and design work to resume, but provided no timetable for finishing those assessments.

Throughout the tumult at the OpenAg project, its leader, Caleb Harper, had been posting to Instagram photos and a video of what looked like experiments. Harper did not respond to requests for comment, the Times said.

The Times described Harper as an architect “without any scientific training” who described food computers as integral to a “fourth agricultural revolution.” In a TED Talk from 2015, which has more than 1.8 million views, Harper laid out his vision: Food computer owners would share their data on optimal growing conditions — called “climate recipes” — with fellow food producers around the world, who would use that information to improve yields from their own food computers.

According to former researchers at the project, however, Harper made exaggerated or false claims to the project’s corporate sponsors as well as in talks and interviews with the news media. They said plants bought in stores had been inserted into the food computers so visitors would think they had been grown there.

More broadly, the researchers said, the food computers could not independently control the conditions within their boxes — changing the amount of light would raise the temperature, and so on. Whatever data was collected by the food computers would therefore have little scientific significance. Nonetheless, the lab produced a paper for a peer-reviewed journal that claimed to have used machine learning to discover the ideal combination of light, nutrients, temperature and water to grow the most flavorful basil.

The independent news organization ProPublica and the Boston radio station WBUR reported last month that the larger food servers in Middleton were dumping wastewater with 20 times the legal limit of nitrogen underground, an apparent violation of state regulations. MIT halted the research at Middleton and said it was evaluating how the water had been disposed of there. The nitrogen levels were not an immediate danger to the public, the town administrator, Andy Sheehan, said in an interview, but could lead to overgrowth of plants that can threaten local wildlife.

On Thursday, IEEE Spectrum, the publication of the one of the world’s largest professional organizations devoted to engineering and applied sciences, released a lengthy investigation on OpenAg. The investigation examined OpenAg’s plan to deliver personal food computers to a Syrian refugee camp in Jordan through the United Nations World Food Program.

According to the investigation, Harper, in talks to sponsors and the public, described his pride in giving the refugees the means to grow their own food inside the camp. However, as the IEEE Spectrum article noted, the food computers never made it to the camp itself, but were kept in a Jordanian research lab where they faltered because of hot, dry conditions and technical failures.

So, it seems that yet another “super tech” idea and application is raising more questions than answers. Clearly, super tech approaches can yield ideas and lessons more conventional market participants can use some of the time but artificial environments have often proved both difficult and expensive to manage. It is not clear yet what lessons were intended by the Open Ag experiment, but they seem likely to reveal that even heavy investments do not always provide large returns and that promises of fundamental breakthrough technology in basic food production processes should be watched very carefully by producers as they emerge, Washington Insider believes.

EPA Publishes Supplemental RFS Plan

EPA’s supplemental proposal for the 2020 biofuel and 2021 biodiesel levels under the Renewable Fuel Standard (RFS) has been published in the Federal Register.

There are no discernable changes to the plan that the agency released earlier this month. There is a 32-day comment period on the plan – it runs through November 29 which that means the agency will not meet the statutory deadline to finalize the 2020 levels by November 30. EPA will also hold a public hearing on the plan October 30 in Michigan.

The Renewable Fuel Standard (RFS) will stay in the headlines via a House hearing today regarding the small refinery exemptions (SREs) granted by the Trump administration. The House Energy & Commerce Environment and Climate Change Subcommittee will hold a hearing on "Protecting the RFS (Renewable Fuel Standard): The Trump Administration's Abuse of Secret Waivers."

USTR Notes Progress In US-China Trade Talks

U.S. Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin spoke by phone Friday with Chinese Vice Premier Liu He, and afterward USTR said that the two sides “made headway on specific issues and the two sides are close to finalizing some sections of the agreement.”

More talks of course are on tap. Indications are the components so far are the halt of additional U.S. tariffs in exchange for a two-year phase-in of Chinese purchases of a U.S.-reported $40 billion to $50 billion of U.S. farm goods, new rules on currency manipulation and efforts by China to finish opening its financial sector to foreign firms. It might include some measures to protect intellectual property.

In a statement from China, Xinhua reported the two sides reached an agreement for the U.S. to import cooked poultry products from China, as well as to regard its catfish product regulation system as equivalent to the United States.

“Both sides agreed to appropriately resolve the core concerns of both parties,” Xinhua said. “Working-level deputies will speed up talks for the trade deal before the principals talk over the phone in the near future.”

Tuesday Watch List

Markets
On Tuesday, the Federal Reserve begins a two-day meeting, which ends with a decision on interest rates on Wednesday. U.S. consumer confidence and pending home sales are Tuesday's only official reports, both set for 9 a.m. CDT. Weather forecasts remain of interest through harvest and any trade moves by China get close attention.

Weather
Tuesday features dry but cold conditions in northern and central crop areas, slowing harvest progress. Light rain will be noted in the far Southern Plains. Southeastern areas will have a warmer pattern. Rain, snow and cold will cover much of the central U.S. Tuesday evening through Wednesday.

Chinese Importers Buy Even More U.S. Soybeans

The U.S. Department of Agriculture says that private exporters reported the sale of 264,000 tons of U.S. soybeans to China for delivery in the 2019/2020 marketing year. The deal comes as hopes continue for a partial trade deal between the world’s two largest economies. Reuters says this is the first U.S. government confirmation of a soybean sale to China since October 11, when President Trump announced that China will buy up to $50 billion in American farm commodities thanks to a partial trade agreement. A prior report showed U.S. soybean export sales of 475,200 tons, which included just 68,300 tons to China during the week ending on October 17. Those numbers were quite a bit lower than analysts’ projections for that week, ranging from 800,000 to 1.6 million tons. Earlier last week, Beijing had offered major Chinese and international soybean processors waivers that would exempt them from tariffs on imports of up to 10 million tons of U.S. soybeans. USDA has confirmed sales totaling six million tons of soybeans to China since the marketing year began on September 1. That compares with just 431,000 tons over the same time in 2018, as well as 8.4 million tons during the same period in 2017, before the trade war.

Ag Sales Could Hit Pre-Trade War Levels by 2020 Election

U.S. farmers could see a return to a pre-trade war level of ag sales to China by the 2020 election. Bloomberg says that would relieve economic pressure on one of President Trump’s key voting blocs as he campaigns for another term. The president announced a tentative partial trade deal back on October 11. China is looking to buy $20 billion worth of agricultural products per year if the partial deal with the U.S. is signed. People familiar with the negotiations told Bloomberg that China would consider boosting that level of purchases as high as $40-50 billion. That would take China’s imports of American commodities back to near-2017 levels before the feud broke out between the White House and Beijing. People close to the situation say increasing the level of purchases would depend on President Trump removing remaining punitive tariffs. Beijing says it will exempt some U.S. agricultural goods from tariffs if the U.S. removes tariffs imposed on September 1 and cancels the tariff hike scheduled for December. President Trump is hoping that he and Chinese President Xi Jinping will sign a phase-one deal when they meet in Chile next month. Chinese officials have also said publicly that talks are progressing.

Mexico Says U.S. Congress Will Move on USMCA Trade Deal Soon

Mexico’s Deputy Foreign Minister for North America said Friday that he believes U.S. lawmakers will begin the process of approving the U.S.-Mexico-Canada Trade Agreement soon. He believes it will move forward in the U.S. Congress now that Mexican President Obrador has vowed to increase wages and funding for labor reforms. A Yahoo Dot Com article says the USMCA must win approval in a divided U.S. Congress, where Republicans control the Senate and Democrats control the House. At a news conference last week, the Deputy Foreign Minister said, “The progress made in dialogue with House Speaker Pelosi, U.S. lawmakers, and negotiators makes us think that the end to this complex story is near, that soon we’ll see the United States initiate the formal process for approving the trade deal.” Mexican President Obrador has vowed to increase wages and other labor provisions in a campaign to convince House Democrats to ratify the North American trade agreement. When reporters asked if Mexico’s push to convince U.S. lawmakers about its commitment to implement the labor reforms was working, the Deputy Minister said, “I think we’re getting there.” President Obrador sent a letter recently to Speaker Pelosi calling for ratification “soon,” to not have the 2020 election process “Impede or delay” its finalization.

Rabo Agrifinance Offering Industry’s First Organic Transition Loan

Farmers looking for organic certification on all or part of their operations can get some financial help from Rabo Agrifinance. The company has developed a loan product so farmers can get the capital they need up front to help with costs associated with changing production practices. Farmers can then schedule loan repayments when they get additional revenue from selling certified organic products. The USDA requires a three-year transition period for farmers to get their land certified as organic. The deputy head of Rabo Agrifinance says, “During that transition period, farmers often experience yield loss in comparison to conventional production, and they can’t collect organic premiums for that land’s production to compensate for the lower yield. That challenge has created a financial barrier against making the transition to organic production.” Farmers want to take advantage of consumer demand for organic products, but they often have trouble penciling out how they’ll survive the transition period it takes to be able to meet that demand. Stephen Nicholson, a grain and oilseed analyst at Rabo Agrifinance, says the demand for organic products has grown faster than domestic production.

USDA Releases Partial List of Agricultural Projections to 2029

The USDA will release selected tables prepared for the upcoming “USDA Agricultural Projections to 2029” report on November 1. USDA will post online tables containing long-term supply, use, and price projections to 2029 for major U.S. crops and livestock products. The tables will also include supporting U.S. and international macroeconomic assumptions. The short-term projections from the October 11, 2019, WASDE report are used as a starting point. The complete USDA Agricultural Projections to 2029 will be released in February of 2020. The complete report will include a full discussion of the commodity supply and use projections, as well as projections for farm income and global commodity trade. The early-release tables will be posted to the Office of the Chief Economist’s website at www.usda.gov/oce. USDA’s long-term agricultural projections represent a departmental consensus on a ten-year representative scenario for the agricultural sector. The projections don’t represent USDA forecasts, but rather reflect a conditional long-run scenario based on specific assumptions about macroeconomic conditions, policy, weather, and international developments, along with no domestic or external shocks to global agricultural markets.

Legislation Will Protect America’s Food Supply

The Senate unanimously approved bipartisan legislation designed to address the shortage of agricultural inspectors who protect the nation’s food supply and agricultural industries at the border. The Protecting America’s Food and Agriculture Act of 2019 would ensure the safe and secure trade of agricultural goods across the nation’s borders. It authorizes the U.S. Customs and Border Protection to hire additional inspectors, support staff, and even canine teams to fully staff American airports, seaports, and land ports of entry. “Agriculture is a critical economic driver across the country, but longstanding shortages of agricultural inspectors limit Customs and Border Protection’s ability to prevent pests, diseases, and other dangers from entering our country and putting production agriculture at risk,” says Michigan Democrat Gary Peters, one of four senators who introduced the legislation. Senate Ag Committee Chair Pat Robers says, “By strengthening the agricultural inspector workforce at the border, American agriculture and our entire food system will be safer.”

Washington Insider: Push Back on Trade Policies

There has been significant unhappiness for some time among groups on the frontline in the trade fight, primarily in response to the administration’s heavy reliance on tariffs — and on its willingness to apply them to well established, functioning markets.

Bloomberg is reporting that this week a group of prominent economists from the U.S. and China have released a joint statement calling for the world’s two largest economies “to abandon their trade war and agree to a new path forward that would give both countries more latitude to both pursue their own domestic economic policies and hit back at those that hurt them.”

In a joint statement issued in China on Sunday, 37 economists – a including Joseph Stiglitz, Michael Spence and three other Nobel winners – bemoaned what they said has been a descent of the trade conflict into a binary debate where the only emerging solutions are either wholesale economic reforms by China leading to a converging of economic models or an economically damaging “decoupling.”

The group argued a more sensible framework for future trade relations would give China room to pursue industrial policies that are often a target of criticism from the U.S., while also allowing the U.S. latitude to respond with targeted tariffs if China’s policies were damaging its interests.

“We believe this approach preserves the bulk of the gains from trade between the two economies without presuming convergence in economic models,” the statement says. It also would be in line with the current multilateral system, they argued, although it would enlarge both the U.S. and China’s rights under current World Trade Organization rules.

The push is emblematic of the ways in which economists and other thinkers are wrestling with how to respond to U.S. President Trump’s challenge to the existing governance of the global economy. While many countries have circled the wagons to try and protect the WTO and other institutions from Trump’s attacks, there is also a growing acknowledgment from many sides of politics that the current system has not worked in addressing China’s economic rise and its effect on other economies.

The statement comes as Trump is working to close what he has described as “phase one” of a trade truce with China that is designed to avoid a further escalation of their trade wars. It would see China commit to resuming agricultural purchases from the U.S. at levels similar to those seen before the U.S. started imposing new tariffs last year and would put on hold the threat of further U.S. duties. It is also expected to include commitments on intellectual property reforms and currency manipulation by China.

But the interim deal, which President Trump has said he hopes to sign with China’s Xi Jinping at a summit in Chile next month, would crucially push discussions of other U.S. complaints such as China’s industrial policies to later rounds of negotiations.

Bloomberg said that the effort unveiled Sunday was led by New York University law professor Jeffrey Lehman, Harvard economist Dani Rodrik and Yang Yao, dean of the National School of Development at Peking University. Rodrik is a long-standing critic of globalization and has advocated giving countries more “policy space” to pursue and protect domestic economic priorities, arguing that the current global trading system often violates nations’ sovereignty.

The statement’s other signatories include former World Bank chief economists Justin Yifu Lin and Kaushik Basu.

Professor Rodrik said President’s Trump’s trade attack on China has shifted the debate on how to manage the economic relationship into dangerous territory. “What he is doing is crowding out space for a more reasonable discussion,” he said.

“What the United States is doing is actually engaging in a trade war and imposing tariffs as a way of forcing China into a series of economic arrangements,” he said. “The modus operandi is ‘China you are not playing by the rules of the game and we are going to raise our tariffs on you until you fall into line.’”

At the same time, he said, “China brings to a head the fundamental tensions of the world trading regime like nothing else” and policymakers needed to realize that their expectation that China would simply “fall into line” with global trading rules had not worked.

“China is the clearest example that that is an unrealistic expectation and because it is such a large economy it makes the tension existential,” he said.

While the economists statement likely will receive considerable media attention, it is unclear whether it will have any significant impact on administration policy makers who long have been “deeply dug in” on the use of aggressive tariffs to achieve fundamental shifts in China’s policies.

Still, there were a few hints that some reconsiderations may be already underway. For example, one of the administration’s most active “China hawks,” White House Trade Adviser Peter Navarro said over the weekend that a postponement of tariffs on China due to be implemented in December “might be in play” as the administration “works toward the signing of a partial trade deal in Chile next month.”

“If they walk away again it won’t be our fault,” Navarro said in a TV interview, referring to the breakdown in talks in May. “We are on a glide path to Chile...let’s see what happens”

So, we will see. It seems clear that both economic and political pressures are building on both sides for some sort of reset on trade, especially if the global economy continues to show signs of weakening. Whether or not the changes extend as far as the recent letter from the economists’ group suggests remains to be seen, but could well mean at least consideration of a widened dialogue that producers should watch closely if it emerges, Washington Insider believes.

Sen. Ernst Warns She Could Call For Wheeler to Exit Over Biofuel Plan

Should the biofuel plan from EPA not result in restoring demand for ethanol as has been pledged by President Donald Trump, Sen. Joni Ernst, R-Iowa, said she will call for EPA Administrator Andrew Wheeler to leave his post.

"If we get to a point where the EPA is not following through on what the president has directed them to do then we will have to hold them accountable," Ernst said Thursday in remarks to Iowa reporters. "And I, at that point if we do not see that result, that 15 billion gallons, then I am ready to call for the resignation of Andrew Wheeler.”

She said if that were to happen, she would go to President Donald Trump and say, “‘Andrew Wheeler is the one that is not following through with your commitment to America’s farmers. You need to get rid of him.'"

China to Ask Removal of Existing Tariffs in Exchange for Stepped-up Ag Buys

Discussions between top-level U.S. and Chinese negotiators – U.S. Trade Representative Robert Lighthizer, Treasury Secretary Steve Mnuchin and Chinese Vice Premier Liu He – were expected to see China request cancellation of “some planned and existing U.S. tariffs” on Chinese imports in exchange for China’s increased purchases of U.S. farm goods, according to sources cited by Reuters.

China was expected to request the U.S. not impose tariffs December 15 on $156 billion in goods from China and that the U.S. remove the 15 percent tariffs put in place in September on $125 billion in China products.

“The Chinese want to get back to tariffs on just the original $250 billion in goods,” one source told the news service. China would, in turn, exempt some U.S. ag products from tariffs, including soybeans, wheat and corn, the report said, with Chinese buyers exempt from existing tariffs to make purchases and get refunds of tariffs already paid on prior purchases.

The report also indicated that Lighthizer and Mnuchin would travel to China the week of November 3, but the Treasury Department did not confirm that possibility.

Monday Watch List

Markets

Traders will check the latest weather forecasts for harvest opportunities and have ears perked for any trade news with China. USDA will release its weekly report of grain export inspections at 10 a.m. CDT, followed by a new Crop Progress report at 3 p.m.
Weather

Dry conditions are in store for all primary crop areas Monday. Temperatures will be very cool north and central and warm south and southeast. A rain-snow mix is indicated to form in the Midwest Tuesday.

China First Year Phase One Agreement Ag Purchases aimed at $20 Billion

The phase one agreement with China would boost U.S. ag exports to at least $20 billion in its first year. The overall agreement includes $40-50 billion of U.S. farm commodity sales to China over a roughly two-year period. China claims it would aim to buy at least $20 billion worth in the first year, if the agreement is signed, according to Bloomberg News. $20 billion would boost U.S. export sales to China back to levels seen before the tit-for-tat trade war began. China imported $9.1 billion of U.S. farm products in 2018, down from the 2017 level of $19.5 billion. China and the U.S. are working out the details of the limited phase one agreement that could be signed next month. Meanwhile, Vice President Mike Pence delivered a closely watched speech on China in Washington, D.C. Thursday. In his remarks, Pence called on China to “start anew by ending the trade practices that have taken advantage of the American people for far too long.”

EPA Proposes Pesticide Application Exclusion Zone Requirements Update

The Environmental Protection Agency Thursday issued a notice of proposed rulemaking regarding application exclusion zones, known as AEZ. The National Corn Growers Association says the proposal would make two major changes for farmers. The changes include modifying the AEZ so it is only enforceable on a farmer’s property. The proposal would replace the current regulation requiring farmers to ensure individuals are outside of the pesticide AEZ not only on their property, but off their property as well. The proposal would also exempt farm owners and their immediate family members from the requirement that they leave their home during certain pesticide applications. EPA Administrator Andrew Wheeler stated in an agency news release the updates maintain safety requirements, “while providing greater flexibility for farmers.” The American Farm Bureau Federation welcomed the proposed rule change. AFBF President Zippy Duvall says, “every effort to make the rule more sensible and practical for farmers while safeguarding workers is important.” EPA will accept comments on the proposal through a 90-day comment period.

USDA Encourages Producers to Contact Insurance Agents for Delayed Harvest

The Department of Agriculture says farmers in the federal crop insurance program facing harvest delays should contact their Approved Insurance Provider. USDA says those farmers should file a Notice of Loss and request more time to harvest. Producers in several states, including Colorado, Iowa, Minnesota, Montana, Nebraska, North Dakota, South Dakota, Wisconsin, and Wyoming, have been affected by extremely wet and snowy conditions early this fall. Martin Barbre, Administrator of USDA’s Risk Management Agency, says, "producers covered by Federal crop insurance should contact their insurance agent as soon as possible to determine what actions they can take." Producers must file a Notice of Loss and request more time to harvest before the end of the insurance period, so that federal crop insurance claims are settled based on the amount of harvested production. The end of the insurance period for crops such as spring-planted wheat and barley is October 31, and for corn and soybeans is December 10. Insurance providers may allow additional time to harvest, on a case-by-case basis, under specific circumstances.

Drought Expanding in South, Southwest

Drought conditions expanded in the South and Southwest over the last week, while the Midwest largely remains drought-free. The weekly Drought Monitor Thursday showed drought and abnormal dryness expanded across parts of Texas and Oklahoma. But, other parts of Texas,  Arkansas, Louisiana, Mississippi and Tennessee experienced a reduction of drought and abnormal dryness. Meanwhile, 75 percent of the Southeast region of the U.S. remains in classified drought conditions. However, heavy rain, locally over five inches, contracted drought and abnormal dryness across much of the region. Much of the Four Corners states in the west are in a classified moderate to severe drought. Parts of Illinois, Ohio, Indiana and Kentucky are considered abnormally to moderately dry, while much of the Upper Midwest and High Plains remain mostly drought-free. California, along with the Pacific Northwest, remains mostly drought-free, as well. Meanwhile, more rains are expected in the South and Southeast over the next week, providing potential drought relief for those regions.

Hawley, Blackburn, Introduce Bill to Move Most Federal Agencies

Missouri Senator Josh Hawley introduced legislation this week to move the Department of Agriculture to Missouri. Joined by Tennessee Senator Marsha Blackburn, the Republicans seek to move the headquarters of USDA to Missouri and the Department of Education to Tennessee. However, the legislation doesn’t stop there, as the bill would move 90 percent of ten federal agencies out of Washington, D.C., and into what the lawmakers describe as economically distressed regions. Hawley claims federal employees of the two agencies are “too removed from the rest of America.” The Helping Infrastructure Restore the Economy, or HIRE Act, the Senators claim, would “move policymakers directly into the communities they serve.” Senator Blackburn says moving federal agencies out of Washington, D.C., “boosts local economies and lowers costs.” The Senators cited the relocation of two USDA agencies, the Economic Research Service and the National Institute of Food and Agriculture, along with the Bureau of Land Management’s planned move to Colorado, in introducing the legislation.

USDA Opens Registration for the 2020 Agricultural Outlook Forum

The Department of Agriculture Thursday opened registration for its 2020 Agricultural Outlook Forum. Planned for February 20-21 next year, the event is the largest annual meeting of USDA. The 2020 event, themed “The Innovation Imperative: Shaping the Future of Agriculture,” will feature more than 30 sessions. The topics include innovations in agriculture, global trade trends, food loss and waste, conservation, and the science of food safety. USDA’s Chief Economist will unveil the outlook for U.S. commodity markets and trade in 2020 and discuss the U.S. farm income situation. USDA’s Agricultural Outlook Forum began in 1923 to distribute and interpret national forecasts to farmers in the field. The goal was to provide the information developed through economic forecasting to farmers so they had the tools to read market signals and avoid producing beyond demand. USDA says the event will be at the Crystal Gateway Marriott Hotel in Arlington, Virginia. The 2020 Forum’s program will be announced at the beginning of November. Registration information is available at usda.gov.

Washington Insider: Economic Outlook Still Cloudy

The tea-leaf readers are at it again and the administration’s pressure for lower interest rates continues to be intense. This week, Bloomberg reports that government bonds in Denmark, Germany, Japan, Sweden, and Switzerland carry negative yields — meaning it will cost money for investors to hold them to maturity. Thus, a “big question for fixed-income markets in 2020 is whether it could happen in the U.S., too.”

Bond yields fall when their prices rise, and in August investors piled heavily into U.S. Treasuries, driving yields on the benchmark 10-year bond to a three-year low of 1.43% by early September. Yields have climbed back some since that time, to around 1.8%, but investors are still getting a razor-thin income for lending to the U.S. government.

There are several reasons why that matters, the report says. First, the yields on these bonds help set the pace for long-term borrowing costs throughout the economy — but they also reflect investors’ sentiments about the economy. “And the story these low yields tell isn’t rosy,” Bloomberg says.

One force pulling down bond yields has been the U.S. Federal Reserve’s recent cuts in key short-term interest rates that are added to stimulate the U.S. economy — in part because it’s worried about a slowdown in global growth. Meanwhile, the fact that 10-year bond investors are willing to be paid so little suggests they have little fear of inflation, which usually goes hand in hand with a strong expansion.

If the Fed keeps cutting short-term rates back to near zero, where they were from late 2008 to 2015, and also restarts quantitative easing, “negative yields on U.S. Treasuries could swiftly change from theory to reality,” Joachim Fels, global economic adviser at Pacific Investment Management Co., said.

Still, that scenario is an “outside shot,” Bloomberg says. Futures markets are anticipating more Fed rate-cutting, perhaps as soon as late October. But zero is several normal-size cuts of 0.25% away.

Even more than usual, the direction of rates may depend on global politics. Bruno Braizinha, U.S. rates strategist for Bank of America Corp., says he sees “meaningful” risks to the economic outlook and even a chance that the 10-year yield may hover near zero by the end of 2020—but that a signed U.S.-China trade deal could go a long way toward halting that momentum.

However, JPMorgan Chase & Co. strategist Jan Loeys foresees the possibility of the benchmark yield reaching zero by 2021, a full year quicker than he previously thought, citing trade tensions and worries about capital spending.

Others think a big drop in yields from here may be hard to get. Margaret Steinbach, a fixed-income investment specialist at Capital Group, says, “Global investors are trying to figure out if we are in a midcycle slowdown heading into next year or the beginning of a more protracted downturn.

In addition to borrowers, one more group should be paying attention to yields: investors in fixed-income funds. Since the drop in yields has gone along with rising values for existing bonds, many funds have recently enjoyed strong returns and that would continue if the march toward zero resumes. If the economy finds its footing and yields stabilize—or rise—gains like that will be a thing of the past.

Still, consumers appear to be buoying up the economy — and are accounting for almost 70% of the U.S. economy — higher than in almost every other country. And while the propensity of Americans to shop has long been crucial for economic growth, it’s particularly the case now.

That’s because companies have pulled back, hiring at a slower pace and postponing long-term investments, and business spending declined earlier this year for the first time since 2016. Manufacturing, which was booming two years ago, is constrained after contracting earlier this year. A good deal of the blame appears to fall on the Trump administration’s trade wars, which have increased costs and created uncertainty for businesses. Also, a “strong” dollar hasn’t helped.

Despite all that, the overwhelming majority of economists, including Bloomberg’s, aren’t predicting a recession in the next 12 months. They are counting on Americans to keep spending—as in 2015 and 2016 when they powered the economy through weakness in the energy and manufacturing sectors.

Continued strong household consumption reflects a simple reality, according to James Sweeney, chief economist at Credit Suisse Group AG. “Households are employed, and their incomes are growing,” he says. And inflation isn’t eating away at those gains and consumer confidence is near historic highs.

Still, some analysts are emphasizing the economic “cracks,” Bloomberg notes and emphasizes that “more people are hunting for bargains now, which could foreshadow a pullback. There’s weakness across some discretionary sectors and prices in once-hot markets such as Los Angeles and New York are stagnant or in decline.

Americans also have loaded up on credit card debt. “It’s just a matter of time until it catches up with people,” says Shah, who reckons that some 40% are on the edge of having to cut back on spending.

So, we will see. The current outlook is increasingly complex, with many, many moving parts and an unusually complicated array of stake holders. Thus, although the situation remains extremely difficult, it is one producers should watch closely as these trends emerge, Washington Insider believes.

Groups Express Dismay at Additional Brazil Moves on Ethanol Imports

U.S. ethanol and corn interests are expressing even more disappointment at Brazilian decisions relative to their imports of U.S. ethanol.

On August 31, Brazil announced it was increasing the tariff-free quota for imports of U.S. ethanol to 750 million liters (198 million gallons) from a prior 600 million liters (158 million gallons). Imports above that level would be subject to a 20% import tariff.

Last week, Brazil also introduced a seasonality clause for the imports, saying that from Aug. 31, 2019 through Feb. 29, 2020, another 200 million liters (53 million gallons) could be imported without the 20% tariff, with 275 million liters (73 million gallons) able to imported each quarter without the tariff from March 1, to August 31, 2020.

The quota reflects the cycle of when Brazilian producers are producing more domestic ethanol, according to the U.S. Grains Council.

While expressing disappointment earlier this fall that the tariff-free quota was not eliminated and only increased, now U.S. interests complain the latest move to include seasonality provisions further restricts U.S. shipments.

“The decision by Brazil to place seasonal restrictions on its tariff rate quota for U.S. ethanol is disappointing and puts up additional roadblocks to free trade, hurting consumers and our respective ethanol industries,” the U.S. Grains Council, Growth Energy and the Renewable Fuels Association said in a joint statement. “The action by Brazil to impose seasonal restrictions on the sale of ethanol does not create a case study in leading by example, but rather the opposite - it is up-ending real opportunities for free trade.”

Grassley Accuses Democrats of Foot Dragging On USMCA

House Democrats appear to be “foot-dragging” relative to the approval of the U.S.-Mexico-Canada Agreement (USMCA), Senate Finance Committee Chairman Chuck Grassley, R-Iowa, said in remarks Wednesday in the Senate floor.

“The Democratically controlled House of Representatives looks increasingly less likely to act this year on USMCA,” Grassley stated. “That threatens passage of the trilateral trade deal this Congress, as next year is a presidential election year.”

Even though a group of House Democrats have been meeting with U.S. Trade Representative Robert Lighthizer and staff-level discussions have been taking place, Grassley questioned “how long” it will take to get a resolution on the issues Democrats want addressed. Grassley noted there has been no “date or timeline” for concluding those talks.

“With every passing month, these seem less like good-faith assurances, and more like stalling tactics,” he alleged. “I am beginning to wonder if Democrats are interested in reaching a compromise at all. It’s looking more like they would prefer to deprive the administration of a victory, even if it comes at the expense of the American people.”

Grassley’s comments come despite House Speaker Nancy Pelosi, D-Calif., Democrats want to get to “yes” on the trade pact as it is a positive overall for the U.S.

Friday Watch List

Markets

Friday is a quiet day for reports with an index of U.S. consumer sentiment due out at 9 a.m. CDT. At 2 p.m. CDT, USDA will release its monthly cattle on-feed report for October 1. September placements are expected to be slightly higher, but the on-feed total down 1% from a year ago. DTN continues to sort the wheat from the chaff where it comes to rumors of Chinese ag purchases.

Weather

Dry and cool conditions in northern and central crop areas Friday will offer harvest progress. Rain will focus on the Delta and Deep South.

Coalition Challenges EPA on 2018 Refinery Waivers

A coalition of renewable fuels and agricultural trade organizations filed a petition with the Washington, D.C., Court of Appeals on Tuesday. The petition challenges the process the Environmental Protection Agency uses to exempt certain unknown small refineries from their respective obligations under the Renewable Fuels Standard in 2018. The coalition includes American Coalition for Ethanol, Growth Energy, National Biodiesel Board, National Corn Growers Association, National Farmers Union, and Renewable Fuels Association. In the petition, the coalition noted that the EPA’s document outlining the waiver decisions was just two pages long. These two pages outlined the reasons behind granting 36 waiver exemptions to small refineries that didn’t then have to blend approximately 1.5 billion gallons of renewable fuel. The document doesn’t reveal details and contains just “bare-bones” reasoning behind the decisions. Furthermore, the groups point out that the decision didn’t even address whether or not the refineries were eligible for the exemptions. It also didn’t include an analysis of “disproportionate economic hardship” as the statute requires. The coalition says, “Even as the Trump Administration indicates it’s taking steps to account for future small refinery exemptions, the coalition remains concerned that the EPA’s abuse of the small refinery exemption program diverges from the spirit and letter of the Clean Air Act.”

Grassley; Losing Hope on USMCA Passage This Year

Senate Finance Committee Chair Chuck Grassley of Iowa says he’s “very worried about the U.S.-Mexico-Canada Agreement for the first time.” He tells Politico that he’s pessimistic that Congress will sign off on the deal before the end of this year. Grassley has maintained an optimistic outlook for some time as the Trump administration negotiated with House Democrats on potential changes to the deal. However, Politico says talks are stretching into month number four, and with only 22 legislative days left in 2019, Grassley is losing faith. He’s also asking U.S. Trade Representative Robert Lighthizer to not cave into Democrat demands. He says changing the trade deal’s labor, environmental, enforcement, and prescription drug provisions too much could put Republican support for the pact in jeopardy. As recently as July, Grassley had said he was “optimistic” after a 30-minute meeting with House Speaker Nancy Pelosi. The Trump Administration’s trade boss is scheduled to meet again with House Democrats this week in continuing efforts to push the legislation through Congress and get it to the president’s desk for his signature.

Judge Says Amendment to U.S.-Mexico Sugar Deal is “Unlawful”

A judge with the U.S. Court of International Trade struck down a sugar trade pact between the U.S. and Mexico that was renegotiated by the Trump Administration in 2017. Nasdaq Dot Com says the judge ruled the decision to amend a previous agreement between the two nations was unlawful. Specifically, Judge Leo M. Gordon says the U.S. Commerce Department’s determination to amend an agreement that suspended U.S. countervailing duties on Mexican sugar imports was unlawful. The Trump Administration’s Commerce Secretary, Wilbur Ross, had redone the 2014 trade deal, which some U.S. companies said had curtailed their sugar supplies. Trump said on Twitter back in 2017 that the agreement was “a very good one for both Mexico and the U.S.” A U.S. sugar company had challenged the 2017 amended agreement, alleging that competitors were using the trade talks to deny it access to cheap Mexican sugar imports. The U.S. Department of Commerce’s failure to maintain full records of all its meetings cannot be described as “harmless,” the judge said in his ruling. The decision will revert sugar trade terms between the U.S. and Mexico back to the 2014 agreement, and it marks a blow to the Trump Administration by overturning its very first trade agreement.

Missouri Cattle Deal Leads to Murder of Wisconsin Brothers

A Missouri man at the center of an investigation into the disappearance of two brothers from Wisconsin has been charged with murdering both of them. The brothers, Nick and Justin Diemel (DEE-mul), were visiting Garland Joseph Nelson on cattle business. They traveled to Missouri to collect a $250,000 check from Nelson for cattle that were currently in Nelson’s care. Nick Diemel, age 35, and Justin, 24 years old, were in Missouri when they went missing on July 21 after not making their return flight to Wisconsin. KMBC Dot Com says after the brothers were reported missing, police say Nelson gave different explanations of events that were an attempt to keep them from locating the missing brothers. In a court affidavit, authorities believe that Nick and Justin Diemel never left Nelson’s property and were killed there. Authorities found bloodstains on clothing belonging to Nelson, and DNA testing confirmed the blood was Nick Diemel’s. Nelson was charged with two counts of first-degree murder, abandonment of a corpse, tampering with physical evidence, unlawful possession of a firearm, as well as an armed criminal action.

U.S. Cattlemen’s Association Fights for Truth in Labeling

The United States Cattlemen filed a petition for rulemaking with the USDA’s Food Safety and Inspection Service to address “Product of the USA” and “Made in the USA” claims on U.S. beef. The USCA says since the repeal of Country of Origin Labeling (COOL) back in 2015, there is no clear definition of what constitutes a U.S. beef product. Cattle or beef imported into the U.S. that undergoes further processing or handling at a USDA-inspected facility can then be labeled as a “Product of the United States.” That’s even if the handling of the product inside U.S. borders was minimal. The petition says, “To eliminate the likelihood of confusion and to better inform consumers, USCA contends that voluntary labels indicating ‘Made in the USA,’ ‘Product of the USA,’ or similar content should be limited to beef from cattle born, raised, and harvested in the United States.” U.S. Cattlemen’s founding members were the first proponents of Country of Origin Labeling in the 2002 Farm Bill. The organization says it remains steadfast in its support for a truthful and transparent labeling program for U.S. beef products.

CoBank: Hemp Offers Big Risks, Big Rewards to Agriculture

Since the 2018 Farm Bill removed industrial hemp from the Controlled Substances Act, agriculture has never been more interested in adding hemp to its crop rotations. A lot of available information says there’s a large financial upside to the industry. Producers responded to that by tripling hemp acreage between 2017 and 2018. However, CoBank says that false, outdated, biased, or contradictory information can make it difficult to navigate the industry. CoBank’s Knowledge Division released a report that includes nine risks or uncertainties that face each of hemp’s three crops and markets, which include fiber, grain/seed, and CBD production. Crystal Carpenter, a specialty crop analyst, says,” Overall, CBD production has the highest level of risk across the board due to a range of factors. The industry could face many headwinds from seed quality, labor costs and availability, THC limit risks, as well as long-term acceptance by the Food and Drug Administration.” Carpenter adds that the risks of a new industry like hemp are compounded by potential legal and regulatory hurdles. The USDA is expected to release hemp regulations and guidance soon. The timing of future FDA regulation will be critical to long-term demand for CBD.

Washington Insider: Testing Fake Burgers

If you think these are confusing times, you would both be right and have company. For example, a central idea of the food elitists in recent years has been built on commitments to the most natural, the simplest, the most traditional—and the least processed. All else was suspect, at the very least.

So, how are we to interpret the recent tidal wave of market interest, as well as intense and approving reports in the urban press for the new “fake meat?” It is claimed to be a way to deal with global warming—based on extremely controversial claims by manufacturers and supporters and by the press including high profile urban magazines and dailies. And it is credited with many desirable characteristics, these reviews say, including its “almost meat” taste.

So, it probably was inevitable that some group would run a test, and the New York Times reported just that this week. The report said that new generation of veggie burgers aims to replace the beefy original with “fake meat or fresher vegetables.” The report included a “blind tasting of six top contenders.”

The article says that in only two years, food technology has moved consumers from browsing for wan “veggie patties” in the frozen aisle to selecting fresh “plant-based burgers” sold next to the ground beef.

The Times says there is still a fight going on behind the scenes at the supermarket as meat producers sue to have the words “meat” and “burger” restricted to their own products as government standards have traditionally done. Even so, makers of meat alternatives like Beyond Meat and Impossible Foods are vying to claim growing shares of the global fast-food market as big players like Tyson and Perdue join the fray.

However, some stakeholders are less enthusiastic – environmental and food scientists are insisting that we eat more plants and less processed food, while many vegetarians and vegans say the goal is to break the habit of eating meat, not feed it with surrogates.

“I would still prefer to eat something that’s not lab-grown,” said Isa Chandra Moskowitz, the chef at the vegan restaurant Modern Love in Omaha, where her own burger is the most popular dish on the menu. “But it’s better for people and for the planet to eat one of those burgers instead of meat every day, if that’s what they are going to do anyway.”

The new refrigerator-case “meat” products already comprise one of the fastest-growing segments of the food industry, the Times says.

Some products are “proudly high-tech,” the Times notes, assembled from an array of starches, fats, salts, sweeteners and synthetic umami-rich proteins. They are made possible by new technologies that, for example, whip coconut oil and cocoa butter into tiny globules of white fat that give the Beyond Burger the marbled appearance of ground beef.

Others are resolutely simple, based on whole grains and vegetables and reverse-engineered with ingredients like yeast extract and barley malt to be crustier, browner and juicier than their frozen veggie-burger predecessors. At the same time, some consumers are turning away from those familiar products, not only because of the taste, but because they are most often made with highly processed ingredients, the Times says.

But how do all the newcomers perform? The Times restaurant critic and its cooking columnist lined up both kinds of new vegan burgers for a blind tasting of six national brands. Though many people have already tasted these burgers in restaurants, the Times said it aimed to replicate “the experience of a home cook with children.” In fact, the test produced a winner although it reported that it had a fairly high cost of almost $9 for a 12-ounce package.

The test notes said that the winner had a “brawny flavor,” that convinced some of the children that it was real and that it “quite successfully replicates the bloody look and taste of a rare burger.”

But meat it was not. The article say the ingredient list included water, soy protein concentrate, coconut oil, sunflower oil, natural flavors, 2 percent or less of: potato protein, methylcellulose, yeast extract, cultured dextrose, food starch-modified, soy leghemoglobin, salt, soy protein isolate, mixed tocopherols (vitamin E), zinc gluconate, thiamine hydrochloride (vitamin B1), sodium ascorbate (vitamin C), niacin, pyridoxine hydrochloride (vitamin B6), riboflavin (vitamin B2), vitamin B12.

The other, lesser ranked products differed in several ways, including whether or not they included GMOs, a somewhat odd criterion. They generally cost between $4 and $6 for two four-ounce patties. Several of the “fake burgers” were less aimed at seeming like traditional burgers than at being better “artificial burgers.”

So, we will see. It seems certain that the move to acceptance for a totally processed product will prove harder for the food elitists to accept than it has seemed so far and the product cost may discourage consumption for some – although cost has not slowed acceptance of organic products nearly as much as some expected. How well the products, with all their varied ingredients, fare under the microscopes of nutritionists and other analysts; and, how acceptable the corporate provenance of the manufacturers proves to be in the longer term may be a factor, as well.

One thing is clear; these competitors are real, often well-funded, and seriously intend to take traditional markets wherever they can, and producers should watch their investments closely as they emerge, Washington Insider believes.

Suit Filed on EPA’s 2018 Small Refinery Waiver Actions

A suit has been filed by a coalition of biofuel supporters over the EPA rationale for granting small refinery exemptions (SREs) for the 2018 compliance year. The lawsuit was filed with the Court of Appeals for the DC Circuit.

The groups cited an August 9 document from EPA detailing its rationale for resolving 36 SREs for 2018 in their lawsuit. “Unlike previous years, EPA’s entire decision document was only two pages long… In these short two pages, EPA purported to resolve 36 pending petitions for disproportionate economic hardship exemptions — a decision that exempted small refineries from having to blend almost one and a half billion gallons of renewable fuel,” the coalition wrote in a joint release.

In the document, EPA explained that it granted full exemptions in cases where the Department of Energy had recommended only partial waivers.

The court challenge was filed by American Coalition for Ethanol, Growth Energy, National Biodiesel Board (NBB), National Corn Growers Association (NCGA), National Farmers Union (NFU) and Renewable Fuels Association (RFA).

House Panel Plans Hearing On RFS Small Refiner Waivers

A House Energy & Commerce subcommittee will hold a hearing Tuesday on the Trump administration’s use of small refinery exemptions (SREs) relative to the Renewable Fuel Standard (RFS).

Chairman of the House Energy and Commerce Committee, Frank Pallone, D-N.J., and the chairman of the Environment and Climate Change Subcommittee, Rep. Paul Tonko, D-Ill., said in a statement that “the Trump administration’s abuse of EPA’s waiver authority is undermining the RFS program and devastating the renewable fuel industry.”

House Agriculture Committee Chairman Collin Peterson, D-Minn., welcomed the hearing. "Our farmers and rural communities rely on the RFS for their economic viability, and EPA’s actions have done nothing but provide uncertainty and the potential for economic ruin," Peterson said.

It is not yet clear who will be testifying on behalf of the administration.

Thursday Watch List

Markets
Thursday's reports start at 7:30 a.m. CDT with weekly export sales, U.S. jobless claims, U.S. durable goods orders and an updated U.S. Drought Monitor all due out at the same time. U.S. new home sales are released at 9 a.m. CDT, followed by natural gas inventory at 9:30 a.m. Weather remains critical with a wider coverage of freezing temperatures entering the latest forecasts.

Weather
Thursday will be rainy with some snow in the Southern Plains. Other crop areas will be dry. A cold temperature pattern will begin spreading over northern and central areas.

EPA Finalizes Rule to Repeal WOTUS

The Environmental Protection Agency Tuesday published the final rule repealing the Waters of the U.S. rule. The EPA and Army Corps of Engineers effort repeals and returns the law to provisions in place prior to 2015. The new rule will go into effect on December 23, 2019. However, legal challenges are expected from environmental groups. First announced in September, the American Farm Bureau Federation at the time called the rule a victory for farmers and ranchers. The EPA attributed the repeal to four factors. First, the agency says the 2015 rule did not implement the legal limits on the scope of the agency authority under the Clean Water Act as intended by Congress. EPA also says the Obama-era rulemaking failed to adequately consider states’ rights. The repeal is an effort by the EPA to avoid interpretations of the Clean Water Act that “push the envelope of their constitutional and statutory authority.” Lastly, the EPA and Army Corps conclude that the 2015 Rule’s distance-based limitations suffered from “certain procedural errors” and a lack of adequate record support.

EPA’s Wheeler: Response to RFS Proposal a “Knee Jerk” Reaction

Environmental Protection Agency Administrator Andrew Wheeler this week downplayed criticism towards the EPA's small refinery exemptions proposal. Wheeler told reporters, "I think a lot of people who had a knee jerk reaction" because the rule "wasn't exactly what they were expecting," according to Politico. Wheeler, along with President Donald Trump, this week reiterated that the proposal would get the Renewable Fuel Standard to the 15 billion gallons of ethanol, as per requirements of the law. President Trump claimed during a Cabinet meeting Monday the rule was “fully approved,” while Agriculture Secretary Sonny Perdue suggested agriculture was confused about the new rule. Perdue stated, “Once they fully understand what you’ve done here, they’ll be fine as they see it implemented.” The ethanol industry called the rule a “bait and switch” attempt to avoid fixing demand problems created by an excess of small refinery waivers issued by the Trump administration. Growth Energy CEO Emily Skor says the proposal “will do nothing to bring back the ethanol plants that have shut down.”

USDA Announces More Rural Broadband Investments

The Department of Agriculture Tuesday announced investments into a $9.7 million high-speed broadband project in South Carolina. The project will create or improve rural connectivity for 3,900 rural households in the state, and is part of the USDA ReConnect Pilot Program. USDA last Friday announced the first investment in the program, funding a $2.8 million infrastructure project in Tennessee to improve broadband access for nearly 350 households. Agriculture Secretary Sonny Perdue says of the program, “We know that rural communities need robust, modern infrastructure to thrive, and that includes having access to broadband e-Connectivity.” In March 2018, Congress provided $600 million to USDA to expand broadband infrastructure and services in rural America. Secretary Perdue announced the program in December 2018, called “ReConnect,” to help build broadband infrastructure in rural America. USDA received 146 applications this summer, requesting $1.4 billion in funding across all three ReConnect Program funding products: 100 percent loan, 100 percent grant, and loan-grant combinations.

NCBA Applauds Livestock Risk Management and Education Act

The cattle industry welcomed legislation introduced this week that would provide grants to certain state land-grant universities to better equip livestock producers with risk management training. South Dakota Republican Representative Dusty Johnson this week introduced the Livestock Risk Management and Education Act in the House of Representatives. The National Cattlemen’s Beef Association says the bill “speaks directly to our core values as an industry,” adding the legislation gives producers the latest farm management resources and tools to help them navigate dynamic markets. NCBA announced support for the bill following its introduction. The legislation would authorize the National Institute of Food and Agriculture to provide resources to improve livestock producers’ knowledge of futures markets, and to help them better manage market volatility. Representative Johnson says an understanding of futures contracts and risk management strategies will allow producers to better anticipate cattle prices. Republican Representatives Liz Cheney of Wyoming and Frank Lucas of Oklahoma joined Johnson in introducing the bill.

Legislation Introduced to Help Support Rural Hospitals

New legislation in the Senate would support rural health care providers to deliver high-quality care. Introduced by Kansas Republican Pat Roberts and Nevada Democrat Catherine Cortez Masto. the Rural ACO Improvement Act would fix a glitch in the program, according to the lawmakers. The legislation would change the accountable care organizations, or ACO, reimbursement formula which inadvertently punishes rural health care providers when they reduce costs. The bill would put rural providers on a level playing field with their urban counterparts and ensure that all providers are rewarded equally for their work to deliver value in health care. ACOs are made up of groups of health care providers that share responsibility for providing coordinated care to patients to improve health care quality and reduce unnecessary spending. When ACO providers work together to improve care and lower costs below what Medicare expected to spend, Medicare saves money. The health care providers in ACOs are then able to receive a share of those savings.

USDA Publishes Pumpkin Production

With Halloween approaching, many consumers are searching for the nearest pumpkin patch. Meanwhile, the Department of Agriculture just updated pumpkin production data, showing production is widely dispersed throughout the United States. All U.S. states produce some pumpkins, but according to the 2017 U.S. Census of Agriculture, about 62 percent of pumpkin acres were grown in only ten States. Illinois is consistently the nation's largest producer of pumpkins, the majority of which are used for pies and other processed foods. Pumpkin production from the other states surveyed annually by USDA is primarily destined for decorative, or carving, use. While 2019 production has not yet been surveyed, early feedback indicates an average year for Illinois and California with a healthy crop. Retail prices for pumpkins typically fluctuate from week to week leading up to Halloween. At the end of the first week of October, average retail price for jack-o-lantern style pumpkins was $3.42 per pumpkin compared to $3.32 for the same week in 2018.

Washington Insider: Brighter Trade Outlook

President Donald Trump told the Cabinet on Monday that “negotiations over an initial trade deal [with China] are advancing and raising expectations” and that a trade deal could be signed at a global leaders’ meeting next month in Chile.”

For example, Bloomberg quoted the President as telling the Cabinet, “they have started the buying,” during Monday’s White House meeting, referring to Chinese purchases of U.S. agriculture products that he has pushed as part of a deal. “I want more,” he added.

Earlier in the week, Commerce Secretary Wilbur Ross said that it was more important to get details of the agreement right than it was for the President to sign it at an expected meeting with Chinese President Xi Jinping next month.

Stocks in Asia gained Tuesday as positive signs regarding the trade talks emerged ahead of earnings from some of the world’s biggest companies. S&P 500 futures rose suggesting there is scope for the underlying gauge to extend gains after it surpassed 3,000.

Ross also said on TV that the “actual meat” of the agreement would come in two additional phases yet to be completed. While the White House touted a preliminary agreement earlier this month, officials in Beijing have yet to confirm that anything is set in stone.

U.S. officials say they expect China to significantly increase purchases of American agricultural commodities and agree to some intellectual property, financial services, and currency concessions. In exchange, the U.S. paused a tariff increase due to hit in the middle of October, just ahead of Christmas shopping season.

The agreement is being seen by some observers as a pause in the 18-month trade war that has hurt the economies of both countries – but which falls short of the dramatic overhaul of Chinese economic policy the administration has sought. The agreement also doesn’t address Huawei Technologies Co., which has pushed forward with a global effort to sign 5G commercial contracts even as the U.S. seeks to persuade other countries to blacklist the firm.

In addition, Reuters was reporting earlier in the week that India’s Trade Minister Piyush Goyal had said that the broad outline of a trade deal with the United States has been worked out. He suggested that an announcement would follow soon.

The two countries have been locked in trade disputes for months, “slapping higher tariffs on each other’s products and the U.S. withdrawing a key concession to India,” Reuters said.

Washington has been especially concerned about Indian policies that mandate foreign firms to store more data locally and restrict the way U.S. e-commerce giants such as Walmart-owned Flipkart and Amazon.com operate. Goyal told a business conference that he was hoping to meet U.S. Trade Representative Robert Lighthizer soon.

“We have almost resolved the broad contours of what we are going to announce. I don’t see any great difficulty in closing the gap on the first announcement,” Goyal said at the U.S.-India Strategic Partnership Forum (USISPF).

The deal under discussion includes lowering tariffs on U.S. farm produce while giving Indian pharmaceuticals faster approval to enter the U.S. market. India dominates the world’s generic drugs market and the United States is among its top importers.

“With regards to the trade talks between India and the U.S., the Commerce and Industry Minister said that things are on the right track and India is looking to the U.S. for technology, innovation, skills and quality education,” a government statement quoted Goyal as saying.

According to USISPF estimates, India-U.S. bilateral trade is projected to grow to $238 billion by 2025 from $142.1 billion in 2018. The expected boosts in trade and investments are expected to include sectors such as defense, commercial aircrafts, oil and LNG, coal, machinery and electronics, Reuters said.

India is aiming to promote automotive, pharmaceuticals, seafood, IT and travel services to the U.S. market. Goyal indicated that India and the U.S. “must look at a larger trade agreement,” the government statement said, without elaboration.

So, we will see. Clearly, the negotiating progress in these talks being pointed to is in early, vulnerable stages similar to those in which disruptions have come before with little warning. But even fragile signs of agreement are better than the alternative and should continue to be watched closely as they approach completion, Washington Insider believes.