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Friday, January 31, 2020
FCC Launches $20 Billion Rural Broadband Fund
The Federal Communications Commission Thursday approved a rural broadband funding initiative. The new Rural Digital Opportunity Fund will help finance the deployment of high-speed broadband networks in rural America. Through a two-phase reverse auction mechanism, the FCC will direct up to $20.4 billion over ten years to finance up to gigabit speed broadband networks in unserved rural areas. The FCC says the effort will connect millions more American homes and businesses to broadband. The first phase of the effort will begin later this year and target census blocks that are wholly unserved with fixed broadband at speeds of at least 25/3 megabits per second. This phase would make available up to $16 billion to census blocks where existing data shows there is no such service available. Phase two of the program will make available at least $4.4 billion to target partially served areas, census blocks where some locations lack access to 25/3 megabits per second broadband.
Magistrate Favors USDA, Beef Councils, in R-CALF Lawsuit
A decision in lawsuit against the Department of Agriculture and multiple state beef checkoff’s favor the federal programs. The lawsuit, filed by R-CALF, claims there is a lack of oversight in state beef councils. However, a magistrate decision sided with USDA and the state organizations earlier this week. National Cattlemen’s Beef Association CEO Collin Woodall says the decision “was a crucial step toward ensuring state beef councils retain the important ability to direct their investments at the grassroots level.” The decision of the magistrate judge will now be forwarded to the federal district court for a final ruling. It could continue to be appealed by either party after the district court judge issues an opinion, a process that will continue over the next several months or longer, and appeals are expected. NCBA credits a recent memorandum of understanding between the state groups and USDA that reaffirms a commitment to transparent oversight for the court decision.
World Ag Expo Guarding Against Coronavirus
World Ag Expo is set to host attendees and exhibitors from across the country and around the world in just two weeks. Now they will also prepare to guard against the newest coronavirus emerging in China. Show officials are working with local, state and federal officials to monitor the situation and develop a plan on the show grounds. A spokesperson for the show says, "The health and safety of everyone at our show is our top priority.” World Ag Expo is advising precautions for attendees that closely match recommendations for flu season. Those recommendations include hand washing, covering coughs, staying home if ill, and contacting a physician if symptoms arise. Travelers attending World Ag Expo who become ill should contact the local health department where they are staying, and report their illness, as well. World Ag Expo boasts an international farm show atmosphere, with more than 100,000 attendees each year in California.
AEM: USMCA A Victory for Equipment Makers
This week’s signing of the U.S.-Mexico-Canada Agreement offers certainty beyond the farm for agriculture. The Association of Equipment Manufacturers says the agreement will help equipment makers grow in the United States, compete globally, and support millions of jobs across the country. Case IH North American Vice President Scott Harris serves on the AEM board of directors. Harris says that, "With commodity price stagnation and global market uncertainty, solidifying and expanding the North American market is absolutely critical for the broader agricultural community,” including AEM member dealers and customers. AEM is the North American-based international trade group representing off-road equipment manufacturers and suppliers, with more than 1,000 companies in the agriculture and construction-related industry sectors worldwide. Since the creation of NAFTA two decades ago, AEM says equipment manufacturers have benefited greatly from duty-free market access to Canada and Mexico, adding USMCA builds upon that success, supporting 1.3 million jobs in the U.S., and 149,000 more in Canada.
Report: Sustainability Improving Ag Retailers Profitability, Reputation
New research shows how sustainability and conservation-focused products and services are changing the ag retail business. Research by Farm Journal's Trust In Food initiative, in partnership with the Environmental Defense Fund, suggests the focus on sustainability is leading to improvements in ag retailers' profitability and reputation. The report documents key insights gathered through in-depth interviews with nine sustainability leaders in the ag retail sector, as well as through broader feedback from a national survey of more than 70 ag retail professionals. Collectively, these professionals service each of the nine Department of Agriculture Farm Resource Regions and represent more than $1.7 billion in annual revenue. The study reveals how ag retail companies are successfully integrating products and services related to conservation agriculture and the sustainability of agriculture into their business portfolios. Organizers say the report presents a clear business case for ag retailers to dramatically transform their businesses to meet the needs of farmers, the food value chain, local communities and the world's natural resources. Find the report at trustinfood.com.
Organic Chicken Feed Subscription Launches
An eCommerce store is launching organic chicken feed subscriptions. The online store, called Mile Four, offers subscription and one-time sales, targeting the backyard chicken market. Customers who subscribe to their chosen feed receive ten percent off every order and can set their delivery schedule exactly how they want, depending on the size of their flock. Founder Luke Huebner says the subscription “makes things so much easier for the buyer and the flock when feed, supplements and treats are delivered directly to their door." He says the goal of the eCommerce store is to “make raising backyard chickens as simple as possible.” Huebner grew up on a fifth-generation family farm four miles outside of a small town in western Minnesota and is self-described as an eCommerce veteran with 15 plus years of experience. The online store offers Starter, Grower and Layer Feed as well as several different supplements and treats.
Washington Insider: Fed Rate Unchanged
The media reported on Thursday that the Federal Reserve left interest rates unchanged at this week's first meeting of 2020. For example, the New York Times reported that the Fed upheld its "patient stance" after an active and often tumultuous 2019.
Jerome Powell, the Fed chair, walked a careful line in his post-meeting news conference, painting a picture of a solid economy that is fueled by strong job gains and a confident consumer willing to spend. But he noted global risks that remain, including the outbreak of a deadly new coronavirus. He also said that price gains remain "surprisingly soft."
Fed officials, whose job is to maintain both full employment and stable inflation, think the current economic situation merits a wait-and-see approach. The federal funds rate is currently set in a 1.5% to 1.75% range and the decision to keep it steady was unanimous.
Powell is seen as signaling that the central bank does not plan to move policy in either direction unless something shifts "fundamentally" -- and that it does not expect to cut interest rates as long as the economy shapes up as expected, the Times said.
The Fed's decision is unlikely to sit well with President Donald Trump who has been pushing it to slash rates further. In a tweet on Tuesday, the president said "the Fed should get smart & lower the Rate," arguing that comparatively high rates in the United States are putting the country at a disadvantage.
The report noted that the central bank has been emphasizing recently that it does not answer to the White House and that its policy goals come from the Congress. Still, it faces a "complicated backdrop" when it comes to achieving those targets, NYT said.
Expectations of a global growth turnaround have been climbing, helped along by an initial trade deal between the United States and China that forestalls additional tariffs between the two large economies.
But those positive signs could be dampened by the new coronavirus, which is forcing quarantines in China where it is shuttering multinational operations and causing nervousness around the world.
Powell pointed to that potential economic threat at his news conference, though he said it was too early to know what its macroeconomic effect would be. "There is likely to be some disruption to activity in China and perhaps globally," he said, adding that the Fed was "very carefully monitoring the situation."
The chair also noted other persistent weak spots, including soft business investment and exports, which he attributed to "sluggish growth abroad and trade developments." Manufacturing is also continuing to see a fall off, though Powell suggested that weakness might be bottoming out. "We need to be a little bit patient about the effect on the economy."
Still, Powell struck an optimistic tone about the U.S. economy overall, pointing out that employers are still hiring and unemployment continues to hover near a half-century low. He also cautioned about inflation, which continues to fall short of the Fed's 2% target. It has not hit that rate of change sustainably since the central bank formally adopted the goal in 2012.
The annual price increase, as measured by the Fed, came in at just 1.5% in November. While sluggish price gains might sound positive, the Fed sees steady, gradual increases as better for the economy. Weak inflation leaves officials with less room to cut rates in a downturn. And if consumers begin to expect slower increases, that outlook could become self-fulfilling, dragging inflation down further.
Fed policymakers do not expect it to eclipse 2% this year, based on their most recent set of economic projections. "In theory, inflation should be moving up," Powell added, given that the United States economy is in its 11th year of an expansion and unemployment is very low, at 3.5%.
Some analysts interpreted Powell's wary tone as a sign that the Fed was still oriented more toward cutting rates than raising them.
In a purely technical tweak, the central bank did nudge up the interest rates it pays on excess reserves -- bank deposits stashed at the Fed. The move was meant to keep the Fed funds rate trading within its target range.
It also affirmed that it will continue purchasing Treasury bills "at least into" the second quarter of 2020, and said it would continue to conduct operations in the repo market "through April 2020 to ensure that the supply of reserves remains ample" even in stressful periods.
The Fed has repeatedly said these interventions are not the type of mass bond-buying programs the central bank used to prop up the economy during and after the Great Recession. While those programs, known as quantitative easing, were meant to bolster the economy, the new interventions have been structured differently and are simply meant to fix a market-plumbing problem.
Investors have turned a skeptical eye on that claim, and equity analysts regularly argue that the purchases are pushing up stock prices, as markets take a cue from the Fed to buy.
So, we will see. It appears that the Fed will continue to tout its independence and that the president likely will continue his criticism. The Fed also seems prepared to take stronger action if "fundamentals" change, policies that producers should watch closely if they emerge, Washington Insider believes.
Jerome Powell, the Fed chair, walked a careful line in his post-meeting news conference, painting a picture of a solid economy that is fueled by strong job gains and a confident consumer willing to spend. But he noted global risks that remain, including the outbreak of a deadly new coronavirus. He also said that price gains remain "surprisingly soft."
Fed officials, whose job is to maintain both full employment and stable inflation, think the current economic situation merits a wait-and-see approach. The federal funds rate is currently set in a 1.5% to 1.75% range and the decision to keep it steady was unanimous.
Powell is seen as signaling that the central bank does not plan to move policy in either direction unless something shifts "fundamentally" -- and that it does not expect to cut interest rates as long as the economy shapes up as expected, the Times said.
The Fed's decision is unlikely to sit well with President Donald Trump who has been pushing it to slash rates further. In a tweet on Tuesday, the president said "the Fed should get smart & lower the Rate," arguing that comparatively high rates in the United States are putting the country at a disadvantage.
The report noted that the central bank has been emphasizing recently that it does not answer to the White House and that its policy goals come from the Congress. Still, it faces a "complicated backdrop" when it comes to achieving those targets, NYT said.
Expectations of a global growth turnaround have been climbing, helped along by an initial trade deal between the United States and China that forestalls additional tariffs between the two large economies.
But those positive signs could be dampened by the new coronavirus, which is forcing quarantines in China where it is shuttering multinational operations and causing nervousness around the world.
Powell pointed to that potential economic threat at his news conference, though he said it was too early to know what its macroeconomic effect would be. "There is likely to be some disruption to activity in China and perhaps globally," he said, adding that the Fed was "very carefully monitoring the situation."
The chair also noted other persistent weak spots, including soft business investment and exports, which he attributed to "sluggish growth abroad and trade developments." Manufacturing is also continuing to see a fall off, though Powell suggested that weakness might be bottoming out. "We need to be a little bit patient about the effect on the economy."
Still, Powell struck an optimistic tone about the U.S. economy overall, pointing out that employers are still hiring and unemployment continues to hover near a half-century low. He also cautioned about inflation, which continues to fall short of the Fed's 2% target. It has not hit that rate of change sustainably since the central bank formally adopted the goal in 2012.
The annual price increase, as measured by the Fed, came in at just 1.5% in November. While sluggish price gains might sound positive, the Fed sees steady, gradual increases as better for the economy. Weak inflation leaves officials with less room to cut rates in a downturn. And if consumers begin to expect slower increases, that outlook could become self-fulfilling, dragging inflation down further.
Fed policymakers do not expect it to eclipse 2% this year, based on their most recent set of economic projections. "In theory, inflation should be moving up," Powell added, given that the United States economy is in its 11th year of an expansion and unemployment is very low, at 3.5%.
Some analysts interpreted Powell's wary tone as a sign that the Fed was still oriented more toward cutting rates than raising them.
In a purely technical tweak, the central bank did nudge up the interest rates it pays on excess reserves -- bank deposits stashed at the Fed. The move was meant to keep the Fed funds rate trading within its target range.
It also affirmed that it will continue purchasing Treasury bills "at least into" the second quarter of 2020, and said it would continue to conduct operations in the repo market "through April 2020 to ensure that the supply of reserves remains ample" even in stressful periods.
The Fed has repeatedly said these interventions are not the type of mass bond-buying programs the central bank used to prop up the economy during and after the Great Recession. While those programs, known as quantitative easing, were meant to bolster the economy, the new interventions have been structured differently and are simply meant to fix a market-plumbing problem.
Investors have turned a skeptical eye on that claim, and equity analysts regularly argue that the purchases are pushing up stock prices, as markets take a cue from the Fed to buy.
So, we will see. It appears that the Fed will continue to tout its independence and that the president likely will continue his criticism. The Fed also seems prepared to take stronger action if "fundamentals" change, policies that producers should watch closely if they emerge, Washington Insider believes.
USMCA Signed By Trump With Attention Shifting to Canada
President Donald Trump signed the implementing legislation for the U.S.-Mexico-Canada Agreement (USMCA) Wednesday at a White House ceremony.
The remaining step in the ratification process is now with Canada's parliament, which is expected to approve the deal though timing remains uncertain.
Once ratification is complete, then the three countries have to embark on the process of making sure that regulations/laws reflect provisions of the updated agreement.
After that process is completed, the countries are to notify each other via letters, which will start the implementation process.
The remaining step in the ratification process is now with Canada's parliament, which is expected to approve the deal though timing remains uncertain.
Once ratification is complete, then the three countries have to embark on the process of making sure that regulations/laws reflect provisions of the updated agreement.
After that process is completed, the countries are to notify each other via letters, which will start the implementation process.
Concern Rising Within USDA on Slow Farmer Safety Net Signup for 2019 Crops
USDA's Farm Service Agency is about to deploy a mailing campaign to remind farmers they need to enroll for 2019-crop safety net programs -- Ag Risk Coverage (ARC) and Price Loss Coverage (PLC).
There are 2.3 million farms with base acres, according to FSA, and typically around 1.7 million farms enroll the programs on an annual basis. As of Jan. 27, only 327,408 farms have enrolled, FSA detailed in a notice to state and county offices outlining steps to be taken to make sure that producers meet the March 16 deadline to enroll for 2019.
While county FSA offices have used a "register" when it is not possible for a producer to meet a deadline for enrollment in a program, FSA said the register must not be used "unless a producer is scheduled for an appointment or requests an appointment and the County Office does not have capability to service the producer by March 16, 2020."
FSA said that appointments placed on a register "must be completed as soon as possible after the March 16, 2020, deadline."
Use of the register is not considered an extension of the enrollment deadline. If a valid 2019 election and enrollment on a farm is not filed by March 16, (including enrollment registers), FSA stated, "the farm will remain with default program elections and no payments will be issued for the 2019 crop year."
It is clear that farmers are waiting to gather as much information price-wise or market-wise before they make their choice on whether to go with ARC or PLC for the 2019 crop year.
There are 2.3 million farms with base acres, according to FSA, and typically around 1.7 million farms enroll the programs on an annual basis. As of Jan. 27, only 327,408 farms have enrolled, FSA detailed in a notice to state and county offices outlining steps to be taken to make sure that producers meet the March 16 deadline to enroll for 2019.
While county FSA offices have used a "register" when it is not possible for a producer to meet a deadline for enrollment in a program, FSA said the register must not be used "unless a producer is scheduled for an appointment or requests an appointment and the County Office does not have capability to service the producer by March 16, 2020."
FSA said that appointments placed on a register "must be completed as soon as possible after the March 16, 2020, deadline."
Use of the register is not considered an extension of the enrollment deadline. If a valid 2019 election and enrollment on a farm is not filed by March 16, (including enrollment registers), FSA stated, "the farm will remain with default program elections and no payments will be issued for the 2019 crop year."
It is clear that farmers are waiting to gather as much information price-wise or market-wise before they make their choice on whether to go with ARC or PLC for the 2019 crop year.
Friday Watch List
Markets
Friday marks the final day of a week dominated by concerns over the spread of coronavirus and infection counts will continue to be watched. Minor economic reports of U.S. personal income and the employment cost index are due out at 7:30 a.m. CST, followed by an index of consumer sentiment at 9 a.m. USDA releases its semi-annual cattle inventory report for January 1, set for 2 p.m. CST.
Weather
January ends with snow crossing the Midwest, rain in the Delta and Southeast, and mixed precipitation in the Northwest Friday. Dry conditions will be in place elsewhere. Temperatures will again be well above normal in northern and central areas. This is much different than a year ago, when the polar vortex outbreak gripped the U.S. east of the Rockies.
Friday marks the final day of a week dominated by concerns over the spread of coronavirus and infection counts will continue to be watched. Minor economic reports of U.S. personal income and the employment cost index are due out at 7:30 a.m. CST, followed by an index of consumer sentiment at 9 a.m. USDA releases its semi-annual cattle inventory report for January 1, set for 2 p.m. CST.
Weather
January ends with snow crossing the Midwest, rain in the Delta and Southeast, and mixed precipitation in the Northwest Friday. Dry conditions will be in place elsewhere. Temperatures will again be well above normal in northern and central areas. This is much different than a year ago, when the polar vortex outbreak gripped the U.S. east of the Rockies.
Thursday, January 30, 2020
President Trump Signs USMCA During White House Ceremony
President Donald Trump Wednesday signed the U.S.-Mexico-Canada Agreement. During a White House ceremony, Trump stated USCMA is, “the largest, most significant, modern and balanced trade agreement in history.” USMCA replaces the North American Free Trade Agreement, a trade deal Trump considered “outdated” and “terrible.” Mexico approved and signed the agreement last year. Legislation to approve the agreement in Canada was announced this week. Canada seems likely to approve the agreement within the next month, following its legislative process. Canada and Mexico are top trading partners for United States agriculture. President Trump says USMCA is “a monumental win for American farmers and ranchers, improving access to Canadian and Mexican markets.” The agreement protects current market conditions between the U.S., Mexico and Canada, and includes an estimated $2.2 billion increase in U.S. agricultural exports. The agreement is expected to grow annual dairy exports by nearly $315 million. Trump promised dairy farmers improved trade with Canada when announcing his intention to upgrade NAFTA.
Secretary Perdue: USMCA Critical for U.S. Agriculture
Agriculture Secretary Sonny Perdue Wednesday proclaimed, “Today is a good day for American agriculture,” referring to President Donald Trump’s signing of the U.S.-Mexico-Canada Agreement. Perdue says USMCA"shows the rest of the world the United States is open for business," adding the agreement is critical for U.S. farmers and ranchers. Canada and Mexico are the first and second-largest export markets for United States food and agricultural products, totaling more than $39.7 billion in farm exports in 2018. Those exports, according to the Department of Agriculture, support more than 325,000 American jobs. All food and agricultural products that have zero tariffs under the North American Free Trade Agreement will remain at zero tariffs. Key provisions, Perdue says, include increasing dairy market access, along with updates to biotechnology rules, geographical indications, sanitary and phytosanitary measures, and increased market access for poultry, eggs and wheat, along with agreements to avoid technical trade barriers for wine and spirits.
Agriculture Groups Respond to USMCA Signing
Agriculture groups applaud President Donald Trump for signing the U.S.-Mexico-Canada Agreement. American Farm Bureau Federation President Zippy Duvall says, “There is definitely increased optimism on farms and ranches across America and we’re grateful for the advances, but we’re also realists eager to see results.” American Soybean Association President Bill Gordon attended the signing ceremony Wednesday. Gordon states, “We reiterate our hearty thanks to both houses of Congress, the President, and their staff who worked together to make this important deal happen.” National Cattlemen’s Beef Association President Jennifer Houston also attended, and points out USMCA follows the new WOTUS rule, a Phase One trade agreement with China, and changes to the National Environmental Policy Act. Houston says, “it’s easy to see that 2020 is off to a truly historic start for U.S. beef producers.” Finally, National Farmers Union President Roger Johnson stated that while USMCA is a big step forward, “it should be a floor for future trade deals, not a ceiling.”
Trump Administration Trade Agenda Turning to EU, India
The Trump administration's focus on trade continues, as officials work towards more trade agreements. Agriculture Secretary Sonny Perdue traveled to the European Union to discuss a potential trade deal this week, and talks are ongoing to reach a tentative agreement with India. Perdue maintains that "Agriculture needs to be included in a trade deal" with the European Union. Specifically, Perdue told reporters Wednesday from Rome he wants the EU to recognize the U.S. method of sanitizing chicken products, along with addressing geographic indicators and EU objections to biotechnology. Meanwhile, Politico reports U.S. Trade Representative Robert Lighthizer is expected to travel to New Delhi, India, early next month, for potential trade talks with India's Commerce Minister. President Donald Trump revoked trade benefits for India last year that cuts duties on products from developing nations. India is seeking to regain those benefits, while the U.S. wants equivalent access for U.S. agricultural products in any tentative trade deal.
NASDA Submits Hemp Program Comments to USDA
This week, the National Association of State Departments of Agriculture submitted final comments on federal hemp production guidelines. The comments submitted to the Department of Agriculture highlight potential changes to the Domestic Hemp Production Program interim final rule. NASDA CEO Barb Glenn says, “We know at least 30 states will have to revise their own laws in order to comply with the requirements of the rule,” adding that without some flexibility, the rule could create competitive differences between states. NASDA recommends USDA extends the number of days in the testing window to within 15 to 30 days of harvest, along with dropping the requirement for states to use a Drug Enforcement Administration registered laboratory. Additionally, the organization suggests USDA create a tier-based approach for sampling and testing that would allow for greater flexibility for state regulators, set the negligence threshold for THC at one percent, and allow for states to develop mitigation plans, among other recommendations. The comment period closed Wednesday.
NMPF: Congress Needs to Pass DAIRY PRIDE Act for Consumers
The National Milk Producers Federation says Congress needs to pass the DAIRY PRIDE Act soon to ensure the Food and Drug Administration does its job. The DAIRY PRIDE Act would designate foods that make an inaccurate claim about milk contents as "misbranded" and subject to enforcement of labeling rules. It would require FDA to issue guidance for federal enforcement of mislabeled imitation dairy products within 90 days of its passage, and require FDA to report to Congress two years after enactment. NMPF Executive Vice President Tom Balmer told the House Energy and Commerce Committee's Health Subcommittee Wednesday, "By calling these products "milk," they are clearly seeking to trade on the health halo of real milk.” Balmer says the imitators aren't nutritionally the same as milk, or the same simply by definition. The legislation would force FDA to act against plant-based imitators of milk, cheese, butter and other products that defy current FDA rules.
Washington Insider: CBO says Deficit to Top $1 Trillion
U.S. officials now see the budget deficit exceeding $1 trillion annually for much of the next decade, the Congressional Budget Office (CBO) said this week. The estimates were reported by the New York Times and other media outlets. The red ink is expected to ultimately top $1.7 trillion in 2030, CBO says.
The ballooning deficit is being fueled by increased borrowing by the federal government, which continues to spend more money than it takes in. By 2030, the CBO projected, federal debt held by the public will surpass $31 trillion — about 98 percent of the forecast size of the nation’s economy.
The federal budget deficit already hit $1 trillion last year — the first calendar year since 2012 that the gap between revenue and spending topped the $1 trillion mark. CBO sees that as a “permanent pattern” over the next 10 years.
The somber news was tempered somewhat by the budget office’s expectation that interest rates for the next decade would be substantially lower than what its August forecast indicated, saving the United States hundreds of billions of dollars in interest payments on the federal debt.
The decline in interest rate projections reflects a shift in strategy by the Federal Reserve which cut rates last year amid slowing growth and little sign of sustained price increases that could spiral into rapid inflation. The budget office now expects the interest paid by 10-year Treasury bills to remain below 3 percent through 2027.
President Donald Trump has pushed Fed officials to reduce rates even further, toward zero or even into negative territory. On Tuesday, hours before the new forecast was issued, he suggested lower rates would allow the United States to “refinance” its debt and begin to pay it off.
The administration had promised to pay off the national debt during the 2016 campaign but in three years in office it has added to it with big tax cuts and increased federal spending.
The president and Republican lawmakers have claimed the tax cuts will pay for themselves through increased economic growth, which would ostensibly produce higher tax revenues. Treasury Secretary Steven Mnuchin repeated that assertion last week in Davos, Switzerland.
But while the 2017 tax cuts produced an uptick in growth in 2018, federal revenues declined. The latest CBO forecast shows no indication that officials there expect rapid growth will return any time soon, as the administration has projected.
The budget office estimates the economy grew more slowly last year than it predicted in August, and sees annual growth declining from 2.2% in 2020 to 1.5% by the middle of the decade. The new forecast anticipates a sharper decline in overall tax receipts through 2029 than did the August projections.
Democrats, Republicans and independent fiscal hawks all found cause for concern after the recent report.
The forecast “confirms that the president’s economic policies did not create a sustained boost for the economy like he has claimed,” said Rep. John Yarmuth, D-Ky., chairman of the House Budget Committee.
The committee’s top Republican, Steve Womack of Arkansas, said the forecast “once again confirms what we already know: our nation’s debt and deficits continue to grow, and we are on an unsustainable trajectory.”
Maya MacGuineas, president of the Committee for a Responsible Federal Budget, said the latest numbers should serve as a wake-up call for policymakers.
“We’re running trillion-dollar deficits while the economy is expanding — when are lawmakers going to wake up?” she said. “Every year we set a new postwar record for debt as a share of the economy, every year the Congressional Budget Office warns that debt is rising unsustainably, and every year our largest trust funds get closer to depleting their reserves. Ignoring what is staring us right in the face is fiscal malfeasance.”
Clearly, the trillion dollar estimates are attention-catchers—and can be expected to add emphasis to questions regarding how remaining urgent needs, such as the need for renewing the nation’s infrastructure, can be met without de-stabilizing the economy. These continue to be critical issues and should be
The ballooning deficit is being fueled by increased borrowing by the federal government, which continues to spend more money than it takes in. By 2030, the CBO projected, federal debt held by the public will surpass $31 trillion — about 98 percent of the forecast size of the nation’s economy.
The federal budget deficit already hit $1 trillion last year — the first calendar year since 2012 that the gap between revenue and spending topped the $1 trillion mark. CBO sees that as a “permanent pattern” over the next 10 years.
The somber news was tempered somewhat by the budget office’s expectation that interest rates for the next decade would be substantially lower than what its August forecast indicated, saving the United States hundreds of billions of dollars in interest payments on the federal debt.
The decline in interest rate projections reflects a shift in strategy by the Federal Reserve which cut rates last year amid slowing growth and little sign of sustained price increases that could spiral into rapid inflation. The budget office now expects the interest paid by 10-year Treasury bills to remain below 3 percent through 2027.
President Donald Trump has pushed Fed officials to reduce rates even further, toward zero or even into negative territory. On Tuesday, hours before the new forecast was issued, he suggested lower rates would allow the United States to “refinance” its debt and begin to pay it off.
The administration had promised to pay off the national debt during the 2016 campaign but in three years in office it has added to it with big tax cuts and increased federal spending.
The president and Republican lawmakers have claimed the tax cuts will pay for themselves through increased economic growth, which would ostensibly produce higher tax revenues. Treasury Secretary Steven Mnuchin repeated that assertion last week in Davos, Switzerland.
But while the 2017 tax cuts produced an uptick in growth in 2018, federal revenues declined. The latest CBO forecast shows no indication that officials there expect rapid growth will return any time soon, as the administration has projected.
The budget office estimates the economy grew more slowly last year than it predicted in August, and sees annual growth declining from 2.2% in 2020 to 1.5% by the middle of the decade. The new forecast anticipates a sharper decline in overall tax receipts through 2029 than did the August projections.
Democrats, Republicans and independent fiscal hawks all found cause for concern after the recent report.
The forecast “confirms that the president’s economic policies did not create a sustained boost for the economy like he has claimed,” said Rep. John Yarmuth, D-Ky., chairman of the House Budget Committee.
The committee’s top Republican, Steve Womack of Arkansas, said the forecast “once again confirms what we already know: our nation’s debt and deficits continue to grow, and we are on an unsustainable trajectory.”
Maya MacGuineas, president of the Committee for a Responsible Federal Budget, said the latest numbers should serve as a wake-up call for policymakers.
“We’re running trillion-dollar deficits while the economy is expanding — when are lawmakers going to wake up?” she said. “Every year we set a new postwar record for debt as a share of the economy, every year the Congressional Budget Office warns that debt is rising unsustainably, and every year our largest trust funds get closer to depleting their reserves. Ignoring what is staring us right in the face is fiscal malfeasance.”
Clearly, the trillion dollar estimates are attention-catchers—and can be expected to add emphasis to questions regarding how remaining urgent needs, such as the need for renewing the nation’s infrastructure, can be met without de-stabilizing the economy. These continue to be critical issues and should be
CBO Ag Baseline Updates Signal PLC To Be Safety Net Program Of Choice Ahead
U.S. government outlays for farmer safety net programs are expected to be heavily weighed on the Price Loss Coverage (PLC) program in Fiscal Year (FY) 2021 and beyond, according to the Congressional Budget Office (CBO).
CBO expects PLC outlays at $2.03 billion in FY 2019 and $2.23 billion in FY 2020. For FY 2021, those outlays are expected to move up to $5.24 billion and top $7 billion in FY 2022 and 2023, moving below that mark for through FY 2030, but not being any smaller than $5.08 billion in FY 2030. The FY 2020-2030 total is pegged at $62.98 billion.
Outlays under the Ag Risk Coverage (ARC) program are put at $1.06 billion in FY 2019, falling to $750 million in FY 2020 and remaining in a range of $351 million (FY 2024) and $494 million (FY 2030) for a total of $5.2 billion over FY 2020-2030.
As expected, the CBO update does not forecast another Market Facilitation Program (MFP) effort ahead. They estimate the 2018 MFP payments were $8.57 billion in FY 2019 with another $5.11 billion for the 2019 MFP effort. For FY 2020, CBO forecasts $10 million in outlays from the 2018 MFP with $10 billion under the 2019 MFP program.
CBO expects PLC outlays at $2.03 billion in FY 2019 and $2.23 billion in FY 2020. For FY 2021, those outlays are expected to move up to $5.24 billion and top $7 billion in FY 2022 and 2023, moving below that mark for through FY 2030, but not being any smaller than $5.08 billion in FY 2030. The FY 2020-2030 total is pegged at $62.98 billion.
Outlays under the Ag Risk Coverage (ARC) program are put at $1.06 billion in FY 2019, falling to $750 million in FY 2020 and remaining in a range of $351 million (FY 2024) and $494 million (FY 2030) for a total of $5.2 billion over FY 2020-2030.
As expected, the CBO update does not forecast another Market Facilitation Program (MFP) effort ahead. They estimate the 2018 MFP payments were $8.57 billion in FY 2019 with another $5.11 billion for the 2019 MFP effort. For FY 2020, CBO forecasts $10 million in outlays from the 2018 MFP with $10 billion under the 2019 MFP program.
USDA’s Perdue Says Not Clear if Coronavirus Will Impact China Buys of US Ag Goods
The outbreak of the Wuhan coronavirus in China has spawned talk of whether China can meet its purchases of U.S. ag goods under the Phase One agreement signed January 15.
As for how high the focus is, the issue came up while USDA Secretary Sonny Perdue held a telephone briefing with reporters from Italy to provide an update on his discussions this week with European Union (EU) officials.
Asked of the China coronavirus situation could impact the commodity purchase commitments, Perdue said, “We don’t really know that yet. We would love and pray for a very quick resolution and conclusion to the coronavirus outbreak.”
Coronavirus is “obviously going to have some ramifications economy wide, which we hope will not inhibit the purchase goal that we have for this year,” he concluded.
The focus on this issue is coming via the following provision in the language of the Phase One trade agreement signed Jan. 15: “In the event that a natural disaster or other unforeseeable event outside the control of the Parties delays a Party from timely complying with its obligations under this Agreement, the Parties shall consult with each other.” Perdue did not say whether any such consultations have been requested on the part of China.
As for how high the focus is, the issue came up while USDA Secretary Sonny Perdue held a telephone briefing with reporters from Italy to provide an update on his discussions this week with European Union (EU) officials.
Asked of the China coronavirus situation could impact the commodity purchase commitments, Perdue said, “We don’t really know that yet. We would love and pray for a very quick resolution and conclusion to the coronavirus outbreak.”
Coronavirus is “obviously going to have some ramifications economy wide, which we hope will not inhibit the purchase goal that we have for this year,” he concluded.
The focus on this issue is coming via the following provision in the language of the Phase One trade agreement signed Jan. 15: “In the event that a natural disaster or other unforeseeable event outside the control of the Parties delays a Party from timely complying with its obligations under this Agreement, the Parties shall consult with each other.” Perdue did not say whether any such consultations have been requested on the part of China.
Thursday Watch List
Markets
Thursday morning is busy with weekly U.S. export sales, U.S. jobless claims and fourth-quarter GDP all due out at 7:30 a.m. CST. Weekly natural gas inventories follow at 9:30 a.m. and we can't overlook the latest news updates regarding coronavirus and South American weather.
Weather
Light snow will cross the Northern Plains Thursday. Other crop areas will be dry. However, fog and areas of freezing on roadways will cause transportation and safety hazards.
Thursday morning is busy with weekly U.S. export sales, U.S. jobless claims and fourth-quarter GDP all due out at 7:30 a.m. CST. Weekly natural gas inventories follow at 9:30 a.m. and we can't overlook the latest news updates regarding coronavirus and South American weather.
Weather
Light snow will cross the Northern Plains Thursday. Other crop areas will be dry. However, fog and areas of freezing on roadways will cause transportation and safety hazards.
Wednesday, January 29, 2020
Canada’s Freeland Urges Quick USMCA Approval
The U.S. signing of the U.S.-Mexico-Canada Agreement Wednesday clears another hurdle towards implementation of the agreement. Following the signing ceremony, the U.S. and Mexico await approval by Canada, whose government is beginning the process this week. Canadian Deputy Prime Minister Chrystia Freeland introduced a motion in the nation’s House of Commons to consider the agreement. USMCA replaces the North American Free Trade Agreement. Freeland and Canada call the trade pact either the CUSMA, putting Canada first, or “the new NAFTA.” Freeland asked Canadian lawmakers to “work together to put Canada and Canadians first, and get this important work done without undue delay.” Freeland noted during a press conference the trade agreement received bipartisan support in the U.S. in a "highly polarized" political climate. USMCA, welcomed by U.S. agriculture, protects critical markets for U.S. farmers, and provides an additional $2 billion in agricultural exports to Canada and Mexico, the top trading partners of the United States.
House Dems Support Lawsuit Against SNAP Cuts
House Democrats are seeking to block the Trump administration’s cuts to the Supplemental Nutrition Assistance Program. Changes to the SNAP Requirements for Able-Bodied Adults Without Dependents are set to take effect in April. The Department of Agriculture says the rule revises the conditions under which USDA would waive, when requested by states, the able-bodied adult without dependents time limit in areas that have an unemployment rate of over ten percent or a lack of sufficient jobs. Representative Marcia Fudge, an Ohio Democrat and chair of the House Ag Subcommittee on Nutrition, announced House support of the lawsuit, filed by 15 states, including the District of Columbia. The lawsuit says the rule strips SNAP benefits from 700,000 recipients in a move rejected by the 2018 farm bill. Representative Fudge says the rule "does real harm to SNAP’s ability to accomplish its mission,” adding the House will “fight this hypocritical and political cruelty.”
Justice Department Investigating Possible Dean Foods Deal
The U.S. Justice Department is investigating a potential deal for Dairy Farmers of America to acquire the bankrupted Dean Foods. A Justice Department representative confirmed to the Wall Street Journal this week the investigation is probing the potential loss of competition in U.S. milk sales, as Dean Foods and DFA are among the largest milk processors in the country. Dairy Farmers of America represents roughly 22 percent of all U.S. milk processing, while Dean Foods is self-described as “the largest processor and direct-to-store distributor of fresh fluid milk and other dairy and dairy case products in the United States.” Dean Foods announced its bankruptcy in November of last year, while pledging to use the process to “protect and support its ongoing business operations.” Dean Foods also announced at the time that it was engaged in advanced discussions with Dairy Farmers of America regarding a potential sale of all assets of the company.
USDA: One Month Left for CRP General Signup
The Department of Agriculture reminds farmers interested in the Conservation Reserve Program 2020 general signup to enroll by February 28, 2020. The signup is available to farmers and private landowners who are either enrolling for the first time or re-enrolling for another ten to 15-year term. FSA Administrator Richard Fordyce notes, "This is the first opportunity for general sign up since 2016, and we want producers and private landowners to know that we have just one month remaining." CRP has 22 million acres enrolled, but the 2018 farm bill lifted the cap to 27 million acres. Signed into law in 1985, CRP is one of the largest private-lands conservation programs in the United States. It was originally intended to primarily control soil erosion and potentially stabilize commodity prices by taking marginal lands out of production. Farmers and ranchers who enroll in CRP receive yearly rental payments for voluntarily establishing long-term, resource-conserving plant species which can control soil erosion, improve water quality and develop wildlife habitat.
Chesapeake Bay Foundation Preparing to Sue EPA
The Chesapeake Bay Foundation is preparing to file a lawsuit against the Environmental Protection Agency. The planned lawsuit alleges the EPA is failing to enforce the Clean Water Act. Following a 2009 lawsuit, a plan was implemented to establish a watershed-wide Total Maximum Daily Load, a limit on the pollution the Bay can withstand and remain healthy. CBF has been concerned about the lack of progress in reducing nitrogen pollution in Pennsylvania. That concern was heightened when Pennsylvania released its plan for reducing pollution between now and the 2025 deadline. The plan has a funding shortfall of more than $300 million annually, and falls 25 percent short of the nitrogen goal. CBF President William C. Baker claims, “agriculture is the largest source of pollution from Pennsylvania,” adding that while stakeholders have pledged to comply, the lawmakers have failed by not fulling funding the efforts. Without EPA holding Pennsylvania accountable, Baker says the state’s local waters and the Bay downstream “will never be saved.”
Michelob Launches Campaign to Convert Farmland to Organic
An initiative by Anheuser-Busch InBev seeks to help farmers convert farmland to organic production. Michelob ULTRA Pure Gold, and AB InBev product, is launching their 60 second Super Bowl commercial featuring 6 For 6-Pack, a new program that allows consumers to join the brand in helping farmers transition six square feet of farmland into organic production. Michelob ULTRA Pure Gold is the first national beer brand to be USDA-certified organic. A portion of sales from each Pure Gold 6-pack will go directly to farmers looking to transition to organic, “allowing consumers to help drive change.” The commercial advertises that consumers can help farmers by “simply having a beer.” By the math, for every acre assisted in the program, consumers will need to drink 43,560 beers. Last year, AB InBev caught opposition from the corn industry, and sparked an advertising war with MillerCoors, by depicting corn syrup negatively, sparking lawsuits. The 2020 Michelob commercial is now available on YouTube.
Washington Insider: Extended Steel and Aluminum Tariffs
In spite of signs of some pull backs in trade policy battles, the Trump administration announced plans to broaden tariffs on foreign steel and aluminum late last week. It argued that “existing tariffs had not proved as effective as hoped in reviving American production the New York Times said Tuesday.
The administration accused foreign companies of trying to “circumvent” the 25% tariff placed on foreign steel and the 10% tariff on foreign aluminum in 2018. Imports of steel and aluminum into the United States have declined since the tariffs went into place but imports of products made with those metals had “significantly increased,” the administration said.
The net effect “has been to erode the customer base for U.S. producers of aluminum and steel and undermine” the effect of original tariffs, the announcement said. That led the United States to expand its tariffs to cover products made of steel and aluminum—like nails, tacks, staples, cables, certain types of wire, and bumpers and other parts for cars and tractors — as of Feb. 8.
For American companies making such products, the move provided some relief. For example, Southwire, a Georgia company that makes power cable and one of the largest manufacturers calling for the new tariffs, said the measures were necessary to ensure fair competition in the market for aluminum wire.
“We continue to believe that when there is a level playing field, the strength of our manufacturing comes forth,” Burt Fealing, Southwire’s general counsel, said.
However, the Times said that for economists and trade experts the development was an “I told you so” moment.
Economists have long argued that by raising the price of steel and aluminum, the administration’s tariffs would make it more expensive to produce things like nails or cars in the United States—and would encourage companies to import more of those items.
Chad Bown, a senior fellow at the Peterson Institute for International Economics, called this an example of “cascading protectionism” that he said was “entirely predictable.”
“Trump’s steel and aluminum tariffs have raised the cost of key inputs, making American companies that rely on those metals less competitive worldwide,” Bown said. “Now President Trump is expanding his tariffs to shield their products from competition as well. Where will it end?”
Richard E. Baldwin, a professor of international economics at the Graduate Institute of International and Development Studies in Geneva said that the administration is “learning this particular lesson in economics one failure at a time.”
In his order expanding the tariffs, President Trump pointed to large increases in imports of certain products made of steel and aluminum. For example, from June 2018 to May, imports of items including steel nails and staples rose 33% from a year earlier. Imports of aluminum wire and cable were up 152% over the same period, the administration said.
President Trump continues to argue that his trade policies are delivering on his promises to revive the manufacturing sector by sheltering American businesses from unfair competition and encouraging companies to move factories back to the United States.
But a study released by two economists at the Federal Reserve in December showed that the costs of the administration’s trade approach to China had outweighed its benefits for manufacturers.
Tariffs offered American companies some protection from Chinese imports, the study showed. But those positive effects were more than offset by the negative effects of the trade war, including the higher prices companies must pay to import components from China and the retaliatory tariffs China had placed on the United States.
Still, American producers of steel and aluminum have supported the tariffs and U.S. steel producers operated their plants at a modestly higher share of capacity this year compared to last. But in its order, the administration said capacity utilization had not stabilized above 80%, its goal.
Large steel companies have ramped up their investment since the tariffs came into effect, however. However they also have faced steel prices well below recent highs, leading to decisions to idle some facilities. For example, a plant near Detroit is sending layoff notices to roughly 1,500 employees. Some analysts continue to point at China for market pressure, since it produced steel at a record level in 2019.
At the same time, trade experts have questioned the legal basis for Trump’s continuing to make revisions to his metal tariffs.
The administration has said Section 232 of a 1962 trade law gives the president broad powers to impose tariffs to protect American industry for matters of national security — and that domestic capacity to make iron and steel is essential for national defense. It issued broad tariffs globally, before later carving out some exemptions for Argentina, Australia, Canada, Mexico, Brazil and South Korea.
But in a preliminary decision last year, the United States Court of International Trade gave a narrower interpretation of that statute, arguing that the president must act within certain periods that have already expired.
So, we will see. Certainly tariffs on basic production inputs like steel and aluminum do have impacts across a broad range of products and may well become a continuing source of skepticism for the administration’s tariff-oriented trade policies. This also is likely to lead to a continuing debate that producers should watch closely in the coming months, Washington Insider believes.
The administration accused foreign companies of trying to “circumvent” the 25% tariff placed on foreign steel and the 10% tariff on foreign aluminum in 2018. Imports of steel and aluminum into the United States have declined since the tariffs went into place but imports of products made with those metals had “significantly increased,” the administration said.
The net effect “has been to erode the customer base for U.S. producers of aluminum and steel and undermine” the effect of original tariffs, the announcement said. That led the United States to expand its tariffs to cover products made of steel and aluminum—like nails, tacks, staples, cables, certain types of wire, and bumpers and other parts for cars and tractors — as of Feb. 8.
For American companies making such products, the move provided some relief. For example, Southwire, a Georgia company that makes power cable and one of the largest manufacturers calling for the new tariffs, said the measures were necessary to ensure fair competition in the market for aluminum wire.
“We continue to believe that when there is a level playing field, the strength of our manufacturing comes forth,” Burt Fealing, Southwire’s general counsel, said.
However, the Times said that for economists and trade experts the development was an “I told you so” moment.
Economists have long argued that by raising the price of steel and aluminum, the administration’s tariffs would make it more expensive to produce things like nails or cars in the United States—and would encourage companies to import more of those items.
Chad Bown, a senior fellow at the Peterson Institute for International Economics, called this an example of “cascading protectionism” that he said was “entirely predictable.”
“Trump’s steel and aluminum tariffs have raised the cost of key inputs, making American companies that rely on those metals less competitive worldwide,” Bown said. “Now President Trump is expanding his tariffs to shield their products from competition as well. Where will it end?”
Richard E. Baldwin, a professor of international economics at the Graduate Institute of International and Development Studies in Geneva said that the administration is “learning this particular lesson in economics one failure at a time.”
In his order expanding the tariffs, President Trump pointed to large increases in imports of certain products made of steel and aluminum. For example, from June 2018 to May, imports of items including steel nails and staples rose 33% from a year earlier. Imports of aluminum wire and cable were up 152% over the same period, the administration said.
President Trump continues to argue that his trade policies are delivering on his promises to revive the manufacturing sector by sheltering American businesses from unfair competition and encouraging companies to move factories back to the United States.
But a study released by two economists at the Federal Reserve in December showed that the costs of the administration’s trade approach to China had outweighed its benefits for manufacturers.
Tariffs offered American companies some protection from Chinese imports, the study showed. But those positive effects were more than offset by the negative effects of the trade war, including the higher prices companies must pay to import components from China and the retaliatory tariffs China had placed on the United States.
Still, American producers of steel and aluminum have supported the tariffs and U.S. steel producers operated their plants at a modestly higher share of capacity this year compared to last. But in its order, the administration said capacity utilization had not stabilized above 80%, its goal.
Large steel companies have ramped up their investment since the tariffs came into effect, however. However they also have faced steel prices well below recent highs, leading to decisions to idle some facilities. For example, a plant near Detroit is sending layoff notices to roughly 1,500 employees. Some analysts continue to point at China for market pressure, since it produced steel at a record level in 2019.
At the same time, trade experts have questioned the legal basis for Trump’s continuing to make revisions to his metal tariffs.
The administration has said Section 232 of a 1962 trade law gives the president broad powers to impose tariffs to protect American industry for matters of national security — and that domestic capacity to make iron and steel is essential for national defense. It issued broad tariffs globally, before later carving out some exemptions for Argentina, Australia, Canada, Mexico, Brazil and South Korea.
But in a preliminary decision last year, the United States Court of International Trade gave a narrower interpretation of that statute, arguing that the president must act within certain periods that have already expired.
So, we will see. Certainly tariffs on basic production inputs like steel and aluminum do have impacts across a broad range of products and may well become a continuing source of skepticism for the administration’s tariff-oriented trade policies. This also is likely to lead to a continuing debate that producers should watch closely in the coming months, Washington Insider believes.
China Says It Is Bringing Its Domestic Ag Supports Into Compliance With WTO
While much attention in a meeting of the WTO Dispute Settlement Body (DSB) Monday focused on the stalled appeals process as the U.S. continues to block appointment of new judges to hear appeals to WTO rulings, China offered a status report on their efforts to comply with a WTO ruling against their use of subsidies for domestic wheat, corn and rice producers.
“Chinese government agencies [have] conducted intensive consultations aiming to implement the recommendations and rulings of the DSB in this dispute,” China said. Internal processes “with respect to amending relevant measures” are ongoing, officials told the WTO, noting the “complexity of measures at issue.”
China said it would “accelerate the internal process and fulfil our implementation obligation in due course.” China is facing a March 31 deadline to bring its domestic ag supports for wheat, corn and rice into compliance with the ruling in the case brought by the U.S.
The U.S. said it would “engage bilaterally with China on specific amendments it will make to bring its measures into compliance.”
“Chinese government agencies [have] conducted intensive consultations aiming to implement the recommendations and rulings of the DSB in this dispute,” China said. Internal processes “with respect to amending relevant measures” are ongoing, officials told the WTO, noting the “complexity of measures at issue.”
China said it would “accelerate the internal process and fulfil our implementation obligation in due course.” China is facing a March 31 deadline to bring its domestic ag supports for wheat, corn and rice into compliance with the ruling in the case brought by the U.S.
The U.S. said it would “engage bilaterally with China on specific amendments it will make to bring its measures into compliance.”
USDA’s Perdue Pushes EU To Follow ‘Science’ On Food, Ag Products
USDA Secretary Sonny Perdue continues to press the European Union (EU) on trade issues relative to agriculture, pushing the bloc to follow “sound science” when it comes to matters on food safety, genetically modified organisms (GMOs) and other matters. Perdue is currently in Europe and met with ag ministers from EU countries.
The issue of poultry trade figures to be a key as Europe said it will not accept so-called “chlorine-washed” poultry, referring to the U.S. practice of using a chemical wash to remove pathogens from chicken. Perdue said the U.S. does not use chlorine but peracetic acid. “Peracetic acid … is a great pathogen reduction treatment,” he told reporters in Brussels. “You know what it is? It is vinegar, essentially. To say that is unsafe or not to be used… we do not think there is a basis for that in sound science.”
On biotechnology, Perdue also chided Europe for its views on GMO crops. “I use the example of table salt that can be hazardous if you consume it in too much quantity, but we use it regularly,” Perdue explained. “And that is why we have the MRL (maximum residue level) for pesticides.” Perdue said the stance by Europe is going to put European farmers behind since they are not able to adopt technology used by growers in other areas of the world.
Perdue also heard complaints from EU farm ministers on U.S. trade policies, including the use of tariffs on a host of goods. His stance on including agriculture in any U.S.-EU trade deal was also emphasized, with him criticizing offers to remove barriers to U.S. apples, pears and shellfish as not enough. "We are not going to get there with apples and pears and shellfish. There are other things have to happen," he said.
The issue of poultry trade figures to be a key as Europe said it will not accept so-called “chlorine-washed” poultry, referring to the U.S. practice of using a chemical wash to remove pathogens from chicken. Perdue said the U.S. does not use chlorine but peracetic acid. “Peracetic acid … is a great pathogen reduction treatment,” he told reporters in Brussels. “You know what it is? It is vinegar, essentially. To say that is unsafe or not to be used… we do not think there is a basis for that in sound science.”
On biotechnology, Perdue also chided Europe for its views on GMO crops. “I use the example of table salt that can be hazardous if you consume it in too much quantity, but we use it regularly,” Perdue explained. “And that is why we have the MRL (maximum residue level) for pesticides.” Perdue said the stance by Europe is going to put European farmers behind since they are not able to adopt technology used by growers in other areas of the world.
Perdue also heard complaints from EU farm ministers on U.S. trade policies, including the use of tariffs on a host of goods. His stance on including agriculture in any U.S.-EU trade deal was also emphasized, with him criticizing offers to remove barriers to U.S. apples, pears and shellfish as not enough. "We are not going to get there with apples and pears and shellfish. There are other things have to happen," he said.
Wednesday Watch List
Markets
Wednesday's reports start with U.S. pending home sales at 9 a.m. CST. The Energy Department's weekly inventory reports follow at 9:30 a.m. and include ethanol. At 1 p.m. CST, the Federal Reserve will make a post-meeting announcement and is expected to keep interest rates steady.
Weather
Wednesday features light snow in the western and southern Midwest and light rain in the Delta and Deep South. Other primary crop areas will be dry. Temperatures will again be well above normal for north and central areas for this time of year.
Wednesday's reports start with U.S. pending home sales at 9 a.m. CST. The Energy Department's weekly inventory reports follow at 9:30 a.m. and include ethanol. At 1 p.m. CST, the Federal Reserve will make a post-meeting announcement and is expected to keep interest rates steady.
Weather
Wednesday features light snow in the western and southern Midwest and light rain in the Delta and Deep South. Other primary crop areas will be dry. Temperatures will again be well above normal for north and central areas for this time of year.
Tuesday, January 28, 2020
Court Rules Against EPA Small Refinery Waivers
The Environmental Protection Agency must reconsider its small refinery exemptions, following a recent court decision. A document dated January 24 from the U.S. Court of Appeals for the 10th Circuit says the EPA overstepped its authority to grant three specific waivers in question. The decision is expected to broadly impact the EPA approach to granting waivers, according to the Renewable Fuels Association, which claims the waivers are unlawful. The court ruling stems from a May 2018 challenge brought against EPA by the Renewable Fuels Association, the National Corn Growers Association, the American Coalition for Ethanol and National Farmers Union. NFU President Roger Johnson says, “We believe this ruling will help restore the ability of the RFS to drive demand.” Among other findings, the court says EPA cannot “extend” exemptions to any small refineries whose earlier, temporary exemptions had lapsed. The court also found EPA abused its discretion in failing to explain how the agency could conclude that a small refinery might suffer a disproportionate economic hardship.
USDA to Accept Applications for the Second Round of ReConnect Funding
Department of Agriculture Secretary Sonny Perdue says USDA will again accept rural broadband funding request this week. USDA will accept applications for the second round of $550 million in ReConnect Program loan and grant funding starting January 31. The funds will expand public-private partnerships in rural communities to build modern broadband infrastructure in areas with insufficient internet service. Insufficient service is defined as connection speeds of less than ten megabits per second download and one megabit per second upload. Secretary Perdue says, “we at USDA are very excited to begin accepting applications for the second round of funds.” Telecommunications companies, rural electric cooperatives and utilities, internet service providers and municipalities may apply for funding through USDA’s ReConnect Program to connect rural areas that currently have insufficient broadband service. Through the program, USDA is making available approximately $200 million for grants, as well as up to $200 million for loan and grant combinations, and up to $200 million for low-interest loans. More information is available online at www.usda.gov/reconnect.
Corps of Engineers Monitoring High Water on Upper Mississippi River
The U.S. Army Corps of Engineers, St. Paul District, is monitoring high water conditions affecting parts of the Upper Mississippi River in Minnesota, Wisconsin and Iowa as a result of historic flows this winter. Cities from Winona, Minnesota, to Guttenberg, Iowa, have an increased chance of localized flooding due to ice dams. The high water conditions were created by a combination of ice dams and historic high flows. The current river flows are at levels normally observed in late spring. Irregular temperatures have also prevented ice from forming in a stable way, which compounds the ice dam problem. The ice has blocked the river’s normal flow and forced water out of its banks. It has also reduced the ability to actively manage the river water elevations. Depending on temperatures and the rate of ice melt, there could be more high water in the weeks and months ahead. the Corps is working with the National Weather Service and the U.S. Geological Survey to monitor the river and provide communication with the public.
Wisconsin Special Legislative Session Focusing on Dairy Crisis
A special session of the Wisconsin legislature opening this week seeks to help the state’s struggling dairy industry. Wisconsin Governor Tony Evers signed an executive order last week to authorize the special session to consider eight agriculture-focused bills. They include farmer assistance, stress and mental health support, promoting value-added agriculture, farm grants and a focus on exports. Evers announced the plan during his State of the State Address last week, and says, “It's about investing in and supporting our rural families and communities.” The governor hopes to increase Wisconsin dairy exports to 20 percent of the nation’s milk supply by 2024. The Milwaukee Journal Sentinel reported earlier this month that last year, Wisconsin lost nearly 700 dairy farms. The Wisconsin Cheese Makers Association says the industry is challenged by trade instability, poor weather conditions, a severe labor shortage, and a decline in milk consumption. Association executive director John Umhoefer (um-hay-fer) says, “Urgent action is needed to stabilize and strengthen Wisconsin’s backbone industry.“
United Nations Declares 2020 as the International Year of Plant Health
The United Nations has declared 2020 as the International Year of Plant Health to bring worldwide attention to invasive pests. The pests destroy up to 40 percent of the world's food crops and cause $220 billion in trade losses each year, according to the United Nations. They are calling on stakeholders to work together to protect plants against the introduction and spread of invasive pests. The U.S. National Plant Protection Organization—the Department of Agriculture's Plant Protection and Quarantine—is leading the effort in the United States. Undersecretary for Marketing and Regulatory Programs, Greg Ibach (eye-bah), says “we’re urging everyone to take this issue seriously and to do their part.” According to USDA, everyone can help avoid the devastating impact of pests and diseases on agriculture, livelihoods, and food security. Tips to do so include reporting unusual signs of pests, refrain from moving firewood, and declaring food or ag items at U.S. Customs and Border Protection checkpoints when returning from international travel.
Public Lands Council Names Executive Director
The Public Lands Council Monday announced that Kaitlynn Glover joined the organization as its executive director. The Public Lands Council, known as PLC, is a national trade association representing 22,000 ranchers who raise cattle and sheep on federal land. Glover will serve as the chief lobbyist for the organization, representing cattle and sheep producers in western states on resource issues affecting their operations. The legislative and regulatory portfolio focuses on protecting grazing on federal land, and includes the Clean Water Act, tax policy, the Endangered Species Act, property rights, and other matters. Glover says her top priority will focus on policies that “ensure a strong future for agriculture and healthy public lands.” Glover comes to PLC from Wyoming Republican Senator John Barrasso’s office. Originally from Wyoming, Glover has strong ties to grazers, recreationalists, and many other users of public land resources. Glover will also lead the National Cattlemen's Beef Association's natural resources policy portfolio in the organization's Washington, D.C. office.
Washington Insider: Focus on Infrastructure, Again
There is considerable media attention this week on the nation’s infrastructure needs and Bloomberg is reporting that as House lawmakers return to Washington after a recess week there are new plans “to roll out a draft infrastructure package.”
The House Ways and Means Committee will be tasked with the responsibility of finding ways to fund new legislation. It plans to meet Wednesday to discuss funding and financing proposed projects.
Any effort to pass a comprehensive infrastructure package in an election year would face some roadblocks, Bloomberg thinks, including the need for the president to find common ground with House Democratic lawmakers.
The administration itself has called for a big infrastructure package, but it may have problems persuading congressional Republicans to support that type of legislation.
The 2017 tax law, which received no Democratic votes in either chamber, imposed new limits on advanced refund bonds, which cities and counties use as a way to finance infrastructure projects. “To do something really big on infrastructure is going to take a significant hand-holding exercise, obviously, it’s going to have to be a bipartisan effort,” said Andrew Grossman, chief tax counsel for Ways and Means Chairman Richard Neal, D-Mass. “Whether or not we can get there in an election year remains to be seen but we’re still optimistic.”
The New York Times also focused on infrastructure last week, noting that state voters approved $7.7 billion in transportation spending last year, but the federal government needs to do much more to fix the nation’s ragged roadways.
Drivers in America topped 3.2 trillion miles in 2018, much of that on the countless roads and bridges in dire need of repair and improvement. The Times cited the American Society of Civil Engineers’ bleak picture of the country’s byways in its Infrastructure Report Card in the spring of 2017, the most recent of its every-four-years editions. The organization’s assessment resulted in an overall D-plus grade. Road conditions earned an underwhelming D, while bridges slid by with a C-plus. In all, 45% of the nation’s roads were deemed in poor condition.
Since then, the group estimates that vehicle travel has increased 17% alongside an unequal 5% increase in new roadways. The result has been 6.9 billion hours a year of traffic delays, which cost motorists roughly $616 each in 2017 — the last year tracked.
Federal spending on road infrastructure is struggling to keep up, the Times says. It notes that federal lawmakers staved off a cut to the national Highway Trust Fund last year that would have pulled $7.6 billion away from state highway budgets. This has left the states to fill in some of the gaps and voters around the country last year approved major transportation investments via ballot measures.
“The ballot results are a great reminder infrastructure investment remains one of the few areas where red states, blue states, Republicans and Democrats can all come together,” Dave Bauer, president of the American Road & Transportation Builders Association, said. “It should also demonstrate to lawmakers on Capitol Hill that the public will be on board for the passage of a long-term bill that significantly boosts highway and transit investment at the federal level.”
Jim Tymon, executive director of the American Association of State Highway and Transportation Officials, said that “States and localities are doing their part and this is a great opportunity for the federal government to do its part.” The American Society of Civil Engineers says there is a huge backlog of federal highway projects that need funding, to the tune of $836 billion.
The Transportation Investment Advocacy Center at the road builders group said that most of the ballot measures involved property tax increases to pay for road repairs. The road builders group reported that 57 ballot initiatives across 12 states had the potential to raise $20 million in revenue each.
All told, voters approved $7.7 billion worth of investment into transportation projects and $1.9 billion in continued funding over the next quarter-century. Washington State and Colorado were among the few to vote for tax cuts that are likely to squeeze highway budgets.
The issue is important at the local level, too. The United States Conference of Mayors published a campaign agenda wish list in December that called on 2020 presidential candidates to say what they would do to stabilize the Highway Trust Fund, regulate new transportation technology and strengthen public transportation.
President Trump’s initial infrastructure plan — coming in widely mocked “infrastructure week” presentations stalled several times before resurfacing again last spring. A $2 trillion infrastructure package seemed politically plausible but appears sidelined by the impeachment issue.
So, we will see. State and local governments are working hard to get things done, but we need the federal government to step up with a bill, the Times said. Whether a bi-partisan effort, even for a widely supported investment, can be defined in the current toxic political environment remains to be seen and should be watched closely by producers as options are considered, Washington Insider believes.
The House Ways and Means Committee will be tasked with the responsibility of finding ways to fund new legislation. It plans to meet Wednesday to discuss funding and financing proposed projects.
Any effort to pass a comprehensive infrastructure package in an election year would face some roadblocks, Bloomberg thinks, including the need for the president to find common ground with House Democratic lawmakers.
The administration itself has called for a big infrastructure package, but it may have problems persuading congressional Republicans to support that type of legislation.
The 2017 tax law, which received no Democratic votes in either chamber, imposed new limits on advanced refund bonds, which cities and counties use as a way to finance infrastructure projects. “To do something really big on infrastructure is going to take a significant hand-holding exercise, obviously, it’s going to have to be a bipartisan effort,” said Andrew Grossman, chief tax counsel for Ways and Means Chairman Richard Neal, D-Mass. “Whether or not we can get there in an election year remains to be seen but we’re still optimistic.”
The New York Times also focused on infrastructure last week, noting that state voters approved $7.7 billion in transportation spending last year, but the federal government needs to do much more to fix the nation’s ragged roadways.
Drivers in America topped 3.2 trillion miles in 2018, much of that on the countless roads and bridges in dire need of repair and improvement. The Times cited the American Society of Civil Engineers’ bleak picture of the country’s byways in its Infrastructure Report Card in the spring of 2017, the most recent of its every-four-years editions. The organization’s assessment resulted in an overall D-plus grade. Road conditions earned an underwhelming D, while bridges slid by with a C-plus. In all, 45% of the nation’s roads were deemed in poor condition.
Since then, the group estimates that vehicle travel has increased 17% alongside an unequal 5% increase in new roadways. The result has been 6.9 billion hours a year of traffic delays, which cost motorists roughly $616 each in 2017 — the last year tracked.
Federal spending on road infrastructure is struggling to keep up, the Times says. It notes that federal lawmakers staved off a cut to the national Highway Trust Fund last year that would have pulled $7.6 billion away from state highway budgets. This has left the states to fill in some of the gaps and voters around the country last year approved major transportation investments via ballot measures.
“The ballot results are a great reminder infrastructure investment remains one of the few areas where red states, blue states, Republicans and Democrats can all come together,” Dave Bauer, president of the American Road & Transportation Builders Association, said. “It should also demonstrate to lawmakers on Capitol Hill that the public will be on board for the passage of a long-term bill that significantly boosts highway and transit investment at the federal level.”
Jim Tymon, executive director of the American Association of State Highway and Transportation Officials, said that “States and localities are doing their part and this is a great opportunity for the federal government to do its part.” The American Society of Civil Engineers says there is a huge backlog of federal highway projects that need funding, to the tune of $836 billion.
The Transportation Investment Advocacy Center at the road builders group said that most of the ballot measures involved property tax increases to pay for road repairs. The road builders group reported that 57 ballot initiatives across 12 states had the potential to raise $20 million in revenue each.
All told, voters approved $7.7 billion worth of investment into transportation projects and $1.9 billion in continued funding over the next quarter-century. Washington State and Colorado were among the few to vote for tax cuts that are likely to squeeze highway budgets.
The issue is important at the local level, too. The United States Conference of Mayors published a campaign agenda wish list in December that called on 2020 presidential candidates to say what they would do to stabilize the Highway Trust Fund, regulate new transportation technology and strengthen public transportation.
President Trump’s initial infrastructure plan — coming in widely mocked “infrastructure week” presentations stalled several times before resurfacing again last spring. A $2 trillion infrastructure package seemed politically plausible but appears sidelined by the impeachment issue.
So, we will see. State and local governments are working hard to get things done, but we need the federal government to step up with a bill, the Times said. Whether a bi-partisan effort, even for a widely supported investment, can be defined in the current toxic political environment remains to be seen and should be watched closely by producers as options are considered, Washington Insider believes.
Extension Of Comment Period On NEPA Reforms Urged
A 180-day extension of the 60-day comment period on the Trump administration’s notice of proposed rulemaking (NPRM) on the National Environmental Policy Act (NEPA) reforms has been requested by the Council on Environmental Quality.
Given that the proposed rule would impact how “every single agency in the federal government considers the health and environmental impacts federal decisions,” the group said the 60-day comment period and two public meetings scheduled by EPA are “woefully inadequate” for the plan the group says would impact more than 50,000 decisions made each year by the federal government.
They called for additional public meetings to be held in both rural and urban areas versus the two proposed by EPA to be held in Denver, Colorado, and Washington, D.C.
Given that the proposed rule would impact how “every single agency in the federal government considers the health and environmental impacts federal decisions,” the group said the 60-day comment period and two public meetings scheduled by EPA are “woefully inadequate” for the plan the group says would impact more than 50,000 decisions made each year by the federal government.
They called for additional public meetings to be held in both rural and urban areas versus the two proposed by EPA to be held in Denver, Colorado, and Washington, D.C.
Court Sends Some Small Refinery Exemptions Back To EPA
EPA has to reconsider small refinery exemptions (SREs) issued for the 2016 compliance under the Renewable Fuel Standard (RFS), according to a decision from the U.S. Court of Appeals for the 10th Circuit.
The court ruled that exemptions granted to Holly Frontier’s Woods Cross and Cheyenne refineries and CVR Energy’s Wynewood refinery were improper, stating the agency overstepped its authority as the refiners had not previously been granted SREs. The court said the statute states that any SRE granted to a refinery has to be in the form of an “extension” after 2010, yet the three refineries were given exemptions for the first time in the 2016 compliance year.
"Because an 'extension' requires a small refinery exemption in prior years to prolong, enlarge or add to, the three refinery petitions in this case were improvidently granted," the court said. "We remand these matters to the EPA for further proceedings consistent with this opinion."
EPA approved 19 of the 20 SRE requests received for the 2016 compliance year and it rejected only one of the requests.
There are currently 21 SRE requests pending at EPA for the 2019 compliance year, already at half the level that were requested for the 2018 compliance year.
The court ruled that exemptions granted to Holly Frontier’s Woods Cross and Cheyenne refineries and CVR Energy’s Wynewood refinery were improper, stating the agency overstepped its authority as the refiners had not previously been granted SREs. The court said the statute states that any SRE granted to a refinery has to be in the form of an “extension” after 2010, yet the three refineries were given exemptions for the first time in the 2016 compliance year.
"Because an 'extension' requires a small refinery exemption in prior years to prolong, enlarge or add to, the three refinery petitions in this case were improvidently granted," the court said. "We remand these matters to the EPA for further proceedings consistent with this opinion."
EPA approved 19 of the 20 SRE requests received for the 2016 compliance year and it rejected only one of the requests.
There are currently 21 SRE requests pending at EPA for the 2019 compliance year, already at half the level that were requested for the 2018 compliance year.
Tuesday Watch List
Markets
Early Tuesday, traders will note a report of U.S. durable goods orders at 7:30 a.m. CST, followed by an index of U.S. consumer confidence at 9 a.m. South American weather forecasts and coronavirus infection counts will also get attention. The Federal Reserve begins a two-day meeting on Tuesday and is expected to keep interest rates unchanged on Wednesday afternoon.
Weather
Rain, freezing precipitation and snow will cross the central and southern Plains Tuesday, and the western and northern Midwest will have freezing precipitation and snow. Transportation and travel delays are in store along with safety hazards. We'll also see rain and snow in the Northwest. Temperatures will be well above normal in much of the northern and central areas for this time of year.
Early Tuesday, traders will note a report of U.S. durable goods orders at 7:30 a.m. CST, followed by an index of U.S. consumer confidence at 9 a.m. South American weather forecasts and coronavirus infection counts will also get attention. The Federal Reserve begins a two-day meeting on Tuesday and is expected to keep interest rates unchanged on Wednesday afternoon.
Weather
Rain, freezing precipitation and snow will cross the central and southern Plains Tuesday, and the western and northern Midwest will have freezing precipitation and snow. Transportation and travel delays are in store along with safety hazards. We'll also see rain and snow in the Northwest. Temperatures will be well above normal in much of the northern and central areas for this time of year.
Monday, January 27, 2020
President Trump Expected to Sign USMCA on Wednesday
White House and administration officials confirmed to CNN that the president will sign the U.S.-Mexico-Canada Trade Agreement on Wednesday. The new agreement was one of the president’s biggest priorities during his term and was passed out of Congress just days before the impeachment trial began. Trump is expected to tout this agreement as an important highlight during the 2020 presidential campaign, especially in the swing states that will see a lot of benefits from the pact. For example, the agreement opens the Canadian dairy market to U.S. farmers, something Trump is likely to point out in dairy-heavy states like Wisconsin. During a speech at the American Farm Bureau’s National Convention, Trump told attendees that the agreement will “massively boost exports for farmers, ranchers, growers, and agricultural producers.” The deal was originally signed by leaders of all three countries back in November of 2018. However, the text was later changed after months of closed-door negotiations between House Democrats and the Trump Administration. The updates added additional labor protections and got rid of controversial patent protections for certain drugs.
New WOTUS Rule Appears Headed to the Courts
Environmental groups and Democratic states are already promising to sue over the new Waters of the U.S. Rule, which the Trump administration calls the “Navigable Waters Protection Rule.” The conservative-leaning Pacific Legal Foundation made a similar promise, calling the new rule not narrow enough. If the challenges happen to make it to the Supreme Court, the administration is banking on being able to win the backing of five of the justices who have a novel interpretation of the limits of federal power laid out under the Clean Water Act. Legal experts tell Politico that it’s a gamble that could result in a lasting win for the administration and its allies or a “spectacular loss.” Janette Brimmer, an attorney for the northwest office of Earthjustice, joined other environmentalists in calling the new rule “the dirty water rule.” She says, “President Trump’s administration wants our waters to burn again.” The Chesapeake Bay Foundation says, “The administration’s new definition of ‘Waters of the United States’ unravels safeguards in place since the landmark Clean Water Act first went into effect in 1972.”
USDA Recruiting for a Trade Mission to the Philippines
The U.S. Department of Agriculture will lead a trade mission to the Philippines, designed to explore new business opportunities with the island nation. The trade mission will travel to Manila on April 20-23. They’re looking for agribusiness people who want to take part in the trip. Anyone interested should apply to the USDA’s Foreign Agricultural Service by February 6. Morgan Haas is the FAS counselor for agricultural affairs in Manila. She says, “U.S. agricultural exports to the Philippines have more than doubled over the last decade, reaching a record $3 billion in 2018. Positive consumer attitudes and a healthy business climate point to continued growth potential going forward.” Haas also says local consumers in the country have an affinity for American brands, while the country’s rapidly expanding retail, food service, and food processing sectors offer robust opportunities for U.S. exporters looking to sell agricultural raw materials, high-value ingredients, and consumer-oriented food and beverage products. FAS office staff in the Philippines will arrange business meetings between trade mission delegates and local companies seeking to import American farm and food products. The trip to the Philippines is one of seven trade missions USDA has scheduled in 2020.
Queen Approves Brexit, Potential New Ag Markets for U.S.
Britain’s effort to leave the European Union was finally approved by Queen Elizabeth last week, clearing the way for the United Kingdom to make the move to independence. Royal approval was the last obstacle toward Brexit. Now it’s up to the European Union leaders to formally ratify the law in a vote scheduled for Wednesday. The EU Parliament’s constitutional affairs committee voted by a large margin last week to approve the Brexit withdrawal deal, paving the way for the final vote this week. The UK is expected to then begin trade negotiations with the EU as well as the United States soon after the move is official. The Brexit move could be very good news for American farmers, but that’s only if the UK doesn’t keep the restrictive EU-based ag policy in place that limits trade. Gregg Doud, the chief agricultural negotiator for the Office of the U.S. Trade Representative, says a new trade pact with Britain is of utmost importance to him. “In my mind, that’s a legitimate top ten market for U.S. agriculture,” Doudd says. “When that move is official, we’ll be right there ready to begin negotiations with the U.K.” Last week at the World Economic Forum in Switzerland, U.S. Commerce Secretary Wilbur Ross sounded optimistic that a deal would get done once Brexit is completed.
Legislators Send Letter to FDA on Dairy Labeling
Senator Tammy Baldwin, a Wisconsin Democrat, and Jim Risch, an Idaho Republican, have led a bipartisan coalition that sent a letter to Stephen Hahn, the new Commissioner of the Food and Drug Administration. They’re asking Hahn to stop the use of dairy terms on the labels of non-dairy products. The Hagstrom Report says under the former commissioner, the FDA began to review how to enforce regulations on what may or may not be labeled a dairy product, and the public comment period on the topic has concluded. “Dairy farmers are now waiting for action from the FDA,” the senators say in the letter. “We encourage you to move swiftly to address this unfairness and ensure that dairy terms may only be used to describe products that include dairy.” The senators say imposter products should no longer be able to get away with violating the law and taking advantage of dairy’s “good name.” Baldwin and Risch are also the cosponsors of the Dairy Pride Act of 2019. The act requires non-dairy products made from nuts, seeds, plants, and algae to no longer be labeled with dairy terms like milk, cheese, and yogurt.”
Beef, Pork Production Hit Record Highs in December
Pork and red meat production hit a monthly record in December. The USDA says pork production totaled 2.44 billion pounds, a nine percent jump over December of the previous year. Slaughter was also higher, up nine percent to 11.4 million head. The average live weight gaining was up two pounds to 288 pounds. Beef production totaled 4.72 billion pounds, a jump of eight percent over 2018. Slaughter increased to 2.75 million head, up seven percent from December of 2018. The five-pound gain for the average live weight was 1,373 pounds. December red meat production totaled 4.72 billion pounds; eight percent higher than the previous year. Unofficially, red meat production for 2019 was 54.5 billion pounds, three percent higher than in 2018. The USDA’s official red meat production numbers for 2019 come out in April. December’s dairy cow slaughter totaled 265,400 head, a jump of 9.3 million head from November and 4.2 million more than the previous December. The unofficial total for 2019 was 3.22 million head, a 71,000 head increase above the 2018 total.
Washington Insider: Future Trade With China
There has been something of a surge in skepticism regarding parts of the recent phase one deal with Beijing, especially China’s pledge to buy billions of dollars of U.S. foodstuffs. “The farmers are really happy with the new China Trade Deal,” the president tweeted the day after a signing ceremony in the White House.
However, that “euphoria” may be fading fast, Bloomberg reported this week. The dispute exposed Beijing’s vulnerability when it comes to food imports and the Communist Party leadership is expected to do all it can to wean itself off the U.S.
David MacLennan, chief executive of Cargill Inc., the world’s largest agricultural commodity trader said, “I think they don’t want to be in the same position again of being overly dependent on one supplier.”
Food security has long been a Chinese policy priority and officials there remember the political impact of price rises in the late 1980s that stoked dissent in the run-up to the Tiananmen Square protests. A generation later, China is many times richer but still depends on food and other imports.
For U.S. farmers, the trade deal means a potentially short-lived benefit — but possible long-term challenges as “America’s biggest customer looks elsewhere.” The extent of this response will affect the fortunes of global ag companies from traders like Cargill and Louis Dreyfus Co. to farming equipment manufactures and beyond, Bloomberg said.
China has long been striving for self-sufficiency, paying huge subsidies to farmers to grow corn and rice and more than 95% of its cereal needs can now be satisfied locally. But declining arable land, water shortages and an aging farm labor force mean that domestic production alone isn’t enough in the rapidly urbanizing country, Bloomberg says.
President Xi Jinping launched the Belt and Road initiative in 2013 to expand its trading routes, after also embarking on a multi-billion-dollar spree in global agriculture firms and infrastructure over the last decade. Before trade hostilities escalated in 2017, the U.S. was China’s top agricultural supplier for 18 years running, providing almost 20% of its farm goods imports amounting to $24 billion a year.
In the China-U.S. trade war, imports from the U.S. tumbled 45% in 2018. Beijing slapped retaliatory levies ranging from 5% to 60% on almost all American farm goods including soybeans, pork and corn. As a result, the administration announced a $28 billion bailout for farmers. The fight also forced China to search for supplies elsewhere — and to double down on efforts to diversify, with rivals Brazil and Argentina the most obvious beneficiaries.
Brazilian President Jair Bolsonaro and China’s Xi promised to continue increasing bilateral trade that surged to record levels during the trade war. China also bolstered its alliance with Argentina, opening the door to the South American nation’s soybean meal shipments for the first time.
“Food security is always critical to China’s leadership, and this trade war just affirms the importance of having strong domestic production and diversified import sources,” said Li Qiang, chief analyst with Shanghai JC Intelligence Co., an influential Chinese agricultural consultant.
But China is seen as unlikely to attempt to rely on South America alone. Brazil typically exports soybeans during March to September, before new-crop U.S. supplies are available. Despite record imports from Brazil, China briefly experienced a recent soybean deficit due to lack of American supply. So, it also has been looking for other sources, for example by investing in Russia and the Black Sea regions.
The reality is that it will be hard for China to wean itself entirely from the U.S. China’s annual soy demand is about 110 million tons, of which domestic output satisfies just 15%, according to China’s ministry of agriculture.
Thus, many Chinese officials regard the U.S. as “just too influential.” America will remain an important trading partner for soybeans, China’s minister of agriculture and rural affairs said last year. It may also prove politically expedient for Beijing to maintain some trade with Washington to keep its truce in place.
There’s historical precedent for how trade disputes can permanently reshape global trade, and the lessons from a battle more than 40 years ago suggest American farmers may suffer over the longer term, Bloomberg asserts.
In 1973, Washington imposed an embargo on soybean exports to Japan. The conflict lasted only five days, and Japan returned to purchase U.S. soybeans — but “has never again seen America again as a reliable supplier,” Bloomberg said. Instead it diversified purchases and invested heavily in the then-nascent Brazilian soybean industry.
In addition, the Nixon administration embargoed trade with China over two decades through 1971, policies that may also have stained the U.S.’s reputation as a reliable partner in the minds of Chinese leadership. “Given those experiences, it’s not surprising they put a lot of emphasis on food security,” Friedrichs said. “They don’t want to be overly dependent on a single supplier.”
So, we will see. Questions have frequently been raised across the ag industry regarding the future impacts of the recent trade fight, and these likely will resurface as the two-year duration of the current truce approaches its end—and the phase two considerations take shape. These are debates that will be crucial to ag producers and which should be watched closely as they emerge, Washington Insider believes.
However, that “euphoria” may be fading fast, Bloomberg reported this week. The dispute exposed Beijing’s vulnerability when it comes to food imports and the Communist Party leadership is expected to do all it can to wean itself off the U.S.
David MacLennan, chief executive of Cargill Inc., the world’s largest agricultural commodity trader said, “I think they don’t want to be in the same position again of being overly dependent on one supplier.”
Food security has long been a Chinese policy priority and officials there remember the political impact of price rises in the late 1980s that stoked dissent in the run-up to the Tiananmen Square protests. A generation later, China is many times richer but still depends on food and other imports.
For U.S. farmers, the trade deal means a potentially short-lived benefit — but possible long-term challenges as “America’s biggest customer looks elsewhere.” The extent of this response will affect the fortunes of global ag companies from traders like Cargill and Louis Dreyfus Co. to farming equipment manufactures and beyond, Bloomberg said.
China has long been striving for self-sufficiency, paying huge subsidies to farmers to grow corn and rice and more than 95% of its cereal needs can now be satisfied locally. But declining arable land, water shortages and an aging farm labor force mean that domestic production alone isn’t enough in the rapidly urbanizing country, Bloomberg says.
President Xi Jinping launched the Belt and Road initiative in 2013 to expand its trading routes, after also embarking on a multi-billion-dollar spree in global agriculture firms and infrastructure over the last decade. Before trade hostilities escalated in 2017, the U.S. was China’s top agricultural supplier for 18 years running, providing almost 20% of its farm goods imports amounting to $24 billion a year.
In the China-U.S. trade war, imports from the U.S. tumbled 45% in 2018. Beijing slapped retaliatory levies ranging from 5% to 60% on almost all American farm goods including soybeans, pork and corn. As a result, the administration announced a $28 billion bailout for farmers. The fight also forced China to search for supplies elsewhere — and to double down on efforts to diversify, with rivals Brazil and Argentina the most obvious beneficiaries.
Brazilian President Jair Bolsonaro and China’s Xi promised to continue increasing bilateral trade that surged to record levels during the trade war. China also bolstered its alliance with Argentina, opening the door to the South American nation’s soybean meal shipments for the first time.
“Food security is always critical to China’s leadership, and this trade war just affirms the importance of having strong domestic production and diversified import sources,” said Li Qiang, chief analyst with Shanghai JC Intelligence Co., an influential Chinese agricultural consultant.
But China is seen as unlikely to attempt to rely on South America alone. Brazil typically exports soybeans during March to September, before new-crop U.S. supplies are available. Despite record imports from Brazil, China briefly experienced a recent soybean deficit due to lack of American supply. So, it also has been looking for other sources, for example by investing in Russia and the Black Sea regions.
The reality is that it will be hard for China to wean itself entirely from the U.S. China’s annual soy demand is about 110 million tons, of which domestic output satisfies just 15%, according to China’s ministry of agriculture.
Thus, many Chinese officials regard the U.S. as “just too influential.” America will remain an important trading partner for soybeans, China’s minister of agriculture and rural affairs said last year. It may also prove politically expedient for Beijing to maintain some trade with Washington to keep its truce in place.
There’s historical precedent for how trade disputes can permanently reshape global trade, and the lessons from a battle more than 40 years ago suggest American farmers may suffer over the longer term, Bloomberg asserts.
In 1973, Washington imposed an embargo on soybean exports to Japan. The conflict lasted only five days, and Japan returned to purchase U.S. soybeans — but “has never again seen America again as a reliable supplier,” Bloomberg said. Instead it diversified purchases and invested heavily in the then-nascent Brazilian soybean industry.
In addition, the Nixon administration embargoed trade with China over two decades through 1971, policies that may also have stained the U.S.’s reputation as a reliable partner in the minds of Chinese leadership. “Given those experiences, it’s not surprising they put a lot of emphasis on food security,” Friedrichs said. “They don’t want to be overly dependent on a single supplier.”
So, we will see. Questions have frequently been raised across the ag industry regarding the future impacts of the recent trade fight, and these likely will resurface as the two-year duration of the current truce approaches its end—and the phase two considerations take shape. These are debates that will be crucial to ag producers and which should be watched closely as they emerge, Washington Insider believes.
US Eyes Trade Deal With UK Before Year End
The Trump administration is looking to complete a trade deal with the United Kingdom before the end of 2020, Treasury Secretary Steven Mnuchin said Thursday. Talks could start as soon as February.
“The president is very focused ... on Europe,” Mnuchin said in an interview with CNBC. “The good news is we have seen a lot of investments in the U.S. from the European car companies. But the president wants to make sure that we have free and fair and reciprocal trade in Europe. And by the way, we are very focused on a UK Free Trade Agreement, which we hope to get done this year as well.”
British Prime Minister Boris Johnson is expected in Washington next month to begin talks with President Donald Trump though the exact dates have not yet been set.
Key in the U.S.-UK trade deal will be in large part dictated by the way the UK aligns itself with the EU upon Brexit. The closer it hones its rules to those of the EU, it could make it much more difficult for negotiations in areas like agriculture.
“The president is very focused ... on Europe,” Mnuchin said in an interview with CNBC. “The good news is we have seen a lot of investments in the U.S. from the European car companies. But the president wants to make sure that we have free and fair and reciprocal trade in Europe. And by the way, we are very focused on a UK Free Trade Agreement, which we hope to get done this year as well.”
British Prime Minister Boris Johnson is expected in Washington next month to begin talks with President Donald Trump though the exact dates have not yet been set.
Key in the U.S.-UK trade deal will be in large part dictated by the way the UK aligns itself with the EU upon Brexit. The closer it hones its rules to those of the EU, it could make it much more difficult for negotiations in areas like agriculture.
EPA Finally Unveils WOTUS Replacement
The final rule to replace the Obama-era Waters of the U.S. (WOTUS) rule was released by EPA Thursday, with the Navigable Waters Protection Rule representing “step two” of the plan from EPA and the U.S. Army Corps of Engineers to repeal and replace the Obama-era regulation.
The rule scales back the categories of waters that fall under Clean Water Act (CWA) jurisdiction. Under the new rule, four categories would be federally regulated: The territorial seas and traditional navigable waters; perennial and intermittent tributaries to those waters; certain lakes, ponds and impoundments; and wetlands adjacent to jurisdictional waters. The rule also spells out 12 categories that would be excluded, including those that only contain water in direct response to rainfall, groundwater, ditches that are not traditional navigable waters and tributaries that are not next to wetlands.
EPA also noted that states may still choose to regulate waters that do not fall under the scope of the federal CWA. The rule would become effective 60 days after being published in the Federal Register.
Ag interests welcomed the rule while many environmental groups criticized the plan as expected. The rule is expected to end up being challenged in the courts.
The rule scales back the categories of waters that fall under Clean Water Act (CWA) jurisdiction. Under the new rule, four categories would be federally regulated: The territorial seas and traditional navigable waters; perennial and intermittent tributaries to those waters; certain lakes, ponds and impoundments; and wetlands adjacent to jurisdictional waters. The rule also spells out 12 categories that would be excluded, including those that only contain water in direct response to rainfall, groundwater, ditches that are not traditional navigable waters and tributaries that are not next to wetlands.
EPA also noted that states may still choose to regulate waters that do not fall under the scope of the federal CWA. The rule would become effective 60 days after being published in the Federal Register.
Ag interests welcomed the rule while many environmental groups criticized the plan as expected. The rule is expected to end up being challenged in the courts.
Monday Watch List
Markets
There are few economic reports on Monday morning other than new home sales. DTN will be watching for South American weather updates, any news about the coronavirus, and will be watching for new sales announcements, especially regarding China. We will also be looking at grain inspections.
Weather
Light freezing precipitation is in store for much of the western and northern Midwest Monday, causing transportation and safety hazards and delays. Hazardous fog is also indicated in the Midwest and southeastern Plains. Other crop areas will be drier. However, moderate to heavy snow is slated to form in the southwestern Plains Monday night through Tuesday.
There are few economic reports on Monday morning other than new home sales. DTN will be watching for South American weather updates, any news about the coronavirus, and will be watching for new sales announcements, especially regarding China. We will also be looking at grain inspections.
Weather
Light freezing precipitation is in store for much of the western and northern Midwest Monday, causing transportation and safety hazards and delays. Hazardous fog is also indicated in the Midwest and southeastern Plains. Other crop areas will be drier. However, moderate to heavy snow is slated to form in the southwestern Plains Monday night through Tuesday.
Friday, January 24, 2020
EPA Announces WOTUS Change
The Environmental Protection Agency Thursday, along with the Army Corps of Engineers, announced a new “clear definition for Waters of the United States.” EPA Administrator Andrew Wheeler says the new Navigable Waters Protection Rule provides “much needed regulatory certainty and predictability for American farmers.” The rule recognizes the difference between federally protected wetlands and state protected wetlands, and adheres to the statutory limits of the agencies’ authority. The revised definition identifies four clear categories of waters that are federally regulated under the Clean Water Act: the territorial seas and traditional navigable waters, perennial and intermittent tributaries, certain lakes, ponds and impoundments, and wetlands that are adjacent to jurisdictional waters. The final action also details what waters are not subject to federal control, including features that only contain water in direct response to rainfall, groundwater, many ditches, including most farm and roadside ditches, prior converted cropland, farm and stock watering ponds, and waste treatment systems.
Ag, Environmental Groups, React to EPA WOTUS Announcement
The Waters Advocacy Coalition applauds the new Clean Water rule that brings clarity and certainty to enforcement of the Clean Water Act. The coalition is a broad cross-section of small businesses, farmers, ranchers and builders, including the American Farm Bureau Federation. The Environmental Protection Agency and U.S. Army Corps of Engineers announced the WOTUS replacement Thursday. Farm Bureau President Zippy Duvall says AFBF supports the new rule, as it allows “farmers to understand water regulations without having to hire teams of consultants and lawyers.” National Pork Producers Council President David Herring says the previous WOTUS rule was “a dramatic government overreach and an unprecedented expansion of federal authority over private lands.” Now, Agriculture Secretary Sonny Perdue says the new rule removes “undue burdens and strangling regulations” from farmers. The response from agriculture was expected, as was the response from Environmental groups. The Natural Resources Defense Council says the Trump administration is “stripping protections” from streams and wetlands, adding “It's a blatant disregard for science, and for public health.”
Farmers Optimistic Despite Challenging 2019
A new poll finds farmers are optimistic for 2020, despite a challenging 2019. The DTN/Progressive Farmer Agriculture Confidence Index rose to 164.1 in December 2019, significantly higher than the Index of 110.2 in March and the December 2018 level of 109.2. The long, drawn-out, challenging crop year, along with trade battles, didn’t dampen their mood for the future, or their feelings about the Trump administration. About 75 percent of farmers said that if the 2020 presidential election was held at that time, they would vote to reelect the current administration. About a quarter said they would likely not vote for the current administration. Farmers were surveyed in mid-to-late December, when President Donald Trump announced a phase one trade agreement with China, and the House of Representatives approved the U.S.-Mexico-Canada Agreement, sending the trade deal to the Senate. The DTN/Progressive Farmer Agriculture Confidence Index is conducted three times a year, before planting, before harvest, and before the end of the year.
Export Exchange 2020 Scheduled For October
The U.S. Grains Council announced Export Exchange 2020 this week, scheduled for October 7-9. The event, sponsored by the U.S. Grains Council, Growth Energy and the Renewable Fuels Association, uniquely focuses on connecting international grain buyers with U.S. suppliers. Export Exchange 2020 will take place at the Loews Kansas City hotel in Kansas City, Missouri. More than 200 international purchasers and end-users of U.S. coarse grains and related products are expected to join an estimated 300 U.S. producers, agribusinesses and representatives at the event. In addition to business-to-business meetings and an exhibit hall, the conference will address critical issues facing U.S. exports to build awareness of the benefits of U.S. corn, sorghum, distiller’s dried grains with solubles (DDGS) and other products. The grain buyers from 35 countries who attended Export Exchange 2018 in Minneapolis reported purchasing approximately 2.1 million metric tons of coarse grains and co-products traded either at the conference or immediately before or after, valued at an estimated $403 million.
Climate Change and Other Issues Move Doomsday Clock: 100 Seconds to Midnight
The metaphorical Doomsday Clock set by the Bulletin of the Atomic Scientists was set at 100 seconds until midnight this week, as the organization says, “Humanity continues to face two simultaneous existential dangers—nuclear war and climate change.” Rachel Bronson, president and CEO of Bulletin of the Atomic Scientists, says, “We now face a true emergency – an absolutely unacceptable state of world affairs that has eliminated any margin for error or further delay.” Regarding climate change, the organization says governmental action still falls far short of meeting the challenge at hand. The Doomsday Clock has now moved closer to midnight in three of the last four years. While the Doomsday Clock did not move in 2019, its minute hand was set forward in 2018 by 30 seconds, to two minutes to midnight. The clock was adjusted in 2017 to two and a half minutes to midnight from its previous setting of three minutes to midnight.
Americans to Eat Record 1.4 Billion Chicken Wings for Super Bowl
The National Chicken Council Thursday released its annual Chicken Wing Report, projecting Americans to consume a record-breaking 1.4 billion wings during the upcoming Super Bowl weekend. Americans’ love for wings continues to grow. This year’s wing consumption estimate is a two percent increase over 2019, meaning Americans will eat 27 million more wings during this year’s big game weekend versus last year’s. To put that in perspective, if Kansas City Chiefs’ coach Andy Reid ate three wings per minute, it would take him about 900 years to eat 1.4 billion wings. Council spokesperson Tom Super says when it comes to Super Bowl menus, wings rule the roost.” The Council asked wing-eaters about their habits, and roughly two thirds of Americans, 65 percent, who eat chicken wings, claim they like to do so while watching a major sporting event like the Super Bowl. Half, 51 percent, claim that they believe chicken wings should be the official food of the Super Bowl.
Washington Insider: Did the Fed Hold the Economy Back?
The fight over U.S. monetary policy continues on display. On Wednesday, President Donald Trump renewed that criticism from the sidelines of an elite gathering in Davos, Switzerland.
When asked why his economic growth goal was not reached, he said, “No. 1, the Fed was not good,” Data for the full year aren’t isn’t in yet, but probably was 2.2% or 2.3% relative to the fourth quarter of 2018, economists estimate.
The president also pointed to the grounding of Boeing’s 737 Max plane and severe storms as factors that held back the economy, but added that “with all of that, had we not done the big raise on interest, I think we would have been close to 4%.”
Economists said that claim was not realistic.
The central bank’s nine interest rate increases between 2015 and late 2018 — three of which it reversed last year — probably reined in business investment and the housing market, economists say. But that impact did not shave nearly 2 percentage points from growth.
It discussed “a few ways to think through how the economy might have shaped up had the Fed acted differently.”
In the “real world,” the Fed lifted rates between December 2015 and the end of 2018 in an effort to achieve a soft landing in which growth continued at a moderate pace and inflation settled around its 2% target. When growth showed signs of wavering in 2019 and inflation remained soft, Fed officials reversed course, cutting rates three times.
In what it called the “most extreme counterfactual,” one in which the Fed never raised its policy interest rate at all, growth might have been 1 percentage point higher in 2019, said Ernie Tedeschi, policy economist at Evercore ISI.
That estimate, based on the central bank’s main economic model, would have gotten America to around 3.2% growth in 2019 — but at a hefty cost. For example, “Inflation would’ve been well above their mandate, 2.5% and rising, at this point,” Tedeschi said, and “would have necessitated a sharp increase in rates.” Such an abrupt change could have weakened the economy and certainly “would have been painful,” he said.
But even in that version of the world, one in which the Fed was willing to leave its policy totally untouched at near-zero for more than a decade, the economy could have achieved that 4% growth figure only absent a trade war — and even that is a stretch, the Times said.
While it’s hard to gauge precisely how much the administration’s tariffs reduced growth, estimates suggest they could have shaved between 0.5% and 1 percentage point away in 2019, Mr. Tedeschi said.
All of these projections are highly uncertain and even if the basic figures are right, “this scenario is unrealistic,” the Times said.
In another version of the world, the Fed could have raised interest rates between 2015 and 2018, but then lowered them much more quickly in 2019. Had the federal funds rate dropped to zero at the very start of the year, Tedeschi said, it might have added about 0.35 percentage point to growth, getting the economy up to the 2.5% range.
However, that is seen as far-fetched since the Fed has never slashed rates to zero outside of a recession.
Doing so at a time when the economy was growing and the president pushing for more stimulus would have looked overtly political and could have raised the risk of higher inflation. Relative to the economy’s structural growth path — the one driven by labor force expansion and productivity — the Fed’s rate-setting may have shaved about 0.1 percentage point from growth in 2019, according to an estimate from Julia Coronado, a founder of MacroPolicy Perspectives. Slower capital expenditures and trade probably shaved another 0.1 percentage point from growth. But those effects were offset by the aftereffect of ramped-up government spending and tax cuts, which she estimates probably lifted growth by about 0.4 percentage point.
But even here, there are uncertainties.
While it is clear that business investment fell sharply last year and manufacturing sagged, weighing down growth, it is hard to tell how much of that was a lagged response to higher interest rates and how much was a response to the trade war.
“The slowdown in capital expenditures came along when the trade war escalated,” Torsten Slok, an economist at Deutsche Bank, said in an interview. “One cautious estimate is that the trade war played a bigger role,” he said.
Tax cuts and higher government spending have helped to nudge growth temporarily above its potential — it came in at 2.8 percent in 2017 and 2.5 percent in 2018, decently above the roughly 2 percent sustainable growth rate.
Yet those gains probably will not hold. The working-age population is growing more slowly, and productivity, which popped temporarily, has since fallen back to earth. The Congressional Budget Office estimates that over the next decade, growth will average 1.9% a year, up slightly from the preceding decade but down substantially from the 3 percent and higher growth that prevailed before 2000.
So, we will see. “We haven’t seen 4% growth for many, many years,” Slok said. Certainly, this continuing fight over monetary policy should be watched closely by producers as it intensifies during the coming campaign, Washington Insider believes.
When asked why his economic growth goal was not reached, he said, “No. 1, the Fed was not good,” Data for the full year aren’t isn’t in yet, but probably was 2.2% or 2.3% relative to the fourth quarter of 2018, economists estimate.
The president also pointed to the grounding of Boeing’s 737 Max plane and severe storms as factors that held back the economy, but added that “with all of that, had we not done the big raise on interest, I think we would have been close to 4%.”
Economists said that claim was not realistic.
The central bank’s nine interest rate increases between 2015 and late 2018 — three of which it reversed last year — probably reined in business investment and the housing market, economists say. But that impact did not shave nearly 2 percentage points from growth.
It discussed “a few ways to think through how the economy might have shaped up had the Fed acted differently.”
In the “real world,” the Fed lifted rates between December 2015 and the end of 2018 in an effort to achieve a soft landing in which growth continued at a moderate pace and inflation settled around its 2% target. When growth showed signs of wavering in 2019 and inflation remained soft, Fed officials reversed course, cutting rates three times.
In what it called the “most extreme counterfactual,” one in which the Fed never raised its policy interest rate at all, growth might have been 1 percentage point higher in 2019, said Ernie Tedeschi, policy economist at Evercore ISI.
That estimate, based on the central bank’s main economic model, would have gotten America to around 3.2% growth in 2019 — but at a hefty cost. For example, “Inflation would’ve been well above their mandate, 2.5% and rising, at this point,” Tedeschi said, and “would have necessitated a sharp increase in rates.” Such an abrupt change could have weakened the economy and certainly “would have been painful,” he said.
But even in that version of the world, one in which the Fed was willing to leave its policy totally untouched at near-zero for more than a decade, the economy could have achieved that 4% growth figure only absent a trade war — and even that is a stretch, the Times said.
While it’s hard to gauge precisely how much the administration’s tariffs reduced growth, estimates suggest they could have shaved between 0.5% and 1 percentage point away in 2019, Mr. Tedeschi said.
All of these projections are highly uncertain and even if the basic figures are right, “this scenario is unrealistic,” the Times said.
In another version of the world, the Fed could have raised interest rates between 2015 and 2018, but then lowered them much more quickly in 2019. Had the federal funds rate dropped to zero at the very start of the year, Tedeschi said, it might have added about 0.35 percentage point to growth, getting the economy up to the 2.5% range.
However, that is seen as far-fetched since the Fed has never slashed rates to zero outside of a recession.
Doing so at a time when the economy was growing and the president pushing for more stimulus would have looked overtly political and could have raised the risk of higher inflation. Relative to the economy’s structural growth path — the one driven by labor force expansion and productivity — the Fed’s rate-setting may have shaved about 0.1 percentage point from growth in 2019, according to an estimate from Julia Coronado, a founder of MacroPolicy Perspectives. Slower capital expenditures and trade probably shaved another 0.1 percentage point from growth. But those effects were offset by the aftereffect of ramped-up government spending and tax cuts, which she estimates probably lifted growth by about 0.4 percentage point.
But even here, there are uncertainties.
While it is clear that business investment fell sharply last year and manufacturing sagged, weighing down growth, it is hard to tell how much of that was a lagged response to higher interest rates and how much was a response to the trade war.
“The slowdown in capital expenditures came along when the trade war escalated,” Torsten Slok, an economist at Deutsche Bank, said in an interview. “One cautious estimate is that the trade war played a bigger role,” he said.
Tax cuts and higher government spending have helped to nudge growth temporarily above its potential — it came in at 2.8 percent in 2017 and 2.5 percent in 2018, decently above the roughly 2 percent sustainable growth rate.
Yet those gains probably will not hold. The working-age population is growing more slowly, and productivity, which popped temporarily, has since fallen back to earth. The Congressional Budget Office estimates that over the next decade, growth will average 1.9% a year, up slightly from the preceding decade but down substantially from the 3 percent and higher growth that prevailed before 2000.
So, we will see. “We haven’t seen 4% growth for many, many years,” Slok said. Certainly, this continuing fight over monetary policy should be watched closely by producers as it intensifies during the coming campaign, Washington Insider believes.
Farm Bureau policy plans call for more farmer aid
The American Farm Bureau Federation has set their policy goals for 2020, including another round of trade aid for farmers. “Our members are basically saying, ‘Show us results,’” said Scott VanderWal, the group’s national vice president. He noted that “no products have moved, implementation has not happened yet, and it is kind of a ‘prove it to me’ thing.”
They also are calling for a review of USDA's National Agricultural Statistics Service (NASS) and its crop reporting program, including its methodology and track record. “The June 2019 Acreage report was a debacle, and it seems like each NASS report this year has contained surprises and unexpected market impacts, etc.,” Farm Bureau said.
The group also wants USDA to amend its hemp production framework to allow for plants with up to one percent tetrahydrocannabinol (THC, the chemical in cannabis), compared with the current limit of 0.3%. USDA's interim hemp rule requires “hot” crops to be destroyed at 0.5% THC levels.
They also are calling for a review of USDA's National Agricultural Statistics Service (NASS) and its crop reporting program, including its methodology and track record. “The June 2019 Acreage report was a debacle, and it seems like each NASS report this year has contained surprises and unexpected market impacts, etc.,” Farm Bureau said.
The group also wants USDA to amend its hemp production framework to allow for plants with up to one percent tetrahydrocannabinol (THC, the chemical in cannabis), compared with the current limit of 0.3%. USDA's interim hemp rule requires “hot” crops to be destroyed at 0.5% THC levels.
Grassley signs USMCA legislation
Sen. Chuck Grassley, R-Iowa, took to social media Wednesday to announce he has signed the US-Mexico-Canada Agreement (USMCA) in his role in the Senate.
“As President pro tem I had the honor of signing United States Mexico Canada Agreement Implementation Act w my colleagues. This trade agreement will greatly benefit Iowa. Now to Pres Trump for signature,” Grassley tweeted.
Canada has yet to clear the trade deal but is expected to once their parliament returns January 27.
The exact date President Donald Trump will sign the pact remains unclear, with some indications he wants to do it in farm country and with Canadian and Mexican officials present.
“As President pro tem I had the honor of signing United States Mexico Canada Agreement Implementation Act w my colleagues. This trade agreement will greatly benefit Iowa. Now to Pres Trump for signature,” Grassley tweeted.
Canada has yet to clear the trade deal but is expected to once their parliament returns January 27.
The exact date President Donald Trump will sign the pact remains unclear, with some indications he wants to do it in farm country and with Canadian and Mexican officials present.
Friday Watch List
Markets
Early on Friday we will see reports on personal income, consumer spending, and the core price index. Also, we will see export sales released. We will also watch for any daily export sales that might be announced, South American weather, and any hint that China may be buying ahead of their Lunar New Year. We will also be keeping an eye on coronavirus, and any new information regarding that.
Weather
Light to moderate snow and moderate to locally heavy rain are in store for the central and eastern Midwest, Mid South, and Southeast Friday. We'll also see rain and snow throughout the Northwest. The precipitation keeps soils saturated and will delay transportation. Other crop areas will be dry. A new storm system is slated for the central U.S. early next week.
Early on Friday we will see reports on personal income, consumer spending, and the core price index. Also, we will see export sales released. We will also watch for any daily export sales that might be announced, South American weather, and any hint that China may be buying ahead of their Lunar New Year. We will also be keeping an eye on coronavirus, and any new information regarding that.
Weather
Light to moderate snow and moderate to locally heavy rain are in store for the central and eastern Midwest, Mid South, and Southeast Friday. We'll also see rain and snow throughout the Northwest. The precipitation keeps soils saturated and will delay transportation. Other crop areas will be dry. A new storm system is slated for the central U.S. early next week.
Thursday, January 23, 2020
Senate Sends USCMA to President Trump
The U.S. Senate Wednesday put its finishing touches on the U.S.-Mexico-Canada Agreement. Senator Chuck Grassley, chair of the Finance Committee and Senate President Pro Tempore, signed the agreement, the final step before the agreement heads to the White House. President Donald Trump was previously expected to sign the agreement sometime this week. The ceremony Wednesday signals the end is close after the nearly three-year process of renegotiating the agreement, then further negotiations to gain U.S. congressional approval. President Trump, in January 2017, announced his intention to renegotiate the North American Free Trade Agreement. The trade talks started in May of that year. A deal was reached in September of 2018 between the U.S., Mexico and Canada. Senator Deb Fischer, a Republican from Nebraska who attended the ceremony Wednesday, says she is "proud that this critical trade agreement has finally come across the finish line.” President Donald Trump told the American Farm Bureau Federation on Sunday, that USMCA, and the agreement with China, “are just the beginning,” as his administration seeks more trade agreements.
Canada to Consider USMCA Next Week
Canada will consider the passage of the U.S.-Mexico-Canada Agreement next week. Prime Minister Justin Trudeau (true-doh) told reporters this week, ”On Monday, we will introduce a Ways and Means motion, and on Wednesday we will table legislation to ratify the deal.” The comments were part of a press conference detailing plans for Canada’s Parliament, which returns to work next week. Trudeau says, “We are going to make sure that we are going to move forward in the right way, and that means ratifying this new NAFTA as quickly as possible, but responsibly in the House of Commons.” Canada is the last of three nations to take action on the agreement. Mexico has already ratified the agreement, and the U.S. has one final step to ratify the agreement, being President Donald Trump's signature. The USMCA, or CUSMA, as it’s known in Canada, is estimated to be worth an extra $2 billion annually in exports for U.S. farmers.
Farm Bureau Establishes 2020 Priorities
Farmer and rancher delegates to the American Farm Bureau Federation’s 101st Annual Convention this week adopted policies to guide the organization’s work in 2020. After a year-long process to review ways to modernize Federal Milk Marketing Orders, AFBF’s delegates voted to support creation of a flexible, farmer- and industry-led milk management system. This includes giving individual dairy farmers a voice by allowing them to vote independently and confidentially on rules governing milk prices. The new dairy policies, when combined, “will form a strong foundation” to guide the organization during future reform efforts to better coordinate milk supply and demand. Delegates also updated labor and immigration policies, emphasizing the need to see significant changes to the H-2A program. And delegates also voted to support allowing a higher THC level in hemp. Delegates also re-elected American Farm Bureau President Zippy Duvall and Vice President Scott VanderWal for their third terms. VanderWal served as chair of the meeting on behalf of Duvall, who is grieving the loss of his wife, Bonnie.
Cattle Disease Traceability Continues Advancing
Multiple state cattlemen’s organizations from major beef producing regions have partnered together to form U.S. CattleTrace, a disease traceability initiative. The goal is to develop a national infrastructure for disease traceability and encourage private industry’s use of the infrastructure for individualized management practices. The new U.S. CattleTrace initiative combines the efforts of CattleTrace, which includes the Kansas Livestock Association and others in Kansas, Missouri, Oklahoma, Kentucky, Oregon and Washington, as well as traceability pilot projects underway in Florida and Texas. Brandon Depenbusch, CattleTrace board of directors chairman, says the partnership “will be a catalyst to build upon the CattleTrace foundation we established the past few years.” In late August 2018, CattleTrace Inc. was formally established as a private, not-for-profit corporation to securely maintain and manage the data collected as part of the disease traceability pilot project. Volunteer leaders from each of the partner organizations have agreed to a set of guiding principles for U.S. CattleTrace.
NBB Welcomes New Biodiesel Quality Reports
The National Biodiesel Board Wednesday welcomed new reports on Biodiesel fuel quality published by the National Renewable Energy Laboratory. Through funding and support from the National Biodiesel Board, NREL's statistical analysis is based on thousands of data points that were previously unavailable. The reports are comprised of data gathered from U.S. and Canadian BQ-9000 producer members. The analysis from both the 2017 and 2018 reports show that the vast majority of biodiesel readily exceeded the specification limits in ASTM D6751, the standard for biodiesel. As part of the data gathering process, biodiesel producers test their own B100 fuel at the point of production monthly, then provide NBB's National Biodiesel Accreditation Commission with the resulting data. NBAC randomizes and anonymizes the results and provide the final version to NREL for statistical analysis. NBB Technical Director Scott Fenwick says, “We now have a simpler, more efficient way to collect, analyze, and determine the quality of biodiesel.” The data was presented during a breakout session at the 2020 National Biodiesel Conference and Expo.
ASA Celebrates Its ‘First Soy Century’
The American Soybean Association is celebrating its “First Soy Century” as it recognizes its 100th anniversary throughout 2020. The roots of ASA were formed during the first Corn Belt Soybean Field Day in Camden, Indiana, in September 1920. The event drew nearly 1,000 farmers from six states, who were interested in discovering more about this emerging new commodity called soybeans. The National Soybean Growers’ Association—later renamed the American Soybean Association—was formed that year. In the century since those beginnings, ASA has continually focused on sustaining and improving the prospects and opportunities for profitability for U.S. soybean farmers. ASA plans a robust year of activities to celebrate the association’s centennial including, high profile activities at Commodity Classic, and a policy event in July at the National Museum of American History in Washington, D.C. ASA will also host a forward-looking symposium entitled “The Next Soy Century” to be held on the campus of Purdue University in August. Learn more at ASA100Years.com.
Washington Insider: Emerging GOP Climate Plans
Although President Trump is widely seen as a climate-change skeptic, he announced on Tuesday that the United States will join the One Trillion Trees Initiative launched at the World Economic Forum in a global effort to combat climate change, The Hill reported this week.
The president made the announcement during an address to global business leaders gathered in Davos, Switzerland. "We're committed to conserving the majesty of God's creation and the natural beauty of our world," he said, adding that the U.S. "will continue to show strong leadership in restoring, growing and better managing our trees and our forests.
The Hill reported that the announcement drew “some of the most sustained applause of any portion of the president’s 30-minute speech which focused mostly on his administration's accomplishments and the strength of the U.S. economy. That economic message contrasted with other world leaders who used the forum to highlight issues like climate change and global collaboration.
President Trump has been asked repeatedly at gatherings with foreign leaders about his views on climate change and the environment. He declared Tuesday that he's "a very big believer in the environment" and earlier this month told reporters he does not believe climate change is a hoax, as he once claimed.
But environmentalists have been alarmed by his administration's policies, including rolling back regulations meant to curb air and water pollution and withdrawing the U.S. from the Paris climate agreement.
Also speaking at Davos on Tuesday was 17-year old Swedish climate activist Greta Thunberg. Trump, in an interview with The Wall Street Journal, said he didn't "really know anything" about Thunberg and dismissed her as "very angry."
The Hill also noted that House Minority Leader Kevin McCarthy, R-Calif., “teased” new details about Republicans' forthcoming climate plan Tuesday, highlighting the legislation's focus on trees as a method for capturing carbon pollution. The Republican effort focuses on traditional areas of interest for the party, including spurring green technology innovation and carbon capture.
Rep. Bruce Westerman, R-Ark., who is developing the legislation that would commit the U.S. to the goal, said the plan would "go back to something old for something new and trees are the ultimate carbon sequestration."
Republicans had previously hinted the plan would rely heavily on trees but it's still unclear just how many Westerman's legislation would require planting.
The plan would not, however, set any targets for reducing carbon pollution, The Hill said. An ambitious plan from the Democrats outlined earlier this month would require the U.S. to rely on 100 percent clean energy by 2050.
Even though Democrats have likewise expressed interest in boosting tree planting as well as green technology, the Republican plan would face an uphill battle in the House as Democrats push forward their own plan with hard targets for carbon reductions.
In addition, environmental groups have already criticized the Republican bill, arguing they were pushing policies they've already thwarted. "Congressional Republicans and Donald Trump just blocked a package of clean energy tax credits from being included in the year-end tax and budget deal," Sierra Club global climate policy director John Coequyt said in a statement.
"That was a serious and limited solution they failed to support, but they are suddenly serious a few weeks later after decades of climate denial."
The Hill also reported that presidential candidates Michael Bloomberg and Tom Steyer are leaning into climate change as a campaign issue to stand out in a crowded Democratic field. The former New York City mayor and owner of the Bloomberg financial empire has donated millions of dollars to the Sierra Club's Beyond Coal campaign, which has worked to shutter numerous coal plants, and he has pledged to donate $500 million to close the country's remaining coal plants by 2030
Meanwhile, Steyer founded the organization NextGen America, which aims to support candidates who advocate for climate action.
Both have highlighted their commitment to the issue on the campaign trail. Steyer has said that he would declare climate change a national emergency on his first day in office and Bloomberg has also said that fighting climate change would be a focus for him.
"They have been super active and insistent at not only raising the profile of the issue in front of voters, making it a litmus test with elected officials, but also, especially if you look at Mike Bloomberg, using his resources ... to give big cities and major carbon users real incentives to plan for the future and a lower-carbon or carbon free future," Democratic strategist Jon Reinish said of the two candidates.
The Hill also points out that both candidates have faced a certain degree of skepticism on climate issues and are contending with candidates who are polling higher than they are and who have also put heavy emphasis on climate policy.
So, we will see. Clearly the public is worried about the climate and there seems to be growing pressure on candidates to weigh in on those issues which continue to be extremely contentious—and which should be watched closely by producers as these debates continue to intensify, Washington Insider believes.
The president made the announcement during an address to global business leaders gathered in Davos, Switzerland. "We're committed to conserving the majesty of God's creation and the natural beauty of our world," he said, adding that the U.S. "will continue to show strong leadership in restoring, growing and better managing our trees and our forests.
The Hill reported that the announcement drew “some of the most sustained applause of any portion of the president’s 30-minute speech which focused mostly on his administration's accomplishments and the strength of the U.S. economy. That economic message contrasted with other world leaders who used the forum to highlight issues like climate change and global collaboration.
President Trump has been asked repeatedly at gatherings with foreign leaders about his views on climate change and the environment. He declared Tuesday that he's "a very big believer in the environment" and earlier this month told reporters he does not believe climate change is a hoax, as he once claimed.
But environmentalists have been alarmed by his administration's policies, including rolling back regulations meant to curb air and water pollution and withdrawing the U.S. from the Paris climate agreement.
Also speaking at Davos on Tuesday was 17-year old Swedish climate activist Greta Thunberg. Trump, in an interview with The Wall Street Journal, said he didn't "really know anything" about Thunberg and dismissed her as "very angry."
The Hill also noted that House Minority Leader Kevin McCarthy, R-Calif., “teased” new details about Republicans' forthcoming climate plan Tuesday, highlighting the legislation's focus on trees as a method for capturing carbon pollution. The Republican effort focuses on traditional areas of interest for the party, including spurring green technology innovation and carbon capture.
Rep. Bruce Westerman, R-Ark., who is developing the legislation that would commit the U.S. to the goal, said the plan would "go back to something old for something new and trees are the ultimate carbon sequestration."
Republicans had previously hinted the plan would rely heavily on trees but it's still unclear just how many Westerman's legislation would require planting.
The plan would not, however, set any targets for reducing carbon pollution, The Hill said. An ambitious plan from the Democrats outlined earlier this month would require the U.S. to rely on 100 percent clean energy by 2050.
Even though Democrats have likewise expressed interest in boosting tree planting as well as green technology, the Republican plan would face an uphill battle in the House as Democrats push forward their own plan with hard targets for carbon reductions.
In addition, environmental groups have already criticized the Republican bill, arguing they were pushing policies they've already thwarted. "Congressional Republicans and Donald Trump just blocked a package of clean energy tax credits from being included in the year-end tax and budget deal," Sierra Club global climate policy director John Coequyt said in a statement.
"That was a serious and limited solution they failed to support, but they are suddenly serious a few weeks later after decades of climate denial."
The Hill also reported that presidential candidates Michael Bloomberg and Tom Steyer are leaning into climate change as a campaign issue to stand out in a crowded Democratic field. The former New York City mayor and owner of the Bloomberg financial empire has donated millions of dollars to the Sierra Club's Beyond Coal campaign, which has worked to shutter numerous coal plants, and he has pledged to donate $500 million to close the country's remaining coal plants by 2030
Meanwhile, Steyer founded the organization NextGen America, which aims to support candidates who advocate for climate action.
Both have highlighted their commitment to the issue on the campaign trail. Steyer has said that he would declare climate change a national emergency on his first day in office and Bloomberg has also said that fighting climate change would be a focus for him.
"They have been super active and insistent at not only raising the profile of the issue in front of voters, making it a litmus test with elected officials, but also, especially if you look at Mike Bloomberg, using his resources ... to give big cities and major carbon users real incentives to plan for the future and a lower-carbon or carbon free future," Democratic strategist Jon Reinish said of the two candidates.
The Hill also points out that both candidates have faced a certain degree of skepticism on climate issues and are contending with candidates who are polling higher than they are and who have also put heavy emphasis on climate policy.
So, we will see. Clearly the public is worried about the climate and there seems to be growing pressure on candidates to weigh in on those issues which continue to be extremely contentious—and which should be watched closely by producers as these debates continue to intensify, Washington Insider believes.
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