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Friday, February 28, 2020
EPA Set to Back Down on Ethanol Waivers
The Environmental Protection Agency is backing down on its extensive use of blending exemptions for smaller oil refiners. A Reuters report says the decision comes after last month’s 10th Circuit Court of Appeals ruling that vacated three existing waivers and set stricter requirements for exempting refineries from their obligations under the Renewable Fuels Standard. It’s been well-documented that the EPA drastically ramped up its use of refinery waivers under President Donald Trump. That sparked a fierce backlash from farmers who have largely supported the president despite policies like trade tariffs that have hit the U.S. agricultural sector hard. The White House has been struggling to find a compromise between oil and agriculture, two of the bigger pieces of Trump’s political base as he looks toward possible re-election. The court decision from January found that only small oil refineries that had maintained blending exemptions continuously since 2011 were eligible to apply for extended waivers. Oil and biofuel industry estimates both say that could preclude all but three oil refineries from obtaining exemptions. The EPA is currently reviewing 23 petitions for blending waivers and most are expected to be rejected.
Committee Hearing Highlights Differences over Trade Policies and Aid
At a House Ways and Means Committee hearing, the split between farmers and lawmakers over the trade policies of President Trump was a big topic of conversation. Another big topic of discussion included the impact of the Phase One trade deal with China. An Agri-Pulse report describes Republicans on the committee as playing down the overall impact of the trade war and saying the trade agreement with China was a “major success.” Democrats pointed out that tariffs are continuing to restrict trade. Both sides of the political aisle said Trump’s duties on imports and the resulting retaliatory tariffs hurt the U.S. agricultural sector. Some people at the hearing were optimistic that China would follow through on its promise to purchase $80 billion worth of farm products over the next two years. Others weren’t convinced and said billions more in government assistance may be needed to further blunt the damage from a continuing loss of overseas exports. Minnesota farmer Tim DuFault was one of the witnesses at the committee hearing and said, “As far as the Phase One deal goes, the purchases that haven’t yet materialized are a promise, while the tariffs are for real. Commodity prices, which plummeted when the trade war began, have actually fallen further after the U.S. and China signed the phase one deal.”
Hemp Growers Get Good News
The Drug Enforcement Agency says it won’t require all labs testing the THC levels of U.S. hemp to be certified by the agency during the 2020 crop year. Politico says that offers producers a little more flexibility because it will alleviate potential bottlenecks at the more limited number of labs that have the certification. Greg Ibach (EYE-baw), the Undersecretary for Marketing and Regulatory Programs, first announced the change during remarks given to the National Association of State Departments of Agriculture. The department is also planning to give states more options for disposing of “hot hemp,” which are plants with THC levels above 0.3 percent, which is the legal threshold. When the department first released its initial regulatory framework for hemp production, farmers and state regulators pointed out that some states don’t have a single lab certified by the DEA, such as Alabama. That would greatly slow down testing, which is required to happen during a 15-day window before harvest. Delays would eventually threaten the market viability of the crop.
Consumers will Stop Buying Pork if AFS Hits the U.S.
Bill Even, CEO of the National Pork Board, says the results of consumer research have amplified the need to promote safety in the event of a large foreign animal disease outbreak. Swine Web Dot Com says at the onset of the African Swine Fever crisis in 2018, the checkoff polled consumers about their perceptions of the safety of pork. After giving consumers more information about how it’s a viral disease in pigs, not humans, and telling them it’s not a public health threat, more than half of the consumers who responded to the checkoff survey say they would stop eating pork if ASF was found in the U.S. Consumers wondered in the event of an outbreak if the public “should be eating pork.” Others asked if it should still be for sale in the store in the event of an ASF outbreak. Hispanic respondents, who tend to eat more pork than other consumer demographics, had even more concern about the ability to have pork on the shelves that’s safe for consumers to eat. Even says the checkoff, along with partners like USDA, has developed video resources for consumers that are available in case there is a disease outbreak. “Rest assured, there will be millions of dollars at the ready should we have an event occur around a foreign animal disease,” Even says.
Fertilizer Price Volatility Began in 2002
Fertilizers are important for the nutrients they provide in the production of crops. However, their prices have been more volatile in the last six years than ever before. From 1960 through 2002, both fertilizer and crop prices received by farmers increased in tandem at a fairly modest rate. Between 2002 and 2008, annual fertilizer prices paid by farmers increased rapidly, generally at a much faster rate than the prices farmers were paid for their crops. Fertilizer prices also became more volatile over those six years. Fertilizer price increases through 2008 were largely driven by high energy prices and the record costs of natural gas, which is a basic input in producing nitrogen. In response to record fertilizer prices in 2008, farmers reduced their use of fertilizers, contributing to a decline of 18 percent in fertilizer prices through 2010. Fertilizer prices recovered through 2012, driven by strong domestic demand for plant nutrients due to high crop prices, before declining afterward. Since June of 2017, fertilizer prices and crop prices received have both trended upwards.
Maine Representative Introduces the Ag Resilience Act
Maine Representative Chellie Pingree introduced what she calls the “Ag Resilience Act,” which she says would promote “farmer-driven climate solutions.” The bill envisions reaching a net-zero greenhouse gas emissions in U.S. agriculture by the year 2040. “Farming has always been a risky business, but unpredictable, extreme weather patterns are creating immense challenges that threaten our nation’s food production and jeopardize the livelihood of American farmers,” Pingree says. The Maine Rep has been an organic farmer for more than 40 years. “Last year, farmers were unable to plant 19.6 million acres of crops due to record-breaking rainfall,” she says. “We must be proactive to keep farmers on the land and in business.” The bill contains provisions for increasing agricultural research, improving soil health, and protecting farmland by increasing funding for the Local Agriculture Market Program and the Agriculture Conservation Easement Program. The bill was endorsed by the National Farmers Union, the American Farmland Trust, the National Sustainable Agriculture Coalition, and the Union of Concerned Scientists.
Washington Insider: The Digital Tax Problem
While everybody seems to be aware of the viral threat these days, not all media are focused there exclusively. Bloomberg says a possible fight over the right to tax some of the world’s most profitable companies could become a multifront trade war – no matter who the next president is.
In fact, either party might be tempted to continue to pursue “a policy of retaliation” against foreigners who impose new taxes on U.S. tech companies, the report says.
A tit-for-tat trade fight already is building with France, which passed a 3% tax on large tech companies that went into effect at the start of 2019. The U.S. responded with the threat of tariffs on $2.4 billion worth of French cheese, sparkling wine and makeup, prompting the EU to consider tariffs on U.S. goods.
All sides have now agreed to a tax cease-fire until the end of the year to see if a broader global agreement can be worked out.
“Democrats have been as opposed to the digital services taxes as Republicans,” Brian Jenn, a former Treasury official said. “While very few Democrats are tariff fans, it looks like the tariff approach at least bought a temporary victory in the case of France.”
The U.S., along with more than 130 countries, is currently negotiating at the OECD about a new international tax system that would redefine which countries can tax which corporate profits. A revamped global tax code could apply not just to tech companies but also to other multinational firms that have customers in countries where they don’t currently record profits.
Bloomberg says that negotiators need to reach an agreement this year before several countries--including France, Canada and Italy--plan to move forward with their own taxes on tech giants.
A retaliatory tariff fight with the UK could begin even sooner since its version of the tax is set to go into effect in April and U.S. officials are considering responding with tariffs on car exports. That could be a “worst case” scenario for companies such as Amazon.com Inc. that could end up paying taxes to several countries on the same income. And they have reason to worry--it’s far from certain that there will be a deal ahead of this year’s deadline, Bloomberg says.
“I’m very skeptical that the U.S. will agree to this proposal by the end of this year – or ever,” said Gary Hufbauer, a senior fellow at the Peterson Institute for International Economics. Without a deal “interesting enough” to keep the parties at the negotiating table, U.S. companies could face taxes from perhaps a dozen countries that have proposed the idea, causing either a Republican or a Democratic administration to fend off levies on revenues that the U.S. views as within its right to tax, Bloomberg said.
“There aren’t a lot of other tools in the toolbox to address unilateral taxes in a meaningful way,” Jenn said. He served as a U.S. delegate to the OECD and is now a partner at law firm McDermott Will & Emery.
The negotiations are centered around two main points: establishing a global minimum tax so companies can’t avoid taxes entirely, as well as reallocating taxing rights, meaning some countries with many customers or users of a digital service could push for taxes on some of the profits even if the company doesn’t have business operations there.
U.S. Treasury Secretary Steven Mnuchin said after a G-20 Finance Ministers meeting in Saudi Arabia that there’s “pretty much consensus” about the minimum tax. The point of contention is reallocating taxing rights, which the U.S. wants to be optional for companies.
The OECD plan “is structured so that those companies would pay more tax abroad, regardless of U.S. tax policy,” Daniel Bunn, vice president of global projects at the Tax Foundation, said. And, it’s still not clear how the U.S. would fare under the global approach—since it could “lose the right to tax some profits from highly profitable technology and pharmaceutical companies, but gain some of that back from foreign companies that have lots of U.S. customers, including French luxury brand conglomerates or German carmaker Mercedes-Benz AG.
Facebook Chief Executive Officer Mark Zuckerberg said this month he approves of the OECD efforts, even though it would increase his company’s overall tax bill, because it would create a “stable and reliable system going forward.”
So, we will see. It now seems clear that world commerce will be changed after the coronavirus threat ends, but there is not yet any indication of what those shifts may be. The threat of additional taxes seems real, but so does the threat of damaging instability. These are trends that should be watched closely as they continue to emerge in today’s hyper-political world, Washington Insider believes.
In fact, either party might be tempted to continue to pursue “a policy of retaliation” against foreigners who impose new taxes on U.S. tech companies, the report says.
A tit-for-tat trade fight already is building with France, which passed a 3% tax on large tech companies that went into effect at the start of 2019. The U.S. responded with the threat of tariffs on $2.4 billion worth of French cheese, sparkling wine and makeup, prompting the EU to consider tariffs on U.S. goods.
All sides have now agreed to a tax cease-fire until the end of the year to see if a broader global agreement can be worked out.
“Democrats have been as opposed to the digital services taxes as Republicans,” Brian Jenn, a former Treasury official said. “While very few Democrats are tariff fans, it looks like the tariff approach at least bought a temporary victory in the case of France.”
The U.S., along with more than 130 countries, is currently negotiating at the OECD about a new international tax system that would redefine which countries can tax which corporate profits. A revamped global tax code could apply not just to tech companies but also to other multinational firms that have customers in countries where they don’t currently record profits.
Bloomberg says that negotiators need to reach an agreement this year before several countries--including France, Canada and Italy--plan to move forward with their own taxes on tech giants.
A retaliatory tariff fight with the UK could begin even sooner since its version of the tax is set to go into effect in April and U.S. officials are considering responding with tariffs on car exports. That could be a “worst case” scenario for companies such as Amazon.com Inc. that could end up paying taxes to several countries on the same income. And they have reason to worry--it’s far from certain that there will be a deal ahead of this year’s deadline, Bloomberg says.
“I’m very skeptical that the U.S. will agree to this proposal by the end of this year – or ever,” said Gary Hufbauer, a senior fellow at the Peterson Institute for International Economics. Without a deal “interesting enough” to keep the parties at the negotiating table, U.S. companies could face taxes from perhaps a dozen countries that have proposed the idea, causing either a Republican or a Democratic administration to fend off levies on revenues that the U.S. views as within its right to tax, Bloomberg said.
“There aren’t a lot of other tools in the toolbox to address unilateral taxes in a meaningful way,” Jenn said. He served as a U.S. delegate to the OECD and is now a partner at law firm McDermott Will & Emery.
The negotiations are centered around two main points: establishing a global minimum tax so companies can’t avoid taxes entirely, as well as reallocating taxing rights, meaning some countries with many customers or users of a digital service could push for taxes on some of the profits even if the company doesn’t have business operations there.
U.S. Treasury Secretary Steven Mnuchin said after a G-20 Finance Ministers meeting in Saudi Arabia that there’s “pretty much consensus” about the minimum tax. The point of contention is reallocating taxing rights, which the U.S. wants to be optional for companies.
The OECD plan “is structured so that those companies would pay more tax abroad, regardless of U.S. tax policy,” Daniel Bunn, vice president of global projects at the Tax Foundation, said. And, it’s still not clear how the U.S. would fare under the global approach—since it could “lose the right to tax some profits from highly profitable technology and pharmaceutical companies, but gain some of that back from foreign companies that have lots of U.S. customers, including French luxury brand conglomerates or German carmaker Mercedes-Benz AG.
Facebook Chief Executive Officer Mark Zuckerberg said this month he approves of the OECD efforts, even though it would increase his company’s overall tax bill, because it would create a “stable and reliable system going forward.”
So, we will see. It now seems clear that world commerce will be changed after the coronavirus threat ends, but there is not yet any indication of what those shifts may be. The threat of additional taxes seems real, but so does the threat of damaging instability. These are trends that should be watched closely as they continue to emerge in today’s hyper-political world, Washington Insider believes.
USDA Official Says Growers Will Not Be Required To Test Hemp Crop at DEA Labs For 2020 Crop Year
Growers will not be required to have their hemp crops for the 2020 crop year to be tested at Drug Enforcement Agency (DEA) certified labs, according to USDA Undersecretary for Marketing and Regulatory Affairs Greg Ibach.
"DEA will still expect states to work with their labs to try and achieve certification for the 2021 crop year. But for the 2020 crop year, we are not going to require all those labs to through DEA certification,” he told members of the National Association of State Departments of Agriculture.
The issue of testing the crop and what producers would be required to do with a “hot” crop – one that is above the 0.3% maximum for THC – remain a key issue for the industry moving forward.
"DEA will still expect states to work with their labs to try and achieve certification for the 2021 crop year. But for the 2020 crop year, we are not going to require all those labs to through DEA certification,” he told members of the National Association of State Departments of Agriculture.
The issue of testing the crop and what producers would be required to do with a “hot” crop – one that is above the 0.3% maximum for THC – remain a key issue for the industry moving forward.
EPA Chief Pledges Word ‘Soon’ on Small Refinery Waivers Decision
EPA Administrator Andrew Wheeler would not confirm to lawmakers that reports the agency would dramatically scale back its use of small refinery exemptions (SREs) were on the mark, only offering that they would announce the decision “soon.”
Wheeler insisted to lawmakers EPA officials were still discussing the situation with the Department of Justice and the White House relative to the 10th Circuit Court decision, which ruled EPA overstepped its bounds on three SREs granted for the 2016 compliance year.
“We are working with the Department of Justice and closely looking at that as well as other court decisions” relative to the RFS. “It is a very litigated area,” he added.
Even though several lawmakers sought Wheeler’s comments on the SRE decision, Wheeler would only pledge that the agency will be issuing guidance relative to the court ruling and said that guidance would be coming “soon.”
Wheeler insisted to lawmakers EPA officials were still discussing the situation with the Department of Justice and the White House relative to the 10th Circuit Court decision, which ruled EPA overstepped its bounds on three SREs granted for the 2016 compliance year.
“We are working with the Department of Justice and closely looking at that as well as other court decisions” relative to the RFS. “It is a very litigated area,” he added.
Even though several lawmakers sought Wheeler’s comments on the SRE decision, Wheeler would only pledge that the agency will be issuing guidance relative to the court ruling and said that guidance would be coming “soon.”
Friday Watch List
Markets
Among reports early on Friday are personal income, consumer spending and core inflation. DTN will be watching closely for any news regarding the coronavirus (Covid-19), Chinese buying interest and weather in South America.
Weather
Light snow today and Friday for northern areas of the western Midwest, mostly dry Saturday. A band of moderate snow Saturday night into Sunday likely over southern Minnesota. Moderate rain developing over southern Missouri into Monday. The eastern Midwest to see rain, snow and freezing rain changing to mostly snow tonight. Some moderate snow over Ohio on Friday. Some light snow on Saturday. Moderate snow Wisconsin into Michigan and light to moderate snow south on Sunday. Showers drying out on Monday. Central and Southern Plains to be mostly dry today, some light in Colorado/western Kansas Friday. Mostly dry Saturday. Some rain shower activity east Saturday night/Sunday, mostly south/east Texas Monday.
Among reports early on Friday are personal income, consumer spending and core inflation. DTN will be watching closely for any news regarding the coronavirus (Covid-19), Chinese buying interest and weather in South America.
Weather
Light snow today and Friday for northern areas of the western Midwest, mostly dry Saturday. A band of moderate snow Saturday night into Sunday likely over southern Minnesota. Moderate rain developing over southern Missouri into Monday. The eastern Midwest to see rain, snow and freezing rain changing to mostly snow tonight. Some moderate snow over Ohio on Friday. Some light snow on Saturday. Moderate snow Wisconsin into Michigan and light to moderate snow south on Sunday. Showers drying out on Monday. Central and Southern Plains to be mostly dry today, some light in Colorado/western Kansas Friday. Mostly dry Saturday. Some rain shower activity east Saturday night/Sunday, mostly south/east Texas Monday.
Thursday, February 27, 2020
Deadline for CRP Signup is Friday
The deadline to get involved in the Conservation Reserve Program is this Friday, February 28. Agricultural producers and private landowners need to make an offer of acres or schedule an appointment to do so with their local USDA service center by Friday. The signup first opened in December and is available to producers and private landowners who are either offering acres for the first time or re-offering acres for another 10-15 year term in the Farm Service Agency’s conservation program. “Call your FSA county office today to make an appointment to sign up for the Conservation Reserve Program,” says FSA Administrator Richard Fordyce. “As long as you have an appointment scheduled, your CRP offer will be able to compete in this general signup, even if the appointment is in the first week of March. This is the first opportunity for general signup since 2016 and we want to make sure interested producers and landowners take advantage of the popular conservation program.” Farmers and ranchers who enroll land in CRP receive yearly rental payments for voluntarily establishing long-term, resource-conserving plant species, such as approved grasses or trees, which are called “covers.” CRP currently has about 22 million acres enrolled, but the fiscal cap for 2020 is 24.5 million acres.
Agriculture Still Slowing Pace of EU, U.S. Trade Talks
U.S. President Donald Trump is turning up the heat on Brussels when it comes to trade discussions. He’s set on taking down some trade barriers to so-called “chlorine chicken,” GMO crops, and other U.S. products that don’t fit into the EU’s strict food safety standards. The two sides are still stuck on agriculture, which isn’t helping the talks that have struggled to get off the ground since 2018. Each side has been talking up the potential of a deal ahead in the coming weeks or months. EU Trade Commissioner Phil Hogan has said recently he’s aiming for a mini agreement as soon as March 18. U.S. officials have long been unhappy with the EU policy that tightly controls agricultural tools like pesticides. Hogan notes that U.S. rules currently block sales of European apples and pears, so there is an opening for regulatory tradeoffs on both sides of the Atlantic. Politico says the U.S., is an agricultural powerhouse that has seen its share of the EU market shrink steadily for decades. The trade deficit with Europe topped $2 billion in 1989 and evolved into a $15 billion deficit in 2019.
Trump Leaves India without a New Trade Deal
President Trump is leaving India without the trade deal in place he was hoping for. The U.S. president was looking to expand access to the massive market for U.S. dairy goods and other products like motorcycles and medical devices. India currently has tariffs on American farm goods at an average rate of 32.8 percent. As if that’s not high enough, India has 100 percent tariffs on raisins and coffee, as well as 150 percent on alcoholic beverages. For the second time since last September, when India’s prime minister visited the U.S., the two sides failed to reach even a limited “mini-trade deal,” which would increase trade on focused groups of goods, which would include dairy products. The New York Times says negotiators have worked since 2018 on a deal that would lower India’s barriers to some American products, as well as restore India’s access to a program that allows goods to enter the U.S. tariff-free. The U.S. India Business Council released a statement that says,” Both sides are tuned into their own political imperatives and not where the other side might have an area of accommodation. That makes it harder to find where the common ground is and where a deal could be struck.”
Wisconsin Representative Asks Perdue for More Certainty
Wisconsin Representative Ron Kind fired off a letter to Ag Secretary Sonny Perdue demanding more information after the Secretary and the President brought up the possibility of more trade aid for farmers. Perdue had recently told farmers “not to anticipate” more aid in 2020, but Kind points out that the purchases promised in the trade deal with China have not materialized yet. The president says the trade aid would be paid for by tariffs the Administration has slapped on imported goods. However, Kind says that’s a tax actually paid for by working families. Because the purchases outlined in the Phase One trade deal haven’t happened yet, the Wisconsin Representative is pushing for a clear plan from the Ag Department on how they will enforce China’s commitments and ensure farmers “see the proof” of these purchases as promised. “Farmers in Wisconsin have been forced to bear the burden of this Administration’s trade war for nearly two years,” Kind says in the letter. “This deal was supposed to bring them some much-needed relief but instead, the secretary and the president continue to create more uncertainty.” Kind says he’s consistently expressed concerns that the agreement wasn’t fully binding like a more traditional trade agreement.
Commodity Experts Worried About the Coronavirus
Commodity experts at the International Sweetener Colloquium say announcements on the spread of the coronavirus and the falling stock market are making them nervous about the future. The director of dairy market intelligence for High Ground Dairy says fear is gripping the entire supply chain. While dairy prices have risen recently after multiple bad years, the coronavirus could pull dairy prices lower. That means price forecasting in any agricultural sector is extremely difficult. Stephen Nicholson is a senior analyst for Rabo AgriFinance, who says, “We have to be ready for more volatility as we see trade disrupted. We’re going to see economic activity contract and there may be a little more downside than we’d thought.” He’s not in the same camp as those who are sure that the Chinese will fulfill their promises to buy $40 billion to $50 billion in agricultural products. Nicholson says commodity prices are low, which means China will have to buy a lot of products to spend that much money. The Hagstrom Report quotes Nicholson as saying the Trump Administration will have to make a “tough decision on whether to punish China if they don’t live up to their promises.”
Wisconsin Senator Working to Slow the Tide of Dairy Bankruptcies
Wisconsin is currently leading the nation in farm bankruptcies, a position that no one wants to be in. Wisconsin Senator Tammy Baldwin is working to give flexibility to local banks and credit unions to help fight the surging number of farm bankruptcies. Local financial institutions like banks and credit unions are restricted in their regulatory lending ability to farmers, even though they are uniquely positioned to help farmers get the loans they need to get by. In a letter to financial regulators, Baldwin and John Thune from South Dakota are urging the federal government to give those local banks and credit unions the flexibility they need to help farmers navigate through these tough economic conditions. Baldwin says, “We’re calling on the federal government to lift the regulatory restrictions on local financial institutions to ensure our farmers have the tools to be successful and move our state forward.” Baldwin and Thune sent their letter to financial regulators from the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, the Office of the Comptroller of the Currency, and the National Credit Union Administration.
Washington Insider: Coronavirus Pressure on the Fed
The key issue in the media this week is the spread of the coronavirus and its impact.
The question of what the central banks and other will do in response is also “a dire challenge,” The Hill says this week. Pressure is building on the Fed to cut interest rates as it struggles to both keep the economy stable and defend its independence from the President’s pressure.
The Fed earlier indicated a desire to keep interest rates steady this election year after navigating both a trade war and a global downturn in 2019, The Hill says. But, even as bank officials say it is too soon to react to the outbreak, “that stance is being put to the test.”
U.S. financial markets are now betting on an interest rate cut after this week’s Wall Street losses obliterated six weeks of stock gains as coronavirus fears intensified. Tuesday’s 3.2% plunge followed a Monday loss of 1,031 points, or 3.6%, its worst day since February 2018.
The stretch of losses could extend further as worries about the coronavirus fester continue the Centers for Disease Control and Prevention warned Tuesday. “It’s not a question of if this will happen but when — and how many people in this country will have severe illnesses,” said Nancy Messonnier, a top CDC official. “Disruption to everyday life might be severe.”
The warning from federal health officials spurred further alarm among investors as expectations of a Fed rate cut in March rose to 27.7% Tuesday from just 11.1% a week ago, according to investment firm CME Group.
Fed officials have been reluctant to cut rates further after slashing borrowing costs three times last year, bringing the central bank’s baseline range to just 1.5% to 1.75%. With rates so close to an effective rate of zero percent, economists fear that a minor reduction would do little to handle a global supply shortfall and cost the Fed crucial room to cut rates in the event of a crisis.
“They won’t want to cut rates too soon and then immediately see the pace of new infections quickly diminish and an inventory correction occur suddenly, wrote University of Oregon economic professor Tim Duy in a Tuesday analysis.
Several members of the Federal Open Markets Committee, which sets Fed interest rates, have spoken out against cutting over the past four days. The Fed held rates steady at its January meeting and had expected to maintain that stance.
Fed Vice Chairman Richard Clarida said in a Tuesday speech that “it is still too soon” to gauge the potential economic impact the outbreak could have on the U.S., adding that the Fed will “respond accordingly” to “a material reassessment of our outlook.”
Clarida’s comments echoed similar remarks from several Federal Reserve Bank presidents — including Loretta Mester of Cleveland, Raphael Bostic of Atlanta and James Bullard of St. Louis — who played down the need for a March rate cut over the past few days.
But the economic toll of a prolonged outbreak also would likely raise the President’s ire as he seeks reelection on the strength of the economy. He and his top officials who regularly pressure the Fed to cut rates amid stock downturns have tried to soothe the fears of a pandemic driving Wall Street’s losses.
“We have very few people with it,” the President told reporters at a press conference in New Delhi on Tuesday, saying it was “well under control” in the U.S. “The people are getting better. They’re all getting better,” Other officials agreed despite warnings from CDC officials.
Economists at Goldman Sachs warned last week that the coronavirus could cause a stock market correction, which is considered a 10% decline from the most recent peak, before the weekend’s sharp increase in infections.
The President often ties the success of his economic agenda to the rise of the stock market while blaming the Fed for even minor downturns. The president has piled unprecedented pressure on the Fed and its chairman, Jerome Powell, to pump a steady economy with crisis-level stimulus.
“When Jerome Powell started his testimony recently the Dow was up 125, & heading higher. As he spoke it drifted steadily downward, as usual. Germany & other countries get paid to borrow money. We are more prime, but the Fed Rate is too high, Dollar tough on exports,” the President tweeted earlier as Powell testified before a House committee.
The Fed has largely ignored the President’s pressure and took great pains to distance its three 2019 rate cuts from any political considerations. But the President’s pressure is likely to intensify if the markets continue their weakness, The Hill said.
“A Fed rate cut will bolster financial conditions but it will take months to filter through to the real economy,” said Joe Brusuelas, chief economist at U.S. tax and audit firm RSM on Tuesday.
Brusuelas warned that if the coronavirus outbreak slumps the U.S. economy, it could take a special lending facility from the Fed and fiscal action from Congress to counter the damage.
“The agencies that could help like the [Small Business Administration] need to be mobilized now and additional trade finance will need to be considered,” he said.
So, we will see. The situation appears to be highly complex and challenging, and there is the potential for destabilization if inappropriate policies are applied. It certainly is one producers should watch closely as it continues, Washington Insider believes.
The question of what the central banks and other will do in response is also “a dire challenge,” The Hill says this week. Pressure is building on the Fed to cut interest rates as it struggles to both keep the economy stable and defend its independence from the President’s pressure.
The Fed earlier indicated a desire to keep interest rates steady this election year after navigating both a trade war and a global downturn in 2019, The Hill says. But, even as bank officials say it is too soon to react to the outbreak, “that stance is being put to the test.”
U.S. financial markets are now betting on an interest rate cut after this week’s Wall Street losses obliterated six weeks of stock gains as coronavirus fears intensified. Tuesday’s 3.2% plunge followed a Monday loss of 1,031 points, or 3.6%, its worst day since February 2018.
The stretch of losses could extend further as worries about the coronavirus fester continue the Centers for Disease Control and Prevention warned Tuesday. “It’s not a question of if this will happen but when — and how many people in this country will have severe illnesses,” said Nancy Messonnier, a top CDC official. “Disruption to everyday life might be severe.”
The warning from federal health officials spurred further alarm among investors as expectations of a Fed rate cut in March rose to 27.7% Tuesday from just 11.1% a week ago, according to investment firm CME Group.
Fed officials have been reluctant to cut rates further after slashing borrowing costs three times last year, bringing the central bank’s baseline range to just 1.5% to 1.75%. With rates so close to an effective rate of zero percent, economists fear that a minor reduction would do little to handle a global supply shortfall and cost the Fed crucial room to cut rates in the event of a crisis.
“They won’t want to cut rates too soon and then immediately see the pace of new infections quickly diminish and an inventory correction occur suddenly, wrote University of Oregon economic professor Tim Duy in a Tuesday analysis.
Several members of the Federal Open Markets Committee, which sets Fed interest rates, have spoken out against cutting over the past four days. The Fed held rates steady at its January meeting and had expected to maintain that stance.
Fed Vice Chairman Richard Clarida said in a Tuesday speech that “it is still too soon” to gauge the potential economic impact the outbreak could have on the U.S., adding that the Fed will “respond accordingly” to “a material reassessment of our outlook.”
Clarida’s comments echoed similar remarks from several Federal Reserve Bank presidents — including Loretta Mester of Cleveland, Raphael Bostic of Atlanta and James Bullard of St. Louis — who played down the need for a March rate cut over the past few days.
But the economic toll of a prolonged outbreak also would likely raise the President’s ire as he seeks reelection on the strength of the economy. He and his top officials who regularly pressure the Fed to cut rates amid stock downturns have tried to soothe the fears of a pandemic driving Wall Street’s losses.
“We have very few people with it,” the President told reporters at a press conference in New Delhi on Tuesday, saying it was “well under control” in the U.S. “The people are getting better. They’re all getting better,” Other officials agreed despite warnings from CDC officials.
Economists at Goldman Sachs warned last week that the coronavirus could cause a stock market correction, which is considered a 10% decline from the most recent peak, before the weekend’s sharp increase in infections.
The President often ties the success of his economic agenda to the rise of the stock market while blaming the Fed for even minor downturns. The president has piled unprecedented pressure on the Fed and its chairman, Jerome Powell, to pump a steady economy with crisis-level stimulus.
“When Jerome Powell started his testimony recently the Dow was up 125, & heading higher. As he spoke it drifted steadily downward, as usual. Germany & other countries get paid to borrow money. We are more prime, but the Fed Rate is too high, Dollar tough on exports,” the President tweeted earlier as Powell testified before a House committee.
The Fed has largely ignored the President’s pressure and took great pains to distance its three 2019 rate cuts from any political considerations. But the President’s pressure is likely to intensify if the markets continue their weakness, The Hill said.
“A Fed rate cut will bolster financial conditions but it will take months to filter through to the real economy,” said Joe Brusuelas, chief economist at U.S. tax and audit firm RSM on Tuesday.
Brusuelas warned that if the coronavirus outbreak slumps the U.S. economy, it could take a special lending facility from the Fed and fiscal action from Congress to counter the damage.
“The agencies that could help like the [Small Business Administration] need to be mobilized now and additional trade finance will need to be considered,” he said.
So, we will see. The situation appears to be highly complex and challenging, and there is the potential for destabilization if inappropriate policies are applied. It certainly is one producers should watch closely as it continues, Washington Insider believes.
USDA Sees Continued Tame Grocery Store Food Price Inflation Ahead
Food at home (grocery store) prices are seen increasing from 0.5% to 1.5% in 2020, in line with the 2019 increase of 0.9% and a forecast that would continue the trend of grocery store prices rising less than one percent that has been in place since 2016, according to USDA. 2015 was the last time that grocery prices rose more than 1% with an increase of 1.2%.
Still, the result remains well below the 20-year average of 2%.
USDA also recalculated the 20-year averages for food items to include the 2019 data, with nine categories seeing a decrease in their averages (beef and veal, fish and seafood, eggs, dairy products, fats and oils, fruits and vegetables, fresh fruits and vegetables, fresh fruits, and other foods) while four saw increases (food away from home, pork, fresh vegetables, and sugars and sweets).
Food away from home (restaurant) prices have continued to see strong increases as they contain several other cost factors not included in grocery store prices such labor and rental prices with food making up only a small percentage of total restaurant costs.
Still, the result remains well below the 20-year average of 2%.
USDA also recalculated the 20-year averages for food items to include the 2019 data, with nine categories seeing a decrease in their averages (beef and veal, fish and seafood, eggs, dairy products, fats and oils, fruits and vegetables, fresh fruits and vegetables, fresh fruits, and other foods) while four saw increases (food away from home, pork, fresh vegetables, and sugars and sweets).
Food away from home (restaurant) prices have continued to see strong increases as they contain several other cost factors not included in grocery store prices such labor and rental prices with food making up only a small percentage of total restaurant costs.
Report says EPA to Extend Court Ruling on RFS Waivers Nationwide
The Trump administration has decided to limit the small refinery exemptions (SREs) under the Renewable Fuel Standard (RFS) based on a January court ruling that EPA overstepped its bounds in granting three SREs for the 2016 compliance year.
EPA is now expected to apply the ruling by the 10th Circuit Court of Appeals nationwide, Bloomberg reported, citing sources familiar with the internal discussions. This would mean that only a few small refiners would be granted the exemptions as the court ruling indicated that EPA erred in granting the waivers as they were not extensions of waivers that had been granted in 2010.
EPA data showed a sizable increase in the level of SRES granted starting with the 2016 compliance year. EPA data posted showed that the agency approved eight out of the 16 SREs sought for the 2013 compliance year, eight of 13 sought for the 2014 compliance year and seven of 14 sought for the 2015 compliance year.
EPA is now expected to apply the ruling by the 10th Circuit Court of Appeals nationwide, Bloomberg reported, citing sources familiar with the internal discussions. This would mean that only a few small refiners would be granted the exemptions as the court ruling indicated that EPA erred in granting the waivers as they were not extensions of waivers that had been granted in 2010.
EPA data showed a sizable increase in the level of SRES granted starting with the 2016 compliance year. EPA data posted showed that the agency approved eight out of the 16 SREs sought for the 2013 compliance year, eight of 13 sought for the 2014 compliance year and seven of 14 sought for the 2015 compliance year.
Thursday Watch List
Markets
Thursday's schedule of events will look familiar to long-time market watchers: USDA export sales, weekly U.S. jobless claims and a new U.S. Drought Monitor at 7:30 a.m. CST. Also at 7:30 a.m., fourth quarter U.S. GDP and advanced durable goods in January will be posted. The U.S. Energy Department will provide natural gas inventory at 9:30 a.m. CST. South American weather and any trade news also remain of interest.
Weather
A little light snow in the Northern Plains and lighter lake-effect snow in the eastern Midwest, otherwise it will be rather quiet over the major crop areas on Thursday. Warming conditions over the next several days will help with snowmelt and soil drainage.
Thursday's schedule of events will look familiar to long-time market watchers: USDA export sales, weekly U.S. jobless claims and a new U.S. Drought Monitor at 7:30 a.m. CST. Also at 7:30 a.m., fourth quarter U.S. GDP and advanced durable goods in January will be posted. The U.S. Energy Department will provide natural gas inventory at 9:30 a.m. CST. South American weather and any trade news also remain of interest.
Weather
A little light snow in the Northern Plains and lighter lake-effect snow in the eastern Midwest, otherwise it will be rather quiet over the major crop areas on Thursday. Warming conditions over the next several days will help with snowmelt and soil drainage.
Wednesday, February 26, 2020
Progress on Implementing the Phase One Trade Deal with China
Ag Secretary Sonny Perdue and U.S. Trade Representative Robert Lighthizer announced that China has taken numerous actions to begin implementing its agriculture-related commitments in the Phase One trade deal. The countries first entered into the landmark agreement back on February 14. China’s actions toward implementing the deal include signing a protocol that allows the importation of U.S. fresh chipping potatoes. They’ve lifted the ban on imports of U.S. poultry and poultry products, including pet food containing poultry products. China has lifted restrictions on imports of U.S. pet food that contains ruminant material. They’ve also updated lists of facilities approved for exporting animal protein, pet food, dairy infant formula, and tallow for industry use to China. The Chinese government has also updated the lists of products that can be exported to China as feed additives. Additionally, China has begun announcing tariff exclusions for imports of U.S. agricultural products subject to its retaliatory tariffs, and it announced a reduction in retaliatory tariff rates on certain U.S. agricultural goods. Lighthizer says, “We’re already seeing positive results just a month after signing the agreement with China. We will continue to ensure the agreement is strictly enforced for the benefit of our workers, farmers, ranchers, and businesses.”
Wheat Exports Set to Rise
Ag Secretary Sonny Perdue had good news for U.S. wheat farmers. Effective immediately, U.S. wheat can now be shipped to Kenya regardless of the state of origin or which port of export it comes from. This important step means that Idaho, Oregon, and Washington can now join the list of states that can ship wheat to Kenya. “America’s farmers in the Pacific Northwest now have full access to the Kenyan wheat market,” says Greg Ibach (EYE-baw), USDA Undersecretary for Marketing and Regulatory Programs. “This action proves our commitment to securing fair treatment and greater access for U.S. products in the global marketplace.” The USDA’s Animal and Plant Health Inspection Service has been working closely with Kenya for 12 years to address plant health concerns that kept U.S. wheat exports from Idaho, Oregon, and Washington, out of Kenya. The export protocol signed off on by Kenya’s Plant Health Inspectorate Service and APHIS gives U.S. exporters full access to the wheat market in Kenya, valued at nearly $500 million annually.
Doing a Deep Dive into U.S. Dairy Consumption
It’s no secret that the dairy sector has been struggling with low milk prices for years. Agricultural Economic Insights took a deep dive into the U.S. dairy industry in the face of rising bankruptcies among small farmers and big milk processors like Dean Foods. Fluid milk consumption per capita in the U.S. has been falling for decades. However, consumers are actually buying more dairy goods overall, including more butter and cheese. Cheese consumption per capita has doubled since 1975, with mozzarella and cheddar each representing about 30 percent of consumption in 2018; butter consumption has grown by a third since 2001 and a Politico article says part of that surge comes because fat has lost some of its stigma among dietary health advocates. Per-capita yogurt consumption was steadily climbing up till 2014 before dropping over the past five years. Fluid milk consumption dropped more than 40 percent since 1975, or about 1.2 percent per year. In the meantime, alternatives like almond and soymilk have grown in popularity. Overall, the dairy industry is primarily driven by slow rates of changes unfolding over several decades,” says AEI farm economist David Widmar. Farm bankruptcies in the dairy industry jumped by nearly 20 percent in 2019.
UK Farmers Union Wants High Food Standards in Trade Negotiations
The United Kingdom shouldn’t allow imports of food that fall short of the country’s own standards when it draws up trade agreements. That thought comes directly from the head of the UK’s National Farmers Union. NFU President Minette Batters says domestic production standards should be used as a benchmark in trade talks. Business Times Dot Com says her comments signal that British farmers would face a setback if the government allows imports of products that are treated with certain chemicals or made using lesser animal-welfare rules. After leaving the European Union last month, the UK is working on getting trade talks going with multiple nations that cover everything from food trade to data protection. “It’s not just about chlorinated chicken,” Batters says in a statement. “This is about a wider principle. We must not tie the hands of British farmers to the highest rung of the standards ladder while waving through food imports which may not even reach the bottom rung.” As it has in America, trade uncertainty is weighing down UK farm sentiment, with one-year confidence falling to its third-lowest point since 2010.
U.S. Facing a Sugar Shortage and Higher Prices
Last year was a rough one for American sugar farmers. The Hagstrom Report says America is facing a sugar shortage after last year’s bad weather in the Midwest, a freeze in Louisiana, and drought in Mexico. The shortage is driving the prices for the industrial sweetener higher, reaching several cents above average. A national refiner of raw sugar is offering refined cane sugar at 44 cents per pound now and 41 cents for the calendar year 2021. That’s compared with the more usual prices of 37 to 38 cents. The bad weather hit particularly hard in the Red River Valley of North Dakota and Minnesota. Those areas have some of the most sophisticated delivery systems to candy makers and other food companies in Chicago and other midwestern cities. The U.S. Ag Department can make changes if needed to its sugar management system to make it easier and cheaper to bring in raw cane sugar from other countries into the United States, but also has no control over the refining process once the sugar enters the country. The U.S. sugar industry used to have 104 production plants but now has 45.
More Farmers Converting to Organic
U.S. farmers harvested almost 3.3 million acres of certified organic field crops in 2019, with that number driven by 14 percent more organic operations. Those numbers come from Mercaris, the market data service and online trading platform for organic, non-GMO, and certified agricultural commodities. The company’s final 2019 report shows that the number of growers converting land to organic production escalated significantly throughout 2019, adding to the U.S. organic harvest and offsetting the impact of a wet growing season. Producers harvested 1.1 million acres of organic hay and alfalfa in 2019, up eight percent year-over-year with 11 percent more certified organic operations. Thirteen percent more certified organic operations harvested organic corn over 2019, offsetting a significant decline in the number of harvested acres per operation. The number of certified operations harvesting organic soybeans reached 2,835, up 11 percent. The amount of harvested organic wheat acres was driven by expansion in the High Plains region, growing 16 percent in 2019. A release from Mercaris says, “Despite what can fairly be described as the most difficult growing season in more than a decade, 2019 was a remarkable year for organic production.”
Washington Insider: Coronavirus Damage
The U.S., like nearly all of the rest of the world, is quite unprepared to deal with a vicious new disease, Coronavirus (COVID-19), or even to know how it should be regarded. The New York Times said on Tuesday that while “Wall Street is (finally) waking up to the damage the virus could cause, no one really knows quite what should be done.”
The Times focused on the uncertainties involved and reported “a strange divergence” among people in the trenches of global commerce—supply chain managers, travel industry experts, employers large and small who warned of substantial disruptions to businesses and the financial markets — and most economic forecasters who had been willing to downplay expectation of economic harm or loss of profits.
“Something had to give and this week, it did,” NYT said, “giving way to a more pessimistic view across major world markets.”
While “huge uncertainty” remains about how widely the virus will spread and how much damage it will do, at least the financial world “is realizing just how much is at stake” — and how different this may be from other recent hiccups in the global economy, notably last year’s trade war between the United States and China.
“It’s one thing if Wuhan is on lockdown, another if China is on lockdown; or Asia--and yet another if the whole world is affected,” said Patrick Chovanec, an adviser for Silvercrest Asset Management and an expert on the Chinese economy.
Since the end of the global financial crisis more than a decade ago, investors who have been the most alarmist about various risks have had a tendency to lose money. Global asset prices have been on a steady march upward despite the eurozone crisis, the end of the Federal Reserve’s quantitative easing, the trade war and every other problem that has occupied financial headlines.
So it is somewhat understandable if investors were quick to assume that coronavirus would follow a similar pattern — a temporary blip that reduced China’s growth for a quarter or two but had little lasting impact. “The portfolio managers apparently figured this is a flash-in-the-pan virus, that will end as soon as the winter does, and that even if that assumption isn’t right, that central bankers will step in and fix this mess, the Times said.
Markets accustomed to optimism may be all the more vulnerable if the virus becomes a global pandemic that causes meaningful pullback of commerce across major economies. The financial markets remain richly valued, even after Monday’s sell-off that included a 3.4% drop in the S&P, the steepest single-day retrenchment in two years. The U.S. stock market remained above its level of Feb. 7.
The trade war, in which the United States and China placed tariffs on specific imported goods, caused a significant slump in manufacturing last year. But the coronavirus is hurting service industries as well. If the authorities in major world economies start shutting down any facility where large numbers of people congregate — a list that includes factories, shopping malls and airports — the damage could prove broad and lasting.
When a hotel or airplane sits empty for weeks because people are afraid to travel, that is a loss that cannot be recovered once business returns.
That’s particularly relevant for the United States, where service industries account for the majority of economic activity. This means that even companies that made it through the trade wars unscathed might be exposed to lost revenue or business shutdowns because of the virus outbreak.
Moreover, while tariffs might put sand in the gears of global commerce, implications are different when gears stop entirely. Companies had many options for dealing with the trade war, whether sourcing goods from elsewhere or simply paying more for them.
The longer the shutdowns of Chinese production and the more widely other countries are forced to take similar measures the more the spread of the virus could affect the ability of global companies to do business.
Moreover, while the Fed and other central banks may well take action to try to insulate the world economy from the disease shocks, their tools are ill-suited to the task in many ways. The economic effects of coronavirus on the productive potential of affected nations from factors unrelated to those that more traditionally shape economic results like monetary policy or fiscal policy.
In addition, lower interest rates won’t make a sick person well or give public health authorities confidence that businesses can reopen. All they can do is lower borrowing costs and help encourage businesses and consumers to spend and push financial market prices higher.
“We would rather have a vaccine than a rate cut and fully recognize that monetary policy is not optimized for addressing this type of shock,” said Krishna Guha with Evercore ISI, in a research note. “But it does not follow from this that the appropriate path of policy under the shock is unchanged.”
Neither economists nor portfolio managers make particularly good epidemiologists. But what has become clearer in the last few days is that it is the science of epidemics — and the policy choices that nations make to try to address them — that will shape the economy for the near future, and maybe quite some time to come.
So, we will see. Amid growing concerns regarding economic impacts, there is new talk of additional technologies and perhaps potential to build a vaccine fairly quickly. However, the new disease threat is at least being taken seriously and its implications should continue to be watched closely as they develop, Washington Insider believes.
The Times focused on the uncertainties involved and reported “a strange divergence” among people in the trenches of global commerce—supply chain managers, travel industry experts, employers large and small who warned of substantial disruptions to businesses and the financial markets — and most economic forecasters who had been willing to downplay expectation of economic harm or loss of profits.
“Something had to give and this week, it did,” NYT said, “giving way to a more pessimistic view across major world markets.”
While “huge uncertainty” remains about how widely the virus will spread and how much damage it will do, at least the financial world “is realizing just how much is at stake” — and how different this may be from other recent hiccups in the global economy, notably last year’s trade war between the United States and China.
“It’s one thing if Wuhan is on lockdown, another if China is on lockdown; or Asia--and yet another if the whole world is affected,” said Patrick Chovanec, an adviser for Silvercrest Asset Management and an expert on the Chinese economy.
Since the end of the global financial crisis more than a decade ago, investors who have been the most alarmist about various risks have had a tendency to lose money. Global asset prices have been on a steady march upward despite the eurozone crisis, the end of the Federal Reserve’s quantitative easing, the trade war and every other problem that has occupied financial headlines.
So it is somewhat understandable if investors were quick to assume that coronavirus would follow a similar pattern — a temporary blip that reduced China’s growth for a quarter or two but had little lasting impact. “The portfolio managers apparently figured this is a flash-in-the-pan virus, that will end as soon as the winter does, and that even if that assumption isn’t right, that central bankers will step in and fix this mess, the Times said.
Markets accustomed to optimism may be all the more vulnerable if the virus becomes a global pandemic that causes meaningful pullback of commerce across major economies. The financial markets remain richly valued, even after Monday’s sell-off that included a 3.4% drop in the S&P, the steepest single-day retrenchment in two years. The U.S. stock market remained above its level of Feb. 7.
The trade war, in which the United States and China placed tariffs on specific imported goods, caused a significant slump in manufacturing last year. But the coronavirus is hurting service industries as well. If the authorities in major world economies start shutting down any facility where large numbers of people congregate — a list that includes factories, shopping malls and airports — the damage could prove broad and lasting.
When a hotel or airplane sits empty for weeks because people are afraid to travel, that is a loss that cannot be recovered once business returns.
That’s particularly relevant for the United States, where service industries account for the majority of economic activity. This means that even companies that made it through the trade wars unscathed might be exposed to lost revenue or business shutdowns because of the virus outbreak.
Moreover, while tariffs might put sand in the gears of global commerce, implications are different when gears stop entirely. Companies had many options for dealing with the trade war, whether sourcing goods from elsewhere or simply paying more for them.
The longer the shutdowns of Chinese production and the more widely other countries are forced to take similar measures the more the spread of the virus could affect the ability of global companies to do business.
Moreover, while the Fed and other central banks may well take action to try to insulate the world economy from the disease shocks, their tools are ill-suited to the task in many ways. The economic effects of coronavirus on the productive potential of affected nations from factors unrelated to those that more traditionally shape economic results like monetary policy or fiscal policy.
In addition, lower interest rates won’t make a sick person well or give public health authorities confidence that businesses can reopen. All they can do is lower borrowing costs and help encourage businesses and consumers to spend and push financial market prices higher.
“We would rather have a vaccine than a rate cut and fully recognize that monetary policy is not optimized for addressing this type of shock,” said Krishna Guha with Evercore ISI, in a research note. “But it does not follow from this that the appropriate path of policy under the shock is unchanged.”
Neither economists nor portfolio managers make particularly good epidemiologists. But what has become clearer in the last few days is that it is the science of epidemics — and the policy choices that nations make to try to address them — that will shape the economy for the near future, and maybe quite some time to come.
So, we will see. Amid growing concerns regarding economic impacts, there is new talk of additional technologies and perhaps potential to build a vaccine fairly quickly. However, the new disease threat is at least being taken seriously and its implications should continue to be watched closely as they develop, Washington Insider believes.
US-UK Trade Officials To Meet This Week
U.S. Trade Representative Robert Lighthizer will meet his British counterpart in London on Thursday as the two work toward reaching a trade deal yet this year.
Lighthizer’s meeting with International Trade Secretary Liz Truss comes on the same day London releases its position on separate talks with the EU toward a post-Brexit trade arrangement. This comes as U.S. and UK meat industry groups have signed a memorandum of understanding to further their contacts as the two parties work on a trade deal.
Meanwhile, reports indicate European Union (EU) Trade Commissioner Phil Hogan will be in Washington next month just a few days before March 18, his target date for striking a separate trade agreement with the Trump administration.
Lighthizer’s meeting with International Trade Secretary Liz Truss comes on the same day London releases its position on separate talks with the EU toward a post-Brexit trade arrangement. This comes as U.S. and UK meat industry groups have signed a memorandum of understanding to further their contacts as the two parties work on a trade deal.
Meanwhile, reports indicate European Union (EU) Trade Commissioner Phil Hogan will be in Washington next month just a few days before March 18, his target date for striking a separate trade agreement with the Trump administration.
USDA Touts China Actions in Phase One Deal
USDA released an update which outlines the changes that China has made as part of the phase-one trade deal, including shifts the country undertook on several fronts.
China’s lifting of its ban on imports of U.S. poultry, noting it also includes pet food containing poultry products. China also listed its restriction on pet food containing ruminant material.
USDA also noted China’s action on a new protocol to allow in fresh shipping potatoes as another action the country took under terms of the deal.
China has also updated its list of U.S. facilities that can export animal proteins, pet food, dairy, infant formula and tallow for industrial use, and also broadened its list of U.S. seafood products.
The announcement also touted China’s action to half retaliatory tariffs on a host of U.S. products and allow Chinese importers to apply for exemptions on tariffs for nearly 700 U.S. products.
China’s lifting of its ban on imports of U.S. poultry, noting it also includes pet food containing poultry products. China also listed its restriction on pet food containing ruminant material.
USDA also noted China’s action on a new protocol to allow in fresh shipping potatoes as another action the country took under terms of the deal.
China has also updated its list of U.S. facilities that can export animal proteins, pet food, dairy, infant formula and tallow for industrial use, and also broadened its list of U.S. seafood products.
The announcement also touted China’s action to half retaliatory tariffs on a host of U.S. products and allow Chinese importers to apply for exemptions on tariffs for nearly 700 U.S. products.
Wednesday Watch List
Markets
It looks likely that the spread of coronavirus will remain a concern for markets, at least into spring. South American weather also gets attention as Brazil advances through its soybean harvest. At 9 a.m. CST, U.S. new home sales will be released, followed by the Energy Department's weekly report of energy inventories, including ethanol.
Weather
Wednesday features rain and snow in the eastern Midwest and mid-South, keeping soils saturated ahead of spring. Other crop areas will be dry, allowing for some excess moisture drainage. Northern Midwest conditions will continue to have snowpack-induced cold.
It looks likely that the spread of coronavirus will remain a concern for markets, at least into spring. South American weather also gets attention as Brazil advances through its soybean harvest. At 9 a.m. CST, U.S. new home sales will be released, followed by the Energy Department's weekly report of energy inventories, including ethanol.
Weather
Wednesday features rain and snow in the eastern Midwest and mid-South, keeping soils saturated ahead of spring. Other crop areas will be dry, allowing for some excess moisture drainage. Northern Midwest conditions will continue to have snowpack-induced cold.
Tuesday, February 25, 2020
Trump says More Trade Aid an Option; Conflicting Messages on the Need for it.
A Twitter announcement from President Donald Trump last week made it seem like more trade aid for farmers hurt by trade disputes is a legitimate possibility. Evidently, he hadn’t yet made it known to USDA that this was on the table. “The president’s tweet was a surprise to us,” says Ted McKinney, Undersecretary for Trade and Foreign Ag Affairs. “That’s the decision we’ll go with.” Politico says the administration’s agricultural forecasts offer some conflicting messages about whether additional trade is actually needed this year. USDA’s Chief Economist, Robert Johansson, predicts a return to what he called “normal trade” in 2020, along with mentioning more hopeful signs for the farm economy ahead this year after a recent economic downturn. Farm income is projected to increase this year despite a large drop in federal farm payments as the 2019 trade aid program wraps up. Ag Secretary Sonny Perdue has already predicted a “record year for agricultural exports with China.” But, market analysts say isn’t entirely possible because of Beijing’s insistence on following market demand and complying with World Trade Organization limitations. USDA has already paid out $23 billion directly to U.S. producers since 2018.
Brazilian Beef is Back in the U.S.
Late last week, the USDA reopened the door into the U.S. market for imports of raw beef from Brazil. The agency says the world’s largest beef exporter has taken the right steps to improve its food-safety inspection system, bringing it up to U.S. standards. Some farmers, ranchers, and food safety groups are already pushing back against the decision. The National Cattlemen’s Beef Association is one of those groups that has serious concerns about the decision. “NCBA strongly supports science-based trade and the administration’s efforts to enforce it,” says Kent Baucus, the Senior Director of International Trade and Market Access for NCBA. “But, NCBA has serious concerns about Brazil returning to the U.S. beef market.” He says the NCGA has frequently questioned the lack of scientific evidence that was used to justify Brazil’s initial entry into the U.S. market in 2016. “Unfortunately, we weren’t surprised that Brazil forfeited its beef access to the U.S. in 2017 due to a large number of food safety violations,” Baucus says. “Given Brazil’s history with foot-and-mouth disease and its track record of repeated food safety violations at ports-of-entry, you can rest assured that we will keep a sharp eye out on all future developments with Brazil.”
Deere says Farms, Ag Economy Beginning to Stabilize
Deere and Company had a surprisingly strong first quarter after an extended period in which the tractor and construction equipment maker was hit hard by the trade dispute between China and the U.S. “Farmer confidence, though still subdued, has improved due in part to hopes for a relaxation of trade tensions and higher agricultural exports,” says CEO John May. An Associated Press report says China has suspended more punitive tariffs on imports of U.S industrial goods in response to a truce in its trade war with Washington. It’s been well-documented how hard Chinese tariffs hit U.S. agricultural commodities like soybeans, which hurt farmers, and in turn, hurt farm equipment manufacturers as well. Illinois-based Deere and Company had posted three consecutive quarters of falling profits and slowing sales growth as trade tensions between China and the U.S. continued. It also stuck to a conservative outlook during 2020. Deere expects sales in its agriculture-and-turf business to fall between five and ten percent, and those in the construction and forestry segments to fall between 10 and 15 percent.
NFU says Goodbye to Roger Johnson; Election Coming for New President
The National Farmers Union officially saw Roger Johnson off into retirement late last week during a party that took place in the Farmers and Distillers Restaurant in northwest Washington, D.C. Johnson, the NFU President for 11 years, announced back in December that he would be retiring. “Farmers Union has been a fundamental part of who I am for all my life,” Johnson says. “It’s been the biggest honor of my life to serve this organization and the farmers and ranchers that make up the membership ranks. It’s a bittersweet feeling to step away from the role of a lifetime but I need to spend more time with my wife and four grandkids.” The Hagstrom Report says the election to replace Johnson at the top spot of the NFU is coming up March 1-3. There are three candidates to replace Johnson, including Rob Larew, NFU’s Senior VP of Public Policy; Donn Teske, president of the Kansas Farmers Union and a former NFU National Vice President; and Mike Eby, spokesperson and chair for the National Dairy Producers Organization. The Farmers and Distillers Restaurant where the retirement celebration took place is part of a restaurant group owned by the North Dakota Farmers Union.
U.S. Launches Pilot Program for Prairie Pothole Region to Plant Cover Crops
The USDA’s Farm Service Agency announced a new pilot program to enable farmers in the Prairie Pothole region to receive payments for planting cover crops on their land for three to five years. The new Conservation Reserve Program’s Soil Health and Income Protection Program, or SHIPP, is available for producers in Iowa, Minnesota, Montana, North Dakota, and South Dakota. The signup for the pilot program starts on March 30 and ends August 21. “We’re excited to provide a short-term Conservation Reserve Program option tailored to the unique soil health needs of producers in the Prairie Pothole Region,” says FSA Administrator Richard Fordyce. “The number of people that can be enrolled in the program is limited, and participation will be on a first-come, first-served basis.” Fordyce says interested landowners need to contact their FSA county office for an appointment to apply. Through the SHIPP program, producers have the option of taking a three, four, or five-year CRP contract to establish cover crops on less productive cropland in exchange for payments. Cover crops, used either in a single crop rotation or over multiple years, can improve the productivity and health of soils on a farm for generations and increase the bottom line for the farmer.
Cargill Moving into the Fake-Meat Business
Cargill is making a jump into the plant-based protein business. The global giant announced plans to sell its private-label plant-based patties and ground products to retailers and restaurants beginning in early April. Cargill says the offerings are part of its “new approach” to the future of the protein market, and they predict protein demand will jump by 70 percent over the next three decades. The plant-based products were developed and will be manufactured in Cargill facilities. The company’s managing director of the alternative protein team says they’ve created some of the “best-tasting products available in the plant-based category.” However, it doesn’t mean that Cargill is going to a 100 percent plant-based protein production plant. Brian Sikes, the leader of Cargill’s global protein and salt business says, “We need to keep all protein options on the table. Whether people are eating alternative or animal protein, Cargill intends to be right there at the center of the plate.”
Washington Insider: Limited Trade Negotiation Progress in India
Politico says this week that President Donald Trump has been anticipating a warm welcome in India, but that the nation has been reluctant to give the administration “even a small trade victory.”
Over the last few weeks, U.S. officials have “struggled to clinch a miniature agreement” that could result in some modest additional access for U.S. medical devices, motorcycles and milk products in a market of more than 1.3 billion people.
As a result, the president moved quickly to tamp down expectations, including that a “big deal” may only be possible “after he wins a second term.” U.S. Trade Representative Robert Lighthizer did not plan to travel to India with the president, further diminishing any chance for substantial results, nor did he go to India ahead of the president’s visit, also dampening expectations for a deal.
“We may make a tremendous deal there -- or maybe we’ll slow it down. We’ll do it after the election. I think that could happen too,” the president said late last week.
A senior administration official said a "wide scope" of issues is complicating progress toward a mini trade deal. "We want to address a lot of concerns and we’re not quite there yet.” He noted that discussions with the prime minister about these concerns are expected, Politico said.
India is expected to announce some significant purchases of U.S. energy and defense products but the administration’s fixation with imbalanced trading relationships is likely impeding any willingness to offer New Delhi concessions, Politico said.
India is the United States’ ninth-largest trading partner and bought about $34 billion worth of goods in 2019 -- just a fraction of the $256 billion exported to Mexico, the top destination for U.S. goods last year.
The U.S.-Indian trade deficit was $24 billion last year while India's exports to the U.S. grew much faster than U.S. exports to India. Politico thinks these statistics could be driving the president’s reluctance to give India what it really wants -- access again to the U.S. Generalized System of Preferences, a tariff-cutting program for developing countries that discounts duties on roughly $6 billion worth of imports.
Policies that have fiercely guarded India's markets have been the bane of multiple previous U.S. administrations. Even now, as India’s economy slumps further and pressure from neighboring China grows, New Delhi has continued to make protective moves including a multiyear "Make in India" initiative aimed at bolstering the country's manufacturing sector through local sourcing and production requirements, Politico said.
India also released a national budget in late January that raised tariffs on a number of products that were under consideration to be cut or eliminated under a mini-agreement with the U.S.
U.S.-India Business Council President Nisha Biswal said India’s tariff increases on walnuts, medical devices and other goods that were to be part of a trade deal further “complicated” the talks. The negotiations also got hung up on details related to increasing access for U.S. dairy products and credit card companies.
Modi’s latest actions may reflect efforts to stem a tide of cheap, Chinese imports where a significant portion of the population still lives in poverty. India was also likely emboldened by the U.S. and other countries to stand firm or ramp up its tariffs.
For months, administration officials have weighed the launch of a so-called Section 301 trade investigation, a law that gives the president broad leeway to impose trade restrictions to address unfair trade actions. Trump used the same authority on China, which resulted in tariffs on hundreds of billions worth of imports — but no final decision has been made on whether to apply it to India.
At least this week, the President may be content to maintain the warm relationship with a leader he views as a kindred spirit who can mobilize the masses of supporters the president relishes. Modi’s visit to Houston in September where he held a joint rally with Trump brought the president one of his largest crowds.
U.S. businesses were hoping a limited trade package would be a confidence-building move for a more comprehensive negotiation. "We are fundamentally looking at an Indian approach to trade that is still emerging and evolving from a more protectionist or closed trading system to a more open one," an administration official told Politico.
So, we will see. India’s trade policies have long been difficult and highly political — and the growing global tensions and intensifying fears of a destructive coronavirus outbreak appear to be among several key economic and social threats lurking ahead, Washington Insider believes.
Over the last few weeks, U.S. officials have “struggled to clinch a miniature agreement” that could result in some modest additional access for U.S. medical devices, motorcycles and milk products in a market of more than 1.3 billion people.
As a result, the president moved quickly to tamp down expectations, including that a “big deal” may only be possible “after he wins a second term.” U.S. Trade Representative Robert Lighthizer did not plan to travel to India with the president, further diminishing any chance for substantial results, nor did he go to India ahead of the president’s visit, also dampening expectations for a deal.
“We may make a tremendous deal there -- or maybe we’ll slow it down. We’ll do it after the election. I think that could happen too,” the president said late last week.
A senior administration official said a "wide scope" of issues is complicating progress toward a mini trade deal. "We want to address a lot of concerns and we’re not quite there yet.” He noted that discussions with the prime minister about these concerns are expected, Politico said.
India is expected to announce some significant purchases of U.S. energy and defense products but the administration’s fixation with imbalanced trading relationships is likely impeding any willingness to offer New Delhi concessions, Politico said.
India is the United States’ ninth-largest trading partner and bought about $34 billion worth of goods in 2019 -- just a fraction of the $256 billion exported to Mexico, the top destination for U.S. goods last year.
The U.S.-Indian trade deficit was $24 billion last year while India's exports to the U.S. grew much faster than U.S. exports to India. Politico thinks these statistics could be driving the president’s reluctance to give India what it really wants -- access again to the U.S. Generalized System of Preferences, a tariff-cutting program for developing countries that discounts duties on roughly $6 billion worth of imports.
Policies that have fiercely guarded India's markets have been the bane of multiple previous U.S. administrations. Even now, as India’s economy slumps further and pressure from neighboring China grows, New Delhi has continued to make protective moves including a multiyear "Make in India" initiative aimed at bolstering the country's manufacturing sector through local sourcing and production requirements, Politico said.
India also released a national budget in late January that raised tariffs on a number of products that were under consideration to be cut or eliminated under a mini-agreement with the U.S.
U.S.-India Business Council President Nisha Biswal said India’s tariff increases on walnuts, medical devices and other goods that were to be part of a trade deal further “complicated” the talks. The negotiations also got hung up on details related to increasing access for U.S. dairy products and credit card companies.
Modi’s latest actions may reflect efforts to stem a tide of cheap, Chinese imports where a significant portion of the population still lives in poverty. India was also likely emboldened by the U.S. and other countries to stand firm or ramp up its tariffs.
For months, administration officials have weighed the launch of a so-called Section 301 trade investigation, a law that gives the president broad leeway to impose trade restrictions to address unfair trade actions. Trump used the same authority on China, which resulted in tariffs on hundreds of billions worth of imports — but no final decision has been made on whether to apply it to India.
At least this week, the President may be content to maintain the warm relationship with a leader he views as a kindred spirit who can mobilize the masses of supporters the president relishes. Modi’s visit to Houston in September where he held a joint rally with Trump brought the president one of his largest crowds.
U.S. businesses were hoping a limited trade package would be a confidence-building move for a more comprehensive negotiation. "We are fundamentally looking at an Indian approach to trade that is still emerging and evolving from a more protectionist or closed trading system to a more open one," an administration official told Politico.
So, we will see. India’s trade policies have long been difficult and highly political — and the growing global tensions and intensifying fears of a destructive coronavirus outbreak appear to be among several key economic and social threats lurking ahead, Washington Insider believes.
EPA Receives Additional Small Refiner Exemptions
EPA data shows the agency now has 23 small refinery exemption (SREs) requests for the 2019 compliance year, an increase from two compared with month-ago data.
Attention continues on the issue with reports indicating EPA will respond to a court decision sometime in early March on this topic.
Indications are the court ruling has the potential to impact many previously granted SREs in that the court determined that for three of those granted for the 2016 compliance year, the agency did not act appropriately as the court said the SREs were to be extensions of ones granted prior to 2010.
Attention continues on the issue with reports indicating EPA will respond to a court decision sometime in early March on this topic.
Indications are the court ruling has the potential to impact many previously granted SREs in that the court determined that for three of those granted for the 2016 compliance year, the agency did not act appropriately as the court said the SREs were to be extensions of ones granted prior to 2010.
China Lifts Ag Restrictions on US Beef
China has conditionally lifted its ban on imports of U.S. beef/products from animals more than 30 months of age, according to a notice from the Chinese General Administration of Customs Office.
The notice said that inspection and quarantine requirements would be released separately.
The action is one of the moves that China agreed to make as part of the phase-one agreement with the U.S.
The other one on beef is that China is to set maximum residue levels (MRLs) for three growth hormones used in U.S. beef production. That is an action that China agreed to take within 30 days of the agreement taking force – March 14.
The age limit action announced by China was also on the same timeline as the MRL issue, so China is ahead of their deadline on that front.
The notice said that inspection and quarantine requirements would be released separately.
The action is one of the moves that China agreed to make as part of the phase-one agreement with the U.S.
The other one on beef is that China is to set maximum residue levels (MRLs) for three growth hormones used in U.S. beef production. That is an action that China agreed to take within 30 days of the agreement taking force – March 14.
The age limit action announced by China was also on the same timeline as the MRL issue, so China is ahead of their deadline on that front.
Tuesday Watch List
Markets
Traders are keeping an eye on the spread of coronavirus with questions as to whether it can be contained. Tuesday's lone report is for U.S. consumer confidence at 9 a.m. CST. South American weather and any trade news will also get attention.
Weather
Tuesday features snow, cold and strong winds in the Northern and central Plains, and rain in the eastern Midwest and Southeast. Areas with snow will have transportation and safety issues along with livestock stress. Rain in the Midwest continues to keep soils saturated ahead of spring. A drier trend is in store during the last half of the week.
Traders are keeping an eye on the spread of coronavirus with questions as to whether it can be contained. Tuesday's lone report is for U.S. consumer confidence at 9 a.m. CST. South American weather and any trade news will also get attention.
Weather
Tuesday features snow, cold and strong winds in the Northern and central Plains, and rain in the eastern Midwest and Southeast. Areas with snow will have transportation and safety issues along with livestock stress. Rain in the Midwest continues to keep soils saturated ahead of spring. A drier trend is in store during the last half of the week.
Monday, February 24, 2020
Pork Pessimistic on EU; Cattle Optimistic on China
U.S. pork producers don’t seem optimistic about a potential trade deal with the European Union coming together anytime soon. Nick Giordano is the Vice President of Global Government Affairs for the National Pork Producers Council. Giordano tells Politico that he’s “very skeptical” that the two sides will even reach a mini agreement in the weeks ahead. He feels the real goal should be a comprehensive trade pact covering all sectors of agriculture. “It’s outrageous that a market of that size, with that level of income, is so closed to us,” Giordano says. “They’re stealing jobs from us because of their protectionism and that’s unacceptable.” The VP says there will be widespread support in the U.S. agriculture community for the Trump Administration to take tough action against the EU if there are no concessions regarding a more open EU market. Meantime, U.S. cattlemen might annually sell $4 billion worth of beef to China within the next five years. Kent Baucus, Senior Director of International Affairs with the National Cattlemen’s Beef Association, says the Phase One trade deal and the meat shortage in China cause by African Swine Fever should drive U.S. beef exports higher. “We haven’t even scratched the surface on the Chinese market,” he says. “There is a tremendous amount of unmet protein demand in China.
USDA Ag Outlook Forum Calls for a Return to “Normal” Trade in 2020
The USDA’s top economist predicted agricultural trade will return to normal this year. USDA Chief Economist Robert Johansson says farm exports to China will rise from $10 billion last year to $14 billion in 2020. That “slight” $4 billion jump doesn’t quite add up to the $40 billion in U.S. ag products that China committed to import from the U.S. under the Phase One trade deal. Johansson says the forecast “reflects public information that’s available right now on phase one.” Later, he added that the calendar year predictions don’t completely include the phase one commitments. However, Ag Secretary Sonny Perdue says that China’s import commitments were not included in Johansson’s estimates. “We expect to exceed that, certainly,” Perdue told reporters. An Agri-Pulse report says Johansson noted that improved exports this year should help farmers’ bottom lines in 2020, while lower interest rates would reduce borrowing costs and strengthen land values. USDA is projecting a corn price at $3.60 a bushel this year, down four percent from last year. The price of soybeans is expected to be $8.80 a bushel, one percent higher last year. Wheat prices are predicted to average $4.90 a bushel, up eight percent from 2019.
Trump Promises Farmers More Trade Aid if Needed
President Donald Trump took to Twitter again to talk trade. There have been questions on the possibility of more trade aid distribution this year, with the president seemingly saying it’s a possibility. “If our formally targeted farmers need additional aid until such time as the trade deals with China, Mexico, Canada, and others fully kick in, that aid will be provided by the federal government, paid for out of the massive tariff money coming into the USA,” he said in a Friday Tweet. However, The Hagstrom Report says Trump isn’t technically accurate when he says the aid will come out of tariff income. The money comes from the Commodity Credit Corporation, which was set up back in the 1930s as a way to distribute aid to farmers. The CCC is a division of the U.S. Department of Agriculture. It has a line of credit set up at the Treasury Department that Congress replenishes. Ag Secretary Sonny Perdue has told farmers recently to not expect more trade aid in 2020. The Trump Administration has already paid out a total of $28 billion in trade aid by way of payments to farmers, trade promotion, and purchases from food items for distribution to food shelves across the country.
ASF Virus Infections Last Longer Than Originally Thought
A group of researchers and veterinarians put together a fact sheet dealing with the African Swine Fever that’s called “Holding Time Calculations for Feed Ingredients to Mitigate Virus Transmission.” However, they’ve revised the necessary holding time upward when it comes to determining if the African Swine Fever virus is sufficiently degraded in feedstuffs to potentially prevent transmission. The new recommendation is to hold conventional soybean meal an average of 125 days from when it’s placed in a package, which is up from only 52 days found in previous research. The new research was funded by the Swine Health Information Center with Pork Checkoff Funds. The study was conducted at Kansas State University using the ASF virus inside the National Bio and Agro-Defense Facility. Experts recommend that producers talk with their feed suppliers and ask for the “born-on” date for all imported feed products. Vigilance is the best protection against a potential ASF outbreak in the U.S. To further ensure the U.S. swine herd remains free of African Swine Fever, the National Pork Producers Council is asking Ag Secretary Sonny Perdue to take further measures to keep potentially infected animal feed out of the country.
Hopes Fading for a U.S.-India Trade Deal Before Trump Visits
It’s looking like the U.S. and India won’t be able to reach a trade deal before President Donald Trump visits the country. A Reuters report says India has proposed new tariffs that have complicated the negotiations. The U.S.-India Business Council tells reporters that hopes were fading for the two sides to be able to quickly bridge the gap in their efforts to restore some U.S. trade preferences for India, as well as improve market access for selected U.S. farm products. “We’re still hopeful that some kind of agreement could be reached,” the council says in a statement. “We do recognize and acknowledge that both governments have been indicating that an agreement is not likely to happen at the stage of the talks.” Trump himself is sending mixed messages on the possibility of a trade agreement with India. “We’re going to India and we may make a tremendous deal there,” he says. “Maybe we’ll slow it down and do it after the election. We’ll see what happens, but we will only make deals if they are good deals that put America first.” A spokesman for India’s Foreign Ministry says they won’t rush into a trade deal with the U.S. unless there’s a balanced outcome that’s good for both countries.
Farm Bureau Readying for Ag Safety Awareness Program Week
The American Farm Bureau says its groups across the nation are getting ready for Agricultural Safety Awareness Week, which is coming up on May 1-7. U.S. Agricultural Safety and Health Centers will join the Farm Bureau in promotion of the week with the theme as “20:20 Vision on Ag Safety.” Ag Safety Awareness Program Week has a different focus each day. Topics Monday through Friday include Mental Health on Monday, followed by Transportation Safety, Weather Disasters, Confined Spaces, and Farmer Wellness on Friday. Both organizations encourage farmers across the country to make safety a priority on the farm during the week and throughout the entire year. The Agricultural Safety Awareness Program is part of the Farm Bureau Health and Safety Network of professionals who share an interest in identifying and decreasing safety and health risks. They invite farmers to visit their YouTube channel for new content and fresh ideas on how to stay safe while working in agriculture, forestry, and fishing. There’s a lot more information on the Agricultural Safety Awareness Week webpage as well.
Washington Insider: Considering a New Farm Bailout
It appears that the administration is seriously considering another farm bailout, in spite of its own recent negative comments regarding such an effort. The Washington Post is reporting that President Trump “for the first time Friday” vowed to continue his multibillion-dollar bailout of the farm industry “if necessary.”
The White House comments appeared to surprise a number of administration officials, the Post said. However, the report noted that the comments came amid growing signs that last month’s partial trade deal with China is “falling far short of the levels initially promised.”
As recently as Thursday, a senior U.S. Department of Agriculture official said China might end up buying just $14 billion in U.S. farm products through the end of September and that total purchases for the year could be much less than the $40 billion the president had promised.
The Post said the President’s political support among farmers appears to continue to be strong “but White House officials have long been worried about a backlash if prices remain low and bankruptcies continue.”
USDA reported at its recent outlook conference that total farm debt was at an all-time high and that there had been no “bump” in commodity prices following either the new China trade deal or the separate pact with Canada and Mexico — in spite of the president’s promise of a farming renaissance and his exhortation to farmers “to buy a bigger tractor and more land.”
“We are frustrated with the situation. We understand the broader trade implications but feel we have been targeted in a bigger political battle we did not sign up for,” said Jamie Beyer, a soybean farmer in Wheaton, Minn. and president of the Minnesota Soybean Growers Association. “We are all very excited about the USMCA (U.S.-Mexico-Canada Agreement) and the trade deal with China. But we are all waiting for that to be reflected in commodity prices and orders… it’s disheartening."
A third multibillion-dollar bailout could cast a shadow over administration claims about the “big, beautiful” trade deal reached with China last month, an agreement expected to form a key part of his 2020 reelection message on the economy. The outbreak of the coronavirus has wreaked havoc on the Chinese economy, making it more difficult to forecast how large farm purchases by China will ultimately be this year, the Post said.
The farm bailout program began in 2018 as a way to address fury from farmers who said Chinese tariffs on their exports had pushed many to the brink of collapse. The program continued in 2019, but White House officials had suggested it would not be renewed in 2020 — until the President reversed course Friday.
“Farmers are no dummies. They’ve seen this get rolled out the past two years, programs invented out of whole cloth,” said Roger Johnson, president of the National Farmers Union. “The president is going to do whatever he can to appease the farmers because it’s an election year."
The need for what would amount to a third round of bailout funding highlights the immense challenges the administration has faced in its international trade war conflicts. It imposed tariffs on a range of Chinese imports, including steel, as a way to ramp up pressure on the Chinese government to boost U.S. imports. But China retaliated by targeting agricultural producers in politically critical Midwestern states.
The administration “has said from the beginning that the trade war is nothing but rainbows and unicorns. The reality is that it’s not just us being tough on China; China and other countries are being tough on us,” said Rory Cooper, a former Republican aide who now works at Purple Strategies, a political consulting firm.
Zippy Duvall, president of the American Farm Bureau Federation said that he was optimistic that China would purchase more than $14 billion in agricultural products, based on conversations with China’s minister of agriculture but that the final outcome was uncertain. “The difficult times farmers are having today are not getting any better because of slow implementation,” Duvall said.
The President’s talk of additional bailout money may be meant as a signal to China that the White House will not wait patiently for Beijing to comply with the new trade deal, Sen. Kevin Cramer, R-N.D., a farm-state ally of the President, said.
GOP lawmakers worry that the President’s trade war “weakened the impact of their 2017 tax law, slowing U.S. economic growth.” The bailout’s price tag is now more than twice the cost of the Obama administration’s auto bailout, which was criticized by conservative lawmakers, the Post said. Unlike with many other government bailout programs, farmers are not required to pay any of the money back.
Still, Democrats may be in a difficult position to exploit the intra-GOP rift on the issue, the Post said. Congressional Democrats passed up an opportunity last year to force the White House to scale back the program amid pressure from lawmakers in their own caucus representing farm states. And party leaders such as Senate Minority Leader Charles Schumer, D-N.Y., have argued that the administration has “not been tough enough on China.”
Senior administration officials previously expressed alarm about the administration’s legal justification for the bailout, which they have based on a New Deal-era program. It was modified from its initial form to include additional crops, among other changes.
So, we will see. The administration’s heavy reliance on tariffs appears to be attracting growing criticism — at least in some quarters — especially as the coronavirus appears to continue to spread, a trend producers should watch closely as the season progresses, Washington Insider believes.
The White House comments appeared to surprise a number of administration officials, the Post said. However, the report noted that the comments came amid growing signs that last month’s partial trade deal with China is “falling far short of the levels initially promised.”
As recently as Thursday, a senior U.S. Department of Agriculture official said China might end up buying just $14 billion in U.S. farm products through the end of September and that total purchases for the year could be much less than the $40 billion the president had promised.
The Post said the President’s political support among farmers appears to continue to be strong “but White House officials have long been worried about a backlash if prices remain low and bankruptcies continue.”
USDA reported at its recent outlook conference that total farm debt was at an all-time high and that there had been no “bump” in commodity prices following either the new China trade deal or the separate pact with Canada and Mexico — in spite of the president’s promise of a farming renaissance and his exhortation to farmers “to buy a bigger tractor and more land.”
“We are frustrated with the situation. We understand the broader trade implications but feel we have been targeted in a bigger political battle we did not sign up for,” said Jamie Beyer, a soybean farmer in Wheaton, Minn. and president of the Minnesota Soybean Growers Association. “We are all very excited about the USMCA (U.S.-Mexico-Canada Agreement) and the trade deal with China. But we are all waiting for that to be reflected in commodity prices and orders… it’s disheartening."
A third multibillion-dollar bailout could cast a shadow over administration claims about the “big, beautiful” trade deal reached with China last month, an agreement expected to form a key part of his 2020 reelection message on the economy. The outbreak of the coronavirus has wreaked havoc on the Chinese economy, making it more difficult to forecast how large farm purchases by China will ultimately be this year, the Post said.
The farm bailout program began in 2018 as a way to address fury from farmers who said Chinese tariffs on their exports had pushed many to the brink of collapse. The program continued in 2019, but White House officials had suggested it would not be renewed in 2020 — until the President reversed course Friday.
“Farmers are no dummies. They’ve seen this get rolled out the past two years, programs invented out of whole cloth,” said Roger Johnson, president of the National Farmers Union. “The president is going to do whatever he can to appease the farmers because it’s an election year."
The need for what would amount to a third round of bailout funding highlights the immense challenges the administration has faced in its international trade war conflicts. It imposed tariffs on a range of Chinese imports, including steel, as a way to ramp up pressure on the Chinese government to boost U.S. imports. But China retaliated by targeting agricultural producers in politically critical Midwestern states.
The administration “has said from the beginning that the trade war is nothing but rainbows and unicorns. The reality is that it’s not just us being tough on China; China and other countries are being tough on us,” said Rory Cooper, a former Republican aide who now works at Purple Strategies, a political consulting firm.
Zippy Duvall, president of the American Farm Bureau Federation said that he was optimistic that China would purchase more than $14 billion in agricultural products, based on conversations with China’s minister of agriculture but that the final outcome was uncertain. “The difficult times farmers are having today are not getting any better because of slow implementation,” Duvall said.
The President’s talk of additional bailout money may be meant as a signal to China that the White House will not wait patiently for Beijing to comply with the new trade deal, Sen. Kevin Cramer, R-N.D., a farm-state ally of the President, said.
GOP lawmakers worry that the President’s trade war “weakened the impact of their 2017 tax law, slowing U.S. economic growth.” The bailout’s price tag is now more than twice the cost of the Obama administration’s auto bailout, which was criticized by conservative lawmakers, the Post said. Unlike with many other government bailout programs, farmers are not required to pay any of the money back.
Still, Democrats may be in a difficult position to exploit the intra-GOP rift on the issue, the Post said. Congressional Democrats passed up an opportunity last year to force the White House to scale back the program amid pressure from lawmakers in their own caucus representing farm states. And party leaders such as Senate Minority Leader Charles Schumer, D-N.Y., have argued that the administration has “not been tough enough on China.”
Senior administration officials previously expressed alarm about the administration’s legal justification for the bailout, which they have based on a New Deal-era program. It was modified from its initial form to include additional crops, among other changes.
So, we will see. The administration’s heavy reliance on tariffs appears to be attracting growing criticism — at least in some quarters — especially as the coronavirus appears to continue to spread, a trend producers should watch closely as the season progresses, Washington Insider believes.
Boost in Guest Workers Coming From Trump Administration
The Trump administration plans to allow 45,000 additional seasonal (H-2B visa program) guest workers to return to the U.S. this summer, the highest number since the president took office, according to administration officials.
The Department of Homeland Security plans to announce the additional seasonal-worker visas next week. They will become available in two waves: the first 20,000 will be immediately available, while employers can apply for the remainder for jobs beginning June 1.
The additional visas are being made available ahead of the summer, when demand for short-term work is typically highest.
The Department of Homeland Security plans to announce the additional seasonal-worker visas next week. They will become available in two waves: the first 20,000 will be immediately available, while employers can apply for the remainder for jobs beginning June 1.
The additional visas are being made available ahead of the summer, when demand for short-term work is typically highest.
India Now Downplaying Expectations For US-India Trade Deal Soon
Expectations for a U.S.-India trade deal to be inked when President Donald Trump visits the country next week continue to fade, with the U.S.-India Business Council the latest to lower those expectations.
“As new issues have continued to emerge, including the introduction of new tariffs in the most recent budget,” the group’s president, Nisha Biswal, told reporters in a teleconference, “the conversations may have gotten a little bit more complicated.” However, Biswal said there is still a chance for an agreement, but “both governments have been indicating that is unlikely at this juncture.”
Indications are that the situation is linked to India not making the kind of concessions on some issues that the U.S. sought as they were wanting to put some kind of trade deal together that Trump could announce while in the country.
“As new issues have continued to emerge, including the introduction of new tariffs in the most recent budget,” the group’s president, Nisha Biswal, told reporters in a teleconference, “the conversations may have gotten a little bit more complicated.” However, Biswal said there is still a chance for an agreement, but “both governments have been indicating that is unlikely at this juncture.”
Indications are that the situation is linked to India not making the kind of concessions on some issues that the U.S. sought as they were wanting to put some kind of trade deal together that Trump could announce while in the country.
Monday Watch List
Markets
Coronavirus remains a concern to markets with infections spreading beyond China. With the Ag Outlook Forum concluded on Friday, traders will be back to checking South American weather forecasts and watching for any trade news to emerge. USDA's weekly report of export inspections is due out at 10:00 a.m. CST, followed by a monthly cold storage report at 2 p.m.
Weather
Moderate to locally heavy rain is in store for the southern Midwest and Delta Monday, keeping soils saturated and threatening flooding. Meanwhile, snow will develop in the northern and western Plains, adding to meltwater supply for spring flood potential.
Coronavirus remains a concern to markets with infections spreading beyond China. With the Ag Outlook Forum concluded on Friday, traders will be back to checking South American weather forecasts and watching for any trade news to emerge. USDA's weekly report of export inspections is due out at 10:00 a.m. CST, followed by a monthly cold storage report at 2 p.m.
Weather
Moderate to locally heavy rain is in store for the southern Midwest and Delta Monday, keeping soils saturated and threatening flooding. Meanwhile, snow will develop in the northern and western Plains, adding to meltwater supply for spring flood potential.
Friday, February 21, 2020
EU Sets a Target Date for U.S. Trade Deal
Phil Hogan, European Union Trade Chief, says he’s looking to have a trade deal in place with the Trump Administration and the U.S. by March 18. Politico says he’s working on a package of agreements for EU leaders to present to Trump in the coming weeks. Among the potential concessions the EU may be willing to make are speeding up the approval process for certain Genetically Modified Organisms, as well as allowing U.S. imports of tallow, which is a form of beef or sheep fat. Why March 18th? That’s when higher U.S. retaliatory tariffs on Airbus planes are set to take effect. The Trump Administration last week raised duties from 10 percent to 15 percent but suspended implementing the increase. Hogan says the move by Washington, as well as the decision to not raise tariffs on EU farm goods, was seen as a positive sign that the U.S. is ready to make a deal. The U.S. also didn’t do anything to increase the 25 percent duties in place on European food and alcohol products.
Hormel Eliminating Ractopamine from Hog Supplies
Hormel Foods is getting rid of ractopamine (rack-TOH-pah-meen), a growth drug banned by China, from its hog supply. Hormel is joining rival companies like Tyson Foods and JBS in looking to make more meat sales to China, which is in the middle of wrestling with a large shortage of pork. Hormel isn’t going to accept hogs that have been fed or otherwise exposed to ractopamine after April first. Tyson Foods and JBS USA took that step last year. The companies’ moves ramped up the competition for the increased pork demand from China, where the outbreak of African Swine Fever has decimated their herds. In a statement announcing the move, Hormel says, “We have been actively monitoring the changing global market dynamics for several years and believe this decision will further position us to meet growing international demand.” Ractopamine is used in some countries to raise leaner pigs, but China doesn’t allow its use or tolerate residues in its imported meats. The European Union also bans ractopamine.
Perdue Announces New Innovation Initiative for USDA
Ag Secretary Sonny Perdue announced the Agriculture Innovation Agenda, which is a department-wide initiative to help better position U.S. ag to meet future global demands. The initiative will align resources, programs, and research to help stimulate innovation so that American agriculture can achieve the goal of increasing production by 40 percent while cutting the environmental footprint of U.S. agriculture in half by 2050. “We know we have a challenge facing us: to meet future food, fiber, fuel, and feed demands with finite resources,” Perdue says. “USDA’s Agriculture Innovation Agenda is our opportunity to define American agriculture’s role to feed everyone and do right as a key player in the solution to this challenge.” He calls the new agenda a strategic, department-wide effort to better align USDA’s resources, programs, and research to provide farmers with the tools they need to be successful. “We’re also continually mindful of the need for America’s agriculture industry to be environmentally, socially, and economically sustainable to maintain our position as a leader in the global effort to meet demand,” he adds. The first component of the Ag Innovation Agenda is to develop a U.S. ag innovation strategy that aligns and synchronizes public and private sector research.
U.S. Pork Industry Wants Additional ASF Prevention Measures in Place
Continued vigilance by the USDA, Customs and Border Protection, and the U.S. pork industry, means that the U.S. has so far prevented an outbreak of the African Swine Fever Virus. The disease affects pigs and poses no threat to human safety. The National Pork Producers Council and 30 state associations are asking Ag Secretary Sonny Perdue to take additional measures, including restricting imports of organic soy products for animal feed from all countries that have ASF outbreaks. The U.S. pork and feed industries have adopted holding times to allow for the natural degradation of any viruses, to ensure that most imported feed ingredients are safe to use. Research shows that organic soy products can maintain the virus for longer periods, making holding times impractical. Most soy imports into the U.S. are organic. NPPC says it’s confident in the safety of domestic soy products. NPPC and the associations are also asking USDA to further explore the merit of restricting all soy products from ASF-positive countries, to enhance its online system used to permit animal movements in the event of an outbreak, and to expand state animal health laboratory testing capacity.
Groups to Study 100 Percent Biodiesel Engine Technology
A wide range of groups announced a partnership to conduct a year-long validation project of revolutionary biodiesel technology. Five trucks owned by ADM will be outfitted with Optimus Technologies Vector Fuel System, which enables diesel engines to run almost entirely on sustainable biodiesel. In a real-world environment, the trucks will be used in everyday fleet operations for a year, with each vehicle likely to travel between 160,000 and 180,000 miles, while reducing up to 500,000 pounds of carbon dioxide. Five other trucks in the ADM fleet will be a control group in the study and operate on conventional biodiesel. While nearly all diesel engine manufacturers support at least 20 percent biodiesel, the Optimus Vector System is designed to allow conventional diesel engines to run on 100 percent biodiesel in a wide range of climates. The system is already in use in short mileage, local fleet applications. The new project will test the viability for longer-haul, over-the-road fleets, which could potentially open a pathway to significantly higher volumes of biodiesel in the U.S. truck fleet. Other organizations involved in the project include the National Biodiesel Board, the Illinois Soybean Association, and the Missouri Soybean Merchandising Council.
Farmers Union Recommends Improvements to EQIP
The USDA continues to implement the 2018 Farm Bill and released the Environmental Quality Incentives Program Interim Rule. The National Farmers Union is urging the agency to strengthen the conservation program to better support farmers as they work to ensure the longevity of their land and natural resources. Farmers Union President Roger Johnson says his group values the program and wants to make improvements to ensure its efficiency. “We’d like to encourage the agency to include climate resilience and soil health in its list of EQIP priorities,” Johnson says. “These are two of the most critical issues facing agriculture today and farmers need all available tools and resources to address them.” They also recommend NRCS give each state the ability to set their high-priority practices for increased payment rates. Local and regional offices are the most knowledgeable about the resource concerns in their areas and should determine, when possible, how to address those concerns. “We also urge NRCS to prioritize farmers and ranchers when allocating EQIP funding,” Johnson adds. “We’d like funding to be available to water management entities that serve mostly farmers and ranchers.”
Washington Insider: Complex Economic Trends
It seems likely that much of the coming political campaign debate will center on the economy, and that there may well be a series of political fights brewing there as the administration seeks to claim a “blue collar boom” across the U.S.
At the same time, others tend to see the recent trends as more complicated. For example, Bloomberg is reporting this week that “in the 11th year of a record expansion the rising tide of the U.S. economy hasn’t been lifting all boats equally — at least when it comes to pay.”
It is true that unemployment is the lowest for half a century and that wages have been picking up steam across the board, the report says — but it also notes that “the biggest rewards from a strong economy are still skewed toward white people, men and high earners.” The report relies on details from an annual study by the Economic Policy Institute.
Administration officials frequently argue that previously left-behind groups are “benefiting from a blue-collar boom.” However, Bloomberg says that while there have been gradual improvements for many “some disparities have actually worsened over time.” It points to the wage gap between blacks and whites, which is wider now than in 2000. And, it points out that along with tight labor markets, minimum wage legislation at the local level has helped deliver some of the gains for low earners.
In the past two decades — encompassing two expansions and a recession — wage growth has been fastest for the highest-paid workers, Bloomberg says. However, it notes that it wasn’t until last year that workers with only “some college education” got back to their pre-2008 wage level.
It also notes that men with a standard college degree are still paid more than women with an advanced one--and black workers with some college education still get paid less than in 2000. Still, most black workers experienced stronger wage growth between 2018 and 2019 than any year since 2000, the report said.
And it notes that Hispanic workers were the only ethnic group to see their wages rise across all education levels from 2018 to 2019--although at almost every level, Hispanic and black workers were paid less than white peers.
Bloomberg also reports wage disparity “even near the top.” For example, men in the 95th percentile saw a 37% wage gain in the last 20 years, about twice that for those just next door in the 90th percentile. As for the median, that indicator ticked up only 3.4%. And among the top 0.1%, earnings grew at more than double the pace of the mere 1%.
Wage rates paid to the lowest-paid men saw faster growth than those in the middle, with the 10th percentile rising 12% and the 20th up 10%. However, the gains among the lowest-paid workers have been concentrated during economic expansions with wages accelerating a few years into boom cycles and then tapering off.
Minimum wage legislation also affected the trends, Bloomberg said. Pay rose 18% for the lowest-paid 10% of workers in states where minimum wage legislation was enacted in the last seven years. It rose just 9% in regions without those laws.
The trend in wage growth is more important than usual just now, since it is one reason Federal Reserve policy makers are comfortable leaving interest rates at historically low levels at this time; Chairman Jerome Powell has cited growth beginning to reach those on the sidelines.
So, we will see. The strong domestic economic trends have been widely welcomed even while there are reports of economic pitfalls ahead, including those facing trade policies as well as the coronavirus outbreak. USDA is emphasizing its belief that China will honor its phase one requirements in spite of the economic pressures it faces — although tensions appear to be growing between the U.S. and Europe.
Clearly, the trends and issues producers face now are increasingly complex and difficult to evaluate. They should be watched closely as the season advances, Washington Insider believes.
At the same time, others tend to see the recent trends as more complicated. For example, Bloomberg is reporting this week that “in the 11th year of a record expansion the rising tide of the U.S. economy hasn’t been lifting all boats equally — at least when it comes to pay.”
It is true that unemployment is the lowest for half a century and that wages have been picking up steam across the board, the report says — but it also notes that “the biggest rewards from a strong economy are still skewed toward white people, men and high earners.” The report relies on details from an annual study by the Economic Policy Institute.
Administration officials frequently argue that previously left-behind groups are “benefiting from a blue-collar boom.” However, Bloomberg says that while there have been gradual improvements for many “some disparities have actually worsened over time.” It points to the wage gap between blacks and whites, which is wider now than in 2000. And, it points out that along with tight labor markets, minimum wage legislation at the local level has helped deliver some of the gains for low earners.
In the past two decades — encompassing two expansions and a recession — wage growth has been fastest for the highest-paid workers, Bloomberg says. However, it notes that it wasn’t until last year that workers with only “some college education” got back to their pre-2008 wage level.
It also notes that men with a standard college degree are still paid more than women with an advanced one--and black workers with some college education still get paid less than in 2000. Still, most black workers experienced stronger wage growth between 2018 and 2019 than any year since 2000, the report said.
And it notes that Hispanic workers were the only ethnic group to see their wages rise across all education levels from 2018 to 2019--although at almost every level, Hispanic and black workers were paid less than white peers.
Bloomberg also reports wage disparity “even near the top.” For example, men in the 95th percentile saw a 37% wage gain in the last 20 years, about twice that for those just next door in the 90th percentile. As for the median, that indicator ticked up only 3.4%. And among the top 0.1%, earnings grew at more than double the pace of the mere 1%.
Wage rates paid to the lowest-paid men saw faster growth than those in the middle, with the 10th percentile rising 12% and the 20th up 10%. However, the gains among the lowest-paid workers have been concentrated during economic expansions with wages accelerating a few years into boom cycles and then tapering off.
Minimum wage legislation also affected the trends, Bloomberg said. Pay rose 18% for the lowest-paid 10% of workers in states where minimum wage legislation was enacted in the last seven years. It rose just 9% in regions without those laws.
The trend in wage growth is more important than usual just now, since it is one reason Federal Reserve policy makers are comfortable leaving interest rates at historically low levels at this time; Chairman Jerome Powell has cited growth beginning to reach those on the sidelines.
So, we will see. The strong domestic economic trends have been widely welcomed even while there are reports of economic pitfalls ahead, including those facing trade policies as well as the coronavirus outbreak. USDA is emphasizing its belief that China will honor its phase one requirements in spite of the economic pressures it faces — although tensions appear to be growing between the U.S. and Europe.
Clearly, the trends and issues producers face now are increasingly complex and difficult to evaluate. They should be watched closely as the season advances, Washington Insider believes.
EU Trade Chief Lays Out US-EU Trade Pact Expectations
European Union (EU) trade chief Phil Hogan is working to get a deal with the U.S. by March 18, he told reporters Wednesday night. Hogan said he is preparing a package of several agreements for European Commission President Ursula von der Leyen to present to President Donald Trump in the next few weeks.
The Trump administration’s decision last week not to increase retaliatory tariffs on agricultural products in the long-running Boeing-Airbus dispute was a positive sign that the U.S. is willing to negotiate a deal, Hogan said.
The U.S. Trade Representative instead boosted retaliatory tariffs on Airbus aircraft to 15%, from 10%, and left unchanged a 25% tariff on EU food, alcohol and other products. As for the significance of March 18, Hogan noted USTR Robert Lighthizer suspended the tariff increase on Airbus planes until March 18.
“Between now and then, we are trying our best to have a mini deal based on the terms of reference that was given to us ... by President von der Leyen and Trump in Davos,” Hogan said.
The Trump administration’s decision last week not to increase retaliatory tariffs on agricultural products in the long-running Boeing-Airbus dispute was a positive sign that the U.S. is willing to negotiate a deal, Hogan said.
The U.S. Trade Representative instead boosted retaliatory tariffs on Airbus aircraft to 15%, from 10%, and left unchanged a 25% tariff on EU food, alcohol and other products. As for the significance of March 18, Hogan noted USTR Robert Lighthizer suspended the tariff increase on Airbus planes until March 18.
“Between now and then, we are trying our best to have a mini deal based on the terms of reference that was given to us ... by President von der Leyen and Trump in Davos,” Hogan said.
USDA Announces Program to Reduce Environmental Impact of Farming
USDA Secretary Sonny Perdue announced an initiative to reduce the environmental impact of American farming. He stressed voluntary conservation incentives and efficiency improvements rather than regulation as he joins major farm groups in seeking to shape the public debate on agriculture and climate change.
Some 21 farm groups announced a coalition Wednesday on environmental sustainability.
Perdue set a goal of increasing farm production by 40% while cutting the “environmental footprint” in half by 2050.
The initiative includes goals such as a 50% reduction in food waste by 2030, a 30% cut in fertilizer run-off by 2050 and an overall “net reduction” in carbon emissions by 2050 “without regulatory overreach.”
Perdue also set a goal for biofuels such as ethanol to reach “market-driven blend rates” of 15% of U.S. transportation fuels by 2030 and 30% of transportation fuels by 2050.
Some 21 farm groups announced a coalition Wednesday on environmental sustainability.
Perdue set a goal of increasing farm production by 40% while cutting the “environmental footprint” in half by 2050.
The initiative includes goals such as a 50% reduction in food waste by 2030, a 30% cut in fertilizer run-off by 2050 and an overall “net reduction” in carbon emissions by 2050 “without regulatory overreach.”
Perdue also set a goal for biofuels such as ethanol to reach “market-driven blend rates” of 15% of U.S. transportation fuels by 2030 and 30% of transportation fuels by 2050.
Thursday, February 20, 2020
Farm Groups Come Together for Sustainability Discussion
Twenty-one farm and ranch groups that represent millions of U.S. farmers and ranchers are launching Farmers for a Sustainable Future. It’s a new coalition committed to environmental and economic sustainability. The coalition will serve as a primary resource for lawmakers and policymakers as they consider climate policies. One important task for the new coalition is to share with elected officials, media, and the public, U.S. agriculture’s commitment to sustainability and the incredible strides they’ve already made to reduce agriculture’s environmental footprint. As policy proposals are developed and considered, the goal is for the coalition and its guiding principles to serve as a foundation to ensure the adoption of meaningful and constructive policies and programs affecting agriculture. Those guiding principles include calling for policies that support science-based research, voluntary incentive-based conservation programs, investment in infrastructure, and solutions that ensure vibrant rural communities and a healthy planet. The coalition says farmers and ranchers are committed stewards of the land, leading the way to climate-smart farming by promoting soil health, conserving water, enhancing wildlife, using nutrients efficiently, and caring for their animals.
Ag Groups Excited about New Sustainable Farming Coalition
Farm groups that represent millions of farmers and ranchers across the country have come together to form a new coalition called Farmers for a Sustainable Future. It’s a coalition committed to environmental and economic sustainability. One of the ag groups is the American Soybean Association. Their CEO, Ryan Findlay, says, “Soybean farmers have an awesome story to tell, including their sustainability initiatives, so it’s great to be able to collaborate with like-minded organizations to facilitate sound policy and program decisions and have a platform to share our efforts.” The National Council of Farmer Cooperatives also joined the coalition. Chuck Conner, President and CEO of the NCFC, says, “This effort is important as policymakers at both the state and federal levels, and our partners in the value chain develop programs to reduce greenhouse gas emissions and address climate change.” National Cattlemen’s Beef Association Vice President of Government Affairs Ethan Lane says, “Twenty-one agricultural groups are now standing side-by-side in unity to correct a false narrative that’s haunted us for as long as I can remember.” The National Pork Producers Council says farmers and ranchers are “committed stewards of the land” and leading the way in climate-smart farming.
Meat Import Containers Piling Up in Chinese Ports
There are thousands of containers of frozen pork, chicken, and beef, all sitting in major Chinese ports because of the impact of the coronavirus outbreak. Bloomberg says transportation disruptions and labor shortages are slowing operations down drastically. People familiar with the situation tell Bloomberg that there aren’t enough truck drivers to pick up and move the containers due to travel restrictions imposed on the country to control the coronavirus. Ports are running out of electricity to help freeze the containers, while some ships have been told to move on to other destinations in mainland China or Hong Kong. China imports massive amounts of meat products from South America, Europe, and the United States. It’s been boosting purchases to help ease some of the shortages caused by the African Swine Fever outbreak that decimated its hog herds. Customs data shows that China boosted its imports of meat and offal by almost 50 percent last year to a record 6.2 million tons. It’s not known if or when port operations will be able to return to normal as truck drivers returning from other cities are quarantined for 14 days. Other transport restrictions on trucks also remain in place.
China Offers More Tariff-Relief on U.S. Imports
The University of Illinois’ Farm Policy News website says reports are surfacing that China is looking at purchasing some U.S. farm products by early March. The gesture would be intended to show the U.S. that it will meet its commitments outlined in the Phase One trade deal. The Chinese government is in discussions over what commodities it could potentially buy at the end of February or in early March. The purchases would show the U.S. that China intends to stick to the trade deal despite the impact of the coronavirus outbreak. Additional reports from Reuters show that China intends to “grant exemptions on retaliatory duties imposed on almost 700 U.S. products,” which would be the most substantial tariff relief to be offered so far. That would be the third round of tariff relief offered by China and comes after the Phase One trade deal officially went into effect on February 14. China has already been issuing tariff waivers on more of an ad hoc basis for U.S. farm products, including soybeans. The exemption announcement that came this week includes energy products like crude oil.
Don’t Forget to Complete Census of Agriculture Special Studies
The USDA’s National Ag Statistics Service continues to collect responses to the 2019 Organic Survey and the 2019 Census of Horticultural Specialties, both of which are special studies that take place every five years. The response window runs through March of this year. NASS is asking producers who received the questionnaires to respond online, by mail, or by telephone. “We are extending the deadlines for responses since we still have a steady stream of completed questionnaires coming in,” says NASS Administrator Hubert Hamer. “NASS produces the most comprehensive data about U.S. agriculture. Our record of accuracy is why NASS data continues to be used throughout the industry.” Hamer says the better response they get from the questionnaires means the better data they have to offer. “Responding to NASS surveys and censuses means contributing to the future,” Hamer adds. The resulting data will be used by commodity associations, agribusinesses, policymakers, researchers, Extension, and more. Producers who didn’t respond to the original deadline will receive a second questionnaire this month.
CRP Signup Deadline Rapidly Approaching
The USDA is reminding producers interested in the Conservation Reserve Program that the signup deadline is on February 28. The signup is available to farmers and private landowners who are either enrolling for the first time or re-enrolling for another 10-to-15-year term. Farmers and ranchers who enroll in the program get yearly rental payments for voluntarily establishing long-term, resource-conserving plant species, such as approved grasses or trees, which can control soil erosion, improve water quality, and develop wildlife habitat on marginally productive agricultural lands. The CRP has 22 million acres currently enrolled, but the 2018 Farm Bill lifted that cap to 27 million. The program is marking its 35th anniversary in 2020 with many milestones. It’s prevented more than nine billion tons of soil from eroding, which is enough soil to fill 600 million dump trucks. The program has also sequestered an average of 49 million tons of greenhouse gases, equal to taking nine million cars off the road.
Washington Insider: Growing Obesity Threat
The New York Times science section recently featured a report that argued that climate change “is not the only source of dire projections for the coming decade.” The article was responding to “a predicted continued rise in obesity among American adults.”
It featured projections from a prestigious team of medical scientists who conclude that “by 2030, nearly one in two U.S. adults will be obese, and nearly one in four will be severely obese.” The estimates are thought to be particularly reliable, NYT says because the team corrected for current underestimates of weight given by individuals in national surveys.
In as many as 29 states, the prevalence of obesity will exceed 50%, with no state having less than 35% of residents who are obese, the team said.
Likewise, it expects that in 25 states the prevalence of severe obesity will be higher than one adult in four and could become the most common weight category among women, non-Hispanic black adults and low-income adults nationally.
Given the role obesity plays in fostering of many chronic, disabling and often fatal diseases, these are dire predictions indeed, the Times said. Yet it notes that “the powers that be” in the U.S. are doing very little to head off these potentially disastrous results.
Well-intentioned efforts like limiting access to huge portions of sugar-sweetened soda, the scientists note, have been “effectively thwarted” by well-heeled industries able to dwarf the impact of efforts by health departments that have minuscule budgets by comparison.
Claims that such taxes are regressive “and unfairly target low-income people” are shortsighted, according to Zachary Ward, public health specialist at Harvard and the lead author of the new report published in The New England Journal of Medicine in December.
“What people would save in health care costs would dwarf the extra money paid as taxes on sugar-sweetened beverages,” he said told the press.
Still, in “a city like Philadelphia,” where a soda tax of 1.5 cents an ounce took effect three years ago, total purchases declined by 38% even after accounting for beverages people bought outside the city, the report’s authors said.
However, the report downplayed piecemeal policy changes like this as too small to make a significant difference in the obesity forecast for the country. Rather, nationwide changes are needed as the “food environment” has fostered a steady climb toward a weight-and-health “disaster”.
NYT says that this health threat is relatively new and that since 1990, the prevalence of obesity in this country has doubled.
This change is not from genetics, which have “not changed in the last decade,” Dr. Sara Bleich said. Rather, what has changed is the environment in which our genes now function. Food is super easy to access, said Bleich, a professor of public health at the Harvard T.H. Chan School of Public Health. “We eat out more, consuming more foods that are high in fat, sugar and salt, and our portion sizes are bigger.”
“It doesn’t take that many extra calories to result in weight gain,” Dr. Bleich said. “Through marketing, we’re constantly being sold on foods we didn’t even know we wanted.”
Unless something is done to reverse current trends, Ward said, “Obesity will be the new normal.”
In addition, the study authors think that there is “no one thing to throw at the problem.” However, they point out that policies that reduce added sugars have reduced weight gains and health problems and that “when people drink their calories, they don’t feel as full as when they consume solid food, so they end up eating more.”
With a third of meals now being eaten out, Dr. Bleich suggested that prompting restaurants to gradually reduce the amount of fat, sugar and calories in the meals they serve could help dampen societal weight gain. “Menus could make healthier, lower-calorie meals the default option,” she said.
Controlling portion sizes is another critically important step. “Big portions are especially motivating for low-income people who reasonably want to get more calories for their dollar,” she said. Low-income groups already have the highest rates of obesity and, the new projections show, they are the groups most likely to experience a rising prevalence of obesity and severe obesity.
“From a policy perspective,” Ward said, “prevention is the way to go. Children aren’t born obese, but we can already see excessive weight gain as early as age 2. Changes in the food environment are needed at every level, local, state and federal. It’s hard for individuals to voluntarily change their behavior.”
So, we will see. Taxes are unpopular and face an uphill fight for acceptance, so education likely is the most acceptable policy choice. Whether or not warnings and nutrition education can effectively derail this trend remains to be seen, but it is a growing industry wide threat with potential implications for the food industry that should be watched closely by producers, Washington Insider believes.
It featured projections from a prestigious team of medical scientists who conclude that “by 2030, nearly one in two U.S. adults will be obese, and nearly one in four will be severely obese.” The estimates are thought to be particularly reliable, NYT says because the team corrected for current underestimates of weight given by individuals in national surveys.
In as many as 29 states, the prevalence of obesity will exceed 50%, with no state having less than 35% of residents who are obese, the team said.
Likewise, it expects that in 25 states the prevalence of severe obesity will be higher than one adult in four and could become the most common weight category among women, non-Hispanic black adults and low-income adults nationally.
Given the role obesity plays in fostering of many chronic, disabling and often fatal diseases, these are dire predictions indeed, the Times said. Yet it notes that “the powers that be” in the U.S. are doing very little to head off these potentially disastrous results.
Well-intentioned efforts like limiting access to huge portions of sugar-sweetened soda, the scientists note, have been “effectively thwarted” by well-heeled industries able to dwarf the impact of efforts by health departments that have minuscule budgets by comparison.
Claims that such taxes are regressive “and unfairly target low-income people” are shortsighted, according to Zachary Ward, public health specialist at Harvard and the lead author of the new report published in The New England Journal of Medicine in December.
“What people would save in health care costs would dwarf the extra money paid as taxes on sugar-sweetened beverages,” he said told the press.
Still, in “a city like Philadelphia,” where a soda tax of 1.5 cents an ounce took effect three years ago, total purchases declined by 38% even after accounting for beverages people bought outside the city, the report’s authors said.
However, the report downplayed piecemeal policy changes like this as too small to make a significant difference in the obesity forecast for the country. Rather, nationwide changes are needed as the “food environment” has fostered a steady climb toward a weight-and-health “disaster”.
NYT says that this health threat is relatively new and that since 1990, the prevalence of obesity in this country has doubled.
This change is not from genetics, which have “not changed in the last decade,” Dr. Sara Bleich said. Rather, what has changed is the environment in which our genes now function. Food is super easy to access, said Bleich, a professor of public health at the Harvard T.H. Chan School of Public Health. “We eat out more, consuming more foods that are high in fat, sugar and salt, and our portion sizes are bigger.”
“It doesn’t take that many extra calories to result in weight gain,” Dr. Bleich said. “Through marketing, we’re constantly being sold on foods we didn’t even know we wanted.”
Unless something is done to reverse current trends, Ward said, “Obesity will be the new normal.”
In addition, the study authors think that there is “no one thing to throw at the problem.” However, they point out that policies that reduce added sugars have reduced weight gains and health problems and that “when people drink their calories, they don’t feel as full as when they consume solid food, so they end up eating more.”
With a third of meals now being eaten out, Dr. Bleich suggested that prompting restaurants to gradually reduce the amount of fat, sugar and calories in the meals they serve could help dampen societal weight gain. “Menus could make healthier, lower-calorie meals the default option,” she said.
Controlling portion sizes is another critically important step. “Big portions are especially motivating for low-income people who reasonably want to get more calories for their dollar,” she said. Low-income groups already have the highest rates of obesity and, the new projections show, they are the groups most likely to experience a rising prevalence of obesity and severe obesity.
“From a policy perspective,” Ward said, “prevention is the way to go. Children aren’t born obese, but we can already see excessive weight gain as early as age 2. Changes in the food environment are needed at every level, local, state and federal. It’s hard for individuals to voluntarily change their behavior.”
So, we will see. Taxes are unpopular and face an uphill fight for acceptance, so education likely is the most acceptable policy choice. Whether or not warnings and nutrition education can effectively derail this trend remains to be seen, but it is a growing industry wide threat with potential implications for the food industry that should be watched closely by producers, Washington Insider believes.
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