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Friday, May 29, 2020
Hong Kong Trade Status, U.S. Relationship with China, in Limbo
The Trump Administration sent a formal notice to Congress that it doesn’t see Hong Kong as an autonomous region from China. Politico says that puts Hong Kong’s status as a separate customs territory at risk and opens up Beijing to sanctions. The move would hurt Beijing but also lessen Hong Kong as an Asian center for business and finance. “I fully expect the U.S. to proceed with sanctions on individuals and entities deemed to be undermining Hong Kong’s autonomy,” says Bonnie Glaser, director of the China Power Project at the Center for Strategic and International Studies. Politico says Beijing recently proposed a “national security law” that would bypass Hong Kong’s legislature and give China more authority to crack down on protests. What’s next for the U.S. is currently up to President Trump, who hinted at the possibility of sanctions on the Asian nation. China has already vowed to retaliate if the U.S. takes strong actions because of its moves against Hong Kong. Assistant Secretary of State for East Asian and Pacific Affairs David Stilwell says the possibilities include personnel sanctions, visa sanctions, economic sanctions, as well as numerous other options. The U.S. Chamber of Commerce says any changes to Hong Kong’s status could have serious impacts on the more than 1,300 U.S. companies that operate in the island nation.
Brazil’s Ag Exports to China are “Booming”
The first four months of 2020 were profitable for Brazilian ag exporters. Brazil’s agricultural exports to China were worth $31.4 billion from January through April. MercoPress reports that it marked a 5.9 percent increase year-over-year. The growth in agricultural exports to China resulted in a more than 11 percent increase in export volume, while the index price actually suffered a drop of 4.7 percent. The Brazilian Department of Trade and International Relations says those sales numbers broke the record for the largest amount ever shipped between January and April. The agricultural exports accounted for almost half of the total number of Brazilian exports (46.6 percent) during the first four months of this year. Brazil took in $4.57 billion worth of imports, which resulted in an agribusiness trade surplus of $26.83 billion during that time. Soybean exports were big from January through April, setting records in terms of revenue worth $11.5 billion and quantity at 33.66 million tons shipped. That’s despite a 4.2 percent drop in the average price for soybeans. Brazil sent China a whopping 73.4 percent of its total grain exports and sold a record $2.13 billion worth of fresh beef to China.
African Swine Fever Impact Even Greater in 2020
Experts are saying that the African Swine Fever outbreak that continued last year could have an even bigger impact in 2020. The Guardian says that the highly-contagious virus that is fatal to pigs is still spreading at a rapid rate. While human attention is on the COVID-19 outbreak, the concern is growing around the world that countries are not putting enough focus on halting the spread of ASF through better biosecurity practices, cooperating on vaccine development, or being transparent about the scope of outbreaks. Despite being present in the world for more than 100 years, there is still no vaccine for the disease that kills almost every animal it infects. “The ASF virus is much more potent than COVID-19 because it can survive in the environment or processed meats for weeks and months,” says Dirk Pfeiffer, a veterinary science professor at City University in Hong Kong and one of the world’s leading experts on ASF. The disease reached China in the fall of 2018 and unofficially led to culling more than 200 million pigs from the world’s largest hog herd. Global ASF infection numbers by the end of April showed this year is close to or above the infection numbers from 2019. China, Vietnam, the Philippines, and Eastern Europe are the current focal points for outbreaks, with new outbreaks showing up in India and New Guinea.
House, Senate Ag Committees Get Low Grades on Oversight
The House Agriculture Committee got a D grade and the Senate Ag Committee received a C- on oversight. Those grades came from the Lugar Center, which was founded by former Indiana Republican Senator and Ag Committee Chair Richard Lugar, in a report that measured congressional oversight. The Hagstrom Report says the Congressional Oversight Hearing Index categorizes and catalogs all congressional hearings held over the past 12 years, which totals up to about 20,000 hearings. After looking through all the data, the index assigns grades to the oversight performance of current congressional committees and past committees going back to 2009. “Most Americans agree that robust congressional oversight of the workings of our government and society is an important element of American Democracy,” says Dan Diller, policy director at the Lugar Center. “Until now, there’s been no objective criteria for gauging whether congressional committees are living up to their oversight responsibilities.” Of the 17 House Committees the center graded, nine received A’s, two got B’s, and three were given C’s. However, the Senate grades weren’t as high. Of the 17 Senate committees given grades, just two got A’s, none were given B’s, four received C’s, and eight Senate committees were given F’s.
Second Annual “BeSure!” Campaign is Underway
The second “BeSure!” campaign supported by the National Corn Growers Association is off and running through July. The effort is aimed at helping pollinators by promoting best management practices and habitat creation year-round. BeSure! centers on promoting proper use of neonicotinoid (neo-NIH-cuh-tih-noid) products to protect honeybees and other pollinators critical to the food supply and ecosystem. This year, the campaign is seeking to reach not only growers and applicators, but also golf course, turf, and ornamental landscape managers. In its debut year, BeSure! focused its messaging on major crops in the Midwest that utilize neonicotinoid-treated seeds, such as corn and soybeans. This year, the campaign is expanded to include neonicotinoid foliar sprays, soil drenches, and granule uses on fruits, nuts, vegetables, turf tress, and ornamental plants that bees visit regularly. “Neonicotinoids are widely used in agriculture and a variety of landscape and nursery settings,” says Tom Smith, executive director of the National Pesticide Safety Education Center. “Regardless of the application method, product label directions should always be followed, and responsible stewardship practices used to protect pollinators.” Other companies behind the BeSure! Campaign include the American Soybean Association, American Seed Trade Association, CropLife America, and the Agricultural Retailers Association.
Governors Ask Congressional Leadership to Support Ethanol Relief
South Dakota Governor Kristi Noem and Minnesota Governor Tim Walz sent a letter to leadership in both chambers of Congress asking them to support relief for the biofuels industry. The Midwest governors are asking Congress to make sure that relief for the biofuels industry is included in Phase 4 COVID-19 emergency relief package currently making its way through Congress. Governor Noem and Governor Walz are the chair and vice-chair of the Governors’ Biofuels Coalition. The governors pointed out that nearly three-fourths of the nation’s 204 ethanol plants are fully or partially idled, resulting in workers being laid off, lost markets for farm commodities, and constrained supplies of critical ethanol co-products. “We’re pleased to see that two bills were recently introduced in both the Senate and the House,” they wrote in their letter. “The Senate’s Renewable Fuel Feedstock Reimbursement Act of 2020, introduced by Senators Grassley and Klobuchar, and the Renewable Fuel Reimbursement Program Provision included in the HEROS Act, provide critical emergency relief to renewable fuel producers.” They say these initiatives provide responsible and much-needed economic relief to their states’ biofuel producers. “Our states’ ethanol industries have become an irreplaceable contributor to our nation’s economy, and they must be preserved,” the governors concluded.
Washington Insider: Holding Back on Economic Data
In an unusual move, White House officials have decided “not to release updated economic projections this summer,” the Washington Post reported this week.
The White House normally publishes a federal budget proposal every February and then provides a “mid-session review” in July or August with updated projections on economic trends such as unemployment, inflation and economic growth.
Budget experts told the Post “they were not aware of any previous White House decision against providing forecasts in the mid-session review” in any other year since at least the 1970s.
The Post also cited two White House officials who confirmed the “data decision” reflects the fact that the novel coronavirus is causing extreme volatility in the U.S. economy “making it difficult to model economic trends.”
The decision gets them off the hook for having to say what the economic outlook looks like, said Douglas Holtz-Eakin, a former director of the Congressional Budget Office who served as an economic adviser to the late Sen. John McCain, R-Ariz.
Both liberal and conservative critics said the White House should publish its economic projections as prior administrations did, regardless of uncertainty caused by economic conditions, the paper said. The White House under President Barack Obama continued to release these numbers during the Great Recession, although they were unflattering.
The Post quoted a “senior administration official” who argued that it would be “foolish” to publish forecasting data when it “may mislead the public.”
“Given the unprecedented state of play in the economy at the moment, the data is also extremely fluid and would produce a less instructive forecast," said the official, who spoke on condition of anonymity. "Furthermore, we remain in complete accordance with the law as there is no statutory requirement to release this information, just precedent, which, when compared to our current economic situation, is dismissible.”
The magnitude of the economic impact of the coronavirus has grown by the week. The Treasury Department said earlier this month it plans to borrow $3 trillion from April through June to finance spending in response to the pandemic. The monthly deficit in April soared to $738 billion.
In fact, the Post noted, there is a growing possibility of a “W-shaped economic recovery, and it’s scary.” Mainstream economists and Wall Street forecasters have predicted unemployment could remain north of 10% through 2020 and into 2021.
Budget experts say there is no reason the White House would be unable to release its own economic projections. The Congressional Budget Office, for instance, updated its economic projections in both April and May as the coronavirus rippled through the U.S. economy.
In its 2017 mid-session budget review, the White House said it would not be providing new economic projections, but for a much different reason. It said “economic developments over the past few months do not provide a basis for changing this forecast,” using the same assumptions it had in the previous budget. In other words, it was sticking with its previous projections.
While this year’s mid-session budget will not include new projections, there is no logistical reason they couldn’t do it,” said Bill Hoagland, senior vice president at the Bipartisan Policy Center and former Republican staff director for the Senate Budget Committee.
White House officials have claimed they are being transparent about the extent of the downturn. Kevin Hassett, a White House economist, said over the recent weekend that unemployment could remain north of 10% on Election Day in November. Larry Kudlow, director of the White House National Economic Council, said last week that “the numbers coming in are not good. In fact, they are downright bad in most cases.”
Critics charge that the White House is not confronting the extent of the economic damage facing the nation. The administration has largely broken off negotiations now with Congress on an additional stimulus package, although many economists say additional stimulus is necessary, the Post said.
“They’re never going to address the problems if they put these kinds of blinders on,” said Jared Bernstein, a former economic adviser to presumptive Democratic presidential nominee Joe Biden. “Managing the economy means publishing credible forecasts.”
White House officials have defended their response to the economic downturn, citing the trillions of dollars they approved with Congress to pump into the economy.
The Post report suggests that the decision to withhold the midseason projections is a “big deal” and that agencies need good information on the economic outlook to plan. The economy today is not the economy six months ago,” said Claudia Sahm, who worked on the macroeconomic forecast underlying the budget as an economist in the White House Council on Economic Advisers during the Obama administration. “Without these forecasts, they cannot ask for the right amount in appropriations.”
So, we will see. Economic experts tend to argue that intense economic volatility supports the need for fresh economic data, rather than reducing it. So, the Trump administration can expect strong criticism for its decision. Information policies are important for modern producer operations, and decisions in this sphere should be watched closely as they emerge, Washington Insider believes.
The White House normally publishes a federal budget proposal every February and then provides a “mid-session review” in July or August with updated projections on economic trends such as unemployment, inflation and economic growth.
Budget experts told the Post “they were not aware of any previous White House decision against providing forecasts in the mid-session review” in any other year since at least the 1970s.
The Post also cited two White House officials who confirmed the “data decision” reflects the fact that the novel coronavirus is causing extreme volatility in the U.S. economy “making it difficult to model economic trends.”
The decision gets them off the hook for having to say what the economic outlook looks like, said Douglas Holtz-Eakin, a former director of the Congressional Budget Office who served as an economic adviser to the late Sen. John McCain, R-Ariz.
Both liberal and conservative critics said the White House should publish its economic projections as prior administrations did, regardless of uncertainty caused by economic conditions, the paper said. The White House under President Barack Obama continued to release these numbers during the Great Recession, although they were unflattering.
The Post quoted a “senior administration official” who argued that it would be “foolish” to publish forecasting data when it “may mislead the public.”
“Given the unprecedented state of play in the economy at the moment, the data is also extremely fluid and would produce a less instructive forecast," said the official, who spoke on condition of anonymity. "Furthermore, we remain in complete accordance with the law as there is no statutory requirement to release this information, just precedent, which, when compared to our current economic situation, is dismissible.”
The magnitude of the economic impact of the coronavirus has grown by the week. The Treasury Department said earlier this month it plans to borrow $3 trillion from April through June to finance spending in response to the pandemic. The monthly deficit in April soared to $738 billion.
In fact, the Post noted, there is a growing possibility of a “W-shaped economic recovery, and it’s scary.” Mainstream economists and Wall Street forecasters have predicted unemployment could remain north of 10% through 2020 and into 2021.
Budget experts say there is no reason the White House would be unable to release its own economic projections. The Congressional Budget Office, for instance, updated its economic projections in both April and May as the coronavirus rippled through the U.S. economy.
In its 2017 mid-session budget review, the White House said it would not be providing new economic projections, but for a much different reason. It said “economic developments over the past few months do not provide a basis for changing this forecast,” using the same assumptions it had in the previous budget. In other words, it was sticking with its previous projections.
While this year’s mid-session budget will not include new projections, there is no logistical reason they couldn’t do it,” said Bill Hoagland, senior vice president at the Bipartisan Policy Center and former Republican staff director for the Senate Budget Committee.
White House officials have claimed they are being transparent about the extent of the downturn. Kevin Hassett, a White House economist, said over the recent weekend that unemployment could remain north of 10% on Election Day in November. Larry Kudlow, director of the White House National Economic Council, said last week that “the numbers coming in are not good. In fact, they are downright bad in most cases.”
Critics charge that the White House is not confronting the extent of the economic damage facing the nation. The administration has largely broken off negotiations now with Congress on an additional stimulus package, although many economists say additional stimulus is necessary, the Post said.
“They’re never going to address the problems if they put these kinds of blinders on,” said Jared Bernstein, a former economic adviser to presumptive Democratic presidential nominee Joe Biden. “Managing the economy means publishing credible forecasts.”
White House officials have defended their response to the economic downturn, citing the trillions of dollars they approved with Congress to pump into the economy.
The Post report suggests that the decision to withhold the midseason projections is a “big deal” and that agencies need good information on the economic outlook to plan. The economy today is not the economy six months ago,” said Claudia Sahm, who worked on the macroeconomic forecast underlying the budget as an economist in the White House Council on Economic Advisers during the Obama administration. “Without these forecasts, they cannot ask for the right amount in appropriations.”
So, we will see. Economic experts tend to argue that intense economic volatility supports the need for fresh economic data, rather than reducing it. So, the Trump administration can expect strong criticism for its decision. Information policies are important for modern producer operations, and decisions in this sphere should be watched closely as they emerge, Washington Insider believes.
Livestock Sector Challenges Noted In Fed Update
The Fed’s Beige Book report was replete with notations of pandemic-related impacts in a host of sectors. Chicago, Minneapolis, St. Louis, Kansas City and Dallas Fed banks focused their ag recaps on the livestock sector impacts from meat plans being closed or running at reduced capacity.
“With no place to deliver market-ready animals, farmers were forced to slow herd growth (including by euthanizing hogs),” the Chicago Fed noted. “On net, the supply disruptions led to higher prices and shortages of meat at grocery stores and restaurants, but lower prices for cattle and hogs.”
The Kansas City Fed pointed out, “roughly a quarter of U.S. meatpacking and food processing plants with confirmed COVID-19 cases were located in the District.”
In terms of overall ag conditions, the Chicago recap included an observation that “Farmers anticipated government programs would help during the downturn, but observers expected some distressed farms to be forced to liquidate.”
“With no place to deliver market-ready animals, farmers were forced to slow herd growth (including by euthanizing hogs),” the Chicago Fed noted. “On net, the supply disruptions led to higher prices and shortages of meat at grocery stores and restaurants, but lower prices for cattle and hogs.”
The Kansas City Fed pointed out, “roughly a quarter of U.S. meatpacking and food processing plants with confirmed COVID-19 cases were located in the District.”
In terms of overall ag conditions, the Chicago recap included an observation that “Farmers anticipated government programs would help during the downturn, but observers expected some distressed farms to be forced to liquidate.”
US Food Chain Issues Targeted In Legislation
Democrats on the Senate Agriculture Committee released a bill on Wednesday which outline what they want in the next COVID-19 aid plan.
The Food Supply Protection Act would provide $5.5 billion in grants, loans and loan guarantees to help small- and medium-sized companies shift their operations to respond to COVID-19, including procuring more personal protective equipment and testing.
The proposal includes $1 billion for grants to help food banks and other nonprofits boost their capacity to handle food and $1.5 billion for more surplus food purchases, including a new clearinghouse to help connect excess products with groups that need it.
“The COVID-19 crisis has tested the strength of our nation’s food supply chain, creating a ripple effect that’s harming our families, farmers and workers,” said Sen. Debbie Stabenow, D., Mich., ranking member of the Senate Agriculture Committee, in a statement.
The Food Supply Protection Act would provide $5.5 billion in grants, loans and loan guarantees to help small- and medium-sized companies shift their operations to respond to COVID-19, including procuring more personal protective equipment and testing.
The proposal includes $1 billion for grants to help food banks and other nonprofits boost their capacity to handle food and $1.5 billion for more surplus food purchases, including a new clearinghouse to help connect excess products with groups that need it.
“The COVID-19 crisis has tested the strength of our nation’s food supply chain, creating a ripple effect that’s harming our families, farmers and workers,” said Sen. Debbie Stabenow, D., Mich., ranking member of the Senate Agriculture Committee, in a statement.
Friday Watch List
Markets
The final trading day of May starts with weekly grain export sales and U.S. personal incomes at 7:30 a.m. CDT, followed by the University of Michigan's consumer sentiment index at 9 a.m. The latest weather forecasts and any trade news, especially involving China remain topics of high interest. President Donald Trump is expected to have a news release concerning China sometime Friday.
Weather
Light rain is in store for the eastern Midwest Friday. Other primary crop areas will be dry. This is the start of a general drier trend through early June.
The final trading day of May starts with weekly grain export sales and U.S. personal incomes at 7:30 a.m. CDT, followed by the University of Michigan's consumer sentiment index at 9 a.m. The latest weather forecasts and any trade news, especially involving China remain topics of high interest. President Donald Trump is expected to have a news release concerning China sometime Friday.
Weather
Light rain is in store for the eastern Midwest Friday. Other primary crop areas will be dry. This is the start of a general drier trend through early June.
Thursday, May 28, 2020
ITC Investigating Economic Impact of Duty-Free Imports from Kenya
The U.S. International trade Commission announced this week an investigation that will outline the economic impacts of removing import duties on products from Kenya. The move comes at the request of U.S. Trade Representative Robert Lighthizer, who asked the USITC to provide the assessment in March. The USITC expects to submit its confidential report to Lighthizer by September 16, 2020. The assessment is part of ongoing trade talks between the U.S. and Kenya. Lighthizer last week released a summary of negotiating objectives including specific goals for goods and commodities, and sanitary and phytosanitary measures. The objectives seek to “Secure comprehensive market access for U.S. agricultural goods in Kenya by reducing or eliminating tariffs.” Additionally, the U.S. seeks to provide reasonable adjustment periods for U.S. import-sensitive agricultural products. The trade talks also seek to establish specific commitments for trade in products developed through agricultural biotechnologies, including transparency, cooperation, and managing low level presence issues, and a mechanism for exchange of information and enhanced cooperation on agricultural biotechnologies.
Stabenow Introduces Food Supply Protection Act
Senator Debbie Stabenow Wednesday introduced legislation to help protect the food supply after the COVID-19 crisis has put an unprecedented strain on farmers, workers, food banks and families. Stabenow, the Ranking Democrat on the Senate Ag Committee, says, “This bill will help strengthen our food supply.” The Food Supply Protection Act will support food banks and non-profits to help increase their capacity and address growing demand. The bill will provide infrastructure grants that can be used for additional cold storage and refrigeration, transportation, personal protective equipment, rental costs and additional use of commercial and community infrastructure. Further, Stabenow says the bill will strengthen food partnerships to prevent food waste and feed families through grants and reimbursements. Additionally, the bill will use grants, loans and reimbursements to protect workers and retool small and medium sized food processors. The bill is supported by more than 40 food and agriculture groups, including Feeding American, the National Farmers Union and the United Farm Workers Union.
Iowa Ag Department Launches Pork Disposal Assistance Program
The Iowa Department of Agriculture is launching a disposal assistance program to help pork producers who are unable to harvest pigs due to COVID-19 supply chain disruptions. COVID-19-related worker shortages are causing meat processing facilities to drastically reduce production. Iowa State University estimates that, as of mid-May, approximately 600,000 pigs in Iowa were unable to be harvested. The Department is offering producers $40 per approved animal to help cover some of the disposal costs for market-ready hogs, weighing at least 225 pounds. Producers must provide documentation, including proof of proper disposal, and an affidavit from their herd veterinarian confirming impending welfare issues, to receive funding. The disposal assistance funding will be made available to Iowa producers in at least three rounds. Each approved applicant will receive funding for at least 1,000 animals and up to 30,000 animals per round, depending on the number of applicants. To qualify for the first round of funding, producers must submit their applications to the Iowa Department of Agriculture before May 29.
H-2A Positions Increase Fivefold Since 2005
The Department of Agriculture says the number of H-2A workers increased fivefold between 2005 and 2019. Calling the data an indicator of the scarcity of farm labor, USDA’s Economic Research Service says the number of H-2A positions requested and approved increased from just over 48,000 in 2005 to nearly 258,000 in 2019. The H-2A Temporary Agricultural Program provides a legal means to bring foreign-born workers into the United States on a temporary basis. Workers employed on an H-2A visa are allowed to remain in the U.S. for up to ten months at a time. Employers must demonstrate, and the U.S. Department of Labor must certify, that efforts to recruit U.S. workers were not successful. Employers must also pay a region-specific minimum wage, known as the Adverse Effect Wage Rate. The Economic Research Service says the average duration of an H-2A certification in 2019 was 5.3 months, implying that the 258,000 positions certified represented about 114,000 full-year workers.
USDA Funding Rural Water and Wastewater Improvements
The Department of Agriculture Wednesday announced a $281 million investment for 106 projects to improve rural water and wastewater infrastructure. Announced by deputy undersecretary for rural development Bette Brand, the funding will assist rural communities in 36 states and Puerto Rico. Brand says the investments will “bring modern, reliable water and wastewater infrastructure to rural communities.” USDA is funding the projects through the Water and Waste Disposal Loan and Grant program. Eligible applicants include rural cities, towns and water districts. The funds can be used for drinking water, stormwater drainage and waste disposal systems in rural communities that meet population limits. The funds will help rural communities replace deteriorating, leaking water pipes with new ones, and upgrade water and wastewater handling systems that are decades old. USDA Rural Development provides loans and grants to help expand economic opportunities and create jobs in rural areas. For a list of funded projects, visit www.rd.usda.gov.
Propane Council Announces Game and Educational Website
The Propane Education and Research Council this week announced www.PropaneKids.com. The website is an interactive online activity center for parents and caretakers of preschool and young school children looking for learning opportunities. The site includes games, activities, and even science experiments for children that are designed to reinforce the importance of propane safety and education with a focus on the farm. Tucker Perkins, President and CEO of PERC, says, “We wanted to do our part to help provide a fun, free learning center for young children.” At PropaneKids.com, parents, caregivers, and their children can explore a virtual farm or create their own, play games like farm bingo and spot-the-difference and color digital coloring pages. Americans living on acreages and farms away from the city center are already familiar with propane in use on their land. Nearly 40 percent of farms in America rely on propane in their farming and ranching operations to run pumps and engines, heat buildings, and dry and process crops.
Washington Insider: Something Suspicious About Soaring Meat Prices
Politico and others are pretty steamed up about meat prices these days. “Supermarket customers are paying more for beef than they have in decades,” Politico says, but hastens to add that the companies that process the meat for sale are paying farmers and ranchers “staggeringly low prices for cattle.”
Now, the USDA and prosecutors are investigating whether the meatpacking industry is manipulating prices. The federal government did the same thing 100 years ago when antitrust prosecutors broke up meat “monopolies.” Can they repeat the process Politico asks?
The Department of Justice is looking at the four largest U.S. meatpackers -- Tyson Foods, JBS, National Beef and Cargill -- which collectively control about 85% of the U.S. market for the slaughter and packaging of beef, Politico says.
Meatpackers say beef prices have spiked during the pandemic because plants are running at lower capacity as workers fall ill, so less meat is moving through supply chains.
However, there is “evidence that something isn’t right in the industry,” said Sen. Chuck Grassley, R-Iowa. In April, he requested federal investigations into “market manipulation and unfair practices” within the cattle industry. So have 19 other senators and 11 state attorneys general.
Much of the criticism is aimed at the unusual price behavior. Ed Greiman, general manager of Upper Iowa Beef who formerly headed the Iowa Cattlemen’s Association, attributed the consumer price increase to plants running at lower capacity.
“I’m running at half speed,” Greiman said. “Cattle are backing up because we can’t run our plants fast enough. Nothing is functioning properly. We need to be careful not to put blame on any one thing or part of the industry because we can’t get these plants going."
The industry has long been a focus for government antitrust enforcement. Exactly 100 years ago, after years of litigation, the five biggest U.S. meatpackersâ??which then accounted for 82% of the beef marketâ??agreed to an antitrust settlement with the Justice Department that helped break their control over the industry.
“There’s greater concentration in meatpacking now” than in 1921, said Thomas Horton, an antitrust professor at the University of South Dakota, who previously worked at the Justice Department. The first antitrust laws were “passed to take care of the Big Five. Now we have the Big Four. We’re going backwards.”
Not only are their fewer packing plants but about 70 percent of cattle are sold under contracts for delivery at an a certain weight with the price to be determined later. The is usually by a formula that takes into account how much cattle sell for in the cash market.
The use of contracts has some advantages for ranchers, because they know they have buyers and don’t have to spend time in negotiations, said Ted Schroeder, an agricultural economist at Kansas State University. But the decline in data from cash sales has made it harder to figure out the “right” price for cattle, he said.
Worker illnesses and temporary plant closures have held plants to about 50% of operating capacity, Schroeder said and calls the rising consumer prices and falling cattle prices “normal” responses to market trends. It’s economics 101 We are pretty close to the wholesale and farm prices he would expect “given the bottleneck,” he said.
Not everyone agrees. Last year, ranchers filed an antitrust suit against the four meatpackers for colluding to depress cattle prices. The suit, pending in Minneapolis federal court, alleges that the large packers began coordinating in 2015 to reduce the number of cattle slaughtered while also limiting how many they bought in the cash market. Ranchers with excess animals on their hands were forced to sell for less or enter into long-term contracts beneficial to meatpackers.
“The Big Four simultaneously withdrew from the cash market with intent to reduce prices across the board,” said Bill Bullard, CEO of Ranchers-Cattlemen Action Legal Fund, one of the lead plaintiffs in the suit, in an interview. This “drove prices down at least 8 percent,” said Bullard.
The Justice Department could once again try to make a case that the meatpackers have engaged in “an anticompetitive set of industry practices, which taken together, violate antitrust law and require a broader restructuring,” Bullard said.
Bullard’s group is also pushing for broader changes to the industry, such as requiring packers to buy at least half of their cattle from the cash market or prohibiting contracts that don’t include prices.
Senator Grassley, meanwhile, says he’s not ready to call for the breakup of major meatpackers, but he has “a great deal of questions about whether they’re operating within the law.”
Kansas’ Schroeder, though, warned against moving the industry backwards. Breaking up the meatpackers would likely lead to higher consumer prices, he thinks and insisting on cash sales would eliminate some of the advantages, like stable supply, that contracts offer. “We should be cautious how we approach regulation, so we don’t turn the apple cart upside down, he said.”
So, we will see. The U.S. meat supply chains are extremely complex and difficult to change and have developed high levels of efficiency and well tested safety practices that are also hard to change.
At the same time, the coronavirus pandemic is a threat unlike any seen in modern times and will bring unanticipated pressures and challenges that producers should watch closely as the industry accommodates, Washington Insider believes.
Now, the USDA and prosecutors are investigating whether the meatpacking industry is manipulating prices. The federal government did the same thing 100 years ago when antitrust prosecutors broke up meat “monopolies.” Can they repeat the process Politico asks?
The Department of Justice is looking at the four largest U.S. meatpackers -- Tyson Foods, JBS, National Beef and Cargill -- which collectively control about 85% of the U.S. market for the slaughter and packaging of beef, Politico says.
Meatpackers say beef prices have spiked during the pandemic because plants are running at lower capacity as workers fall ill, so less meat is moving through supply chains.
However, there is “evidence that something isn’t right in the industry,” said Sen. Chuck Grassley, R-Iowa. In April, he requested federal investigations into “market manipulation and unfair practices” within the cattle industry. So have 19 other senators and 11 state attorneys general.
Much of the criticism is aimed at the unusual price behavior. Ed Greiman, general manager of Upper Iowa Beef who formerly headed the Iowa Cattlemen’s Association, attributed the consumer price increase to plants running at lower capacity.
“I’m running at half speed,” Greiman said. “Cattle are backing up because we can’t run our plants fast enough. Nothing is functioning properly. We need to be careful not to put blame on any one thing or part of the industry because we can’t get these plants going."
The industry has long been a focus for government antitrust enforcement. Exactly 100 years ago, after years of litigation, the five biggest U.S. meatpackersâ??which then accounted for 82% of the beef marketâ??agreed to an antitrust settlement with the Justice Department that helped break their control over the industry.
“There’s greater concentration in meatpacking now” than in 1921, said Thomas Horton, an antitrust professor at the University of South Dakota, who previously worked at the Justice Department. The first antitrust laws were “passed to take care of the Big Five. Now we have the Big Four. We’re going backwards.”
Not only are their fewer packing plants but about 70 percent of cattle are sold under contracts for delivery at an a certain weight with the price to be determined later. The is usually by a formula that takes into account how much cattle sell for in the cash market.
The use of contracts has some advantages for ranchers, because they know they have buyers and don’t have to spend time in negotiations, said Ted Schroeder, an agricultural economist at Kansas State University. But the decline in data from cash sales has made it harder to figure out the “right” price for cattle, he said.
Worker illnesses and temporary plant closures have held plants to about 50% of operating capacity, Schroeder said and calls the rising consumer prices and falling cattle prices “normal” responses to market trends. It’s economics 101 We are pretty close to the wholesale and farm prices he would expect “given the bottleneck,” he said.
Not everyone agrees. Last year, ranchers filed an antitrust suit against the four meatpackers for colluding to depress cattle prices. The suit, pending in Minneapolis federal court, alleges that the large packers began coordinating in 2015 to reduce the number of cattle slaughtered while also limiting how many they bought in the cash market. Ranchers with excess animals on their hands were forced to sell for less or enter into long-term contracts beneficial to meatpackers.
“The Big Four simultaneously withdrew from the cash market with intent to reduce prices across the board,” said Bill Bullard, CEO of Ranchers-Cattlemen Action Legal Fund, one of the lead plaintiffs in the suit, in an interview. This “drove prices down at least 8 percent,” said Bullard.
The Justice Department could once again try to make a case that the meatpackers have engaged in “an anticompetitive set of industry practices, which taken together, violate antitrust law and require a broader restructuring,” Bullard said.
Bullard’s group is also pushing for broader changes to the industry, such as requiring packers to buy at least half of their cattle from the cash market or prohibiting contracts that don’t include prices.
Senator Grassley, meanwhile, says he’s not ready to call for the breakup of major meatpackers, but he has “a great deal of questions about whether they’re operating within the law.”
Kansas’ Schroeder, though, warned against moving the industry backwards. Breaking up the meatpackers would likely lead to higher consumer prices, he thinks and insisting on cash sales would eliminate some of the advantages, like stable supply, that contracts offer. “We should be cautious how we approach regulation, so we don’t turn the apple cart upside down, he said.”
So, we will see. The U.S. meat supply chains are extremely complex and difficult to change and have developed high levels of efficiency and well tested safety practices that are also hard to change.
At the same time, the coronavirus pandemic is a threat unlike any seen in modern times and will bring unanticipated pressures and challenges that producers should watch closely as the industry accommodates, Washington Insider believes.
FCC Proposes Establishing 5G Fund for Rural America
The Federal Communications Commission (FCC) is seeking comments on a proposal to retarget universal service funding for mobile broadband and voice to deploy 5G services to rural areas of the country by setting up the 5G Fund for rural America.
In a notice in the Federal Register, FCC said that while T-Mobile has committed to deploy 5G service to 99% of Americans within six years and cover 90% of those living in rural areas, FCC said it was “concerned” that some rural areas will still not be serviced due to “insufficient financial incentive” for mobile wireless carriers to invest in 5G-capable networks and potentially leave areas of the country excluded from 5G for years to come.
FCC noted that given issues that have been revealed with the deployment of 4G LTE networks in rural areas, it proposes to distribute up to $9 billion in two phases to support 5G service in rural areas.
The initial stage would target at least $8 billion for rural areas, targeting a 5G Fund Phase I auction in 2021. Phase II would target “harder to service and higher cost areas, such as farms and ranches,” with $1 billion in funds “specifically aimed at deployments that would facilitate precision agriculture.” Comments on the plan are due by June 25.
In a notice in the Federal Register, FCC said that while T-Mobile has committed to deploy 5G service to 99% of Americans within six years and cover 90% of those living in rural areas, FCC said it was “concerned” that some rural areas will still not be serviced due to “insufficient financial incentive” for mobile wireless carriers to invest in 5G-capable networks and potentially leave areas of the country excluded from 5G for years to come.
FCC noted that given issues that have been revealed with the deployment of 4G LTE networks in rural areas, it proposes to distribute up to $9 billion in two phases to support 5G service in rural areas.
The initial stage would target at least $8 billion for rural areas, targeting a 5G Fund Phase I auction in 2021. Phase II would target “harder to service and higher cost areas, such as farms and ranches,” with $1 billion in funds “specifically aimed at deployments that would facilitate precision agriculture.” Comments on the plan are due by June 25.
DOE Official Comments Spark Fresh Concern From RFA Over RFS Waivers
Comments by current Energy Undersecretary Mark Menezes during his confirmation hearing for the post of Deputy Energy Secretary have raised new concerns about small refinery exemptions (SREs). Menezes was asked if the DOE would consider past year applications for SREs.
This appears to be an effort to address the 10th Circuit Court ruling which said that invalidated three SREs issued for the 2016 compliance year on the basis that they had to have requested SREs in years following 2010. “I can assure that as EPA sends over these … filings if you will to be consistent with the 10th Circuit decision,” Menezes said. “We will review them expeditiously and we will return them as promptly as we can to the EPA with our determinations as we have done in the past.”
The Renewable Fuels Association (RFA) has decried the situation, telling EPA Administrator Andrew Wheeler in a letter that the effort amounted to an “end run” that was not consistent with the court ruling.
RFA President Geoff Cooper said the apparent effort is a “thinly veiled attempt to circumvent the 10th Circuit’s decision” by retroactively seeking exemptions to establish a continuous string of SREs and thus maintain the refiners’ eligibility for SREs in subsequent compliance years.
This appears to be an effort to address the 10th Circuit Court ruling which said that invalidated three SREs issued for the 2016 compliance year on the basis that they had to have requested SREs in years following 2010. “I can assure that as EPA sends over these … filings if you will to be consistent with the 10th Circuit decision,” Menezes said. “We will review them expeditiously and we will return them as promptly as we can to the EPA with our determinations as we have done in the past.”
The Renewable Fuels Association (RFA) has decried the situation, telling EPA Administrator Andrew Wheeler in a letter that the effort amounted to an “end run” that was not consistent with the court ruling.
RFA President Geoff Cooper said the apparent effort is a “thinly veiled attempt to circumvent the 10th Circuit’s decision” by retroactively seeking exemptions to establish a continuous string of SREs and thus maintain the refiners’ eligibility for SREs in subsequent compliance years.
Thursday Watch List
Markets
The calendar is busy Thursday morning. U.S. jobless claims, first quarter GDP, U.S. April durable goods orders and an update of the U.S. Drought Monitor are all out at 7:30 a.m. CDT. The U.S. pending home sales index for April is at 9 a.m., followed by natural gas inventory at 9:30 a.m. and the Energy Department's weekly inventory report at 10 a.m. CDT. Traders will also watch the latest weather forecasts, any export news and for any hints of President Donald Trump's response to China's move in Hong Kong.
Weather
Light to moderate rain is in store for most central and eastern crop areas Thursday. The rain will continue to delay later-stage planting. Western crop areas will be dry with favorable conditions for crop development. Temperatures will be mainly seasonal to above normal.
The calendar is busy Thursday morning. U.S. jobless claims, first quarter GDP, U.S. April durable goods orders and an update of the U.S. Drought Monitor are all out at 7:30 a.m. CDT. The U.S. pending home sales index for April is at 9 a.m., followed by natural gas inventory at 9:30 a.m. and the Energy Department's weekly inventory report at 10 a.m. CDT. Traders will also watch the latest weather forecasts, any export news and for any hints of President Donald Trump's response to China's move in Hong Kong.
Weather
Light to moderate rain is in store for most central and eastern crop areas Thursday. The rain will continue to delay later-stage planting. Western crop areas will be dry with favorable conditions for crop development. Temperatures will be mainly seasonal to above normal.
Wednesday, May 27, 2020
Online Grocery Shopping a New Reality
The COVID-19 pandemic has changed the ways shoppers fill their grocery needs. Throughout the pandemic, the Food Marketing Institute has been tracking consumer trends and charting how shopping behaviors are changing. While it’s uncertain how the trends will continue, the pandemic will permanently change consumer habits. Pre-coronavirus, FMI projected that online food and beverage sales would equate to $143 billion by 2025, representing about 18 percent of an expected overall $800 billion in combined online and in-store spending for food and beverages at home. However, since the pandemic, about 21 percent of Americans have tried online shopping for the first time, eight percent have returned, and 19 percent are continuing to online shop. FMI President and CEO Leslie Sarasin says, “Online grocery shopping is a new reality for our retail and wholesale members.” Research by FMI suggests that not everyone will continue ordering online at the levels they were during the height of the pandemic, but they are likely to continue using it more.
House Lawmakers Press USDA Over Food Box Contracts
House Agriculture Committee members want questions answered regarding the Department of Agriculture’s Families Food Box Program. Led by Democrat Marcia Fudge of Ohio, the group sent a letter to Agriculture Secretary Sonny Perdue. They say the letter comes amid reports of contracts under the program awarded to companies with little to no experience in agriculture and food distribution, and may have little or no capacity to meet the obligations set by USDA. The lawmakers are seeking information on what criteria were used to determine which applicants would be awarded contracts. They also want to know how USDA considered applicants' financial standings, along with consideration of minority-owned businesses, and how USDA will ensure the contracts are fulfilled. How USDA evaluated applicants, and food safety concerns are also on the list. Representative Stacey Plaskett of the U.S. Virgin Islands and Representative Jim Costa of California joined Fudge in the letter. The three lawmakers chair separate House Agriculture subcommittees.
Farmland Prices Continue Decline, Farm Borrowing Increasing
The latest Rural Mainstreet Index from Creighton University shows farmland prices are declining while farmer borrowing is growing. Released last week, the overall index for May increased to 12.5 from April's record low 12.1, but down significantly from March's weak 35.5. The index ranges between 0 and 100, with a reading of 50.0 representing growth neutral. Farmland prices continue to slide as May’s reading fell to 39.7 from April’s 40.9. This is the 77th time in the past 78 months the index has been below growth neutral. The May farm equipment-sales index increased slightly to 21.9 from 20.0 in April. This marks the 80th straight month that the reading has remained below growth neutral 50.0. Borrowing by farmers expanded for May, but at a slower pace than in April. The borrowing index slipped to 72.2 from April’s 75.8. The checking-deposit index soared to 86.1 from April’s 65.6, while the index for certificates of deposit and other savings instruments increased to 48.6 from 48.4 in April.
AEM Developing Health and Safety Guidelines for Events
The Association of Equipment Manufacturers will craft guidelines for industry exhibitions and events. The association recently formed a Health and Safety Task Force to guide its efforts in ensuring the well-being of exhibitors, attendees, industry peers, and AEM members and staff at association-run events. The task force will create a universal set of health and safety guidelines. The team will consider all touch points of every visitor group's experience, vendor roles, implication to contracts, communication of practices to stakeholders, cost and revenue impact, as well as execution. The initial set of guidelines created by the Health and Safety Task Force will focus on the ongoing COVID-19 pandemic and minimizing the potential risk of infection for AEM staff and visitors. However, once the pandemic passes, the team will craft a revised set of guidelines for implementation at the appropriate time. The initial set of guidelines will be in place prior to AEM's Product Safety & Compliance Seminar and Liability Seminar, scheduled this August in Illinois.
Deere Earnings Beat Expectations
John Deere's quarterly sales and profit estimates beat expectations. Net income fell 41 percent to $665.8 million, or $2.11 per share in the quarter, but beat analysts’ average estimate of $1.62 per share, according to Reuters. Equipment sales declined 20 percent to $8.22 billion, topping expectation of $7.69 billion. Agriculture and turf sales decreased for the quarter due to lower shipment volumes and the unfavorable effects of currency translation. The new forecast from the company expects farm and turf equipment sales to fall between 10 percent and 15 percent this year. Net income attributable to Deere and Company is forecast to be in a range of $1.6 billion to $2 billion for the full year. However, many uncertainties remain regarding the effects of the COVID-19 global pandemic that could negatively affect the company's results and financial position in the future. A news release states, “Uncertainties related to the magnitude and duration of the COVID-19 pandemic may significantly adversely affect the company’s business and outlook.”
Gas, Diesel Prices Continue Rising
For the fourth consecutive week, the national average price of gasoline increased, up 5.5 cents to $1.96 per gallon. The average price of diesel rose 0.2 cents to $2.41 per gallon. Patrick DeHaan with GasBuddy says as long as COVID-19 cases continue to drop over time and states reopen, average prices could hit the $2 per gallon mark as early as this week. Crude oil prices continued to rally over the last week, though the increase was smaller than previous weeks. The rally in crude oil comes as production continues to drop to meet reduced global demand, and while demand has begun to recover, pushing the needle of prices higher. Last week’s data from the Energy Information Administration pointed to yet another drop in crude oil inventories, which fell five million barrels, but remain a healthy ten percent above year-ago levels. Gasoline inventories saw a rebound of 2.8 million barrels, while distillate inventories perked up 3.8 million barrels.
Washington Insider: Shape of Next Coronavirus Bill
Bloomberg is reporting this week that the contents of the next coronavirus relief package will hinge on a central question of "whether the goal should be to provide another tourniquet for the economy or a crutch to help return it to normal.”
House Democrats focused their claim for the upcoming negotiations by passing a $3 trillion relief package. Republican leadership and the White House are taking a more cautious approach, calling for some time to measure the impact of previous relief bills and determine what else is needed to get the economy on track.
The tension over whether the next package should aim to provide more aid or stimulate a reopening economy is evident in two of the key areas of disagreement: whether unemployment benefits and further federal aid to states should be extended in the next bill, which could rival or exceed the size of the third law, known as the CARES Act.
“Republicans know CARES was not the end of the congressional response but they clearly don’t feel the same urgency as their blue state counterparts,” said Liam Donovan, a principal at Bracewell LLP in Washington. “You might think of this ongoing pause as walking away from the legislative bazaar â?? blithely dismissing what they deem a liberal wish list, winding down the clock, and lowering the price on the inevitable next phase.”
Aides on both sides of the aisle expect talks to gain steam in June. By that time, the effectiveness of the Federal Reserve’s new emergency powers and the return to operations of some nonessential businesses could weigh heavily on the next steps.
There appears to be bipartisan momentum behind certain provisions in the House-passed response bill, including tweaking the employee retention credit to make it more usable, providing further financial assistance through the tax code to help businesses cover fixed costs during shelter-in-place orders and loosening IRS rules on deductions related to loans issued under the Paycheck Protection Program. Less clear is whether Republicans would agree to another round of direct payments to Americans, something they viewed as an emergency bridge to increased unemployment benefits.
Aides agree that the parties are in a ‘pre-negotiation’ phase, trying to build consensus within their own ranks.
A $600 weekly increase in unemployment insurance, set to expire at the end of July, will be critical to those talks. It is popular among Democrats but Republicans see it as disruptive to the labor market in re-opening states.
Two influential Senate Finance Committee members have launched opening bids in an effort to reach compromise.
Sen. Rob Portman, R-Ohio, is calling for a $450 weekly “back-to-work bonus” for people who can go back to work before the end of July. The proposal, which he intends to include in the next bill, would use funding from the increased unemployment benefit to pay for the bonus, but keep that beefed up insurance in place for those who don’t have a job to return to.
Sen. Ron Wyden, D-Ore., is drafting a proposal that would extend the benefit by tying it to the unemployment rate. The idea would be to sidestep the politics of extending the subsidy by automating it.
“If you can tie things to economic indicators that can be helpful, it just has to be done right,” a Senate Republican staffer told Bloomberg when asked about Wyden’s idea, though the aide said there is concern that the increased benefit would fuel continued high unemployment.
The aide said a setting a sunset date for the provision might help convince Republicans.
There is a closer deadline when it comes to aid for states and localities. Most state and local fiscal years end June 30 and early data on lost tax revenue could drive action on more federal aid.
But for now, Republicans are gambling that the authorization Congress gave the Fed to extend credit to state and local governments will lessen the need for more direct federal help, even though that credit has yet to be fully implemented.
“Currently we still have additional funds to probably the tune of over a trillion dollars that’s yet to actually be put out into the market from the last CARES Act,” Rep. Patrick McHenry, R-N.C., the top Republican on the House Financial Services Committee, told Bloomberg last week. “So, let’s make sure that those dollars are effective before we spend again.”
The more gradual approach towards the next bill also applies in the other direction: Republicans don’t want to pare back existing relief measures like a CARES Act provision allowing businesses to carry back net operating losses as far back as five yearsâ??as some current proposals would do.
Mark Warren, chief tax counsel for Senate Finance Republicans, indicated during a May 22 panel discussion with Grossman that Republicans wouldn’t be open to passing something that they would view as a retroactive tax increase.
“Especially when economists all say that increasing taxes in a recessionâ??it hasn’t been declared yet, but it’s hard to imagine we’re notâ??that that’s just really the wrong policy for a recovery,” Warren said.
So, we will see. Clearly, the stakes are high concerning the details in the next legislative package. As a result, the current negotiations should be watched closely by producers as details are hammered out over the coming weeks, Washington Insider believes.
House Democrats focused their claim for the upcoming negotiations by passing a $3 trillion relief package. Republican leadership and the White House are taking a more cautious approach, calling for some time to measure the impact of previous relief bills and determine what else is needed to get the economy on track.
The tension over whether the next package should aim to provide more aid or stimulate a reopening economy is evident in two of the key areas of disagreement: whether unemployment benefits and further federal aid to states should be extended in the next bill, which could rival or exceed the size of the third law, known as the CARES Act.
“Republicans know CARES was not the end of the congressional response but they clearly don’t feel the same urgency as their blue state counterparts,” said Liam Donovan, a principal at Bracewell LLP in Washington. “You might think of this ongoing pause as walking away from the legislative bazaar â?? blithely dismissing what they deem a liberal wish list, winding down the clock, and lowering the price on the inevitable next phase.”
Aides on both sides of the aisle expect talks to gain steam in June. By that time, the effectiveness of the Federal Reserve’s new emergency powers and the return to operations of some nonessential businesses could weigh heavily on the next steps.
There appears to be bipartisan momentum behind certain provisions in the House-passed response bill, including tweaking the employee retention credit to make it more usable, providing further financial assistance through the tax code to help businesses cover fixed costs during shelter-in-place orders and loosening IRS rules on deductions related to loans issued under the Paycheck Protection Program. Less clear is whether Republicans would agree to another round of direct payments to Americans, something they viewed as an emergency bridge to increased unemployment benefits.
Aides agree that the parties are in a ‘pre-negotiation’ phase, trying to build consensus within their own ranks.
A $600 weekly increase in unemployment insurance, set to expire at the end of July, will be critical to those talks. It is popular among Democrats but Republicans see it as disruptive to the labor market in re-opening states.
Two influential Senate Finance Committee members have launched opening bids in an effort to reach compromise.
Sen. Rob Portman, R-Ohio, is calling for a $450 weekly “back-to-work bonus” for people who can go back to work before the end of July. The proposal, which he intends to include in the next bill, would use funding from the increased unemployment benefit to pay for the bonus, but keep that beefed up insurance in place for those who don’t have a job to return to.
Sen. Ron Wyden, D-Ore., is drafting a proposal that would extend the benefit by tying it to the unemployment rate. The idea would be to sidestep the politics of extending the subsidy by automating it.
“If you can tie things to economic indicators that can be helpful, it just has to be done right,” a Senate Republican staffer told Bloomberg when asked about Wyden’s idea, though the aide said there is concern that the increased benefit would fuel continued high unemployment.
The aide said a setting a sunset date for the provision might help convince Republicans.
There is a closer deadline when it comes to aid for states and localities. Most state and local fiscal years end June 30 and early data on lost tax revenue could drive action on more federal aid.
But for now, Republicans are gambling that the authorization Congress gave the Fed to extend credit to state and local governments will lessen the need for more direct federal help, even though that credit has yet to be fully implemented.
“Currently we still have additional funds to probably the tune of over a trillion dollars that’s yet to actually be put out into the market from the last CARES Act,” Rep. Patrick McHenry, R-N.C., the top Republican on the House Financial Services Committee, told Bloomberg last week. “So, let’s make sure that those dollars are effective before we spend again.”
The more gradual approach towards the next bill also applies in the other direction: Republicans don’t want to pare back existing relief measures like a CARES Act provision allowing businesses to carry back net operating losses as far back as five yearsâ??as some current proposals would do.
Mark Warren, chief tax counsel for Senate Finance Republicans, indicated during a May 22 panel discussion with Grossman that Republicans wouldn’t be open to passing something that they would view as a retroactive tax increase.
“Especially when economists all say that increasing taxes in a recessionâ??it hasn’t been declared yet, but it’s hard to imagine we’re notâ??that that’s just really the wrong policy for a recovery,” Warren said.
So, we will see. Clearly, the stakes are high concerning the details in the next legislative package. As a result, the current negotiations should be watched closely by producers as details are hammered out over the coming weeks, Washington Insider believes.
House Democrats Raise Questions with USDA’s Perdue
Three House Agriculture subcommittee chairmen sent USDA Secretary Sonny Perdue questions about how $1.2 billion in contracts for the new Farmer to Families Food Box program were awarded.
The lawmakers also sought answers on how the department will determine if contracts are fulfilled and what actions it will take against an awardee not meeting contract requirements.
The effort it part of the Coronavirus Food Assistance Program (CFAP) where USDA said it would use $3 billion for the effort.
Asking the questions were Reps. Marcia Fudge, D-Ohio, Jim Costa, D-Calif., and Stacey Plaskett, D-U.S.V.I.
The lawmakers also sought answers on how the department will determine if contracts are fulfilled and what actions it will take against an awardee not meeting contract requirements.
The effort it part of the Coronavirus Food Assistance Program (CFAP) where USDA said it would use $3 billion for the effort.
Asking the questions were Reps. Marcia Fudge, D-Ohio, Jim Costa, D-Calif., and Stacey Plaskett, D-U.S.V.I.
COVID-19 Prompts Upward Revision to USDA Food Price Forecasts
The impact of the COVID-19 situation continues to show in various areas, now showing in food prices. USDA’s monthly update to the food price forecasts typically does not see a lot of adjustments.
The April rate of inflation for food at home (grocery store) prices increased 2.7% from March and were up 4.1% from April 2019. “Food-at-home prices had a month-to-month rate of inflation higher than any month since 1990, while food-away-from-home prices were nearly flat,” USDA’s Economic Research Service (ERS) said. “For the past several years, inflation for food-at-home prices had been slower than for food-away-from-home prices; however, the effects of the COVID-19 pandemic have ended that trend.”
The situation also prompted an upward revision to the grocery store (food at home) price forecast, upping that to a rise of 2% to 3% vs 0.5% to 1.5% the agency saw in their month-ago update. And overall food prices are now seen rising 2% to 3% as well, up from 1.5% to 2.5% previously.
Within the grocery store prices, only three areas were not revised upward from the month-ago marks.
The April rate of inflation for food at home (grocery store) prices increased 2.7% from March and were up 4.1% from April 2019. “Food-at-home prices had a month-to-month rate of inflation higher than any month since 1990, while food-away-from-home prices were nearly flat,” USDA’s Economic Research Service (ERS) said. “For the past several years, inflation for food-at-home prices had been slower than for food-away-from-home prices; however, the effects of the COVID-19 pandemic have ended that trend.”
The situation also prompted an upward revision to the grocery store (food at home) price forecast, upping that to a rise of 2% to 3% vs 0.5% to 1.5% the agency saw in their month-ago update. And overall food prices are now seen rising 2% to 3% as well, up from 1.5% to 2.5% previously.
Within the grocery store prices, only three areas were not revised upward from the month-ago marks.
Wednesday Watch List
Markets
With the trading calendar shortened by Memorial Day, the weekly report of energy inventories is pushed to Thursday and the only official report on Wednesday is the Federal Reserve's Beige Book at 1 p.m. CDT. The latest weather forecasts and any export news will maintain high interest, as usual.
Weather
Light to moderate rain is in store for portions of the eastern Midwest Wednesday, while broad rain coverage is indicated for the Delta and Southeast. Other primary crop areas will be dry.
With the trading calendar shortened by Memorial Day, the weekly report of energy inventories is pushed to Thursday and the only official report on Wednesday is the Federal Reserve's Beige Book at 1 p.m. CDT. The latest weather forecasts and any export news will maintain high interest, as usual.
Weather
Light to moderate rain is in store for portions of the eastern Midwest Wednesday, while broad rain coverage is indicated for the Delta and Southeast. Other primary crop areas will be dry.
Tuesday, May 26, 2020
White House: China Deal is “On Track”
Officials in the Trump Administration are talking positively about China’s commitments in implementing the Phase One trade deal with the U.S. Politico says that’s even as the coronavirus outbreak that began in China is straining relations between the countries. The deal requires China to make their markets more open, as well as increase its purchases of U.S. farm goods, manufactured goods, as well as energy and services by $200 billion above 2017 levels in the next two years. U.S. Trade Representative Robert Lighthizer says China is working to expand access for U.S. producers. Ag Secretary Sonny Perdue is also upbeat about the recent steps China took to open its market to U.S. goods like avocados, blueberries, barley, meat, dairy, and forage products. However, officials didn’t release the exact numbers of goods China has bought since the start of 2020. U.S. trade data that came out earlier in May showed that U.S. goods exported to China were actually coming in below the benchmark levels set in 2017. That prompted President Trump to say there was always the option of ending the agreement if China didn’t meet its obligations.
Potato Industry Feels Left Out of CFAP
The National Potato Council and state grower organizations wrote Ag Secretary Sonny Perdue last week to talk about potatoes that have nowhere to go for processing. The Hagstrom Report says the council noted more than “1.5 billion pounds of fresh potatoes for processing and potato products are trapped in the supply chain with no likely customers.” Mountains of potatoes are being given away or left to cow feed as surplus crops are piling up despite government efforts to distribute the potatoes as part of food boxes being given to needy families. The potato sector feels like the USDA’s new Farmers to Families Food Box program, as well as other initiatives, aren’t enough to dent the losses in a sector that depends heavily on foodservice sales. Kam Quarles (Quarrels), CEO of the National Potato Council, says, “It was clear the people who were doing well in retail could probably take more advantage of this than the impaired side of the business, which is food service.” The NPC sent a letter to USDA saying, “This oversupply has impacted both the 2019 and 2020 crop for U.S. family farms that grow potatoes. Some of these farms will have no ability to sell their 2019 or 2020 crop.” The industry suggested several enhancements regarding eligibility and payment rate adjustments that will help USDA help the industry.
Rural Infrastructure Advancement Act Introduced in the Senate
Senator Roger Wicker of Mississippi introduced Senate Bill 3842, called the Rural Infrastructure Advancement Act. Wicker authored legislation that would establish a Rural Assistance Pilot Program to help rural communities and localities better utilize and leverage existing Department of Transportation funding and financing opportunities. “Rural states often face challenges when trying to find the financial resources necessary to fund critical infrastructure projects, such as improving our roads and bridges,” Wicker says. “This bill would provide professional technical assistance to rural communities interested in utilizing existing financial programs.” He says it’s important that they provide the resources necessary to support and advance rural infrastructure. The legislation would do several things, including establishing a pilot program that retains expert firms, all of whom will need DOT approval, to provide financial, technical, and legal assistance to rural project sponsors seeking to apply for a loan or grant. It would also authorize funding for the Transportation Department to carry out the program, develop an online portal for applications, and post information about the pilot program and the resources available online.
Officials Say Cattle to Blame for E. coli Outbreak in California
Outbreaks of E. coli that sickened almost 200 people in California late last year probably came from cattle grazing close to the farms that grew the tainted romaine lettuce. The Associated Press says those findings came from a report released late last week by the U.S. Food and Drug Administration. Cow feces, which can contain the bacteria, is considered by the FDA as “the most likely contributing factor” to three outbreaks of the food-borne illness that traced to fields in the Salinas (Suh-LEE-nuhs) Valley of California. The outbreaks happened last November and December and affected people in at least 16 states as well as Canada. No deaths were reported. Investigators concluded that the illness centered on ranches and fields owned by the same grower that was located downslope from the public land that cattle had grazed on. The FDA says it couldn’t definitively identify a route of contamination for the three 2019 outbreaks, but it did say the possibilities included water runoff from the grazing area, wind-blown material, or animals or vehicles tracking it out to fields in the area. The report’s executive summary says, “Agricultural water sources used to grow the romaine were also possible routes of contamination.”
Dairy Farmers Partner with Pizza Hut, Giving Half-Million Pizzas to Graduates
Dairy Management Incorporated and its checkoff partner Pizza Hut are joining together to give away half a million pizzas to the Class of 2020 high school graduates. “We are excited to partner with Pizza Hut to help high school seniors and their families celebrate this special milestone in their lives,” says Marilyn Hershey, Chair of DMI, which runs the national dairy checkoff. “This is a great example of what we accomplish when dairy farmers and importers build relationships with a company like Pizza Hut through our checkoff. The promotion was officially announced on the Tonight Show with Jimmy Fallon last week. “We have a long history of celebrating moments that matter, such as graduations, and Pizza Hut takes pride in being a part of our customers’ big days,” says George Felix, chief marketing officer for Pizza Hut. “It’s only natural that we’d be there for students and their families to help celebrate the accomplishments of the graduating class of 2020.” They’re also proud to partner with America’s hard-working dairy farmers. To claim a free one-topping medium pizza, go to www.pizzahut.com/gradparty for more information. Coupons will be valid through June 4.
Beef Checkoff Recognizes Farmers and Ranchers for Keeping Beef on the Table
As Americans fired up their grills for Memorial Day, the “Beef, It’s What’s for Dinner” campaign is highlighting the hard-working beef farmers and ranchers who make grilling season possible. They’re doing so in a new video, released on Memorial Day, that takes consumers on a dawn-till-dusk workday of raising beef, doing so in just 30 seconds. As the video ends, it proudly proclaims that “the summer grilling season is brought to you by beef farmers and ranchers.” The Federation Division at the National Cattlemen’s Beef Association says, “Beef sizzling on grills during the summer months has brought families together for generations.” The video, which will be shared throughout social and digital media, is just a glimpse into what’s coming this summer from the “Beef, It’s What’s for Dinner” campaign. This summer, the brand will focus on how grilling brings people together, be it physically or virtually, and will continue to recognize those who raise beef, starting with National Beef Burger Day on May 28.
Washington Insider: Next Steps in US China Trade Spat
A major item in the urban press this week is speculation about the next steps in the trade fight with China over Hong Kong. The Trump administration is promising “strong action” against China’s new national security law in Hong Kong, but faces limited options because any harsh penalties could likely also harm both Hong Kong and the U.S., Bloomberg says.
While Secretary of State Mike Pompeo indicated Friday that the U.S. could reconsider Hong Kong’s special trade status, such broad actions risk significant harm to U.S. interests. As a result, the administration may consider sanctioning individuals or businesses involved in curtailing Hong Kong’s democracy or by maintaining special treatment of the territory for sensitive technologies, Bloomberg says.
Businesses and investors are anxiously watching developments, which could have far-reaching implications for the U.S.-China relationship. Earlier this week, China reiterated a pledge to implement the first phase of its trade deal with the U.S. despite setbacks from the coronavirus outbreak.
“Beijing’s decision puts the U.S. government in a difficult position, because any policy response against Hong Kong will largely punish the wrong actors,” said Leland Miller, chief executive officer of China Beige Book, a firm that researches China’s economy. “Pulling back its special status will mostly hurt Hong Kongers who overwhelmingly oppose this move as well as U.S. and other foreign companies based there. Visa restrictions or tariff hikes would be similarly counterproductive.”
Miller said he expects the Trump administration to apply targeted sanctions but in order to turn up the heat the U.S. would have to target Beijing’s interests, not Hong Kong’s.
“And with the phase-one deal still technically a go, the administration doesn’t appear to have much appetite for that right now,” he added. However, one administration spokesman told reporters at the White House that “Hong Kong has been the financial center of Asia for a very, very long time. I don’t think it will continue to be and so the costs for China and are very, very large” if the government moves forward, he added.
With China as the world's second-largest economy, Hong Kong isn’t as important to mainland China’s economy as it once was. Yet the territory has remained a “crucial asset” for China, “as a starting point for mainland firms investing overseas, a source of equity and bond finance, and a channel for capital account opening,” Bloomberg said in a report last year.
The Hong Kong Human Rights and Democracy Act, signed into law last fall, requires the secretary of State to certify, no less than annually, whether Hong Kong continues to warrant special treatment, as defined in the Hong Kong Policy Act.
Pompeo was to submit a report to Congress weeks ago but held off until after China’s National People’s Congress met. Senator Marco Rubio, R-Fla., who sponsored the human-rights bill, said the administration had no choice but to certify that Hong Kong is no longer autonomous if the Chinese government implements the proposed national security law. He also said he expected the executive branch to meet its statutory deadlines.
“Beijing’s exploitation of U.S. capital markets in furtherance of the Communist Party’s efforts to undermine U.S. national and economic security -- including facilitating egregious human rights abuses and a range of military activities -- demands a serious response, and I will continue to work with my colleagues to do just that,” Rubio said in a statement.
But a negative determination with respect to the territory’s independence doesn’t mean the U.S. has to revoke the special status entirely. People familiar with the administration’s discussions on its options said officials actually have a lot of flexibility and a spectrum of options, rather than a binary choice to treat Hong Kong exactly like mainland China.
The U.S. treats Hong Kong differently from mainland China on tariffs, technology curbs – or export control laws – and on visas.
As one potential option, the administration could impose all tariffs it’s levied against Chinese imports on exports from Hong Kong but maintain special treatment of the territory when it comes to sensitive technologies. The U.S. has enacted license requirements for American companies that want to do business with Chinese technology firms, including Huawei Technologies Co.
The White House could also sanction individuals involved in curtailing Hong Kong’s democracy, or businesses associated with such actions, before it partly revokes the region’s preferential trade status.
The administration has regularly blamed China for failing to prevent the coronavirus from spreading beyond its borders after it was first discovered in the city of Wuhan. The American Chamber of Commerce in Hong Kong said Friday that China’s proposed legislation could lead to a tit-for-tat between Washington and Beijing that eventually curtails Hong Kong’s special treatment.
“Hong Kong today stands as a model of free trade, strong governance, free flow of information and efficiency,” said Robert Grieves, the group’s chairman. “No one wins if the foundation for Hong Kong’s role as a prime international business and financial center is eroded.”
So, we will see what happens. Both sides in this fight seem to be increasingly dug in, so it will be difficult to disengage, especially as election-year fever makes controversies increasingly difficult. The Hong Kong issue is certainly important and should be watched closely by producers as the season progresses, Washington Insider believes.
While Secretary of State Mike Pompeo indicated Friday that the U.S. could reconsider Hong Kong’s special trade status, such broad actions risk significant harm to U.S. interests. As a result, the administration may consider sanctioning individuals or businesses involved in curtailing Hong Kong’s democracy or by maintaining special treatment of the territory for sensitive technologies, Bloomberg says.
Businesses and investors are anxiously watching developments, which could have far-reaching implications for the U.S.-China relationship. Earlier this week, China reiterated a pledge to implement the first phase of its trade deal with the U.S. despite setbacks from the coronavirus outbreak.
“Beijing’s decision puts the U.S. government in a difficult position, because any policy response against Hong Kong will largely punish the wrong actors,” said Leland Miller, chief executive officer of China Beige Book, a firm that researches China’s economy. “Pulling back its special status will mostly hurt Hong Kongers who overwhelmingly oppose this move as well as U.S. and other foreign companies based there. Visa restrictions or tariff hikes would be similarly counterproductive.”
Miller said he expects the Trump administration to apply targeted sanctions but in order to turn up the heat the U.S. would have to target Beijing’s interests, not Hong Kong’s.
“And with the phase-one deal still technically a go, the administration doesn’t appear to have much appetite for that right now,” he added. However, one administration spokesman told reporters at the White House that “Hong Kong has been the financial center of Asia for a very, very long time. I don’t think it will continue to be and so the costs for China and are very, very large” if the government moves forward, he added.
With China as the world's second-largest economy, Hong Kong isn’t as important to mainland China’s economy as it once was. Yet the territory has remained a “crucial asset” for China, “as a starting point for mainland firms investing overseas, a source of equity and bond finance, and a channel for capital account opening,” Bloomberg said in a report last year.
The Hong Kong Human Rights and Democracy Act, signed into law last fall, requires the secretary of State to certify, no less than annually, whether Hong Kong continues to warrant special treatment, as defined in the Hong Kong Policy Act.
Pompeo was to submit a report to Congress weeks ago but held off until after China’s National People’s Congress met. Senator Marco Rubio, R-Fla., who sponsored the human-rights bill, said the administration had no choice but to certify that Hong Kong is no longer autonomous if the Chinese government implements the proposed national security law. He also said he expected the executive branch to meet its statutory deadlines.
“Beijing’s exploitation of U.S. capital markets in furtherance of the Communist Party’s efforts to undermine U.S. national and economic security -- including facilitating egregious human rights abuses and a range of military activities -- demands a serious response, and I will continue to work with my colleagues to do just that,” Rubio said in a statement.
But a negative determination with respect to the territory’s independence doesn’t mean the U.S. has to revoke the special status entirely. People familiar with the administration’s discussions on its options said officials actually have a lot of flexibility and a spectrum of options, rather than a binary choice to treat Hong Kong exactly like mainland China.
The U.S. treats Hong Kong differently from mainland China on tariffs, technology curbs – or export control laws – and on visas.
As one potential option, the administration could impose all tariffs it’s levied against Chinese imports on exports from Hong Kong but maintain special treatment of the territory when it comes to sensitive technologies. The U.S. has enacted license requirements for American companies that want to do business with Chinese technology firms, including Huawei Technologies Co.
The White House could also sanction individuals involved in curtailing Hong Kong’s democracy, or businesses associated with such actions, before it partly revokes the region’s preferential trade status.
The administration has regularly blamed China for failing to prevent the coronavirus from spreading beyond its borders after it was first discovered in the city of Wuhan. The American Chamber of Commerce in Hong Kong said Friday that China’s proposed legislation could lead to a tit-for-tat between Washington and Beijing that eventually curtails Hong Kong’s special treatment.
“Hong Kong today stands as a model of free trade, strong governance, free flow of information and efficiency,” said Robert Grieves, the group’s chairman. “No one wins if the foundation for Hong Kong’s role as a prime international business and financial center is eroded.”
So, we will see what happens. Both sides in this fight seem to be increasingly dug in, so it will be difficult to disengage, especially as election-year fever makes controversies increasingly difficult. The Hong Kong issue is certainly important and should be watched closely by producers as the season progresses, Washington Insider believes.
Lawmakers Continue to Push EPA On RFS Waiver Requests
More than a dozen Republican senators, including Senate Environment Committee Chairman John Barrasso, R-Wyo., say the EPA has a clear case to waive or significantly reduce the Renewable Fuel Standard’s (RFS) biofuels mandate. In a letter to EPA Administrator Andrew Wheeler on Tuesday, the senators say the cost of complying with the RFS has tripled since the beginning of this year.
Republican attorneys general recently urged the EPA to grant petitions from six governors, including one Democrat, to waive the 2020 RFS requirements amid the pandemic. “A failure to grant, in part or in whole, the governors’ petitions would render this provision of the Clean Air Act utterly meaningless,” the senators wrote. “It would be a gross example of a federal agency nullifying an act of Congress.”
But biofuel backers led by Sens. Joni Ernst, R-Iowa, and Tina Smith, D-Minn., have written President Trump noting the conditions to waive the RFS have not been met.
EPA must be able to demonstrate there is “severe economic harm” from the RFS itself to waive the requirements, a feat the corn state senators said it would not be able to do given the ongoing, widespread economic damage from the pandemic.
Republican attorneys general recently urged the EPA to grant petitions from six governors, including one Democrat, to waive the 2020 RFS requirements amid the pandemic. “A failure to grant, in part or in whole, the governors’ petitions would render this provision of the Clean Air Act utterly meaningless,” the senators wrote. “It would be a gross example of a federal agency nullifying an act of Congress.”
But biofuel backers led by Sens. Joni Ernst, R-Iowa, and Tina Smith, D-Minn., have written President Trump noting the conditions to waive the RFS have not been met.
EPA must be able to demonstrate there is “severe economic harm” from the RFS itself to waive the requirements, a feat the corn state senators said it would not be able to do given the ongoing, widespread economic damage from the pandemic.
US, China Both Talk Phase One Trade Agreement
China is importing U.S. ag and other goods a bit slower than originally hoped for, but the phase-one trade pact is still being successfully implemented, National Economic Council (NEC) Director Larry Kudlow said Thursday.
“I guess the Chinese purchases are a little behind, but I think that’s more because of poor economic and market conditions … and China has every intent of implementing (phase one),” Kudlow told the Washington Post.
Kudlow said China is not currently looking to renegotiate the trade pact, saying that’s not happening. “At the present time … there’s no renegotiating at all,” he said. “We’re looking for steady implementation and we’ll be monitoring it very closely.”
USDA and the U.S. Trade Representative said in an update that Beijing is making progress "despite difficult times for both our countries" with agricultural purchases, exemptions on retaliatory tariffs and approvals of more U.S. exports of farm products.
USDA Secretary Sonny Perdue was also upbeat about recent steps China has taken to open its market to U.S. avocados, blueberries, barley, meat, dairy and forage products. The White House released a document on Thursday on the administration’s “strategic approach” toward China, which called the Phase One agreement a sign of “critical progress toward a more balanced trade relationship.”
Both sides continue to emphasize that the phase-one agreement continues even as some continue to counter that China is not expected to meet the terms of the agreement.
“I guess the Chinese purchases are a little behind, but I think that’s more because of poor economic and market conditions … and China has every intent of implementing (phase one),” Kudlow told the Washington Post.
Kudlow said China is not currently looking to renegotiate the trade pact, saying that’s not happening. “At the present time … there’s no renegotiating at all,” he said. “We’re looking for steady implementation and we’ll be monitoring it very closely.”
USDA and the U.S. Trade Representative said in an update that Beijing is making progress "despite difficult times for both our countries" with agricultural purchases, exemptions on retaliatory tariffs and approvals of more U.S. exports of farm products.
USDA Secretary Sonny Perdue was also upbeat about recent steps China has taken to open its market to U.S. avocados, blueberries, barley, meat, dairy and forage products. The White House released a document on Thursday on the administration’s “strategic approach” toward China, which called the Phase One agreement a sign of “critical progress toward a more balanced trade relationship.”
Both sides continue to emphasize that the phase-one agreement continues even as some continue to counter that China is not expected to meet the terms of the agreement.
Tuesday Watch List
Markets
After the three-day weekend, futures markets resumed trading Monday evening and traders will be checking the latest weather forecasts and any news on the coronavirus front. At 9 a.m. CDT, April new home sales and a U.S. index of consumer confidence will be released, followed by USDA's weekly report of grain export inspections at 10 a.m. USDA's Crop Progress report at 3 p.m. CDT will update row crop planting progress and winter wheat crop conditions.
Weather
Moderate to locally heavy rain is in store from the U.S.-Canadian border in North Dakota south to the Texas coast Tuesday. This activity includes the western Midwest. Portions of the central U.S. have already seen very heavy rain and flash flooding over the holiday weekend, including the central and southeastern Plains and portions of the Midwest. A notably drier pattern is featured in the six-to-10-day forecast through early June.
After the three-day weekend, futures markets resumed trading Monday evening and traders will be checking the latest weather forecasts and any news on the coronavirus front. At 9 a.m. CDT, April new home sales and a U.S. index of consumer confidence will be released, followed by USDA's weekly report of grain export inspections at 10 a.m. USDA's Crop Progress report at 3 p.m. CDT will update row crop planting progress and winter wheat crop conditions.
Weather
Moderate to locally heavy rain is in store from the U.S.-Canadian border in North Dakota south to the Texas coast Tuesday. This activity includes the western Midwest. Portions of the central U.S. have already seen very heavy rain and flash flooding over the holiday weekend, including the central and southeastern Plains and portions of the Midwest. A notably drier pattern is featured in the six-to-10-day forecast through early June.
Friday, May 22, 2020
U.S. Ethanol Heading to China
According to three ethanol-industry sources and shipping data, a rare U.S. ethanol shipment will arrive in China very soon. Reuters says that may be the first ethanol shipment to hit China since the two countries struck a trade deal earlier this year. China recently waived some additional tariffs on almost 700 American products, including ethanol, to support more purchases of U.S. farm goods to help meet its obligations in the Phase One trade deal. Since China made the move, the ethanol industry has been watching for signs of renewed trade in the biofuel. Tariffs on U.S. fuel ethanol were as high as 70 percent after Beijing upped some retaliatory tariffs on U.S. imports in the back-and-forth trade dispute with Washington, D.C. A slump in fuel demand brought on by COVID-19 led to an oversupply of ethanol that caused prices to bottom out, forcing producers to slash their production amounts. One of the three sources to tell Reuters about the shipment says the vessel was carrying ethanol that originated in the United States and had been resold to China, likely from a seller in Saudi Arabia. A trader based in China tells Reuters that, “People are looking to import fuel ethanol from overseas as prices in northeastern China have risen in the past few days.”
EPA Plan Would Raise Biofuel Blending Targets Slightly in 2021
The Environmental Protection Agency has drafted a plan that would include a small bump in their biofuel-blending targets in 2021. Three people familiar with the matter told Bloomberg that the proposed rule is undergoing a White House review. Under the rule, the EPA would require refiners to use 5.17 billion gallons of advanced biofuels in 2021, up from 5.09 billion gallons this year. The plan would include 670 million gallons of cellulosic renewable fuels, such as those made from crop residue, switchgrass, and biogas harvested at landfills, up from the 590 million gallons required in 2020. Refiners would be able to use as much as 15 billion gallons of conventional renewable fuels, including corn-based ethanol, to satisfy the mandate in 2021. In 2022, the EPA draft plan would require refiners to use 2.76 billion gallons of biodiesel, typically made from soybeans and waste cooking oil. That requirement would be up from the 2.43 billion gallons required in 2021. The EPA is expected to propose the quotas in the coming months while facing a deadline of November 30 to finalize the targets.
USDA Providing $1 Billion in Loan Guarantees for Rural Business and Ag Producers
Ag Secretary Sonny Perdue says the agency will make up to $1 billion in loan guarantees available to help rural businesses meet their working capital needs during COVID-19. Also, agricultural producers who aren’t eligible for Farm Service Agency loans may receive funding under the USDA Business and Industry CARES Act Program provisions that are included in the Coronavirus Aid, Relief, and Economic Security Act. Other changes will allow USDA to provide 90 percent guarantees on B & I CARES Act Program loans, to set the application and guarantee fee at two percent of the loan, as well as to accept appraisals completed within two years of the loan application date, and extend the maximum term for working capital loans to 10 years. “USDA is committed to be a strong partner to rural businesses and agricultural producers and being a strong supporter of all aspects of the rural economy,” Perdue says. “Ensuring more rural agricultural producers can gain access to much-needed capital in these unprecedented times is a cornerstone of that commitment.” USDA intends to consider applications in the order they’re received, but they may also assign priority points to projects if the demand for funds exceeds availability.
USDA Accepting Applications for 2021 Export Programs
The USDA’s Foreign Agricultural Service is accepting applications from eligible organizations for the fiscal year 2021 funding for five export market development programs. FAS recently published the Fiscal Year 2021 Notices of Funding Opportunity for the Market Access Program, Foreign Market Development Program, Technical Assistance for Specialty Crops Program, the Quality Samples Program, and the Emerging Markets Program. The application deadline for all five of the programs is June 26, 2020. Under the Market Access Program, USDA provides competitive, cost-share assistance to U.S. exporters and agriculture, fish, and forest product trade organizations for international marketing and promotion of U.S. commodities and products. Under the Foreign Market Development Program, USDA partners with nonprofit agricultural and forest product trade associations to build longer-term international demand for U.S. commodities. The Technical Assistance for Specialty Crops Program funds projects that address sanitary, phytosanitary, and technical barriers that prohibit or threaten the export of U.S. specialty crops. The Quality Samples Program helps agricultural trade organizations provide small samples of their products to potential importers. As the name implies, the Emerging Markets Program supports technical assistance activities that promote U.S. agricultural, fish, and forest products in emerging markets.
NCGA Working to Find New Uses for Corn
The National Corn Growers Association is working hard to find new uses for corn and demonstrating it as the clear feedstock of choice. The availability of corn-based feedstocks and consumer demand represents an opportunity for stakeholders in the sustainable biomaterials industry and will help drive demand for corn higher. NCGA Director of Market Development Sarah McKay says, “The seeds have to be planted along the way to find the next big new uses of corn. It doesn’t just happen overnight.” She says that’s why NCGA works with university researchers, government entities, as well as untraditional partners to prime the pump for innovation and viable uses of corn. NCGA also works with individual companies, innovators, and research groups to engage in conversations and projects together to facilitate these technologies getting to commercialization, while also making sure their consumers understand the value of corn as an industrial feedstock. The NCGA has also held two Consider Corn Challenge contests. Many of the winners have gone on to secure additional funding to get their products to market. The contest winners have developed biosourced materials from corn that are starting materials for various biobased plastics, nylons, polyester resins, and more.
Cotton Council Joins Sustainable Apparel Coalition
Cotton Council International announced it had joined the Sustainable Apparel Coalition. It will use the group’s sustainability measurement suite of tools, known as the Higg Index, to drive environmental and social responsibility throughout its supply chain. With its membership in the SAC, the council joins more than 250 global brands, retailers, and manufacturers, as well as governmental, non-profit environmental organizations, and academic institutions. All of the various groups are committed to improving supply chain sustainability in the apparel, footwear, and textile industry. The U.S. cotton industry is committed to continual improvement in sustainability and continues to build upon the strong environmental gains already achieved over the past 35 years. In a release, the Cotton Council International says, “We are pleased to be joining the Sustainable Apparel Coalition and are confident that together we can scale positive impacts on product sustainability over time. We are collaborating with many other groups to enable greater supply chain transparency and informed decision making.” The Sustainable Apparel Coalition says, “Having CCI as part of the Coalition widens the scope of our impact within the industry and accelerates the changes we’re making toward responsible industry actions.”
Washington Insider: US, China Escalating War of Words
Bloomberg and others are reporting this week that President Trump and President Xi Jinping have escalated their rhetoric sharply. President Trump has actively suggested that China is behind a “disinformation and propaganda attack on the United States and Europe. It all comes from the top,” the president said in a series of tweets this week. He added that China was “desperate” to have former Vice President Joe Biden, the presumptive Democratic nominee, win the presidential race.
While the president has often blamed China for failing to prevent the pandemic now ravaging the global economy, he has previously been careful to maintain that his relationship with Xi remains strong. China’s foreign ministry has regularly fired back with similar charges, saying the Trump administration was looking to obscure the facts around the virus to deflect from its own shortcomings.
Now, however, the U.S. president and other Republicans have been ratcheting up efforts to paint China as the villain as the U.S. economy drifts into recession and the president’s handling of the crisis is being increasingly criticized. China has denied Trump’s claims that it was trying to damage his chances at re-election in November.
The feud has revived the worst-case scenarios concerning U.S.-China ties, Bloomberg said. It thinks the two sides are “edging” closer to confrontation “than at any point since the two sides established relations four decades ago.” From supply chains and visas to cyberspace and Taiwan, the world’s two largest economies are escalating disputes across several fronts that had quieted after they signed a “phase one” trade deal in January.
Last week, Chinese foreign ministry spokesman Zhao Lijian sidestepped a question on President Trump’s tweets while attacking Secretary of State Michael Pompeo for his comments about Taiwan and Hong Kong. “Who’s been doing everything possible to ensure people’s lives and health and to promote international anti-virus cooperation?” he said. “The answer is clear as day. The world is a fair judge.”
A day earlier, the Chinese military condemned a rare message from Pompeo to Taiwan’s president as “wrong and very dangerous,” vowing to defend Beijing’s claim to the democratically ruled island.
Hours later, the White House issued a broad critique of China’s economic and military policies in a report to Congress without detailing specific actions the U.S. will take in response.
The U.S. Senate also overwhelmingly approved legislation Wednesday that could lead to Chinese companies such as Alibaba Group Holding Ltd. and Baidu Inc. being barred from listing on U.S. stock exchanges. The Republican-controlled upper chamber had already passed a bill this month that would impose sanctions on Chinese officials over human rights abuses against Muslim minorities.
The U.S. president, who had repeatedly praised Xi’s handling of the coronavirus outbreak early on, has passed up recent opportunities to criticize the Chinese president directly. During a TV appearance on May 3, the president described Xi as a “strong” leader with whom he had a good relationship.
This week, however, President Trump accused “some wacko in China” on Twitter of deflecting responsibility for the spread of the coronavirus, without elaborating. He accused China of “mass worldwide killing.”
Although it was unclear who the President’s reference included in either tweet, Hu Xijin, the editor-in-chief of the Communist Party’s Global Times newspaper, denounced U.S. administration officials as “political hooligans” who don’t care about the lives of more than 100,000 Americans. Chinese Foreign Ministry spokesman Zhao Lijian hewed closely to the usual talking points in his agency’s regular briefing Wednesday.
Hu pushed back against Trump’s “wacko” remark in a subsequent tweet, saying “I have never heard of such a wacko in China making this statement” and speculating that the person is “fictional.” He later said Chinese internet users wished President Trump would be re-elected, saying he promotes “unity in China” and makes international news “as fun as comedy.”
So, we will see. While this “back and forth” seems unlikely to lead directly to more serious confrontations just now, it certainly doesn’t offer any clear path to declining tensions and a better climate for trade and global market recovery.
In the current political and economic climate, the issue of how the coronavirus outbreak was begun and managed in each country likely will continue to be extremely fraught. So the current spat holds at least some danger for both sides and should be watched closely to prevent accidentally crossing the line to a more costly confrontation, as such wars of words sometimes do, Washington Insider believes.
While the president has often blamed China for failing to prevent the pandemic now ravaging the global economy, he has previously been careful to maintain that his relationship with Xi remains strong. China’s foreign ministry has regularly fired back with similar charges, saying the Trump administration was looking to obscure the facts around the virus to deflect from its own shortcomings.
Now, however, the U.S. president and other Republicans have been ratcheting up efforts to paint China as the villain as the U.S. economy drifts into recession and the president’s handling of the crisis is being increasingly criticized. China has denied Trump’s claims that it was trying to damage his chances at re-election in November.
The feud has revived the worst-case scenarios concerning U.S.-China ties, Bloomberg said. It thinks the two sides are “edging” closer to confrontation “than at any point since the two sides established relations four decades ago.” From supply chains and visas to cyberspace and Taiwan, the world’s two largest economies are escalating disputes across several fronts that had quieted after they signed a “phase one” trade deal in January.
Last week, Chinese foreign ministry spokesman Zhao Lijian sidestepped a question on President Trump’s tweets while attacking Secretary of State Michael Pompeo for his comments about Taiwan and Hong Kong. “Who’s been doing everything possible to ensure people’s lives and health and to promote international anti-virus cooperation?” he said. “The answer is clear as day. The world is a fair judge.”
A day earlier, the Chinese military condemned a rare message from Pompeo to Taiwan’s president as “wrong and very dangerous,” vowing to defend Beijing’s claim to the democratically ruled island.
Hours later, the White House issued a broad critique of China’s economic and military policies in a report to Congress without detailing specific actions the U.S. will take in response.
The U.S. Senate also overwhelmingly approved legislation Wednesday that could lead to Chinese companies such as Alibaba Group Holding Ltd. and Baidu Inc. being barred from listing on U.S. stock exchanges. The Republican-controlled upper chamber had already passed a bill this month that would impose sanctions on Chinese officials over human rights abuses against Muslim minorities.
The U.S. president, who had repeatedly praised Xi’s handling of the coronavirus outbreak early on, has passed up recent opportunities to criticize the Chinese president directly. During a TV appearance on May 3, the president described Xi as a “strong” leader with whom he had a good relationship.
This week, however, President Trump accused “some wacko in China” on Twitter of deflecting responsibility for the spread of the coronavirus, without elaborating. He accused China of “mass worldwide killing.”
Although it was unclear who the President’s reference included in either tweet, Hu Xijin, the editor-in-chief of the Communist Party’s Global Times newspaper, denounced U.S. administration officials as “political hooligans” who don’t care about the lives of more than 100,000 Americans. Chinese Foreign Ministry spokesman Zhao Lijian hewed closely to the usual talking points in his agency’s regular briefing Wednesday.
Hu pushed back against Trump’s “wacko” remark in a subsequent tweet, saying “I have never heard of such a wacko in China making this statement” and speculating that the person is “fictional.” He later said Chinese internet users wished President Trump would be re-elected, saying he promotes “unity in China” and makes international news “as fun as comedy.”
So, we will see. While this “back and forth” seems unlikely to lead directly to more serious confrontations just now, it certainly doesn’t offer any clear path to declining tensions and a better climate for trade and global market recovery.
In the current political and economic climate, the issue of how the coronavirus outbreak was begun and managed in each country likely will continue to be extremely fraught. So the current spat holds at least some danger for both sides and should be watched closely to prevent accidentally crossing the line to a more costly confrontation, as such wars of words sometimes do, Washington Insider believes.
EPA’s Wheeler Says No Decisions Yet on RFS Waiver Requests
EPA has not yet made any final decisions on the requests from several states for a waiver of Renewable Fuel Standard (RFS) requirements this year, according to EPA Administrator Andrew Wheeler in testimony before the Senate Environment and Public Works Committee.
He acknowledged the ethanol industry is facing difficult times, noting he has “talked personally with a number of small refiners all over the country, including I think every small refinery in Wyoming, and we are working with them to see what we can do to help them during this time.” He also noted the fewer miles driven was also an issue and pledged “we have extraordinary circumstances this year and we are looking to see what relieve we can provide everyone.”
As for request by states for waivers of RFS requirements, Wheeler said he was “familiar” with the requests, but when asked if a decision on the requests had been made, he replied that “No, we have not yet.” Sen. Joni Ernst, R-Iowa, asked if EPA would look at prior years when waiver requests had been made and were denied, noting that the decision calls on EPA to determine if the RFS is the cause of harm or if it is some other factor like the Saudi-Russia frictions or the COVID-19 situation. Wheeler said that “yes” the agency would look at precedent.
He acknowledged the ethanol industry is facing difficult times, noting he has “talked personally with a number of small refiners all over the country, including I think every small refinery in Wyoming, and we are working with them to see what we can do to help them during this time.” He also noted the fewer miles driven was also an issue and pledged “we have extraordinary circumstances this year and we are looking to see what relieve we can provide everyone.”
As for request by states for waivers of RFS requirements, Wheeler said he was “familiar” with the requests, but when asked if a decision on the requests had been made, he replied that “No, we have not yet.” Sen. Joni Ernst, R-Iowa, asked if EPA would look at prior years when waiver requests had been made and were denied, noting that the decision calls on EPA to determine if the RFS is the cause of harm or if it is some other factor like the Saudi-Russia frictions or the COVID-19 situation. Wheeler said that “yes” the agency would look at precedent.
Former VP Biden Lashes Out At Trump Administration COVID-19 Response
Former Vice President Joe Biden took issue with the Trump administration’s responses to the COVID-19, saying it was a leadership issue. “We don't have a food shortage problem, we have a leadership problem,” Biden said during a webinar event with Rep. Ron Kind, D-Wis.
“From the start, [President Donald Trump] has failed to support food producers,” he argued, saying among other things that the administration was “slow to order the government to buy food from farmers and send that food to food banks” as the crisis took hold.
He said a Biden administration would have stepped up purchases of milk and other commodities where surpluses have arisen due to the restaurant shutdowns cutting food service demand. He also criticized the Trump administration for its trade policy, saying it has made the U.S. a “bad partner.”
“From the start, [President Donald Trump] has failed to support food producers,” he argued, saying among other things that the administration was “slow to order the government to buy food from farmers and send that food to food banks” as the crisis took hold.
He said a Biden administration would have stepped up purchases of milk and other commodities where surpluses have arisen due to the restaurant shutdowns cutting food service demand. He also criticized the Trump administration for its trade policy, saying it has made the U.S. a “bad partner.”
Thursday, May 21, 2020
Growth Energy Lauds Introduction of Biofuels Relief Bill in Senate
Growth Energy praised the introduction of legislation that would assist biofuel producers impacted by the COVID-19 pandemic. Iowa Republican Senator Chuck Grassley along with Minnesota Democratic Senator Amy Klobuchar introduced the legislation Tuesday. Specifically, the bill would require the U.S. Department of Agriculture to reimburse biofuel producers for their feedstock purchases in the first quarter of 2020 through the Commodity Credit Corporation. Growth Energy CEO Emily Skor says the proposal would “deliver immediate relief for biofuel workers, farm partners, and thousands of rural communities.” The legislation follows numerous appeals from Growth Energy and other farm and biofuel leaders, lawmakers and local governments. As the coronavirus pandemic spread, gasoline use in the United States plummeted to 50-year lows around the country. From March 8 to April 4 of this year, total miles driven dropped by 58 percent. The rapid decrease in consumption has led more than 130 biofuel plants to partially or fully shut down in rural America.
Ag Retailers: New EPA Transparency Rule a Positive Step for Agriculture
The Agricultural Retailers Association calls a proposed rule on transparency by the Environmental Protection Agency a positive step forward for agriculture. This week, the EPA announced the proposal to establish requirements and procedures for the issuance of guidance. ARA President and CEO Daren Coppock says the proposal "will not only provide the opportunity to be sure that our voices are heard but will also ensure that new rules are guided by sound science, practicality and economic feasibility.” Last Fall, President Trump issued an executive order to promote transparency by ensuring all active guidance documents are made available to the public. The EPA says the rule will significantly increase the transparency of EPA’s practices around guidance and the agency’s process for managing guidance documents. The rule will establish the first formal petition process for the public to request that EPA modify or withdraw a guidance document, and ensure that the agency’s guidance documents are developed with appropriate review and are accessible and transparent to the public.
American Farmland Trust Releases Farmland Report
Millions of acres of America’s agricultural land were developed or converted to uses that threaten farming between 2001 and 2016, according to American Farmland Trust. The organization this week released a report on U.S. farmland. The report’s Agricultural Land Protection Scorecard is the first-ever state-by-state analysis of policies that respond to the development threats to farmland, showing that every state can, and must, do more to protect their agricultural resources. The report shows the extent, location, and quality of each state’s agricultural land and tracks how much of it has been converted. The research also reveals a new threat of land use of low-density residential development, the process of farmland being converted to large-lot residential development. American Farmland Trust says low-density residential development compromises opportunities for farming and ranching, making it difficult for farmers to get into their fields or travel between fields. Additionally, new residents not used to living next farms often complain about equipment on roads or odors related to farming. The full report is available at farmland.org.
AVMA Applauds Dog Import Inspections Bill
The American Veterinary Medical Association recently announced its support of the Healthy Dog Importation Act. The legislation seeks to ensure that dogs entering the United States do not pose a health risk to humans or other animals. Sponsored by three veterinarians in Congress, provisions of the act would give the U.S. Department of Agriculture new tools and authority to monitor and safeguard the health of dogs being imported, ensuring that dogs are in good health and not a risk to spread dangerous diseases that could impact animal and public health. AVMA President Dr. John Howe says, “For far too long, dogs have been entering the United States without proper inspection, increasing the risk of disease introduction and transmission.” Up to 1.2 million dogs are estimated to be imported into the United States each year. The legislation would require every dog entering the U.S. to have a certificate of veterinary inspection, as well as certification that the dog has all the required vaccinations as well as negative test results for illness
SNAP Online Purchasing to Cover 90% of Households
Agriculture Secretary Sonny Perdue this week approved 13 states for online food purchases with Supplemental Nutrition Assistance Program benefits. Once operational, online purchasing will be available in 36 states and the District of Columbia, home to more than 90 percent of SNAP participants. Perdue also announced an expansion of independently owned and operated retail stores beyond those included in the original pilot. Soon more SNAP authorized retailers, under multiple store banners, will be accepting SNAP benefits online. Perdue says online food purchases “will go a long way in helping Americans follow CDC social distancing guidelines.” On April 18, 2019, Perdue announced the launch of the two-year SNAP online purchasing pilot that began in New York before being rolled out to additional states. In less than six weeks, amidst an unprecedented situation, USDA has expanded SNAP online purchasing to 36 states and the District of Columbia. Currently, the SNAP online purchasing pilot is operational in 18 states and the District of Columbia, with additional states going live each week.
March Margin Triggers Dairy Margin Coverage Program Payment
The Department of Agriculture’s Farm Service Agency announced this week that the March triggered the first payment to dairy farmers enrolled in the Dairy Margin Coverage program. The March income over feed cost margin was $9.15 per hundredweight. Current projections indicate that a DMC payment is likely to trigger every month for the remainder of 2020, a different expectation from last July when some market models had forecast no program payments for 18 months. FSA Director Richard Fordyce says the payment “comes at a critical time for many dairy producers,” noting it’s the first payment to dairy producers in seven months. Authorized by the 2018 Farm Bill, DMC is a voluntary risk management program that offers protection to dairy producers when the difference between the all-milk price and the average feed price falls below a certain dollar amount selected by the producer. Although DMC enrollment for 2020 coverage has closed, dairy producers should look for FSA to open sign up for 2021 coverage in July.
Washington Insider: Slow Economic Rebound Keeps Focus on Fiscal Aid
Bloomberg is reporting this week that high U.S. unemployment likely means “that the chance of an immediate economic bounce back from the coronavirus appear slim.” As a result, lawmakers are said to agree they’ll need to provide further fiscal aid, even as partisan rifts remain over how and when to act.
Unemployment is expected to average 15.1% in the second quarter and 15.8% in the third quarter of 2020, before gradually dropping to 8.6% in the last quarter of 2021. It is projected to average 11.5% in 2020 and 9.3% in 2021.
CBO reported this week that U.S. real GDP is projected to contract by 11.2% in the second quarter of 2020 and by 5.6% for the year.
The longer-term unemployment projections are slightly more optimistic than those CBO released in April but they still portend high unemployment rate for more than a year and a half.
The report “makes it clear that we are facing a severe and prolonged economic downturn and Congress must keep pushing forward to fight the pandemic, soften the blow to our economy, and stand with the American people to build a strong recovery,” House Budget Chairman John Yarmuth, D-Ky., said.
Congressional Republicans continue to say they aren’t in a rush to pass another economic package, while House Democrats continue to call on the Senate to take up its $3 trillion measure. A proposal from Speaker Nancy Pelosi, D-Calif., to extend increased unemployment benefits through January 2021 will likely face resistance from Republicans, who are concerned that the extra $600 per week will encourage workers to stay home and slow the reopening of the economy, Bloomberg said.
However, the report also says that Republicans don’t plan to oppose additional legislation indefinitely, but believe they need to assess what already has been done and “discuss the way forward,” Senate Majority Leader Mitch McConnell, R-Ky. told the press this week.
There will need to be some sort of additional federal support “for several months,” Sen. Marco Rubio, R-Fla., said at a conference hosted by the American Enterprise Institute last week. Rubio, chairman of the Small Business Committee and a key proponent of aid to small businesses, said business closures, limited international travel and a lack of consumer confidence likely will be a damper on the economy “for a while.”
There is a risk of long-term economic damage because of the virus, Federal Reserve Board Chairman Jerome Powell told lawmakers at a Senate Banking Committee virtual hearing at midweek. He said he’s concerned about “the risk of lasting damage to the productive capacity of the economy, as a result of longer-term unemployment, and from unnecessary, avoidable insolvencies by small- and medium-sized businesses. Those two things create a real risk.”
Growth is expected to rebound in the third quarter of the coming year, when CBO projects 5% real GDP growth. But economic output is still projected to be lower throughout 2020 and 2021 than it was at the end of 2019.
CBO estimated the leisure and hospitality sector shed 48.3% of its jobs, 8.6 million lost in total, in March and April.
Bloomberg also commented that Congress may need to step in to help the U.S. Citizenship and Immigration Services “to prevent the agency from furloughing workers,” acting Homeland Security Secretary Chad Wolf told the Chamber of Commerce this week. USCIS pays for 97% of its budget with fees, but those monies have fallen off “significantly” during the coronavirus, Wolf said.
“We’re going to need some help from Congress on making sure that USCIS does not have to furlough individuals and can keep them running.” Wolf said. He wants to be able to pay the cash back once receipts come back as the economy reopens, he said.
In the meantime, Progressive House Democrats say they are looking to cut defense spending in the face of the pandemic, arguing they have the votes to defeat the fiscal 2021 defense authorization legislation if House Armed Services Committee leaders don’t reduce Pentagon’s funds from this year’s $738 billion. Nearly 30 Democrats, led by Progressive Caucus Co-Chair Mark Pocan, D-Wis., are demanding the reduced budget in a letter this week.
So, we will see. Clearly, there is still strong support for shoring up coronavirus damaged economic sectors. At the same time, push-back appears to be growing with each new proposal, although the team of Federal Reserve Chairman Jerome Powell and key administration officials appears to be able to continue to provide crucial support to a number of the main stressed sectors to aid coronavirus recovery Washington Insider believes.
Unemployment is expected to average 15.1% in the second quarter and 15.8% in the third quarter of 2020, before gradually dropping to 8.6% in the last quarter of 2021. It is projected to average 11.5% in 2020 and 9.3% in 2021.
CBO reported this week that U.S. real GDP is projected to contract by 11.2% in the second quarter of 2020 and by 5.6% for the year.
The longer-term unemployment projections are slightly more optimistic than those CBO released in April but they still portend high unemployment rate for more than a year and a half.
The report “makes it clear that we are facing a severe and prolonged economic downturn and Congress must keep pushing forward to fight the pandemic, soften the blow to our economy, and stand with the American people to build a strong recovery,” House Budget Chairman John Yarmuth, D-Ky., said.
Congressional Republicans continue to say they aren’t in a rush to pass another economic package, while House Democrats continue to call on the Senate to take up its $3 trillion measure. A proposal from Speaker Nancy Pelosi, D-Calif., to extend increased unemployment benefits through January 2021 will likely face resistance from Republicans, who are concerned that the extra $600 per week will encourage workers to stay home and slow the reopening of the economy, Bloomberg said.
However, the report also says that Republicans don’t plan to oppose additional legislation indefinitely, but believe they need to assess what already has been done and “discuss the way forward,” Senate Majority Leader Mitch McConnell, R-Ky. told the press this week.
There will need to be some sort of additional federal support “for several months,” Sen. Marco Rubio, R-Fla., said at a conference hosted by the American Enterprise Institute last week. Rubio, chairman of the Small Business Committee and a key proponent of aid to small businesses, said business closures, limited international travel and a lack of consumer confidence likely will be a damper on the economy “for a while.”
There is a risk of long-term economic damage because of the virus, Federal Reserve Board Chairman Jerome Powell told lawmakers at a Senate Banking Committee virtual hearing at midweek. He said he’s concerned about “the risk of lasting damage to the productive capacity of the economy, as a result of longer-term unemployment, and from unnecessary, avoidable insolvencies by small- and medium-sized businesses. Those two things create a real risk.”
Growth is expected to rebound in the third quarter of the coming year, when CBO projects 5% real GDP growth. But economic output is still projected to be lower throughout 2020 and 2021 than it was at the end of 2019.
CBO estimated the leisure and hospitality sector shed 48.3% of its jobs, 8.6 million lost in total, in March and April.
Bloomberg also commented that Congress may need to step in to help the U.S. Citizenship and Immigration Services “to prevent the agency from furloughing workers,” acting Homeland Security Secretary Chad Wolf told the Chamber of Commerce this week. USCIS pays for 97% of its budget with fees, but those monies have fallen off “significantly” during the coronavirus, Wolf said.
“We’re going to need some help from Congress on making sure that USCIS does not have to furlough individuals and can keep them running.” Wolf said. He wants to be able to pay the cash back once receipts come back as the economy reopens, he said.
In the meantime, Progressive House Democrats say they are looking to cut defense spending in the face of the pandemic, arguing they have the votes to defeat the fiscal 2021 defense authorization legislation if House Armed Services Committee leaders don’t reduce Pentagon’s funds from this year’s $738 billion. Nearly 30 Democrats, led by Progressive Caucus Co-Chair Mark Pocan, D-Wis., are demanding the reduced budget in a letter this week.
So, we will see. Clearly, there is still strong support for shoring up coronavirus damaged economic sectors. At the same time, push-back appears to be growing with each new proposal, although the team of Federal Reserve Chairman Jerome Powell and key administration officials appears to be able to continue to provide crucial support to a number of the main stressed sectors to aid coronavirus recovery Washington Insider believes.
USDA Sets Details of CFAP Sign-up
USDA unveiled the Coronavirus Food Assistance Program (CFAP) details, providing a list of eligible commodities, those commodities that are not eligible, payment limits and other information on the effort that will provide $16 billion in direct payments to farmers and ranchers suffering at least a 5% price decline over a specified period.
USDA has not provided a lot of specifics on how the payments will work, creating confusion in the ag industry. The fact that two pools of money are being used is causing confusion. Those pots of money include $9.5 billion under the Coronavirus Aid, Relief, and Economic Security (CARES) Act and $6.5 billion in authority under the Commodity Credit Corporation (CCC) Charter Act.
There are two payment rates involved in the calculations for what are labeled non-specialty crops such as corn, soybeans and more.
There is also a list of commodities that were not deemed eligible as they had not suffered a 5% decline in prices over the period from mid-January to mid-April, but USDA will seek comments on crops excluded and may add them into the mix down the road.
USDA has not provided a lot of specifics on how the payments will work, creating confusion in the ag industry. The fact that two pools of money are being used is causing confusion. Those pots of money include $9.5 billion under the Coronavirus Aid, Relief, and Economic Security (CARES) Act and $6.5 billion in authority under the Commodity Credit Corporation (CCC) Charter Act.
There are two payment rates involved in the calculations for what are labeled non-specialty crops such as corn, soybeans and more.
There is also a list of commodities that were not deemed eligible as they had not suffered a 5% decline in prices over the period from mid-January to mid-April, but USDA will seek comments on crops excluded and may add them into the mix down the road.
Trump Suggests Halting Cattle Imports
In announcing farmer aid efforts, President Donald Trump Tuesday also singled out cattle imports as a recent topic of discussions in the administration.
“Today where we take some cattle in from other countries, because we have trade deals, I think you should look at terminating those deals,” he said. “There are some countries that are sending us cattle for many years," he said. "We're very self-sufficient, and we're becoming more and more self-sufficient.”
He also asked USDA Secretary Sonny Perdue as to why the U.S. was bringing in cattle. Perdue responded by emphasizing existing U.S. trade relationships and noting that countries exporting cattle to the U.S. have “been working with us for many years.”
While agreeing with Perdue’s assessment, Trump said, “generally speaking, unless this is a country that really has been with us, we shouldn’t be taking their cattle … and that’s the way we’re going to handle it.”
The National Cattlemen’s Beef Association indicated in a statement they said the situation underscores the complexity of the U.S. trade situation.
“Today where we take some cattle in from other countries, because we have trade deals, I think you should look at terminating those deals,” he said. “There are some countries that are sending us cattle for many years," he said. "We're very self-sufficient, and we're becoming more and more self-sufficient.”
He also asked USDA Secretary Sonny Perdue as to why the U.S. was bringing in cattle. Perdue responded by emphasizing existing U.S. trade relationships and noting that countries exporting cattle to the U.S. have “been working with us for many years.”
While agreeing with Perdue’s assessment, Trump said, “generally speaking, unless this is a country that really has been with us, we shouldn’t be taking their cattle … and that’s the way we’re going to handle it.”
The National Cattlemen’s Beef Association indicated in a statement they said the situation underscores the complexity of the U.S. trade situation.
Thursday Watch List
Markets
Thursday is busy with reports, starting with weekly export sales, U.S. jobless claims and an update of the U.S. Drought Monitor at 7:30 a.m. CDT. Reports on April existing home sales and leading indicators are at 9 a.m., followed by natural gas inventory at 9:30 a.m. CDT. USDA's monthly cold storage report is set for 2 p.m. CDT.
Weather
Moderate to heavy rain with flooding will continue in portions of the southeastern U.S. Thursday. Meanwhile, a rainy period will begin in the Plains with prospects for moderate to heavy amounts and flood threat, mainly in south-central and southeastern Plains areas. Northern Plains areas will also have showers with continued pressure on fieldwork and the likelihood of prevented planting.
Thursday is busy with reports, starting with weekly export sales, U.S. jobless claims and an update of the U.S. Drought Monitor at 7:30 a.m. CDT. Reports on April existing home sales and leading indicators are at 9 a.m., followed by natural gas inventory at 9:30 a.m. CDT. USDA's monthly cold storage report is set for 2 p.m. CDT.
Weather
Moderate to heavy rain with flooding will continue in portions of the southeastern U.S. Thursday. Meanwhile, a rainy period will begin in the Plains with prospects for moderate to heavy amounts and flood threat, mainly in south-central and southeastern Plains areas. Northern Plains areas will also have showers with continued pressure on fieldwork and the likelihood of prevented planting.
Wednesday, May 20, 2020
CFAP Payment Breakdown - USDA Spells Out Payment Details and Formula for Coronavirus Aid
GLENWOOD, Iowa (DTN) -- USDA officials on Tuesday provided more extensive details on the payment plan for producers under the Coronavirus Food and Aid Program (CFAP).
The payment details are complicated, depending on whether livestock or crops are involved and whether producers had sold their commodities within a timespan from Jan. 15 to April 15 of this year.
Farmers and livestock producers will initially receive 80% of their calculated payment under CFAP. USDA right now has $9.5 billion from the Coronavirus Aid, Relief and Economic Security (CARES) Act and $6.5 billion in funds from the Commodity Credit Corp. USDA officials on Tuesday acknowledged the aid available right now will not meet all of producers' expected losses.
"To get the program out quickly, we're using all of those resources that we can," USDA Chief Economist Robert Johansson said on a call with reporters Tuesday. "But it certainly will not rise to the level of the damages we're expecting to see for agriculture and producers as a result of the coronavirus."
USDA is expected in July to have at least another $14 billion to tap from the Commodity Credit Corp., barring any further additional legislation passed by Congress.
Local Farm Service Agency offices can start accepting applications on Tuesday, May 26. Farmers and livestock producers will have to set up phone-call appointments with FSA staff because they are not accepting in-person visits due to coronavirus restrictions. Producers can also communicate with staff through email or go online to fill out applications.
LIVESTOCK
Cattle producers will be the largest recipients of aid at roughly $5 billion. The payments break down several different ways depending on the type of cattle, if they were sold from Jan. 15 to April 15:
-- Fed cattle for slaughter: $214 per head.
-- Slaughter cows and bulls: $92 a head.
-- Feeder cattle under 600 pounds: $102 a head
-- Feeders over 600 pounds: $139 a head
-- All other cattle: $102 a head
For payments, USDA will require producers to document the number of head a producer sold from that Jan. 15-to-April 15 time frame.
Unpriced cattle in inventory from April 16 to May 14 receive a flat rate from the Commodity Credit Corp. of $33 a head. Producers can basically pick a date of their choosing in that time frame and report their inventory to USDA.
Pigs sold from Jan. 15 to April 15 have a payment rate of $28 a head while hogs sold during that time have a payment rate of $18 a head. Unsold hogs and pigs in inventory from April 16 to May 14 have a payment rate of $17 a head. USDA also right now does not have any payment indemnity in the CFAP for euthanized hogs. USDA officials repeatedly noted the only aid for those livestock would be support for disposal from USDA's Natural Resources Conservation Service.
Lambs and yearlings also have a CARES payment of $33 a head and a CCC payment of $7 a head.
Dairy farmers will be paid on a certification of their first-quarter production with $4.71 per cwt coming from the CARES Act. A second payment based on second-quarter production will also be multiplied by 1.014, then a payment will be made for $1.47 per cwt from the Commodity Credit Corp.
Left out of the program were contract poultry growers. USDA officials said farmers would have to show ownership of the commodity to receive a payment.
COMMODITY CROPS
For commodity crop producers, payments are eligible for unpriced crops, or "inventory held subject to price risk" that a farmer held on Jan. 15, 2020.
"If you already sold it ahead, you set a price on it, then that's not being impacted by the reduction of prices," said Bill Northey, USDA's undersecretary for farm production and conservation.
The inventory will be self-certified, Northey said, though there will be some compliance audits conducted, he said.
"We want it to be correct, but we want to avoid large amounts of paperwork at the county office," he said. Northey added, "We just need a final inventory."
A producer will be paid on that commodity in storage, but the inventory cannot be higher than 50% of total 2019 production that the producer reported to the Farm Service Agency. Effectively, a farmer who grew 100,000 bushels or more in 2019 and has 50,000 bushels of 2019 corn in storage, unsold, on Jan. 15 would be paid on the 50,000 bushels
Yet, it is more complicated the way the rule is spelled out.
Half of that 50,000 bushels would be paid 32 cents from the CARES Act, and the other 25,000 bushels would be paid 35 cents from the Commodity Credit Corp. Essentially, USDA officials explained, when it is boiled down, the 50,000 bushels would be multiplied by 33.5 cents. That breaks down to 50,000 x 0.335, or $16,750.
For soybeans, the payment rates are 45 cents a bushel from the CARES Act and 50 cents a bushel from CCC. A farmer with 50,000 bushels unsold in storage from the 2019 harvest on Jan. 15 would be paid on 25,000 bushels at 45 cents a bushel. The other 25,000 bushels would be paid at 50 cents a bushel. That equates to $23,750 (50,000 x 0.475).
For hard red spring wheat, the payments are set at 18 cents a bushel from CARES and 20 cents from CCC. Durum wheat is 19 cents from CARES and 20 cents from CCC. Barley is 34 cents from CARES and 37 cents from CCC. Upland cotton is 9 cents a pound from CARES and 10 cents a pound from CCC.
PAYMENT LIMIT CHANGES
Payment limits have been adjusted under the CFAP as well. Payment limits are raised to $250,000 per individual, raising the limit for a married couple to $500,000.
Another change affects corporations, which typically receive one payment limit. Under CFAP, corporations, limited liability corporations and partnerships with members and shareholders can receive up to three payments if they have members or shareholders who contribute at least 400 hours of active personal labor or management. So those corporate entities could receive a maximum of $750,000 in payments if three members can meet those actively engaged standards, Northey said.
Once USDA determines a producer's payment, the department will make a payment of up to 80% of the total within a week.
"We believe those payments can go out within a week of when we open up here," Northey said.
Another 20% payment will be held back for later in the year, depending on when funds become available.
Payment adjusted gross income is capped at $900,000 for producers, unless they can show at least 75% of their income is derived from farming, ranching or forestry.
Greg Ibach, undersecretary for marketing and regulatory programs at USDA, said specialty crop producers -- fruit and vegetable growers -- would be paid based on multiple factors. Producers would receive a payment for crops sold from Jan. 15 to April 15. A different payment is established for specialty crop producers who harvested and shipped crops, but they spoiled because of lost markets over that time.
Ibach also said USDA is looking for details from farmers on the impacts they received raising nursery products or aquaculture products, if those producers can show a 5% market decline for their products.
USDA Announces Details of Coronavirus Food Assistance Program
The Trump administration Tuesday announced the rollout of the Coronavirus Food Assistance Program, which will provide up to $16 billion in direct payments to farmers and ranchers. Beginning May 26, the Department of Agriculture will be accepting applications from farmers who have suffered losses of five percent or more. The funds come from the $9.5 billion in appropriated funding provided in the CARES dedicated to agriculture and $6.5 billion from the Commodity Credit Corporation. Farmers will receive a combined total from CFAP and the CCC of 95 cents per bushel for soybeans, and 67 cents for corn. The payment rate for cattle is $247 per-head of slaughter cattle, $171 per-head of feeder cattle over 600 lbs, and $45 for hogs under 120lbs. There is a payment limitation of $250,000 per person or entity. Producers will receive 80 percent of their maximum total payment upon approval of the application. The remaining portion of the payment will be paid later. Producers can apply through their local FSA office, and applications will be accepted through August 28, 2020. Additional information and application forms can be found at farmers.gov/cfap.
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