Vilsack Starts Second Tenure at USDA, Climate Work Begins

Agriculture Secretary Tom Vilsack spoke with the media Thursday, following this week's Senate vote to confirm his nomination. Vilsack was sworn in Wednesday evening by Vice President Kamala Harris. He returns to the Department of Agriculture after serving eight years at the same post during the Obama administration. Vilsack spoke as the House Agriculture Committee explored U.S. agriculture's role in climate change solutions. Much of the climate conversation regarding agriculture focuses on establishing a climate bank or market, paying farmers for climate-smart practices. Vilsack says President Joe Biden has a vision of a net-zero emission U.S. agriculture, adding, "I think it has the capacity to fundamentally change U.S. agriculture in a positive way and create new revenue sources." However, he says that work won’t happen in a single administration, but added “the work has to begin.” Vilsack planned to meet with the USDA climate team Friday. Vilsack says USDA’s role will be to provide technical guidance to lawmakers and the administration in crafting climate policies.

USDA Extends CFAP Application Deadline

The Department of Agriculture Thursday extended the deadline to apply for the latest round of the Coronavirus Food Assistance Program. Agriculture Secretary Tom Vilsack told reporters the sign-up period will be extended, allowing producers more time to apply. The deadline will extend 30 days after USDA completes a review of the program. As part of the Biden administration review of federal programs, USDA suspended the processing and payments under the program. The American Farm Bureau Federation requested the deadline extension in a letter to Vilsack earlier in the week. Farm Bureau President Zippy Duvall stated, “Recent severe weather and the suspension of CFAP payments led to challenges and confusion surrounding the application process.” Vilsack says USDA is in the process of reviewing the program. Vilsack says, “We want to make sure that as we implement this next level of support that we do so, within the resources provided, do it in an equitable way, and try to respond to some of the legitimate concerns."

CoBank: Weak Dollar Benefits Commodities

The value of the U.S. dollar weakened substantially since March 2020 and is expected to experience modest deflation in 2021, making U.S. ag products more competitive globally. However, CoBank reports not all commodities are affected equally given the diversity in global export competition and foreign exchange rates. Fundamental factors like tariffs and weather conditions in key agricultural producing regions often dominate market dynamics despite currency impacts. A CoBank researcher says, “some agricultural commodities like grains, oilseeds, and cotton will face a currency headwind.”  A CoBank index tracking commodities reveals that U.S. animal protein exports are expected to benefit from a modest tailwind fueled by a weaker U.S. dollar in 2021. The U.S. trade-weighted grain and oilseed index strengthened by 14 percent in 2020 and is expected to gain another four to five percent in 2021. Dairy products are expected to receive potential support from global factors. Finally, U.S. cotton faces headwinds from weaker foreign currency values in 2021, according to CoBank.

Coalition Urges Lawmakers to Protect Crop Insurance

The Crop Insurance Coalition urges lawmakers to protect crop insurance from budget cuts in the upcoming fiscal year 2022 budget process. The coalition of 58 partners recently sent a letter to key lawmakers detailing the request. Letters were also sent to the White House Office of Management and Budget and Agriculture Secretary Tom Vilsack. The coalition says farmers need access to a strong and secure federal crop insurance program. The letters say the last several years have brought an onslaught of uncertainty for America's farmers and ranchers - from weather extremes to the disruptions of international markets to COVID-19 and its unique challenges. Given the challenges rural America faces and the nature of crop insurance, the coalition says cuts to the program should be avoided. Referring to ad hoc programs supporting farmers over the last three years, the letter states, "it would only serve to undercut these efforts to propose harmful changes to a crop insurance program."

Western U.S. Stress by Drought

The Western half of the United States is reported in various stages of drought in the latest U.S. Drought Monitor, released Thursday. Much of the Southwestern U.S. is in a classified extreme or exceptional drought, with the worst states being Nevada, Utah, Colorado, Arizona and New Mexico. The Drought Monitor reports frequent Pacific storms battered the Northwest and tracked southeastward across the Northern and Central Rockies, dropping plentiful moisture on Washington, Oregon, northern California, Idaho, and western Montana. However, the moisture missed most of the Southwest. In contrast, much of the Eastern half of the country is not experiencing drought conditions, with a few small pockets of abnormally dry conditions. Storms also dropped widespread precipitation on much of the Southeast, mid-Atlantic, and coastal New England, while most of the Midwest saw light frozen precipitation in the last week. Little or no precipitation fell on south Texas and northeastern Texas into southeastern Oklahoma, expanding drought severity in the region.

USDA Invests $42 Million in Distance Learning and Telemedicine

The Department of Agriculture Thursday announced a $42.3 million investment to help rural residents access health care and educational opportunities. USDA says rural areas are seeing higher infection and death rates related to COVID-19 due to several factors, including a much higher percentage of underlying conditions, difficulty accessing medical care, and lack of health insurance. A recent report by the Rural Policy Research Institute’s Center for Rural Health Policy Analysis found infection and death rates in rural America due to COVID-19 are 13.4 percent higher than in urban areas. USDA Economic Research Service data also confirms the data. The $42.3 million includes $24 million provided through the CARES Act and will reach five million rural residents. Agriculture Secretary Tom Vilsack says, “With health care and education increasingly moving to online platforms, the time is now to make historic investments in rural America to improve quality of life for decades to come.”

Washington Insider: Powell Suggests Congress Explore Child Care Options

The New York Times reported this week that Fed Chair Jerome Powell is sufficiently concerned about the decline in female participation in the labor force that he suggested on Wednesday that improved child care support might help pull more women into the labor market.

The Fed chief studiously avoided commenting on most specific government policy proposals during three hours of wide-ranging testimony before the House Financial Services Committee. But he did acknowledge that enabling better options for affordable child-care is an “area worth looking at” for Congress.

“Our peers, our competitors, advanced economy democracies, have a more built-up function for child care and they wind up having substantially higher labor force participation for women,” Powell said. “We used to lead the world in female labor force participation, a quarter-century ago, and we no longer do. It may just be that those policies have put us behind.”

Powell limited his supportive comments but stressed the near-term need to help workers who have been displaced from their jobs during the pandemic. He made it clear that the labor market remains “far from healed, that the pandemic's economic fallout has disproportionately hurt women and minorities and that both Congress and the central bank have a role to play in supporting vulnerable families until the economy has recovered more fully.”

Women's labor force participation had climbed for decades in the U.S. before stalling out — and then actually dropping slightly — starting in the 1990s. Powell commented that adult U.S. women hold jobs or look for them at lower rates than women in some other major advanced economies, such as Canada or Germany.

Powell noted that the Federal Reserve Bank of San Francisco had examined the question of why the share of Canadians who work or look for jobs had climbed even as the U.S. rate had fallen. The report concluded that most of the gap came from declining participation by women. “And they pointed to caregiving policy differences as a likely culprit,” he said.

“Parental leave policies in Canada provide strong incentives to remain attached to the labor force following the arrival of a new child,” the paper, written by the San Francisco Fed president, Mary Daly, and co-authors, pointed out. The fact that child care responsibilities fall heavily on women in the United States has come under a brighter spotlight during the pandemic which has shuttered schools and disproportionately left women bearing added child care responsibilities.

While women lost jobs less dramatically than men during the 2009 recession, their employment rate is down by about as much as men's is now — so, in measures of the share of people who are either working or looking, women have lost more ground. Female participation dropped 2.1 percentage points to 55.7% in January compared with February 2020, whereas men's participation has dropped 1.7 points to 67.5%.

Throughout his tenure as Fed chair, Powell has been keenly focused on the job market and has repeatedly argued that both monetary and fiscal policymakers should support displaced workers so that they can make their way back into jobs when the economy reopens.

While the Fed can help the economy and the job market improve broadly, helping individual groups in a targeted way is generally left to elected officials. Still, the Fed says it intends to help foster conditions for strong economic growth overall which pulls people into the labor market and helps set the stage for higher wages.

Officials are trying to do that by keeping interest rates low and buying large quantities of government-backed bonds, policies that can fuel both lending and spending.

Powell has been pledging for months that the Fed would use its policies to help the economy get through the pandemic but political concerns that big government spending could fuel economic overheating are now increasing. Still, Fed officials argue that weak price gains, not runaway ones, are the modern problem.

Powell reiterated that message Wednesday and commented that the Fed is still “trying to bolster prices. We believe we can do it, we believe we will do it. It may take more than three years,” he said.

The Fed tweaked its approach to monetary policy in 2020, saying that it would aim for periods of slightly higher inflation and that it would no longer seek to cool off the economy just because the unemployment rate was falling — an approach Fed governor Lael Brainard explained to a Harvard economics course Wednesday morning.

The Fed was relatively patient in lifting interest rates after the 2007 to 2009 recession — leaving them near zero until 2015 and then raising them slowly, as unemployment dropped to 50-year lows. Workers who had been counted out began to re-enter the labor market and employers started to go to greater lengths to recruit and train talent.

“At very low levels of unemployment” the United States “saw benefits going to those at the lower end of the spectrum—which means disproportionately African Americans, other minorities, and women,” Powell said. “With our tools, what we can do, is try to get us back to that place.”

So, we will see. Clearly, Powell and other Fed officials are convinced of the strength of their policy positions and are determined to continue to work to strengthen investment. This is a tense moment for advocates of highly interventionist policies in both monetary and fiscal arenas, fights that producers should watch closely as they intensify, Washington Insider believes.

Tai Pledges Work On USMCA Enforcement, Addressing China As USTR

The Senate Finance Committee heard from Katherine Tai, President Joe Biden's choice to be U.S. Trade Representative (USTR), and she offered some insight into focus should she be confirmed to that role.

Tai pledged her first focus will be on helping the U.S. recover from the pandemic and the “economic crisis.” USTR's role in that is to “build out strong supply chains that will get our economy back on track.”

The longer-term focus will be on making sure that trade benefits all U.S. citizens, not just consumers. “I will make it a priority to implement and enforce the renewed terms of our trade relationship with Canada and Mexico. Too often in the past, Congress and the administration came together to finalize and pass a trade agreement. But then other urgent matters arose and we all moved on.”

She noted the U.S.-Mexico-Canada Agreement (USMCA) is an opportunity to “break that trend” as it is an “important step in reforming our approach to trade.” She did not specify issues with the WTO but said that she would “prioritize rebuilding our international alliances and partnerships.” Tai also focused on China, labeling them “simultaneously a rival, a trade partner, and an outsized player whose cooperation we'll also need to address certain global challenges.”

Having previously been the chief enforcer at USTR on China's unfair trade practices, Tai said there must be a “strategic and coherent plan for holding China accountable to its promises and effectively competing with its model of state-directed economics” and backed Biden's call to build a “a united front of U.S. allies” when dealing with China. “We must remember how to walk, chew gum and play chess at the same time.”

USDA Extends Deadline For CFAP Applications

The application deadline for the Coronavirus Food Assistance Program--Additional Assistance (CFAP-AA) will be extended beyond the current deadline of February 26. USDA took the action after a request by the American Farm Bureau Federation that the deadline be extended due to the regulatory review that suspended CFAP-AA payments.

USDA spokesman Matt Herrick said in an email to some news outlets that the CFAP-AA review is “ongoing, and we anticipate a decision in the weeks ahead.” Herrick confirmed the deadline and noted the agency continues to accept applications “so that, once a determination is made on the direction, we are ready to act.” He said there would be at least another 30 days for producers to signup after any decision is announced, a decision that matches the request by AFBF.

“What we're doing now is listening and gathering feedback so that we get help to as many producers as possible without focusing on one group or geography at the expense of another,” Herrick said.

There is no timeline yet for any resumption of the CFAP-AA process even though USDA had indicated when it suspended the effort in late January that the agency would be addressing the issue “in coming days.” Now a timeframe of in the “weeks” ahead is being mentioned by USDA. 

Friday Watch List

Markets

Friday at 7:30 a.m. CST, the U.S. Commerce department will release reports on U.S. personal incomes and consumer spending in January, followed by the University of Michigan's consumer sentiment index at 9 a.m. USDA's annual report of cold storage is set for 2 p.m. CST. Traders will remain attentive to the latest weather forecasts and to any news of export sales that might emerge.

Weather

Moderate to locally heavy rain is in store for the Delta and Mid-South Friday. We'll also see widespread snow in the Northwest U.S. crop areas. Dry conditions will be in place elsewhere. Winter wheat areas of the Plains have no meaningful moisture in the forecast.

AFBF: Farmers Need More Time to Apply for CFAP

The American Farm Bureau Federation is asking the Department of Agriculture to extend the deadline to apply for the Coronavirus Food Assistance Program. In January, an additional $13 billion in assistance was made available to help farmers and ranchers suffering losses due to the COVID-19 pandemic. The current deadline is this Friday, February 26, but recent severe weather and the suspension of CFAP payments led to challenges and confusion surrounding the application process. In a letter sent today to Agriculture Secretary Tom Vilsack, AFBF President Zippy Duvall said the recent regulatory freeze on pending executive actions, though common, "has created confusion for farmers and ranchers with respect to eligibility and the application process." The letter also notes severe weather, which impacted travel conditions and created broadband disruptions, may have also impacted farmers' ability to complete the application process. AFBF asks USDA to extend the deadline to apply for assistance by at least 30 days after the regulatory review is completed.

Pilgrims Pride Pleads Guilty to Price Fixing

Pilgrim's Pride Corporation this week pleaded guilty to price-fixing allegations. The Department of Justice announced the plea, and a sentence to pay approximately $107 million in criminal fines. According to the plea agreement entered in the U.S. District Court in Denver, from as early as 2012 and continuing at least into 2017, Pilgrim's participated in a conspiracy to suppress and eliminate competition for sales of broiler chicken products in the U.S. that affected at least $361 million in Pilgrim's sales of broiler chicken products. Pilgrim's is the first company to plead guilty for its role in a conspiracy to fix prices and rig bids for broiler chicken products. Broiler chickens are chickens raised for human consumption and sold to grocers and restaurants. Ten executives and employees at major broiler chicken producers have also previously been charged. The case results from an ongoing federal antitrust investigation into price-fixing, bid-rigging, and other anticompetitive conduct in the broiler chicken industry.

Lawmakers Introduce emergency Feed Bill

Legislation introduced this week in the Senate would provide farmers and ranchers with additional flexibility to alleviate feed shortages in years with widespread excessive moisture, flooding or drought. The Feed Emergency Enhancement During Disasters with Cover Crops Act would create an emergency waiver authority for the Secretary of Agriculture to allow for haying, grazing or chopping of a cover crop on prevented plant acres before November 1, in the event of a feed shortage due to extreme weather. Senators Tammy Baldwin, a Wisconsin Democrat, and John Hoeven, A North Dakota Republican, introduced the legislation. The bill states that under the waiver, producers would not see a reduction of their crop insurance indemnity. The legislation also directs the Agriculture Secretary to establish regional haying and grazing dates for each crop year. The current date, November 1, is set on a nationwide basis and disadvantages producers in the upper Midwest. Representatives Dusty Johnson, a South Dakota Republican, and Angie Craig, a Minnesota Democrat, introduced companion legislation in the House.

Legislative Fix Introduced to Make More Farmers Eligible for PPP

New bipartisan legislation would make more farmers and ranchers eligible for the Paycheck Protection Program. Representative Ron Kind, a Wisconsin Democrat, and Jeff Fortenberry, a Nebraska Republican, recently introduced the Paycheck Protection Clarification for Producers Act. The legislation would allow farmers and ranchers organized as partnerships or limited liability companies access to the program. The lawmakers say these farmers have been unable to apply for loans under the new calculation because of the Small business Administration's interpretation of eligibility for partnerships or limited liability companies. Representative Fortenberry says Nebraska leads the U.S. in per capita PPP loans approved. However, adds, "Due to quirks in the law, some farmers hard hit by COVID-19 were left out.” Representative Kind states, “No farmer should be shut out of this crucial program and denied a financial lifeline because of an interpretation error.” Kind previously led legislation that allowed farmers more access to the PPP, which was included in the latest COVID-19 relief package.

Missouri Lawmakers Seek to block Multi-state Transmission Line

Missouri lawmakers are again seeking to block a multi-state high voltage transmission line for wind energy. The St. Louis Post Dispatch reports a new measure in the Missouri legislature would require Invenergy, the Grain Belt Express future transmission line owner, to receive approval from individual counties. The move is one of many to block the project, as lawmakers seek to stop a private company from using eminent domain to take land for the project. The Grain Belt Express would take wind energy from Kansas through Missouri, Illinois and Indiana. The Missouri Supreme Court earlier ruled the project be granted public utility status because the $2.3 billion project is in the public’s interest. The transmission line in Missouri is expected to cross the property of 570 landowners, stretching more than 200 miles across the northern sector of the state. Invenergy says the project will play a major role in economic recovery in the Midwest by supporting jobs, adding broadband infrastructure, community investment and energy savings.

Mentorship to help Underserved Farmers with Conservation

A new mentorship program is linking historically underserved farmers and ranchers with award-winning conservationists. Sand County Foundation’s Vice President of Agricultural Research, Dr. Heidi Peterson, says, “Now historically underserved farmers and ranchers have access to a reliable network of conservation mentors.” Since 2003, the Sand County Foundation’s Leopold Conservation Award has recognized nearly 150 farmers, ranchers and forestland owners nationwide for their efforts to improve soil health, water quality and wildlife habitat. The Department of Agriculture’s Natural Resources Conservation Service awarded Sand County Foundation a Conservation Collaboration Grant to support this opportunity to empower award recipients as mentors. Now, the Sand County Foundation is seeking applicants for the program. Sand County Foundation's network of Leopold Conservation Award-winning farmers will serve as program mentors. Participants will have access to the network and receive technical and mentorship support on navigating USDA conservation programs and practices. Learn more and sign up for this free mentorship opportunity at www.sandcountyfoundation.org.

Washington Insider: Farm Size Battleground Revisited

One of the perpetual battles in Washington concerns the extent to which government programs focus on larger farms. The issue crosses party lines and Congress has written many complex limits on benefits for farms of various sizes for many years.

This week, it seems that battle is rejoined. A new report by an ag advocacy organization says that the Trump administration aimed its “bailouts” increasingly to the nation's biggest farms. The report was written by the Environmental Working Group (EWG), an environmental advocacy group that highlights issues of equity, which it is watching closely as the Biden administration designs potential new climate-related and other financial incentives for farmers.

The report said that only 1% of farm aid recipients collected 23% of subsidy payments in 2019, up from 17% in 2016 as former President Donald Trump's trade bailout swelled payments. Their portion crept up to 24% in the first half of 2020, the most recent period covered in the data, as farm aid hit a record level with coronavirus relief payments, the EWG said.

That is the largest share of federal farm subsidies going to the top 1% – the 7,873 subsidy recipients who got the highest payments – since 2007, according to the analysis. The average payment for that group was $497,907.

The findings followed earlier criticism from Democrats concerning inequities of Trump administration farm bailouts. In addition, Bloomberg said that a number of academic studies concluded that trade aid payments were greater than farmers' actual losses from the tariff conflict with China. A Government Accountability Office report issued in September found the top 25 recipients of trade aid in 2019 received an average of $1.5 million per farm.

“This certainly adds to the questions about the way that program was designed,” said Jonathan Coppess, a University of Illinois professor who ran the federal agency that administers farm subsidies during the Obama administration, but wasn't involved in the advocacy group's analysis. “Why all of a sudden did you see this big a shift?”

American farmers in 2020 had their most profitable year since 2013, largely because of federal aid which accounted for 38% of their net income, USDA reported earlier this month. Crop prices also rose late in the year as China stepped up agricultural imports.

“The largest and wealthiest farms should not be getting most of the money, because they have large assets to fall back on in times of trouble,” said Anne Schechinger, a senior analyst with the group. “We're at a time when so many Americans have lost their jobs, are struggling to put food on the table or keep their businesses open, it makes you wonder why so much money is going to farmers, especially the largest, wealthiest farmers.”

She said the shift in subsidy payments toward larger farms in 2019 likely was driven by Trump's adoption of a more generous formula for computing trade losses that year and a decision to double the maximum trade aid benefit per person. Large operators sometimes increase their subsidy payments by including relatives, even those who live in distant cities, as actively engaged in management of the farm, multiplying the benefits they are allowed, EWG said.

Trump administration officials defended the program against criticism, arguing that they tend to be more productive and so suffer larger losses from trade-related commodity price drops.

Schechinger said the Environmental Working Group, which advocates re-directing farm subsidies to smaller operators and conservation programs, released the findings in part to focus attention on inequities in aid distribution as the Biden administration considers financial incentives to encourage farmers to adopt climate-friendly practices.

Administration officials have floated ideas including a carbon bank to finance payments to farmers who take steps to sequester additional carbon in soil and other measures to reduce greenhouse gas emissions. Schechinger said her organization wants the USDA to avoid advantaging larger operations over smaller ones when it makes proposals.

The Environmental Working Group regularly obtains data on federal farm subsidy payments from USDA through the Freedom of Information Act. Its analysis covered total farm subsidy payments, which includes both one-time programs under President Trump and continuing farm programs authorized by Congress.

The issue of how farm benefits are allocated among farms of varying sizes is thorny and has long persisted. Many farm operations are highly capitalized now into larger units that are very efficient--and account for the vast bulk of U.S. food and fiber production, even although their numbers are relatively small. As a result, programs intended to affect production or other key aspects of the sector often prominently include larger units – a highly controversial outcome especially for those who focus closely on social aspects of the sector.

So, we will see. Recent government supports have been important to the sector and almost certainly will continue to be highly controversial, especially as they are deeply involved in issues of trade policy, along with conservation, supplemental nutrition and income support, Washington Insider believes.

Vilsack Wins Senate Approval To Again Head USDA

Tom Vilsack was sworn in Wednesday evening to lead USDA under the Biden administration, a post he held for eight years in the Obama administration.

The Senate approved the nomination 92-7 on Tuesday, with six Republicans voting against his nomination and Sen. Bernie Sanders, I-Vermont. Sanders caucuses with the Democrats and is the first lawmaker from that side of the aisle to vote against a Biden administration nominee.

In explaining his vote, Sanders said he didn't have a major issue with Vilsack but thought that Biden “could have done better” with his choice of someone to lead USDA.

Republican Sens. Rick Scott of Florida, Rand Paul of Kentucky, Josh Hawley of Missouri, Marco Rubio of Florida, Ted Cruz of Texas, and Dan Sullivan of Alaska, opposed returning Vilsack to head USDA.

Now the attention will quickly shift to lower-level appointments at USDA that require Senate confirmation.

Former USTR Official Touts Changes By China That Were Part Of Phase One Agreement

Former top U.S. ag trade negotiator at the Office of the U.S. Trade Representative (USTR) Gregg Doud, Tuesday told a Farm Foundation forum that market access in the agreement was critical. He stressed implementation of nearly all the 57 market access commitments, placing emphasis on the approval of more U.S. facilities to export to China.

“Before we started [Phase 1] negotiations, we had about 1,500 facilities in the U.S. eligible to export agricultural products to China,” Doud said. “So that would have been beef processing facilities, dairy facilities, pet food facilities… 1,500 of those. Today, we now have well over 4,000 facilities in the U.S. eligible to export their products to China.” That gives the U.S. access to the Chinese market “we never had before, and this is a major change,” Doud said. “The improvements in market access that we now have in place are going to treat us well here going forward.”

As for the purchase commitments, Doud simply said it comes down to U.S. competitiveness, a point focused on by Chinese negotiators.

He also noted the two sides spent a considerable amount of time talking about ethanol, with trade in the corn-based fuel something Doud said he believed China was truly interested in. “My sense is that China really is trying to think through this whole notion of infrastructure for the use of ethanol,” Doud said. “You know, it took us a long time to build that infrastructure in the United States.”

As for overall market conditions moving ahead, Doud predicted continued volatility, notable with China involved in the market. He said there is no way to say with certainty that in two or three years whether China would be importing 30 million metric tons of corn or just 5 million ton. The shift by China away from feeding swill to hogs is a key that Doud has focused on in his comments on China before, and said that is “maybe one of the biggest things that ever happened in the history of world agriculture.”

Thursday Watch List

Markets

USDA's weekly export sales, U.S. jobless claims, U.S. fourth-quarter GDP, January durable goods orders and an update of the U.S. Drought Monitor are all set for release at 7:30 a.m. CST. An index of U.S. pending home sales is due out at 9 a.m., followed by U.S. natural gas inventory at 9:30 a.m. Traders will keep examining the latest weather forecasts and watch for any new export sales that may emerge.

Weather

Dry conditions will remain in effect across most primary crop areas Thursday. Precipitation will be confined to snow in portions of the far western Plains and Northwest and rain along the Texas coast. Temperatures will be seasonal north and central and seasonal to below normal south.

Senate Confirms Vilsack as Ag Secretary

The Senate Tuesday overwhelming approved the nomination of Tom Vilsack as Agriculture Secretary. The Senate voted 92 to seven to approve the nomination via a roll call vote, sending Vilsack back to the Department of Agriculture's top position. Vilsack returns to the agency after serving as Agriculture Secretary during the Obama administration. The Senate allowed for 20 minutes of debate, but opted for short statements from Senate Agriculture Committee leadership before calling for the vote. Senate Agriculture Chair Debbie Stabenow, a Michigan Democrat, says, “After an overwhelmingly bipartisan vote, Secretary Vilsack can now get to work.” Noting Vilsack is “uniquely qualified” to head up the USDA, having served there previously, National Association of Wheat Growers CEO Chandley Goule stated Vilsack "has an exceptional understanding of agricultural and rural issues." American Farm Bureau Federation President Zippy Duvall says, "His strong track record of leadership and previous experience at USDA will serve rural America well.”

Organic Trade Association Hosts Virtual DC Fly-in

Organic agriculture representatives met with lawmakers Tuesday through a virtual fly-in. The Organic Trade Association hosted the event, continuing Wednesday, to brief the new administration on the challenges the organic sector faces. The issues from more than 20 organic producers from a dozen states are expansive and including ensuring continuous improvement and accountability in organic standards. Industry advocates also expressed the need for increasing funding for organic research, providing organic farmers, businesses and workers with adequate support and protection to help deal with COVID-19 and restoring full funding to help organic farmers cover their certification fees. The industry also seeks investment in federal programs to support farmers in successfully transitioning to, and staying in, organic production. Organic Trade Association Vice President of Government Affairs Megan DeBates says, “There are plenty of spaces now where our ‘asks’ can come, in the next farm bill, climate change policy, COVID recovery, so this is a great time to be presenting the organic case.” 

Farm Groups Embrace New EPA Position on SREs

Farm and biofuel groups welcome the recent Environmental Protection Agency announcement supporting the Tenth Circuit Court’s January 2020 decision regarding small refinery waivers. EPA states that it “agrees with the court that the exemption was intended to operate as a temporary measure and, consistent with that Congressional purpose, the plain meaning of the word ‘extension’ refers to continuing the status of an exemption that is already in existence.” The four petitioners in the case—the Renewable Fuels Association, National Corn Growers Association, American Coalition for Ethanol and National Farmers Union, welcomed the announcement in a statement. The groups say, “This announcement marks a major step forward by the Biden administration to restore the integrity of the Renewable Fuel Standard.” Last month, the U.S. Supreme Court granted a request from two refiners to review the Tenth Circuit case, even though EPA did not ask the high court to examine the ruling. Arguments before the Supreme Court are expected in the spring.

Ag Energy Coalition Releases 2021 Policy Recommendations

The Agriculture Energy Coalition recently announced its 2021 policy recommendations. Those priorities include providing the Department of Agriculture Rural Energy for American program at least $2.5 billion over ten years, including a financial infusion upfront and Increase to 90 percent REAP Loan Guarantee for any loan amount under $1 million. They also seek to extend clean energy tax credits, provide USDA with additional rural development funding and authorize and modernize the Biorefinery Assistance, Renewable Chemical and Biobased Product Manufacturing Program. The recommendations also include modernizing the Advanced Biofuel Payment Program, increase funding for the BioPreferred program, and make sustainable aviation fuels a priority for USDA. The coalition says USDA Should prioritize the role of biomass in forest management and wildfire risk reduction. Finally, the group asks USDA to consider using the Commodity Credit Corporation to support low carbon renewable energy innovation. The Agriculture Energy Coalition represents a diverse set of interests in agriculture and renewable energy, such as farmers, advanced biofuel and bio-based manufacturers, clean-tech, rural lenders, and environmental NGOs.

PLC to Hold Legislative Conference Virtually Next Month

The Public Lands Council Tuesday announced their 2021 Legislative Conference is being held virtually March 23-25, 2021. PLC volunteer leaders, staff, and affiliates will host legislative strategy sessions and workshops on how to successfully advocate the livestock industry in our nation's capital. Attendees will hear from Members of Congress, policy experts, scientists, and other industry professionals who are dedicated to Western lands, waters, and perspectives. This also gives public lands ranchers the opportunity to catch up, after a busy start to the year. PLC President Niels Hansen says, “Even though we are meeting virtually this year, all of these things are still a focus of our Legislative Conference.” Panel discussions will focus on how grazing facilitates opportunities for other multiple uses, how permittees help protect open spaces from conversion, reduce the risk of catastrophic wildfire, and promote biodiversity. Registration for the event is free and is available on the Public Lands Council website, publiclandscouncil.org.

Still Time to Be Counted in the 2020 Local Food Marketing Practices Survey

Farmers and ranchers still have time to respond to their 2020 Local Food Marketing Practices Survey.  The Department of Agriculture's National Agricultural Statistics Service will continue to accept responses through April to ensure an accurate picture of U.S. local and regional food systems.  The 2020 Local Food Marketing Practices Survey is part of the Census of Agriculture program and required by federal law. These federal laws require producers to respond and USDA to keep identities and answers confidential. Over the next several weeks, NASS will follow-up with additional mailings and phone calls to farmers and ranchers who have not yet responded. Producers are encouraged to complete their questionnaire online at www.agcounts.usda.gov, by mail, or phone as soon as possible. All information collected will be used for statistical purposes only and published on the NASS website in aggregate form this November. To learn more about NASS and the Local Foods Marketing Practices Survey, visit www.nass.usda.gov.

Washington Insider: Krugman, Summers on Economic Policy

Bloomberg reported recently on a key economic policy issue by two of the “best-known and sharpest-elbowed center-left economists.” The report features something of a disagreement between the two on an economic topic that is being widely discussed in Washington.

The discussion focused on President Biden's $1.9 trillion coronavirus rescue plan, which was hosted by Princeton University economist Markus Brunnermeier and pitted Lawrence Summers, the former Treasury secretary, National Economic Council director, and Harvard president, against Paul Krugman, the Nobel laureate formerly of Princeton and now at City University of New York.

Summers defended his recent Washington Post op-ed that argued that, as the headline said, “The Biden stimulus is admirably ambitious. But it brings some big risks, too.” Krugman responded by talking the line of his own recent column in the New York Times, headlined, “Biden Is the Big Spender America Wants.”

Summers made four points, Bloomberg said: 1) The $1.9 trillion package is “extremely large” and the amount of spending is far bigger than the estimated “output gap,” that is, the amount by which the economy's output is falling short of potential; 2) it goes “way beyond what is necessary” to help victims of the COVID-19 crisis; 3) “We risk an inflationary collision of some kind” — and if the package does kick up inflation, the Federal Reserve could inadvertently cause a recession by trying to squelch the inflation with higher interest rates; 4) that sum of money, or even more, would be better spent on long-term public investment, what Biden calls “building back better.”

Krugman did not wholly disagree, but responded that Biden's plan should be regarded as a rescue, not a stimulus. “Think of it as disaster relief or like fighting a war. When Pearl Harbor gets attacked, you don't say, 'How big is the output gap?'”

Breaking the Biden plan into three parts, Krugman said the first part, which consists of “public goods” spending such as federal assistance in getting people vaccinated and making schools safe from COVID-19, is well-justified. The second part, support for job losers and state and local governments, is also defensible, he thinks.

He concedes that the third part, which includes $1,400 checks for many people who haven't been harmed by COVID, is not as essential but is the most popular aspect and will help get the whole package through Congress.

Krugman also argued that the package wouldn't overstimulate the economy or cause inflation, because a lot of the $1,400 given out in checks will be saved, rather than spent. And if the coronavirus crisis should ease, much of the aid to state and local governments will also be saved in rainy day funds. As for Summers's idea of focusing on infrastructure, Krugman said the government could do both: coronavirus relief now, and infrastructure — which takes time — starting in 2022 and continuing beyond.

Summers said he doesn't trust the Fed to fine-tune interest rates to offset excessive fiscal stimulus without tipping the economy into a recession. He mentioned that some speculators in GameStop Corp bragged about using “stimmies” — stimulus checks — to buy shares. He said there could be close to $1 trillion of “air” — non-essential spending — in the Biden plan. He also disagreed with Krugman's contention that most of the relief money would be spent slowly. He said that once the pandemic ends, there could be a burst of consumption.

Krugman, responding to the GameStop comment, said “bubbles happen” and it's rarely wise to calibrate monetary policy to prevent them. He thinks that Biden will win political support from successful passage of the $1.9 trillion package, which would make it easier for his administration to pass other big projects later because voters will decide that “these people seem to know what they're doing.”

Also, he sees little risk that people would begin to expect much higher inflation — which, in theory, could become a self-fulfilling prophecy. It took “years and years of bad policy judgment” for that to happen in the 1960s, he said.

Summers continues to worry that younger economists falsely assume that inflation will never again be a problem, and “that's probably a mistake.” Because of the risk of inflation or other problems, he said, “It's a good idea to take small, careful steps unless there's a compelling reason to do something else.”

Toward the end of the discussion, the two came to partial agreement although Krugman thinks Summers's views about inflation are wrong, and that he is excessively worried. “But I'm not sure about that.” What they think doesn't matter anyhow, he said, because the package is likely to pass intact — or nearly intact. “Then we'll find out.”

So, we will see. The debate and the topics it focused on remains crucially important and likely will intensify ahead of key Congressional votes in coming days — votes producers should watch closely as the fight for the next stimulus recovery package intensifies, Washington Insider believes.

Minnesota Lawmaker Urges Investigation On Price Gouging

Sen. Tina Smith, D-Minn., is calling for federal investigations into possible price gouging of natural gas in the Midwest, which also suffered extreme cold and outages last week.

Smith said natural gas spot prices spiked as high as 100 times normal levels, forcing high costs upon utilities and other natural gas users, many of which were passed on to customers.

In a letter sent Saturday to federal regulators, Smith said the price spikes harm consumers and also “threaten the financial stability of some utilities that do not have sufficient cash reserves to cover their short-term costs in this extraordinary event.”

The letter was obtained by the Associated Press and was sent to the Federal Energy Regulatory Commission (FERC) and other agencies.

US Maintains Block On Resumption Of WTO Appellate Body

The U.S. this week held with its blocking of a plan to restart the WTO Appellate Body via a proposal from Mexico that has the backing of 140 countries.

In the Geneva meeting, the U.S. said the objections raised by the Trump administration that had prevented the naming of new Appellate Body members were valid, but the Biden administration is open to a dialogue to address those issues.

This runs counter to expectations that the Biden administration would seek to set aside the objections raised by the Trump administration on the dispute settlement process, some of which were heightened after the Biden administration ended the U.S. blockade on naming a new leader of the trade body.

Wednesday Watch List

Markets

Ongoing concerns of too much rain in central Brazil and not enough in Argentina keep traders checking the latest weather forecasts Wednesday. At 9 a.m. CST, U.S. new home sales for January will be released, followed by the Energy Department's weekly report of energy inventories at 9:30 a.m. Fed Chairman Jerome Powell speaks to the U.S. House of Representatives Wednesday morning and may offer more clues about where monetary policy is headed.

Weather

Wednesday will be dry across most primary crop areas. A few snow showers will cross the northern tier. Temperatures will be seasonal to above normal, allowing for more snow melt and recovery from the harsh mid-February cold wave.

Biden EPA Supports 10th Circuit Court’s Decision on SREs

The Biden Administration handed a major victory to the corn ethanol industry. The EPA says it agrees with last year’s ruling by the Tenth U.S. Circuit Court of Appeals that rejected the Trump EPA’s retroactive waivers to oil refiners from the Renewable Fuel Standard. The Biden EPA says the Tenth Circuit ruling “better reflects” the law and Congress’s intent in establishing the RFS. Ethanol groups that filed suit against the Trump EPA hailed the EPA’s reversal under the new administration, which did not file a brief with the Supreme Court by Monday’s deadline, backing the earlier EPA’s position. Small refiners appealed the Tenth Circuit ruling, and the Supreme Court agreed to hear the case, though it’s unclear what impact the latest development might have on the case going forward. Renewable Fuels Association’s CEO Geoff Cooper issued a statement, calling the announcement “a giant step forward” to restore the integrity to the RFS. The RFA and Growth Energy both agreed with EPA’s finding that the small refinery exemption is a temporary measure intended for true economic harm from compliance. The lower court had agreed that only previously existing exemptions could be extended. The RFA estimates that more than four billion gallons of ethanol demand were lost to dozens of Trump EPA RFS waivers.

Trade Policy will be a Big Topic on Thursday

Politico says trade policy will move front-and-center this week as the Senate Finance Committee considers Biden’s nominations for the U.S. Trade Representative and the number two Treasury official. Wally Adeyemo (Ah-dah-YAY-moh) is the nominee for Deputy Treasury Secretary, and Katherine Tai is the USTR nominee. How the Biden Administration will handle China in the wake of a trade war will be a key issue for both nominees. As the nation’s top trade negotiator, Tai would be responsible for reviewing the tariffs that Donald Trump put into effect on China and other nations. She would also be responsible for the Phase One Trade Deal that China has yet to live up to. Adeyemo will help lead the administration’s review of sanctions on Chinese leaders and firms that Trump put in place because of Beijing’s human rights abuses. Both nominees will likely take a tough rhetorical stance on China’s trade practices and abuses without making concrete promises that would limit future policy options. That will fall in with Biden’s promise to review Trump’s tariffs on China and other nations before taking further action.

USDA Forecasting Higher Production in 2021

The USDA sees more corn and soybean production ahead this year. A DTN report says the USDA’s initial Grains and Oilseeds Outlook released last week includes a rise in both planted acres and the yield forecast. The agency says corn production will be 15.2 billion bushels for the 2021-2022 crop, while soybean production is forecast at 4.5 billion bushels. Higher demand is in the forecast for both crops, which will keep the year’s ending stocks lower, especially in soybeans. USDA released the Grains and Oilseeds Outlook at its Agricultural Outlook Forum. USDA says farmers will plant 92 million acres of corn. The yield projection is 179.5 bushels per acre, which will make the yield total of 15.2 billion bushels. The average corn price will drop by ten cents to $4.20 a bushel. USDA says farmers will plant 90 million acres of soybeans, up 6.9 million from last year. The soybean projection of 4.5 billion bushels is nine percent higher than the previous marketing year. Ending stocks are projecting to be 145 million bushels. The season-average farm price will be $11.25 a bushel. The wheat production forecast for 2021-2022 is 1.827 billion bushels, almost unchanged from the previous year. Total acreage will be 45 million acres, with a national average yield of 49.1 bushels per acre and a higher farm-gate price of $5.50 per bushel. 

Ag Climate Alliance Expands and Makes Policy Recommendations

The Food and Agriculture Climate Alliance announced its membership is expanding as it puts together new policy working groups. Last year, the Alliance made more than 40 recommendations on how agriculture can help mitigate climate change and the new groups will focus on developing a set of more-specific policy proposals. The eight founding member organizations of the Alliance recently welcomed 14 new groups to the Steering Committee. They include the American Seed Trade Association, American Sugar Alliance, Association of Equipment Manufacturers, and many more. Congress and the Biden Administration have expressed high levels of interest in the previously released FACA recommendations and requested additional guidance on achieving the goals laid out in the report released last November. The groups are working on producing more detailed recommendations on the carbon bank concept, tax credits, and other incentives, as well as climate research. “We are encouraged that leaders in both the House and Senate are requesting more detailed guidance to achieve FACA’s climate goals and recommendations,” says AFBF President Zippy Duvall. “We also welcome the 34 new members of FACA who represent farmers, agribusinesses, state governments, and environmental advocates.”

United Fresh Releases 2020 Fourth Quarter Report

Fresh produce continues its steady growth at retail, with increased sales for fruits and vegetables during the fourth quarter of 2020. That’s according to a new report on United Fresh, detailing the fourth quarter of last year and the 2020 year-end report. Among the fourth quarter highlights, both fruits and vegetables continued to grow as sales surged across categories driven by consumers making more shopping trips and spending more during those trips. Total fruit sales generated $7.3 billion in the last quarter of 2020, representing 7.7 percent growth over the previous year. Vegetable dollar sales grew 14 percent during the quarter, reaching $8.8 billion. Some of the key numbers from the Year-End report show produce departments generating $7.1 billion in 2020, accounting for 33 percent of total fresh sales, second only to the meat department. Total fruit sales in the U.S. reached $33.7 billion and were 14.4 percent higher than the previous year. Apples, grapes, and bananas ranked as the top three categories in sales. Vegetable sales reached a new high of $35.8 billion and were 14 percent higher than in 2019. Pre-packed salads, tomatoes, and potatoes were the top three categories in sales.

Dry Weather Concerns in South America Continue

The corn and soybean harvest in South America continues to accelerate, and as the planting window for the second-corn crop opens, temperature and precipitation patterns become more important. Spotty showers in parts of Brazil are slowing down harvest and delaying the second-corn crop planting efforts. Drier weather in southern Brazil and Argentina has been more favorable for harvest. Weather Trends 360 says the prospect for dry weather will continue into March, which isn’t optimistic for the immature crops and the second-corn crop plants. In central and western Brazil, spotty showers are causing harvest delays as producers dodge hit-or-miss showers in their fields. Late planting of the second-corn crop means a risk of the plants entering the critical pollination period as the rainy season in Brazil ends, which puts the yield at risk. Overall, the southern third of Brazil will be stuck in a dry trend through next month. Dry and hot conditions will cause soil moisture to be at a deficit across much of the region, especially in Argentina.

Washington Insider: Growing Snarl in Global Shipping

Bloomberg is reporting this week that an “ongoing surge” in the cost of shipping goods around the world is prompting manufacturers and their customers to search for new arrangements of many kinds. The report says that exporters, importers and their agents are considering buying their own shipping containers and chartering vessels to avoid the sky-high costs and delays of existing services.

Most of the 25 million containers in global use are owned or leased by about a dozen ocean carriers including Copenhagen-based AP Moller-Maersk A/S and China's Cosco Shipping Holdings Co. The steel boxes are still scarce on routes from China, Bloomberg says, and reports that exporters in Asia are complaining that rates to move freight to Europe or the U.S. jumped fivefold in the past year.

One large maker of toys, such as Sea-Monkeys, says some buyers are deferring shipments until prices cool down.

If it persists, the crunch threatens to dim hopes of a smooth recovery from the world economy's pandemic slump, Bloomberg asserts. While a boom in demand for work-from-home technology and medical equipment has fueled a sharp rebound in trade, pressures on the supply side are straining inventories and weighing on balance sheets.

“We still have a backlog that's the highest we've had in our history,” Clarence Smith, chairman of 135-year-old Haverty Furniture Cos. of Atlanta, said on a conference call last week. “We're paying a premium to get the product to make sure we can serve our customers” and “we are increasing prices.”

A 2016 paper by the Federal Reserve Bank of Kansas City said “a 15% increase in shipping costs leads to a 0.10 percentage point increase in core inflation after one year.” In the U.S., imported goods account for about 12% of gross domestic product and most arrive by sea.

Because U.S. import price indexes don't include information about cargo rates, “shipping cost pressures act as an additional, but often overlooked,” channel for price pressure the Fed paper said.

Germany's Schwarz Group – one of the world's biggest supermarket operators – recently considered hiring whole ships to transport goods, according to Hong Kong-based executive Bjoern Lindner. “All of my peers in the industry are scrambling for capacity” and “we have to be creative,” he said.

Brian Sondey, chief executive of container leasing firm Triton International Ltd. of Hamilton, Bermuda, said some shippers of cargo are looking to buy their own boxes and “finding that somehow it's a net lower price.”

“We've seen some interest in people like the Amazons of the world to start maybe owning some of their own containers because they get charged by the shipping lines when they hold on to containers longer than they are supposed to,” Sondey said on a conference call last week.

In the meantime, the container carriers are “pulling out all stops” to meet the sustained high demand, said John Butler, CEO of the World Shipping Council, a group representing the liner industry. “All vessels are sailing, all available container equipment is being used, carriers are setting up new inland depots to speed up trucking turn-time operations and doing their best to keep customers informed in an extremely unpredictable situation,” he said.

Some of supply pressure may ease in coming months, given container throughput at Shanghai Port increased by more than 20% during the Lunar New Year holiday compared with a year ago, and throughput at Ningbo Zhoushan Port rose about 29%, Xinhua reported, citing data from from the China Ports & Harbours Association.

Still, the longer shipping costs remain elevated, the more the question lingers of whether they'll start to show up in the price of consumer goods.

Toymaker Dave Cave, who runs Hong Kong-based Dragon-I Toys – one of the world's biggest manufacturers of toy dinosaurs and whose products include aquatic pets called Sea-Monkeys and Chatimal the Talking Hamster – said it's not worth shipping some toys given the tight margins already in the industry.

He warns that unless conditions improve, retailers may raise their prices. “If nothing changes between now and the end of May, everyone who is shipping will land products at a much higher price than the actual products already in the store,” he said in an interview.

Some of Cave's clients are deferring shipments until April on hopes that conditions improve. “Never, ever, ever has a container price ever been more than 20% or 30% up or down, never. To be 500% up, this is something new to everybody.”

At this stage, though, many economists remain sanguine about the inflation threat and don't expect shipping costs to materially dent shopping baskets in the U.S. and Europe. “Ultimately, whether such costs can be passed on to consumers depends on the strength of consumer demand, which is more related to fiscal and monetary policy in the U.S. and Europe,” said Helen Qiao, chief Greater China economist at Bank of America.

So, we will see. Rebuilding links between participants in the global trading system likely will be subject to many types of adjustments – trends producers should watch closely as the enormous global system readjusts, Washington Insider believes.

USDA Changes Definition of 'Agricultural Products' in Trade Data

USDA will shift its definition of “agricultural products” in terms of U.S. export data in the January 2021 trade data to be released March 5.

The change will adopt the WTO definition of “agricultural products” to include ethanol, distilled spirits, and tobacco products. Those products are not currently considered ag products under USDA's current definition.

The change will put the USDA numbers on agricultural products in line with the Office of the U.S. Trade Representative (USTR).

USDA's Foreign Agricultural Service is updating its historical datasets for the March 5 change and said it would “make data available under both definitions in its Global Agricultural Trade System (GATS) database.”

EPA Now Supports 10th Circuit Court Small Refinery Exemption Decision

EPA on Monday announced they have taken a new position on small refinery exemptions (SREs), saying that after “careful consideration” that they support the 10th Circuit Court of Appeals ruling in the case of Renewable Fuels Association (RFA) vs. EPA.

“EPA supports that court's interpretation of the renewable fuel standard (RFS) small-refinery provisions,” the agency said in a release. “This conclusion, prompted by a detailed review following the Supreme Court's grant of certiorari in the case, represents a change from EPA's position before the 10th Circuit. The change reflects the Agency's considered assessment that the 10th Circuit's reasoning better reflects the statutory text and structure, as well as Congress's intent in establishing the RFS program.”

The 10th Circuit in January 2020 vacated and remanded three EPA decisions to grant SREs for the 2016 and 2017 compliance years, holding that a “small refinery's position can be granted only if the refinery satisfies two conditions,” EPA noted, those being that the refinery had to demonstrate an existing exemption and they have to demonstrate disproportionate economic hardship caused by RFS compliance.

On Jan. 8, 2021, the U.S. Supreme Court agreed to review the 10th Circuit court decision at the request of the small refineries affected by the decision.

“After further, careful review of the RFA Decision following the change of Administration, EPA has reevaluated the statutory text and now agrees with the 10th Circuit's reading” of the Clean Air Act section which said that “an exemption must exist for EPA to be able to 'extend' it,” the agency said. “EPA agrees with the court that the exemption was intended to operate as a temporary measure and, consistent with that congressional purpose, the plain meaning of the word 'extension' refers to continuing the status of an exemption that is already in existence.”

Tuesday Watch List

Markets

Other than an index of U.S. consumer confidence due out at 9 a.m. CST, there are no official reports on Tuesday's docket. Federal Reserve Chairman Jerome Powell will testify before the U.S. Senate Banking Committee Tuesday morning and offer an assessment of the economy. Traders will check the latest weather forecasts and watch for any news of export sales.

Weather

Tuesday will be mainly dry and mild across the primary crop areas. This will allow for snow melt and recovery from the harsh cold and snow of the past two weeks. Snow and cold will be confined to the far northern Plain and portions of the Canadian Prairies.

RFS Integrity Act Introduced in the House

Democrat Angie Craig of Minnesota and Republican Dusty Johnson of South Dakota introduced the Renewable Fuel Standard Integrity Act into the House of Representatives last week. The goal of the legislation is to reduce the secrecy currently surrounding the small refinery exemption process and bring more certainty into the renewable fuel marketplace. “We applaud the introduction of the RFS Integrity Act and the strong bipartisan effort to restore integrity and transparency to the Renewable Fuel Standard,” says Growth Energy CEO Emily Skor. “The intent of the RFS is to blend more biofuels into our nation’s transportation fuel supply every year, not to have oil companies use questionable tactics to delay and avoid their blending obligations.” She says that creates tremendous amounts of uncertainty for farmers, biofuel producers, and the entire fuel supply chain. The Environmental Protection Agency doesn’t impose a clear deadline for submitting a request for an SRE. If enacted, the RFS Integrity Act would set an annual deadline of June 1 for refineries to submit SRE petitions. It would also bring greater transparency to SREs by no longer excluding the refinery’s name, the number of exempted gallons requested, and the compliance years requested from public disclosure.

Ethanol Production Drops to Lowest Level in Five Years

During the week ending on February 12, the Energy Information Administration announced that ethanol production dropped to its lowest level in five months while stockpiles grew. The EIA report says that ethanol production fell to 911,000 barrels per day, down from 937,000 barrels a day during the prior week. That’s the lowest production level since late September. A Successful Farming report says the Midwest, which produces the most ethanol of any region in the country, saw its production drop to 868,000 barrels a day. That’s a drop from the 895,000 per day from the previous week and the lowest output level since late September. The East Coast and Gulf Coast regions stayed at an average of 12,000 barrels per day, while the Rocky Mountain and West Coast production levels were unchanged at 9,000 barrels per day, on average, according to the EIA. Stockpiles increased to 24.297 million barrels in the seven days ending on February 12. In other news the ethanol industry won’t like, the Environmental Protection Agency says that all 16 petitions from small refineries that would exempt them from meeting blending obligations under the Renewable Fuel Standard from 2020 are still pending. In total, 66 petitions that date back as far as 2011 are still pending.

Biden Immigration Bill Introduced in Congress

Senator Bob Menendez of New Jersey and Representative Linda Sanchez of California, both Democrats, introduced President Biden’s immigration proposal into their respective chambers. The Hagstrom Report says both members of Congress say the bill will “create an earned pathway to citizenship for all 11 million undocumented immigrants, providing Dreamers, Temporary Protective Status holders, and some farm workers with an expedited three-year path to citizenship.” It also gives all other undocumented immigrants who pass background checks and pay taxes an eight-year path to citizenship without fear of deportation. National Milk Producers Federation President and CEO Jim Mulhern praised everyone involved with moving the legislation forward. However, he says, “Reforms to the immigration system must include changes crucial for the dairy workforce.” Reforms the NMPF wants to see include extending legal protections to current workers and their families that they’ve earned and enables dairy farmers to use a guest worker program to supplement their domestic workforce when they need to. Democratic Representative Jim Costa of California is a co-sponsor of the legislation. “I want to see this pass for the hardworking immigrants that have an earned path to citizenship,” he says. “For too long, we have talked about reform without taking any serious action.”

USDA Fills Key Leadership Positions

The USDA announced the appointment of Gloria Montaño (Mon-TAHN-yoh) Greene as the Deputy Undersecretary for Farm Production and Conservation. Zach Ducheneaux (DOO-shu-know) is the new Farm Service Agency Administrator. Montaño Greene is a former Director of the Farm Service Agency in Arizona from 2014-2017, a position she was appointed to by then-President Obama. She led the implementation of the 2013 Farm Bill Programs across the state. Ducheneaux is the current Executive Director of the Intertribal Agriculture Council, the largest, longest-standing Native American agricultural organization in the U.S. The Council represents all Federally Recognized Tribes and serves 80,000 Native American producers. He also operates his family’s ranch on the Cheyenne River Sioux Reservation in north-central South Dakota with his brothers. “We are honored to have professionals of the caliber of Gloria and Zach join our team,” says Katharine Ferguson, Chief of Staff with the Office of the USDA Secretary. “With their leadership of USDA farm and conservation programs, we will create new market opportunities and streams of income for farmers, ranchers, and producers that address climate change and environmental challenges, strengthen local and regional food systems, and lead the world in food, fiber, and feed production for export.”

USDA Clarifies Rules Regarding Buying and Selling Seeds from Other Countries

The USDA recently finished a months-long investigation into thousands of reports from citizens who received unsolicited seed packages in the mail last year. The Animal and Plant Health Inspection Service found no evidence that someone was intentionally trying to harm U.S. agriculture with the shipments. APHIS did confirm that some of the seeds sent to the U.S. were unsolicited, but others were seeds that the recipients ordered, although the buyers didn’t know they were coming from a foreign country. Regardless, most shipments were illegal because they came into the country without a permit or phytosanitary certificate. “Plants and seeds for planting online from other countries can pose a significant risk to U.S. agriculture and natural resources because they can carry harmful insects and pathogens,” the APHIS Plant Protection and Quarantine Program says in a statement. “We’ve been working closely with e-commerce companies and other federal partners to stop the flow of illegal plant and seed shipments into the U.S.” The agency set up a new site to help in its efforts to facilitate the safe trade of plants and seeds through the e-commerce pathway. More information is available at www.aphis.usda.gov.

USCA Wants Beef Imports Halted Because of FMD

The U.S. Cattlemen’s Association wants beef imports from Namibia (Nah-ME-bee-ah) halted following reports of Foot-and-Mouth Disease outbreaks in the country. Namibia’s livestock industry is divided into two zones by what’s called the Veterinary Cordon Fence. North of the VCF is where the infections have taken place, while south of the fence is considered an FMD-free zone. However, the region’s buffalo populations are consistent carriers of FMD and can move freely in and out of the country, potentially contacting domestic cattle herds. The country’s elephant populations have also been known to damage the fence and allow wild animals to cross to either side. “Now, more than ever, we need to ensure there are strong health and safety standards in place within our food supply chain to guard against threats to our agriculture industry,” says USCA President Brooke Miller. “The U.S. hasn’t had an FMD outbreak for almost 100 years, but we continue to recklessly pursue trading relations with countries that have known outbreaks. We want this to be a prominent topic in the upcoming Senate and House Agriculture Committees.” USCA estimates that a U.S. outbreak of FMD would result in as much as $14 billion in losses. Not only would it hit farm income, but it would also affect consumers and international trade relations.

Washington Insider: Challenging Trade Debate Emerges

The Hill this week featured a warning in an article by Desmond Lachman – a resident fellow at the American Enterprise Institute. Lachman was formerly a deputy director in the International Monetary Fund's Policy Development and Review Department and the chief emerging market economic strategist at Salomon Smith Barney.

He warns President Biden “not to repeat the trade policy mistakes made by the previous administration.” He argues that President Joe Biden inherited a U.S. and global economy in “much worse shape than did former President Donald Trump – and that he can ill-afford to repeat the same trade policy mistakes that the Trump administration made.” He worries especially about the worldwide drift to “protectionist policies that now threatens to be destructive to U.S. and global prosperity.”

He says “it would be a gross understatement to say that Trump's trade policy was a dismal failure. Not only did it fail to eliminate the U.S. trade deficit and level the trade playing field with China as it repeatedly promised to do. It also managed to alienate our traditional trade allies in Europe and Japan, lose our economic influence in the Asian Pacific region by pulling out of the Trans-Pacific Partnership and abandon our country's traditional world economic leadership role,” Lachman says.

He thinks a key economic policy mistake the Trump administration made was to view international trade as a zero-sum game and to take a “my way or the highway” approach to trade policy. This induced him to adopt an “America First” trade policy and to start a costly Chinese trade war on a unilateral rather than on a multilateral basis, Lachman says.

It also induced him to undermine the World Trade Organization, to arbitrarily impose import tariffs on our allies on supposedly national security grounds and to eschew participation in multilateral trade agreements.

Lachman criticizes “another cardinal trade policy mistake made by the former administration, which was not to realize that our trade deficit is determined fundamentally by the difference between our country's saving and investment levels.” Had it grasped this basic economic principle, it might have refrained from engaging in the large 2017 unfunded corporate tax cut which had the effect of causing us to “revisit the twin budget deficit and trade deficit problem of the Reagan years,” the commentary said.

Lachman is especially worried that while the Biden administration has yet to articulate a coherent international trade policy, “it is far from clear that it will be making a clean break from Trump's trade policies and restoring the country's traditional role of promoting freer international trade.”

He sees as a positive the Biden administration efforts to adopt a more multilateral and rules-based approach to trade than the Trump administration did in general and that it “wishes to restore the WTO's authority in particular.”

Another encouraging sign is that President Biden has not ruled out the possibility that the United States might re-join the Trans-Pacific Partnership.

He also approves that the new administration also appears to understand that our European trade allies share our concern about China's multiple unfair trade practices and that our leverage in trade negotiations with China would be enhanced if we cooperated with Europe. This is particularly the case considering that European trade with China now exceeds that of ours.

On the negative side, Lachman worries that President Biden is pursuing a “Buy American” program that appears to follow the previous “America First” playbook. And he sees problems from the new administration's commitment to fast track a $1.9 trillion-dollar budget package “that is almost sure to create a twin deficit problem that would cause the dollar to rise on the back of higher U.S. interest rates caused by a more expansive budget policy.”

With the world still in the grip of its worst post-war economic recession and with protectionist policies on the rise, the world very much needs U.S. international economic leadership to maintain an open international trade system. To provide that leadership, the U.S. will need to lead by example.

That leadership will require repairing fences with our traditional European economic allies to facilitate greater international cooperation to ensure that all countries, including China, play by the rules of the game in their international trade policies.

It will also require the Biden administration to “dial back on its protectionist tendencies and refrain from pursuing a reckless budget policy that threatens to exacerbate current international economic imbalances.”

So, we will see. It is clear that the administration almost certainly will find itself challenged as it attempts to support economic recovery from the coronavirus without inflating its currency—and a strong debate is now underway about the implications of those threats. That debate should be watched very closely as new policies are considered and implemented, Washington Insider believes.

US Ag Export Forecast Raised To New Record

U.S. agriculture is now forecast to see record exports in Fiscal Year (FY) 2021 of $157 billion, up from a November forecast of $152 billion. Imports are also forecast at a record mark up $137.5 billion, up from $137 billion in USDA's November forecast.

The two forecasts would result in U.S. agriculture registering a trade surplus of $19.5 billion, the biggest since a $21.1 billion surplus in FY 2017.

For China, USDA forecasts their FY 2021 imports at $31.5 billion, up $4.5 billion from their November outlook, “due to strong first quarter shipments and surging sales, most notably of corn,” USDA said. “China is forecast to remain the largest U.S. agricultural market in FY 2021.”

The resulting trade surplus for U.S. agriculture would be up $17 billion from the FY 2020 result, which was the smallest trade balance for U.S. agriculture since it was $2.1 billion in 1972.

USDA, FDA Insist 'No Credible Evidence' COVID Is Transmitted Via Food Or Food Packaging

There is “no credible evidence of food or food packaging associated with or as a likely source of viral transmission of severe acute respiratory syndrome coronavirus 2 (SARS-CoV-2), the virus causing COVID-19,” according to a statement issued by acting USDA Secretary Kevin Shea and acting FDA Commissioner Janet Woodcock.

“While there are relatively few reports of the virus being detected on food and packaging, most studies focus primarily on the detection of the virus' genetic fingerprint rather than evidence of transmission of virus resulting in human infection,” the statement said. “Given that the number of virus particles that could be theoretically picked up by touching a surface would be very small and the amount needed for infection via oral inhalation would be very high, the chances of infection by touching the surface of food packaging or eating food is considered to be extremely low.”

The agencies said they were sharing the information “based upon the best available information from scientific bodies across the globe, including a continued international consensus that the risk is exceedingly low for transmission of SARS-CoV-2 to humans via food and food packaging.” Further, the USDA/FDA statement indicated food products and food packaging has “not been attributed” as a transmission source via national or international surveillance systems.

This comes as China has maintained that this can be a source of infection and a World Health Organization (WHO) team that investigated the situation in China indicated that further exam needs to be done on whether frozen foods and the cold supply chain are possible transmission methods.

Monday Watch List

Markets

As usual, traders will be checking the latest weather forecasts and watching for any export sales news that might emerge Monday morning. An index of U.S. leading indicators will be released at 9 a.m. CST, followed by USDA's weekly report of grain export inspections at 10 a.m.

Weather

Monday features rain and snow in the eastern Midwest through the East Coast and Southeast. Dry conditions will be in place elsewhere along with notably milder temperatures.

China Surpasses U.S., Becomes EU’s Biggest Trading Partner

New data from the European Union puts China ahead of the United States as the EU’s biggest trading partner. A spokesperson from China’s Foreign Affairs Ministry calls the data “great news for both sides.” 2020 saw China-EU economic and trade ties grow stronger against the COVID-19 pandemic. More than 60 percent of EU companies in China are ready to increase investment, according to the latest survey by the EU Chamber of Commerce in China. At the end of last year, China and the EU announced the conclusion of negations on a China-EU investment agreement that elevates relations and cooperation between the two. China claims that for mutual investment, the agreement means wider market access, better business environment and a brighter prospect of cooperation. In 2020, EU imports from China increased 5.6 percent, while exports increased 2.2 percent. Although the US and the UK remain the EU's largest export markets, trade with both countries dropped significantly.

USDA Announces Dealer Statutory Trust to Protect Livestock Sellers

The Department of Agriculture this week announced a new Dealer Statutory Trust to Protect Livestock Sellers. The Consolidated Appropriations Act, signed in December, amended the Packers and Stockyards Act by adding language to establish a "Dealer Statutory Trust" for the benefit of unpaid cash sellers of livestock. Much like the existing packer and poultry trusts, the amendment requires livestock dealers to hold all livestock purchased. If livestock has been resold, the receivables or proceeds from such sale, in trust for the benefit of all unpaid cash sellers of livestock until full payment has been received by those sellers. Dealers whose average annual livestock purchases do not exceed $100,000 are exempt. Livestock sellers who do not receive timely payment from a dealer may file claims on the dealer's statutory trust. Livestock and Foreign Agriculture Subcommittee Chairman Jim Costa of California applauded the move. The Democrat states, "I am pleased that USDA has taken the necessary steps to put these protections in place for the benefit of livestock sellers throughout our country."

Farm Groups Submit Comment on Phosphate Duties

Farm groups this week submitted comments to the U.S. International Trade Commission regarding duties on Russian and Moroccan imports of phosphate fertilizer. The groups include the American Soybean Association, the National Corn Growers Association and the National Cotton Council. The groups say, “countervailing duties on these imports will adversely impact the availability of phosphate fertilizer in the United States and adversely affect crop production and farmer livelihoods.” The comments are part of the USITC’s hearing on a petition from the Mosaic Company for the countervailing duties on Russian and Moroccan imports. Mosaic says the company’s survival depends on stopping unfairly subsidized imports. However, the farm groups say countervailing duties impact availability of phosphate fertilizers and lead to shortages. Additionally, the groups say the duties will reduce competition and choice available to farmers in the U.S. marketplace. The farm groups request that the USITC remove the countervailing duties. Phosphate fertilizers are widely used by corn, cotton, soybean, and other crop producers throughout the United States.

NPPC Applauds USDA For Extending COVID Vaccine Support

Farm groups welcome plans by the Department of Agriculture to assist states in administering the COVID-19 vaccine. USDA's Animal and Plant Health Inspection Service this week announced it has deployed 119 employees to assist in several states, largely in Nevada and Oklahoma. The USDA employees are helping to vaccinate people at various rapid points of distribution, including mobile teams and pop-up clinics. Farm groups, such as the National Pork Producers Council, welcomed the news from USDA. NPPC says that, declared essential by the Department of Homeland Security, hog farmers, veterinarians, livestock haulers, harvest facility employees and other workers across the supply chain, play a vital role in food security and rural economies. This week, NPPC also launched a campaign, “You’re Essential, So It’s Essential,” to encourage U.S. pork industry workers to get vaccinated as soon as possible. visit nppc.org/essential to learn more about the NPPC vaccination campaign

USB Sets 2022 Investment Directions

Directors of the United Soybean Board this week met virtually to define strategies and goals for 2022 investments. Those priorities include strengthening soy's position in the U.S. and global marketplaces related to soybean meal, oil and sustainability. USB's financial stewardship and program development responsibilities include investing in projects to promote the sustainability of U.S. soy as a market differentiator domestically and to build new markets abroad. In addition, the soy checkoff funds education to enhance end-user awareness of soy products and research to strengthen the resilience of soybean production, improve meal quality and develop new uses for soybean oil. Nearly 500 proposals were submitted to achieve checkoff objectives in research education and promotion. The shared goal of all selected proposals is to strengthen U.S. soy's reputation and competitive advantage when it comes to nutrition, quality and sustainability. Between now and USB's next meeting in July, checkoff farmer-leaders will review proposals in detail to determine strategic fit ahead of making their final 2022 project portfolio recommendations.

CattleFax Cow-Calf Survey Announced

CattleFax has introduced its annual Cow-Calf Survey. Information requested in the survey provides participants and the industry with valuable data regarding industry benchmarks and trends. Survey participants will receive a results summary packet, with useful benchmarking information that will allow managers and owners to evaluate their own operations. Items such as cow-calf profitability, tendencies of high and low return producers, regional data, and other valuable material are included. To receive the summary packet, a valid email address must be submitted. All individual results will be confidential and remain anonymous. By completing the survey and submitting a valid email address, participants will also be entered into a drawing to win a $700 CattleFax voucher. The credit can be used for any CattleFax memberships, registration fees for education seminars, including Corporate College and Risk Management Seminars, and/or registration fees for the annual Outlook and Strategies Session. The survey can be accessed by going to CattleFax.com. The deadline to complete the survey is February 22, 2021.

Washington Insider: Retail Sales Surprise

Bloomberg is reporting this week that U.S. retail sales surged in January “by the most in seven months, beating all estimates and suggesting fresh stimulus checks helped spur a rebound in household demand following a weak fourth quarter.”

The value of overall sales increased 5.3% from the prior month after a 1% decline in December, the Department of Commerce (DOC) report said. “It was the first monthly gain since September. All major categories showed sharp advances,” DOC said.

Ahead of the report, the median estimate in a Bloomberg survey of economists called for a 1.1% monthly gain in retail sales.

A surge in COVID-19 cases curbed spending at year-end, but since then, virus cases have ebbed and states have started to ease some restrictions on businesses and activity. The ability to shop and eat out, paired with the latest round of $600 stimulus payments, helped drive spending increases across a variety of categories, Bloomberg said.

The jump in retail sales could further embolden Republican opposition to President Biden's $1.9 trillion stimulus plan which many in the GOP already criticize as “too big,” Bloomberg said. Even so, Democrats are on track to narrowly pass the package without Republican votes – and the new retail sales data could also be held up as evidence of how critical relief payments are to the economy and jobs.

The report shows that “when fiscal aid arrives to household balance sheets, it does get turned around fairly quickly and materializes in economic activity,” Michael Gapen, chief U.S. economist at Barclays Plc, said.

With another stimulus package likely in March, “we should see a pretty rapid acceleration in demand and household spending as we move into the into the second quarter, which could be continued if vaccinations continue apace, and mobility gradually recovers over time,” Gapen said.

Non-store retailers' sales, which includes online stores, rose 11%, the most in two years. Food services and drinking places rose 6.9% as restrictions eased at restaurants and bars across the country. Furniture stores, and electronics and appliance merchants also saw double-digit gains in the month.

The so-called “control group” subset of sales, which excludes food services, car dealers, building-materials stores and gasoline stations, rose 6%, the largest gain since June.

Bloomberg said its own economists reported that “The strength and composition of retail sales (specifically the tilt toward discretionary categories) is an encouraging signal that consumers' aggressive saving patterns from 2020 are starting to ease—a development which, if sustained, could unleash a torrent of pent-up demand in 2021.”

The report noted that gas station receipts rose 4%, at least in part reflected higher fuel prices. The retail figures aren't adjusted for price changes, so sales also reflect changes in gasoline costs. At the end of January, the average nationwide price for a gallon of gasoline was $2.42 – roughly in line with pre-pandemic prices.

Other data from the Labor Department showed producer prices increased 1.3% in January, the biggest gain in records dating back to 2009, driven by broad-based gains in categories including energy and food.

The core measure, which excludes energy and food, jumped by 1.2% – also the most in records – over the prior month. Meanwhile, the core consumer price index – a key measure of prices paid by U.S. consumers – was unchanged in January for a second straight month, pointing to the pandemic's lingering restraint on inflation.

A separate report from the Federal Reserve on Wednesday “showed manufacturing extended its recovery in early 2021. Output rose in January by more than forecast, though it remained 1.9% below the pre-pandemic level.”

Bloomberg also noted that the National Association of Home Builders showed increased confidence among residential construction firms in February as the allure of low interest rates generated more prospective buyer traffic. Still, rising construction costs threaten to slow demand, Bloomberg warned.

So, we will see. The declines in COVID-19 cases are clearly good news, as are the stronger retail markets. Still, the threats from the virus are very significant and efforts to test and vaccinate continue to be extremely important — key trends producers should watch closely as they emerge, Washington Insider believes.

Senators Push For COVID Vaccinations For Farm, Food Workers

There needs to be a “swift vaccination of farm and food chain workers” as it is “imperative that these essential frontline workers be included in initial phases of vaccine distribution nationwide,” Senate Ag Committee Chair Debbie Stabenow, D-Mich., and Sen. Cory Booker, D-N.J., said in a letter to White House Coronavirus Response Coordinator Jeff Zients.

The lawmakers lamented that states and other jurisdictions have excluded farm and food chain workers in their vaccine distribution plans. They also called for vaccines distributed through employers be done in consultation with union and worker representatives.

“This must be done in order to both adequately ensure their health and safety while also guaranteeing the continuity of food production and distribution in the U.S.,” the lawmakers said.

USDA's Meyer Outlines 2021 Acreage, Trade Prospects

The USDA Outlook Forum is in virtual form this year, with USDA Chief Economist Seth Meyer laying out the economic landscape for the agricultural sector. He noted the rebuilding of the Chinese hog herd as a factor in markets, including corn and soybeans.

For corn, Meyer detailed, “What we have seen, though, in China, and what has sparked this big import of corn has been the spread between internal prices for corn in China and what corn prices are elsewhere in the world.” He put the difference in price at round $150 per metric ton.

He also said the tariff-rate quota (TRQ) will not be a limit on Chinese corn imports.

For 2021 U.S. planted acreage, he said USDA sees corn planting at 92 million acres and soybeans at 90 million for a combined 182 million acres, a record. For wheat, Meyer said that USDA sees a “small rise” in wheat area for 2021 to 45 million acres. He also noted that winter wheat harvested area is a “question.” He also said USDA sees cotton plantings at 12 million.

USDA sees season average prices for corn at $4.20 per bushel, soybeans at $11.25 per bushel and wheat at $5.50 per bushel in their respective 2021-22 marketing years, Meyer said, while the agency expects higher prices forecast compared with 2020 for live cattle at $115 per cwt., hogs at $50.50 per cwt., and broilers at 84.5 cents per pound.

But to hit the price marks, he said there needs to be “robust domestic demand and solid exports.” Interestingly, Meyer commented on the Food Box program, noting a question is if USDA maintains the program.

Overall U.S. agricultural exports in Fiscal Year (FY) are now seen at a record $157 billion against imports at a record $137.5 billion for a trade surplus of $19.5 billion. That would be $17 billion higher than FY 2020 and the biggest trade black ink since FY 2017 when it was $21.1 billion