Farmers Satisfaction with Inputs Has Room for Improvement

A recent report from Biome Makers finds 84 percent of farmers have not found an input product yet that they find completely satisfying. The report, 2021 Trends and Challenges in Agriculture, is based on a survey conducted at the beginning of the year among nearly 100 farmers and agronomists worldwide. The report found ag-input satisfaction rates have ample room for improvement, and the costs of ag-inputs weigh heavily on farmers, as 39 percent selected ag-inputs as one of their top two major operation costs. According to the study, sustainable practices are increasingly being embraced and implemented by farmers. Cover crops, in particular, are one of the top sustainable management practices that 45 percent of farmers expressed a willingness to adopt. Climate change continues to be a considerable challenge this season, causing a variety of issues for 68 percent of farmers. However, only about a third of them have reported any involvement in carbon farming initiatives.

Iowa State Releases Custom Rates Costs Survey

Iowa State recently announced results of the 2021 Iowa Farm Custom Rate Survey. The survey covers the amounts charged and paid for common crop and livestock services in the state. Tillage, planting, harvesting, manure hauling and livestock transportation are all included. Compared to last year, most custom rates saw a decline except for the cost of farm labor. The cost of combining corn ranged from $22 to $45 per acre, with an average of $35.10 per acre. The cost of combining soybeans ranged from $22 to $46 per acre, with an average of $34.20. The cost to mow hay ranged from $8 to $15 per acre. The average cost for baling small square bales was $.59 per bale, $9.35 for large square bales, $10.80 for large round bales without wrapping, and $13.20 for large round bales wrapped. Meanwhile, 14 percent of the respondents perform custom work, 16 percent hire work done, and 45 percent indicated they do both.

AEM Welcomes Legislation to Create Executive Branch Manufacturing Post

The Association of Equipment Manufacturers applauds legislation that would create the Office of Manufacturing and Industrial Innovation Policy in the Executive Office of the President. A bipartisan group of senators this week introduced the bill, called the Office of Manufacturing and Industrial Innovation Policy Act. AEM President Dennis Slater says the new proposed office “will help ensure America's global leadership in manufacturing.” AEM was the first industry group to call for the creation of a Chief Manufacturing Officer and the development and execution of a national manufacturing strategy. Last spring, equipment manufacturers called on the federal government to develop and implement such a strategy. U.S. equipment manufacturers represent one in eight manufacturing jobs in the United States and support 2.8 family-sustaining jobs, highlighting the need for the office, according to AEM. Slater adds, “We urge lawmakers in both parties to support this important legislation and increase our nation's global manufacturing competitiveness."

Interior Disburses Nearly $249 Million to Gulf States for Coastal Conservation

The Department of the Interior Tuesday announced nearly $249 million in Fiscal Year 2020 energy revenues to the four offshore Gulf oil and gas producing states. Those states are Alabama, Louisiana, Mississippi and Texas. The funds, disbursed annually based on oil and gas production revenue, are used to support coastal conservation and restoration projects, hurricane protection programs, and activities to implement marine and coastal resilience. The Gulf of Mexico Energy Security Act of 2006 created a revenue-sharing model for oil and gas-producing Gulf states to receive a portion of the revenue generated from oil and gas production offshore in the Gulf of Mexico. The act also directs a portion of revenue to the Land and Water Conservation Fund. The announcement represents the second-largest disbursement since the department first began paying revenues to states in 2009. Since enacted, Interior has disbursed over $1 billion to the coastal states to further conservation efforts of critical coastal wildlife habitats.

USDA Announces Oscar Gonzales as Assistant Secretary for Administration

The Department of Agriculture this week announced the appointment of Oscar Gonzales as Assistant Secretary for administration. Gonzales, nominated by President Joe Biden, previously served in the Obama administration in several senior positions with USDA, including Deputy Assistant Secretary for administration. He also served as the California State Executive Director for USDA's Farm Service Agency, where he oversaw FSA programs across 58 counties in the nation's largest agricultural producing state. His government background includes working for top California leaders, including Governor Gray Davis and others. Most recently, Gonzales served as Vice President for Government Relations, Western States, for Goldman Sachs. Before that, he was Vice President for Community and Government Relations for Aura Financial. Agriculture Secretary Tom Vilsack says Gonzales "has dedicated his life and career to fighting for underserved and marginalized communities." Vilsack says Gonzales will help USDA ensure equity across the department. Prior to serving in government, Gonzales worked with various nonprofit organizations.

Alltech ONE Ideas Conference returns virtually in 2021

Alltech’s global agri-food conference, the Alltech ONE Ideas Conference, returns virtually on May 25–27, 2021. Now in its 37th year, Alltech’s flagship event is an industry resource, with innovative ideas, inspiration and motivation from world-class speakers. The virtual platform provides on-demand tracks, streaming keynote presentations and live Q&A chats with select speakers. And this year, it will also offer an interactive networking experience, allowing attendees to connect with their peers from around the world. This year’s virtual event features sessions that will uncover the challenges and opportunities in the aquaculture, beef, business, crop science, dairy, equine, health and wellness, pet, pig, and poultry sectors. Each May, the Alltech ONE Ideas Conference typically attracts over 3,500 attendees from more than 70 countries to Lexington, Kentucky. In 2020, the event transformed into the Alltech ONE Virtual Experience and brought more than 21,500 registrants from 126 countries together online. Registration for the Alltech ONE Ideas Conference is now open at one.alltech.com.

Washington Insider: GOP Senator Probes San Francisco Fed Research on Climate, Race

The Hill is reporting this week that the top Republican on the Senate Banking Committee asked the Federal Reserve Bank of San Francisco to explain several recent research bulletins and seminars on racial economic disparities and climate change.

Sen. Pat Toomey, R-Pa., asked Mary Daly, president of the San Francisco Fed, to provide a briefing and a decade of records related to the reserve bank's economic research activities. “The Federal Reserve may pursue mission creep or welcome itself to political capture. But such activities are inconsistent with its statutory responsibilities,” Toomey argued.

The San Francisco bank is one of the Federal Reserve system's 12 institutions, each responsible for conducting monetary and regulatory activities within a certain U.S. region.

Each reserve bank is responsible for bank supervision and examination, lending to financial institutions, operating Fed services and reporting on the unique business environment and development within its respective district. The Fed system is funded with fees paid by banks and contributes billions of dollars annually to the Treasury.

Reserve banks also publish economic research conducted by staff economists on a wide range of topics relevant to the Fed's mandate to foster maximum employment, stable prices and a secure banking system.

Toomey argues, however, that “a sizable portion” of San Francisco Fed research focuses “on matters unrelated to monetary policy and how these impact narrow subgroups of people.” He specifically cited two San Francisco Fed blog posts on racial equity and a series of virtual seminars on the climate-related economic issues hosted by the bank.

The San Francisco Fed has also published recent research on capital flow surges, the economic impact of school closures, inflation, community bank resilience and differences between the U.S. and other advanced economies in recovering from the COVID-19 recession.

While Toomey criticized research from other reserve banks, he wrote that the “seemingly sudden and alarming inclusion of social research” at the San Francisco Fed “risks being of a bitterly partisan nature” and warranted a probe from the Banking panel.

He asked Daly to provide a briefing for Banking Committee staff, all records related to the San Francisco Fed's climate seminar series, all documents related to climate change and racial justice research dating back to July 1, 2019, and 10 years of reserve bank's annual expenses on research and community outreach.

“We have received and are reviewing Sen. Toomey's letter, and we look forward to discussing the contents with Sen. Toomey's office," a spokesman for the San Francisco Fed said.

The Hill said that Toomey's letter “opens another front in the battle between Republicans and the Fed over the central bank's growing focus on climate change and other social issues GOP lawmakers consider irrelevant to its mission and Democrats consider essential.”

Republicans have fiercely criticized the Fed for creating committees and investing in research related to the potential climate-related risks facing the banks it supervises. The Fed also has joined a global network of central banks and financial supervisors focused on climate change.

Fed leaders have insisted that the bank will play no role in setting climate policy for the U.S., but rather focus on how climate change effects bank supervision.

Even so, Republicans fear the bank could eventually steer credit away from certain energy sources — something the Fed has ruled out ever doing.

Toomey and GOP lawmakers have also blasted moves toward climate and diversity policy from the Treasury Department and Securities Exchange Commission (SEC). Treasury Secretary Janet Yellen has faced intense blowback from Republican lawmakers after declaring climate change “an existential threat” that required action from the department. She has also opened the door to fiscal and regulatory policy designed to limit carbon emissions, but has not explained what form that would take.

Gary Gensler, Biden's pick to lead the SEC, also irked Republicans when he voiced support for tougher climate, diversity and political spending disclosure rules for publicly traded firms.

In fact, there is considerable intense debate over a number of Congressional and executive research topics—as well as Democratic interest in using the Congressional Review Act to overturn controversial Department of Health and Human Services rules passed in the final days of the Trump presidency.

Reps. Raja Krishnamoorthi, D-Ill., and Anna Eshoo, D-Calif., on Monday introduced a resolution of disapproval over the HHS "sunset" rule, which requires all 18,000 agency regulations to be reviewed every 10 years, or else they expire.

However, provisions of that are available for only the first 60 legislative days of the new Congress and would end likely sometime in April. The resolution currently has no Senate co-sponsors.

The CRA was a legislative tool favored by Republicans in the early days of the Trump administration and was used to strike down 14 regulations from the Obama era. But Democrats have been more reluctant to use it, partly due to concern over statutory language in the CRA that blocks the relevant agency from crafting another rule that's substantially similar.

So, we will see. Clearly the administration and the Congress are interested in implementing changes, including prominently program changes to cut back on climate change—important proposals that should be watched closely as they are considered, Washington Insider believes.

WH Group Cites Illegal ASF Vaccine Use As Factor Tempering Chinese Hog Herd Expansion

The use of illegal African Swine Fever (ASF) vaccines in 2020 was a factor which tempered the efforts to rebuild China's hog herd, according to the Ma Xiangjie, president of Henan Shuanghui Investment and Development, WH Group's domestic unit.

In remarks to reporters after the release of WH Group annual earnings, Ma said commented on impact of illegal vaccines. “Since the second half of last year some pig producers in China, especially south of the Yangtze river, used some immature pig vaccines and caught African Swine Fever again," said Ma.

The WH Group processed 46% of its hogs in China in 2020 compared with 2019 due to tight supplies, Ma, noted, with capacity utilization at its plants reduced to 30%.

But imports of 700,000 metric tons of pork, beef and poultry helped make up with shortfall, with 70% of the imports coming from the U.S. Ma said the firm's Chines hog price forecast has been raised due to the impact from “toxic vaccines” and said the company was expecting 2021 meat imports rise as the firm was working to expand the range and volume of products from the U.S.

US Has Suspended Trade Relations With Myanmar

The U.S. suspended trade relations with Myanmar after soldiers and police backing the military coup there killed more than 90 people.

U.S. Trade Representative Katherine Tai said Monday the U.S. was reviewing trade benefits for the country under the now-lapsed Generalized System of Preferences (GSP).

The U.S. imported slightly more than $1 billion worth of goods from the country, including around $621 million of apparel and footwear.

Wednesday Watch List

Markets

At 7:15 a.m. CDT Wednesday, the private firm, ADP, will have an estimate of U.S. payrolls for March, an early hint for Friday's unemployment report. The U.S. Energy Department will have a report on weekly inventories at 9:30 a.m. USDA's Prospective Plantings report and March 1 Grain Stocks are set for 11 a.m. CDT. As usual, the latest weather forecasts and any trade news will also be noticed.

Weather

A cold front situated across the Delta and Midwest will move southeastward with moderate scattered showers on Wednesday. Behind the system, temperatures are falling well below normal, inducing some freeze potential for portions of the Plains through Thursday morning and the eastern Midwest and Southeast through Friday morning. Temperatures will be on a rising trend thereafter. This could briefly affect vulnerable winter wheat, but the short duration should not have a profound impact.

Consumers Plan Record Spending on Easter

Consumers plan to spend an average of $179.70 this Easter, the highest figure on record, according to survey results released by the National Retail Federation. A total of 79 percent of Americans will celebrate the holiday and spend a collective $21.6 billion, down slightly from last year's pre-pandemic forecast of $21.7 billion. NRF President and CEO Matthew Shay says, "There is a lot of momentum heading into the Spring and holiday events like Easter." The momentum is fueled by positive trends in vaccinations and growing consumer confidence. Easter gifts, food and candy are the biggest drivers of growth this year. Consumers plan to spend an average of $31.06 on gifts, $52.50 on food and $25.22 on candy. As more and more individuals become vaccinated, consumers plan to celebrate in ways they might have missed last year due to COVID-19. Consumers plan to celebrate by cooking a holiday meal, visiting with family and friends, planning an Easter egg hunt or attending church.

Fertilizer Prices Up Dramatically

Fertilizer prices are up dramatically this spring, increasing input costs for growers. Data from the Department of Agriculture shows prices are up between 17 and 57 percent since the fall. David Widmar of Agricultural Economics Insights says that while nitrogen often gets the most attention, phosphorus prices are up the most. Anhydrous ammonia and urea are up 37 percent from the fall, but considerably smaller increases over Spring 2020. Meanwhile, liquid nitrogen prices are only up nine percent over last year, but 20 percent higher than last fall. The increase in fertilizer prices means fertilizer expenses are up $29 per acre than last spring, or 30 percent higher. However, Widmar notes, the increases follow a strong downturn a year ago, adding prices are up from historic lows and, for the most part, remain well below the levels of 2011-2014. The exception, however, is phosphorus fertilizer, up 51 percent compared to last fall.

Interior Joins Government-Wide Effort to Advance Offshore Wind

The U.S. Interior Department is part of the Biden Administration's effort to boost renewable energy, including offshore wind generation. Interior Secretary Deb Haaland joined leadership of Energy, Commerce and Transportation at a White House forum Monday on the topic. The event included a commitment to establish a target to deploy 30 gigawatts of offshore wind by 2030, creating nearly 80,000 jobs. At the forum, leaders discussed key opportunities and challenges to ensuring domestic economic and employment benefits of aggressively expanding offshore wind. Interior announced the final Wind Energy Areas in the New York Bight – an area of shallow waters between Long Island and the New Jersey coast to identify the offshore locations that appear most suitable for wind energy development. Additionally, the department is initiating the environmental review of the third commercial scale offshore wind project by announcing a Notice of Intent to prepare an Environmental Impact Statement for Ocean Wind, LLC’s proposed project offshore New Jersey.

USDA Restricts PACA Violators from Operating in the Produce Industry

The Department of Agriculture Monday announced sanctions on five produce businesses. The sanctions are in response to the businesses failing to meet obligations to the sellers of produce they purchased and failing to pay reparation awards issued under the Perishable Agricultural Commodities Act, or PACA. The sanctions include suspending the businesses’ PACA licenses and barring the principal operators of the businesses from engaging in PACA-licensed business. The businesses are Urban Fresh Produce of California, Sunrise Produce of Maryland, PFI Express and Temple Turmeric of New York and Eli Gonzalez Distributors of Texas. PACA provides an administrative forum to handle disputes involving transactions, which may result in a reparation order that requires damages to be paid by those not meeting their contractual obligations in buying and selling fresh and frozen fruits and vegetables. By issuing these penalties, USDA continues to enforce the prompt and full payment for produce while protecting the rights of sellers and buyers in the marketplace.

Fuel Prices Taper Off

The national average price of gas and diesel fell for the second straight week, after a constant rise to start the year. GasBuddy reports the national average price of gasoline fell 2.7 cents to $2.84 a gallon, with diesel prices down 1.2 cents to $3.08 a gallon. GasBuddy’s Patrick De Haan says, "increases have largely tapered off, and we're now seeing decreasing prices in most areas of the country, thanks to oil prices that have moderated for the time being." However, demand is rising. According to a new dataset released by GasBuddy, U.S. gasoline demand continued to rise for the week ending March 27, as Americans continued to get outside amidst better conditions and fewer travel restrictions. National gasoline demand rose 1.95 percent. Weekly gasoline demand last week again set another new pandemic high, rising to just three percent above the last pre-pandemic figures from mid-March 2020, but still stand down several percentage points from what would be considered normal for late March.

Washington Insider: Watching for Signs of Recovery

Bloomberg is expecting more political fireworks this week as the Biden administration reveals some of the main elements of its coming infrastructure plan.

President Joe Biden is expected to describe the “scope and ambition of his plans to expand and reorient the U.S. government, setting the stage for a bitter fight on Capitol Hill that could define his presidency.”

Bloomberg said it expects the president will unveil the framework for a major infrastructure-and-jobs program Wednesday in Pittsburgh. Later this week he is expected to offer the first glimpse of his 2022 budget — which promises to redirect federal funds to areas such as climate change and health care.

The announcements will include the first concrete details of the administration plan to overhaul federal spending, in a sales pitch without the immediacy of the pandemic emergency that he had for his first package. To succeed, it will have to convince the public and lawmakers on a multi-trillion-dollar investment in infrastructure and social safety nets, along with a revamp of the tax code to help address funding needs and widening inequality, Bloomberg said.

“Successful presidents — better than me — have been successful in large part because they know how to time what they're doing,” Biden said Thursday when asked why he was pursuing the massive spending package instead of other legislative priorities, such as gun control. Infrastructure is “the place where we will be able to significantly increase American productivity, at the same time providing really good jobs.”

While Biden has made clear his plans will include tax-policy changes to help fund what aides have laid out as a roughly $3 trillion long-term program, how specific he'll be on Wednesday is uncertain. His budget plan also won't include a comprehensive breakdown about the agency-by-agency spending increases the administration is seeking.

“What the American people will hear from him this week is that part of his plan, the first step of his plan towards recovery which will include an investment in infrastructure,” said White House Press Secretary Jen Psaki, referring to plans for two separate proposals. “He's going to have more to say later in April about the second part of his recovery plan,” she added, which will include health care, childcare, and other social issues.

They're “not quite at the legislative strategy yet,” and “the total package” is still being worked out,” she said. “But he's going to introduce some ways to pay for that, and he's eager to hear ideas from both parties as well,” she said.

Bloomberg also says that a vehicle “miles traveled tax is no longer on the table as an option to pay for infrastructure projects.” After Transportation Secretary Pete Buttigieg said in an interview on Friday that a vehicle miles traveled tax “shows a lot of promise,” a spokesperson for the department countered his comment.

“The Secretary was having a broad conversation about a variety of ways to fund transportation,” Ben Halle, a spokesman for the Department of Transportation, said. “To be clear, he never said that VMT was under consideration by the White House as part of this infrastructure plan—and it is not.”

In a political counter move by Democrats, Postmaster General DeJoy's 10-year plan for the USPS, Rep. Raja Krishnamoorthi, D-Ill., on Friday introduced a bill that seeks to “ensure that the USPS maintains the 2-3 day standard delivery option,” the lawmakers said.

The move came on the same day that the Postal Service filed a notice to its regulatory board seeking to push back the delivery time for priority mail and change the classification of printed materials to competitive products. The Postal Regulatory Commission will review the changes before they are scheduled to take effect, Bloomberg said.

So, we will see. The administration's antivirus efforts and its new economic proposals are still big news items with the capacity to provide relief in the form of new jobs and economic growth — signs that are being watched closely as they appear, Washington Insider believes.

Vilsack: Mexico GMO Restrictions Won't Affect Feed

Asked how he will respond to Mexico's plan to stop importing genetically modified (GM) corn, USDA Secretary Tom Vilsack said Friday that Mexico is only considering such a ban for corn used in human food products, not animal feed.

He called the distinction a “big difference here to producers in the United States.” He has been in contact with his Mexican counterpart and U.S. Trade Representative Katherine Tai on the GM corn issue, noting the U.S.-Mexico-Canada Agreement (USMCA) includes provisions for formal consultations, and, if needed, a dispute resolution process. However, he stressed, “we're not anywhere near there yet,” referring to invoking dispute settlement provisions of the trade pact. “We're just having these conversations.”

Bottom line, Vilsack said, “It is important to distinguish between what Mexico is currently thinking about doing, and the fact that it's not going to have as great an impact it would if it was everything all at once, all right now,” referring to fears of a broader GM corn import ban.

This appears to clarify a situation which has caused major concern on the potential for U.S. corn and soybean exports to Mexico to be affected.

Vilsack Outlines Expectations On Climate Efforts

USDA Secretary Tom Vilsack said that climate-smart ag policies will include initial moves to harness existing conservation programs like the Conservation Reserve Program (CRP).

“Congress has basically authorized and approved up to [25] million acres to go into that program,” he explained. The data on what is currently in CRP is 20.8 million at the end of January, Enrolling an additional 4 million acres to meet the cap can “begin the process of addressing some of the challenges that we face” related to climate, he said.

USDA may work with states to come up with ways to encourage farmers to enroll more marginal lands in CRP, potentially including additional incentive payments. A key will be ensuring a balance between promoting climate goals and not distorting markets in regions across the country, he added.

For CRP and other USDA conservation programs, Vilsack said he hopes to focus them on climate-smart ag practices. “We need to provide incentives, we need to provide resources, we need to provide cost-share for all the activities that are currently taking place and see if we can expand them and build upon them.”

Vilsack reiterated that harnessing carbon markets will be another focus and ensuring they serve the needs of farmers will be critical. “You can set up the prototype if you will, or the pilot, and then see how it works,” he said of an ag carbon bank, suggesting the move could tap extra funds from the Commodity Credit Corporation (CCC). Should the pilots prove successful “then we basically go back to Congress and say, 'How can we get this thing ramped up to a point where more and more farmers are participating?'”

Tuesday Watch List

Markets

Other than a report on U.S. consumer confidence at 9 a.m. CDT, there are no official reports on Tuesday's docket. Traders will examine the latest weather forecasts and watch for any export sales news that might develop. Trading in grains will likely be quiet ahead of Wednesday's Prospective Plantings and Grain Stocks reports.

Weather

A cold front from the Great Lakes southwest to the Texas Panhandle will lead to variable temperatures and breezy conditions Tuesday. Precipitation will be minimal, with a few showers in the Texas coast area. Rain becomes more prominent in the eastern Midwest, Delta and Mid-South Wednesday.

EPA States Position on RFS Exemptions Before the Supreme Court

The Environmental Protection Agency filed a brief with the Supreme Court last week that lays out its new position on the Renewable Fuel Standard. A DTN report says the brief covered EPA’s view of the scope and purpose of the RFS, stating that three refiners who received RFS exemptions in 2017 and 2018 didn’t qualify for them. The U.S. Court of Appeals in Denver ruled that the agency violated the law when it granted the exemptions during the Trump administration. The January 2020 ruling led biofuel groups to push the former administration to apply the ruling nationally. The EPA brief also says that few refiners would be eligible for extensions if the law is followed. The Trump EPA granted 88 small-refinery exemptions between 2016 and 2020. The Tenth Circuit Court remanded three exemptions granted to refiners in Oklahoma, Wyoming, and Utah. In February of this year, the Biden EPA reversed the previous administration’s course and sided with the Tenth Circuit Court’s ruling. Also in the Supreme Court brief, the EPA says the exemptions program was put into the RFS as a “bridge toward eventual compliance” for small refineries.

U.S. Hog Inventory Drops Two Percent

The USDA says there were 74.8 million hogs and pigs on U.S. farms as of March first. The Quarterly Hogs and Pigs Report says that the number is down two percent from March 2020, and three percent lower than December first of last year. Among the other key findings, the USDA’s National Ag Statistics Service says of the 74.8 million hogs and pigs, 68.6 million were market hogs, while 6.21 million were kept for breeding. Between December and February, producers weaned 33.3 million pigs, down one percent from the same period a year earlier. U.S. hog and pig producers weaned an average of 10.94 pigs per litter between December and February of this year. Producers intend to have 3.07 million sows farrow between March and May of this year and 3.12 million sows farrow between June and August of 2021. Iowa hog producers have the largest inventory among the states at 23.8 million head. Minnesota was second with nine million head, and North Carolina was third at 8.5 million. To get an accurate measurement of the American swine industry, NASS surveyed almost 5,000 operators across the nation during the first half of March. The Quarterly Hogs and Pigs Report is available at www.nass.usda.gov.

Sheep Industry Report Covers the Challenges and Positives in 2020

2020 was a year of ups-and-downs in the United States, and the sheep industry was no exception. COVID-19, major changes in processing, and changes in consumer behavior led to challenges for the U.S. sheep industry. However, there were also positives outlined in the 2020 Sheep Industry Review, a checkoff-funded report commissioned by the American Lamb Board and the American Sheep Industry Association. “COVID-19 made changes to the way U.S. consumers bought and consumed lamb last year,” says ALB Chair Gwen Kitzan. Commercial slaughter was down four percent last year when compared with 2019. Total sheep and lamb inventory decreased one percent to 5.2 million head. Leg, loin, and shoulder sales outpaced ribs. Weekly feeder lamb prices started off the year above 2019 ls but quickly dropped and stayed low through the summer before they rebounded in the fourth quarter of 2020. Looking ahead to the rest of 2021, the report estimates commercial lamb production will increase by three percent, and the year will bring a two percent increase in the commercial slaughter of American lamb. Imports will potentially drop as much as ten percent. Steady production, lower imports, and the lowest available supply since 2017 may set the stage for solid prices in 2021.

U.S. Corn Export Sales Jump Higher

Corn sales to overseas buyers jumped higher over the seven days ending on March 18. The USDA says wheat and soybean sales declined during the same period. Corn sales totaled 4.48 million metric tons, up from 395,500 tons during the prior week. China was the big buyer at 3.89 million metric tons. South Korea was next with 353,300 metric tons, followed by Mexico in third place with 196,000 tons. Exports totaled just over two million metric tons, down seven percent week-to-week. Wheat sales dropped 12 percent week-to-week at 343,600 tons. That’s still 24 percent higher than the prior four-week average. Japan was the top wheat buyer at 118,800 metric tons, followed by South Korea’s 116,400 tons. Unnamed countries canceled shipments of just over 215,000 metric tons. Soybean sales were dismal at 101,800 metric tons, a 50 percent drop from the previous week and a 56 percent drop from the four-week average. Egypt was the top buyer with 109,700 metric tons. Unnamed destinations canceled purchases totaling 152,500 metric tons. Exports fell six percent week-to-week at 501,400 metric tons.

Report Highlights Need for Increased Ag Research Spending

A new report says stagnant public funding for agricultural research is threatening the future vitality of U.S. food systems. That poses risks to farmer productivity and profitability, the steady supply of affordable food, and ultimately, global food security. The report is a joint effort from the Farm Journal Foundation and the American Farm Bureau Federation. The report highlights the vital importance of public funding for agricultural research and development. New innovations are crucial so farmers can increase their productivity and meet the rising global demand for food. The world population is expected to reach 10 billion by 2050, and food production will have to increase by 60-70 percent to meet the rising demand. While private-sector funding for agricultural R and D has been rising, U.S. public spending has been flat for the past ten years. “The U.S. has always been a leader in agricultural innovation, but we’re at risk of losing that advantage by falling behind the rest of the world in research and development,” says AFBF President Zippy Duvall. Tricia Beal, CEO of Farm Journal Foundation, says, “COVID-19 showed we need more research to deal with unexpected shocks and to find solutions that make our entire food system more resilient.”

CCC Won’t Buy and Sell Sugar Under Feedstock Flexibility Program

The USDA’s Commodity Credit Corporation won’t be buying and selling sugar under the Feedstock Flexibility Program for the 2020 crop year, which runs through September 30 of this year. The CCC is required by law every quarter to announce its estimates of sugar that the agency will purchase and sell under the Feedstock Flexibility Program based on crop and consumption forecasts. Federal law allows sugar processors to get loans from USDA with maturities of up to nine months when the sugarcane or sugar beet harvest begins. On loan maturity, the sugar processor may repay the loan in full or forfeit the collateral sugar to USDA to satisfy the loan. The FFP got created as an option to avoid forfeitures on sugar loans. If the USDA faces the likelihood of loan forfeitures, it’s required to purchase surplus sugar and sell it to bioenergy producers to reduce the surplus in the food use market and support sugar prices. USDA’s most recent WASDE report shows that the U.S. ending sugar stocks are unlikely to lead to forfeitures, so USDA doesn’t expect to buy and sell sugar under FFP for the crop year 2020.

Washington Insider: US Manufacturing Momentum Grows

Bloomberg is reporting this week that American manufacturing “continues to pour on the momentum” as the first quarter draws to a close, despite some supply-chain woes and rising materials costs that are inflaming the inflation debate.

Freshly released March data show that an increasing number of factory purchasing managers are reporting faster expansion, Bloomberg says. The Federal Reserve Bank of Philadelphia's index of general business activity soared to an almost five-decade high, while the IHS Markit's preliminary gauge of U.S. manufacturing was the second-strongest in data back to 2007.

Orders continue to grow as the economy gathers steam, while inventories of finished goods and stockpiles of materials remain lean, a combination that should fuel even quicker production growth in the months ahead, Bloomberg says. Yet, challenges remain.

Producers are struggling with some bottlenecks in the form of shipping and port delays as importers battle over a limited number of available containers. Those strains existed even before a ship stuck in the Suez Canal last week raised more questions about the potential for future delays or price increases.

What's more, steady demand and shortages of supplies needed to manufacture goods have sparked price pressures for inputs.

In February, the share of manufacturers who signaled slower delivery times approached 50%, according to Institute for Supply Management data. Excluding the period that followed the nation's shutdown to control the spread of COVID-19, that's the largest share since oil imports from Iran were disrupted in 1979.

Meantime, producers are paying up for everything from copper and aluminum to crude and iron ore. The latest Philadelphia, New York and Richmond Fed surveys highlight growing materials inflation that risks filtering through to higher prices of finished goods for households and businesses.

Fed Chair Jerome Powell told lawmakers this week, however, that he views the current supply-chain bottleneck pressures on input prices as temporary. “We have been living in a world of strong disinflationary pressures, around the world really, for a quarter of a century,” Powell told the House Financial Services Committee on Tuesday. “We don't think a one-time surge in spending leading to temporary price increases would disrupt that.”

New York Fed President John Williams, in a Wednesday event, noted that “we're still about 9 million jobs lower than we were a year ago in the U.S. economy, so I think that that's going to keep inflation pressures pretty low for some time.”

Recent manufacturing figures for March support Powell's forecast. While regional Fed prices received indexes have been increasing, they're not keeping pace with prices paid.

The Richmond Fed's latest manufacturing survey showed the region's manufacturers aren't expecting much more room to raise prices on their products.

Respondents said they expected prices received to rise an annualized 3.57% six months from now. That compares with the 3.52% increase they're currently receiving, the smallest difference in seven months.

A March survey from the Kansas City Fed showed that while nearly half of manufacturing firms were able to pass through a majority of materials price increases, just 8% said they could fully pass them through.

In the meantime, the press took a dark view of the impacts of last week's accidental blockage of the Suez Canal. NYT said the event “called into question the global reliance on globalization.”

Of course, the ship involved is not just any vessel, it is one of the world's largest container ships, with space for 20,000 metal boxes. And the Suez Canal is not just any waterway. It is a vital channel linking the factories of Asia to the affluent customers of Europe, as well as a major conduit for oil.

The fact that one mishap could sow fresh chaos from Los Angeles to Rotterdam to Shanghai underscored the extent to which modern commerce has come to revolve around truly global supply chains—and their fairly recent dependence on “so-called just-in-time manufacturing.”

Some experts have warned for years that short-term shareholder interests have eclipsed prudent management in prompting companies to skimp on stockpiling goods. The report cited Ian Goldin, a professor of globalization at Oxford University who said, no one could predict a ship going aground in the middle of the canal, just like no one predicted where the pandemic would come from. Just like we can't predict the next cyberattack, or the next financial crisis, but we know it's going to happen.” The canal's blockage, he says, affects roughly one-tenth of the world's trade—and has intensified the strains on the shipping industry, which has been “overwhelmed by the pandemic and its reordering of world trade.”

If the Suez remains clogged for more than a few days, the stakes likely will rise drastically. Ships now stuck in the canal will find it difficult to turn around and pursue other routes given the narrowness of the channel.

Those now en route to the Suez may opt to head south and navigate around Africa, adding weeks to their journeys and burning additional fuel — a cost ultimately borne by consumers. And, whenever ships again move through the canal, they are likely to arrive at busy ports all at once, forcing many to wait before they can unload—an additional delay.

“This could make a really bad crisis even worse,” said Alan Murphy, the founder of Sea-Intelligence.

So, there is a lot of uncertainty regarding the implications of this accident—and what it might mean—and its implications for future US inflation. These are developments producers should watch very closely as they emerge, Washington Insider believes.

EIA Details New Biofuel Information To Be Released

The US Energy Information Administration (EIA) said it will start publishing additional biofuels data in a monthly report to account for the increase in biofuel production.

The report to be released March 31 will include expanded information on production capacity for biodiesel, fuel alcohol and renewable fuels along with expanded information on feedstocks used to produce those biofuels. Reuters previously reported the change was coming and could possibly be added to the WASDE report in May, the first 2021/22 forecasts from USDA.

Vilsack Discusses China Phase One Progress

While China is purchasing large amounts of many US ag commodities, USDA Secretary Tom Vilsack said Friday (March 26) he thinks they could “be doing more” in some areas to meet their commitments under the US-China Phase One agreement.

For corn, soybeans and many other commodities, Vilsack said China is “purchasing fairly significant amounts to the point where we're probably back to where we were pre-tariff and pre-pandemic.”

However, China could ramp up imports of biofuels, distiller's dried grains with solubles (DDGS) and dairy, Vilsack said during an appearance at the National Press Club. Beyond those products, he said “there's still work to be done on the relationship,” noting overall US ag market share in China “has suffered as a result of the trade and tariff war.”

Asked whether there was the need for any additional trade aid for farmers, Vilsack said no, noting high commodity prices and the rapid clip of purchases by China.

Monday Watch List

Markets

There are no official reports on Monday's docket, but some state NASS offices will offer winter wheat crop ratings at 3 p.m. CDT. As usual, traders will check the latest weather forecasts and pause at 8 a.m. CDT to see if USDA has a new export sale announcement.

Weather

Dry, warm and very windy conditions will cover the Plains and western Midwest Monday. This combination is leading to widespread high wind and extreme wildfire warnings. Precipitation will be confined to snow squalls in the northern Rockies. Outside the wind and fire threat area, conditions will favor field drying and spring fieldwork.

Farm Groups Welcome USDA Pandemic Relief

Agriculture groups applaud the Department of Agriculture for this week’s announcement of plans to distribute more than $12 billion under the Pandemic Assistance for Producers. The funding includes $6 billion to develop new programs or modify existing proposals using remaining discretionary funding from the Consolidated Appropriations Act. Another $5.6 billion will be directed to formula payments to cattle producers and eligible flat-rate or price trigger crops.  American Farm Bureau Federation President Zippy Duvall says, “We appreciate Secretary Vilsack’s action to release funds and expand eligibility for farmers hit.” National Farmers Union President Rob Larew says, “This sensible approach will help reach farmers who have previously been excluded from relief programs and keep them in business.” The aid programs include biofuels, previously excluded from relief packages. Growth Energy CEO Emily Skor says, “Secretary Vilsack’s announcement that aid is on the way is a light at the end of the tunnel.” Sign-ups for the new program begin April 5, 2021.

NCBA: Grassley Bill Not Solution Industry Needs

Senator Chuck Grassley this week introduced legislation to address transparency in the cattle market. The Iowa Republican, along with a bipartisan group of Senators, says the bill intends to foster efficient markets while increasing competition and transparency among meatpackers who purchase livestock directly from independent producers. This bipartisan bill will require that a minimum of 50 percent of a meat packer's weekly volume of beef slaughter be purchased on the open or spot market. However, the National Cattlemen's Beef Association does not approve of the legislation. NCBA Vice President of Government Affairs Ethan Lane says, “simply put, Senator Grassley’s bill misses the mark.” NCBA says any legislative solution to increased price discovery must account for the unique dynamics within each geographic region. United States Cattlemen's Association President Brooke Miller commended Grassley for introducing the bill. USCA says the '50-14’ or spot market bill, follows legislation already supported by USCA, the Cattle Market Transparency Act of 2021.

Business and Ag Groups Urge Rollback of Section 232, 301 Tariffs

The National Foreign Trade Council this week re-launched the Tariff Reform Coalition. The coalition is a broad alliance of business and agriculture groups substantially harmed by the import tariffs imposed by the previous Administration. The group urges the rollback of Section 232 and Section 301 tariffs, saying the tariffs "are causing serious damage to those already struggling.” The coalition says the Biden administration needs to reassess the Section 232 and 301 tariffs, and Congress should hold hearings to see if the tariffs are achieving their objectives.  The coalition says tariffs on imports of steel and aluminum should be removed, and use of other trade laws more consistent with the WTO should be considered to address the issue of overcapacity. The coalition includes the National Council of Farmer Cooperatives, National Pork Producers Council, Farmers for Free Trade and others in the agriculture sector. The coalition made the requests in an advocacy document directed at the Biden administration and Congress.

Farmers for Free Trade Announces New Board Members

Farmers for Free Trade Thursday announced five new Board members. Farmers for Free Trade is a coalition supported and comprised of America’s leading ag organizations and businesses. The new board members include Michael Anderson, trade and industry relations Vice President at the Corn Refiners Association, and Iowa corn farmer Bob Hemesath, a National Corn Growers Association member. Additionally, Angela Hofmann, co-founder of Farmers for Free Trade and Lauren Sturgeon, CoBank Government Relations Director, and Maria Zieba, National Pork Producers Council International Affairs Director, joins the board. Sara May, former President of Farmers for Free Trade, has retired from the board.  Steve Noah, President of Farmers for Free Trade, says, "We're pleased with the diversity of interests on the Board of Directors." Brian Kuehl, Farmers for Free Trade Executive Director, says the new members have all built careers that reflect the organization's central mission to help deliver economic opportunity for American agriculture.

Anhydrous Ammonia Tank Recovered from Missouri River

Federal, state, and local response agencies worked together last weekend to recover an anhydrous ammonia tank floating in the Missouri River. Recovered near Jefferson City, Missouri, the 1,500-gallon tank, including its wheeled chassis, was seen floating downstream last Friday. Given the tank contained anhydrous ammonia, the Missouri Department of Natural Resources requested Environmental Protection Agency’s support with recovery and disposal. The river was at flood stage Friday, and the EPA secured and recovered the tank Saturday. The tank was found intact and not leaking. A Missouri DNR representative says, “Without the collaboration from all teams, removing the tank from the Missouri River would not have been as successful.” Missouri Farmers Association, known as MFA, agreed to store the tank at its location in Jefferson City. The Missouri Department of Natural Resources and MFA agreed to work together to find the tank owner. MFA will keep possession of the tank if no owner can be found.

Washington Insider: Better Fish Food

The New York Times is reporting this week on worries by the “world's foodies” over a potential “environmental mess” have eased some. The concern was that fish farms were gobbling up wild fish stocks, spreading disease and causing marine pollution.

This week, some of the same experts who published that report issued a new paper concluding that fish farming, in many parts of the world, at least, “is a whole lot better.” The most significant improvement was that farmed fish were not being fed as much wild fish. In fact, they are eating more plants, such as soy meal.

The study was highly sophisticated and synthesized hundreds of research papers over the last 20 years across the global aquaculture industry. The latest edition was published on Wednesday in the journal Nature.

The findings are seen to have “real-world implications for nutrition, jobs and biodiversity,” the Times said. Aquaculture is a source of income for millions of small-scale fishers and revenue for fish-exporting countries.

It is also vital if the world's 7.75 billion people who depend on fish and shellfish but want to avoid draining the ocean of wild fish stocks and marine biodiversity. This has led to concerns among some environmentalists about aquaculture's effects on natural habitats. The new paper found promising developments, but also lingering problems. And it didn't quite inform the average fish-eater what they should eat more of — or avoid.

The report called the aquaculture industry “too diverse for broad generalizations,” according to Rosamond Naylor, a professor of earth systems science at Stanford University and the lead author of both the 2000 cautionary paper and the review published Wednesday.

“The aquaculture industry includes over 425 species farmed in all sorts of freshwater, brackish water, and marine systems, so it doesn't make sense to lump them all together into a 'sustainable' or 'non-sustainable' category,” Naylor said. “It has the potential to be sustainable — so how can we ensure it moves in that direction?”

Global aquaculture production has more than tripled in the last 20 years, producing 112 million metric tons in 2017, the most recent year for which statistics were are cited. China leads the way, producing more than half of all farmed fish and shellfish worldwide. Outside of China, Norway and Chile are big players, producing mostly farmed Atlantic salmon, while Egypt produces mostly the Nile tilapia. Most fish produced in Asia is consumed in Asia, meaning that it serves as an important source of protein for citizens of those countries.

The study also found that the production of farmed seaweed and bivalves, like oysters and clams, had greatly expanded as well. That is perhaps the most encouraging news, because neither seaweed nor bivalves need extra food to reproduce. They filter nutrients from the water and, in turn, produce nutrition for human consumption.

The study reported that freshwater aquaculture today accounts for 75% of farmed fish directly consumed by humans. Its most striking finding, though, concerns fish feed, the Times said, especially for carnivorous fish like salmon, which were traditionally fed lots of wild fish, like anchovies. Between 2000 and 2017, the study said the production of farmed fish tripled in volume, even as the catch of wild fish used to make fish feed and fish oil declined.

Martin Smith, an environmental economist at Duke University who was not involved in the study, said the changes in aquaculture resulted partly from new regulations in some countries — rules in Norway, for instance, reduced the spread of sea lice in salmon farms — but mostly because the aquaculture industry had no reason to buy expensive wild fish feed once they had access to plant-based alternatives.

“It was always in aquaculture's interest to reduce their most expensive ingredient,” said Smith, who teaches a class called “Should I Eat Fish?” “The language around aquaculture has been overly negative and overly pessimistic,” he thinks. “But also, the industry has gotten a lot better.”

Still, problems linger, the authors of the latest study point out.

Aquaculture needs better oversight to ensure that environmentally sustainable practices are followed and rewarded. Some countries need to better manage the use of antimicrobials in fish ponds to guard against drug resistant microbes. Aquaculture also remains vulnerable to extreme climate events and disruptions in global trade, such as those created by the coronavirus pandemic. And then there's the question of where the soy used for fish farming comes from. Pressure is mounting on the aquaculture industry to ensure that it does not source soy from deforested areas like the Amazon.

“As is the case with all food systems, consumers must realize that there is no free lunch, but there are important choices that can be made with sufficient information,” Naylor said.

So, we will see. Environmentalists are rarely happy with the way the world is going — and many would prefer totally plant based diets for more people, in spite of the extent that many of these products rely on manufacturing — and in spite of the frequent criticism that often surfaces for farmed fish. As a result, ag producers probably should be happy with the modest, if growing, areas of agreement recently observed and interpret those as possible future growth markets as they do tend to be, Washington Insider believes.

Administration, Groups Urge Supreme Court To Uphold Decision On Refinery Exemptions

The Department of Justice (DOJ) said the U.S. Supreme Court should uphold the decision by the U.S. Court of Appeals for the Tenth Circuit which said EPA overstepped its authority when it granted small refinery exemptions (SREs) to three refiners for the 2016 compliance year.

The court ruled the SREs should have only been made available to those refiners that had continuously received them previously.

“By providing an initial, 'temporary' exemption that can be extended only under specified circumstances, Congress struck a sensible balance, giving small refineries time to develop compliance strategies while maintaining the ultimate goal of universal compliance,” the filing from the DOJ and EPA said.

Filings by the Renewable Fuels Association (RFA) and others echoed that view, saying the law supports the court decision and that the SREs “siphon a significant portion of renewable fuel blending requirements” called for under the Renewable Fuel Standard (RFS).

The Supreme Court will hear arguments in the case April 27. 

USDA Announces New Payment Effort, Resumes Some CFAP Actions

USDA announced a new Pandemic Assistance Program (PAP) and said that it has completed a portion of the review of the Coronavirus Food Assistance Program (CFAP).

USDA said the new effort will reach more producers and it will make at least $6 billion available for the new program. Signup for CFAP 2 will be reopened for at least 60 days starting April 5. The new effort will target payments to a host of ag and other sectors, including biofuels.

Additional payments under CFAP 1 will be made to cattle producers, with more than $1.1 billion in payments, but additional payments to hog producers and contract growers remain on hold and are “likely to require modification,” USDA said.

Friday Watch List

Markets

At 7:30 a.m. CDT Friday, the U.S. Commerce Department releases U.S. personal incomes and consumer spending for February, followed by the University of Michigan's consumer sentiment index at 9 a.m. Traders remain interested in the latest weather forecasts and any news of export sales. Concerns about rising coronavirus infections in Europe were a bearish influence on Thursday's soybean oil price.

Weather

Friday brings showers to the Great Lakes with an easing of dry conditions. We'll also see light showers in the Southeast after the volatile severe weather events of Thursday. During the weekend, periods of rain will cross the central Plains and the Midwest, with heavier rain in the eastern Midwest and Delta Sunday.

AFBF: Agriculture Must Be Prioritized for COVID-19 Vaccine

The American Farm Bureau Federation is urging the Biden administration to prioritize agriculture for the COVID-19 vaccine. In a letter sent to the administration Wednesday, AFBF President Zippy Duvall called for the elimination of barriers to vaccine access for America's farmers and farm workers. Duvall says, "This prioritization would ensure that planting, harvesting, processing, and distribution of human and animal food can continue to ensure our grocery shelves and food pantries remain stocked." The administration recently directed states to prioritize vaccines for teachers. AFBF's request that similar action be taken for agriculture is consistent with the recommendations of several medical and science groups, including the Centers for Disease Control and Prevention. While farmers and farmworkers in some states have been able to access the vaccine, AFBF says other states have not allowed food and agriculture workers priority access. Duvall asks the administration to "take additional action to eliminate any barrier to vaccine access for America's farmers and farm workers."

Farm Lending Pullback Continues

Agricultural debt at commercial banks eased further at the end of 2020, and loan repayment problems moderated slightly, according to the Kansas City Federal Reserve Bank. Research by the KC Fed released this week shows general improvement in the agricultural economy likely drove the pullback in farm lending activity and strengthened credit conditions. Higher crop prices and an influx of government payments in 2020 also contributed to stronger growth in deposits, which supported a sharp increase in liquidity at agricultural banks. Agricultural loan balances at commercial banks reached a five-year low in the fourth quarter and continued to shift toward farm real estate. Although the accumulation of farm debt remained higher than the average of the past ten years, the total value of farm loan portfolios fell five percent from the previous year. Moving forward, the research says the pace of lending to farmers may remain slower than in previous years, as 2020 government payments and recent strength in crop prices have improved borrower liquidity and farm balance sheets.

EPA Extends RFS Compliance Deadline

The Environmental Protection Agency this week extended the compliance deadline for refiners to meet their Renewable Volume Obligations. EPA is extending the RFS compliance deadline for the 2019 compliance year and submission of reports for the 2019 compliance year for small refineries. The new deadlines are November 30, 2021, and June 1, 2022. EPA is also extending the RFS compliance deadline for the 2020 and the associated deadline for attest engagement reports. The new deadlines are January 31, 2022, and June 1, 2022. Finally, EPA is extending the attest engagement reports deadline for the 2021 compliance year to September 1, 2022. Following the Announcement, Growth Energy CEO Emily Skor stated her organization is disappointed in the decision to agree to the deadline extension request by refiners. Skor says, “Refiners using COVID-19 as a pretext to attack the Renewable Fuel Standard is wrong, as biofuel producers were among the hardest hit by COVID-19.”

Equipment Manufacturers Report Positive Outlook for 2021

Equipment Manufacturers report a positive outlook for 2021, according to a new survey by the Association of Equipment Manufacturers. The survey found 88 percent of manufacturers report a positive outlook for 2021, while more than half expect sales to increase or remain stable despite the ongoing impact of the global pandemic. The online survey was targeted to employees of AEM member companies and includes results from more than 130 respondents, including CEOs, vice presidents, and sales and operations leaders, among others. AEM President Dennis Slater says, “Equipment manufacturers have begun to turn the corner.” Looking at the biggest challenges facing company executives and the equipment manufacturing industry as a whole in 2021, respondents indicated that the lingering COVID-19 pandemic and keeping employees safe and on the job remain the top concerns, followed by finding skilled workers for new jobs being created. One in eight respondents said that COVID-19 will have a lasting impact on how they work.

Organic Valley Launches National Clean Energy Fund for Its Farmers

Organic Valley is partnering with Clean Energy Credit Union to launch the Powering the Good Loan Fund. The fund seeks to provide the best loan terms for farmers seeking to reduce their reliance on fossil fuels with renewable energy and efficiencies. Organic Valley says the program is the first of its kind for both cooperatives, pioneering a unique clean energy loan fund for over 1,700 farmers across the country. To accelerate energy improvements, Organic Valley and Clean Energy Credit Union will roll out a $1 million fund with plans to expand. As the nation's largest organic, farmer-owned cooperative, Organic Valley pulls carbon out of the air through regenerative practices like rotational grazing, while also working to reduce carbon emitted wherever possible. Bob Kirchoff, Organic Valley CEO, says, “We are providing farmers a means to reduce their energy costs and become more self-sufficient and sustainable.”  He says farmers who participate will contribute to a healthy, regenerative future for the next generation.

Farm Bureau Chief Economist Join Senate Ag Committee Staff

Farm Bureau Chief Economist John Newton is joining the Senate Agriculture Committee staff. Newton will serve as Chief Economist for the Ranking Member John Boozman, an Arkansas Republican.  Boozman announced the appointment of 15 staff members this week. The Senator says, “I am excited to move forward with this accomplished team.” AFBF President Zippy Duvall says, “Although I am sorry to see John go, I am also pleased to know he will serve in such an important role.” Before joining AFBF, he served as the chief economist for the National Milk Producers Federation. Newton holds a doctorate in agricultural economics and master’s degrees in macroeconomics and agricultural economics, all obtained at Ohio State University. Boozman also added Pam Miller as a Senior Professional Staff member. Miller previously served as the administrator of USDA’s Food and Nutrition Service. And, Martha Scott Poindexter returns to the Committee as staff director for the Republican side. She had previously led the committee staff from 2005-2010.

Washington Insider: Administration Begins Discussion on Water Infrastructure

Bloomberg is reporting this week that the proposed Drinking Water and Wastewater Infrastructure Act of 2021 is beginning to be discussed in both chambers. It says that Senate proposals would invest more than $35 billion in water resource development projects across the country.

A major target of the effort is to authorize two critical EPA programs—the Drinking Water State Revolving Fund (DWSRF) and the Clean Water State Revolving Fund (CWSRF) — which provide financial aid to localities' drinking water systems and to state safe water programs, as well as loan financing and assistance for communities for a range of water infrastructure projects.

The legislation would reauthorize the DWSRF at $2.4 billion in fiscal 2022, gradually increasing that amount to $3.25 billion in fiscal years 2025 and 2026 for a total of $14.7 billion. It would increase the minimum percentage of those too be aimed for “disadvantaged communities” from 6% to 12%.

The CWSRF would be reauthorized at the same funding levels between fiscal years 2022 and 2026 as the DWSRF. The legislation also would re-up the Water Infrastructure Finance and Innovation Act through 2026 at the current funding level of $50 million per year.

“Rebuilding our water infrastructure must be at the heart of the ongoing 'Build Back Better' efforts because we will have missed a huge opportunity to improve American lives if we only fix our roads, but fail to repair and upgrade the pipes beneath them,” said lead author of the bill Sen. Tammy Duckworth, D-Ill.

The legislation “begins to bridge the growing gap in federal cost-share of water infrastructure,” wrote Adam Krantz, chief executive officer of the National Association of Clean Water Agencies, in a letter to EPW leadership. “Overwhelmingly, the increasing costs of these essential public services are borne by local ratepayers – with no reliable safety net for households when costs are unaffordable.”

On the House side, the Energy and Commerce and Transportation and Infrastructure panels both have jurisdiction over water issues. T&I Chairman Peter DeFazio, D-Ore., has unveiled legislation that would authorize $40 billion over the next five years for the Clean Water State Revolving Fund. House Energy and Commerce Committee Democrats have introduced a $300 billion infrastructure package that includes $51.6 billion to protect Americans' drinking water “by extending and increasing funding for the State Revolving Loan Fund and other safe water programs and providing substantial new funding for the replacement of lead service lines that threaten public health,” a committee fact sheet said.

Even as Congressional majorities are beginning to discuss new projects, Republicans signaled they “aren't ready to engage in bigger infrastructure discussions.” Democrats say they hope for a bipartisan bill, but advocated for a broad definition of infrastructure that Republicans rejected. House Ways and Means ranking Republican Kevin Brady, Texas, said no Republican members in the committee joined “because Democrats over-politicized the infrastructure process.”

Also this week, USDA said the government should be prepared to support prices farmers receive for carbon credits but “avoid setting up a federally run carbon market that would compete with nascent private markets.” Robert Bonnie, the department's main climate adviser, said a key way the agency can work to reduce greenhouse gas emissions would be by making purchases to bolster prices of the credits, which farmers can sell for switching to practices that reduce emissions or sequester carbon.

In addition, the Federal Reserve said it is planning to make climate change a major part of its Wall Street oversight by creating a new committee that will identify and respond to dangers from a warming planet to the financial system. The Financial Stability Climate Committee will be “charged with developing and implementing a program to assess and address climate-related risks to financial stability,” Fed Governor Lael Brainard said in a speech yesterday.

Also, Idaho Republican Gov. Brad Little told a House Natural Resources subcommittee Tuesday that Democrats' efforts to protect federal land as wilderness and other designations “could prevent states from getting control of climate change-driven wildfires.” Little urged the Biden administration to “scale up” its management to deal with the effects of climate change by allowing workers to log forests to reduce the wildfire threat.

Democrats, however, said land use changes from logging and oil and gas development are driving climate change and their impacts need to be considered in federal land decisions, including wildfire mitigation.

At the same time, some Democrats are continuing to target fracking. Reps. Yvette Clarke, D-N.Y., Matt Cartwright, D-Pa., Diana DeGette, D-Colo., and Jan Schakowsky, D-Ill., plan to reintroduce a package of five bills to hold big oil and gas companies accountable to national standards for water and air protection.

The measures would close the “aggregation exemption” written into the Clean Air Act for oil and gas activities, require increased regulation of waste from production activities, require an Interior study on stormwater runoff, repeal an exemption for hydraulic fracturing in the Safe Drinking Water Act, and require testing of underground sources of drinking water in connection with fracking.

So, we will see. Clearly, the Biden administration is taking concerns about climate change seriously, along with more limited threats to the environment. These are policies and proposals that producers should watch closely as the continue to emerge, Washington Insider believes.

USDA To Pursue Rulemaking On RFID Tags

USDA announced it will not finalize a plan put forth by the Trump administration to approve Radio Frequency Identification (RFID) tags as the official eartag for interstate movement of cattle, and the Animal and Plant Health Inspection Service (APHIS) will use the rulemaking process for future actions on RFID tags.

APHIS said his means that all current approved ID methods can be used until further notice. The agency said they will “continue to encourage the use of RFID tags” while rulemaking is pending as they believe the tags provide the “best protection against the rapid spread of animal diseases.”

USDA in July 2020 had issued a notice seeking public comment on making RFID the only ID devices approved for cattle and bison laying out a timeline of no longer allowing the official USDA shield to be used on metal or other tags that did not have RFID components starting January 1, 2022, and would make RFID tags the only official ID tags effective January 1, 2023. 

Vilsack Initial Discussion With China Counterpart Yields Little Fresh Information

USDA Secretary Tom Vilsack spoke with Chinese Minster for Agriculture and Rural Affairs Tang Renjian, with the two agreeing that it was “important” for the two sides to “work together and address areas of common concern.”

A USDA spokesperson said that Vilsack did “raise concerns” about Chinese trade barriers, but provided no information on any specific issues that he raised. The two also discussed the “positive role agriculture can play in addressing climate change.”

The two agreed to “discuss these issues further” in the future.

As has been the case with initial readouts of discussions between U.S. and foreign officials early in the Biden administration, there are few details being offered about the specific issues raised and thus it is hard to determine what kind of progress, if any, may have been made.

But these initial sessions are never expected to be ones where significant breakthroughs take place. If anything, they are more of a “meet-and-greet” effort to hopefully set the stage for detailed discussions or resolutions in the future.

Thursday Watch List

Markets

Thursday looks busy with USDA's weekly export sales, U.S. jobless claims, report on fourth-quarter U.S. GDP and the U.S. Drought Monitor all out at 7:30 a.m. CDT. At 9:30 a.m., the U.S. Energy Department releases its weekly report of natural gas inventory. USDA follows at 2 p.m. CDT with its quarterly report of hogs and pigs inventory. Weather forecasts and any fresh export sales will also be noticed.

Weather

Thursday features moderate to locally heavy rain in the Delta and Mid-South, along with periods of snow in the Northwest. Areas with rain will have field work disruptions along with a threat of flooding. Heavy rain potential moves into the eastern Midwest Thursday night. Dry northern areas will again be bypassed by precipitation.

USFRA Announces Growing Commitment to Future of Agriculture

U.S. Farmers and Ranchers in Action celebrated National Ag Day by announcing the growing list of companies, organizations and individuals who have joined the Decade of Ag. The program is the first sector-wide movement to align to a shared vision for the next decade centered around investing in the next generation of agricultural systems, restoring the environment, regenerating natural resources and in doing so, strengthening the social and economic fabric of America. USFRA CEO Erin Fitzgerald says, “These leaders are stepping up in action to collaborate for meaningful impact.” The shared Decade of Ag vision is for a resilient, restorative, economically viable and climate-smart agricultural system. The Decade of Ag vision was a two-year process finalized at USFRA's annual Honor the Harvest Forum in the fall of 2020. USFRA says the case for food and agriculture to become the first U.S. economic sector to become carbon negative is promising, but more collaboration, partnerships and investment are needed to accelerate progress and make a meaningful impact in reducing greenhouse gas emissions.

Pro Farmer Survey Predicts Record Corn and Soybean Acres

A survey from ProFarmer predicts farmers will plant a record number of corn and soybean acres this year. The Pro Farmer/Doane survey revealed total area planted to crops in the U.S. is expected to rise to 319.4 million acres. That would be up nearly three percent, or 8.9 million acres, from 2020. If the survey findings hold true, it also means U.S. acreage will hit the highest level since 2018. The survey projects total corn and soybean plantings at a record 182.3 million acres, which would be up 8.4 million acres from last year. Total acres planted to corn, soybeans, wheat and cotton, are expected to rise 9.5 million acres from last year. USDA's 2021 Ag Outlook Forum in February provided an initial look at acreage. USDA's new chief economist, Seth Meyer, released projections showing the agency expects farmers to plant 90 million acres of soybeans this year and 92 million acres of corn. Combined, that would be a new record.

AFBF: U.S. Must Enforce Trade Agreements with Mexico

The American Farm Bureau Federation and 26 other industry groups urge the Biden administration to enforce U.S. trade agreements with Mexico. Farm Bureau President Zippy Duvall states, “recent moves by Mexico to limit American imports and to undercut prices in the U.S. puts America’s farmers and ranchers at a competitive disadvantage.” In a letter, the groups ask Agriculture Secretary Tom Vilsack and U.S. Trade Representative Katherine Tai to tackle various trade issues with Mexico. On December 31, 2020, the Mexican government issued a Presidential Decree stating the intention to phase out the use of glyphosate and use of genetically modified corn for human consumption. The groups say that while the standing of the Decree is unclear and the scope is vague, the Decree creates a significant risk and uncertainty to trade of corn and corn products with Mexico. Other issues include dairy trade, organics, meat industry access and geographical indications and biotechnology approvals, among others.

New Report Details Connection Between Conservation Practices and Farm Profitability

A new report from the Soil Health Partnership details the financial impact of conservation tillage and cover crop usage among Midwest corn and soybean growers. Titled Conservation’s Impact on the Farm Bottom Line, the project was done in collaboration with the Environmental Defense Fund. Based on an analysis of farm operations, management practices and financial records, the project team identified three key takeaways. The first is conservation tillage reduces operating costs, resulting in higher net returns per acre among study participants. Meanwhile, cover crops can be part of a profitable farming system, especially as experience with the practice grows. Finally, success with conservation practices is optimized when farmers take a targeted, stepwise, tailored approach to implementation. The hope with this project, according to the National Corn Growers Association, is that analyses like this will encourage continued and expanded support for farmers, both technical and financial, as they transition to conservation practices in the future.

USDA Awards Over $11.5 Million to Help Small and Mid-Sized Farms

The Department of Agriculture Tuesday announced $11.5 million for research to ensure small and medium-sized farms become more profitable. Announced on National Ag Day, Agriculture Secretary Tom Vilsack says the funding "will give these family farms the tools they need to be more sustainable, profitable and productive as they face agricultural and economic challenges. USDA's National Institute of Food and Agriculture awarded 24 grants to 20 universities and organizations through their Agriculture and Food Research Initiative, the nation's leading and largest competitive grants program for agricultural sciences. These research efforts focus on alternative crop enterprises, marketing, and scaling up fruit and vegetable production to overcome marketing constraints. By focusing on these key elements, USDA says small and medium-sized farm operators can increase their competitiveness in local markets and can provide greater access to food for their communities, something USDA says is extremely critical as we build back a stronger, more equitable food and farming system.

USDA Invests $266 Million to Improve Rural Communities Facilities

The Department of Agriculture is providing more than $200 million for rural community services. USDA undersecretary for rural development, Justin Maxson, announced the funding Tuesday. USDA will invest 266 million to build and improve critical community facilities to benefit nearly three million rural residents in 16 states and Puerto Rico. This funding includes $156 million to support health-care-related improvements and emergency response services that will benefit nearly one million rural residents in nine states and Puerto Rico. Maxson says the funding will “spur community development and build sound infrastructure like hospitals and medical facilities to help rural America build back better and stronger.” Specifically, USDA is investing in 41 projects through the Community Facilities Direct Loan and Grant Program. The assistance will fund a variety of essential community services, including emergency response vehicles and equipment. The investments are going to Alabama, California, Georgia, Iowa, Illinois, Kansas, Michigan, Missouri, New Jersey, North Carolina, New York, Ohio, South Dakota, Virginia, Vermont, Washington and Puerto Rico.

Washington Insider: Administration's Large-Scale Economic Plan

Bloomberg is reporting this week that the White House is preparing to send to the president a large-scale economic plan that's “expected to make infrastructure and climate change its leading priorities.”

The proposed programs are expected to include as much as $3 trillion worth of measures to include in the long-term economic investments that will follow the $1.9 trillion coronavirus relief bill signed earlier this month.

Infrastructure and climate change have long been described as major priorities in the proposals and new details show the administration is looking at some $400 billion for so-called green spending, according to persons involved in the effort. The plan also addresses investing in human capital, with tuition reductions proposed for minorities along with health care initiatives.

Unlike the COVID-19 emergency-spending program, the longer-term proposals will feature a major revenue-raising effort. Bloomberg said increasing corporate taxes and rates for the wealthy are expected to be core components of what's set to amount to the biggest tax increases since the 1990s.

The New York Times and Washington Post both reported earlier on White House discussions of the new investment program that Bloomberg says likely will be divided into two main components. The $3 trillion investment figure compares with economists' estimates that ranged of around $2 trillion to $4 trillion. Bloomberg noted that no final spending total has yet been decided on and $3 trillion is what will be presented for consideration at this time.

In related news, Bloomberg said that the rich got richer in the U.S. last year, as wealth created by rebounding stock and real-estate markets skewed toward high earners. The richest 1% of households saw their net worth rise by some $4 trillion in 2020, meaning that they captured about 35% of the new wealth generated nationwide, according to the latest quarterly study of household wealth from the Federal Reserve. The poorest half of the population, by contrast, got about 4% of overall gains, Bloomberg said.

Widening wealth gaps during the pandemic have become a key driver of Biden administration policy, cited by officials as reasons for the proposed tax increases on high-income groups.

In the meantime, the administration is coming under increasing pressure to respond to a growing crisis at the border, with the surge of migrants fleeing Central America showing no signs of abating. In response to the new pressure, the president sent two top White House officials to Mexico and Guatemala this week for talks in his latest attempt to stem the flow of illegal migration.

The trip comes as Sen. Kyrsten Sinema, D-Ariz., and John Cornyn, R-Texas, wrote to the White House to urge the president to use his “full authorities” to respond to the “border crisis.” The letter argued that “immediate action” is needed to ensure there's enough space to house migrants and to improve the asylum process.

Roberta Jacobson, the coordinator for southwest border affairs, and the National Security Council's Western Hemisphere Director Juan Gonzalez will meet with senior leaders in Mexico and Guatemala to “develop an effective and humane plan of action to manage migration,” NSC spokeswoman Emily Horne told the press. They plan to discuss ways to stop the migrants from traveling north to the U.S. border as well as strategies to address the root causes of the migration, such as corruption, violence and poor economic conditions in Honduras, El Salvador and Guatemala.

The surge has been increasingly embarrassing for the administration given its promises to liberal activists for a more humane immigration system. That pledge has come under increasing fire from conservatives – joined by some Democrats from border states – who are pressing the president for a firmer policy to deal with migrants seeking asylum. The influx of border crossings is especially pronounced among unaccompanied children and teenagers, creating a humanitarian predicament and political problems for the White House. President Biden said Monday that he plans to visit the U.S.-Mexico border “at some point” for a first-hand look at conditions.

White House Press Secretary Jen Psaki said today said the U.S. has amplified warnings to people in Central America not to come, citing more than 17,000 radio ads aired in the region by the State Department. At the same time, she denied the situation amounts to a crisis.

“Children presenting at our border who are fleeing violence, who are fleeing prosecution, who are fleeing terrible situations, is not a crisis,” she said. “We feel that it is our responsibility to humanely approach this circumstance and make sure they are treated and put into conditions that are safe.”

Also this week, the recently confirmed U.S. Trade Representative held her first meetings with counterparts from the European Union and the UK, Bloomberg said. Participants are hoping they can resolve the dispute over subsidies to manufacturers Boeing and Airbus. Katherine Tai and European Commission Executive Vice President Valdis Dombrovskis discussed “their strong interest” in resolving the dispute, Tai's office said. In a separate meeting with British Trade Secretary Liz Truss, Tai agreed to partner with the nation toward the same goal.

The new administration's trade objectives have been dampened somewhat as a result of the recent fractious sessions with China in Alaska. Follow-up efforts have concentrated on reassuring investors in important sectors of the U.S.-China markets and downplaying potential long-term concerns. At the same time, it is clear that China is a major market for U.S. ag products and producers should watch those trends closely as the season progresses, Washington Insider believes.

USDA Increases SNAP Benefits With Funding From American Rescue Plan

USDA on Monday announced a 15% increase in Supplemental Nutrition Assistance Program (SNAP) benefits through September 2021, providing an estimated $3.5 billion to households experiencing food insecurity during the COVID-19 pandemic.

The funding was part of the American Rescue Plan. The 15% increase in SNAP benefits will provide about $28 more per person, per month, or more than $100 more per month for a household of four, in additional SNAP benefits.

“We cannot sit by and watch food insecurity grow in the United States,” said USDA Secretary Tom Vilsack. “The American Rescue Plan brings help to those hurting the most due to the pandemic. It increases SNAP benefits so households can afford to put food on the table. It invests in working people and small towns and small businesses to get the economy back on track. And it makes the most meaningful investments in generations to reduce poverty.”

Ag Groups Press For Action On US-Mexico Issues Under USMCA

U.S. ag and commodity organizations continue to press the Biden administration on agricultural trade issues with Mexico, calling for continued action on implementation of the U.S.-Mexico-Canada Agreement (USMCA).

The groups highlighted several existing and emerging friction points in U.S.-Mexico ag trade relations, including actions related to biotech crops, organics, market access and enforcement of European Union (EU) geographic indications (GIs). The groups noted that biotech crop issues and Mexico's actions on glyphosate are significant issues and create “a significant risk and uncertainty to cross-border trade of corn and corn products.”

The groups also noted that U.S. dairy market access to Canada remains an issue that needs to be addressed. The groups' letter came as newly installed U.S. Trade Representative Katherine Tai held virtual discussions with her Canadian counterpart on USMCA and other issues.

Wednesday Watch List

Markets

A report on February U.S. durable goods orders is due out at 7:30 a.m. CDT and don't be surprised if it is less than expected, as many reports for that cold February have been. The U.S. Energy Department releases its weekly inventory report at 9:30 a.m. and traders will check in on last week's ethanol production pace, in addition to the latest weather forecasts and export sales news.

Weather

Rain showers will cover much of the Great Lakes and portions of the eastern Midwest Wednesday. Snow showers will also occur in the far southwestern Plains along with portions of the Northwest. These occurrences continue the unsettled pattern over the central U.S. which will remain through the end of the week. The pattern turns drier during the six to ten-day period.

FFA Students Share Ag Story for National Ag Day

This week, students from around the country will be busy sharing the importance of agriculture. It’s all in celebration of National Ag Day, which is Tuesday, March 23. The day celebrates agriculture and provides an opportunity for those in the industry to share the importance of agriculture with a broader audience. The future of agriculture is strong, and this is evident in the many student-led agriculture organizations. This week, students from FFA, 4-H, Agriculture Future of America, and Minorities in Agriculture, Natural Resources, and Related Sciences will share information on the critical role agriculture plays in our culture and economy. An FFA news release says, “National Ag Day gives students from agriculture youth organizations the chance to work together and share the importance of agriculture and agricultural education with our national government leaders.” Students will also learn skills this week that they can use as they go forward in their lives and strengthen agriculture along the way. All this week, student leaders will work together virtually to discover how they can continue to be advocates for agriculture while telling the vital story of ag throughout the nation. For more information on those events, go to www.FFA.org.

White House Proclamation on National Ag Day

To celebrate National Ag Day on Tuesday, March 23, the White House issued a proclamation regarding the value of agriculture to the country. “We recognize the unique and irreplaceable value that farmers, ranchers, foresters, farmworkers, and other agricultural stewards have contributed to the nation’s past and present,” the White House says. America’s agriculture sector “safeguards our nation’s lands” through sustainable management; ensures the health and safety of animals, plants, and people; provides a safe and abundant food supply and facilitates opportunities for prosperity and economic development in rural America. “Over the last year, workers and other leaders across the ag sector have stepped up to ensure a stable food supply in the face of COVID-19 challenges,” the proclamation adds. “Farmworkers, who have always been vital to our food system, continued to grow, harvest, and package food, often at great personal risk.” The White House also says local farmers helped meet their communities’ needs by selling food directly to consumers. The White House notes, “These collective efforts helped get food to millions of adults and children in America when it needed food the most.”

Rural Mainstreet Index Rockets to New High

The Creighton University Rural Mainstreet Index climbed above growth neutral for the fifth time in the past six months. The monthly survey of bank CEOs in a ten-state region dependent on agriculture and energy shows the index increased to its highest level since the survey launched in 2006. The overall index for March hit a record high of 71.9 from a solid February reading of 53.8. The index runs from zero to 100, with 50 representing growth neutral. Almost 70 percent of the bank CEOs said their local economy is expanding, while the rest say they’re in a state of little or no growth. “Sharp gains in grain prices, federal farm support, and the Federal Reserve’s record-low interest rates have underpinned the Rural Mainstreet economy,” says Dr. Ernie Goss of Creighton University. “Only three percent of the bank CEOs indicated worse economic conditions compared to the previous month.” However, Goss also admits that rural economic activity remains below pre-COVID levels. The farmland price index moved above growth neutral for the sixth-straight month. The March reading is 71.9, the highest level since 2012. The March farm equipment-sales index hit 63.5, the highest level since 2013.

Utah Egg Producers to be Cage-Free by 2025

Another state will require egg producers to turn to cage-free production methods by 2025. Utah Governor Spencer Cox signed a bill last week that prohibits producers from confining hens in cages beginning on January 1 of 2025. It also requires farmers to provide amenities that allow egg-laying hens to exhibit their “natural behaviors,” such as hen perches, nest boxes, and scratching areas. Utah joins other states like Michigan, Oregon, Washington, Massachusetts, California, Rhode Island, and Colorado in eliminating cages. Josh Balk of the Humane Society says Utah’s law is part of a rapid industry shift toward cage-free production methods, noting that “nearly 30 percent of the industry is cage-free.” ABC TV in Utah says egg-laying hens can be raised in an indoor environment as long as they have enough room under the United Egg Producers’ Animal Husbandry Guidelines for U.S. Egg-Laying Flocks. Someone found in violation of the new law could face a fine of $100 per every written notice, regardless of the number of violations identified in the notice. The Humane Society also says Utah’s approximately five million hens will be able to “run around and stretch their legs in cage-free barns.”

Railroads Combine to Form First “USMCA Rail Network”

Canadian Pacific Railway and Kansas City Southern have come together in a merger agreement worth approximately $29 billion. The transaction has the unanimous support of both boards of directors. Following final approval from the U.S. Surface Transportation Board, the transaction will form two railroads that create the first rail network connecting the U.S., Mexico, and Canada. The two railroad systems come together in Kansas City and will connect customers via single-network transportation offerings between points on CP’s system in Canada, the U.S. Midwest, and the U.S. Northeast, as well as points on the KCS system through Mexico and the Southern U.S. The two companies say their combined network’s new single-line offerings will deliver dramatically wider market reach for customers served by CP and KCS, provide new competitive transportation service options, and support North American economic growth. Additionally, the expected efficiency and service improvements should achieve meaningful environmental benefits. Mike Steenhoek (STEEN-hook), Executive Director of the Soy Transportation Coalition, says it’s normal to have concerns about a merger like this. “It’s healthy to be concerned, given how past mergers and acquisitions resulted in a reduction of rail service access rates or increased rates among agricultural shippers,” he says. “However, there’s also little service overlap between the rail companies, which means this proposed merger may result in increased service options.”

Soils Warming Across the Corn Belt

The Corn Belt has seen warmer-than-normal temperatures in most of March. A Successful Farming article says the big questions are will soils be warm enough for on-time planting, and will there be enough soil moisture? Weather Trends 360 says mostly warmer trends through the end of March will likely help soils warm-up well through early spring. However, the occasional cold front shouldn’t be ruled out yet, with the biggest risk of short-term, below-normal temps in the Northern Plains and western Corn Belt. The bigger concern in this area is a shortage of rainfall that might continue. Weather Trends 360 says areas of below-normal rainfall are expected in parts of the Northern Plains and the western Corn Belt. The one good thing about the drier weather is the reduced risk of flooding in most of the Midwest. Recent heavy rains caused some flooding in the lower Missouri and Ohio River Valleys, but the overall threat for widespread flooding is very low.

Washington Insider: Inflation Debate Intensifies

Bloomberg is reporting this week that the idea that it is safe for governments to borrow and spend more money – so long as they can get hold of it cheaply, is attracting new attention.

However, the report says that “as a guide to policy, the doctrine has a blind spot.” Because even after arguing the point for a couple of centuries, economists find it hard to pin down what drives long-run interest rates.

“The greatest area of uncertainty in any forecast really concerns interest rates,” Laura Tyson, a senior economic adviser to the Clinton and Obama administrations. “The profession has not been great at timing either the direction or the amount.”

Those are crucial questions as governments try to figure out how much it's safe to spend on pandemic recovery – and for investors wondering if this year's surge in sovereign-bond yields is a blip or the start of an important new trend.

For years, estimates of future borrowing costs have tended to be too high – leading to projections of bigger debts and helping deter public spending. Some worry the opposite could happen now: politicians will grow complacent about low interest rates, borrow and spend too much, then get a nasty surprise when they spike.

But there's a growing school of economic thought that says that governments and central banks play a bigger role in shaping interest rates than the mainstream acknowledges. This could mean that countries can turn their own borrowing costs into “policy choices,” instead of a price that gets discovered in the marketplace.

It's not a new idea, says Paul McCulley, the former chief economist at Pimco. “The central bank has always had more power over long rates than the consensus thought,” he says. “They just weren't exercising it.”

Now, they are – one way or another, Bloomberg says.

The Bank of Japan has been explicitly targeting government borrowing costs for years, under a policy known as yield-curve control. Australia followed suit during the pandemic.

But central bankers, often the main buyers of sovereign debt nowadays, have other ways to steer the yields without officially making them a policy tool. European Central Bank officials, for example, acknowledge off the record that they manage the cost of borrowing for euro-area governments via bond purchases, Bloomberg says.

Sometimes the idea on its own is enough, says McCulley, who now teaches at Georgetown University. Once central banks acknowledge they have that power, “and the market agrees with that, then it becomes a self-fulfilling prophecy.”

The concern about such policies has been that politicians will spend their countries into bankruptcy or hyperinflation without some kind of external discipline.

Once, financial markets were thought to provide it. More recently the task has been assigned to central banks which were walled off from the rest of government so they can focus on nipping any signs of inflation in the bud.

Key parts of that intellectual edifice have crumbled, however. Bigger budget deficits and debts, one of the things that were supposed to push interest rates higher, didn't do so. Politicians pivoted to austerity anyway, without much of a push from the markets--and economies suffered a lackluster recovery as a result.

COVID-19 is now being seen as different. Spending by governments has been the key to recovery – and the frameworks for assessing how far they could safely go didn't seem much use.

Typically based around budget deficits or national debts as a share of the economy, traditional fiscal guidelines didn't have a role for interest rates – as debt has become cheaper to service even as it grew bigger. Even the Euro area, which enforces a strict version of the old-school rulebook, threw it out in the pandemic.

So, economists are now working on new rules, Bloomberg says.

In a November paper, Jason Furman and others argued that the interest payments a government has to make every year are a better benchmark than its total debt or annual deficit.

The idea carries weight in the Biden administration Bloomberg says and notes that Treasury Secretary Janet Yellen agrees with it.

Furman says that the rule of thumb advocated in his paper – keeping real debt-service costs below 2% of GDP – is applicable regardless of who's right in the debate about what drives interest rates.

“Can central banks decide one variable? Yes. Can they simultaneously decide three variables? No,” he says. “You can do financial repression for a while,” but that just makes it harder to meet other targets like keeping inflation under control.

Modern Monetary Theory (MMT) agrees that inflation is the ultimate yardstick for policy. But it has different ideas about how governments pay for their spending – and what determines long-term interest rates.

While some economists favor explanations such as ageing populations, rising inequality and capital-saving technology, the MMTers believe that when central banks persist in keeping short-term borrowing costs low, they shape long rates too.

And MMT economists see the debate increasingly shifting in their favor. Countries that borrow in their own currencies can't go broke, they say, and the real risk of overspending is inflation not bankruptcy. Now the MMTers would like the profession to take another step in their direction by acknowledging that governments can manage their own borrowing costs.

In the mainstream models, even low interest rates face the danger of spiking that threatening economic plans, says Scott Fullwiler, an MMT economist and professor at the University of Missouri-Kansas City. “They haven't put into this framework that the interest rates are a policy variable.”

So, we will see. These ideas continue to be bitterly controversial in some quarters and stakes are high. The debate is far reaching and certainly one producers should watch closely as it intensifies, Washington Insider believes.