Washington Insider: Lack of New Subsidy Deal Concerns the Fed

The Hill and other media are reporting this week that Federal Reserve officials expressed deep concerns that the steady spread of the coronavirus would continue to slow the pace of economic recovery and drive the U.S. into a much sharper downturn later this year, according to minutes from its July meeting released Wednesday.

During the July 28-29 meeting of the Federal Open Market Committee—the Fed's policymaking arm — bank officials anguished over signs that the U.S. was losing ground in its fight against the pandemic and the recession it spurred.

Fed leaders cited a slowdown in hiring between May and June, rising cases of coronavirus across the U.S. and the expiration of crucial fiscal stimulus as critical threats to a fragile economy severely restrained by an uncontrolled pandemic.

“The path of the economy will depend significantly on the course of the virus and the ongoing public health crisis will weigh heavily on economic activity, employment, and inflation in the near term and poses considerable risks to the economic outlook over the medium term,” the minutes read.

The readout from the Fed's July meeting is the latest window into the growing concern over the economic impact of the pandemic among central bank officials. Fed Chairman Jerome Powell and several reserve bank presidents have issued increasingly direct calls for social distancing measures, widespread mask-wearing, and other practices proven to curb the spread of the novel coronavirus. In addition, the July FOMC minutes outline the warning signs that moved Powell and other Fed leaders to speak directly about the economic necessity of a robust public health response, The Hill said.

The July meeting wrapped days before a $600 boost to weekly unemployment benefits and an eviction and foreclosure ban expired, sapping fiscal support that economists considered crucial to preventing a deeper downturn.

“Participants noted that the fiscal support initiated in the spring through the CARES Act had been very important in granting some financial relief to millions of families,” the minutes read. Several officials argued that extending that aid “would likely be important for supporting vulnerable families, and thus the economy more broadly, in the period ahead.”

But Congress and the administration have been unable to strike a bipartisan deal ahead of the July 31 deadline and have been locked in a stalemate for weeks since. The broad disagreements among Democrats and Republicans are far greater than those between liberal and conservative economists, who largely agree on the need for another stimulus bill, The Hill said.

In a separate report, The Hill took an unusually critical position regarding Congressional efforts to provide necessary support. It asserts that “majorities in the Democratic-controlled House and Republican-controlled Senate also favor spending about $100 billion to help schools and universities implement full-bore distance learning for an uncertain duration. Yet both chambers went home for August without passing such aid.”

The Hill concludes that, “clearly, this isn't how our democracy is supposed to work — and the current lack of cooperation leads to the “monumental gridlock and dysfunction that has made Congress one of the least-respected and least-liked institutions in the land.”

The report cites a Washington Post early August report that “the talks on Capitol Hill had a dramatic and bitter unraveling.” The parties had managed to approve earlier aid packages,” but this time, “there seemed to be little goodwill or trust, and both sides dug in even as the economic recovery showed signs of losing steam, millions of Americans remained unemployed and deaths from the novel coronavirus continued to climb.”

The Hill then concludes that perhaps the most incomprehensible aspect of this behavior is that the leadership's self-imposed logjams steadily push more power and responsibility away from Congress and toward the executive branch. “We saw this when President Trump announced he would use his executive powers to shift funds (a constitutionally questionable action) to enhance unemployment benefits by $400 a week, partly replacing the $600 that has lapsed during Congress' impasses, the report said.

Now, the Hill thinks that “most Americans' expectations are probably quite low” and it counsels the Congress to “just pass measures you already agree on to help the country at least begin to address its toughest problems.”

So, we will see. Amid nominating conventions of both parties, a fairly new fight is focusing on how the fall elections should be held and votes cast and counted — perhaps the most contentious issue of all. These are a few of many debates and fights going on this fall that producers should watch closely as they emerge, Washington Insider believes.

USDA Updates Payment Limits, Eligibility Rules

USDA has released new rules on payment limits and payment eligibility to reflect updated provisions in the 2018 Farm Bill.

The actions include that USDA may approve a waiver of the average adjusted gross income (AGI) limitation for participants of certain conservation contracts administered by the Farm Service Agency (FSA) and the Natural Resources Conservation Service (NRCS) on environmentally sensitive land.

Also, the mandatory changes expand the definition of “family member” to include first cousins, nieces, and nephews.

The Office of Management and Budget completed its review of the USDA plan July 29 and the final rule is published in today's Federal Register and was effective August 20.

China Says Trade Confab With US On Tap In Coming Days

China and the U.S. will hold trade talks on the status of the Phase One agreement between the two countries “in the coming days,” according to Chinese Commerce Ministry spokesman Gao Feng. He made the remarks during a briefing but did not offer any details, except to say, "Both parties have agreed to hold a call in the near future.”

Meanwhile, White House Chief of Staff Mark Meadows said this week that no talks had been scheduled as of yet. “There are no rescheduled talks ... at this point,” Meadows told reporters. “Ambassador Lighthizer continues to have discussions with his Chinese counterparts involving purchases and fulfilling their agreements.”

This comes as White House trade advisor Peter Navarro acknowledged China's stepped-up purchases of U.S. farm products as part of their commitments made under the Phase One trade deal.

Chinese Ambassador to the U.S. Cui Tiankai said at a Brookings Institution event last week that U.S. needed to make decisions on bringing bilateral ties between the two countries back to a normal track.

Friday Watch List

Markets
USDA's weekly export sales report at 7:30 a.m. CDT always gets attention, but especially during this active time of year. U.S. jobless claims and an update of the U.S. Drought Monitor are also released at 7:30. A U.S. index of leading economic indicators follows at 9 a.m. CDT and natural gas inventory at 9:30 a.m. Thursday's weather forecasts and any additional trade news will also be noticed.

Weather
Thursday will again be very warm and dry over all primary crop areas. Rain will be confined to light showers in the Southeast. The dry pattern is indicated to remain in place through the next seven days. Precipitation chances increase at the end of the month.

Farmer Support for Trump Remains Strong

President Donald Trump trails former Vice President Joe Biden in election polls, but farmer support for Trump remains strong. A recent Pulse Poll from Farm Journal shows 82 percent of the more than 1,500 farmer respondents say they would vote for President Trump if the election were held today. Meanwhile, 13 percent say they would vote for Biden, while five percent remain undecided. Farm Journal conducted a second poll after Biden announced Kamala Harris as his running mate, where just nine percent of respondents say Harris would make them more likely to vote for Biden. Farm Journal says President Trump has enjoyed steady support in the Pulse Poll with his approval rating remaining in a range between 75 percent and 80 percent for the past year. There’s been much discussion during the Democratic National Convention this week how the party needs to engage with rural America. Former Agriculture Secretary Tom Vilsack has pleaded to the party since 2016 to engage with rural voters.

Study Shows Value of Red Meat Exports to Corn Farmers

A new study shows red meat exports added 12 percent of bushel value to U.S. corn farmers in 2019. The U.S. Meat Export Federation recently updated a study on the market value of red meat exports. At an average of $3.75 per bushel, $0.46 is from red meat exports, according to the study. The results indicate that without red meat exports, corn growers would have lost $6.4 billion in corn revenue in 2019. Last year, U.S. beef and pork exports used 480 million bushels of corn. Corn revenue generated by pork exports totaled $1.8 billion. Beef and pork exports also used about three million tons of distiller’s dried grains with solubles in 2019 at an annual average price of $137 per ton. This generated $411.8 million in revenue for co-products from ethanol mills. USMEF says beef and pork exports have been the fastest-growing category of corn use since 2015. The projected market value of red meat exports to U.S. corn from 2020-2029 is $23.1 billion.

CFAP Expansion Doesn’t Include Hemp, Growers Respond

U.S. Hemp growers are disappointed the recent Coronavirus Food Assistance Program commodity expansion does not include hemp. Last week, the Department of Agriculture expanded the commodities covered under the program that provides COVID-19 relief to producers. CFAP includes commodities that USDA can prove saw losses of five percent or more in the first quarter of 2020. The U.S. Hemp Growers Association says, “We believe our farmers did present evidence of losses to our growers that were five percent or more in the first quarter of 2020.” Hemp is such a newly legal crop that it does not have the advantage of data gathered by USDA agencies. Currently, the data available to understand the market is gathered privately by several data companies. USHGA believes two datasets showed a five percent pricing decrease and more in hemp and hemp products in the first quarter of 2020. The statement says, “All hemp farmers are now wondering what kind of treatment they will receive should there be future problems.”