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.”
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Tuesday, March 23, 2021
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.
Local Government Getting Involved in National 4-H Conference Sale
Members of the Chevy Chase Town Council in Maryland now plan to put together a task force to ensure they have a say on the future of the National 4-H Conference ahead of a potential sale later this year.
Representatives for the National 4-H Council briefed members of the town council during a virtual Zoom session last Wednesday evening after residents weighed in by email and the jurisdiction's Listserv on what public amenities and uses they would like to see integrated into future plans for the 12.28-acre site.
The 4-H has retained CBRE to market the property for sale, with a prospective purchaser being selected in the second quarter and a closing before the end of the year.
The property is currently assessed at about $19.9 million, according to the Maryland Department of Assessments and Taxation.
Commercial uses are not permitted by right on the property, and several of the town's elected officials asked whether a condition could be imposed on the sale requiring future owners to maintain its residential zoning.