Sanders' big victory in Nevada | Phase 1 update | Trump again trumps up Perdue on MFP
In today's updates:
* Xi Jinping: Coronavirus cases have not yet peaked
Markets: Many look for financial markets to be nervous over the number of coronavirus cases expanding outside of China. See Monday's Policy Updates for the latest early readings of market tone.
Barron's article: Prices for Corn, Other Farm Commodities Have Taken a Dip. It’s a Chance to Buy. Want to know why? Link to article (paywall). Hints: Despite coronavirus, people still need to eat. And, China will need to rebuild stocks.
RFS waiver requests for 2019 now total 23, up two from EPA's last report. So far, no EPA decisions on the requests.
— Coronavirus update:
- Chinese President Xi Jinping said the coronavirus epidemic had not reached its peak despite a drop in the daily number of infections. State broadcaster CCTV quoted Xi as saying at a meeting of the Communist Party’s Politburo on Friday that the situation in Hubei was still serious. “The battles to defend Hubei province and Wuhan should be well fought, and measures should be taken to contain the spread of the outbreak,” he said.
- South Korea raised its alert on the new coronavirus to the highest level on Sunday amid a sudden spike in the number of infections — the country reported 169 new cases of coronavirus and four new deaths, in the largest number of confirmed infections outside China. South Korea’s national toll of 602 cases is now the highest outside mainland China, apart from the Diamond Princess cruise ship in Japan, after the number of the infections soared in recent days. The four deaths, reported on Sunday, take South Korea’s toll to six.
- In Italy, more than 130 people have tested positive as of Sunday — up from just three cases a few days ago — prompting the government to quarantine 11 towns in the northern part of the country.
- Mainland China reported 648 new infections for a total of 76,936. The daily death toll fell slightly to 97. In all, 2,442 people have died in the country from Covid-19.
- The White House will soon ask Congress for emergency funds to fight the coronavirus outbreak, after weeks of hesitation by the administration to press for additional funding, Politico reported, citing four individuals with knowledge of the pending request. The amount could be significantly lower than some public health officials have argued is necessary.
— U.S./China trade policy update:
- U.S., China to meet regularly to discuss progress of trade deal. U.S. and China trade teams will meet every month to discuss progress or iron out disputes, Gregg Doud, U.S. chief agricultural negotiator at USTR, said Friday at USDA's Agriculture Outlook Forum. The meetings will happen four times a year at Doud’s level and twice a year at U.S. Trade Representative Bob Lighthizer’s level. Non-compliance with the Phase 1 accord will allow nations to impose tariffs equivalent to the size of the damage without retaliation, Doud said, adding that this is the first time a mechanism of this sort has been added to a trade deal.
- USDA trade official says “clearly things have slowed down” in China. While the virus spreading in China has slowed things down, China hasn’t asked to delay its pledges under the Phase 1 accord, USDA Undersecretary Ted McKinney said Friday at USDA's Ag Outlook Forum.
- Sharp decline in China trade growth predicted. Li Xingqian, head of the commerce ministry’s foreign trade department, said the growth rate for China’s imports and exports would decline sharply in the January-February period. The reasons, Li said, were the result of poor logistics in the early stages of the coronavirus outbreak, the delayed start of work and the effects of the Lunar New Year break. Li argued the coronavirus impact would be temporary and said the ministry remained confident of an optimistic outlook for foreign trade over the whole year. “As the prevention and control [measures] achieve new staged results, foreign trade will inevitably resume its growth. China's foreign trade development is expected to remain within a reasonable range throughout the year,” Li said. “The fundamentals for the long-term improvement of China's foreign trade have not changed. The competitive advantages of foreign trade are still here objectively. New trade formats have flourished. Foreign trade momentum remains strong.”
— Bernie Sanders scored a major victory in the Nevada caucuses, strengthening his position in the race for the Democratic nomination, with his momentum making it hard for the less liberal wing of the party to slow his march. “We have just put together a multigenerational, multiracial coalition, which is not only going to win in Nevada it’s going to sweep the country,” Sanders said to a jubilant crowd in San Antonio, Tex., on Saturday night. Check this WSJ link for the latest results.
Contests in 15 states over the coming week and a half — starting in South Carolina on Saturday and then Super Tuesday on March 3 — could prove decisive in determining the course of the race.
— President Trump again surprises Perdue, other USDA officials re: possible need for MFP 3. USDA Secretary Sonny Perdue should have learned after President Trump tweeted about the MFP 2 program following Perdue comments that a program would not be needed. That led USDA to have to scramble in a few weeks to come up with a program to deliver $16 billion in payments. The pattern possible continued last Friday when the president again tweeted about a possible need for MPF for 2020 (MFP 3).
The all-caps tweet from Trump: “IF OUR FORMALLY TARGETED FARMERS NEED ADDITIONAL AID UNTIL SUCH TIME AS THE TRADE DEALS WITH CHINA, MEXICO, CANADA AND OTHERS FULLY KICK IN, PAID FOR OUT OF THE MASSIVE TARIFF MONEY COMING INTO THE USA!”
“The president’s tweet was a surprise to us,” said Ted McKinney, undersecretary of Agriculture for Trade, during the USDA Agriculture Outlook Forum. “He will make that decision. And we will go with that decision.”
Comments: Key phrase in Trump's tweet is “fully kick in” relative to trade deals with China, Mexico, Canada and others. Does anyone think those will fully kick in soon? Perdue in a statement Friday evening said, “The president’s tweet today shows that he stands prepared to do another round” of aid, “if necessary. I hope we can show that a third round is not needed for 2020 — we still believe farmers want trade rather than aid,” he added. Of course, farmers want trade, not aid. But does Perdue think all these trade accords will “fully kick in” during 2020... not partially kick in, but fully kick in? The answer should be no. Bottom line: Another MFP is likely, perhaps a scaled-down program and another different approach to reduce the wide county differences in some areas. One should base the odds of another MFP on what Trump tweets, not comments from Perdue or other USDA officials, some who appear out of touch on this topic that is so important to agriculture's financial well-being. Meanwhile, a former USDA official emailed this: “USDA is trying to tamp down expectations that could influence planting decisions. Having said that, there is only one voice that matters and that is the one coming out of the Oval Office... count me in the camp if exports don’t pick up and prices, we will see another round of MFP.”
— Thune pushes SHIPP program he pushed for in 2018 Farm Bill. While most producers would prefer that each acre of land was equally profitable, Sen. John Thune (R-S.D.) notes that “sometimes the most effective strategy is taking some or all of it out of production altogether.” Farmers who choose this option have a variety of USDA conservation programs available to them to help offset the cost of lost production and ensure the land is being managed as efficiently as possible. Thune's Soil Health and Income Protection Program (SHIPP) is a new USDA conservation pilot program that is expected to open soon in Prairie Pothole Region states, including South Dakota, North Dakota, Iowa, Minnesota, and Montana.
SHIPP is a short-term alternative to the Conservation Reserve Program (CRP). Thune said with SHIPP, he is confident it will become an equally recognizable tool because it offers many of the same benefits as CRP but with far shorter contract commitment options (three, four, or five years).”
Under SHIPP, farmers can enroll up to 15% of a farm’s least productive acres, as long as they were planted or considered planted to a commodity crop for three consecutive years prior to enrollment. In return, the enrollee would receive an annual rental payment. Once enrolled, the acreage must be planted to a perennial conserving use cover that can be hayed or grazed outside the designated primary nesting and brood-rearing season in the county in which the land is located. SHIPP is a low-cost program, Thune said, because “it encourages the removal of poor land from taxpayer-subsidized crop insurance premium subsidies and indemnities.”
In a stab at Democratic presidential candidate Mike Bloomberg, Thune said, “Farming is far more complicated than simply digging a hole, planting a seed, and watching it grow, as most folks who are out of touch with farm country might inaccurately assume. Farmers know what it takes, and so do the communities across America’s heartland that help support their mission to feed the world. In today’s sluggish agriculture economy, we need to keep our eye on the ball and do everything we can to help farm country, and I believe SHIPP will create some much-needed certainty in these highly uncertain times.”
— U.S. lifts ban on Brazil beef imports. The U.S. has reopened its doors to fresh beef from Brazil after a more than two-year ban, a major win for President Jair Bolsonaro ahead of a scheduled meeting with Donald Trump in March. Brazil can now begin shipping raw meat from cattle slaughtered from Feb. 21, according to a letter sent by the Food Safety and Inspection Service to Brazilian Agriculture Minister Tereza Cristina. The decision was taken after Brazil “corrected the systemic issues that led to the suspension,” according to the letter.
Background. The U.S. suspended imports in 2017 after finding meat containing blood clots and lymph nodes. Brazil said the findings were abscesses stemming from a reaction to components of a vaccine against foot-and-mouth disease. After the U.S. measure, Brazil reduced the vaccine dose and changed the feed stock in an effort to overturn the ban. In October, the U.S. told Brazil it would keep the measure in place.
A large Brazilian beef exporter told Reuters that the impact would not be as immediate as the Agriculture Ministry implied. "There is no communication saying, 'Look, tomorrow you can produce and export,'" said the exporter, who asked not to be named. "It is a great step, but they need to be clearer in their communications."
— Other items of note:
- Consumer Reports: The truth about sugar and artificial sweeteners... “Too much sugar in your diet can lead to weight gain and raise your risk of heart disease, type 2 diabetes, and other ailments. But are sugar substitutes any better?” Link to article (paywall). The article looks at how our bodies respond to sugar and low-cal sweeteners.
- This Friday is the deadline to apply for the Conservation Reserve Program under the last general signup. USDA is expected to inform landowners about the fate of their request by the end of March.
— Markets. The Dow on Friday lost 227.57 points, 0.8%, to 28,992.41.The S&P 500 dropped 35.48 points, 1.1%, to 3,337.75. Nasdaq fell 174.37 points, 1.8%, to 9,576.59.
For the week, the Dow dropped 1.4%, snapping two weeks of solid gains. The benchmark is up 1.9% for the year. The S&P 500 index dropped 1.2% for the week and is up 3.6% for the year. The Nasdaq dropped 1.6% on the week and is up 6.9% year to date.
Yield on the benchmark 10-year U.S. Treasury note touched its lowest level since September on Friday, settling at 1.470% after earlier approaching the all-time low of 1.366% from 2016. Yields on even longer-dated Treasurys fell to a record low.
Gold prices climbed for the seventh consecutive session to a seven-year high and extended their gains for the year to 8.2%.
G20 finance officials note downside risks to global economy. Finance chiefs and central bankers from the world’s 20 largest economies cited downside risks to global economic growth and agreed on a “menu of policy options” amid a coronavirus outbreak that’s disrupted supply chains worldwide. The countries “agreed to be ready to intervene with the necessary policies related to these risks,” Saudi Finance Minister Mohammad Al Jadaan said Sunday in remarks concluding the meetings at the Ritz Carlton Hotel in the Saudi capital. “Global economic growth is continuing but remains slow and downside risk persists, including those arising from geopolitical, remaining trade tensions, as well as policy uncertainty.” Meanwhile, the delegates garnered a key concession from the U.S. by including a focus on climate change in the final communique.