No Face-to-Face U.S./China Meeting Yet Scheduled as Another Telephone Session Held

Posted on 07/19/2019 7:10 AM

NASS to use certified acreage data as part of August Crop Production info


The U.S. military shot down an Iranian drone threatening U.S. ships in the Strait of Hormuz. The U.S. took action on Thursday amid escalating tensions with the Middle East country. President Trump announced the event at a press conference soon after it happened. Iran denied that the U.S. Navy downed one of its drones. Iranian foreign minister Mohammad Javad Zarif said, “The drone issue is being investigated, but based on the latest news I have from Tehran, we have no information about losing a drone.” Analysts note that the two countries previously were nearly pulled into a war that no one wants. Iran may again lash out against the pain of U.S. sanctions, while the U.S. and Europe remain deeply divided on a response to diffuse tensions. Hours before the drone incident, Iran’s foreign minister said he was willing to discuss possible solutions to the nuclear crisis with the Trump administration. Market reaction: drone down, crude up.
     Russia has warned Trump to back away from the escalation of tension with Iran, saying the U.S. and its allies were at fault. In an interview with Moscow-based newspaper Argumenty i Fakty, Russian foreign minister Sergey Lavrov said, “The U.S. is flexing its muscles by seeking to discredit Tehran and blame all the sins on the Islamic Republic of Iran... This creates a dangerous situation: a single match can start a fire. The responsibility for the possible catastrophic consequences will rest with the United States.”
     What? A 50 basis point cut in rates later this month by the Federal Reserve? The odds are still below expectations for a 25 basis point cut. Link. On Thursday, financial markets reacted quickly to various Fed officials' comments, with Fed fund rate futures at one point pricing in an almost a 70% chance of a 50 basis point cut. The odds eased to just over 45% (as of this writing) after the New York Fed said Governor John William's speech had not been about immediate policy direction. He said New York Fed research indicated that the Fed needed to act quickly at the first sign of economic problems when inflation and interest rates are low. "It's better to take preventative measures than to wait for disaster to unfold," Williams said. Fed Vice President Richard Clarida later echoed William's proactive approach, saying you "don't have to wait until things get bad to have a dramatic series of rate cuts." Meanwhile, the European Central Bank is expected to signal further easing at its meeting next week.
     Will agriculture be part of budget cuts ahead as part of a deal in the making? The White House sent House Speaker Nancy Pelosi (D-Calif.) a proposed list of spending cuts it says can be used to seal a debt ceiling deal. It wasn't that long ago when the ag sector and the crop insurance sector in particular had to get Congress to backtrack on multibillion dollars in cut as part of a prior budget accord. While congressional leader should have learned some lessons from that errant attempt, anxiety is still mounting as Treasury Secretary Steven Mnuchin said, “We’ve reached an agreement between the administration, the House, and the Senate on top-line numbers for both year one and year two. We are now discussing offsets.” The Associated Press reports Mnuchin said that “negotiators have reached an agreement on the core elements of a deal to increase the government’s borrowing cap and set a $1.3 trillion overall level for the agency budgets that Congress passes each year.” However, Politico reports that the Trump administration “wants a guarantee that Democrats won’t insert ‘poison pills’ in individual spending bills, like provisions barring the use of federal funds to build Trump’s border wall.”
     About the USDA release of interest... NEXT Thursday... not THIS Thursday. Topic: MFP 2 details.
     The Environmental Protection Agency will not ban a widely used pesticide that has been linked to serious health problems in children. It's a victory for the chemical industry and farmers who lobbied for chlorpyrifos.
     Music for babies' ears, but... The city of West Palm Beach in Florida was criticized for a policy of playing two toddler-music hits — “Baby Shark” and “Raining Tacos” — on an incessant loop to keep homeless people away from a city-owned rental facility at night. Advocates for the homeless described the repurposing of infuriating but innocent children’s music was cruel to people “already in desperate straits.”

 

USTR confirms second phone conversation with China on trade. The Office of the US Trade Representative confirmed that USTR Bob Lighthizer and Treasury Secretary Steven Mnuchin spoke with Chinese counterparts, but did not signal which officials the two talked with, nor did they provide any information about what was discussed.

The Xinhua news agency said the talks were with Chinese Vice Premier Liu He and saw the two sides exchange views on implementing the agreement between President Donald Trump and Chinese President Xi Jinping in Osaka, Japan. The report also noted that Minister of Commerce Zhong Shan was part of the conversation.

The two sides also discussed the “next steps” for the consultations, according to to a Ministry of Commerce statement referenced by Xinhua.

Mnuchin signaled early Thursday that the conversation was going to take place and also indicated that it could lead to in-person talks. "Right now we’re having principal-level calls and to the extent that it makes sense for us to set up in-person meetings, I would anticipate that we would be doing that," Mnuchin told Reuters ahead of the conversation.

Bottom line: No announcement of a follow-up face-to-face meeting, which some had been hoping for. The deep differences between the two sides point to slow progress.

‚— Corn as cover crop is counted by NASS. Lance Honig, Crops Branch Chief at USDA’s National Agricultural Statistics Service (NASS), confirmed to Pro Farmer last week that corn planted as a cover crop will be included in total corn plantings in the agency’s acreage resurvey. NASS surveys for total corn plantings, regardless of use. Any adjustment for those acres not intended for use as grain would be via an adjustment to the harvested acreage percentage.

Honig also told Pro Farmer that NASS will use “every piece of information available” in making its August crop estimates, including certified acreage data — even though it won’t be complete. NASS typically doesn’t incorporate certified acreage into its corn and soybean crop estimates until October, but this is not a normal year. NASS does get weekly readings on FSA certified acreage data, not just the monthly that is released to the public. NASS has a long history of tracking that information over the years.

Concern and criticism about USDA's effort to relocate the Economic Research Service (ERS) and National Institute of Food and Agriculture (NIFA) from Washington, DC to the Kansas City area dominated a hearing held by the Senate Agriculture Committee Thursday.

USDA Deputy Undersecretary of Research, Education, and Economics Scott Hutchins was the sole witness, and faced intense questioning from committee Democrats opposed to the departments plan to relocate the two research agencies.

A clear partisan split emerged over the relocations, with Republicans guardedly optimistic about the effort and Democrats emphasizing concerns the moves will decimate the agencies' research capacity and that USDA is disregarding direction from Congress in the matter. While the relocations "will allow these agencies to access the many existing resources and benefits of the [Kansas City] region," committee Chairman Pat Roberts (R-Kan.) cautioned "it is vital that we ensure the research missions remain intact and are supported and strengthened for this nation's growers." Priority must be given to ensuring "the department continues to produce quality analytic reports without delay during this transition," he added.

Democrats cast the relocations as an existential threat to USDA's ag research capacity. "I am deeply concerned that this administration is undermining the foundation of the USDA scientific research mission, the administration's haphazard decision to relocate two critically important research institutions... will affect real people who rely on the USDA services and hamper its capacity to support farmers families in rural communities for years to come," said committee Ranking Member Debbie Stabenow (D-Mich.).

Top concerns are expected staff losses from employees unable or unwilling to relocate, Stabenow said. Besides the immediate impact of lowering the agencies "capacity to do their important work," the moves will also see USDA "lose irreplaceable expertise," she argued.

Hutchins emphasized USDA's stated rationale for the moves, arguing they will "enhance the mission of these agencies in the long term." He cited " Long term savings, the ability to attract top agricultural talent and proximity to numerous agricultural constituents," as key motives for the effort. "USDA is fully committed to seeing NIFA and ERS thrive as mission critical agencies," Hutchins told lawmakers. He noted that this coming Monday, USDA would be welcoming "six brand new employees" between the two agencies in Kansas City.

Freight railroads are demonstrating that falling shipping volumes don’t always mean slimmer profits. Union Pacific Corp. (UP) reported a 4% gain in profit to $1.57 billion in the second quarter and improved its operating ratio, even as the problems that have hit the rail industry helped cut its shipping volumes by 4%. The Wall Street Journal reports (link) that UP also slashed its expenses by 7% in the quarter, in part through operating efficiency efforts that have been sweeping across rail networks. Railroads need the productivity drive: Carload volumes are off 3.1% this year, and the decline has been accelerating across most business lines. “But the railroads are displaying financial and operating discipline. Canadian Pacific Railway Ltd.’s profits jumped 33% on a 13% gain in revenue, and even a downbeat report from CSX Corp. included a strong improvement in the carrier’s operating ratio,” the WSJ noted.

Other items of note:

  • Scalia’s son to be nominated as labor secretary. President Trump plans to nominate Eugene Scalia, a son of the late Justice Antonin Scalia, as secretary of labor, a well-known figure in labor policy after the resignation of Alex Acosta. Link to New York Times article for details. Scalia, a partner at a Washington law firm, has a long record of representing Walmart and other companies.

  • The House voted on Thursday to more than double the federal minimum wage by 2025, to $15 an hour. It would be the first increase in a decade, but the measure faces a major hurdle in the Senate.

  • EPA won’t ban chlorpyrifos, a pesticide linked to developmental disabilities in children. The decision by Andrew Wheeler, the EPA administrator, represents a victory for the chemical industry and for farmers who have lobbied to continue using the substance, chlorpyrifos, arguing it is necessary to protect crops. EPA said in a statement that the data supporting objections to the use of the pesticide was “not sufficiently valid, complete or reliable.” The agency added that it would continue to monitor the safety of chlorpyrifos through 2022. The substance, sold under the commercial name Lorsban, has already been banned for household use but remains in widespread use by farmers for more than 50 fruit, nut, cereal and vegetable crops. “We will go back to court and seek an order to ban chlorpyrifos in our food nationwide,” said Patti Goldman, an attorney with Earthjustice in Seattle. State bans have also been announced in some places.

  • Lineups for the second Democratic debates July 30 and 31: On the first night, Sens. Bernie Sanders (I-Vt.) and Elizabeth Warren (D-Mass.) appear together. Former Vice President Joe Biden and Sen. Kamala Harris (D-Calif.) will face off again the second night, following the last debate that weakened Biden's outlook.
    Second of Dem debates

Markets. The Dow on Thursday edged up 3.12 points, 0.01%, at 27,222.97. The Nasdaq rose 22.04 points, 0.27%, at 8,207.24. The S&P 500 gained 10.69 points, 0.36%, at 2,995.11.

S&P 500 companies are trading at more than 22 times earnings — among the most expensive valuations in the index's history —and the Dow's 19 P/E is also elevated.

The financial fallout from the 737 Max jetliner continues to swell for Boeing, which yesterday announced $7.3 billion in costs that will hit its bottom line. Boeing will take a pretax charge of $5.6 billion in the second quarter, its current estimate of what it will take to compensate its Max-flying customers. Boeing said it also expected the production slowdown to cost a further $1.7 billion. And, it has already announced $1 billion in costs associated with the Max’s grounding last quarter. Total tab thus far: $8 billion... and counting. The costs and the potential timing of the MAX’s return to commercial service will be a key focus of investors when Boeing releases earnings for the second quarter next week.

Drone down, crude up... but benchmark crude prices are on track for their biggest weekly decline in seven weeks. Still, oil futures rose 1.4% to $56.19 overnight as President Trump said the U.S. Navy downed an Iranian drone that flew close to an American warship in the Strait of Hormuz. The area is a major chokepoint for global crude flows. But the IEA still doesn't expect oil prices to rise significantly because demand is slowing and there is a glut in global crude markets, Executive Director Fatih Birol told an energy conference in New Delhi.


 

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