USDA reports today will provide missing info for market tone ahead
Lawmakers working on a border deal say they’re getting close and could strike an agreement to avoid a government shutdown as soon as this weekend. Sen. Richard Shelby (R-Ala.), chairman of the Senate Appropriations Committee, said he believes a deal will be reached among House and Senate negotiators in the coming days. Shelby was at the White House on Thursday to brief Trump on the negotiations. “The president urged me to get to `yes.’ He would like us to conclude our bill in a positive way for the American people,” Shelby said.
USDA today will release some much-anticipated reports covering supply and demand, winter wheat seedings and grain stock estimates. Those, along with likely continued reports about the possible Trump/Xi meeting, will set the tone for ag commodity markets, ahead of USDA's Outlook Forum later this month and the coming Prospective Plantings report. This assumes there will not be another partial government shutdown as lawmakers are signaling an agreement is nearing, with details on that possibly coming no later than Monday.
Mike Allen of Axios writes: “Democrats are flirting with socialism in ways they carefully and clearly ran away from in the past, handing President Trump a new way to unify Republicans — and to club his opponents. It started with Democrats sitting silently as he railed against socialism in his State of the Union speech. It intensified with Rep. Alexandria Ocasio-Cortez's (AOC) release of a Green New Deal, a vague policy manifesto loaded with big-government policies. The surge is unlikely to abate: Young, Twitter- and social-savvy Democrats favor socialism over capitalism. And no Democrat in politics today plays the social media game with more savvy than AOC.”
— Conferees signal spending deal by Monday. Ahead of a Feb. 15 deadline when stopgap government funding expires, some of the lawmakers negotiating a fiscal 2019 spending deal are hopeful that a final bill is close. “I think it’s entirely possible we could have a deal in a timely manner, which would be tomorrow,” Sen. Jon Tester (D-Mont.) said Thursday.
The conference committee could meet Monday on a final package, allowing enough time to get the conference report to the House floor by Thursday, followed by Senate action, said Senate Appropriations Chairman Richard Shelby (R-Ala.). Shelby, after meeting with President Trump in a “productive” and “positive” meeting Thursday, said he thinks Trump would sign a final bill. “We’re negotiating on the substance, serious stuff now…. This is the most positive I’ve been or I’ve seen in the talks since, oh gosh, maybe ever,” Shelby said.
A big push is on by biodiesel supporting lawmakers to include an extension of the lapsed biodiesel tax incentive program.
— U.S. will withdraw from 2013 tomato agreement with Mexico on May 7 to protect American producers from unfair trading practices, the Commerce Dept. said in a statement. Investigations by Commerce and, possibly later, by the ITC, may result in an antidumping duty order, according to the statement. Commerce said it opened negotiations in January 2018 with Mexican counterparts but that “significant outstanding issues remained” in reaching a revised agreement.
Some observers wonder if this will impact Mexico's approving the pending U.S.-Mexico-Canada Agreement (USMCA). Others said the development could aid prospects for the U.S. Congress approving the USMCA as it shows the administration wants to enforce trade policy provisions.
The biggest news regarding the fate of the USMCA came Thursday when House Speaker Nancy Pelosi (D-Calif.) said she was “optimistic” about the chances of USMCA passage, even as she cautioned that strong enforcement needs to be "central" to the deal.
— House Democrats introduced a nonbinding resolution calling for a sweeping environmental and economic mobilization that would make the U.S. carbon neutral by 2030.
But the real message is the difference it shows between some in the Democratic Party and mainstream thinking on a host of issues. Portions of the aggressive push will likely be part of the 2020 election campaigns.
Proponents have called it a “Green New Deal” while House Speaker Nancy Pelosi (D-Calif.) labeled it a “Green Dream.” Pelosi has no plans to bring it to a vote in its current form.
The blueprint released Thursday by Rep. Alexandria Ocasio-Cortez (D-N.Y.) and Sen. Ed Markey (D-Mass.) calls on the federal government to work with farmers and ranchers to remove pollution from the agricultural sector “as much as is technologically feasible.“ It also urges Congress to enact a 10-year plan to shift the U.S. economy away from fossil fuels to combat climate change.
Republicans call the plan a "socialist manifesto" that would "take our growing economy off the cliff and our nation into bankruptcy."
One observer noted the plan “taxes cow farts.”
— Peterson frets about USDA implementation of new farm bill dairy programs. House Agriculture Chairman Collin Peterson (D-Minn.) said Thursday he is concerned the new dairy provisions in the farm bill may be too complicated for USDA and insurance agents to evaluate in time to help farmers decide what protection to buy.
Under the 2018 Farm Bill, dairy farmers can enroll in three programs: Dairy Margin Coverage (formerly known as the Margin Protection Program), as well as two crop insurance policies called Livestock Gross Margin and Dairy Revenue Protection. Farmers can enroll all of their production in both Dairy Margin Coverage, administered by USDA’s Farm Service Agency, plus either the livestock or revenue protection policy, both of which are administered by the department’s Risk Management Agency (RMA). There is a restriction on using the two RMA policies together: they can’t cover the same milk production.
“The biggest problem I think is it‘s going to be very complicated,” Peterson told reporters after a House Agriculture Committee meeting Thursday. “You can now potentially be in all three programs. That’s going to be a tough thing to figure out how to do that.“
Meanwhile, Senate Ag Chairman Pat Roberts (R-Kan.) and ranking member Debbie Stabenow (D-Mich.) sent a letter (link) Thursday to federal banking officials who oversee farm lenders to ask them to consider the new risk management options in the farm bill when making loans to dairy producers. “Because important USDA implementation resources and decision tools were delayed during the government shutdown, dairy farmers and their lenders might not fully account for the benefits they will receive under the new dairy safety net, which could require farmers to provide more collateral, pay a higher interest rate, or be denied altogether,” Stabenow said in a statement.
— Australia expects heavy livestock losses from floods. Heavy rains have produced major flooding in far north Australia are expected to result in hundreds of thousands of livestock deaths, with Prime Minister Scott Morrison signaling the government expects heavy losses and they are working to provide feed for trapped animals. "This will be heartbreaking to these communities that have been experiencing years of drought only to see that turn into a torrential inundation," Morrison told reporters.
The Australian Bureau of Meteorology said that the full extent of the situation will not be known until clouds clear. Others have cautioned that there is not enough information as of yet to determine the extent of losses and they point out that driest areas of the country may end up benefitting from rains as it will improve pasture conditions.
— Other items of note:
The U.S. military set a target date for leaving Syria. The Pentagon is preparing to pull all American forces out of Syria by the end of April, even though the Trump administration has yet to come up with a plan to protect its Kurdish partners from attack when they leave, current and former U.S. officials said.
John Dingell, the longest-serving member of Congress, dies at 92. The Michigan Democrat served in Congress longer than any member in history and was a leader on civil rights, environmental and health-care laws. He represented a Michigan district for a record 59 years.
Anne Hazlett will be leaving her rural development post at USDA to take on a new role at the White House addressing opioid abuse in rural communities. Secretary Sonny Perdue will look for a new undersecretary for rural development, a position reinstated by the 2018 Farm Bill.
Shipping rates in maritime’s dry-bulk sector are in freefall. Declining demand in China and Brazil and slowing economic conditions worldwide have dragged down prices for hauling iron ore and other commodities, the Wall Street Journal reports (link). The Baltic Dry Index, which tracks the cost of moving bulk commodities, is down more than 50% since the start of the year as operators face the lowest demand they’ve seen in two years. It’s not unusual for demand to slow this time of year as China’s Lunar New Year holiday shuts down factories and businesses nationwide. “But trade tensions between China and the U.S. and the Vale iron ore disaster in Brazil have created new sources of uncertainty for bulk ship owners,” the article noted. China agreed last week to purchase 5 million tons of soybeans from the U.S., “but operators need a stronger global economy for a true rebound.”
The first truckloads of a promised $20 million in American aid to Venezuela remained stuck at the border with Colombia, as President Nicolás Maduro’s government continued to refuse relief to his stricken nation. Some 40 countries have recognized opposition leader Juan Guaidó as Venezuela’s legitimate head of state, but Maduro retains control of the army.
Frigid temps impact car batteries. At 20 degrees, the average driving range for an electric vehicle fell by 12% but when the car’s cabin heater was not used. When the heater was turned on, the range dropped by 41 percent, AAA said. Link.
Reuters: Long, strange trip: How U.S. ethanol reaches China tariff-free. Link to article.
Tariffs' impact on food equipment manufacturers. The North American Association of Food Equipment Manufacturers (NAFEM), a member of the Coalition of American Metal Manufacturers and Users, released a survey about the impact of the 232 and 301 tariffs on NAFEM’s members, who are foodservice equipment and supplies manufacturers. The survey (link) found that the tariffs have negatively impacted their businesses:
• 56% said that tariffs on imported steel and aluminum have impaired their ability to compete and 47% said these tariffs are hurting sales.
• 50% said tariffs on Chinese imports are impacting their ability to compete and 53% said these tariffs are hurting sales.
Bowing to pressure from Washington, Johnson & Johnson will start giving the list price of its prescription drugs in TV ads, becoming the first pharmaceutical company to do so.
— Markets. The Dow on Thursday dropped 220.77 points, 0.87%, at 25,169.53. The Nasdaq lost 86.93 points, 1.18%, at 7,288.35. The S&P 500 was down 25.56 points, 0.94%, at 2,706.05.
St. Louis Fed President James Bullard says current Fed policy is a "little bit restrictive," and he's concerned that the approach "might be putting downward pressure instead of upward pressure on inflation." Admittedly dovish, he says the central bank needs to be more concerned about slower growth than higher prices. He's ready to scrap the Fed's "dot plot," which was more useful when rates were stuck near zero, but he's OK with where the FOMC is at the moment: "I'm pretty happy where rates are today."
Energy Dept. analysts say oil sanctions against Venezuela won't cause pain at the pump for U.S. consumers. A new Energy Department analysis says the Trump administration's sanctions on Venezuelan oil will have limited effects on U.S. refineries that rely on it, and thus won't strain the nation's gasoline supply or lead to price increases. The Energy Information Administration addressed the sanctions in its Week in Petroleum analysis. The independent agency said Venezuelan crude oil imports by U.S. refiners have been waning for years, and that the sanctions only sped up the inevitable and complete elimination of oil imports from the South American country.