ASF in China | Trump dines with Fed chairman | USDA’s ERS to unionize?
China: What some ag industry analysts might be missing. Some grain industry analysts appear reluctant to forecast China will buy any or much U.S. corn and wheat, noting fundamentals suggest otherwise. But others say those analysts have always had a hard time mixing politics with demand. Policy and politics frequently trip up analysts who usually abhor the political scene. Many of them take note of policy only when it is too late. While it is not clear that any purchase agreements that come from China as part of the overall trade deal being worked on by the two countries will alter the overall U.S. situation with hefty carryovers or China's own needs, the potential purchases cannot be brushed aside as something that don't matter, say some market participants. One analyst said, “There's plenty of wheat around, but China purchases could be a game-changer for corn as 3 MMT of corn equals 118 million bushels.” And with China gearing up an ethanol industry, "their needs for corn (and ethanol until their industry is well established) could become more consistent than many currently expect," another analyst noted.
African swine fever (ASF) update. As of Jan. 25, the United Nations (UN) had confirmed 104 outbreaks of ASF in China and the culling of 916,000 pigs. Though the disease poses no threat to humans, there is no cure for infected swine and no vaccine against it. Eradication “may not be feasible in the short term”, reckons the UN, especially if wild pigs act as a reservoir for the virus. In Russia an 11-year fight against ASF has caused backyard pork production to fall by almost half. While big commercial farms can afford strict biosecurity controls, such a shift would transform rural China: of the nearly 500 million pigs produced there each year, about 40% come from farms with fewer than 30 sows. Meanwhile, Dim Sums: Rural China Economics and Policy reports that ASF is having “its most severe impact on the financial performance of Chinese companies hit by plunging prices, tight credit, lockdowns on pig shipments and culls of pigs, according to 2018 financial results released by the companies last month.”
Whenever Trump’s fiscal year 2020 budget is released, pay little attention to the budget cuts, including cuts for agriculture. The White House will release its fiscal 2020 budget request as soon as mid-March, perhaps in two parts: bottom line numbers, then a complete breakdown the following week. But history shows Congress pays little attention to many of the proposed cuts included in the coming proposals.
Growth Energy files suit against EPA over small refiner exemptions under RFS. EPA 2019 Renewable Fuel Standard (RFS) levels failed to address the level of small refinery exemptions the agency granted, according to a suit filed by Growth Energy. "EPA’s inaction on addressing lost gallons due to small refinery exemptions in this rulemaking is a clear violation of law," Growth Energy CEO Emily Skor said in a statement. "In doing nothing to remedy these and other deficiencies, EPA has again failed to meet its statutory obligation to ensure that annual RVOs (renewable volume obligations) are met each year." The group is taking issue with the use of small refiner exemptions under the RFS which biofuel interests maintain have resulted the targets under the RFS not being met. Skor said the case filed in court "calls for greater accountability from EPA to ensure that every renewable fuel obligation is fulfilled as the law intended."
USTR released China, Russia WTO compliance (or lack of compliance) reports. The 183-page China report details many of the same concerns raised by the Trump administration in its current trade negotiations with Beijing. It notes China’s “extremely poor record of adhering to its transparency obligations as a WTO member. These shortcomings create their own trade barriers and undermine the competitiveness of China’s trading partners.” The 61-page Russia report raises concerns about agriculture, manufacturing, financial services, telecommunications and intellectual property rights. “Russia has not embraced the responsibility of each WTO Member to implement its commitments and to permit reciprocal and mutually advantageous trade.”
USDA economists seek to unionize amid Perdue efforts to relocate group outside Beltway. Employees at the Economic Research Service (ERS) later this year will vote on whether to join the nation’s largest federal employee union, to protect themselves as the department considers whether to relocate the agency outside of the Washington, D.C., region. According to Government Executive, Peter Winch, special assistant to the American Federation of Government Employees’ District 14 national vice president, said that he filed paperwork with the Federal Labor Relations Authority last week to move forward with a union election at the research service, which USDA leadership plans to move and realign under the department’s Office of the Chief Economist. Link for details.
Dinner for four: Trump, Fed chairman, vice chair and Treasury secretary. Federal Reserve Chairman Jerome “Jay” Powell and Fed Vice Chair Richard Clarida met President Trump and Treasury Secretary Steven Mnuchin at the White House for dinner yesterday to discuss recent economic developments and the outlook, but the central bank said the Fed chief did not share his expectations for monetary policy. Powell’s comments were “consistent with his remarks at his press conference of last week,” the Fed said in a statement. “He did not discuss his expectations for monetary policy, except to stress that the path of policy will depend entirely on incoming economic information and what that means for the outlook.” The rare, but not unprecedented, meeting comes as Powell marks one year as Fed chief. Tomorrow, Powell is scheduled to give opening remarks at the Conversation with the Chairman: A Teacher Town Hall Meeting event in Washington.
Senate panel today seen advancing Wheeler’s nomination to head EPA. The Senate Environment and Public Works Committee is expected to hold a vote on the nomination of Andy Wheeler to be the full-time Administrator of the EPA, a role he currently serves in as acting head of the agency.
Mulling 2020 run, O’Rourke to sit for interview with Oprah today. The Associated Press reports (link) that ex-Rep. Beto O’Rourke’s (D-Texas) “weeks of near-silence end on a massive stage when he sits down for an interview with Oprah Winfrey” today “on ‘Oprah’s SuperSoul Conversations from Times Square.’” Aides to O’Rourke “say he is still making up his mind on a White House run and isn’t expected to announce a decision during Tuesday’s taping. Still, his association with Winfrey could be helpful if O’Rourke decides to pursue a campaign.”
Markets. The Dow on Monday gained 175.54 points, 0.70%, at 25,239.43. The Nasdaq rose 83.67 points, 1.15%, at 7,347.54. The S&P 500 added 18.34 points, 0.68%, at 2,724.87.
Oil storage is filling up and crude exports are crashing in Venezuela as President Nicolás Maduro’s regime struggles to line up buyers for the crude shipments, the Wall Street Journal reports (link). The impasse over oil has undercut the government’s only real source of income and threatens to have a bigger impact on global markets than many experts had anticipated. “Venezuela’s own production has been dropping and tankers with crude for refineries have been stopped off the coast or turned away as U.S. sanctions and payment problems cloud trade with the country. The U.S. has said it would allow some companies to continue making oil transactions with Venezuela for a few weeks. But Washington wants any funds to be held in escrow, leading Venezuela to demand payments in advance and putting shipments in limbo.”