Policy Updates: August 8, 2017

Posted on 08/08/2017 6:50 AM

Farm group leaders on new farm bill | Perdue comments on farmer with WOTUS rule flap | Coming House 8-bill appropriations measure | Tax reform | Perdue defends Clovis | Rural health-care costs mount | USDA proposes to life some restrictions on Mexican pork | U.S.-Canada lumber issues | Unica to push Brazilian gov’t to approve ethanol import quota | Global sugar prices | Labor Market Condition index gone | Credit card use on the rise

— Farm Bureau, NFU stress need to unite on coming farm bill. Leaders from the American Farm Bureau Federation and the National Farmers Union (NFU) on Monday pledged their continued support of U.S. sugar policy and said they would help rally agriculture during the upcoming farm bill debate. Farm Bureau President Vincent “Zippy” Duvall during an address to the sugar industry’s annual meeting in San Diego, Calif., said, “This is not a time to be divided, this is a time to be united. It’s our time. We have the right people in the right places…to write a food security bill to benefit all Americans.” Roger Johnson, NFU’s President, agreed and explained that it’s important for agriculture to come together and to work closely with members of the nutrition and conservation communities, who will be essential to the farm bill’s passage. And this farm bill is particularly important given today’s tough economic times. “A farm bill should address needs, not a budget,” he explained.

— Perdue wants to help California farmer with WOTUS rule problem. California farmer John Duarte is facing millions of dollars in fines under the Clean Water Act/Waters of the U.S. (WOTUS) rule for plowing a field without a permit. USDA Secretary Sonny Perdue said the situation is simply wrong and said he would do what he could to support Duarte by conferring with EPA Administrator Scott Pruitt and Attorney General Jeff Sessions when he gets back to Washington. “This appears … to be normal farming practices and I think it would send a huge chill over American agriculture if we have farmers facing criminal charges and civil charges over normal agriculture practices,” Perdue said. “So, we’re very concerned about it and I plan to engage with both the EPA administrator and our Justice Department when I return.” The Army Corps of Engineers claims Duarte was digging deeper into the soil than normal plowing, threatening wetlands on his property, but Duarte said he was simply just plowing the field.

— House to consider eight-bill appropriations bundle after recess. The House Rules Committee on Monday announced a strategy in which the House would take up the eight remaining fiscal 2018 appropriations bills, including agriculture, in a single, package when Congress returns from recess in September. The move comes as lawmakers try to avert a partial government shutdown when fiscal 2017 funding runs out on Sept. 30.

Rules Chairman Pete Sessions (R-Texas) said the panel would issue a deadline for amendment submission prior to the end of the August recess. “Due to the potential high number of amendments, I strongly encourage you to review the texts of the remaining eight bills ASAP so you can begin to identify priorities that will inform amendment drafting once the text of the consolidated bill is available,” Sessions said.

The amendment deadline is expected to be Aug. 25, but the Rules panel has not yet set an official deadline.

The eight bills in the omnibus package are the Agriculture (HR 3268), Commerce-Justice-Science (HR 3267), Financial Services (HR 3280), Homeland Security (HR 3355), Interior-Environment (HR 3354), Labor-HHS-Education (HR 3358), State-Foreign Operations (HR 3362) and Transportation-HUD (HR 3353) measures. The other four fiscal 2018 appropriations bills were passed in July in a security “minibus” package (HR 3219). They are Defense, Energy-Water, Legislative Branch and Military Construction-VA. A Rules Committee aide said consolidating all 12 appropriations bills is “a possibility.” House GOP aides said the appropriations package was likely to hit the House floor the first week members return from recess. The House is set to reconvene Sept. 5.

A continuing resolution is likely needed to avoid a partial government shutdown, giving Congress time to clear the remaining spending measure. The eight-bill package will likely face hurdles in the Senate as the House spending measures are written to top-line discretionary spending levels that Democrats in both chambers consider unrealistic. In the Senate, Democratic votes are needed to advance appropriations bills because of the chamber’s filibuster rules.

— Tax reform compromise sought. Republicans are seeking a deal that will deliver on their promises for a major tax overhaul without adding to the federal deficit. The approach would combine lasting tax changes to corporations moving profits offshore and temporary tax reductions for individuals and businesses.

A deal on raising the debt ceiling, which the U.S. Treasury Department says could be needed by Sept. 29, remains elusive as discussions are unlikely to start in earnest until the House returns from recess early next month.

— Perdue defends Clovis to be research undersecretary. While former talk show host and economics professor Sam Clovis is no scientist, that shouldn’t disqualify him to be USDA’s next undersecretary for research, education and economics (REE), USDA Secretary Sonny Perdue said during a Monday press conference. “I think any academician understands the scientific method – as he does,” Perdue said. “The person that’s the undersecretary of REE is not going to be doing basic or applied research. That’s not what the job calls for.” Perdue characterized a recent CNN story that published controversial remarks made by Clovis years ago in a blog as an effort to smear Clovis by the media.

Perdue predicted “a very successful confirmation of Clovis when the Senate hears from him directly.”

— Rural health-care costs a top concern in farm country. Farmers are increasingly noting the dramatic rise in health-care costs and reduced health services in farm areas outside of major cities. One farmer said the personal health plan he pays for himself has gone up 160% over the past three years, “and that is with a very high deductible.” He said he could only absorb another two to three years of similar increases before he pulls out of his private insurance policy and will just self-finance, hoping he has no catastrophic illness. Asked if he had checked out ObamaCare coverage, he said “that is worse than what I am paying now, with very limited options.”

Farmers are also increasingly noting a decline in internet speed in rural parts of the country. One farmer said the U.S. government has issued grants and other funding to internet suppliers to modernize the internet in rural areas, “but some companies have used that funding for other endeavors. There should be spot checks on that funding.”

— USDA proposes lifting restrictions on Mexican pork; calls for public comments. USDA is proposing to recognize Mexico as free of classical swine fever, USDA's Animal and Plant Health Inspection Service (APHIS) announced Aug. 7. This action would then lead the U.S. to lift import restrictions on Mexican pork and pork products, though not restrictions on live swine and swine genetics, which are tied to other health concerns. Classical swine fever, also known as hog cholera, is a highly infectious viral disease. While it does not cause illness in people, it is often deadly to infected pigs. Mexico had previously asked the U.S. to lift the restrictions in 2007, but APHIS at the time was not convinced that Mexico's program to control classical swine fever was sufficient to ensure the products were safe. In 2015, the World Organization for Animal Health recognized Mexico as free of the disease, and a USDA site visit to Mexico and other data support that conclusion, APHIS said. The agency will accept public comments for 60 days before making a final determination.

Mexico is the second-largest export destination for U.S. pork, totaling nearly $1.2 billion in 2016.

— Canada foreign minister: lumber deal visible. Canada's Foreign Affairs Minister Chrystia Freeland said she could see the outlines of a softwood lumber agreement with the U.S. starting to take shape. “Having said that, I can't today say whether or not and when such an agreement might be achievable,” she told reporters via teleconference Aug. 7 from Manila after meetings with Association of Southeast Asian Nations (ASEAN) counterparts, according to a transcript of her remarks.

The U.S. and Canada have been working to resolve a long-standing dispute on softwood-lumber trade before North American Free Trade Agreement (NAFTA) talks start Aug. 16. “At this point, I'm unable to predict when we might reach an agreement,” Freeland said. If an agreement is not reached, unfair trade cases brought by the U.S, industry will continue to run their course.

Canada's ambassador to the U.S., David MacNaughton previously said the sides were close to a deal that would cap Canada's share of the U.S. lumber market at 30%, but said the debate continues over what would happen if U.S. producers couldn't fill their 70% share.

On NAFTA 2.0, Freeland again said she would discuss Canada's negotiating objectives and its approach in the negotiations when she testifies before a parliamentary committee on Aug. 14. “That is the appropriate forum for me to talk about that,” she said.

Unica to push Brazilian government to approve ethanol import quota. Brazil's sugar industry group Unica continues to push for an import quota system which would allow 600 million liters of ethanol imports with a 20% tax on volumes above that level unless shipments in any quarter go above 150 million liters. The group's executive director told Reuters it expects Brazil's foreign trade chamber Camex to approve the duty structure at an August 23 session. The issue has been floating for several months, with Brazil holding off adopting it to this point. Others signal the duty should be imposed due to the U.S. EPA seeking comments on imports of Brazilian ethanol which is primarily made from sugarcane and the imports from Brazil have been used to satisfy portions of U.S. biofuel requirements.

— Global sugar prices take a plunge after years of recovery. “Bears remain firmly in the driving seat,” the executive director of the International Sugar Organization said regarding the global sugar market. Worldwide consumption growth has slowed at a time when production is up more than 12 million metric tons, Jose Orive explained at the International Sweetener Symposium, adding that world production could hit an all-time high in the coming year. This comes after two years of deficits and higher prices in the global market, he said. Refined global prices hit 27 cents per pound last year, but are trading below 18 cents now.

Among the factors causing the market swing, according to Orive: “Boosted area under beet production in Europe; production recoveries in India and Thailand; and no huge weather shocks.” Brazil’s crop is also off to a good start, and China, a large global sugar buyer, has curtailed raw sugar imports, he said. As a result, “Funds sold heavily, and by May, had switched from a substantial net long position to a small net short position,” Orive noted.

Market volatility and need for sugar policy. Luther Markwart, the incoming chairman of the American Sugar Alliance, moderated the panel and explained that this kind of volatility on the global market is not that uncommon. “The world dump market is prone to periods of shortages and peaks because it is largely comprised of leftover sugar that foreign producers heavily subsidize to ship abroad,” he said. “That makes the market unpredictable for buyers.” Such subsidization and unreliability, he said, underscore the importance of U.S. sugar policy. “We have some ups and downs, but America’s no-cost sugar policy helps round off the extremes and keeps things far more consistent,” Markwart said.

— Labor Market Conditions Index gone. The Fed's Labor Market Conditions Index has been one of the more-interesting economic indicators that has had a checkered past in terms of what it signals for the U.S. economy. But the Fed has opted to end putting the data together, "We decided to stop updating the LMCI because we believe it no longer provides a good summary of changes in U.S. labor market conditions," the Fed said in announcing its end. "Specifically, model estimates turned out to be more sensitive to the detrending procedure than we had expected, the measurement of some indicators in recent years has changed in ways that significantly degraded their signal content, and including average hourly earnings as an indicator did not provide a meaningful link between labor market conditions and wage growth."

— Consumers expanding revolving credit use. US consumer credit growth came in under expectations at $12.4 billion for June, but growth in revolving credit (where credit cards are tracked) came in at $4.1 billion on top of the $6.9 billion rise from May. This category has risen this year and that at least paints a potentially positive picture for short-term consumer spending. The key to the June figure was non-revolving credit grew less than expected at $8.3 billion. Overall, U.S. consumers now have total revolving credit outstanding of a record $1.021 trillion, beating the April 2008 record of $1.02 trillion. Credit reporting agency TransUnion said lenders are giving more less-qualified consumers access to credit cards, but are giving them lower spending limits.


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