President Trump Signs $2.3 Trillion Phase 3 Rescue Package Amid Talk of Phase 4

Posted on 03/28/2020 11:04 AM

Russia proposes to limit grain exports for three months | Covid-19 case shuts down Canadian beef plant | Key ag topics this week
 


In Today’s Updates



* President Trump signs $2.3 trillion rescue package
* Summary of major portions of the Phase 3 rescue package
* Slow start for $349 billion SBA “loan” program
* More details on $349 billion of SBA “loan program”
* Phase 4 package odds increase
* Over 621,000 Covid-19 cases worldwide
* U.S. cases past 105,000
* Trump invokes DPA to force General Motors to produce ventilators
* Trump to determine whether to extend social distancing guidelines on Mon. or Tues.
* Key agriculture items this past week
* Russia's Agriculture Ministry has proposed to limit grain exports for three months
* Confirmed case of Covid-19 shuts down beef plant north of Calgary

 


MARKET FOCUS



Markets: A three-day megarally spanning Tuesday to Thursday this past week, saw the Dow rise over 21% in that span, signifying the beginning of a new bull market after just 11 trading days in a bear market. Of note, the last time the Dow went from its bear-market low to a bull market in just three days was from Oct. 6 to Oct. 8, 1931. By November 1931, the Dow was in a bear market again, down more than 20%. It didn’t bottom out until mid-1932, down an additional 60%-plus. Others don’t declare a new bull market until the index surpasses its previous high, and would call this week’s action just a bear-market rally.
 

Russia's Agriculture Ministry has proposed to limit grain exports for three months, it said on Friday, with reports signaling it could be extended. In fellow Black Sea exporter Ukraine, the economy ministry on Friday said it was monitoring wheat exports daily and would take measures if needed. The proposal to limit grain exports to 7 million tonnes for April-June was a response to the Russian government's request this week to consider whether exports of any food should be limited because of the coronavirus pandemic. The ministry said that the measure, if approved, would cover the main grain types — wheat, rye, barley and corn — to help to ensure stability in the domestic food market. Reuters noted the size of the limit doesn't have much bite, citing traders, because 7 million tonnes is more or less the general expectation for Russia's export volumes until the end of the 2019-20 season on June 30. But the move has raised expectations that further steps might follow.
 

Confirmed case of Covid-19 shuts down beef plant north of Calgary. A beef processing plant located north of Calgary has been shut down due to a confirmed case of Covid-19, health officials confirmed Friday. Harmony Beef, a family-owned plant, was informed on Thursday that a worker who had not been on the job for a number of days had tested positive, according to spokesperson Crosbie Cotton. In a statement, a spokesperson for the Canadian Food Inspection Agency (CFIA) said staff with the agency would not provide slaughter inspection services on Friday while health risk assessments were being conducted. "[This will] allow the plant to initiate a number of follow-up activities. A date for the resumption of slaughter operations has not yet been determined," the statement reads. Health officials said a few close contacts of the employee have been identified and have been told to stay home. However, despite the confirmed case, health officials stressed there should be no concerns with the food originating from Harmony Beef. "[Covid-19] is not a food-borne illness, so this would not be considered to be a concern with respect to the food that comes out of that plant," said Dr. Deena Hinshaw, the province's chief medical officer of health during Friday's daily news conference. "This wouldn't be considered to be a significant risk to the public and that small number of close contacts were going to be followed up with today."
 


POLICY FOCUS



President Donald Trump signed into law a sweeping $2.3 trillion rescue package to help offset the economic destruction of the Covid-19 pandemic, after it was approved unanimously by the Senate (96-0) and by voice vote by the House of Representatives. Rep. Thomas Massie (R-Ky.) tried to force a recorded vote on the bill Friday, but members’ efforts to get to Washington proved successful in blocking him. After a voice vote was called, Massie requested a recorded vote, but it was not supported by one-fifth of the members present, as required under the rules. He then suggested the absence of a quorum but was overruled by Rep. Anthony G. Brown, the speaker pro tem, who noted there was a quorum and gaveled the vote down, ensuring passage. Trump called out Massie via tweet for "grandstanding" and said he should be expelled from the GOP. "He just wants the publicity," Trump wrote. “It’s an act of vanity and selfishness that goes beyond comprehension,” said Rep. Dan Kildee (D-Mich.). “He should be ashamed of himself and the country should scorn him.”

     Those who didn’t travel back to Capitol Hill for the vote were allowed to record brief statements to air on C-SPAN, which agreed to make an exception amid the crisis.

     “I want to thank Democrats and Republicans for coming together and putting America first,” Trump said in remarks Friday in the Oval Office. He added, in a nod to the size of the package: “I never signed anything with a T on it.”


Phase 4 package odds increase. Lawmakers and stakeholders have already called out several problems and omissions in the bill, such as lower payments for the District of Columbia than the states; caps on small-business loans that hoteliers say will push them out of business; and lack of safety regulations protecting hospital workers and other first responders in danger of coronavirus exposure. "This package is not the first response to Covid-19. Nor will it be the last," said House Energy and Commerce ranking member Greg Walden (R-Ore.). The Senate is currently scheduled to be out until April 20, and House lawmakers left town after the vote, until a date to-be-determined, although some signaled as soon as March 31.

     The Highway Bill and the Water Resources Development Act must be reauthorized this year and key lawmakers signal a Phase 4 bill could envelope both. House Speaker Nancy Pelosi (D-Calif.) also expressed her interest in beginning the crafting of a fourth Covid-19 response package. “Our next bill will lean toward recovery, how we can create good-paying jobs as we go forward, perhaps building the infrastructure of America,” Pelosi added. The Speaker specifically listed increasing benefits under the Supplemental Nutrition Assistance Program/food stamps as one of her priorities. Pelosi has said she wants to see additional worker-safety protections, along with access to free health care for those who become sick from the virus.


Summary of major portions of the Phase 3 rescue package:

     • Financial aid to businesses: The measure would deliver almost $910 billion in direct assistance to businesses, through a mix of grants and loans. That includes $454 billion through new emergency lending facilities at the Federal Reserve for larger companies, with states and cities also eligible; $377 billion in loans to small businesses, much of which won’t need to be paid back if used to maintain payroll; $61 billion in aid to airlines, more than half of it cash grants; and $17 billion in loans to companies considered critical to national security if their continued viability is threatened.

     • The package allocates $349 billion to guarantee loans for small businesses (via the SBA). Ag-related individuals and companies are looking into whether they qualify. Those “loans” will really be grants if participants follow through on requirements. Check with your banker/accountant. The SBA, a small federal agency with 4,000 employees, has already struggled to disburse funds in a timely manner when faced with recent natural disasters, including the 2017 hurricane damage in Puerto Rico. The amount Congress set aside to guarantee small-business loans by banks, credit unions and other lenders is 12 times the size of the loans the agency approved last year. Small-business owners said loan seekers either couldn’t gain access to the online application site or were bounced off before they could complete their application. In response to the complaints, the agency adopted a new system where loan seekers download application forms and fill them out manually before uploading them onto the agency’s site. (Note: See the item below for more details of this program and we will have follow-up reports on the topic.)

     • Tax breaks for households, companies: About $590 billion in tax breaks, including the package’s centerpiece tax rebates for individuals and families worth $292 billion. There’s also over $200 billion in business deductions for losses and interest expense, $55 billion in tax credits for cash-strapped firms to avoid job cuts, and employer payroll taxes due this year would be deferred. The package would also suspend taxes on passenger tickets, jet fuel and other levies collected by airlines; expand deductions for charitable contributions; let savers withdraw money from retirement funds early without penalty and use health savings and flexible spending account funds for over-the-counter medical purchases without a prescription.

     • Money for federal agencies, hospitals, states: Roughly $480 billion to help contain and treat the disease through supplemental appropriations, temporary increases in Medicare and Medicaid payments and funding for community health centers. Hospitals and other health care providers would get $130 billion, with another $17 billion for veterans health care. There’s $27 billion for stockpiling medical supplies and research and development on vaccines and drug treatments. States would get $150 billion to refill depleted coffers, while states and localities would get $31 billion for education, $25 billion for public transit systems, and $10 billion would go directly to airports.

     • Unemployment insurance, nutrition and housing aid: About $300 billion would flow to laid-off workers and low-income households struggling to pay their bills. Most of that would be for a new supercharged unemployment insurance regime that will provide an extra $600 a week in jobless aid through July 31, plus extend regular unemployment compensation by 13 weeks after state benefits are exhausted. The package also contains over $40 billion to boost food stamps and school meal programs, child care funding and rental housing assistance.

     • For agriculture, the legislation injects $14 billion into the Commodity Credit Corporation (CCC) to provide USDA with resources to assist producers (CRP, ARC/PLC payments, etc.). An additional $9.5 billion in emergency funding was included to support farmers and ranchers, including livestock • and specialty crop producers, impacted by Covid-19. With an estimated $7-9 billion in existing CCC authority, the $14 billion infusion, plus the $9.5 billion additional funding for livestock and specialty crops, is seen as sufficient at this time for USDA Secretary Sonny Perdue and his officials and staffers to come up with various aid programs, likely focusing on cattle and perhaps dairy first, and then crops during the late summer so it does not impact planting decisions. Link to the agriculture-related text of the bill and here is a link to the Senate Appropriations Committee section-by-section break down of the bill.

     The rescue legislation provides $300 million to help the U.S. seafood industry, including commercial and charter fishermen. But seafood companies continue to press for a separate change in immigration policy that would help ensure that processing plants in Alaska have enough workers to handle this summer’s salmon catch. Thousands of seasonal workers now working in processing plants for the pollock-fishing season would be allowed to remain in the U.S. between the end of the current fishing season next month and the start of salmon season this summer. Without the change, seasonal workers would be required to go home between seasons and seafood companies worry that they wouldn’t be allowed back into the U.S. due to the coronavirus.

    Ag rescue chart


More details on $349 billion SBA ''loan" program:

     • The measure would authorize $349 billion in total 7(a) lending from Feb. 15 through June 30, instead of the current $30 billion authorization for fiscal 2020.

     • It would authorize the SBA to fully guarantee loans under the new program, compared with a 75% or 85% guarantee for standard 7(a) loans.

     • Loans would be available during the covered period for:

        * Any business, nonprofit, veterans group, or tribal business with 500 or fewer employees, or a number set by the SBA for the relevant industry.
        * Sole proprietors, independent contractors, and eligible self-employed workers.
        * Hotel and food service chains with 500 or fewer employees per location.

     • Eligible recipients could receive loans for as much as $10 million or 250% of their average monthly payroll costs, instead of $5 million. Interest rates during the covered period would be capped at 4%.

     • Recipients could use the loans to cover eligible payroll costs -- including salaries, commissions, regular paid leave, and health-care benefits -- as well as mortgage interest and utility payments. They’d have to make a “good faith certification” that they’ll use the funds to retain workers, maintain payroll, and pay for rent and similar expenses.

     • Recipients couldn’t use the funds to compensate individual employees at an annual rate above $100,000, or to pay for emergency sick or family leave under the second coronavirus response package (Public Law 116-127).

     • The measure would waive rules requiring recipients to pay certain fees, provide collateral, or be unable to obtain credit elsewhere. SBA rules on company affiliates used to determine small business size would be waived for franchises, food or lodging companies with 500 or fewer employees, and businesses that get financial assistance from a small business investment company.

     • Approved 7(a) lenders could issue covered loans if they determine a business was operating with salaried employees or paid contractors as of Feb. 15. The measure would provide $25 million for the Treasury Department to set criteria to allow additional insured banks and credit unions to participate.

     • The SBA would have to assume that eligible loan applicants in operation as of Feb. 15 were adversely affected by Covid-19, and require lenders to let them defer payments for at least six months and as long as one year.

     • Loans would receive a risk weight of 0% under banking capital rules, meaning banks and credit unions wouldn’t have to set aside additional capital to cover them. Lenders that modify covered loans due to Covid-19 would be temporarily exempt from having to make certain disclosures related to troubled debt restructurings.

     Regarding loan forgiveness:

     • Recipients of SBA-guaranteed loans under the Paycheck Protection Program could apply for loan forgiveness over eight weeks for eligible payroll costs and for mortgage interest, rent, and utility payments.

     • The SBA would pay lenders for any canceled debt plus accrued interest. Lenders generally wouldn’t be subject to enforcement actions under the Small Business Act related to loan forgiveness.

     • Loan forgiveness would be reduced for businesses that fire employees or cut their pay. Businesses could receive additional forgiveness for wages paid to tipped employees.

     • Covered loans would have a maximum maturity of 10 years following a borrower’s application for forgiveness. The SBA would continue to guarantee remaining balances.

     • Canceled debt would be excluded from borrowers’ gross income for tax purposes.

     • The measure also would authorize and provide $17 billion for the SBA to pay the principal, interest, and associated fees for loans under the 7(a), 504, and microloan programs for six months.


Coronavirus update:

  • Summary: The number of novel coronavirus infections hit over 621,000, with global deaths of at least 28,658, as countries continue to ramp up efforts to limit people's movement to stop the spread of the virus. The U.S. added more than 15,000 cases, pushing the total past 105,000 today, with a surge of cases in New York and increased testing. The number of U.S. deaths are at least 1,710. The number of deaths due to Covid-19 rose sharply across western Europe, setting new daily records not only in Britain, but also in France, Germany, Spain and Italy. ISTAT, Italy’s official statistics institute, produced the first significant data on the damage to the country's economy, showing a precipitous fall in confidence among businesses and consumers.

    Highest Cases
  • Around the world: France and Belgium extended their national lockdowns by two weeks. Iran closed shopping centers and banned road travel between cities. In Turkey, President Recep Tayyip Erdogan introduced further travel restrictions. Hong Kong banned public gatherings of four or more people beginning midnight Sunday.
     
  • President Trump said he will determine whether to extend social distancing guidelines on Monday or Tuesday, but they won't be relaxed for New York, which continues to see jumps in infections. Two additional members of the U.S. House — Rep. Mike Kelly (R.-Pa.) and Joe Cunningham (D.-S.C.) said they tested positive for the illness.
     
  • President Trump invoked the Defense Production Act to force General Motors to speed up the manufacture of medical ventilators for use in hospitals. GM and a new partner, Ventec Life Systems, had been “wasting time” in negotiations, the president complained. He said America will make or buy 100,000 ventilators in the next 100 days. The New York Times reported Thursday that the administration was concerned about a $1 billion price tag that the company had attached to the ventilators. The order directs the Secretary of Health and Human Services to "use any and all authority" to require GM to "accept, perform and prioritize Federal contracts for ventilators." In the signing ceremony for the rescue bill Friday, Trump said he invoked the Defense Production Act because GM had promised 40,000 ventilators and “all of the sudden it came down to 6,000, then they talked about a higher price than we were discussing.”

    GM posted a news release on its website announcing it would go ahead building the ventilators at GM’s Kokomo, Ind., manufacturing plant with the ventilators scheduled to ship “as soon as next month.” Ventec, too, is taking “aggressive steps" to increase production at its Bothell, Wash., plant.

     
  • 23 states have issued stay-at-home orders in response to coronavirus. An additional 19 states joined California, Illinois, New Jersey, and New York in issuing stay-at-home orders, bringing the total of states with such orders across the country to 23. The 19 states were: Colorado, Connecticut, Delaware, Hawaii, Idaho, Illinois, Indiana, Louisiana, Massachusetts, Michigan, Minnesota, New Hampshire, New Mexico, Ohio, Oklahoma, Oregon, Vermont, Washington, West Virginia, and Wisconsin.
     
  • Across the country, 47 states have ordered a statewide school closure in response to the coronavirus outbreak. Schools in those states served 49.6 million public school students in the 2016-2017 academic year, of the 50.6 million public school students in the United States.
     
  • While wearing a mask may not necessarily prevent healthy people from getting sick, and certainly doesn’t replace important measures such as hand-washing or social distancing, it may be better than nothing, said Dr. Robert Atmar, an infectious disease specialist at Baylor College of Medicine, the New York Times reported (link). But studies of influenza pandemics have shown that when high-grade N95 masks are not available, surgical masks do protect people a bit more than not wearing masks at all (link). And when masks are combined with hand hygiene, they help reduce the transmission of infections (link).


Key agriculture items this past week:

  • EPA will not rescind any prior RFS exemptions and will extend 2019 compliance deadline. EPA finally issued comments relative to the situation with small refinery exemptions (SREs) in the wake of the 10th Circuit Court ruling which invalidated three SREs issued for the 2016 compliance year. “EPA does not intend to unilaterally revisit or rescind any previously granted small refinery exemptions issued for prior compliance years,” the agency said as it announced other fuel-related actions. “As noted in the temporary policy on Covid-19 Implications for EPA's Enforcement and Assurance Program, issued March 26, EPA is focused on protecting our employees and ensuring continued protection of public health and the environment from acute or imminent threats during the Covid-19 pandemic.” The Biofuels Coalition praised the decision. The three small refiners who were the subject of a biofuels industry lawsuit did appeal the decision.
     
  • EPA pushes back summer fuel switch. The Environmental Protection Agency (EPA) on Friday announced they will delay the requirement for refiners to switch from winter fuels to summer fuels. “Due to the steep fall-off in gasoline demand as a result of the Covid-19 pandemic, gasoline storage capacity is limited and more time is needed to transition the distribution system in order to come into compliance for the summer driving season,” EPA said. “EPA will temporarily waive the summer low volatility requirements and blending limitations for gasoline.” Without the EPA action, the agency said it would mean “parties upstream of retailers and wholesale purchasers would be required to stop selling the winter gasoline sitting in their storage tanks on May 1, 2020, which would prevent them from loading summer gasoline into the storage tanks, resulting in a shortage of gasoline.” EPA will now waiver the low volatility and blending limitations through May 20, 2020. However, the agency said would monitor the situation and “should conditions warrant, may modify or extend this waiver at a later date.”
     
  • USDA announces easing of requirements to obtain H-2 visas. USDA announced late Thursday that the State Department and the Department of Homeland Security have agreed to waive in-person interview requirements for H-2A and H-2B visa applicants. “Temporarily waiving in-person interviews for H-2A visa applicants streamlines the application process and helps provide steady labor for the agriculture sector during this time of uncertainty,” said USDA Sec. Sonny Perdue. “H-2A labor is vital to the economy and food security of America — our farmers and producers depend on these workers to continue to feed and clothe the world.”
     
  • FSA extending loan deadlines. USDA's Farm Service Agency (FSA) announced it is relaxing its loan-making process and adding flexibilities for servicing direct and guaranteed loans to provide credit to producers in need. “We recognize that farm loans are critical for annual operating and family living expenses, emergency needs and cash flow through times like this," FSA Administrator Richard Fordyce said in a statement. "FSA is working to find and use every option and flexibility to provide producers with credit options and other program benefits." Link for details.
     
  • USDA accepts more than 3.4 million acres via general CRP. USDA announced the acceptance of more than 3.4 million acres in the general Conservation Reserve Program (CRP) signup recently completed, the first general signup enrollments since 2016. Close to 56,000 farmers and landowners offered 3.8 million acres and 89% of the acres were accepted, USDA said. Link for announcement.
     
  • USDA announces 2020 loan rates for wheat, feed grains, oilseeds, rice and pulse crops. USDA’s Commodity Credit Corporation on Thursday announced the 2020 marketing assistance loan rates for wheat, feed grains, oilseeds, rice and pulse crops. Link to the rates.
     
  • USTR announces specialty sugar tariff-rate quota. The Office of the United States Trade Representative (USTR) announced notice of a change in the quantity and opening dates for the fourth and fifth tranches of the specialty sugar tariff-rate quota (TRQ). Link to notice in the Federal Register.
     
  • Farm Bureau says fewer than half the number of dairy farmers enrolled in DMC; NMPF calls on USDA to reopen sign up. Only 47.8% of operations with production history and 56.2% of the volume of established production history were enrolled in the Dairy Margin Coverage (DMC) program in 2020, the American Farm Bureau Federation said (link). However, the economic downturn due to the coronavirus has increased the likelihood of support under the program and the National Milk Producers Federation (NMPF) has requested USDA reopen the program for producer signup.
     
  • FDA reopens comment period on rule for certain raw milk cheeses. The Food and Drug Admin. (FDA) is reopening the public comment period on a proposed rule that would allow the use of unfiltered milk in certain cheeses and cheese products. The move will give consumers and others an additional 120 days to file comments.
     
  • Cotton AWP drops sharply. The Adjusted World Price (AWP) for cotton dropped to 44.99 cents per pound, effective March 27. This is the lowest mark since the week of April 1, 2016, when it was at 44.48 cents per pound. USDA did not announce another special import quota for upland cotton as prices have fallen below the trigger point for such an action.
     
  • Senate confirms Brashears as USDA Undersecretary for Food Safety. The Senate on Monday confirmed by voice vote Mindy Brashears as Agriculture Undersecretary for Food Safety. Dr. Brashears was previously a professor of food safety and public health and the Director of the International Center for Food Industry Excellence at Texas Tech University.


Other items of note:

  • The Trump administration is preparing to suspend collection of import tariffs for three months to give U.S. companies financial relief amid the coronavirus pandemic, according to administration officials cited by the Wall Street Journal (link). Companies would still be liable for the tariffs at a later date, which hasn’t been determined. There would be no formal changes to tariff policy, officials said. But asked about the WSJ's report at a news briefing yesterday, President Trump called the report “fake news.”
     
  • Former Sen. Tom Coburn dies at 72. Former Oklahoma Sen. Tom Coburn (R) has died at the age of 72. Coburn announced in 2013 that he had been diagnosed with prostate cancer and resigned from the Senate the following year.


Markets. The Dow on Friday dropped 915.39 points, 4.06%, at 21,636.78. The Nasdaq was down 295.16 points, 3.79%, at 7,502.38. The S&P 500 fell 88.60 points, 3.37%, at 2,541.47.

     Dow week

     The major indexes posted big gains for the week, with the Dow soaring 12.8% for its biggest one-week gain since 1938, the S&P jumping 10.3% and the Nasdaq rising 9%

     Week and year

     The dollar posted its biggest weekly decline in more than a decade on Friday. The dollar dipped 0.87% against a basket of currencies Friday to 98.41. It fell 3.90% this week — its biggest weekly decline since March 2009. The dollar index last week had racked up its biggest weekly gain since the financial crisis. Against the yen, the dollar fell 1.56% on Friday to 107.87 yen, as Japanese investors and companies repatriated funds before their fiscal year ends next week. The euro gained 0.83% against the greenback to $1.1119. Speculators increased their net short dollar position in the latest week to $8.88 billion, from $8.27 billion the previous week, according to calculations by Reuters and U.S. Commodity Futures Trading Commission data released on Friday.


 

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