USDA, farm coalition groups unveil ideas, goals on climate issues
In today's updates:
* China central bank lowers benchmark lending rates
Markets: The Shanghai Composite Index closed up 1.8% overnight as the PBOC lowered its benchmark lending rates, cutting its one-year loan prime rate from 4.15% to 4.05% and the five-year rate from 4.80% to 4.75%. The move follows the central bank's decision on Monday to lower interest rates on its one-year medium-term lending facility - funds the PBOC lends to financial institutions - from 3.25% to 3.15%.
USDA Chief Economist Robert Johansson will kick off the Ag Outlook forum at 8 a.m. ET with a discussion of farm income and the department’s 2020 outlook for commodity markets and trade.
The euro reached its lowest level against the dollar in almost three years.
— Coronavirus update:
- China again changes coronavirus methodology. For the second time in about a week, China has altered its criteria for confirming cases of the virus. The government said today that it would now differentiate between “suspected” and “confirmed” cases. Cases would be considered confirmed only after genetic testing.
- World's biggest shipper sees coronavirus peak. "Over the last two and a half weeks we have seen a steady decline in the number of new [coronavirus] cases" and "that is positive," A.P. Møller- CEO Søren Skou told Bloomberg, after soft Q4 results. "It means, very well, we could be set for a peak within the next two weeks," he added. "If that were to be the case, then we would expect a very weak March and a rebound in April, a sharp rebound in April... but there is still a lot of uncertainties out there."
- Tracking the movement of Chinese. Morgan Stanley estimates that less than 40% of the people who left top-tier Chinese cities for the holiday have returned.
— Latest numbers show continued slight expansion in China’s sow herd. China’s sow herd climbed 1.2% from December to January, the fourth month in a row its breeding herd has increased, the country’s ag ministry said today. The ministry did not provide a total number for China’s hog herd, which was nearly halved by an outbreak of African swine fever. The country is now in rebuilding mode.
— Ag coalition wants role in coming congressional debate on climate issues/environmental sustainability. A coalition of 21 agriculture groups says the industry is doing its part to control greenhouse gas emissions and want their views considered as Congress gears up to focus on what most call climate change, but members of the newly formed Farmers for a Sustainable Future used terms like "climate smart," sustainability, climate policy and climate issues. “We’re here in the House Agriculture Committee room because we know discussions around climate policy are ramping up. The House and Senate Agriculture committees will play a real important role in the days to come,” said Zippy Duvall, president of the American Farm Bureau Federation.
Farmers and ranchers, coalition members noted, can help the environment with tools such as efficient water use, improved manure management, use of cover crops that can capture and store carbon and nitrogen, and ethanol and biodiesel to reduce car emissions.
What’s in a name? Michael Formica of the National Pork Producers Council said the terms coalition leaders use, or whether they believe humans contribute to climate change, are irrelevant. “I don’t know if it is human induced or naturally induced, the climate is changing. I think the end result is what matters, that you reduce your emissions,” said Formica, the group's counsel and domestic affairs assistant vice president. He noted a study the industry financed that shows that North Carolina pig farmers reduced ammonia levels from manure lagoons by 22% to 54% over 17 years.
Coalition members want to confront what they call bad information about the role agriculture plays in contributing to climate change, detailing that overall, the industry accounts for 9% of U.S. greenhouse gas emissions. Ethan Lane, governmental affairs vice president for the National Cattlemen’s Beef Association, said beef production has been unfairly characterized in climate debates as a major source of emissions. Lane said beef production accounts for 3% of agricultural emissions. Lane said bad science and false information has driven the narrative about agriculture and climate change, creating “an issue that has haunted us for as long as I can remember.” Agriculture was responsible for 9% of U.S. greenhouse gas emissions in 2017, according to the EPA.
— USDA to announce program to reduce environmental impact of farming. USDA Secretary Sonny Perdue today will announce an initiative to reduce the environmental impact of American farming. He will stress voluntary conservation incentives and efficiency improvements rather than regulation as he joins major farm groups in seeking to shape the public debate on agriculture and climate change. As previously noted, 21 farm groups announced a coalition Wednesday on environmental sustainability.
Perdue will set a goal of increasing farm production by 40% while cutting the “environmental footprint” in half by 2050, according to a preview USDA released in an advance of the announcement.
The initiative includes goals such as a 50% reduction in food waste by 2030, a 30% cut in fertilizer run-off by 2050 and an overall “net reduction” in carbon emissions by 2050 “without regulatory overreach.”
Perdue also will set a goal for biofuels such as ethanol to reach “market-driven blend rates” of 15% of U.S. transportation fuels by 2030 and 30% of transportation fuels by 2050. “We know we have a challenge facing us: to meet future food, fiber, fuel, and feed demands with finite resources,” Perdue will say, according to advance excerpts of announcement to be made at his department’s annual Agricultural Outlook Forum that begins today.
— Other items of note:
- The Democratic presidential nomination debate on Wednesday evening was not good for late-comer Michael Bloomberg. Prediction markets quickly soured on Mr. Bloomberg’s performance. His odds of securing the Democratic nomination have tumbled about 10 percentage points in 24 hours, to about 19%, according to ElectionBettingOdds.com.
- Spam-maker Hormel Foods is ending the use of ractopamine in its pork supply starting April 1, joining Tyson Foods and JBS USA in phasing out the pig feed additive. Meatpackers are hoping to tap into the booming demand for protein in China — where pork raised with ractopamine is banned — because of the African swine fever outbreak that has wiped out the country’s pig herds. Details via Reuters item.
- EU trade chief Phil Hogan is working to get a deal with the U.S. by March 18, he told reporters Wednesday night. Hogan said he is preparing a package of several agreements for European Commission President Ursula von der Leyen to present to President Donald Trump in the next few weeks. The Trump administration’s decision last week not to increase retaliatory tariffs on agricultural products in the long-running Boeing-Airbus dispute was a positive sign that the U.S. is willing to negotiate a deal, Hogan said. The U.S. Trade Representative instead boosted retaliatory tariffs on Airbus aircraft to 15%, from 10%, and left unchanged a 25% tariff on EU food, alcohol and other products. As for the significance of March 18, Hogan noted USTR Bob Lighthizer suspended the tariff increase on Airbus planes until March 18. “Between now and then, we are trying our best to have a mini deal based on the terms of reference that was given to us ... by President von der Leyen and Trump in Davos."
— Markets. The Dow on Wednesday rose 115.84 points, 0.40% at 29,358.03. The Nasdaq gained 84.44 points, 0.87%, at 9,817.18. The S&P 500 added 15.86 points, 0.47%, at 3,386.15.
The U.S. economy won't grow 3% this year without a big infrastructure package and more tax cuts, Trump's top economists said in their annual report. Absent policy changes, GDP will rise 2.4% this year and 2.3% next. At a briefing, the economists acknowledged Trump's trade stance has depressed growth and investment.
The FOMC viewed the current stance of monetary policy as "appropriate” to support “sustained expansion of economic activity, strong labor market conditions, and inflation returning to the committee’s symmetric 2% objective," according to the minutes of its Jan. 28-29 meeting. But uncertainties remain, "including those posed by the outbreak of the coronavirus," which warrants "close watching." The monetary policy-setting committee also indicated the central bank could slow its $60 billion-per-month pace of Treasury bill purchases in Q2 and most Fed officials were comfortable with this proposal.
IMF comments on Phase 1 and coronavirus impacts. The Phase 1 U.S./China trade deal will reduce the effect of tariffs on global GDP by 0.2%, the head of the International Monetary Fund (IMF) said on Wednesday. The IMF also warned that the Chinese coronavirus outbreak represents the most urgent threat to worldwide economic growth. In a blog post (link), IMF Managing Director Kristalina Georgieva acknowledged that the full effects of the virus could greatly vary depending on how quickly it’s contained. A “long-lasting and severe outbreak” would mean a longer growth slowdown in China that would reverberate around the world, as other countries deal with supply chain disruptions and reduced investor confidence, Georgieva said.