Biden Plan to Boost Wheat, Soybean Acres Called ‘Baffling, Convoluted’ Without Much Impact

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Railroad gridlock bogging down the U.S. farm sector

 

                                                In Today’s Digital Newspaper

 

President Biden is seeking an additional $33 billion in aid for Ukraine, to fund weapons and provide longer-term economic and humanitarian aid to Ukraine, as the country’s conflict with Russia enters its third month. Link to White House fact sheet.

Biden wants $500 million in farmer aid. We detailed the proposals in a special report yesterday (link) and today’s dispatch has analysis of the requests, which already has raised several questions and issues. The proposal includes dramatic boosts in commodity loan rates for select crops, including soybeans ($8.68 vs. current $6.20) and wheat ($5.52 vs. $3.38). Loan rates would also be increased 21% for both rice and pulses. It would also pay a $10-an-acre crop insurance subsidy that would be paid to farmers who double-crop soybeans and wheat. The proposal would need congressional approval.

“Putin’s war, not sanctions, are impacting the harvest of food and disrupting the movement of that food by land and sea to nations around the globe that need it,” said President Biden at the White House, referring to Russian president Vladimir Putin. “This funding is going to help ease rising food prices at home as well as abroad, caused by Russia’s war in Ukraine. It’s going to help support American farmers to produce more crops like wheat and oilseeds, which is good for rural America, good for the American consumer, and good for the world.”

Congressional Democrats will steer clear of a gas tax holiday in upcoming legislation meant to lower prices. House Speaker Nancy Pelosi (D-Calif.) referred to such a measure as merely a PR move. Meanwhile, centrist Sen. Joe Manchin (D-W.Va.) is labeling the potential to offer additional electric vehicle (EV) credits “ludicrous” at a time when supply of EVs is far outstripped by demand. “

Germany dropped its objection to a full Russian oil embargo, clearing the way for a European Union ban on crude imports from Russia. But it is murky on how quickly the bloc ends its Russian oil purchases.

Farmers in northern Ukraine say they have returned to fields littered with mines and destroyed equipment, disrupting food supplies from the region. Link to WSJ for details.

Amazon reported its first quarterly loss since 2015, heading $3.8 billion into the red. That was in part because of a $7.6 billion hit from its investment in Rivian, an electric-vehicle startup whose shares have plunged in recent months.

China is rolling out new Covid-19 containment measures as it looks to curtail a rise in cases, introducing a 48-hour pass for residents in the technology hub of Hangzhou while Beijing closed schools. The Covid cases are causing more supply chain woes as several items in today’s dispatch details.

China set an economic stimulus plan to offset Covid lockdowns. The aid measures include providing money for students and allowing employers to stop paying unemployment insurance to the government if they promise to keep workers on the job.

Railroad gridlock is bogging down the U.S. farm sector. Delayed trains and scarce railcars are impeding crop shipments this spring, causing grain-storage facilities to fill up, backing up fertilizer shipments and temporarily shutting down production at ethanol plants.

U.S. recorded the first human infection of the highly contagious H5 bird flu virus in the country, state officials and the CDC said on Thursday. The case was detected in a person in Colorado, the CDC said. We have details in Livestock section.

President Biden said he was closing in on a decision to eliminate some student-loan debt but stressed any loan forgiveness would be less than the $50,000-per-borrower some influential Democrats have sought.

More than 20 academics urged the SEC to withdraw a climate rule proposal, saying the agency was exceeding its authority. Link for details.

A third of all cigarettes sold in the U.S. could be taken off store shelves, according to a national ban proposed by the Biden administration. The measure, which targets menthol stoges and flavored cigars, would be the biggest move the federal government has taken to curb cigarette use since the FDA gained regulatory control over the tobacco industry in 2009. "We know the majority of smokers want to quit," FDA Commissioner Dr. Robert Califf declared. "Prohibiting menthol in cigarettes will give them a better shot." The ban won't impact menthol e-cigarettes, while case-by-case exemptions could be applied to certain products like heated-tobacco devices or cigarettes with very low nicotine levels. It would take at least two years for final legislation to go into effect, with the FDA needing public comment on the proposed rules and time to review them.

 

MARKET FOCUS

Equities today: Global stock markets were mostly firmer overnight. U.S. Dow opened around 100 points lower. Asian equities finished mostly higher Friday with Japan’s Nikkei closed for a holiday. The Hang Seng Index was up 813.22 points, 4.01%, at 21,089.39. The Shanghai Composite rose 71.58 points, 2.41%, at 3,047.06. European equities are seeing gains in early trading, with the Stoxx 600 up 1% and regional markets up 0.4% to 0.9%.

     U.S. equities yesterday: The Dow gained 614.46 points, .185%, at 33,916.39. The Nasdaq gained 382.59 points, 3.06%, at 12,871.53. The S&P 500 rose 103.54 points, 2.47%, at 4,287.50.

     Stocks 042822

Agriculture markets yesterday:

  • Corn: July corn futures rose 1 1/4 cents to $8.13 1/2, a lifetime-high close for the contract, while December futures gained 2 1/4 cents to $7.51 3/4, after hitting a contract high.
  • Soy complex: July soybeans fell 8 cents to $16.84 3/4. July soymeal fell $10.90 to $430.10, a nine-week closing low. May soyoil ended at 90.60 cents, a record close for nearby futures.
  • Wheat: July SRW wheat fell 5 1/2 cents to $10.85 3/4. July HRW wheat fell 12 3/4 cents to $11.41 1/4. July spring wheat fell 3 1/4 cents to $11.91 1/2 after posting a contract high at $12.06.
  • Cotton: July cotton rallied the 700-point daily limit to 147.68 cents per pound.
  • Cattle: June live cattle fell $1.125 to $133.90, the contract’s lowest settlement since April 8, while August feeder cattle gained $1.45 to $170.40.
  • Hogs: June lean hog futures gained 62.5 cents to $110.975, after dropping near a three-month low earlier in the session. Wholesale pork prices remained under pressure.
     

Ag markets today: Soybean futures gained more overnight than they lost on Thursday, making new highs for the week. Wheat and corn also firmed. As of 7:30 a.m. ET, corn futures were trading steady to 3 cents higher, soybeans were 8 to 21 cents higher, SRW wheat was 8 to 9 cents higher, HRW wheat was 2 to 4 cents higher and HRS wheat was mostly 2 to 3 cents higher. Front-month U.S. crude oil futures were around $1 higher and the U.S. dollar index was more than 700 points lower this morning.

Technical and other viewpoints from Jim Wyckoff: “Gold prices are sharply up to end the trading week, on safe-haven demand as Europe grapples with its energy dependency on Russia, and Russia is putting the squeeze on supplying natural gas and oil to European countries.”

     April 29 Corn

     April 29 Soybeans

     April 29 Crude

     April 29 Bonds

     April 29 Gold

On tap today:

     • U.S. consumer spending for March is expected to increase 0.7% from the prior month. (8:30 a.m. ET)
     • U.S. personal-consumption-expenditures price index excluding food and energy for March is forecast to rise 0.3% from one month earlier and 5.3% from one year earlier. (8:30 a.m. ET) UPDATE: March's core PCE price index increased 5.2% year over year, a slightly lower than expected advance. But that's still really strong, and likely cementing the central bank's intention to raise interest rates by half a percentage point in May.
     • U.S. employment-cost index for the first quarter is forecast to rise 1.1% from the prior quarter. [Follow our coverage here] (8:30 a.m. ET)
     • Chicago purchasing managers index is expected to fall to 62.0 in April from 62.9 one month earlier. (9:45 a.m. ET)
     • University of Michigan consumer sentiment index for April is forecast to hold at 65.7, unchanged from a preliminary reading. (10 a.m. ET)
     • Baker Hughes rig count is out at 1 p.m. ET.
     • CFTC Commitments of Traders report, 3:30 p.m. ET.
     • China's official purchasing managers indexes for the manufacturing and service sectors are out at 9:30 p.m. ET.

Eurozone economy grew by 0.2% during the first three months of the year, Eurostat, Europe’s statistics agency, reported on Friday, as rising prices, flagging consumer confidence related to the war in Ukraine and continuing supply chain disruptions exerted a drag on the region’s recovery from the pandemic. The figures for gross domestic product, the broadest measure of economic output, varied widely among the 19 countries that use the euro. In France, where Covid restrictions remained in place for much of the first quarter, growth stagnated. Germany, with the largest economy in Europe, saw a 0.2% increase in GDP for January, February and March, bringing its year-over-year growth to 4%. “The economic consequences of the war in Ukraine have had a growing impact on the short-term economic development since late February,” the Federal Statistics Office of Germany said in a statement.

     Meanwhile, the Eurozone got another piece of hot inflation data, as its consumer price index for April was up 7.5%, year-on-year. That was right in line with market expectations.

        EZ inflation

Amazon.com posted its first quarterly loss in seven years. The result reflected broad economic trends related to a slump in online shopping, higher costs from inflation and supply-chain woes, as well as market jitters over its stake in electric vehicle maker Rivian.

     Amazon

China’s stringent rules to curb Covid-19 are about to unleash another wave of summer chaos on supply chains between Asia, the U.S. and Europe, according to Bloomberg. Ports are already snarled, with the $22 trillion trade in global goods facing months of severe disruption. It takes an average of 111 days for goods to reach a warehouse in the U.S. from the moment they’re ready to leave an Asian factory, close to the record of 113 in January and more than double the trip in 2019, according to San Francisco-based Flexport. The westbound journey to Europe takes even longer — a near-record 118 days.

     Snarl

Market perspectives:

     • Outside markets: The U.S. dollar index is weaker ahead of U.S. market action, with strength in the euro, British pound and Swiss franc versus the greenback. The yield on the 10-year US Treasury note was higher, trading around 2.88%, with a mixed tone in global government bond yields. Gold and silver futures are seeing solid gains ahead of U.S. trading, with gold around $1,913 per troy ounce and silver around $23.55 per troy ounce.

     • Despite today’s setback, the greenback is at its highest level in two decades, climbing another 1% on Thursday to just under 104 in the U.S. Dollar Index, marking its strongest level since 2002. The gauge measures the U.S. currency's strength against a basket of other developed world currencies, including the euro, yen, Canadian dollar and British pound. The dollar has advanced 7% since the beginning of the year, outpacing many assets from stocks and bonds to gold and bitcoin. "It's clearly a 'U.S. dollar is king' world," said Mingze Wu, a currency trader in Singapore at StoneX Group. "The dollar will continue to strengthen globally as long as rest of the world does not keep up in matching interest rate hikes." The greenback is also getting a haven bid along with Treasuries amid concerns about economic growth and a possible recession.

     • Crude oil futures are higher ahead of U.S. trading, with U.S. crude around $106.30 per barrel and Brent around $108.60 per barrel. Crude was mixed in Asian action, with U.S. crude weaker around $105.30 per barrel while Brent was firmer around $107.50 per barrel.

        Coil

     • Iran is ramping up oil exports and benefiting from a rise in oil prices as its main buyer, China, pulls back on its purchases of Russian oil due to the war with Ukraine, the WSJ reports (link). Iran oil exports — which go almost exclusively to China apart from rare deliveries to Syria and Venezuela — rose to 870,000 barrels a day in the first three months of the year, up 30% from an average of 668,000 barrels a day in the full-year 2021.

     • Demand for chicken at American restaurants is back to levels not seen since the coronavirus outbreak, giving a boost to Pilgrim’s Pride Corp., the second-biggest U.S. poultry producer.

     • Fertilizer woes continues… not just in U.S., but Brazil. One of Brazil’s largest farmers is planning to reduce fertilizer use by a quarter next season, relying on more precise applications and soil testing to maintain crop yields. Link for details from Bloomberg.

     • Railroad gridlock is bogging down the U.S. farm sector. Delayed trains and scarce railcars are impeding crop shipments this spring, causing grain-storage facilities to fill up, backing up fertilizer shipments and temporarily shutting down production at ethanol plants. Railroad operators said they are working to fix the problems but struggling to find enough workers. The WSJ reports (link) grain companies are looking for other ways to move farm commodities across the country, leading to higher transportation costs that will ultimately push up food prices for consumers.

     • NWS weather: Heavy rain and severe thunderstorms for portions of the Plains and Ohio Valley on Friday and Saturday... ...There is an Extreme Risk of fire weather over parts of the Central/Southern High Plains on Friday... ...Temperatures will be 10 to 20 degrees below average over parts of the Northern High Plains/Northern Rockies.

        NWS 042922
        Wx 042922

Items in Pro Farmer's First Thing Today include:

     • Soybeans lead overnight price strength
     • China will adjust policy to support economy (details in China section)
     • China to sell more soybean reserves
     • EU lowers wheat crop, but still expects record exports
     • Choice beef firms, movement stays strong
     • Hog/pork cash fundamentals weaken

 

RUSSIA/UKRAINE

— Summary: Ukraine acknowledged it was taking heavy losses in Russia's assault in the east, but said Russia's losses were even worse, as U.S. President Joe Biden called on Congress to send as much as $33 billion to help Kyiv withstand the attack. President Volodymyr Zelenskyy praised Biden's offer of help, which amounts to nearly 10 times the aid Washington has sent so far since the war began on February 24. Ukraine’s president said Russia sent five missiles into Kyiv shortly after his talks with the U.N. secretary general ended there.

  • Jens Stoltenberg, NATO’s secretary-general, said the alliance was prepared to support Ukraine in a war that “will drag on and last for months and years”. He added that NATO would help Ukraine to “move from old Soviet-era equipment to more modern NATO-standard weapons and systems”. Mr Stoltenberg also said that Finland and Sweden would be “warmly welcomed” should they decide to apply for membership.
  • Germany drops opposition to Russian oil ban. German representatives to the EU have lifted their objection to a full a Russian oil embargo, the Wall Street Journal reports (link), increasing the likelihood that the bloc will move forward with its plans to adopt a phased-in Russian oil ban. Details on the timeline for the phased-in ban are unclear since Germany will need time to secure alternative supplies. Still, some officials suggested the EU could move to vote on the embargo as early as next week. The EU imports between 3 and 3.5 million barrels of oil a day from Russia, sending just under $400 million in payments daily. That amounts to some 27% of EU oil imports. Oil and gas revenues accounted for 45% of Russia’s federal budget in 2021, according to the International Energy Agency.

    The European Union is still the biggest buyer of Russian oil. In the two months since the Ukraine war began, the EU bought $46 billion worth of oil from the warring nation — out of the $66 billion Russia made from fuel exports, a study found.
  • EU warns against paying Russia in rubles. EU Commission President Ursula von der Leyen warned EU member countries not to capitulate to Vladimir Putin’s decree that “unfriendly nations” pay for their gas imports using rubles, saying that doing so would be a violation of sanctions passed by the bloc. “Our guidance here is very clear,” she said. "If this is not foreseen in the contract, to pay in rubles is a breach of our sanctions."

    But Reuters reported (link) that some European traders are weighing whether to pay for Russian gas supply in rubles. Among them:

   • Italy’s gas provider, Eni. Reuters reports (link) it has not yet decided on whether to cease imports of Russian supplies, and is “is waiting for clarity” from the EU on whether paying in rubles amounts to a breach of sanctions passed by the bloc.
   • Uniper, Germany’s main importer of Russian gas, has also reportedly declined to rule out the ruble payments just yet, saying “no decision” has been made. Earlier this week, it said it would be possible to pay for the future supplies “without breaching” sanctions but declined to offer additional details.
   • Hungary, meanwhile, is planning to pay for Russian supplies using Gazprom bank, which allows it to convert its currency into rubles in accordance with Putin’s decree. 

— Market impacts:

  • Inspectors find no significant danger at Chernobyl. A team of international nuclear inspectors tasked with measuring radiation at the Chernobyl nuclear facility in Ukraine did not find a dangerous increase in exposure levels after Russian troops briefly seized control of the facility before ceding control back to Ukraine last month. Speaking to reporters in Vienna, International Atomic Energy Agency Director General Rafael Grossi said that the levels measured by his team were “significantly below the authorized levels for workers in an environment with this type of radiation… The situation is not one that could be judged as posing great danger to the environment or to people at the moment that we were taking these measurements,” Grossi said. His remarks come after Russian troops seized control of the plant in late February, forcing more than 200 technicians and support staff there to work at gunpoint and with very little food. Russian soldiers abruptly handed control of the facility back to Ukraine last month, citing exposure to “significant amounts” of radiation while digging trenches in the exclusion zone.

 

POLICY UPDATE

— Biden administration wants more total planted acres with a focus on soybeans and wheat. That is the clear conclusion from what the administration is proposing as part of its latest wish list for Congress. Pro Farmer detailed the requests in a special report yesterday (link). In brief, the proposals need congressional approval and likely would be altered by lawmakers if it ever gets out of both chambers. The requests include dramatic boosts in commodity loan rates for selected crops, including soybeans, wheat, rice and pulse crops. But not corn and cotton. It would also pay a $10-an-acre crop insurance subsidy that would be paid to farmers who double-crop soybeans and wheat.

          The following is initial analysis of the administration’s farm policy proposals, based on talks with and emails from several contacts:

  • The projected market prices are significantly above loan rates (even these new loan rates). So, while it may be nice to have a little more liquidity at harvest, these loans will likely all have to be repaid. If my problem is tight margins due to historically high costs of production, exactly how am I supposed to get excited about a loan that must be repaid within the marketing year?
  • For the double-crop incentive, is it only in counties with approved double cropping?  Regardless, what exactly is $10/ac. supposed to incentivize that $17/bu. in the market won’t already?
  • Since Congress would have to approve all of this, why aren’t they sending up a proposal to help offset skyrocketing costs?
  • The proposal in total is estimated to cost $400 million over two years. Are there costs associated with the significant boosts in selected commodity loan rates?
  • This is clearly a proposal that shows the administration’s concern about 2023 crops since little if anything can be done to impact 2022-crop plantings.
  • The proposals could skew plantings in 2023 if corn prices decline relative to soybeans and even wheat.
  • The crop insurance program is again being used relative to trying to adjust farmer planting behavior.

     Wheat: The proposal would increase the wheat loan rate (2022 and 2023 crops) to $5.52 per bushel from the current $3.38 per bushel.
     • July Chicago wheat futures closed Thursday at $10.85 3/4.
     • 2021 season average cash price: $7.60.
     • 2021 production: 1.645 billion bushels.
     • 2021 put under loan: 10.057 million bushels.
     • 2021 loan value: $34.572 million.
     • 2021 loans outstanding: $13.873 million as $20.698 million has already been repaid.
     • Less than 1% of 2021 crop was put under loan.

     Soybeans: The proposal would boost the 2022 and 2023 loan rate by 40%, setting it at $8.68 per bushel versus the current $6.20 per bushel.
     • November soybean futures closed at $15.21 on Thursday.
     • 2021 crop season average cash price forecast for 2021/22 is $13.25.
     • 2021 production: 4.435 billion bushels.
     • 2021 put under loan: 80.143 million bushels.
     • 2021 loan value: $499.16 million.
     • 2021 loans outstanding: 43.469 million bushels with a value of $270.18 million as producers have already repaid $470.55 million.
     • Less than 2% put under loan.

     Ukraine: “USDA expects that U.S. farmers may be able to increase production during the 2023 crop year and make up almost 50% of the level of wheat typically exported by Ukrainian farmers.” Ukraine exports are forecast at 19 million tonnes in 2021-22; exports were 16.85 million tonnes in 2020-21 and 21.02 million tonnes in 2019-20. If the administration wants to increase production by 50% of the exports by Ukraine, that would mean an increase in production of around 10 million tonnes or 800 million bushels based on the 2021-22 export forecast. The administration is not identifying an increase in production for soybeans.

     Low-cost money. The April CCC interest rate on a loan taken out in April was 2.125%, up from 1.250% in January. If the same pace of increase took place, that would put the interest rate at 2.75% in July and 3% in August. While these rates are below commercially available rates, the monthly interest rate levels will be increasing as the Fed raises interest rates. USDA sets the interest rates on CCC loans at the level USDA is charged for the money by the U.S. Treasury plus 1%.

     Producers can obtain a marketing assistance loan by pledging the commodity as collateral, with the interest rate on the loan set in the month the loan is disbursed. Producers have to have title to the grain and cannot sell the quantity under loan without first repaying the loan. Producers have to repay the loan plus interest at maturity.

     With a marketing loan in place, that allows producers to repay their loans at potentially less than the loan rate if prices fall below the loan rate levels — referred to as a marketing loan gain. However, more producers have opted to capture that difference between the loan rate and the loan repayment rate via a loan deficiency payment (LDP). The producer does not have to pledge the commodity as collateral for a loan nor make any repayment of the loan.

     The loans are also a non-recourse loan which means producers have the option of delivering the pledged collateral to satisfy the outstanding loan at maturity. A settlement value is determined and applied to the outstanding loan principal and interest.

     The loan program has seen declining usage over the years and a small percentage of U.S. production typically is put under loan, particularly soybeans and wheat. A greater percentage of minor oilseed crops in the U.S. are put under a CCC loan.

     Given that most planting decisions have been made for 2022, it seems unlikely there would be little impact to production in 2022. The exception might be via the double-crop provisions, but there are also questions where that could be allowed given that a limited number of areas of the country are considered double-crop areas.

     Bottom line: The action is clearly signaling the administration wants more wheat and soybean acres in 2023. That would appear to be at the expense of corn and cotton acres, given the statement that feed and fiber farm program provisions would be kept the same. Increasing rice acres would seem to be difficult given that is a far different production system than soybeans or wheat.

     The proposals almost seem to work at cross purposes. While it would give producers financing at a favorable interest rate, the goal is to boost production, i.e., make more supplies available to the market. If the crop is under loan, producers would have to repay the loan for those bushels to be made available to the market.

     Other questions:

     • What impact might the actions, labeled as just two-year actions, have on the next farm bill? (Recall that the last farm bill rejected some calls for a 12-month commodity loan program, but the administration proposals have this feature for selected crops.)
     • Will the proposals skew the policies that are developed as part of a new farm bill?
     • Will the proposals distort the costs for farm programs relative to the baseline? However, being as they are billed as temporary, that should not affect the baseline.

     Still, higher loan rates for some crops versus others will raise an equity debate in the farm bill process. And the word equity is paramount to the current group of Democrats and White House. That could be used by some lawmakers to boost loan rates permanently under the next farm bill, potentially increasing farm program costs as increased production will at some point push prices lower, potentially below loan rates, exposing the government (taxpayers) to higher outlays. And the loan rates come into play for the Price Loss Coverage program. Would these higher loan rates then also expose the government to more potential outlays under that program? And if loan rates are increased via the next farm bill because of this temporary effort, could that also skew program participation?

     Upshot: Most sources do not see much impact, with some calling the proposals “baffling” and “convoluted.”

— Vilsack comments on staff, food aid, SNAP and other issues. USDA Secretary Tom Vilsack faced questions about the department’s plans to boost agency staffing, a new food aid plan, changes to the Supplemental Nutrition Assistance Program (SNAP/food stamps) and efforts to find a new chief ag trade negotiator nominee at the Office of the U.S. Trade Representative (USTR) and an ag trade official at USDA during a Thursday (April 28) House Appropriations Ag Subcommittee hearing on USDA’s fiscal year (FY) 2023 budget request.

     Panel chair Sanford Bishop (D-Ga.) said overall he was pleased with USDA’s FY 2023 request, saying the topline $23.6 billion — $2.2 billion (10%) more than FY 2022 enacted levels — “continues to build” on climate, research, equity and other efforts funded in previous budgets.

     But Ranking Member Andy Harris (R-Md.) called the funding request a “large increase,” and noted it includes little to address key issues brought by surging inflation, transportation and export challenges, high fertilizer costs, and a possible global food crisis from Russia’s invasion of Ukraine. Harris also slammed the Biden administration’s broader FY 2023 budget for including controversial capital gains stepped-up basis provision, saying lawmakers already rejected those proposals under the now moribund Build Back Better (BBB) bill. Besides discretionary spending, Harris also said he wants more oversight of non-discretionary spending at USDA, pointing to changes to the Thrifty Food Plan that “unilaterally increased spending $20 billion a year on SNAP.” He added that he is eagerly awaiting a GOP-requested Government Accountability Office (GAO) review of those changes.

     Vilsack told lawmakers the large funding increase for USDA is merited, noting both discretionary and non-discretionary spending at the department have grown slower than the average across all federal agencies. He flagged the need to hire new staff in USDA’s Rural Development office, Natural Resources Conservation Service (NRCS), and other consumer-facing agencies as key — detailing that 5,300 fewer people work at USDA today than at the end the Obama administration.

     Vilsack also stressed the need to “pay attention to agricultural research,” warning the U.S. is falling behind countries like China. “That is an area that I don't think we want to essentially be a second placing, and I think it ultimately has negative implications for agricultural productivity,” he commented.

     Bishop asked Vilsack if the funding requested to hire additional staff at NRCS and the Farm Service Agency (FSA) will “meet the need” in terms of workload, noting the impact of retirements. Vilsack said he was confident the FSA request would allow USDA “to continue to do good work at FSA offices.” But Vilsack cautioned NRCS is “a different story,” noting initiatives aimed at boosting one-on-one work with producers—especially the historically underserved. But he said the request should “allow us to continue to do work that is incredibly important.”

     As for equity and underserved producers, Bishop asked Vilsack whether USDA had the resources to continue those efforts. Vilsack responded that USDA continues to make progress in those initiatives using funds included in recent Covid19 relief measures, including new outreach and programs focused on those producers.

     Harris focused on USDA’s prediction that SNAP participation will increase by 1.2 million people next year, given that declines in unemployment usually correlate with smaller SNAP rolls. Vilsack replied that the topline employment numbers mask the fact that the picture is uneven in different parts of the country and said one reason for the forecast participation increase is USDA’s plan to boost outreach to people who may qualify for SNAP but do not currently collect benefits. “It’s important for us to continue to look for ways in which we can make sure that the programs that [Congress] created are available to be utilized by the people that they are designed for,” Vilsack concluded, referencing not only SNAP but the Special Supplemental Nutrition Program for Women, Infants, and Children (WIC).

     Rep. Robert Aderholt (R-Ala.) asked Vilsack about what resources USDA is budgeting to address “concerns that are emanating from the war in Ukraine and its impact on the global food supply chain.”  Vilsack responded that the budget “provides the resources to do what we think is necessary,” and touted a plan unveiled Wednesday to tap $282 million from the Bill Emerson Humanitarian Trust (BEHT) and $388 million from the Commodity Credit Corporation (CCC) to combat global food insecurity. Vilsack said he was successful in reducing the cost of shipping food aid but said he remains concerned that it will cost more to ship the food than it costs the government to buy it. The shipping costs are high in part because of cargo preference requirements that the food move on U.S. carriers. “I'm not sure that I have the authority as secretary to waive those provisions,” Vilsack said.

     USDA’s moves to boost domestic fertilizer production were raised by Rep. Lauren Underwood (D-Ill.), who asked Vilsack to update the panel on progress implementing a new $250 million grant program. USDA is looking to gather information, Vilsack said, but said when that process concludes this summer the department will decide how to “best allocate the resources and perhaps even add to those resources.” He added that USDA is also working with state attorneys general who are studying consolidation and potential anticompetitive practices related to ag inputs, and flagged department moves aimed at encouraging more efficient fertilizer use. Pressed for a firm timeframe on when the fertilizer grant program might begin to distribute funds, Vilsack told Underwood the goal is “before the end of this fiscal year” that ends Sept. 30.

     DeLauro raises Abbott infant formula recall. House Appropriations Committee Chair Rosa DeLauro (D-Conn.) joined the session and put into the hearing record a new report detailing whistleblower allegations that Abbott Laboratories ignored warnings about safety lapses around infant formula before its product sickened and killed children. “We need to know exactly who in the company was aware of this failure and the alleged attempts to hide this information from the FDA,” she said. “I strongly encourage you to investigate USDA contracts with Abbott,” she said, adding that if the company cannot guarantee the safety of its products the government should exclude them from the WIC program. Vilsack was not asked to respond.

     Ag trade officials near. Slots for USDA’s undersecretary for trade and the U.S. Trade Representative’s chief agricultural negotiator are still not filled. The Office of the U.S. Trade Representative (USTR) is still without a chief ag trade negotiator — more than a year into the Biden administration — after the previous pick, Elaine Trevino, withdrew her nomination. Rep. David Valadao (R-Calif.) said the role needs to be filled “as soon as possible,” and asked Vilsack about the department’s work with President Joe Biden and USTR Katherine Tai on the vacancy. “I'm aware of the fact that [Tai] just recently concluded three interviews for that position,” he responded. Vilsack added that he knows two of the three individuals, calling them “highly qualified,” and adding that the process is nearing the final stage of finding a new nominee. Vilsack said the White House was also “in the final stages getting a nominee” for the USDA position.

     Bird flu and ASF. Rep. John Moolenaar (R-Mich.) asked Vilsack to update lawmakers on the ongoing US bird flu outbreak. “As of today, there are roughly 29 states that have dealt with and are dealing with [bird flu], roughly 200, almost 240 flocks have been infected in 21 states,” Vilsack replied. “We're concerned obviously about rapid spread and that's why we encourage producers to be very cautious … about biosecurity.” He voiced optimism that “rapid detection, quick quarantine, disposal and depopulation,” will help curb the outbreak. Moolenaar also asked about efforts to prevent the spread of African swine fever (ASF) to the U.S., with Vilsack giving a similar response regarding the importance of biosecurity. Vilsack also noted work in partnership with Mexico and other partners to help the Dominican Republic and Haiti control ASF outbreaks there.

 

CHINA UPDATE

— Apple cautioned that the resurgence of Covid-19 in China threatens to hinder sales by as much as $8 billion in the current quarter —a setback after seeing supply-chain improvements during the first three months of the year. The new pain points come as areas around Shanghai, where Apple has many suppliers, face government lockdowns aimed at curbing Covid-19 infections. “I want to acknowledge the challenges we are seeing from supply-chain disruptions driven by both Covid and silicon shortages to the devastation from the war in Ukraine,” said Apple Chief Executive Tim Cook.

— China's yuan will sink to a two-year low in the months ahead as investors flock to the dollar, according to Bank of America. The slowing economy in China, rising commodity prices, and the U.S. Fed's plan to rapidly hike rates will all weigh on the yuan — which has tumbled roughly 3.8% over the last two weeks.

— China’s sow herd declines. China’s sow herd declined 3.3% in March to 41.9 million head, down 3.1% from last year. China had 422.5 million head of hogs at the end of March, down 5.9% from the previous month but up 1.6% from last year, according to the country’s ag ministry.

— China hits back at Australia over Solomon Islands ‘red line’, saying ‘the Pacific is not someone’s backyard.’ China has slammed Australia for opposing its security pact with Solomon Islands, calling it a colonialist myth-driven violation of sovereignty, and saying Canberra had no right to lay down any “red line.” This came as Australian Prime Minister Scott Morrison said a Chinese military base in the South Pacific nation would be a “red line” for his government, days after Beijing and Honiara confirmed the signing of the deal without revealing details. Talk of China building a naval base on Solomon Islands was “purely fake news,” Chinese defense ministry spokesman Tan Kefei said on Thursday, accusing the Australian government and media of intentionally distorting facts and creating tension.

— China will adjust policy to support economy. China will step up macroeconomic policy adjustments to stabilize the economy as challenges and risks increase, state media quoted the Politburo, a top decision-making body of the ruling Communist Party. Beijing will adopt a package of policies to support Covid-hit industries and small firms, back healthy development of the property market and ensure stable operations of capital markets, while reining in major risks and guard against systemic risks.

 

ENERGY & CLIMATE CHANGE

— Granholm talks about LNG exports. Energy Secretary Jennifer Granholm, appearing before House Energy and Commerce lawmakers Wednesday morning, detailed her department’s 2023 budget request and priorities for the year ahead. She fielded questions about the department’s decision to authorize greater LNG export volumes. While both of those projects are currently under construction, she noted, the U.S. remains focused on its goal to increase LNG exports to Europe to 15 billion cubic meters by the end of the year. “Be aware that we have permitted, completely, 30 billion cubic feet of liquefied natural gas that have not been constructed yet,” Granholm said. “We currently export about 12 billion cubic feet of natural gas. We have permitted almost three times as much that could be ready to go but that are simply not under construction.”

     EU Energy Commissioner Kadri Simson emphasized the necessity of buying energy elsewhere, saying to help Ukraine through the war, the Europeans “have to reduce the financing of Putin’s war machine… We need alternatives for imported natural gas and oil products from Russia,” Simson said.

     The Dept. of Energy recently issued orders authorizing nearly four million metric tons worth of additional exports from two in-the-works LNG facilities on the Gulf Coast.

— Reuters: EPA to forward final RFS plans to OMB for review soon. Reuters reported that sources told the news service that EPA would be sending its final 2020, 2021 and 2022 Renewable Volume Obligations (RVOs) under the Renewable Fuel Standard (RFS) to the Office of Management and Budget (OMB) for review “by early next week.” EPA did not comment on the report.

     We previously alerted that for EPA to meet a June 3 court deadline for the final 2020, 2021 and 2022 RFS levels to be signed by that date, the plan would have to soon be sent to OMB for review. That review can take up to 90 days.

     Another EPA effort that would need to go to OMB soon for review is their proposal on how to set RFS levels for 2023 and beyond. Indications are that an announcement of that proposal will come potentially in late-June/early July and be finalized by the end of the year. But that proposal would likely face an extensive review by OMB given the potential implications for the program. And there will be several groups seeking meetings with OMB on the proposal, including biofuel backers and biofuel opponents — 17 meetings were held on the proposed 2020, 2021 and 2022 RFS levels.

— Sen. Manchin labels EV credits ‘ludicrous.’ Sen. Joe Manchin (D-W.Va.) is labeling the potential to offer additional electric vehicle (EV) credits “ludicrous” at a time when supply of EVs is far outstripped by demand. “There’s a waiting list for EVs right now,” Manchin said Thursday during a Senate Appropriations Committee hearing on the fiscal year (FY) 2023 budget for the Department of Transportation. “But they still want us to throw $5,000 or $7,000 or a $12,000 credit to buy an electric vehicle. It makes no sense to me whatsoever, when … we can’t produce the product for the people who want it, and we’re still going to pay them to take it? It’s absolutely ludicrous in my mind.”

— Governors seek E15 waiver. The governors of Iowa, Illinois, Nebraska, Kansas, Minnesota, North Dakota, and Wisconsin asked the EPA for a permanent waiver for the summertime sale of E15, which is now blocked in most of the country as a precaution against smog. Link for details.

 

LIVESTOCK, FOOD & BEVERAGE INDUSTRY

— U.S. recorded the first human infection of the highly contagious H5 bird flu virus in the country, state officials and the Centers for Disease Control and Prevention (CDC) said on Thursday. The first known human case of H5 bird flu in the U.S. was detected in a person in Colorado, the CDC said. The person that tested positive for avian influenza A(H5) virus was involved in the culling of poultry presumed to have had H5N1 bird flu, CDC said. The Colorado Department of Public Health and Environment (CDPHE) said the man is incarcerated at a state correctional facility and was exposed to infected poultry while working at a commercial farm in Montrose County. The man tested positive for an avian influenza A(H5) virus earlier this week and the CDC confirmed the result on Wednesday, the CDPHE said, though repeat testing was negative for influenza. It’s possible the person may not have actually been infected with the virus, the CDPHE noted, suggesting the virus may have been present in his nose due to close contact with infected poultry but did not cause an infection. The man—described as younger than 40, “largely asymptomatic” and reporting only fatigue—is now isolating and taking the antiviral drug oseltamivir, also known as tamiflu, the CDPHE said. No other cases have been confirmed in humans in Colorado or the U.S., the CDPHE said.

     “We want to reassure Coloradans that the risk to them is low,” said Dr. Rachel Herlihy, a state epidemiologist at the Colorado Department of Public Health and Environment.

— USDA pays $146 million in bird flu indemnities. As bird flu losses topped 35 million fowl, USDA Secretary Tom Vilsack said on Thursday that the USDA has paid about $146 million in indemnities to poultry owners, with an additional $263 million available. “That’s about half of where we were in 2014-2015 with the last outbreak,” he said, referring to the epidemic of highly pathogenic avian influenza (HPAI) that killed more than 50 million egg-laying chickens and turkeys. “Hopefully, with warming temperatures, we will see abatement of this virus,” Vilsack said at a House hearing. “We’re going to continue to focus on rapid detection, quick quarantine, and depopulation and disposal” of infected flocks.

— McDonald’s said its U.S. locations increased menu prices by an average of 8% in the first quarter from the same period a year earlier, as restaurant owners raise menu prices to offset their own rising costs. Restaurants and food companies are trying to balance raising prices to offset more expensive ingredients and wages against consumers’ ability and willingness to pay higher prices. Consumers so far haven’t resisted McDonald’s menu price increases, executives said, but some diners are trading down to cheaper options, or ordering less food per visit.

— Unilever raised prices by more than 8% in the first quarter. The company, whose brands include Ben & Jerry’s ice cream and Hellmann’s mayonnaise, said higher prices had resulted in some softening of consumer demand.

 

CORONAVIRUS UPDATE

Summary: Global cases of Covid-19 are at 512,504,080 with 6,231,930 deaths, according to data compiled by the Center for Systems Science and Engineering at Johns Hopkins University. The U.S. case count is at 81,251,637 with 993,164 deaths. The Johns Hopkins University Coronavirus Resource Center said that there have been 574,232,736 doses administered, 219,483,386 have been fully vaccinated, or 66.61% of the U.S. population.  

 

POLITICS & ELECTIONS

House GOP poised to gain three to four seats in redistricting process. Barring even more surprises, Republicans are likely to pick up three to four House seats from redistricting advantages after a series of recent breakthrough victories, bolstering their already favorable prospects in this midterm election cycle. Republicans garnered a crucial court victory in New York Wednesday and an aggressive, GOP-friendly map enacted in Florida last week. “A court-appointed special master will draw a remedial map, perhaps costing Dems three NY seats they otherwise would have gained & making Rs clear redistricting winners," Dave Wasserman, the House editor for the Cook Political Report with Amy Walter, tweeted.

— Amy Walter of the Cook Political Report says: “For months now, discussions about 2024 have mostly focused on whether Donald Trump will run for president. This framing works out well for both Trump and the political media: Trump gets the spotlight he craves, and the political media gets the clicks and eyeballs they need. But, the far more exciting and consequential question is whether or not Pres. Joe Biden will be on the ballot in 2024.” Walter adds: “"Consciously or not, many voters, including many Democrats, voted for Biden in 2020, assuming that he would be a one-term president. They weren't thinking about the logistical and political difficulties that a one-term presidency would pose to the party in four years.”

— President Joe Biden said he's considering canceling "some" debt for federal student loan borrowers, but he won’t be going as far as canceling $50,000 in debt per borrower, which is what several top congressional Democrats had been requesting, notably Sen. Elizabeth Warren (D-Mass.).

     “Student debt cancellation disproportionately benefits middle- and high-income families, though income targeting makes cancellation less regressive,” researchers at JP Morgan concluded after an analysis of debt forgiveness scenarios. People who attended graduate school could reap the most benefit because they hold the highest amount of student debt. Although only a quarter of those with student loans attended graduate school, they hold roughly half the student loan debt, according to the Brookings Institution. Colleges and universities could also benefit from widespread student debt forgiveness, as it would essentially absolve them from responsibility for steadily rising tuition rates over the past several decades.

     The average private university tuition rose 144% in the past 20 years, according to U.S. News and World Report, with the average out-of-state public university tuition climbing 171%. In-state public university tuition jumped the highest, on average rising 211% in the past two decades.

 

CONGRESS

— Pelosi nixes gas tax holiday. Congressional Democrats will steer clear of a gas tax holiday in upcoming legislation meant to lower prices. House Speaker Nancy Pelosi (D-Calif.) referred to such a measure as merely a PR move. “The pros of it are it’s good PR,” she said at a press conference. “The cons are that there’s no guarantee that the saving, the reduction in the federal tax, that would be passed on to the consumer,” she said, noting that the lost revenue would have to be replaced elsewhere.

     Instead, Democrats will go after oil companies. Democrats will pursue legislation to attack oil companies as manipulating the marketplace. “Big Oil has profiteered and exploited the marketplace,” Pelosi said.

     Pelosi was joined at the press conference by Senate Majority Leader Chuck Schumer, House Energy and Commerce Chairman Frank Pallone (D-N.J.), and Senate Commerce Chair Maria Cantwell (D-Wash.). They declined to offer specifics about the legislation. But Schumer made it clear that Democrats think the public is receptive to the idea of blaming the industry for high gas prices. Oil companies maintain that the market is competitive.

     Pallone said they will give the FTC and state attorneys general “increased authority — including civil penalty authority — to go after oil companies and retailers that are gouging their customers.”

     The bill would apply to both wholesale and retail sales.

     Democratic leaders are looking at pairing the price gouging measure with a package of other bills to address skyrocketing food prices.

 

OTHER ITEMS OF NOTE

Cotton AWP falls but remains above 130 cents. The Adjusted World Price (AWP) for cotton fell to 133.38 cents per pound, effective today (April 29), down from 136.20 cents per pound the prior week. But this still marks five straight weeks the AWP has been above 130 cents per pound. Meanwhile, USDA announced that Special Import Quota #2 will be established May 5 for 46,314 bales of Upland Cotton, applying to supplies purchased not later than Aug. 2 and entered into the U.S. not later than Oct. 31.

— The Biden administration proposed a national ban on menthol cigarettes, a plan that could sweep from the market more than a third of all cigarettes sold in the U.S. Rules proposed by the FDA would prohibit the sale of menthol cigarettes and all flavored cigars, a move that FDA chief Robert Califf said would improve smokers’ chances of quitting. Regulators are considering allowing case-by-case exemptions for certain products, such as heated-tobacco devices or cigarettes with very low nicotine levels. The proposed ban wouldn’t affect menthol e-cigarettes and wouldn’t take effect for at least two years.

— Elon Musk sold about $4 billion worth of shares in Tesla, the electric-car maker he founded, presumably to fund his $44 billion prospective purchase of Twitter. He later tweeted that he did not plan to sell any more Tesla shares. Separately, Reuters reported that Musk plans to increase Twitter's cash flow by cutting executive pay and developing new ways to monetize tweets.


 

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