Vilsack Reveals Final COP28 Declaration Will Not Focus on Agriculture and Food

Macy’s receives buyout bid | Commentary says ‘tariffs are for losers’ | Chinese pork prices tumbled last week

Abbreviated report as I am en route to Newton, Kansas, to speak at the MKC Co-op annual meeting.

— Macy’s received a $5.8 billion buyout bid from Arkhouse and Brigade Capital. The WSJ said the bid was submitted Dec. 1 and the investor group indicated it would be open to raising the offer.

— The global economy will grow just 2.7% in 2024, versus 3.1% this year, Bloomberg Economics said. That would be the world's third-worst year since the burst of the dotcom bubble, only after 2009 and 2020.

— In an opinion article (link) in the Wall Street Journal titled "Tariffs Are for Losers" by Andy Kessler, the author criticizes the idea of imposing tariffs on imports as a policy approach. He argues against the use of tariffs for several reasons:

• Bipartisan support for tariffs: The author highlights that there is bipartisan support for tariffs as a policy to protect American industries and jobs, citing examples like J.D. Vance and Senator Josh Hawley.
• Economic consequences: Kessler contends that tariffs impose costs on all Americans by raising prices and that they subsidize a few jobs at the expense of the broader economy.
• Misallocation of capital and resources: The author argues that tariffs lead to misallocation of capital and human resources by diverting entrepreneurs and businesses towards artificial opportunities created by tariffs. This, in turn, hinders innovation.
• Impact on manufacturing: While domestic manufacturers may benefit from tariffs by raising prices, consumers are forced to pay more for goods, and manufacturers can become complacent.
• Trade deficits and profitability: Kessler notes that trade-deficit figures do not necessarily reflect the profitability of manufacturing industries, and tariffs may not be the solution to addressing these issues.
• Inflation and elasticity: The article points out that tariffs contribute to inflation and can hinder economic growth by reducing elasticity, which is the ability of lower costs to drive higher sales.
• Government's role: The author is skeptical of the government's ability to pick winners and losers in the economy through industrial policies and subsidies, citing past failures in areas like steel, EVs, and renewable energy.
• Strength of the economy: Kessler concludes by asserting that tariffs are a sign of weakness and argues for a free-market approach, allowing markets, rather than politicians, to determine which industries thrive.
   

Bottom line: Kessler criticizes tariffs as an ineffective and counterproductive economic policy, suggesting that they lead to unintended consequences and hinder economic growth and innovation.

— The Israeli military said Hamas militants have increasingly been surrendering to Israeli forces in a sign that the militant group is losing control of the Gaza Strip. Meanwhile, Hamas’ Shejaiya Battalion commander has been killed, the IDF said.

— Chinese pork prices experienced a significant decline of more than 6% in the past week, despite efforts by Chinese authorities to support the market. This decline has raised concerns about deflation in the largest economy in Asia, Bloomberg News reports (link). The average national prices for pork, which is a staple protein in China, have now reached their lowest levels since April 2022. Moreover, they have fallen by almost 25% from their peak earlier in the year in early August.

     In response to these falling prices, the Chinese government announced in late November that it would purchase pork to stock the nation's strategic reserves. This marked the third round of such purchases this year, but these efforts have not been sufficient to halt the decline. Authorities are also encouraging farmers to sell their hogs when they are ready for market instead of holding onto livestock.

     These concerns about deflation in China extend beyond the pork market. Official figures recently revealed that consumer prices experienced the steepest decline in the past three years, and producer costs also dropped more than expected. Some farmers are facing the challenge of letting fresh vegetables go to waste in their fields due to decreased demand.

     Looking ahead, the outlook for China's significant pork industry remains pessimistic. Consumption is expected to remain sluggish after the Spring Festival holidays in mid-February, while hog production is anticipated to increase, according to the agriculture ministry's recent statements.

     The Governor of the People's Bank of China, Pan Gongsheng, mentioned last month that the decline in the consumer price index in October was primarily driven by lower food prices, particularly pork. Deflation is a concerning issue for China as it can trigger a negative cycle of reduced economic activity.

— USDA Secretary Tom Vilsack revealed that the final COP28 declaration would not focus on agriculture and food. This decision was influenced by a request from the G77 group of developing countries for additional review and participation related to agriculture and food, leaving no time for negotiations. While Vilsack highlighted the importance of a special day dedicated to agriculture and food policy and the participation of U.S. farm and food leaders, he considered the Emirates Declaration on Sustainable Agriculture, Resilient Food Systems, and Climate Change, signed by 152 nations, and commitments by countries and companies to reduce greenhouse gas emissions and fund related projects as significant achievements. However, some observers were disappointed because this would delay progress until June 2024. Vilsack mentioned the Agriculture Innovation Mission (AIM) for Climate, a joint initiative between the U.S. and the United Arab Emirates aimed at addressing climate change and global hunger through increased investment in climate-smart agriculture and food systems innovation.

     Regarding reducing meat consumption, Vilsack said he had not heard much about that goal but instead emphasized strategies for reducing methane emissions related to livestock. The U.S. is taking a leadership role in methane reduction through research, feed additives, recapturing methane for energy production, and managing manure.

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