OMB on Friday Cleared USDA CFAP Rule

Posted on 05/18/2020 6:28 AM

Fed head Powell: 'There's really no limit to what we can do in lending programs'


In Today’s Updates


* USDA to soon release CFAP rule as President Trump talks ag on Tuesday
* Coming CFAP details will not be the last of payments this year
* Fed's Powell: 'Fed hasn't run out of ammunition by a long shot'
* Oil continues rally with U.S. prices over $31 a barrel
* OPEC chief optimistic that the worst of oil crisis is over
* Gold futures rose 0.8%, rising for a fifth consecutive session
* Analyst: Economic downturn worse than 2008 recession
* U.S. auto-parts industry says it needs between $20 billion and $25 billion
* China demand pushes iron ore back above $90 a tonne
* Japan’s economy fell into a recession in the first quarter
* House Dems Friday passed a $3 trillion coronavirus relief package
* House approved voting by proxy and remote committee work
* Significant changes will be made to the Paycheck Protection Program
* Analysts on U.S./China: Risk of 'super cold war is mounting'
* U.S./China Phase 1 tracker released
* Kudlow: U.S./China trade deal was “absolutely not” falling apart
* U.S. food supply update
* DOJ approves pork industry plan for producers re: euthanizing hogs
* Update on reopening America... and around the world
* More than 2/3 of unemployed Americans receive more in benefits than old jobs
* Coronavirus update
* China vows to tackle troubled wet markets
* Perdue among new members of White House Coronavirus Task Force

* RFS 2021 biofuel (ethanol) and 2022 biodiesel mandate levels sent to OMB
* Some topics always get delayed in Congress: transportation & water infrastructure
* Trump's WOTUS rule replacement is similar to last one: court challenges
* Washington Post article comments on two Minnesota House races




Equities today. Asian and European stocks advanced as investors took some encouragement from signs of businesses reopening across major economies. U.S. stock futures rallied as contracts tied to the S&P 500 gained 1.6%, signaling that U.S. stocks could advance after the opening bell in New York.


     U.S. equities Friday: The Dow finished up 60.08 points, 0.25%, at 23,685.42. The Nasdaq gained 70.84 points, 0.79%, at 9,014.56. The S&P 500 gained 11.20 points, 0.39%, 2,863.70.


     For the week, the Dow tumbled 2.6% while the S&P 500 fell 2.2% and the Nasdaq Composite closed 1.2% lower.


Federal Reserve Chairman Jerome Powell said the U.S. economy could take more than a year to recover from the coronavirus-induced shock. “The economy will recover. It may take a while…. It could stretch through the end of next year. We really don’t know,” Powell said on CBS News’ 60 Minutes program. He cautioned that it would be hard for the public to be “fully confident” until there is a vaccine for the new coronavirus. "In the long run, and even in the medium run, you wouldn’t want to bet against the American economy,” Powell said, comments giving some oomph to stocks today.


     "The Fed hasn't run out of ammunition by a long shot," Powell said. "There's really no limit to what we can do in lending programs."


Federal Reserve issued a stark warning that stock and other asset prices could suffer “significant declines” should the coronavirus pandemic deepen, with the commercial real estate market being among the hardest-hit industries. The Fed made the assertion in its twice-yearly financial stability report (link), in which it flags risks to the U.S. banking system and broader economy. The document highlighted the central bank’s race to intervene in markets and temporarily dial back regulations on financial firms amid the Covid-19 crisis. It cited commercial real estate as being particularly susceptible to falling valuations because “prices were high relative to fundamentals before the pandemic.”


West Texas Intermediate, the U.S. crude benchmark, rose 5.6% to $31.10 a barrel, climbing above $30 for the first time in two months, as demand showed signs of picking up, while supply cuts began to take effect. Brent crude, the international benchmark, rose 5.7% to $33.90 a barrel as traders responded to signs demand was recovering.

     Brent prices

OPEC chief optimistic that the worst of oil crisis is over. OPEC is cautiously optimistic that the worst of the oil crisis triggered by the coronavirus pandemic is over, said the group’s top official. The outlook for the market in the second half of the year is starting to look more encouraging as the global economy recovers, said Mohammad Barkindo, secretary-general of the Organization of Petroleum Exporting Countries (OPEC). The cartel and its allies are rapidly implementing their production cuts, he said. “Here at OPEC we remain cautiously optimistic that the worst is behind us,” Barkindo said in a Bloomberg television interview from Vienna on Friday. “What we saw in April was extraordinary” but the group’s members “rose to the challenge.”


     OPEC cuts


Gold futures rose 0.8%, rising for a fifth consecutive session, and putting the metal on course for a multiyear settling high.


     Gold Prices

Worse than 2008 recession. Sarah Wyeth, the lead analyst for retail and restaurants at S&P Global Ratings, told the Wall Street Journal (link) there is a 50% chance that 19 retailers tracked by S&P will default on their debt. By comparison, five retailers defaulted during the 2008 recession.


     Store closings


The U.S. auto-parts industry says it needs between $20 billion and $25 billion from the government to help it stay afloat. “We need to get liquidity into the automotive supplier community very quickly,” Julie Fream, the head of a trade group for parts makers, told CNBC. “There’s nothing coming in right now and there’s a lot going out in terms of monies and we need to help them now.” The auto-parts industry has been hit hard by widespread car plant closures throughout North America and around the world. Some car factories have now reopened, and parts manufacturers are beginning to ramp up their output in kind but are running low on cash in many cases.


    Auto Outlook


China demand pushes iron ore back above $90 a tonne. The rise in price of steelmaking ingredient suggests China's economy is recovering after lockdowns.


Japan’s economy, the world’s third-largest after the U.S. and China, fell into a recession in the first quarter. The economy shrank an annualized 3.4% in the three months ended March 31 after a 7.3% contraction in the previous quarter. Economists expect Japan’s economy to shrink by an annualized 20% or more this quarter as the pandemic keeps tourists away and depresses spending by households and companies.


    Japan recession




House Democrats pass a $3 trillion coronavirus relief package. The House passed the rescue legislation in a close 208-199 vote, as Democrats saw defections from both the left and right flanks of the party.


     Fourteen Democrats voted against the bill and one Republican supported it — Rep. Peter King of New York, citing robust aid for states and localities like his suffering from revenue shortfalls and high numbers of Covid-19 cases. Among the Democrats who announced in advance they'd vote against the package were Cindy Axne of Iowa, Joe Cunningham of South Carolina, Kendra Horn of Oklahoma, Ben McAdams of Utah and Abigail Spanberger of Virginia. All are moderates in GOP-leaning districts.


     Republicans have opposed the bill, so it has no chance of becoming law. Senate Majority Leader Mitch McConnell (R-Ky.) said he has no interest in taking up the proposal. On Thursday, he said House Speaker Nancy Pelosi (D-Calif.) “published an 1,800-page seasonal catalog of left-wing oddities and called it a coronavirus relief bill.” The White House threatened to veto the legislation before the House voted. White House press secretary Kayleigh McEnany indicated President Trump would back another relief bill. Administration officials said the White House would likely support another round of direct payments. McConnell has called for liability protections for doctors and businesses as part of any future legislation the Senate passes. Democrats have generally criticized the liability language.


     Details: It includes relief for state and local governments, more direct payments, hazard pay for essential workers, an extension of the federal unemployment benefit and money for testing, among other provisions. The summary of the measure totaled 90 pages; the text over 1,800 pages.


     White House officials said the negotiations should be put on hold while the effectiveness of the $2.3 trillion March aid package is reviewed. “Some of the members say let’s take a pause,” Pelosi said on the floor. “Do you think this virus is taking a pause? Do you think that the rent takes a pause? Do you think that putting food on the table — or the hunger that comes if you can’t — takes a pause?”


     White House economic adviser Kevin Hassett said in an interview Friday with the Wall Street Journal that Trump is open to more funding for state and local governments, as long as the money isn’t used to “bail out states that haven’t necessarily had their act together.” Congressional Republicans have said they don’t want to allow states to use the federal funds to support pension programs.


     “Time is of the essence,” Pelosi said Sunday on CBS’s Face the Nation in reference to congressional approval of more relief funds. Pelosi said that now, Senate Republicans and the Trump administration need to come forward with a proposal of their own. “We passed our proffer,” she said. “In the past bills, they’ve put forth their proposal and then we worked in a bipartisan way. That’s what we all anticipate.”


House also approved voting by proxy and remote committee work. The rules changes, major moves for a tradition-bound institution, aim to make it easier for representatives to conduct business from outside of Washington during the crisis.


     The House voted 217-189 to allow Congress to continue much of its business through the pandemic that has made gathering together and travel threats to public health. “Convening Congress must not turn into a super-spreader event,” said House Rules Chairman Jim McGovern (D-Mass).


     Under the new rules, lawmakers will be able to join millions of Americans in working from home if they are unable to travel to Capitol Hill to participate in House business. Proxy voting and remote committee business would only be allowed for a 45 day period, but it could be renewed. The authority to enact a period of proxy voting ends at the close of the 116th Congress.


     The resolution authorizes House committees to hold virtual hearings, markups and depositions using software platforms certified by the chief administrative officer, the office in charge of cybersecurity and technology in the House. Members participating remotely would count toward a quorum for purposes of determining committee proceedings and voting.


Significant changes will be made to the Paycheck Protection Program, the Wall Street Journal reports, citing lawmakers and other officials involved in monitoring the program. The changes are aimed at giving loan recipients more flexibility in how they spend the money from the program and to extend the time over which the funds are required to be spent. Some hard-hit businesses like restaurants say they need to be able to spend more money on overhead costs to stay afloat than the program currently allows. Right now, 75% of a PPP loan must be spent on employee salaries within two months of the funds being received.


     Meanwhile, the Small Business Administration and Treasury Department have issued guidance saying that companies that accepted loans of more than $2 million under the Paycheck Protection Program but are later deemed ineligible can repay the money without legal consequences, backing off an earlier assertion that the government could pursue criminal legal action. Businesses that took loans under $2 million will automatically be assumed to have done so in good faith, according to the guidance.

Update on U.S./China policy:

  • Trump administration stepped up its campaign of blaming China for the coronavirus pandemic, with an aide suggesting Beijing sent airline passengers to spread the infection worldwide.
  • China criticized new U.S. export restrictions targeting firms like Huawei Technologies Co. and vowed to take all necessary measures to defend its companies.
  • U.S. Secretary of State Mike Pompeo warned China against interfering with the work of U.S. journalists in Hong Kong.
  • Analysts: Risk of 'super cold war is mounting.' Taiwan Semiconductor, the world's biggest contract chipmaker, has halted new orders from Huawei Technologies after the U.S. Commerce Department unveiled new restrictions on Friday. Huawei is TSMC's second-largest client only after Apple, accounting for 15-20% of its annual revenue, and was seen as a vital lifeline after Washington placed the Chinese firm on a trade blacklist last May. "The proposed legislation likely aims to stop Huawei's tech progress and quash China's 5G ambitions," Jefferies analysts said in a research note. "We expect China to retaliate if this materializes. The risk of a 'super' cold war is mounting."
  • A new tracker shows that China has gotten off to a slow start toward fulfilling its Phase 1 purchase commitments. The Peterson Institute of International Economics today released the first findings of what will be a monthly update (link) of China’s purchases, using both Chinese and U.S. data.

    For agricultural products covered by the deal, China’s imports of farm products through March 2020 were $5.1 billion, compared with a year to date target of $9.1 billion. For all products China agreed to purchase, Beijing’s total imports from the United States were $19.8 billion through March 2020 compared with a prorated year-to-date target of $43.2 billion.

    China tracker

  • NEC Director Larry Kudlow said the U.S./China trade deal was “absolutely not” falling apart, despite Beijing’s slower-than-expected purchases. He said there was a “very successful deputies call” last week besides the call earlier this month between U.S. Trade Representative Bob Lighthizer, Treasury Secretary Steven Mnuchin and Liu He, the Chinese vice premier.

Update on implementation of CARES 1, including CFAP:

  • USDA's CFAP rule coming soon as it cleared OMB Friday. That means details could be announced as soon as today or on Tuesday, the same day President Donald Trump is going to make remarks on farmers, ranchers and the U.S. food supply chain.
  • The coming CFAP details will not be the last of payments this year, as Congress is widely expected to include additional payments for the ag sector, along with a biofuel aid program, via the next Covid-19 aid package likely coming in June. The next measure may also deal with payment limit language if farm-state lawmakers and others do not like what USDA says this week. Also likely is an eventual boost in USDA Commodity Credit Corporation (CCC) borrowing authority from its current $30 billion cap, likely in return for more SNAP/food stamp funding.

U.S. food supply/industry update:

  • Perdue continues to be upbeat about return of meat production, products. “We've turned the corner, and while some retailers are suggesting they may not have the degree of variety that they once had, we expect that to be cured very quickly. I do expect us to be back up to 85-90% production in probably a very few days or weeks,” USDA Sec. Sonny Perdue said in a recent interview with NPR's Morning Edition.
  • A group of 29 Democratic senators sent USDA Secretary Sonny Perdue a letter asking for answers on earlier questions they raised about how the department will ensure that meat and poultry plant workers are protected from Covid-19 transmission.
  • Justice Department approved a pork industry plan for producers to coordinate with each other and agriculture officials to euthanize hogs because of the shutdown of meatpacking plants. The National Pork Producers Council (NPPC) wants to help farmers and state officials source equipment for culling hog herds and set up “centralized euthanasia and disposal stations.” The process includes sharing projections for the number of hogs that facilities can handle per day, the trade group said. Producers “may work at the direction of the USDA and state agriculture agencies to achieve humane and efficient euthanization of hogs that have grown too large to be processed and are thus unmarketable,” the department said in a statement (link). “The NPPC may also share general information with its members about best practices for depopulating unmarketable hogs.”
  • Perdue, Ivanka unveil food box deliveries. The president’s daughter and adviser joined USDA Sec. Sonny Perdue and Maryland Gov. Larry Hogan on Friday at Coastal Sunbelt Produce, a prominent distributor in Laurel, Md., which received $4.5 million from USDA to provide thousands of boxes of fresh fruit and vegetables to nonprofits in the mid-Atlantic region. The event began the Trump administration’s $3 billion effort to have private distributors buy up excess farm goods and deliver them to food banks and other feeding programs for the growing number of hungry or out-of-work Americans. “I’m proud that the majority of the recipients are small and regional food suppliers who prioritize smaller farms and nonprofits in their bids,” Trump said at the event.
  • EPA alters rule to boost supply of disinfectants that touch food. EPA is modifying one of its rules to increase the supply of products to clean food-contact surfaces due to disinfectant shortages during the coronavirus crisis. The temporary changes target sanitizers containing isopropyl alcohol, the primary ingredient in rubbing alcohol, and a widely used disinfectant within pharmaceutics, hospitals, and electronics manufacturing, EPA said Friday. The agency said it amended the rule based on feedback from the food manufacturing and preparation industries. Those industries told the agency they’re struggling to find enough sanitizers to use while processing low-moisture products like cereal, flour, and industrial baked goods.

Update on reopening America... and around the world:

  • Some U.S. malls are back open. But plenty of stores inside them remain shuttered, and foot traffic across seven states that have begun reopening their economies was down by 83% on average. Details in WSJ article.

  • College towns are in trouble. Communities that rely on vibrant college communities to support their economies are struggling, as campuses have emptied out and traditional festivities that bring in revenue, like graduation, are canceled or moved online.

    College impacts

  • More than two-thirds of unemployed Americans receive more in benefits than they earned at their old jobs. “High [earnings] replacement rates can provide crucial liquidity necessary for households to smooth consumption during this unprecedented period... At the same time, replacement rates over 100% create distributional issues and may hamper efficient labor reallocation both now, and especially during an eventual recovery,” University of Chicago economists Peter Ganong, Pascal Noel and Joseph Vavra write in a new working paper (link).
  • 25 Apple stores in the U.S. will reopen this week, taking its open store tally to nearly 100 outlets worldwide. Customers will be required to submit to a temperature check and wear a mask before entering, and will be screened for other symptoms caused by Covid-19, like a cough. According to the guidelines, occupancy will also be limited as staff focuses on "one-on-one, personalized service."

Coronavirus update:

  • Summary: Global cases of Covid-19 are at 4,730,322 with deaths totaling 315,482, according to data from the Center for Systems Science and Engineering (CSSE) at Johns Hopkins University (JHU). U.S. cases total 1,486,742 with deaths at 89,564.

    U.S. cases increased 1.5% from the same time Saturday to 1.487 million, according to data collected by Johns Hopkins University and Bloomberg News. The rise was below the average daily increase of 1.6% for the past seven days.

    New York reported 1,889 new cases, bringing the total to 350,121, new deaths were 139 -- a seven-week low -- as the state total rose to 22,619.

    New Jersey had 1,272 new cases, raising the total to 146,334, with 107 new deaths, pushing the toll to 10,356, Governor Phil Murphy said. State hospitals reported 3,411 patients Saturday night, the fewest since April 14.

    California reported 2,046 new cases, with a total of 78,839, and added 57 deaths, bringing the total to 3,261.

    Pennsylvania registered 623 new cases, the fewest since May 11, for a total of 62,234, and 15 new deaths for a total of 4,418, the state health department said.

  • Texas saw an increase in the number of reported coronavirus cases on Saturday, with 1,801 new positives. That’s the highest one-day rise the state has seen since the pandemic began. Gov. Greg Abbott said the number of positives would likely continue to rise as the state allocated more testing resources to a hot spot in the Texas panhandle.

    On Sunday, U.S. Secretary for Health and Human Services Alex Azar said that states that have reopened, like Texas, haven’t seen a spike in cases, adding that it is nevertheless too early to draw conclusions from the limited data.

  • Moncef Slaoui, the new White House vaccine chief, said he was confident that a few hundred million doses of a vaccine could be available by the end of this year after seeing early data from a clinical trial for a coronavirus vaccine.
  • The World Health Organization (WHO) today holds its 73rd World Health Assembly. The 194 member states of the WHO will discuss the Covid-19 pandemic response during the two-day meeting.
  • China vows to tackle troubled wet markets. China’s Commerce Minister admitted the ‘standard’ of controversial wet markets is low, as support builds for a Covid-19 inquiry.
  • President Trump said the U.S. is considering restoring partial funding to the WHO after he froze contributions to the group over what he said was its mismanagement of the coronavirus response. The president on Saturday morning said his administration is weighing a proposal that would provide funding to the group on par with what China is contributing. The move, Trump said, would reduce overall U.S. funding to the group by 90%. Trump said in April that the U.S. would pause funding to the WHO, pointing to what he called the organization’s failure to adequately respond to the virus. He also accused the WHO of having a pro-China bias.
  • Perdue among new members of White House Coronavirus Task Force. USDA Sec. Sonny Perdue, Labor Sec. Gene Scalia and NIH Dir. Francis Collins are among five new members of the White House Coronavirus Task Force, Vice President Mike Pence’s office said in statement. Peter Marks, FDA director of the Center for Biologics Evaluation and Research, and Thomas Engels, administrator of the Health Resources and Services Admin., were also named to the panel. The task force is entering a new phase focused on “getting Americans back to work and allowing businesses to re-open,” the statement said.
  • The Covid-19 vaccine spotlight is shining on the U.K. today after AstraZeneca said it aims to make as many as 30 million doses available in Britain by September. It also committed to delivering 100 million doses in 2020, if the inoculation, which is already being studied in humans and could reach late-stage trials by the middle of the year, is successful. The U.K. will be the first country to get the vaccine should everything go smoothly.



  • EPA last week sent RFS 2021 biofuel (ethanol) and 2022 biodiesel mandate levels to OMB. Those would be the proposed levels and will be released June or July. The key is what the final rule says regarding SREs (waivers) relative to 10th circuit ruling. The levels usually get leaked after various groups meet with the Office of Management and Budget (OMB) about the proposed levels.
  • Some topics always get delayed in Congress. The House isn’t in session this week as lawmakers continue to focus on legislation responding to the coronavirus, Majority Leader Steny Hoyer (D-Md.) said Friday. Longer term, Hoyer on Friday mentioned surface transportation and water infrastructure legislation as priorities.
  • Trump's WOTUS rule replacement is similar to last one in a major way: court challenges. The Trump administration’s long-anticipated water jurisdiction rule has already drawn a half-dozen legal challenges since its April release, with more on the way. The Navigable Waters Protection Rule narrows which types of wetlands and waterways trigger federal Clean Water Act oversight, replacing interpretations by Obama-era officials and earlier administrations. The legal snarl stems from years of disagreement over what counts as a WOTUS under the statute. The question has reached the U.S. Supreme Court multiple times, most recently in 2006, but the justices’ mixed ruling failed to end the debate.
  • The Washington Post in a primary season updated commented the following on two Minnesota races:

    Aug. 11 primary: “Rep. Collin C. Peterson, who now represents the reddest district of any House Democrat, has two challengers and a bigger problem looming in November in the form of former lieutenant governor Michelle Fischbach; she is heavily favored over the Republican who lost 2016 and 2018 races to the Democrat.

    “Rep. Ilhan Omar, who represents the state's bluest district — the Minneapolis-centered 5th District gave Trump just 19% of the vote — has four challengers, all of whom make some version of the argument that Minnesota liberals need a less-controversial member of Congress. “We need people in Congress who want to get things done — not who get distracted fighting with Donald Trump on Twitter or even with their own party,” former Hill aide Antone Melton-Meaux says on his website. Omar's criticism of Israel was well known in 2018, when she won a more crowded primary decisively; a new issue opponents have in this cycle is Omar's marriage to a political consultant with whom she'd denied having an affair.”


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