Evening Report | June 2, 2023
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Your Pro Farmer newsletter is now available... Drought continues to expand eastward and is expected to cover most of the Corn Belt during June. If that forecast verifies, timely rains from July forward will be critical for crop development. USDA’s initial corn crop condition ratings came in below average. We have an in-depth look crop conditions and our analysis of what they could mean for corn yields in our News page 4 feature this week. Meanwhile, Brazilian corn crop estimates are on the rise, with some private forecasters indicating a major increase in production potential. Record Brazilian soybean and corn crop production will result in an active flow of those products onto the world market, which reduces demand for U.S. supplies. Due to lower prices and reduced demand, USDA cut its ag export forecast and the data now implies an even greater ag trade deficit for fiscal year 2023. In Washington, it came down to the 11th hour, but the White House and GOP leaders agreed to raise the debt ceiling and implement some budget cuts sought by Republicans. We cover the ag-related impacts, including what it could mean for the writing of a new farm bill. All these items and much more are in this week’s newsletter, which you can access here.
U.S. formally requests USMCA dispute settlement with Mexico over ag biotech measures... The U.S. is escalating its conflict with Mexico over agricultural biotech measures, including the country’s stance on GMO corn, by requesting dispute settlement consultations, U.S. Trade Representative Katherine Tai announced. The U.S. has officially requested dispute settlement consultations with Mexico under the U.S.-Mexico-Canada Agreement (USMCA). If the consultations fail to resolve disagreements within 75 days, the U.S. can request a dispute settlement panel to decide the case.
“The United States has repeatedly conveyed its concerns that Mexico’s biotechnology policies are not based on science and threaten to disrupt U.S. exports to Mexico to the detriment of agricultural producers, which in turn can exacerbate food security challenges. Mexico’s biotechnology policies also stifle agricultural innovation that helps American farmers respond to pressing climate challenges, increase farm productivity, and improve farmers’ livelihoods,” said Tai. “We will continue to work with the Mexican government through these consultations to resolve our concerns and help ensure consumers can continue to access safe and affordable food and agricultural products.”
Ukraine has ‘plan B’ if Black Sea grain deal unravels... Ukraine would be ready to continue exporting grain across the Black Sea as part of a “plan B” without Russia’s backing if Moscow pulls the plug on the current grain export deal and it collapses, Ukraine’s ag minister said. Agriculture Minister Mykola Solsky told Reuters Russia had already blocked the use of Ukraine’s major Black Sea port of Pivdennyi despite the deal and was allowing only one ship a day to deliver Ukrainian grain to certain countries.
“The latest actions that are taking place there during yesterday, the day before yesterday, today, it says more about the fact that in fact only legally it looks like this corridor works, but in reality nothing much is happening there,” Solsky said. “Plan B... excludes the fourth party (Russia) in this relationship. If we are completely blocked, which has almost happened (already) in fact, then the carriers can go (via) this corridor with guaranteed insurance from our government,” he said.
A UN spokesperson said on Thursday Russia had informed officials overseeing the initiative that Moscow would limit registrations to the port of Pivdennyi until all parties agree to unblock the transit of Russian ammonia.
Lighthizer comments on China and other trade issues... Former U.S. Trade Representative Robert Lighthizer said On Larry Kudlow’s show on Fox Business: “The fundamental question is do you believe China is an existential threat and a lethal adversary? This is probably the strongest adversary that we have ever faced in the United States as a country, literally in our history. This is a hostile country that has enormous resources and is focused on being number one in the world and taking over. They think that our system of freedom, democracy, open economies, they think that’s a bad system. And they think totalitarianism and communism is the system of the future. And they go all around the world selling that idea. And every time we show weakness, show that we don’t understand what we’re involved with, we help them sell their system, and we hurt ourselves. So to me, the fundamental question is, Does the president understand that? Lots of people in this administration are smart, good people that do understand it. The question is, will they prevail in the internal debate and right now, you'd have to say they're not prevailing.”
Lighthizer noted China has been “threatening our aircraft, threatening our ships in the military, having a spy balloon come across the U.S., insulting our Cabinet officials. All of that is part of a scheme. It’s coordinated. It’s dictated by Beijing, and it’s designed really to show that they are taking over from the United States and the status quo right now favors them. We should do strategic decoupling. Right now we’re shifting around $700 billion a year of American wealth to the Communist Party of China every single year. This great miracle that they’ve had this economic miracle rising these Chinese out of poverty, almost all of it was done with American dollars. Literally, we have built the greatest, the biggest army in the world and it's in China. We built the biggest Navy in the world and it's in China. We are building the best technology in the world, and it's in China. It's all being done with American dollars. And it’s it is insanity. There’s no precedent in history. It is total madness. We should have tariffs, we should demand balanced trade. We should disentangle our technology, and we should severely restrict incoming and outgoing investment. If we do those things, then the status quo will favor us. At that point you can talk about détente. At least we're not creating the enemy that is gonna devour us.”
Lighthizer continued: “If you look at the trade deficit in goods, for example, with $380 billion, there’s this this silly thing called de minimis in which they probably get another $150 billion or $180 billion from us. They get more trade benefits through countries like Vietnam, how much money that they make by selling fentanyl via Mexico and killing our children. I mean, if you add it all up, look at their economic growth this year, it is probably going to be maximum $800 billion. That is about how much we give them every year. It is insane. It’s absolutely insane.”
The Biden administration will review Phase 1 of the U.S./China trade agreement via Section 301. Lighthizer said “The way I analyze what we did with the Phase 1 agreement and the tariffs, I think we began this process of strategic decoupling within the context that we had at that time. So should these tariffs be lifted? Absolutely not. If they do, I will tell you right now it’s a sign that nobody understands what is going on and that business or other special interests have basically taken over the reins of government. In my judgment, we should double the tariffs that we put in place right now. And take the next step towards decoupling for sure. We shouldn’t and I don’t think that this review is going to lead to that conclusion. The question will be after the election, whether or not the president gets re-elected, whether he would then do something. It’s hard for me to believe it is so unpopular that they would do something like that before the election. But after that would be equally damning if he wins, of course. If the Republicans win, then my guess is the tariffs go up and we move in the direction of decoupling.”
Asked two key items about trade policy, Lighthizer said: “Number one, President Trump raised the alarm on China. Second, we have to change our trade policy to focus on workers… not businesses, but the workforce. Not the globalists… the workforce, the communities, the families.”
Labor market remains strong, wages ease... The U.S. economy added 339,000 non-farm payrolls in May, compared to market expectations of 190,000 and following a rise of 294,000 in April. This marked the 29th straight month of positive job growth. The unemployment rate rose to 3.7% but remained historically low suggesting the labor market remained tight. Average hourly earnings rose 4.3% over the past 12 months, down from 4.4% in April.
Markets signal traders generally expect the Fed to pause its tightening cycle this month, though it could raise rates again later this year. There are reportedly growing concerns among some Fed officials with the commercial real estate market.
House GOP leaders will press for further worker requirements for safety net programs in farm bill... The House overwhelmingly approved a debt ceiling bill that also curbs federal spending, causing House Speaker Kevin McCarthy (R-Calif.) to hint at further tightening work requirements for safety net programs. The legislation expands work requirements for “able-bodied adults without dependents” under the Supplemental Nutrition Assistance Program (SNAP) to older individuals. Under current rules, individuals ages 18 through 49 can’t receive SNAP benefits for more than three months in three years if they don’t meet additional work requirements. The measure would increase the age limit to adults ages 50 to 52 in fiscal 2024 and then up to age 54 beginning in fiscal 2025. The measure also would exempt homeless individuals, veterans, or certain individuals in foster care from the work rules that apply to able-bodied adults without dependents.
McCarthy did not specify which programs he meant when he spoke about work requirements. House Republicans also have pursued stronger work requirements for participants in the cash welfare program Temporary Assistance for Needy Families (TANF). The debt limit bill did not go as far on TANF as a House-passed bill to cut federal spending.
The next farm bill is already considered a potential target for reducing SNAP eligibility and spending. Some Republicans have proposed expanding the 90-day limit to individuals aged 18 to 65.
But Senate Ag Chair Debbie Stabenow (D-Mich.) earlier this week made clear that worker requirements for SNAP are now a settled affair and should not and will not be part of the next farm bill.
California prepares for Prop 12 transition... The California Department of Agriculture (CDFA) knows some pork products procured before July 1 when Prop 12 kicks in will be in circulation and there will be a transition period the rest of 2023. The department intends to focus its limited resources on ensuring all required distributors are registered, accrediting third-party certifying agents to offer more options to producers and distributors, and certifying these producers and distributors.
There are currently 587 registered distributors under Prop 12, with accredited certifying agents in five states – Missouri, Arkansas, Iowa, Virginia and Michigan.
