Evening Report | October 5, 2023

Check our advice monitor on ProFarmer.com for updates to our marketing plan.

Ship hits mine on way to Ukrainian port... A cargo ship is suspected of coming in contact with a sea mine this morning while waiting outside the entrance to the Sulina Canal, according to a Lloyd’s List Intelligeance casualty report. The Turkey-flagged Kafkametler reportedly sustained only minor damage and there were no injuries to the crew. The vessel anchored for a short period but began to sail towards and through the Bytstroe Canal, which is north to the Sulina Canal and leads to Ukraine’s Danube ports.

Kafkametler reportedly did not travel via the temporary corridor outlined by the Ukrainian government to reach the Danube ports.

In “First Thing Today” we reported Britain accused Russia of plotting to sabotage civilian cargo ships loaded with Ukrainian grain by planting sea mines on the approaches to the country’s Black Sea ports.

U.S. ag trade deficit scores another record high... The U.S. exported $12.48 billion of ag goods in August, while ag imports totaled $16.10 billion. This resulted in a monthly trade deficit of $3.62 billion, inching up from the prior record of $3.58 in July. For fiscal year (FY) 2023, cumulative ag exports reached $166.02 billion, while imports totaled $180.03 billion, producing a trade deficit of $14.01 billion. USDA forecasts FY 2023 ag exports at $177.5 billion and imports of $196.5 billion, implying a record trade deficit of $19.0 billion and the third deficit in the last five fiscal years.

U.S. trade deficit narrows to a nearly three-year low... The U.S. trade deficit shrank to an almost three-year low in August, reflecting a pullback in American demand for foreign merchandise and a pickup in goods shipments overseas. The deficit declined 9.9% to $58.3 billion, the lowest since September 2020, from a revised $64.7 billion for the prior month. The value of imports declined 0.7% to $314.3 billion, while exports increased 1.6% to $256.0 billion. But exports of foods, feeds and beverages were the lowest since August 2020.

WTO slashes 2023 global trade growth forecast... The World Trade Organization (WTO) halved its growth forecast for global goods trade this year, saying persistent inflation, higher interest rates, a strained Chinese property market and the war in Ukraine had cast a shadow over its outlook. WTO projected global merchandise trade volumes would increase by just 0.8% this year, compared with its April estimate of 1.7%. WTO said the trade slowdown was broad-based, involving a larger number of countries and goods, though particularly iron and steel, office and telecoms equipment, textiles and clothing.

For 2024, it said goods trade growth would pick up to 3.3%, up a tick from its April estimate of 3.2%.

Can the House even clear a farm bill extension if needed?... Not in the current environment, say several observers. House Ag Chairman Glenn “GT” Thompson (R-Pa.) said Tuesday night he was unsure a farm bill extension, if needed, could make it through a distracted and divided House. “The agitators and the Democrats rule the day. In a mutual way, they’ve really blown up any meaningful legislation. I don’t know how you get a speaker with that coalition. Without a speaker, you can’t do anything,” Thompson said, adding that it could lead to multiple time-consuming rounds of votes for a new speaker. Senate Ag member Chuck Grassley (R-Iowa) said even before the House move against Kevin McCarthy (R-Calif.) he was worried about a farm bill not being ready in December. “I have my doubts that we’re going to get a five-year farm bill [this year] and we’re going to have a one-year, two-year extension. The farmers will have their usual safety nets,” Grassley said on his weekly call with reporters Tuesday.

Grassley also said work on the Senate draft bill was moving slowly amid a disagreement on the Senate Agriculture Committee about reprogramming funds to provide increases in some farm programs. Senate Ag Chairman Debbie Stabenow (D-Mich.) said, “We are diligently working on the farm bill. I’ve been involved in six of them. None of them, unfortunately, have ever hit the exact deadline.”

Voice votes can lead to farm policy problems... Roll Call notes the following: Thompson “had to maneuver to protect the farm bill from potential encroachment by amendments to the fiscal year (FY) 2024 House Ag Appropriations bill on Sept. 28. After the House adopted by voice vote an amendment by Rep. Victoria Spartz (R-Ind.) that would prohibit USDA from administering checkoff programs funded by farmer assessments, Thompson requested a roll call vote, and the amendment was rejected.”

Thompson also worked to keep other amendments from being offered such as one by Rep. Scott Perry (R-Pa.) that would bar USDA from using funds to provide non-recourse loans for raw cane sugar or refined beet sugar. The House rejected the spending bill, 191-237, with 27 Republicans voting against it.

SCOTUS foreign income tax case sparks concerns of far-reaching implications for U.S. tax code... Tax professionals from various political backgrounds are sounding alarm bells regarding a foreign income tax case scheduled for the Supreme Court’s fall docket. The case, Moore v. U.S., revolves around the “transition tax” on unrealized foreign earnings brought back to the United States, a provision introduced in the 2017 Republican tax overhaul. 

Concerns are growing among former GOP staffers, lawmakers, practitioners and the Joint Committee on Taxation that the Supreme Court’s ruling could have broad-ranging effects on the tax code. Many worry that the difficulty of constraining the ruling's scope may lead to more lawsuits challenging other sections of the tax code and potentially reshape Congress' ability to amend the code and raise revenue.

The Moores argue that taxing unrealized gains violates the Commerce Clause of the U.S. Constitution. (Unrealized gains are essentially “on paper” profits because the investment hasn’t been sold.) 

Bottom line: If the Supreme Court rules in the Moores’ favor, the Institute on Taxation and Economic Policy (ITEP) says it could mean windfalls for large corporations such as Apple and Microsoft, with potential tax relief of $37 billion and $18 billion, respectively.