Evening Report | December 12, 2023

Evening Report
Evening Report
(Pro Farmer)

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

 

U.S. CPI eases in November... The U.S. consumer price index (CPI) rose 3.1% above year-ago during November, down from the 3.2% increase the previous month and the lowest reading in five months. Core prices, which exclude food and energy costs, rose 4% annually, the same as in October.

Food prices increased 2.9% from year-ago, down from 3.3% in October. Food at home (grocery store) prices increased 1.7%, while food away from home (restaurant) prices were 5.3% higher than last year.

Energy costs decreased 5.4%, compared to a 4.5% drop in October, with notable declines in gasoline (-8.9%), utility (piped) gas service (-10.4%) and fuel oil (-24.8%).

 

Russia bans durum wheat exports through May... The Russian government on Monday introduced a temporary ban on the export of durum wheat until May 31, 2024. Russia is a small producer and exporter of durum wheat, so market and trade impacts will be limited.

 

House committee considers revoking China’s PNTR status... The House Select Committee on China is considering recommending the revocation of China's Permanent Normal Trade Relations (PNTR) status, which was granted to China by the U.S. in 2000 as part of its accession to the World Trade Organization (WTO). This potential move could have significant implications for the U.S./China relationship and the global economy. It could also have a significant negative impact on U.S. farm exports.

If China’s PNTR status is revoked, it would result in significantly higher tariffs on hundreds of billions of dollars’ worth of Chinese imports. This action would disrupt international trade rules and undermine the global economic system established after the Cold War.

The recommendation itself does not guarantee immediate congressional action. Former President Donald Trump has endorsed this policy, and his trade chief, Robert Lighthizer, has urged lawmakers to recommend revoking China’s trade status. Some legislators have expressed regret over their past votes to grant China normal trade status.

Opposing the revocation of China’s trade status could make Democrats vulnerable to accusations of being soft on Beijing, especially in Rust Belt states where tariffs are popular and anti-China sentiment is strong. Some swing state Democrats, including Sens. Sherrod Brown (D-Ohio) and Tammy Baldwin (D-Wis.), have refrained from taking a clear position on revoking China’s trade status, despite their previous opposition to its granting. Others have opted for a wait-and-see approach.

Farm groups have sent a letter to the Select Committee, expressing concerns about potential policy recommendations. Highlights of the letter:

  • Background: In 2000, Congress granted China PNTR status when China was joining the World Trade Organization (WTO). At that time, the U.S. had limited food and agricultural exports to China, accounting for just 3% of total exports in this category.
  • Economic growth: Over the past two decades, U.S. exports to China have increased significantly, reaching $38.11 billion in 2022, making China the largest buyer of U.S. food and agricultural products, constituting 19% of U.S. exports in this sector. This trade has been crucial for American farmers and rural communities.
  • Trade frictions: Trade tensions between the U.S. and China, including the imposition of Section 232 and 301 tariffs and corresponding retaliatory tariffs, have affected U.S. farmers and food processors. China accounted for approximately 95% of the losses ($25.7 billion), with rural states heavily reliant on agriculture being hit the hardest.
  • Concerns about revoking PNTR: The letter expressed concerns that revoking China’s PNTR status would expose U.S. farmers and ranchers to further retaliation from China. An estimate by Oxford Economics suggests this could result in over a 30% reduction in U.S. agricultural exports to China, with no other market capable of fully replacing this lost share.
  • Market diversification: The letter advocates for a more sustainable approach to addressing concerns about China’s trade practices. It suggests that members of Congress should work on providing alternative market access in the Asia-Pacific region, thereby reducing reliance on the Chinese market.
  • Diplomatic tools: Expanding international trade in the Asia-Pacific region can be a diplomatic tool that helps build relationships and reduces China's global influence.

Bottom line: The letter respectfully urges the committee not to recommend the revocation of China’s PNTR status, emphasizing the potential negative consequences for American farmers, ranchers and food producers. It highlights the economic impact on American workers and rural communities would be significant and long-lasting.

 

Bipartisan bill seeks USDA investigation of fertilizer industry... A bipartisan bill, called the Fertilizer Research Act of 2023, is set to be introduced by Sens. Chuck Grassley (R-Iowa) and Tammy Baldwin (D-Wis.). This bill calls for USDA to investigate concentration within the fertilizer industry and assess any potential "anticompetitive impacts." The move comes as American farmers express concerns about the availability and cost fluctuations of crop nutrients, particularly following Russia's invasion of Ukraine, which disrupted global supply chains and led to record-high fertilizer prices.

Key points about the bill and the fertilizer industry:

  • Scrutiny of concentration: The bill seeks to examine concentration within the fertilizer industry and assess whether it has led to anticompetitive practices.
  • Transparency and pricing: It directs the USDA to investigate pricing transparency, imports, emerging technologies, and other relevant issues within the fertilizer industry.
  • Support from farming groups: The bill has garnered support from groups representing Iowa corn and soybean farmers.
  • Transparency advocated: The Fertilizer Institute, a trade organization for the industry, supports transparency through improved data collection and analysis. They also seek the re-establishment of a fertilizer economist at the USDA to serve as a liaison on crop nutrient matters.
  • Global fertilizer production: As of 2021, North America held a 16% share of global fertilizer production, with the majority of usage occurring outside the United States.
  • Industry response: Top fertilizer maker Nutrien Ltd. is reviewing the legislation, while other crop nutrient producers, CF Industries Holdings Inc. and The Mosaic Co., have not yet commented.
  • Legislative path: Sen. Grassley aims to have this legislation included in next year’s five-year farm bill reauthorization but is open to other avenues for passage.

 

FSIS sends voluntary labeling rule to OMB for review... USDA’s Food Safety and Inspection Service (FSIS) sent its final rule, titled “Voluntary Labeling of FSIS-Regulated Products with U.S. Origin Claims,” to the Office of Management and Budget (OMB) for review. This rule is part of the administration’s efforts to provide recommendations for voluntary labeling of meat and poultry products with U.S. origin claims. The administration had previously indicated that the rule was slated for release in March. The primary goal of this rule, according to FSIS, is to address consumer confusion surrounding current voluntary U.S.-origin labeling policies. While the U.S. industry is keenly interested in the final rule's content, Canada and Mexico are also closely monitoring the effort to ensure that it does not inadvertently lead to the creation of a mandatory country of origin labeling (COOL) program.

 

Fossil fuels text at COP28 deemed too weak, ‘red lines’ sought... Efforts to develop a new text for approval at the conclusion of the UN COP28 conference have brought fossil fuels into the spotlight. The initial draft did not include a clear call for the phase-out of fossil fuels, which several countries were pushing for. In response, COP28 Director General Al Suwaidi released a Monday draft with the aim of soliciting countries’ “red lines” on the text. The draft indicated the consumption and production of fossil fuels should be reduced in a “just, orderly, and equitable manner.” However, this wording faced criticism from some COP28 participants who deemed it too weak. The United Arab Emirates (UAE), which hosted the event, has encountered pressure from OPEC members like Saudi Arabia, who oppose any targeting of fossil fuels in the final text. The situation may lead to an extension of the COP28 session, reminiscent of past climate conferences that have experienced delays in concluding due to disagreements on key issues.

 

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