Evening Report | February 27, 2024

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Update on U.S./Mexico GM corn issue... In 2023, Mexico, the largest importer of U.S. corn, banned the use of genetically modified (GM) corn for human consumption, prompting a trade dispute with the United States. The U.S.-Mexico-Canada Agreement (USMCA) does not mandate GM crop authorization but requires science-based analyses for regulatory decisions. President Andrés Manuel López Obrador’s decree aimed to promote food security and protect native corn varieties but posed concerns for U.S. corn exports. Despite U.S./Mexico consultations, the dispute remains unresolved.

The U.S. initiated formal dispute proceedings, claiming the ban violates USMCA provisions. A dispute settlement panel was convened in August 2023, with oral arguments scheduled for June 2024. The panel’s final report, expected in November 2024 – after elections in both countries – will determine if Mexico must revoke the ban or face U.S. trade sanctions. Until then, Mexico’s ban remains in place.

Perspective: We and U.S. government officials have contended all along this is primarily a domestic political issue in Mexico because López Obrador is from southern Mexico where most of the tortillas are made. This issue should go away after elections in June, when López Obrador is replaced by a new president.

Poland threatens wider Ukrainian bans if EU doesn’t act... Polish Prime Minister Donald Tusk said he couldn’t exclude widening a national ban on imports of Ukrainian grains to other products if the European Union does not act. “We are discussing that it would be possible to extend the embargo to other products if the EU does not find a more effective way to protect the Polish and European markets,” Tusk said.

Polish farmers began a series of protests throughout the country earlier this month, which included a near-total blockade of all Ukrainian border crossings, as well as disruptions at ports and on roads nationwide. On Tuesday, thousands of Polish farmers took to the streets of Warsaw, escalating a protest against food imports from Ukraine and European Union rules.

EU urges farmers to report unfair trading practices amid protests... The European Union urged farmers and small food suppliers to share their experiences of unfair trading practices amid protests by farmers across Europe. The EU said in March it would present several actions to member states covering issues such as market transparency, as well as implementing and enforcing a directive against unfair trading practices. Despite the directive, many farmers allege they face a range of problems with buyers, such as major supermarkets, including late payments, last minute order cancellations and unilateral or retroactive changes to contracts.

“By participating in the survey, farmers and smaller suppliers can express their concerns and share their experience with unfair trading practices,” the EU said in a statement.

French banks offer preferential rates to farmers, including loan suspension option... It pays to protest, at least in France. French Finance Minister Bruno Le Maire announced banks, including Credit Agricole SA and BNP Paribas SA, will offer preferential lending rates to farmers, ranging from 0% to 2.5%. This initiative is part of the government’s efforts to address the ongoing crisis in the agriculture industry, which has led to weeks of protests. Additionally, farmers facing financial difficulties will have the option to negotiate a one-year suspension of existing loans and extend repayment schedules for up to three years beyond that. Le Maire emphasized these measures will provide significant relief to farms facing the greatest challenges amid falling prices and increasing regulatory pressures from the European Union.

G20 draft communique suggests optimistic outlook... There is a growing chance of a soft landing for the global economy amid faster-than-expected disinflation as an upside risk, according to the G20 draft communique. Despite divisions over conflicts in various regions, the draft reflects a relatively optimistic outlook, highlighting receding inflation and improved economic conditions thanks to appropriate monetary policies.

Treasury Secretary Janet Yellen emphasized the U.S. role in underpinning global growth, despite acknowledging risks such as prolonged conflicts and debt troubles in low-income nations.

The meeting in Sao Paulo was marked by haggling over language regarding conflicts like Russia's invasion of Ukraine, with ministers aiming to address various global issues amid divisions.

The final communique will outline the consensus view on the world economy and challenges ahead.

Schumer: House Speaker Johnson vows to avert shutdown... During a private meeting with President Joe Biden and congressional leaders, House Speaker Mike Johnson (R-La.) expressed a clear commitment to avoid a government shutdown, Senate Majority Leader Chuck Schumer (D-N.Y.) reported. The leaders emerged from the meeting optimistic about preventing a shutdown, with discussions primarily focused on keeping the government operational. However, the meeting also addressed intense concerns regarding Ukraine. Schumer emphasized the urgency of taking action to assist Ukraine, particularly after Republicans blocked a bipartisan proposal related to border security earlier this year.

“We have been working in good faith around the clock every single day for months and weeks and over the last several days, quite literally around the clock to get that job done. We’re very optimistic,” Johnson told reporters on the White House lawn. “We believe that we can get to agreement on these issues and prevent a government shutdown, and that’s our first responsibility,” he added.

FTC, states sue to block Kroger/Albertsons merger over wage and price concerns... The U.S. Federal Trade Commission (FTC), along with eight states and Washington DC, filed a lawsuit to block Kroger Co.’s $24.6 billion acquisition of Albertsons Cos., citing concerns over its potential negative impact on workers’ wages and grocery prices. The merger, if allowed to proceed, would create the largest U.S. grocery deal in history, combining the two largest supermarket chains and resulting in nearly 5,000 stores across the country.

Both Kroger and Albertsons have defended the deal, emphasizing their plans to invest in reducing prices and raising worker wages and benefits. However, FTC and states argue the merger would harm consumers by reducing competition, leading to higher prices and poorer quality of service.

The complaint alleges the deal would give the combined company increased leverage over workers, resulting in slower wage growth and worse benefits. Kroger and Albertsons have proposed divesting 413 stores to address antitrust concerns, but FTC argues this remedy would be inadequate.

The lawsuit reflects a broader trend of increased antitrust enforcement by the Biden administration, which has taken a more aggressive stance on mergers. Lawmakers and unions, including the Teamsters and United Food and Commercial Workers International, have also opposed the merger, citing concerns about job cuts and reduced wages.

The lawsuit underscores the intense competition in the U.S. grocery sector, where companies are vying for market share amid growing consumer demand for food and essentials.