Trump woes continue | More NAFTA round timelines | US, Japan talk beef trade | U.S, S. Korea to meet next week re: KORUS | S. Korea lifts ban on U.S. poultry, products | U.S. pork to Argentina first time since 1992 | U.S. rice to Colombia | Cotton AWP | CME lowers soybean, wheat futures margins | Brazil relying more on northern ports | Syria and wheat reserves | Action urged on CSX delays | Yellen speaks Aug. 25 | Democrats and WOTUS | RIN generation | Deere earnings
— Top White House economic advisor Gary Cohn will remain in the administration. Rumors Thursday that the former Goldman Sachs chief operating officer would be exiting Trump’s team sparked an eventual plunge in stocks. Cohn was reportedly upset with President Donald Trump’s response to the deadly violence at a white nationalist rally in Charlottesville, Virginia last weekend. The White House sought to counter the speculation, with a White House spokesman saying, “Gary intends to remain in his position as NEC director at the White House. Nothing’s changed.” Cohn is “focused on his responsibilities,” the official added.
The S&P 500 Index suffered its biggest selloff in three months amid swelling political turmoil that’s seen U.S. Trump seemingly lose a lot of support of Corporate America, with stocks ending at session lows. The U.S. dollar fell from its highs on the reports. After folding its other two business groups, the White House gave up on forming a President’s Advisory Council on Infrastructure, which was to advise Trump. Members of the infrastructure council had not been appointed beyond the initial word in January that it would be led by two real estate developers close to Trump.
Meanwhile, Senator Bob Corker (R-Tenn.) said “radical changes” need to take place in the White House, while Sen. Tim Scott (R-S.C.) said that President Trump had compromised his moral authority with his response to racial violence in Charlottesville, Virginia. Scott, the only black Republican in the Senate, told Vice News that Trump’s “moral authority is compromised": “I’m not going to defend the indefensible.”
The Economist magazine’s lead editorial, “Trump has no grasp of what it means to be president: U-turns, self-regard and equivocation are not what it takes": “This is a dangerous moment. America is cleft in two. After threatening nuclear war with North Korea, musing about invading Venezuela and equivocating over Charlottesville, Trump still has the support of four-fifths of Republican voters. Such popularity makes it all the harder for the country to unite.”
But Vice President Mike Pence doubled down on his support for Trump while on a visit to the Panama Canal. “I think the United States once again has a president whose vision, energy, and can-do spirit is reminiscent of President Teddy Roosevelt,” Pence said.
— Next rounds of NAFTA 2.0 talks set. The second round of NAFTA 2.0 negotiations will be held Sept. 1-5 in Mexico City and Round 3 will happen Sept. 23-27 in Canada. The first round of talks, in Washington, D.C., ends Sunday.
— USTR Lighthizer, Japan Foreign Minister Kono discuss beef trade. U.S. concerns over Japan’s recent imposition of a safeguard measure on imports of beef which put higher tariffs on U.S. frozen beef exports were part of discussions between U.S. Trade Representative Robert Lighthizer and Japanese Foreign Minister Taro Kono in Washington Thursday. The two also discussed several bilateral trade issues under the discussions that took place via the U.S.-Japan Economic Dialogue.
— U. S. and South Korean negotiators will meet next week in Seoul. The meeting will be to potentially amend a five-year-old trade agreement known as KORUS, which has been in place since 2012. President Trump has said he would either renegotiate or terminate the deal, which he said has led to American job losses. South Korea’s trade ministry confirmed U.S. Trade Representative Robert Lighthizer’s announcement that both sides will engage in talks starting on Aug. 22, with Lighthizer in Washington and Trade Minister Kim Hyun-chong in Seoul via a videoconference.
The trade ministry in Seoul said it would maintain its stance that the deal has been “mutually beneficial” and both sides should first “objectively examine, analyze and assess” the pact before attempting to make changes or amendments. Lighthizer has said the U.S.’s overall deficit with Korea has increased since the agreement took effect. The U.S. imported $69.9 billion in goods from South Korea last year but exported only $42.3 billion.
— South Korea lifts ban on imports of U.S. poultry/products. South Korea has lifted its ban on imports of US poultry and poultry products after having imposed the ban on the detection of highly pathogenic avian influenza (HPAI) in Tennessee. USDA notified the World Animal Health Organization (OIE) August 11 that it was now free of HPAI, removing any justification for countries to block U.S. poultry.
Background. Several countries imposed partial bans on imports of U.S. poultry/products when a case of HPAI was found in late-February, with some blocking imports from just the area around the outbreak while others imposed broader bans and South Korea blocked all U.S. poultry/products. Most countries have lifted their restrictions on US poultry since August 11. USDA continues to work with Korean officials towards limiting any future import restrictions to the affected area, consistent with OIE guidelines.
— South Korea also announced a temporary measure that will allow U.S. eggs and egg products to enter the country duty free in the face of a shortage of domestic supplies. Earlier this year, USDA worked with Korea’s agriculture ministry to reopen the market for U.S. eggs and egg products, but imports were again restricted after the HPAI detection in Tennessee. Year-to-date exports through June have totaled $12 million, up nearly $10 million compared with the same period last year.
— It’s now official: U.S. to export pork to Argentina for first time since 1992. The U.S. announced a deal that will allow it to ship pork to Argentina for the first time in 25 years, the White House announced. All fresh, chilled, and frozen pork and pork products from U.S. animals will be eligible for export to Argentina for the first time since 1992. The White House said USDA Secretary Sonny Perdue, Commerce Secretary Wilbur Ross, and U.S. Trade Representative Robert Lighthizer were involved in completing the agreement.
The agreement opens up a market that could be worth $10 million per year for U.S. pork producers, according to the White House. The impact is low because the U.S. doesn’t have a free trade agreement with Argentina, so U.S. pork will be hit with significant tariffs.
Background. Argentina had banned the U.S. pork, citing food safety concerns. Under the terms of the deal, Argentine food safety officials will visit the U.S. to conduct on-site verification of the U.S. meat inspection system before the exports resume. The announcement comes around four months after President Donald Trump raised the issue with Argentina’s President Mauricio Macri during their meeting at the White House in April. It also comes just days after Vice President Mike Pence met with Macri in Buenos Aires on Aug. 15. The U.S. is expected to start sending pork shipments to Argentina by the end of 2017. While Argentina is typically thought of as a beef-eating nation, consumption of pork has been surging there in recent years.
The National Pork Producers Council also called on the Trump administration “to negotiate market access in other countries, such as India and Thailand, that remain closed to U.S. pork due to non-science based trade restrictions.”
— U.S. rice exports to Colombia to increase: U.S. officials. U.S. paddy rice exports to Colombia will expand because of the fast-growing share price, USDA and U.S. Trade Representative officials announced. The total share of U.S. rice exports to Colombia reached $15 million in 2016. Colombia is the U.S.'s 12th-largest export market for food and agricultural products and has already established close trade ties, with exports valued at more than $2.4 billion in 2016, a press release noted.
USDA Secretary Perdue, USTR Lighthizer comment. “The agreement, combined with preferential access under the U.S.-Colombia Trade Promotion Agreement (CTPA), will further accelerate increased U.S. exports of food and agriculture to Colombia,” USDA Secretary Sonny Perdue and USTR Robert Lighthizer said in the press release. Paddy rice exports have increased to $79 million per year, compared with $3 million in 2012, the year before the CTPA entered into force.
Background. The previous U.S. paddy rice agreement in 2012 had strict and costly requirements related to phytosanitary concerns, but the new agreement will lift them. The agreement provides access to all ports of entry in Colombia instead of just the port of Barranquilla.
— Cotton AWP falls under 60 cents; upland cotton import quota announced. The cotton Adjusted World Price (AWP) is at 59.70 cents per pound, effective today, the first time this year the AWP has been under 60 cents and the lowest since it was at 59.20 cents per pound the week of November 18, 2016.
USDA also announced Special Upland Cotton Import Quota #17 will be established Aug. 24, allowing importation of 12,751,474 kilograms (58,566 bales) of upland cotton purchased not later than Nov. 21, 2017, and entered into the U.S. not later than Feb. 19, 2018.
— CME lowers soybean, wheat futures margins. Margins for CME wheat futures will be lowered to $1,200 per contract, down 14.3% from the current $1,400 per contract, while soybean futures margins will be lowered to $1,900 per contract, down from $2,100 per contract. The margins are effective with the close of business today (Aug. 18).
— Brazil relying more on northern ports to ship grain: Agriculture Ministry. While Santos is still the main port in Brazil, the Northern Arch ports have handled almost 24% of Brazilian corn and soybean exports the first seven months of 2017, according to the Brazilian Agriculture Ministry, compared to less than 20% over the same period the past five years.
The ports in question are Itacoatiara, Itaqui, Santarém, Barcarena and Salvador. Through July, farmers shipped 15.3 million tonnes of corn and soybeans through the Northern Arch, the agency said. The Brazilian Transport Ministry Thursday approved the release of about $40.5 million to pave a stretch of the key BR-163 highway which will be used to pave about 65 kilometers (40 miles) of road between Novo Progresso and Igarapé do Lauro.
— Syria says it has six months of strategic wheat reserves: Reuters. War-torn Syria has about six months of strategic wheat reserves, Internal Trade and Consumer Protection Minister Abdullah al-Gharbi told Reuters. “We have a reserve of more than six months, I will not give the exact figure, we have a lot more than countries that have not lived through war like us,” Gharbi told Reuters on the sidelines of the Damascus International Fair. “Last year we had 17 days now we have more than six months.” The wheat has come from a combination of local production and imports, primarily from Russia.
— Ag groups push for action on CSX delays. CSX Railway needs to fully restore service as delayed shipments and irregular schedules are hurting farmers and others relying on the road, a coalition of U.S. ag and commodity groups said in a letter to the Surface Transportation Board (STB). The groups urged the STB to push the railroad to set up a plan to “rectify the harm it has caused to its customers over the past few months and restore service to levels that comply with CSXT’s statutory obligations.” Link to letter.
The groups said the service downturn and disruptions started in June and do not appear to be abating, with some signaling the situation is “becoming worse.”
The STB in July requested CSXT (CSX Transportation Co.) provide weekly updates and again this month followed up with a letter August 14 expressing concern about the situation.
Meanwhile, Union Pacific Railroad Inc. will lay off 750 workers, around 500 management jobs and 250 railroad workers, by mid-September. The layoffs, which represent about 8% of its management force, will largely hit employees in Omaha, Nebraska, where the company is based, but will also affect locations across its network, the company said. The company has roughly 42,000 employees across 23 U.S. states. News of the cuts comes about a month after Union Pacific said it expects to cut costs by between $350 million to $400 million this year.
— Fed Chairwoman Janet Yellen is scheduled to speak at Jackson Hole next week. The subject of the speech will be “Financial Stability,” and it will happen on August 25 at 9 a.m. CT. The talk comes a couple of weeks ahead of the FOMC’s next policy meeting.
— Democratic lawmakers urge EPA to rethink WOTUS repeal. The proposed rescinding of the controversial Waters of the U.S. (WOTUS) rule is being opposed by more than 100 Democratic lawmakers who argue the proposal is “deeply concerning” and “ignores science.” While some have used “scare tactics” on the matter, the lawmakers argued in a letter to EPA Administrator Scott Pruitt that the WOTUS rule “provides certainty over streams and wetlands that have been historically covered by the Clean Water Act.” The lawmakers said that arguments made by WOTUS opponents that it puts in place new requirements for agriculture are not accurate. “We would be willing to work with an administration that wants to develop thoughtful changes that maintain protections,” the lawmakers said, “but this repeal is reckless.” Link to letter.
— RIN generation rose in July, EPA data show. There were some 1.27 billion D6 renewable identification numbers (RINs) generated in July, up from 1.26 billion in June, according to EPA. For biodiesel, there 372 million RINs generated, down from 401 million in June.
— Deere & Co. earnings better than expected. Improving demand for farm equipment, particularly in South America, helped bring better-than-expected quarterly profits for Deere & Co., prompting the farm equipment maker to raise it full-year sales and profit forecasts. Fiscal 2017 equipment sales are now expected to rise 10% versus their prior forecast for a nine-percent increase, Deere said in announcing its earnings, with net income for 2017 to be $2.1 billion, up from a prior estimate of $2.0 billion. Higher demand for farm machinery in South America on gains in corn and soybean output were cited by the firm for the increased outlook. Link for details.
