Trump and Putin | Yellen | CBO baseline | Conaway reaches budget deal | Steel trade | Perdue in China | U.S. rice to China | U.S.-Mexico sugar deal | N. Plains drought | Menu labeling | U.S.-Japan trade issues | Debt limit | India poultry trade
House and Senate are out today. When lawmakers return from the break, Republicans will have just three weeks to move on their legislative agenda before members leave town for the summer recess.
— President Trump will huddle with Russian President Vladimir Putin on the sidelines of the G20 summit next week in Hamburg, Germany, White House National Security Adviser H.R. McMaster said Thursday. McMaster added there’s no “specific agenda” for the meeting. The summit will take place July 7 and 8. Trump will have several other bilateral meetings on the sidelines of the Hamburg gathering, including some time with Chinese President Xi Jinping, a senior administration official told reporters earlier this week.
— Federal Reserve Chairwoman Janet Yellen will testify about monetary policy before the House Financial Services Committee July 12, and the Senate Banking Committee the day after. The back-to-back sessions will come about a week after the Fed publishes its monetary policy report to Congress July 7.
— New CBO baseline provides signals for 2018 Farm Bill spending levels. The Congressional Budget Office (CBO) on Thursday released an updated 10-year baseline of federal revenue and spending that includes projected costs of mandatory farm and nutrition programs. CBO estimates spending on agriculture will amount to $137 billion between fiscal 2018 and 2027, while the Supplemental Nutrition Assistance Program (SNAP/food stamps) will cost $679 billion over the same decade. The document provides a glimpse at funding farm-state lawmakers will have available to complete the 2018 Farm Bill.
Total payments over the fiscal 2017-2027 period under U.S. farm programs are now forecast at $61.574 billion, down from a January projection of $66.582 billon, a reduction of $5 billion, according to the June Congressional Budget Office (CBO) baseline update.
Most of the shifts in the baseline arrive in fiscal 2018 as the baseline now reflects the USDA March Prospective Plantings figures for major crops while latter years of the baseline assume the same planted acreage figures as were in the January baseline update.
The biggest shifts in the projected outlays in the June baseline are in feedgrains – primarily corn. In the June update, CBO projects fiscal 2018 feedgrain payments at $3.455 billion compared to $4.377 billion in January. Corn payments are now forecast to be at $2.935 billion for fiscal 2018 compared to $3.850 billion in January.
Soybean payouts for fiscal 2018 are projected at $553 million compared to $580 million in the January figures, while wheat is forecast now at $1.933 billion versus a $2.246 billion figure in the January update.
Payments for fiscal 2017 are marginally higher -- $8.091 billion in June compared to $8.053 billion in January. For fiscal 2018, the total payouts for program commodities is forecast at $7.667 billion, down from $8.882 billion in January. fiscal 2019 program commodity payments are forecast at $5.955 billion versus a $6.548 billion level seen in January.
A reduction was made in the forecasts for the Dairy Margin Protection Program (MPP), with payments put at $1.849 billion against premiums and administrative fees of $1.083 billion. In January, those were projected at $2.961 billion for payments and $2.152 billion for the premiums and administrative fees.
Forecast payments on generic base acres in the June update are seen at $3.351 billion compared to $3.261 billion in January, with peanuts at $1.775 billion, 35.4% of ARC/PLC peanut payments.
CBO did not change their expectations on the level of shift they see in the Agriculture Risk Coverage (ARC) and Price Loss Coverage (PLC) programs, continuing to see a significant shift in corn to the ARC program for the 2019 marketing year. Corn farmers are seen enrolling 82.1 percent of base acres in PLC from the 2019 marketing year forward compared to 6.6 percent currently. CBO also expects 48.7 percent of soybean base acres to be in PLC (3.1 percent currently) and 82.1 percent of wheat base acres (42.5 percent currently).
The shifts in the baseline put even more pressure on farm-state lawmakers to determine how to divvy up what appears to be a smaller pie, one that reflects concerns that have already been expressed about extra cuts being sought from agriculture spending as lawmakers seek to put together a fiscal 2018 budget resolution.
— House Agriculture Chairman Mike Conaway (R-Texas) late Thursday said he reached agreement with the Budget Committee on a cut to food stamp spending. “As far as Ag Committee and Budget, we’re done,” he said. Conaway did not provide details of his agreement but said he agreed to specific cuts the House Ag panel would have to abide by in the fiscal 2018 budget. He indicated that the cut would be small enough to make it politically feasible to move forward later this year with developing a new farm bill. “It’s a number that I agreed to,” Conaway said. “Working with (House Budget Chairwoman) Diane Black (R-Tenn.), we have come to an agreement and now we’re moving forward,” Conaway said late yesterday afternoon. Conaway also said he still plans to act on a farm bill through regular order late this year or early in 2018.
— The Trump administration is preparing sweeping new trade policies to defend the U.S. steel industry, a move that could lead other countries to retaliate. The White House has been mulling four major options when it comes to action to help domestic steel producers: across-the-board tariffs, a combination of tariffs and quotas, tariffs or quotas targeting specific countries, and enforcement measures for unfair trade practices. President Trump will not likely make a formal trade announcement until after the upcoming G20 summit in Hamburg, Germany, which begins July 7. Trade issues are slated to be a major topic of discussion at the meeting, which Trump will attend.
“The [Chinese] Ministry of Commerce believes there is no evidence that steel imports threaten to impair U.S. national security,” Yu Gu, a ministry official stationed at the Chinese Embassy in Washington, testified at Commerce Department hearing in May. “The United States’ defense and national security requirements are clearly not dependent on imports of foreign-made steel.”
Canadian, Russian and Ukrainian officials have all urged that they be exempted from any import restrictions if the U.S. invokes Section 232 of the Trade Expansion Act of 1962, which allows it to limit imports of steel and aluminum on the basis of protecting national security interests.
— USDA Secretary Sonny Perdue is in China to mark the official return of U.S. beef to the Asian nation. He’ll meet with China’s Minister of Agriculture Han Changfu and Chinese Vice Premier Wang Yang. Perdue also will join U.S. Ambassador to China Terry Branstad and cut prime rib from Nebraska to celebrate the move. China has rapidly become a major importer of beef. USDA said the first shipment of U.S. beef arrived in China on June 19. Han told Perdue and Branstad that agriculture deals between China and the US would improve the well-being of the two peoples, and would aid in particular the farm industry of the US. Perdue will provide a briefing on his trip via a conference call today. He is scheduled to be in Shanghai tomorrow.
“We can provide more safe, high-quality food products for the consumers here in China, a key part of improving our relationship and reducing our trade deficit,” Branstad said in Beijing. “U.S. beef exports to China is a new beginning.”
China has restarted imports of U.S. beef, lifting a ban put in place in 2003 that was triggered by a case of mad cow disease in Washington state. China’s beef imports hit $2.5 billion last year, with total shipments at 579,836 tons, according to official customs data.
The U.S. also hopes that China can approve more traits of genetically modified corn and soybeans and finalize an agreement on rice, Bransted told China’s Agriculture Minister Han Changfu during a meeting with Perdue.
COFCO comments. “U.S. beef is high-quality and is popular among our consumers and we will surely expand imports,” said Li Zhengfang, deputy general manager with COFCO Meat Holdings Ltd., at the sidelines of the event. COFCO imported the first shipment of U.S. beef last week and said China’s beef supply will be in deficit for long period of time due to rising demand and limited domestic resources.
— Potential U.S. rice sales to China. Officials for COFCO told the USA Rice Federation that purchases of U.S. rice are under consideration. Trump administration officials recently said they were working on a rice deal following the April meeting between President Trump and Chinese Prime Minister Xi-Jinping in Florida. USA Rice Chairman Brian King said the industry spent years building a relationship with China and has “fulfilled all the technical requirements needed to open up this market.” USA Rice said it continues to strengthen trade ties in the region by participating in events like HOFEX, Asia’s leading food and hospitality tradeshow. At the show in May, USA Rice met with China National Cereals, Oils and Foodstuffs Corporation (COFCO), a state-owned enterprise that is the largest food company in China, and consequently the largest importer of rice. At the meeting, the COFCO delegation confirmed that the rice phytosanitary protocol was being discussed by the Chinese government. USDA Secretary Perdue has acknowledged to USA Rice that access for U.S. rice is high on his priority list. King said, “The U.S. industry has fulfilled all the technical requirements needed to open up this market and while we wait for the political players to iron out the agreement, we continue to demonstrate our interest and intent with attendance at events like HOFEX.”
— U.S. and Mexico expected to officially sign a deal on sugar trade as soon as today. The suspension trade agreement reduces the amount of refined sugar Mexico can export to the U.S. The deal will be implemented on Oct. 1 for the start of the 2018 fiscal year. U.S. Commerce Secretary Wilbur Ross earlier noted that June 30 was the day the U.S. Would sign off on amendments to the trade suspension accord. President Trump commented on the deal on Thursday, saying, “New Sugar deal negotiated with Mexico is a very good one for both Mexico and the U.S.” “America’s sugar producers thank President Trump and his team for defending U.S. jobs, supporting America’s sugar farmers, and holding Mexico accountable for breaking U.S. trade law,” Phillip Hayes, a spokesman for the American Sugar Alliance, said in a statement. “The president is right, this is a very good deal,” John Bode, the president and chief executive of the Corn Refiners Association, said in a statement of his own. “It strengthens protections for U.S. sugar while also protecting U.S. corn sweetener exports and the 4,000 jobs those exports support.”
— Northern Plains drought gets farm-state lawmaker’s attention. “I don’t know how things can get worse for our ranchers out there,” Sen. Heidi Heitkamp (D-N.D.) told USDA officials at a Senate Agriculture Committee hearing Thursday. “If they are making it, they are making it day to day right now, and they don’t know how they are going to make it to the winter...Go to the limit on what you can provide for these ranchers.” Heitkamp is urging USDA to do everything it can to help ranchers in the region. Heitkamp and other lawmakers asked USDA to ease restrictions on grazing on Conservation Reserve Program (CRP) lands in the region — USDA took that action Thursday. USDA also announced emergency grazing in 284 counties across Iowa, North Dakota, South Dakota, Nebraska, Montana, Minnesota and Wyoming. It also allowed CRP landowners within 150 miles of the affected counties to donate hay from those lands to farmers in the affected area.
— FDA gives another 30 days to comment on menu labeling. The Food and Drug Administration announced Thursday it will give the pubic 30 more days to weigh in on how the agency can reduce regulatory burdens associated with national menu labeling. Groups had until July 3 to weigh in, but the end date now is Aug. 2. The agency said it opted to extend the comment period after receiving a request from various interested groups. that our members’ voices are heard,” she said in a statement.
— USTR talks trade issues with Japan. Trade issues were the topic during a meeting in Washington on Thursday between U.S. Trade Representative (USTR) Robert Lighthizer and Japanese Minister of Economy, Trade and Industry Hiroshige Sekō. Lighthizer stressed the importance of addressing the “very high and decades-long” deficit between the two nations, according to a readout from USTR. “Both sides also stressed the importance of further deepening enforcement cooperation to address unfair practices utilized by third countries that are contributing to global economic imbalances,” USTR said.
— Senate Republican leaders are considering a health-care reform proposal by Sen. Ted Cruz (R-Texas) that would allow insurers to sell cheaper, less robust plans if they also sell policies that meet coverage standards imposed by Obamacare.
— Debt limit won’t be exhausted until early to mid-October: CBO. The Treasury Department will be able to continue borrowing under the current $19.809 trillion debt limit into October, the nonpartisan Congressional Budget Office said, likely complicating efforts to raise it earlier. That date could change if there’s major fluctuations in government spending and revenues over the next few months, the CBO warned.
— India garners WTO compliance panel in U.S. poultry dispute. The World Trade Organization (WTO) established a dispute panel of trade policy analysts to determine whether New Delhi continues to maintain an import ban on U.S. poultry meat, eggs, and live pigs. WTO on June 29 named three dispute panelists to oversee the case — Stuart Harbinson of the U.K., Delilah Cabb of Belize, and Didrik Tnseth of Norway. In the coming months, the panel will examine India’s claim that it adhered to the terms of a 2015 WTO dispute ruling against its prohibition on U.S. agricultural imports. If the panel determines that India did not adequately modify its import restrictions it could open the door to millions of dollars in retaliatory trade measures from the U.S., according to the terms of the WTO dispute settlement understanding. The case dates back to India’s 2007 ban on U.S. imports of poultry meat and eggs, which was aimed at protecting Indian citizens from exposure to avian influenza. A WTO panel confirmed in 2015 that India’s ban was not based on international scientific standards, was more trade restrictive than necessary, and unfairly discriminated against U.S. imports. The Indian delegation said April 19 it revised its regulations to comply with the WTO. U.S. trade officials said India has not complied with the 2015 ruling and maintains a “complete ban”on American poultry and other agricultural products. The three panelists in the compliance dispute will also carry out arbitration in a separate disagreement over whether the U.S. may request WTO authorization to suspend trade concessions against India.
