Here's a quick monitor of Washington farm and trade policy issues from DTN's well-placed observer.
USDA Details Pandemic-Related Help for Depopulated Livestock
USDA finally provided some details on animal depopulation/disposal assistance for livestock and poultry producers who suffered losses during the COVID-19 pandemic due to insufficient access to processing.
Those producers can soon apply for assistance for those losses and the cost of depopulation and disposal of animals under the Pandemic Livestock Indemnity Program (PLIP). Signup will be from July 20 through Sept. 17. Payments will be based on 80% of the fair market value of the livestock and poultry and for the cost of depopulation and disposal of the animal from March 1 through Dec. 26, 2020. Payments will be based on a single payment rate per head.
PLIP payments will be calculated by multiplying the number of head of eligible livestock or poultry by the payment rate per head, and then subtracting the amount of any payments the eligible livestock or poultry owner has received for disposal of the livestock or poultry under the Natural Resources Conservation Service Environmental Quality Incentives Program or a state program.
The payments will also be reduced by any Coronavirus Food Assistance Program (CFAP 1 and 2) payments paid on the same inventory of swine that were depopulated.
USDA has set aside "up to $50 million in pandemic assistance funds to provide additional assistance for small hog producers that use the spot market or negotiated prices. Details on the additional targeted assistance are expected to be available this summer." Packers, live poultry dealers and contract growers are not eligible for PLIP.
US Steps Up Pressure on Businesses Over Xinjiang Situation
The U.S. State Department, Treasury Department, Commerce Department, Home Security Department, Labor Department and Office of the U.S. Trade Representative issued an updated "Xinjiang Supply Chain Business Advisory" to "highlight the heightened risks for businesses with supply chain and investment links to Xinjiang, given the entities complicit in forced labor and other human rights abuses there and throughout China."
The new advisory updates the one issued in July 2020. The new advisory now includes information from the Department of Labor and USTR, which it said are now co-signatories to the advisory. The update stated that China "is perpetrating genocide and crimes against humanity in Xinjiang" and it provides "specific information regarding risks related to investment in PRC [People's Republic of China] companies linked to surveillance and forced labor in Xinjiang."
The new guidance does not have the force of law, but "strengthens recommendations for businesses regarding the risks and potential exposure" for supply chains and investment in Xinjiang.
The new update also outlines the list of U.S. government enforcement actions taken and provides information on silicon and polysilicon supply chains linked to Xinjiang along with providing "a list of other countries' relevant regulatory provisions and information on forced labor in supply chains."
Washington Insider: Inflation and Discussing it Keeps Rising
It's hard to read any major business-related publication or make a visit to a store or watch government data without seeing some signs of inflationary pressures in the U.S. economy. Inflation at the consumer level as measured by the Consumer Price Index (CPI), which rose 0.9% in June compared with May, mounting a 5.4% advance from a year ago, the biggest jump in prices since 2008. In what is known as the "core" rate of inflation -- it strips out the volatile categories of food and energy prices -- inflation in June also rose 0.9%, and the 4.5% rise on an annualized basis was the biggest since 1991. One of the biggest factors was the prices for used cars and trucks. The chip shortages have shot used car and truck prices higher as new models are in short supply or some have given up on waiting months after months for a new vehicle. The 10.5% rise in used car and truck prices in June came after those prices rose more than 7% in May and 10% in April. Food prices showed a more-tempered rise, although the cost of eating out increased significantly. Restaurant prices rose 0.7% for the month and posted a 4.2% rise over the past year, while grocery store prices were up 0.8% from May, but only posted an annual increase of 0.9%, according to the BLS. The rise in restaurant prices on an annualized basis was the biggest rise since May 2009. At the grocery store, beef prices were a key as they rose 4.5% in June, the biggest monthly rise since June 2020. Indeed, there are reports of employers seeking to attract workers by raising wages. Recent data from the government also bore that out, and the unemployment rate is still around 5.9%. But the Fed continues to insist that the rise in prices is "transitory" or that it will not become embedded or sustained enough to damage the U.S. economy. Federal Reserve Chair Jerome Powell acknowledged the rise in inflation in his testimony to the House Financial Services Committee, but reiterated the Fed view that it will "moderate" over time. "Inflation has increased notably and will likely remain elevated in the coming months before moderating," Powell said. But the rise in prices is being "temporarily boosted by base effects, as the sharp pandemic-related price declines from last spring drop out of the 12-month calculation." He also pointed to "strong demand in sectors where production bottlenecks or other supply constraints have limited production and has led to especially rapid price increases for some goods and services, which should partially reverse as the effects of the bottlenecks unwind." Those bottlenecks have certainly been seen in several areas of the U.S. economy as the restart from the COVID-19 pandemic has unfolded. The pandemic caused changes in supply chains around the globe and those are not easy things to reverse. And a sudden surge in demand as consumers now have the ability get out and do things like eat out, shop and travel has put the services sector in a bind. The torrid pace of lumber price increases appears to have abated, another factor that would have produced a bigger hit on the housing sector if not for low interest rates that have allowed home sellers to get their asking price or more for their properties. And, those properties are not staying on the market long. The Federal Reserve's Beige Book report, an anecdotal recap of economic conditions around the country that is issued two weeks before the next Fed rate-setting meeting, also acknowledged the price hikes. The recap noted too, that the "growth in input prices is continuing to outpace that of finished goods and services." Businesses told the Fed, however, they were seeing an "improved ability to raise final selling prices to consumers, especially in the retail, wholesale trade, and manufacturing sectors, and some cited plans to increase selling prices in the coming months." And while Powell kept his inflationary remarks virtually unchanged from where he has been for several weeks now, lawmakers at the hearing Wednesday are starting to question that view. "I can tell you that the families and businesses I represent are not feeling that these price spikes are temporary," Rep. Ann Wagner, R., Mo., told Powell. "It is housing, appliances, food prices, gas." Powell and the Fed have insisted that they believe inflation will run above their 2% target "for some time." Keep in mind, that the CPI data released this week is not the guide that the Fed uses to measure inflation. Instead, they rely on what is called the Personal Consumption Expenditures (PCE), a broader measure of inflation that includes CPI but other components. Rep. Anthony Gonzalez, R., Ohio, pressed Powell on that term "for some time," asking the Fed chair to provide some indication of what that time period is. "It depends," Powell said. Part of that is that Powell has so far refused to be drawn into committing to a timeline on the Fed's actions. He has learned from prior Fed leaders who have made comments on timing of various things to Congress only have those quickly become a market assumption that will dictate action by the Fed. Powell has insisted the central bank cannot be locked into a set path on monetary policy and has to have the flexibility to address situations as they arise. And he also made the remark to lawmakers, "You wouldn't react to something that is likely to go away." No doubt that will not set well with those who are seeing prices rise at the grocery store, the gas pump and other places. The Fed clearly has a difficult and delicate task on their hands, one that so far, they have navigated with some degree of success. But as the price increases come, there are concerns that a policy response from the Fed is needed. The concern is that a Fed response could result in higher borrowing costs. So, we will see. It adds another factor that U.S. agriculture needs to watch as the pandemic has driven down interest costs, which are an important cost factor that must be watched, Washington Insider believes.
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