Here’s a quick monitor of Washington farm and trade policy issues from DTN’s well-placed observer.Cattle Industry Losses Pegged At $13.6 Billion
The U.S. cattle industry is estimated to see losses of $13.6 billion due to the COVID-19 situation, according to an analysis released by the National Cattlemen’s Beef Association (NCBA).
Cow-calf producers are expected to see the biggest impact, with losses forecast at $3.7 billion or $111.91 per head for each mature breeding animal. Stocker/backgrounder losses are put at $156.98 per head for a total impact of $2.5 billion for 2020, while feeding sector losses are figured at $205.96 per head or $3.0 billion.
“This study confirms that cattle producers have suffered massive economic damage as a result of the COVID-19 outbreak and those losses will continue to mount for years to come, driving many producers to the brink of collapse and beyond if relief funds aren't made available soon,” said NCBA CEO Colin Woodall. “This study also clearly illustrates the fact that while the relief funds provided by Congress were a good first step, there remains a massive need for more funding to be allocated as soon as members of Congress reconvene.”
USDA Enters Into Agreement for Disaster Payments For Sugar Producers
USDA has entered into an agreement with cooperative processors to provide 2018 and 2019 disaster assistance to sugar producers that are members of the cooperative, according to the Farm Service Agency (FSA).
American Crystal Sugar Company, Michigan Sugar Company, Minn-Dak Farmers Cooperative, Snake River/Amalgamated Sugar Company, Southern Minnesota Beet Sugar Cooperative, Western Sugar Cooperative and Wyoming Sugar Company are the cooperatives with an approved USDA agreement.
However, USDA said that producers who deliver sugar to Sidney Sugars Incorporated are not members of a cooperative processors, but those with qualifying losses for 2018 and/or 2019 sugarbeet losses can apply for Wildfires and Hurricanes Indemnity Program Plus (WHIP+) benefits.
Members of an approved cooperative processor with sugarbeet losses must apply for 2018 and 2019 disaster benefits through their cooperative processors, FSA said.
Washington Insider: New Fed Monetary Efforts
As the nation struggles with the impacts of the coronavirus, the Federal Reserve is continuing to pump enormous amounts of aid into the economy, The Hill is reporting this week. It is blowing through old taboos with trillions of dollars in rescue loans and bond purchases and facing little concern, The Hill says.
Faced with a “once-in-a-century” economic crisis, Fed Chairman Jerome Powell has pledged to flood the U.S. with as much rescue lending and bond purchases as its legal charter allows and the economy requires. It now has purchased more than $1 trillion in Treasury bonds and mortgage-backed securities that anchor U.S. financial markets, with no clear limit in sight.
The central bank has also opened nearly a dozen special credit facilities to purchase a wide range of consumer, corporate and government debt in exchange for loans to financial firms, businesses and municipal governments.
In addition, the Fed announced it would offer another $2.5 trillion in economic relief, including unprecedented direct aid to nonfinancial businesses and municipal governments.
The Hill noted that the Fed used its emergency lending powers and balance sheet to stimulate the economy and stabilize financial markets during the earlier 2007-09 crisis and recession but was criticized for its efforts to prop up banks.
However, few are now questioning the necessity of the recent sprint to stop an economic collapse. “Moral hazard is not part of the debate as it was during the financial crisis in 2008-09,” said Diane Swonk, chief economist at Grant Thornton. “That is because this time really is different. We have to abandon our biases and warehouse them to deal with a health crisis. It is not the time to discuss who is worthy of our efforts.”
Even so, the scale and speed of the Fed’s latest intervention have raised some concerns about who may still get left behind. “If the Fed continues to go down this road and opens new windows and picks more sectors to support, particularly in this top-down way, the political consequences are going to be pretty interesting,” said Karen Shaw Petrou, managing partner at Washington, D.C., research and consulting firm Federal Financial Analytics.
The Fed’s primary responsibilities are keeping prices stable and unemployment low through monetary policy and ensuring the safety of the U.S. banks through regulation and supervision. But a provision of the bill that created the modern Fed system allows the central bank to become the lender of last resort in extreme economic downturns, with the consent of the Treasury secretary.
The catastrophic toll of the coronavirus pandemic and the recession it has created spurred few political challenges to the Fed’s actions. With the blessing of Treasury Secretary Steven Mnuchin the Fed has rewritten the playbook for responding to an economic crisis.
The report also is true that Powell’s hand is being forced in part by the president and Congress. The $2.2 trillion economic rescue bill orders the Fed to use some of the $454 billion appropriated to backstop its emergency lending programs in facilities for businesses and municipal governments, it said.
The Fed faced criticism in the earlier recession for its unwillingness to extend the same discounted loans to businesses and local governments that it offered to banks, largely because of the political hazards of choosing which specific municipalities or businesses would receive help.
But the scale of the coronavirus pandemic and steep costs it will impose on states have largely erased any hesitation by the Fed to aid municipal governments. The central bank announced last week it would purchase up to $500 billion in bonds from cities with more than 1 million residents and counties with more than 2 million.
The Fed also announced it would offer four-year loans to companies with up to 10,000 employees or less than $2.5 billion in annual revenue that were financially solid before the coronavirus outbreak through a “Main Street Lending Facility.”
The speed and extent of the subsequent rebound remains deeply uncertain, but it is clear that both Congress and the Fed appreciate the depth and extent of the problem, The Hill said.
Few have questioned the necessity of the Fed’s ambitious rescue plan, although the long-term implications of the central bank’s scramble to save the economy worry some Fed watchers and analysts, especially because of the coronavirus’s unique threats to the most vulnerable.
So, we will see. The far-reaching federal anti-virus efforts now have strong support, but can have important and disparate impacts across the economy, observers note. These are significant and should be watched closely by producers as they emerge, Washington Insider believes.
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