Washington Insider -- Tuesday

China Aims at Des Moines

Here’s a quick monitor of Washington farm and trade policy issues from DTN’s well-placed observer.

Talk of Year-Round E15 Announcement Continues

Reports indicate the Trump administration is set to announce a policy change allowing year-round sales of gasoline with E15 ethanol, with the announcement potentially on track in coming weeks.

Some suggest the administration is looking for an ag-related event for the announcement, possibly in Iowa. And there is potential for the announcement to cover more than just E15, as some suggest it will be packaged with other reforms that would be proposed for the Renewable Identification Number (RIN) market.

Possible changes include the imposition of position limits capping the number of RINs that can be held by traders.

However, any announcement is expected to take time to become reality as indications are that there would be a public comment process and legal challenges are also expected. And, given the recent track record on this issue, it could still be pulled back.

USDA expands MFP payments, shifts hog producer inventory dates

USDA announced that fresh sweet cherries and shelled almonds would be added the Market Facilitation Program (MFP) that is part of the trade mitigation package aimed at helping farmers suffering due to the trade war with China.

Producers of these commodities can apply for MFP payments at their local Farm Service Agency office. The signup period for the program is currently open and will remain so through Jan. 15, 2019.

The payment rates will be $0.03 per pound for shelled almonds and $0.16 per pound for fresh sweet cherries. And there will be a separate $125,000 payment limit for the two commodities.

USDA also announced it has expanded the timeline for hog producers relative to their MFP payments, with producers able to choose any date between July 15 and August 15 relative to the inventory figures used to generate MFP payments.

Washington Insider: China Aims at Des Moines

Something of an inscrutable oriental gesture appeared in Des Moines this weekend — an advertising supplement in Iowa’s largest newspaper. The ad aimed to highlight the impact on the state’s soybean farmers as “the fruit of a president’s folly.’’

There’s nothing strange about yet another election-year ad, of course. What was unusual was the fact that the four-page section in Sunday’s Des Moines Register openly carried the label “paid for and prepared solely by China Daily, an official publication of the People’s Republic of China.” It featured articles including one outlining how the trade dispute is forcing Chinese importers to turn to South America instead of the U.S. for soybeans. And, it attracted attention beyond Iowa, Bloomberg said.

“Pretty savvy political play being run by China,’’ Tommy Vietor, a former national security spokesman for President Barack Obama, said on Twitter about the tactic.

The advertising targets a state critical to Trump and Republicans at a time the trade war between the world’s two largest economies is intensifying. The U.S. is imposing tariffs on an additional $200 billion in Chinese imports, on top of the $50 billion in goods already hit with levies. Meanwhile, $110 billion of goods from the U.S. are subject to Chinese retaliatory tariffs.

“As the largest importer of U.S. soybeans, China is a vital and robust market we cannot afford to lose," the supplement quotes Davie Stephens, vice president of the American Soybean Association and a Kentucky soybean grower as saying.

China on Saturday called off planned trade talks with U.S. officials, and there’s a growing consensus in Beijing that substantive talks will only be possible with the Trump administration after U.S. mid-term elections in November, Bloomberg said.

“President Trump has an excellent relationship with President Xi and our teams have been in frequent communication since President Trump took office," Lindsay Walters, deputy White House press secretary asserted. “We remain open to continuing discussions with China, but China must meaningfully engage on the unfair trading practices.’’

President Trump is accusing China of “taking advantage of the United States on trade for many years,’’ and the tariffs the U.S. has been imposing are meant to be a response to allegations of intellectual property theft and forced transfer of U.S. technology.

Besides the article about soybean imports, the Register supplement carried a story highlighting a book about Chinese President Xi Jinping’s “fun days in Iowa" during trips to the state in 1985 and 2012, and a column with the headline, “Beijing can set an example for the world."

China placed similar pages focused on trade in a July issue of Roll Call, a newspaper that covers Congress and the U.S. political scene, but this seems to be its first attempt to go straight to U.S. voters. Former longtime Iowa Governor Terry Branstad is also the U.S. ambassador to China.

Iowa has been especially hard-hit by Trump’s trade policies and retaliation by China and other countries, according to a recent U.S. Chamber of Commerce campaign against the duties highlighting the impact by state. Total Iowa exports threatened by tariffs exceed $1 billion, including $30.8 million in soybeans, and the state has 456,300 jobs supported by trade, according to the chamber.

The administration has acknowledged the impact of the tariffs — especially retaliatory duties on soybeans and other U.S. agricultural products — by offering $12 billion in assistance to farmers, a key part of his political base who helped him carry rural states in 2016.

In general, though, the President believes that any near-term pain to the American economy and consumers is worth it, and that inaction against China would leave the U.S. worse off over the long run, a senior administration official said on Friday.

Still, the administration’s justification for its tough trade policies is raising questions among trade associations representing farmers, retailers, manufacturers and other industries. Many of these groups are now joining forces in a new multi-million-dollar “tariffs hurt the heartland” campaign to influence the administration by highlighting stories of businesses, consumers and farmers negatively affected by the duties.

So far, lobbying against the tariffs has had little impact, Bloomberg says. After a week of public hearings in Washington with companies urging against stepping up the trade war, the administration is going ahead with the tariffs anyway.

So, we will see. Farm groups have been saying for some time that they would much prefer to be able to sell products overseas than to be “assisted” by government payments—and that the programs being offered do not fully offset their losses. And, administration support among farmers is reported to continue to be strong. Still, this is a fight that has intensified rapidly and one producers should watch closely as continues, Washington Insider believes.

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