Here’s a quick monitor of Washington farm and trade policy issues from DTN’s well-placed observer.USDA Announces Crop Insurance Pilot for Hemp
USDA announced a pilot Multi-Peril Crop Insurance (MPCI) product for hemp producers in select counties in 21 states will be available for the 2020 crop year.
USDA created the new program in partnership with the U.S. Hemp Farming Alliance and AgriLogic. Eligible producers may participate in certain counties in Alabama, California, Colorado, Illinois, Indiana, Kansas, Kentucky, Maine, Michigan, Minnesota, Montana, New Mexico, New York, North Carolina, North Dakota, Oklahoma, Oregon, Pennsylvania, Tennessee, Virginia and Wisconsin.
“We are excited to offer coverage to certain hemp producers in this pilot program,” said USDA Risk Management Agency (RMA) Administrator Martin Barbre. “Since this is a pilot program, we look forward to feedback from producers on the program in the coming crop year.”
MPCI coverage under the pilot program is available for hemp grown for fiber, grain or CBD, according to USDA. To be eligible for coverage, producers must meet various requirements including compliance with applicable state, tribal or federal regulations for hemp production, having at least one year of history producing the crop and having a contract for the sale of the insured hemp.
Meanwhile, beginning with the 2021 crop year, hemp will be insurable under the Nursery crop insurance program and the Nursery Value Select pilot crop insurance program, USDA said.
Doud Comments On US-China Phase One Trade Deal
The phase-one U.S.-China trade deal “is done” and is currently going through a legal scrub, chief U.S. ag trade negotiator Gregg Doud said in an interview with Pro Farmer.
Doud elaborated on expected U.S. ag buys by China, saying the average $40 billion in purchases over two years represents the $24 billion baseline of purchases seen in 2017 plus an additional $16 billion in purchases above that. “Now in the first year, it'll be a little less, and the second year will be a little more,” he noted.
On the U.S. ag products China might purchase, Doud said “I think you're going to see a lot in demand for meat. And China's just extraordinary right now because of the African swine fever thing.”
Though the phase-one U.S.-China deal does not specify China ag purchase levels beyond 2021, Doud said U.S. ag exporters will still see benefits from “structural changes that were negotiated in this deal,” including reduced sanitary and phytosanitary non-tariff trade barriers.
Doud also touted the initial U.S.-Japan trade deal, saying it puts “over 90% of the ag products that we send to Japan” at tariff parity with those from competitors covered under other trade agreements.
Though many rice producers were disappointed in the U.S.-Japan accord, Doud suggested a welcome development could be around the corner. “I've got a huge deal for them that I can't talk about yet here just for another few days,” he said.
Washington Insider: Bloomberg’s Expectations for Central Banks
Well, there’s lots going on in Washington these days, but at least some of the earlier hot spots seemed to have cooled a little. For example, there are growing rumors of trade overtures from China.
In the meantime, Bloomberg has published its review of what it expects the world’s central banks to do next year — it labels this year as the time central banks jumped back into the fray, cutting interest to deal with a trade slowdown and subsequent declines in manufacturing.
Some, central banks, like the Federal Reserve, had made rate hikes before 2019, creating “room” to loosen policies amid weaker growth. At the same time, others, like the European Central Bank, “found themselves in a more difficult position and had to cut benchmarks further below zero, stoking resentment about subzero rates.”
Looking ahead, Bloomberg says it thinks that 2020 “might be a quieter year for monetary policy—and that fiscal [policy] “may take up some of the lifting work as growth prospects are looking a little brighter.”
Still, it sees the economic numbers as “mostly mixed” rather than positive. On balance, while the big guns are set to hold fire, others, especially in the emerging markets, are projected to cut interest rates again.
There is a danger, Bloomberg thinks, that the current “moment of calm in the global economy is obscuring a serious challenge for the world's central banks.”
Low rates for most and negative for some means “policy space is severely depleted.” At the same time, the report concludes that “we don't think the next downturn is coming in 2020—but that when it does come, central banks won't have all the answers.”
With regard to the United States, Fed Chairman Jerome Powell “has left no doubt that interest rates are on prolonged hold — based on his earlier comment that the current stance “likely will remain appropriate” unless the Fed's favorable outlook for the economy sees a “material reassessment.”
He spoke after policy makers kept interest rates steady in a 1.5% to 1.75% target range “following three consecutive cuts” and published forecasts showing 13 of 17 officials are projecting no change in rates through 2020. That would keep them on the sidelines during a presidential election year, Bloomberg thinks.
However, the report cautions that the U.S. central bank “isn't entirely fading into the background.” Strains in money markets has pushed it to buy Treasury bills to restore ample reserves in the banking system and some investors argue it will need to broaden the scope of those purchases to short-dated coupon-bearing securities. Powell said they are not yet ready to take such a step, but “would do so if necessary.”
In conclusion, Bloomberg reports that its experts see the Fed “comfortably on hold for the foreseeable future,” as policy makers are less concerned by the risks which justified their ‘insurance cuts’ in the latter half of 2019 including trade tensions, below target inflation and sluggish global growth.
Bloomberg says this outlook makes the threshold high for policy adjustments in the near term, particularly for rate hikes. It also thinks that “the impetus to stand pat will increase as the U.S. election draws nearer.”
The report is extensive and emphasizes the uncertainty it sees, especially in areas like the UK where major policy changes are under consideration following Boris Johnson’s decisive win in December's election that “cleared the way for his government to take the nation out of the European Union at the end of January.”
For now, concern about the outlook means two of the Bank of England’s nine policy makers want to cut interest rates, the report says, and notes that all eyes will be on whether Johnson’s win, as well as Brexit developments which could change the picture.
Still, Bloomberg expects the combination of looser fiscal policy and reduced Brexit uncertainty could “lift growth next year,” and that in response, “the central bank’s tone could change leading to a rate increase in fourth quarter 2020.”
Bloomberg also sees the People’s Bank of China is disappointed in the results of the beginning of its “large-scale monetary easing.” And suggests that “if weakness in the economy worsens, the central bank likely will continue to release cash into the system via cuts to the reserve ratio, which has been a preferred method to shore up output this year.
China is battling a form of “stagflation” now which includes consumer price gains driven beyond the target of 3% by food, amid factory price declines and could well encounter economic growth below 6%, depending significantly on whether trade conflicts continue to cool.
The report runs through its quarterly review of 23 of the world’s top central banks, which together set policy for almost 90% of the global economy, and finds several of those are worth noting, along with Bloomberg’s overall assessment. It concludes that while 2020 looks like a quieter time, there are still a considerable number of potential trouble spots in a mostly mixed picture.
These signals reflect significant global economic trends should be watched very closely in the weeks and months ahead, Washington Insider believes.
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