Washington Insider -- Wednesday

The Federal Farm Rescue

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

Key Lawmakers Call For Administration to Reconsider June 1 USMCA Start

Delaying the Trump administration’s planned June 1 implementation date for the US-Mexico-Canada Agreement (USMCA) is being called for by a bipartisan group of Senate Finance Committee members.

“A long experience of incomplete and inadequate implementation by trade agreement partners has taught us that the United States must do this work on the front end to ensure that the words on paper deliver genuine benefits to Americans, including our farmers, workers, and businesses,” the letter said. “We urge you to seriously reconsider the proposed June 1 entry into force of USMCA, particularly in light of the significant public health crisis and supply chain disruptions caused by COVID-19.”

But even without the COVID-19 situation, the lawmakers said the June 1 deadline would be “highly aggressive, and raises questions as to whether businesses have the information they need to adjust to the new rules and comply by that date.” They also cited both Trade Promotion Authority (TPA) provisions and the USMCA Implementation Act as preventing the agreement from coming into force before Canada and Mexico show their “full adherence” to their USMCA commitments.

While Senate Finance Committee Chairman Chuck Grassley, R-Iowa, and Ranking Member Ron Wyden, D-Ore., signed the letter, not all members of the panel from both parties signed onto the effort.

USDA’s Perdue Insists US Food Supply Is Solid

USDA Secretary Sonny Perdue Monday said that the US food supply is sound despite the COVID-19 situation.

In remarks on Fox Business’ Mornings With Maria, Perdue said, “We have a very complex food supply chain, from those vendors that supply our farmers with the tools and inputs they need to grow the crops — and then after that, it has to be harvested and processed. ... It is a very complex supply chain. Fortunately, it is sound, it is stable. And I think the demand surge we saw a couple weeks ago — we are seeing shelves replenished. I think that gives people a sense of calm when they go in the grocery stores and see the replenishment there.”

Washington Insider: The Federal Farm Rescue

POLITICO is reporting this week that the administration will inject tens of billions of dollars into the farm economy to prop up struggling corners of the sector after “years of trade pain, weather disasters and now a global pandemic and looming recession.”

However, the report notes that the aid comes with few strings attached and distributing it evenly “could prove challenging.”

In addition, there are additional federal efforts underway that affect agriculture including EPA plans to extend the deadline for oil refiners to prove their compliance with biofuel blending rules and says it won’t investigate or act on blending exemptions. Instead, it will focus on higher priorities and wait for a major court case on refinery waivers to play out, the report said.

POLITICO also notes that managing the $23 billion in extra aid for agriculture may be a “challenge,” for USDA.

Already Democrats have worried publicly that USDA might set up another “slush fund” to disperse funds across the industry POLITICO said. That mistrust stemmed in part from how the administration designed its earlier trade bailout program, which critics claimed unfairly benefited Southern states, wealthy farmers and even foreign meatpackers.

“We’ll be monitoring implementation to hold USDA accountable for distributing aid fairly and encourage USDA to follow the bipartisan payment limits set by the farm bill,” said a spokesperson for Senate Ag ranking member Debbie Stabenow, D., Mich.

Joseph Glauber, former USDA chief economist, told POLITICO the stimulus funds, trade aid and traditional farm subsidies could total around $50 billion in fiscal 2020 alone, “an unprecedented amount, to say the least,” said Glauber, now a senior research fellow at the International Food Policy Research Institute.

Implementing the farm stimulus plan could prove even trickier than the trade bailout, which was based on the tariff damage to specific commodities and counties. “I am not sure how you would separate out price impacts from COVID-19 versus other market factors,” Glauber said. “My guess is that the distribution and amounts will look a lot like 2019.”

In addition, EPA on Friday announced a series of “steps to protect the availability of gasoline during the COVID-19 pandemic,” including several moves to delay enforcement of biofuel blending requirements under the Renewable Fuel Standard. The agency said it intends to extend the March 31 compliance date to give small oil refiners more flexibility to meet their RFS requirements, with more details to come.

The coronavirus and efforts to contain it have caused a steep drop in demand for gasoline as people stay home, POLITICO said. The ripple effect has reached biofuel makers, whose products are blended by oil refiners into the gasoline pool.

The EPA also emphasized that it will develop an “appropriate” response to a January court ruling, which struck down a trio of refinery waivers and threatened to undermine many more, once the appeals process has played out.

Biofuel groups have pressed the White House to apply that court decision nationwide, wiping out any waivers that hadn’t been continuously maintained since the program was created more than a decade ago. Brian Jennings, CEO of the American Coalition for Ethanol, said it’s “disappointing to learn the agency prefers to punt this decision” until after the legal appeal by two refiners is resolved.

“The economic fallout of COVID-19 is doing substantial damage to the ethanol industry and we expect the administration to leave no stone unturned in responding instead of only benefiting oil at the expense of rural America,” he said.

POLITICO also said that the president rejected a Wall Street Journal report that the federal government might stop collecting duties for three months to help hard-hit companies weather the economic storm. At a White House briefing on Friday, the president called the report “just more fake news.”

In addition, the administration has left trade war duties in place on more than $350 billion in Chinese goods, in addition to steel and aluminum tariffs on China, the EU and many other nations. The US collected nearly $72 billion in tariffs in fiscal 2019, up from $41.6 billion the prior year.

The ag stimulus includes $300 million earmarked for the seafood industry, including commercial and charter fishermen. But seafood sellers have another problem: Without federal action, thousands of seasonal workers in Alaska processing plants for pollock will soon need to go back to their home country before returning for salmon season this summer, the Wall Street Journal reported.

So, we will see. The combined impacts of the fall elections and the COVID-19 virus mean the demand for new and old market interventions is almost unending and will affect most of the economy and, certainly much of agriculture. These are issues producers should watch closely as they emerge, Washington Insider believes.

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