Here’s a quick monitor of Washington farm and trade policy issues from DTN’s well-placed observer.USDA’s Perdue Again Offers Help for Ethanol Industry
Exports of U.S. ethanol are being eyed as a way to help the sector, but USDA Secretary Sonny Perdue Thursday did not mention the potential for the industry to get any government aid.
Perdue said ethanol was a product that China could purchase as it seeks to meet terms of the Phase One agreement with the U.S. He also offered no indication that USDA is altering its aid package for farmers that it has yet to release.
Meanwhile, a bipartisan group of Senators are pushing USDA to target its relief to local farmers under the Coronavirus Food Assistance Program (CFAP).
They expressed disappointment that there were “no specific details on how this assistance will be tailored to the unique challenges that local producers face, or how the Department will conduct outreach to beginning and underserved farmers.”
USDA’s Perdue Sees Meat Plants Reopening in ‘Days, Not Weeks’
U.S. meat plants are expected to be resuming operations in “days, not weeks,” USDA Secretary Sonny Perdue told Bloomberg in an interview, noting that personal protection gear and access to COVID-19 testing should happen “virtually immediately.” USDA has already started working on orders to get them filled on a priority basis with suppliers.
The downturn in meat production should ease to “10% to 15% within a week to 10 days,” he noted, putting the current shortfall at 20% to 30%.
“There will be some less production, some inefficiency based on line speeds, some employees that will not be able to come back to work,” Perdue said, but emphasized that worker safety “is the first priority here.”
Washington Insider: Coronavirus Restructuring
One of the persistent concerns of economic observers focuses on shifts in the structure of the economy in response to large economic trends. For example, Bloomberg says that the biggest companies are getting even bigger these days and “midsize players are running on fumes.”
The report focuses on efforts by the Justice Department, Federal Trade Commission, and state attorneys general that have been investigating Alphabet Inc.’s Google and Facebook Inc. for possible antitrust infractions. And, the antitrust officials see those inquiries continuing “as they shifted to working remotely” while the economy reopens.
The pandemic is playing to the strengths of the biggest digital players, Bloomberg says, as seen in their earnings results for the quarter ending in March. Amazon.com Inc. has gone on a hiring spree to keep up with a surge in demand from millions of homebound consumers. In what is normally a slow quarter, sales jumped 26% to a record $75.5 billion, though earnings fell 29% compared with the same period in 2019.
In addition, Alphabet’s revenue exceeded expectations as Facebook’s shares soared on Thursday after its results eased some investor concerns about advertising weakness.
Investors were braced for one of the biggest annual sales declines in Apple Inc.’s history but the company reported a surprising 1% revenue increase to $58.3 billion, while retailers, restaurants, airlines and hotels are struggling and more than 30 million Americans have suddenly become jobless.
Dominant companies were already on the march across industries, from the internet to wireless carriers and from health care to food processing, long before the virus hit. Now, antitrust experts fear that as the largest companies increase market shares, weaker firms might disappear or sell out at fire-sale prices to stronger rivals – and that regulators and lawmakers will be under pressure not to stand in the way.
During the 2008 financial crisis, a wave of bank mergers increased concentration and could offer a template for what’s to come. The report says policy makers encouraged the strong to gobble up the weak, at that time. By 2012, five banks -- JPMorgan Chase & Co., Bank of America Corp., Citigroup Inc., Wells Fargo & Co., and Goldman Sachs Group Inc. -- were about twice as large as they had been a decade earlier relative to the U.S. economy.
This time, embattled retail, restaurant, entertainment and travel industries could follow suit, Bloomberg says and notes several structural discussions now underway.
New York University economist Thomas Philippon, whose book, “The Great Reversal,” documented how U.S. markets have become less competitive said big companies gained access to Federal Reserve lending facilities in the $2 trillion coronavirus stimulus package. Meanwhile, millions of small firms were left with a poorly designed Small Business Administration loan program that’s been swamped by demand, including from larger companies with the ability to tap stock and bond markets.
Some are already closing. For example, Service, a travel app, folded after an investment deal and a backup plan to sell to Enterprise Holdings Inc. fell through, said Michael Schneider, the chief executive officer. He had to inform his nine employees in Los Angeles that they were out of a job. “It feels like the end of the world,” he said.
Supply-chain bottlenecks in the meat industry already have led President Donald Trump to invoke the Defense Production Act to keep food supplies flowing. Tyson and its top rivals JBS SA and Cargill Inc. control about two-thirds of America’s beef production, the bulk of which is done in a few dozen giant plants.
“This is 100% a symptom of consolidation,” said Christopher Leonard, author of “The Meat Racket,” which examines the protein industry. “The virus is exposing the profound fragility that comes with this kind of consolidation.”
The pandemic could reshape the American economy in myriad ways, as companies begin to teeter and corporate defaults are projected to soar, Bloomberg says.
Even as the pandemic grinds deal-making to a halt, famed investors in struggling companies like Howard Marks’s Oaktree Capital Group are getting ready to pounce. Mastercard Inc. Chief Executive Officer Ajay Bangatold told investors on an April 29 conference call that the company is “keeping the powder dry” for acquisitions.
Fear of a consolidation wave has led Rep. David Cicilline, D-R.I., who chairs the House antitrust panel, to call for a moratorium on acquisitions.
Two other Democrats, Sen. Elizabeth Warren of Massachusetts and Rep. Alexandria Ocasio-Cortez of New York, are proposing legislation to ban corporate mergers while the pandemic persists.
As the pandemic accelerates, concerns are growing among “antitrust overseers” that Amazon’s grip on U.S. online retail sales could permanently shift consumer behavior toward online shopping. On Friday, Jerrold Nadler, the House Judiciary Committee chairman called Amazon Chief Executive Officer Jeff Bezos to testify about his company’s treatment of third-party merchants on Amazon’s website.
So, we will see. The primary concern likely will be to get the economy reopened, as it was in the earlier case. Still, worries about smaller competitors seems stronger now – and to extend at least modestly across the political aisle, although holding back consolidation will be very tough. Such efforts should be watched closely as the fight against the virus continues, Washington Insider believes.
Want to keep up with events in Washington and elsewhere throughout the day? See DTN Top Stories, our frequently updated summary of news developments of interest to producers. You can find DTN Top Stories in DTN Ag News, which is on the Main Menu on classic DTN products and on the News and Analysis Menu of DTN’s Professional and Producer products. DTN Top Stories is also on the home page and news home page of online.dtn.com. Subscribers of MyDTN.com should check out the US Ag Policy, US Farm Bill and DTN Ag News sections on their News Homepage.
If you have questions for DTN Washington Insider, please email email@example.com
© Copyright 2020 DTN/The Progressive Farmer. All rights reserved.