Here's a quick monitor of Washington farm and trade policy issues from DTN's well-placed observer.
China Purchases Of US Ag Goods Remains In Focus
Both Reuters and Bloomberg are running items which focus on the pace needed for China to meet its purchase commitments of U.S. ag products under the Phase One agreement.
Reuters reports data through May put the country well behind the pace needed and says that their recent purchase pace of U.S. corn and soybeans would have to be maintained in coming months in order to meet their commitments. Bloomberg reports that China has amassed purchases of U.S. cotton despite a global downturn in textile/clothing demand due to COVID-19.
The Wall Street Journal today reports the rise in Chinese corn prices to five-year highs is expected to result in stepped-up imports of corn and other grains, with U.S. corn farmers standing to benefit. Trade data for June due August 5 will provide a clearer picture of the situation.
But USDA announced in its Weekly Export Sales report that foreign buyers picked up 3.344 million metric tons of U.S. soybeans the week ended July 23, including 1.989 mmt to China. And USDA also announced via its daily export sales reporting system that private exporters sold 1.937 mmt of U.S. corn to China for 2020/21, the largest daily corn sale to China on record.
WTO To Appoint Arbitrator Over US Request For Duties On China Goods
The WTO will appoint an arbitrator to rule on a U.S. request to hit $1.3 billion in China goods with retaliatory duties in a dispute over China's subsidies for wheat, corn and rice producers, a WTO official said on Wednesday.
The U.S. maintains China has not complied with a 2019 WTO ruling against Chinese agricultural support programs in a case brought late in the Obama administration in 2016.
China did not appeal the decision, and the U.S. agreed to give Beijing until the end of June 2020 to comply.
China insists they have complied, but the U.S. said they do not think that is the case.
The New York Times and others are reporting this week that the Federal Reserve left interest rates near zero on Wednesday as it predicted a long road ahead and that the recent spike in virus cases “saps momentum from the nascent economic recovery.” Chairman Powell noted that infections have surged since late June and the “pace of recovery looks like it has slowed.”
He also noted that policymakers need more data before drawing firm conclusions about the scope of the pullback. Debit and credit card spending were slowing and as labor market indicators suggest that recent job gains might be weakening.
More than 14 million people who held jobs in February are no longer employed. Powell warned that it will take time for workers in certain industries, like restaurants, hotels and travel, to find new jobs.
“He added that the Fed was “not even thinking about thinking about thinking about raising rates.”
The Times said that while the Fed took no major actions on Wednesday, Powell's comments underlined both the peril ahead for American workers and the reality that interest rates are likely to be very low for an extended period of time. Stock prices climbed following his remarks as investors took heart from the Fed's patient stance.
Ahead of the Chairman's comments, the central bank reiterated that the Fed would keep low rates in place “until it is confident that the economy has weathered recent events.”
The Fed's announcement came amid another round of tense negotiations in Congress over providing more support to workers and businesses. Debate revolves around whether to extend an extra $600 per week in unemployment benefits now set to expire this week.
Powell said the support lawmakers have already provided has been critical for the economy. While he did not weigh in on how high unemployment insurance benefits should be set, he said it would be important to help the large number of workers who were likely to be displaced even if the economy reopened successfully.
“Those people will need support,” he said, noting that government policy so far has “kept people in their homes, it's kept businesses in business.”
Powell said both Congress and the central bank would need to do more in the months ahead. Since March, the Fed has put in place a series of measures to help cushion the economic fallout as businesses close or reduce capacity and as shoppers stay home from malls and movie theaters to control the spread of the coronavirus. The central bank has rolled out nine emergency lending programs, which are meant to keep credit flowing to businesses and state and local governments, and is purchasing government-backed bonds to keep markets functioning normally. Also, it has slashed interest rates to rock bottom to entice borrowing and spending.
On Tuesday, officials announced that they would extend their emergency lending programs through the end of the year. Seven of the programs were initially set to expire around the end of September but could still be needed as coronavirus cases have continued to rise.
That could take time, Powell said. The unemployment rate, while falling, remains historically high at 11.1%. Initial jobless claims ticked up last week after months of gradual improvement, stoking concerns that the economy might be backsliding.
The job losses are hitting disadvantaged communities particularly hard. The Fed's own surveys have shown that poorer people were more likely to lose jobs and that those with less education often did not have the option to work from home. The jobless rate for Black workers has skyrocketed to more than 15% and the unemployment rate for Black men continued to tick up in June even as the rate for other racial and gender groups began to fall.
While Fed officials' June economic projections suggested that they expected unemployment to fall below 10% by the end of the year, policymakers made it clear then that conditions were extremely uncertain.
The central bank's policies do seem to be offering support, at least around the edges. House buying has ticked up, fueled by cheap mortgage rates and the U.S. homeownership rate is now at levels last seen before the 2008 financial crisis.
Key credit markets have calmed down after a disorderly March and April, as has the market for U.S. government debt.
Powell also said the Federal Open Market Committee's longer-run framework review, which could guide the central bank's strategies, would be completed in the near future. Some economists took that news to mean that more action is coming at the Fed's Sept. 15-16 meeting.
“The July FOMC meeting was expected to be a placeholder event until more important decisions are made at the next meeting in September,” Michael Feroli, the chief U.S. economist at JP Morgan, said in a note. “The committee met those expectations.”
So, we will see. Clearly, the economy continues to struggle and is likely to do so for some time. This will heavily Depend on the future intensity of virus outbreaks, as well as investment programs from the government which are now being debated fiercely. These are highly significant fights that producers should watch closely as they intensify, Washington Insider believes.
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