Washington Insider-- Wednesday
IMF Meets as Global Recession Threats Grow
Here's a quick monitor of Washington farm and trade policy issues from DTN's well-placed observer.
CFAP Payouts Continue to Rise
Payments under the Coronavirus Food Assistance Program 1 (CFAP 1) totaled $10.22 billion as of October 11, including $5.0 billion for livestock, $2.6 billion for non-specialty crops, $1.8 billion for dairy, $769 million for specialty crops and $108 million for aqua, nursery and flora crops.
As for CFAP 2, USDA said that payments as of October 13 total $4.5 billion as of October 13, including $2.4 billion in acreage-based payments, $1.3 billion for livestock, $452 million for dairy, $376 million for sales commodities and $109 million for eggs/broilers. By commodity, $1.4 billion has gone for corn (21.2% of the total), $1.0 billion for cattle, $534 million for soybeans and $452 million for milk.
On a state level, $449 million has been paid out in Iowa, $352 million in Illinois, $347 million in Nebraska, $343 million in Minnesota, and $277 million in Wisconsin.
WHIP-Plus Remains Lawmaker Focus
USDA last Friday finally released some information about the much-delayed and complex Wildfire and Hurricane Indemnity Program-Plus (WHIP-Plus) program, with promises for more info ahead.
But Sen. Jon Tester, D-Mont., said that while USDA's announcement was “better late than never,” the fact it took nearly a year to get to this point was “unacceptable.”
While lamenting he should not have to “hold FSA's feet to the fire just to get them to follow the law and do right by folks in production ag,” he pledged he will be “keeping the coals hot and ready so Montana farmers don't get left out in the cold. Disaster relief needs to make it into the pockets of these producers immediately — no more delays.”
USDA announced the end of signup will be October 30, but it has approved the use of a register even though they stressed that is not an extension of signup as no more names can be added to a register after close of business October 30.
The International Monetary Fund and World Bank are holding their annual meetings, with both calling on the Group of 20 largest economies to “extend a freeze in debt payments from the world's poorest nations that's set to expire at year end.”
Bloomberg is reporting this week that “the guardians of the global economy will meet this week under the cloud of the worst recession since the Great Depression—at the same time the recovery increasingly depends on development of a coronavirus vaccine.”
The IMF has been encouraging governments to spend whatever they need to confront the crisis, even while warning that “debt as a percentage of GDP will rise to about 100% for the first time.”
Fund officials earlier this month proposed reforms to debt restructuring for countries that struggle to meet obligations, a burden expected to rise as the pandemic batters economies. Debt vulnerabilities will be a key theme of the meetings, according to first deputy managing director Geoffrey Okamoto.
The G-20 agreed in April to waive billions of dollars in repayments by poorer nations until the end of the year under the Debt Service Suspension Initiative. However, the World Bank now says this isn't enough and wants borrowings reduced to prevent a bigger fallout.
The IMF has also been working to figure out how to transfer existing reserve assets known as special drawing rights from rich countries that don't need them to poorer nations that do. A proposal to create $500 billion in SDRs was blocked in April by the U.S., the fund's biggest shareholder, which criticized the plan as “inefficient.”
The report cites Tom Orlik, Bloomberg's chief economist who says that “with the virus count rising again in Europe, and stalled stimulus negotiations in the U.S., a better than expected third quarter is becoming a worse than expected fourth. Looking into 2021, “hopes for a strong rebound depend on containing the second wave of infections, a stimulus breakthrough in Washington DC, and widespread delivery of a vaccine by mid-year.”
The report cycles through details of the outlook for selected regions and, especially toward Friday when a number of U.S. economic indicators will be released including for September retail sales and industrial production and the Michigan consumer sentiment survey for early October.
Looking to Asia, the calendar includes the scheduled return in China from the “Golden Week Holidays” with trade data on Tuesday expected to show the export recovery continuing and inflation data on Thursday likely to show a moderation in price growth.
Indonesia, Singapore, South Korea and Sri Lanka have monetary policy meetings scheduled through the week. On Thursday, a speech from the Reserve Bank of Australia Governor will be closely watched for any signals he's preparing to add stimulus, while employment data for September will be released.
As the report considers conditions in Asia, Europe, Middle East, Africa, it notes that any surprisingly bad reading of UK labor-market data this week will likely convince a minority of skeptics that more stimulus from the Bank of England is all but inevitable.
By contrast, data in Sweden, which adopted much lighter virus restrictions than the rest of Europe, will reveal whether the trend of decreasing joblessness there will continue.
Also, in eastern Europe, Poland, the Czech Republic, Romania and Serbia all release inflation data in the days ahead.
Central bank officials from across Europe are expected to take part at the IMF and World Bank meetings. In addition, European Central Bank Chief Economist Philip Lane and Governing Council members Francois Villeroy de Galhau, Robert Holzmann and Pablo Hernandez de Cos speak at an event on rising public debt and how to cope with it.
Turkish data is likely to show that the nation ran a current-account deficit for a ninth straight month, as households hoard imported gold and foreign currencies to protect against lira depreciation and inflation.
In Latin America, the IMF last week urged Mexico to boost government stimulus to speed up a weak recovery and output and manufacturing figures posted Monday should underscore that point.
However, in Brazil, a less stringent lockdown and the government's massive income support has buoyed demand, suggesting the August economic activity reading out Thursday will be consistent with that of a gradual recovery.
While inflation is picking up again across the region, it has never gone away in Argentina: analysts expect monthly rates of just under 3% and annual rates near 40%.
Chile's economy is struggling, Bloomberg says, but the central bank's key rate is at a record-low 0.5%. It expects policy makers to keep it there for a seventh month when they meet Thursday.
So, we will see. Clearly, many of the trends being evaluated depend heavily on the success of efforts to control the ravages of the pandemic — including a new round of payments for U.S. producers — important efforts that producers should watch closely as they proceed, Washington Insider believes.
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