Here's a quick monitor of Washington farm and trade policy issues from DTN's well-placed observer.
USDA to Make Big Seafood Buy
USDA said it will purchase up to $159.4 million in domestically produced seafood, fruits, legumes, and nuts for distribution to a variety of domestic food assistance programs, including charitable institutions -- the largest purchase of U.S. raised seafood by the USDA to date.
The purchases will be done using authority under Section 32 of the Agricultural Adjustment Act and is "one of many actions USDA is taking to address the disruptions in the food system supply chain and worsened food insecurity resulting from the COVID-19 pandemic," USDA said.
USDA Secretary Tom Vilsack noted the fisheries and seafood sector have been dealt a "heavy blow" from COVID and this action is one of many efforts to address those effects.
Selected commodities include: Alaska pollock, apricots (canned, dried, and frozen), chickpeas, dry peas, Gulf of Mexico and South Atlantic wild-caught shrimp, lentils, navy beans, Pacific pink shrimp, Pacific rockfish fillets, Pacific whiting fillets, pistachios, prepared peaches, and sockeye (red) salmon.
The inventories of these commodities are in high oversupply due to a decrease in demand because of the COVID-19 pandemic and disruption in the supply chain, as restaurants and other outlets closed during the pandemic.
USTR Tai Signals She Will Raise Several Trade issues With Mexico, Canada
The first meeting of the U.S.-Mexico-Canada Agreement (USMCA) Free Trade Commission will be a busy one as U.S. Trade Representative Katherine Tai listed several items she will raise in the meeting as she testified last week before U.S. congressional trade panels. Mexico's GMO and glyphosate actions, Mexican labor issues and Canadian dairy actions are all items Tai said she will be raising with her counterparts from Mexico and Canada in the first meeting of the Free Trade Commission this week.
On other trade areas, Tai still did not shed a lot of light on the U.S. trade focus ahead nor provide lawmakers with additional information on the U.S. worker-centric trade policy. She did not provide much more on the timeline for Trade Promotion Authority (TPA) which expires in July and did not give lawmakers a significant update on prospects for U.S.-Kenya or U.S.-UK trade negotiations that were started by the Trump administration.
Washington Insider: Focus on Inflation Continues
A pair of inflation reports last week beat expectations to the upside, signaling that inflation may be building in the U.S. economy. And the situation remains a focus across the U.S. economy -- from Washington to Main Street.
As the Biden administration has pushed through the $1.9 trillion COVID aid in March that was in addition to some $900 billion that lawmakers agreed to in December, inflation was cited as a potential impact from the big fiscal outlays.
Federal Reserve officials have continued to insist that the situation with inflation will be "transitory" -- in other words, not big enough nor sustained enough for them to have to tighten monetary policy to cool down the economy. Even as both the reading on inflation at the consumer -- the Consumer Price Index (CPI) -- and at the wholesale level -- Producer Price Index (PPI) -- came in above expectations and put the annual rate of inflation much above where market expectations were, the Fed did not change its tune.
At the White House, Bloomberg reports that President Joe Biden's top advisers are sensing there is a growing political challenge ahead from the spike in inflation, "even as they see little immediate peril to the economy from price increases that officials expect will last through the rest of the year."
They point to the rise in inflation coming for items like used cars, air travel and hotels. The price rise in April for rental cars was the sharpest for the used car index since that data began being kept in the 1950s.
Some argue that the shortage of computer chips for new cars has dried up or severely curtailed their availability, forcing those needing a new vehicle to turn the used car market.
But the White House also views the surge in prices as being from pent-up demand being unleashed as consumers emerge from the COVID pandemic, "That's different from a sustained pick-up in inflation, they argue," according to Bloomberg.
Besides the Fed, Treasury Secretary Janet Yellen has said she it not concerned about the rise in inflation. But she is monitoring it closely, Bloomberg said.
Markets have also taken note. The S&P 500 dropped sharply on the release of CPI data, but turned around to post gains on Thursday and Friday. Plus, bond yields also retreated after a recent rise. Both are being taken as a sign that markets are not overly concerned about the inflation bump.
What the situation has prompted, Bloomberg said, is that the administration are now "mulling ways to better explain the rise in prices to the American public, while backing away from putting any specific time frame on when the price volatility will end."
And therein comes the political situation. Republicans are already taking note of the big rise in inflation and are readying it as one of their tools/talking points for the midterm elections in 2022.
But some Democrats are also sounding the alarm. Former Treasury Secretary Larry Summers and economist Jason Furman are sounding concerns about the situation.
"I'd love to see them tilt a notch toward concern about inflation, but I think they'll mostly be doing more to explain this away," Furman, the head of the Council of Economic Advisers under President Barack Obama said last week on Bloomberg TV.
The administration hears all the concerns, and officials are bracing for a potentially difficult time ahead as they contend with rising inflation and figure out how to explain it in a way that will ease consumer worries. Already, consumer sentiment declined recently with some linking it to the rise in inflation.
Council of Economic Advisers Chair Cecilia Rouse on Friday took part in a White House briefing and cautioned that the months ahead could be "choppy" in terms of inflation. "There's going to be a period, as supply starts to equal demand and sectors are healing and recovering" that features some "choppiness," Rouse said. "We're making good progress" in restarting economy, but there's still "a long way to go," she said.
There are about $4 trillion reasons that the Biden administration is watching the inflation situation as closely as they are as that is the amount of additional spending the White House wants Congress to approve in the form of $2.25 trillion for inflation and $1.8 trillion for social spending.
If consumers become spooked by rising prices, that could sour support for another big installment of government spending.
So we will see. Agriculture is also seeing price inflation, but it is somewhat welcome for the sector as commodity prices lifted higher as 2021 has progressed as demand for commodities has been strong and there are supply concerns in some key areas around the globe. The rise in prices is rebuilding the financial health of the U.S. ag sector. But if the inflation picture gets out of hand and it is enough to prompt the Fed to tighten monetary policy, a rise in interest rates could easily eat up the commodity price gains as costs would rise for farmers, Washington Insider believes.
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