Trump, Xi Meeting, MFP and Farm Bill Update
Update for December 6th, 2018
Last weekend’s meeting between President Trump and Chinese President Xi has delivered promise that an agreement is possible between our 2 nations. Below are some of the bullet points from the framework designed last weekend explained by Jerry Gulke of the Gulke Group:
· The leaders were able to agree to hold off on any further tariffs for 90 days while negotiations continue. Apparently the 90 day grace period began on December 3rd so the 90 day deadline is March 3rd , 2019.
· In the initial agreement President Trump will not raise tariffs on $200 billion of Chinese imports from 10% to 25% on January 1st as previously planned.
· President Xi Jinping has promised to purchase a “very substantial” amount of agricultural, energy, industrial and other products. A Chinese negotiating team has already been scheduled to travel to the U.S. in mid-December. Details of what exactly will be purchased are being negotiated but the $60 billion of corn, ethanol and DDG’s and soybeans that were offered last May could be a good indication of what to expect.
· The two also agreed to immediately begin working on the specific issues within the trade dispute of technology transfer, intellectual property rights, cyber-crimes and agriculture.
· China will now list the extremely deadly drug Fentanyl as a controlled substance to help control its production and export.
· USDA Secretary Sonny Perdue reported on Monday that he expects China will resume buying U.S. soybeans by early January because of the limited supply available from Brazil prior to their harvest that will start sometime in late January. Perdue is still unclear about whether or not China plans to remove the tariffs on U.S. soybean imports but expects negotiators will be determining that over the next few days while the grain market anxiously awaits a decision.
· The Chinese commerce department stated Tuesday that it believes that implementation within 90 days is possible to accomplish.
** “The press/media/negative producers/pseudo analysts and general doubters/haters continually find something wrong with day to day evolution of the meeting. So, markets are going to trade up and down like they normally do, but likely with increased volatility.”
Jerry Gulke said it well, “Bottom Line: What is agreed to between two heads of state is one thing-then comes the grunt work of working out details of what is agreed in principle between those heads of state. Thus, it is a natural course of events to take a lot longer to accomplish a complex new trade environment (deal) that the media or individuals realize or want to believe. It is important to understand that there has been a change in market psychology.”
The first round of MFP payments have been underway since September and soybean producers are encouraged to get to their local FSA office to sign up for the Market Facilitation Program (MFP) and report production if they have not done so already. The U.S. Department of Agriculture has been working with the White House budget shop to finalize the figures for the second installment of trade aid. U.S. Ag Secretary Sonny Perdue suggested that they may have an answer late this week or early next week. It’s unclear whether the new 90 day agreement reached between the U.S. and China will affect the payment rate for the second installment but Perdue noted that nothing has changed from the tariff damage that farmers have already experienced. He also added though that it is hard to know the impact that the new trade truce will have without more details.
The application process has been made as easy as possible for producers. Bill Northey, USDA Under-Secretary for Farm Production and Conservation said, “We don’t want shoe boxes full of production records, we just want your production numbers. Tell us what those are. Make sure that you’re as close as you can be, as we may be spot checking.” Northey added that payments are typically cut within a couple of weeks and often times much sooner. Sign-up for MFP ends January 15th, 2019.
20,000 metric tons of U.S. soybean cargo was scheduled to arrive in a grain hub in Rosario, Argentina this week. The ship named the Torrent is just one of 14 ships that the Argentine soy crusher Vicentin has lined up to transport U.S. soybeans to the South American country for processing according to data from Reuters. These recent purchases are the first of any significance from the U.S. in 20 years. Argentina has good relations with both the United States and China and has been working on deals with both countries in recent weeks.
Lawmakers have been working furiously on a text of the farm bill compromise that was announced a week ago. SNAP was again the most controversial piece of the legislation but with time running out on the lame duck session legislators decided a compromise was necessary on the key issue. The House had wanted to impose stricter work requirements on millions of food stamp recipients but had to concede that issue in order to align it with the Senate version. In addition Senate Majority Leader Mitch McConnell’s bid to legalize the commercial cultivation and sale of hemp made it into the final draft of the Farm Bill. This addition will now make hemp growers eligible to apply for USDA programs. (Source Politico)
This November was one of the coldest on record but now all of us that reside in the central and eastern U.S. may finally get some much welcomed relief. There are indications that the jet stream is forming a northward bulge which is setting up over the eastern U.S. allowing warmer temps to move further to the north. Parts of the northern Plains and upper Midwest should see warmers temps by early to mid-week next week. The rest of the Midwest and Northeast will receive warmer temps by the end of next week. The remainder of the month looks above average for much of the U.S. except the desert Southwest.