4 years, 8 months ago AFBF
China warns the escalating trade war will result in financial market chaos. China has already announced the stoppage of purchases of U.S. agricultural products after Trump planned to enact additional tariffs of 10 percent next month. China also devalued its currency Monday, leading the Trump administration to classify China as a currency manipulator. In a statement, the People's Bank of China said the classification would, "Seriously undermine the international financial order," trigger "financial market turmoil," and hinder international trade. As both sides dig in further, farmers are left hoping for a way out. The American Farm Bureau Federation says the stoppage of China buys of U.S. ag products is a "body blow" to farmers and ranchers. President Trump says he stands with farmers and will "do it again if necessary." The comments suggest Trump is willing to continue the Market Facilitation Program payments, which two further rounds remain available, if needed. Before the trade war, China was a $19.5 billion market for U.S. farmers in 2017.
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July Ag Economy Barometer Increases
The Purdue University/CME Group Ag Economy Barometer reading jumped to 153 in July, up 27 points from June, and up 52 points from May. However, it's safe to expect a decline in the August report. While the Market Facilitation Program payments are a positive to farmers, this week's announcement that China will stop all purchases of U.S. ag products is a significant market loss. Barometer results are based on a survey of 400 producers across the U.S. conducted from July 15 through July 19, 2019, which was before USDA's announcement of 2019 MFP payment rates. A big driver of sentiment was producers' improved expectations for current economic conditions. The Index of Current Conditions, a sub-index of the ag barometer, increased 44 points in July to a reading of 141, marking the largest one-month improvement since data collection began in October of 2015. The barometer's other sub-index, the Index of Future Expectations also increased, up 18 points from June, to a reading of 159 in July.
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Strong Finish to First Half for U.S. Pork, Beef Exports
U.S. pork and beef exports were above year-ago levels in both volume and value in June, according to the U.S. Meat Export Federation. Led by a rebound in Mexico and China, pork export value was the highest in 14 months. June pork exports posted double-digit gains in both volume and value, reaching 212,800 metric tons, valued at $569.2 million. For the first half of 2019, pork exports remained two percent below last year in volume and were down six percent in value to $3.1 billion. In May, the 20 percent retaliatory duty on most U.S. pork exports to Mexico was removed as the U.S., Mexico and Canada reached an agreement on steel and aluminum tariffs. USMEF President and CEO Dan Halstrom says the tariff removal was a "tremendous relief," sparking further U.S. pork exports to Mexico. Meanwhile, beef exports were up three percent year-over-year in June to 118,600 metric tons. Beef export value, at $724.8 million, increased just one percent from a year ago.
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Brazil Considers Removal of Barriers for U.S. Ethanol
Brazil may drop barriers on U.S. ethanol imports, as requested by the United States. Brazil is mulling over the idea to facilitate a bilateral trade deal. Brazil's agriculture minister confirmed the discussion. However, a decision may not be made until the end of the month, according to Bloomberg News. Sources close to the talks say Brazil is considering renewing the current import quotas on U.S. ethanol, but with zero tariffs. A 20 percent tariff is set to take effect at the end of August on imports over the quota. Brazil enacted the tariff on U.S. ethanol two years ago for shipments over the quota of 600 million liters. The tariffs followed a surge in U.S. ethanol imports that Brazil says flooded its market. The removal would be welcome news for U.S. farmers, now facing a loss of the $20 billion market in China, following sharp declines in 2018. Last year, Brazil was the top importer of U.S. corn-ethanol, importing more than 1.7 billion liters.
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Missouri River Runoff Peaks, Water Releases to Remain High
The runoff season along the Missouri River, abruptly started by the bomb-cyclone in March, has finally peaked in 2019. However, the Army Corps of Engineers says water releases from the river system dams will likely remain high through the fall. The forecast calls for 2019 total runoff at 52.9 million-acre feet, the second-highest ever recorded, behind the devastating 2011 season. Total upper basin runoff through July 31 was 45.3 million-acre feet, exceeding the total upper basin runoff in 2018 of 42.1 million-acre feet. Runoff remained particularly high in the reaches from Garrison Dam in North Dakota to Sioux City, Iowa, which ranged between three to seven times average in July. The number of flood warnings has declined along the river. However, those hit hardest in 2011 in Northwest Missouri, and along other stretches of the river, remain in flood stage. Farm fields remain covered with floodwaters in those areas, and the extended high water releases leave little hope for fields to drain anytime soon.
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Gluten-Free Foods Not Always Free of Gluten
Gluten-free foods aren't always gluten-free. Where Food Comes From, Inc., a source verification company for food products, says 32 percent of gluten-free labeled food in restaurants contained gluten. Recent research published in a scientific journal found the worst offenders were pizza and pasta, with gluten discovered in 53 percent of pizza samples and 51 percent of the pasta tested. The detection rates were higher on dinner menus, at 34 percent, compared to breakfast menus, at 27 percent. Where Food Comes From, Inc. used the data in its announcement of the Gluten-Free by WFCF standard. The announcement is simply a move of branding to the Where Food Comes From organization. CEO John Saunders says because of the move, the standard should "enjoy a higher profile among consumers and potential customers." The U.S. gluten-free food products market is estimated at $2.7 billion annually. With increasing occurrences of celiac disease and growing awareness that it is preventable, that market is expected to double by 2025.
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China's halt in buys of U.S. farm goods may not be total, though that may be small comfort to struggling farmers and ranchers.
From more than $19 billion in U.S. ag sales in 2017 to $9 billion last year, to under $8 billion the first half of this year. But is 'zero' the next step, now that China's asked state-owned firms to stop buying U.S. farm goods?
American Farm Bureau's Dave Salmonsen says there's "confusion or uncertainty" about that…
"We had heard that this cutoff of Chinese purchases of U.S. ag was by state-run companies…and then, you're seeing some indication that it's just applying broadly to companies."
Salmonsen says state-run firms were doing most of the buying of major U.S. farm goods, since they weren't being hit with tariffs. AFBF quoted President Zippy Duvall in a release that China "will not buy any agricultural products from the United States."
Either way, the losses on top of almost $11-billion lost since 2017, could be catastrophic. And the new ones have already started…
"This seems to have gone into effect almost immediately. In the past, in reaction to what the U.S. had done, China's said they would do things when the U.S. actions went into effect."
Salmonsen says the future's now unpredictable…
"We'll have to keep a close eye in seeing how this develops, and whether these are pressure points that are being developed, ways for either side to get leverage in negotiations, or if this settles into a longer contest."
Salmonsen says Farm Bureau is making its concerns clear to the administration about the damage from the trade fight continuing. However, he says the latest developments now add "new barriers" to reversing tariffs and getting back into the once-lucrative Chinese market.
