In this file:
· As China Halts U.S. Soy Purchases, ‘Unknown’ Buyers Step Up
… Such unknown buyers often were thought to be China, which typically brings in about two-thirds of global soybean exports...
· Pork Profit Balloon Deflates; It’s Time to Reevaluate Liquidity
… We’re in a very interesting, if not treacherous, time in the evolution of world pork production, global markets and technological developments… There is no doubt that China needs pork, and they are getting it through a carefully orchestrated global acquisition scheme involving many sources and middlemen handlers…
· ‘USDA’s Bank’ Keeps Trade Aid Flowing to Farmers
As China Halts U.S. Soy Purchases, ‘Unknown’ Buyers Step Up
By Michael Hirtzer, Bloomberg
August 7, 2019
While China announced it has halted imports of American soybeans, a mysterious buyer has stepped up. The U.S. Department of Agriculture announced Wednesday a sale of 165,000 metric tons of the oilseed to “unknown destinations.”
Such unknown buyers often were thought to be China, which typically brings in about two-thirds of global soybean exports. However, the Asian nation’s government on Monday asked its state-owned enterprises to halt purchases of U.S. agriculture products as the trade war between the countries escalated.
“With soybeans, we usually assume it’s China,” Arlan Suderman, chief economist at INTL FCStone in Kansas City, said by phone. “In this environment, it certainly would be risky for a private buyer, and I’m skeptical it would be state buyers either. I’m guessing in this case it might be another country.”
USDA’s announcement Wednesday was for roughly three bulk cargoes to be shipped in the 2019/20 season that begins on Sept. 1, in a deal that would have taken place in the past 24 hours. The buyer would have received a relative bargain...
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Pork Profit Balloon Deflates; It’s Time to Reevaluate Liquidity
Dennis DiPietre And Lance Mulberry, Knowledge Ventures, LLC
via FarmJournal's Pork - August 7, 201
The “giant sucking sound” (with apologies to the late Ross Perot) you might have heard or even felt was the air coming out of the pork profit balloon—not only now, but all the way out 12 months or more in the future. An Iowa firm that monitors future hog margins using current and expected futures costs and prices indicated that the average expected net income for producers fell a record single week amount of close to $25.00/head in the last week of July. This is an average drop for the entire coming 12 months.
While profits are still expected in every future month over the same horizon, they will, by this current market’s judgement, be substantially less. The decline was softened some by marginally favorable declines in futures markets prices for corn and soybeans. None of this is realized yet, so all of it could— and will—change some. But it’s a sign of the volatile nature of global markets right now.
We’re in a very interesting, if not treacherous, time in the evolution of world pork production, global markets and technological developments, such as artificial intelligence. The current global political situation is rife with struggle, and the Trump administration is challenging customary terms of commerce in an attempt to reset the footing the relationships have rested on.
Of course, there’s resistance to change at every level of the changing trade tradition. But when major trading partners like China are involved, the offer and counteroffer can become attack and counterattack, as each party has a lot at stake.
China has the tools and the knowhow to press its side of the argument with high precision. As you may know, China uses artificial intelligence methods to micro-target counter-tariffs on the U.S. at the county level—and sometimes at geographic levels beyond counties. Geographies and product combinations as well as other key attributes are carefully chosen to cause producer frustration at a level that makes the political cost to the current administration too high to continue.
Most recently, as the talks broke down the U.S. applied more pressure, and now we’re seeing counterattacks step up as each side attempts to strengthen its hand when new talks resume.
There is no doubt that China needs pork, and they are getting it through a carefully orchestrated global acquisition scheme involving many sources and middlemen handlers. The U.S. is now set up as a major exporting country producing pork in great excess of domestic consumption totals. There is a perfectly beautiful economic win-win possible here, but other very important issues reaching well outside of agriculture add complications to the simple logical resolutions possible...
‘USDA’s Bank’ Keeps Trade Aid Flowing to Farmers
By Chuck Abbott, Successful Farming
Agriculture.com - 8/8/2019
The Trump administration can pay billions of dollars in trade aid to farmers and ranchers this year, and in 2020, too, if it wishes, because Congress quietly and reliably replenishes the funding of the “USDA’s bank.” The broad charter of the Commodity Credit Corp. (CCC) and its direct access to the Treasury mean that agriculture is the only sector of the U.S. economy to get a bailout during the Sino-U.S. trade war.
Created during the Depression, the CCC can spend up to $30 billion at a time in support of U.S. agriculture. Lawmakers are on track to bring it up to full funding this fall. In June, Sen. Debbie Stabenow said the CCC had $7.7 billion left in spending authority, an amount dwarfed by President Trump’s announcement of up to $16 billion in aid to mitigate the impact of the trade war on 2019 farm and ranch production.
The House has voted, as part of a mammoth appropriations bill, to provide “such sums as may be necessary to reimburse the Commodity Credit Corp. for net realized losses,” the bland language routinely used to pour billions of dollars into the CCC. The Senate is expected to draft its USDA funding bill, the usual vehicle for replenishing the CCC, after the August recess. The funding would ensure cash payments to producers while the trade war continues. Trump suggested on Tuesday that a third year of aid might be needed in 2020.
Senate Finance chairman Chuck Grassley, an Iowa farmer, said it was impossible to predict when the trade war would end. If China hopes to outlast Trump, who faces reelection in 2020, “then, obviously, we’re not going to have an agreement,” said Grassley. “I get the sense that farmers are sticking with the president and he’s going to continue to help them.”
Trump assailed China on Wednesday for “stealing intellectual property, targeting our farmers.” The president said, “We have to take on China. … And we’re in a very good position as to whether or not a deal will be made. I will tell you this: China would like to make a deal very badly.”
By drawing money from the CCC for Trump tariff payments, the administration in many ways is bypassing Congress in deciding how to spend federal money. Still, there are few objections from lawmakers. The CCC is “a convenient way to print money” without the internecine conflicts of drafting legislation on Capitol Hill, said an analyst. Farm groups have welcomed the aid while quietly asking for removal of the retaliatory tariffs that make the aid necessary.
“We heard loudly and clearly that farmers don’t want to get their revenue from the government, but we also know that we at the federal level have a responsibility to make sure folks aren’t left behind as a result of forces beyond their control,” said House Agriculture chairman Collin Peterson after a “listening session” at a farm show, the Minnesota Farmfest, on Wednesday.
The administration has been given an unusually free hand to use the CCC as a trade war tool. To date, it has spent $10 billion to mitigate trade losses on 2018 crops and livestock, and it says that up to $7.25 billion will be paid this month on 2019 production...
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