Headlines:
Trump’s Farmer Bailout: Half Now, the Rest Later – Maybe
President Trump’s promise to protect U.S. agriculture from retaliatory tariffs by China and other countries will be paid on the installment plan — half this fall and the rest in December, or early 2019 if assistance is still needed, said Agriculture Secretary Sonny Perdue on Monday. The USDA announced $6.2 billion in outlays that will begin in September, with soybean growers in line for $3.6 billion of it. The payments are equal to half of USDA’s estimate of trade impacts, such as lost export sales and adjustment in markets, from the tariffs. Perdue said the tentative U.S.-Mexico trade agreement, announced earlier in the day, showed how the dour trade outlook could brighten seemingly overnight for U.S. farmers. Mexico, one of the countries with tariffs on U.S. farm goods, is the No. 3 customer for U.S. farm exports. “Payments will be bifurcated,” Perdue said after applauding President Trump’s policy of trade confrontation and calling on China to change its practices. “Announcement about further payments will be made in coming months, if warranted.” USDA Chief Economist Rob Johansson rejected the idea that a second round of payments is certain. “We will continue to evaluate markets … and the secretary will decide in consultation with the White House on the second round of payments,” he said.
Bilateral Is Good, Trilateral Is Better in NAFTA Talks, Say Farm Groups
President Trump dangled the possibility of terminating NAFTA, which generates one third of U.S. food and ag trade, at the same time he announced a tentative trade agreement with Mexico on Monday. Farm groups said NAFTA should stay in effect until a new agreement linking North America’s three economic giants is in place. The two-decade-old NAFTA guarantees duty-free access to Canada and Mexico for U.S. farm exports. They are the No. 2 and No. 3 markets for U.S. agriculture, worth more than $40 billion this year. Mexico and Canada are the No. 1 and No. 2 sources of U.S. food and ag imports, responsible for nearly $4 of every $10 of incoming shipments. “We hope the agreement opens the door for Canada’s reengagement,” said the U.S. Grains Council, “and we continue to oppose withdrawal from the existing NAFTA under any circumstances except adoption of a new, beneficial, and trilateral pact.” The National Corn Growers Association took a similar stance. The American Soybean Association and the American Farm Bureau Federation said they wanted the administration to move forward to a new NAFTA, under negotiation for a year. An ebullient U.S. Trade Representative Robert Lighthizer said the U.S.-Mexico pact covered $1.1 trillion in trade and would be “the biggest agreement of its kind in the world. We hope that Canada can join in. I expect them to very soon.”
Summary:
The corn market was slightly higher in the overnight session waiting for more details regarding the potential US Mexico Trade Agreement deals. Corn would eventually give way to a small loss at settlement. Breakthroughs in the US – Mexico trade was heralded as positive news, but as more information comes out, it looks like it is only in its preliminary phases. Both Mexico and Canada still oppose several of the current US demands regarding the trade deal. The USDA reported that its farm aid package will give corn producers 1 cent on 50% of their 2018 production. The soybean market choppy in early trading but eventually gave way to 6.50 cent loss on the day. The USDA farm aid package is set to give soybean producers $1.65 per bushel on 50% of 2018’s production. The wheat market was back and forth on the day and initially looked like it might closer higher. Instead it finished the day with a 12.50 cent loss. The USDA farm aid package is also set to give 14 cents to wheat producers on 50% of their 2018 production.
