CR Includes $10 Bil. in Farmer Economic Aid, $21 Bil. Disaster Aid, Year-Round E15

CR text not yet released so provisions still not official; House vote likely Thursday or later

•

December 17, 2024 08:04 AM

News/Markets/Policy Updates: Dec. 17, 2024

— CR text expected today will include direct aid, disaster aid and year-round E15. $10 billion is for economic aid due to depressed and high production costs and $21 billion is for production losses. Some $2 billion in specialty crop program payments was recently announced by USDA.

Other inclusions: There appears to be an extension of orphan programs in the 2018 Farm Bill extension, and permanent 1890s scholarship program. And the icing on the cake is a four-year extension of SNAP fraud via the skimming reimbursement language. Orphan programs are ones that were authorized in the 2018 Farm Bill but did not have funding beyond a specified year. The extension provides $177 million of new mandatory funding for programs that did not have a budget baseline. This ensures that these programs can continue to operate during the extension period. The 1890s scholarship program provides scholarships for students attending 1890 land-grant universities, which are historically Black colleges and universities (HBCUs) that were established under the Second Morrill Act of 1890. SNAP Fraud Reimbursement extension is the continuation of reimbursements for stolen Supplemental Nutrition Assistance Program (SNAP) benefits. This provision protects SNAP recipients from losses due to benefit theft via card skimming, cloning, and other similar methods. States will continue to be required to replace stolen benefits under this measure. One source said, “Good policy would be emphasizing the need for States to transition to more secure measures for SNAP recipients, including stronger identity verification practices.”

Nothing is official until text is released, which should occur today after several lengthy Monday negotiations. Besides the $10 billion in farmer aid, the Continuing Resolution (CR) is expected to include provisions for year-round sales of E15 ethanol blend. This has been a long-standing goal for corn growers and ethanol producers, particularly in states like Iowa, Illinois and Minnesota where a significant portion of corn production goes into ethanol. Of note: Senate Ag Chairwoman Debbie Stabenow (D-Mich.) did not get her wish in moving conservation/climate funding into a one-year extension of the 2018 Farm Bill; that discussion will occur next year. Details regarding the $10 billion farmer aid package awaits final text.

Disaster aid for crop losses due to natural disasters for 2023 and 2024 will total $21 billion.

House Majority Leader Steve Scalise (R-La.) reported progress on negotiations for a farm assistance package. As noted, discussions centered on a $10 billion economic aid package to help farmers cope with price declines and rising input costs, though it hasn’t been finalized. House Agriculture Chairman GT Thompson (R-Pa.) indicated that $10 billion is the minimum he would accept. He mentioned Republican support for reallocating conservation program funds from the 2022 legislation into the farm bill baseline, but that Republicans are disputing the “guardrails” that require funds to support “climate-smart” projects. Thompson also noted concerns that some critics want to ensure President-elect Donald Trump would have access to funds to compensate farmers for potential retaliation stemming from new Trump import tariffs.

As for year-round E15, currently E15 is available at over 3,200 gas stations in the U.S., indicating room for growth (there are over 196,000 fuel stations in the U.S.). About 95% of model year 2024 vehicles are explicitly approved for E15 use by manufacturers. The actual increase in ethanol usage would likely be gradual as E15 adoption expands. While the theoretical maximum ethanol usage through year-round E15 sales could reach 20,586 million gallons annually, the actual increase would depend on factors such as consumer adoption and infrastructure development — separate fuel handling and storage for E15.

A vote in the House won’t happen until at least Thursday night if House Speaker Mike Johnson (R-La.) sticks to his plan to honor the rule giving members 72 hours to review the bill.

— House Democrats oust ranking Ag panel leader David Scott. House Democrats removed Rep. David Scott (D-Ga.) as their senior Agriculture Committee leader after he received just 5 votes in Monday’s influential steering panel vote. Rep. Angie Craig (D-Minn.) emerged as the frontrunner with 34 votes, while Rep. Jim Costa (D-Calif.) trailed with 22 votes. Craig now heads into Tuesday’s full caucus vote, seeking additional support. Craig plans to rally House colleagues for the final vote. Meanwhile, Costa vowed to keep pushing and will try to supplant Craig in the full caucus. Lawmakers had anticipated Scott’s ouster amid growing skepticism of his leadership — Scott has dropped out of the race.

Craig indicated part of her pitch to the panel was that there are no other Ranking Members for Democrats from the U.S. Midwest. “There’s not a single ranking member from the middle of the country right now, and that was certainly part of my pitch to my colleagues, is that if we want to represent this whole country, then we need ranking members and leaders in the Democratic Party who are from the whole country,” she stated. Craig came into Congress in 2019 while Costa and Scott were elected in the early 2000s.

— GOP eyes strategic appointment to boost House majority. Republicans may have found a way to temporarily expand their narrow House majority: appointing a Democrat to the Trump administration. Rep. Jared Moskowitz (D-Fla.) is reportedly being considered to lead the Federal Emergency Management Agency (FEMA) next year. The move would leave Democrats short a vote for weeks, bolster the GOP’s edge, and possibly help Republicans flip Moskowitz’s seat. Moskowitz, who previously served as Florida’s emergency management director under Gov. Ron DeSantis, could gain significant recognition if he pursues a 2026 gubernatorial bid. While his office and House Democratic leadership declined to comment, the appointment’s political ramifications are being closely watched ahead of Monday’s internal party elections.

— Canadian Finance Minister Chrystia Freeland announced her resignation from Prime Minister Justin Trudeau’s cabinet, a significant political development occurring just hours before the government was set to deliver its fall economic statement. Freeland, who also held the role of Deputy Prime Minister, cited a breakdown in alignment with Trudeau regarding the best strategies for Canada’s economic future as the primary reason for her departure.

In her resignation letter, Freeland disclosed that Trudeau informed her on Friday that he no longer wished for her to continue in her finance minister role and instead offered her a different position within the cabinet. Freeland interpreted this as a loss of confidence and concluded that resigning was the “only honest and viable path” forward. She emphasized that in recent weeks, there had been disagreements between her and Trudeau on critical economic policies, particularly concerning how to respond to potential tariffs from the incoming U.S. administration under President-elect Donald Trump.

Freeland’s resignation comes amid rising tensions within the Liberal Party as Trudeau’s popularity wanes, with polls showing significant discontent among Canadians regarding issues such as the cost of living and immigration. Freeland has been a prominent figure in Canadian politics, known for her extensive experience and international connections, having previously served as Canada’s international trade minister and foreign minister. Her departure raises questions about Trudeau’s leadership and the stability of his government as they approach a high-stakes election year, with no Canadian prime minister having achieved four consecutive terms in over a century.

In her letter, Freeland argued for fiscal discipline considering Trump’s tariff threats, cautioning against “costly political gimmicks” like temporary tax exemptions intended to alleviate living costs. She stressed the importance of maintaining fiscal resources to prepare for potential economic challenges ahead. The implications of Freeland’s resignation are profound, not only for Trudeau’s cabinet but also for the Liberal Party’s strategy moving into an election year where they must navigate a complex political landscape without a clear majority in Parliament.

Of note: The new finance minister will be Dominic LeBlanc who had accompanied Trudeau to his meeting with President-elect Donald Trump in Florida last month — Freeland was not on the trip. Trump had made clear in his first term that he did not like Freeland. “Our country today faces a grave challenge. The incoming administration in the United States is pursuing a policy of aggressive economic nationalism.” —Freeland, in a scathing resignation letter to Trudeau.

— Despite being invited, Xi Jinping isn’t planning to attend Donald Trump’s inauguration, but he might send a senior official to represent him, according to the Wall Street Journal.

— Dr. Joe Glauber, former USDA economist, on whether there is an ag recession underway: “Not an easy question to answer. The aggregate measure (net farm income, net cash income, debt-to-asset, etc.) would not suggest a recession, but aggregates are often meaningless in such a homogenous sector.Animal agriculture looks to be doing ok — higher product prices, lower feed costs and that seems to be driving the aggregate net cash income numbers.But no question, row crop agriculture is seeing lower prices the past couple of years (particularly when the benchmark is record high (nominal) prices seen in 2022-23).Input costs have come down, but we won’t really know how much people paid in 2024 until next July when NASS releases the farm expenses report. Link to our special report on this topic.

MARKET FOCUS

— Equities today: Asian and European stock indexes were mixed overnight. U.S. stock indexes are pointed toward weaker openings. In Asia, Japan -0.2%. Hong Kong -0.5%. China -0.7%. India -1.3%. In Europe, at midday, London -0.7%. Paris +0.3%. Frankfurt +0.1%.

U.S. equities yesterday: The Dow ended lower to start the week after spending most of the session in negative territory. But the Nasdaq moved higher and finished at a record level. The Dow lost 110.58 points, 0.25%, at 43,717.48 (Dow is still up 17% in 2024). The Nasdaq rose 247.17 points, 1.24%, at 20,173.89. The S&P 500 gained 22.99 points, 0.38%, at 6,074.08.

— Oil slips from multi-week highs on China woes, Fed caution. Oil futures retreated on Monday as weaker-than-expected consumer spending in China and investor caution ahead of the U.S. Federal Reserve’s interest rate decision weighed on markets. Brent crude fell 58 cents (0.8%) to $73.91 a barrel, and U.S. West Texas Intermediate (WTI) dropped 58 cents (0.8%) to $70.71. The pullback follows last week’s rally —s purred by expectations of tighter supply from sanctions on Russia and Iran, as well as optimism over potential interest rate cuts. However, concerns about China’s fragile economy and soft retail sales dampened sentiment. Analysts noted profit-taking after a 6% price surge last week, with funds closing positions ahead of the holiday season.

— Ag markets today: Corn, soybeans and wheat didn’t stray far from unchanged in a lightly traded overnight session. As of 7:30 a.m. CT, corn futures were trading fractionally higher, soybeans were fractionally to 2 cents lower and wheat futures were mostly a penny higher. The U.S. dollar index was around 120 points higher, and front-month crude oil futures were about 85 cents lower.

Cash cattle prices firmed $3.41 last week to an average of $194.31. The cash market has outperformed expectations over the past month, despite negative packer margins. But Monday’s sharp losses in futures featured bearish reversals, indicating a short-term top. If there’s active followthrough selling in futures, it would likely pull the cash market lower.

Monday’s sharp losses in February lean hog futures erased the premium the new lead-month contract held to the cash index. The CME lean hog index is down 6 cents to $83.84 as of Dec. 13, which is 29 cents above where February hogs settled on Monday.

— Agriculture markets yesterday:
• Corn: March corn rose 3 cents to $4.45, closing nearer the session high.
• Soy complex: January soybean futures sunk 6 1/4 cents to $9.82 and near session lows while deferred contracts saw steeper losses. January meal futures climbed 70 cents to $286.90, though settled near session lows. January bean oil futures sunk 89 points to 41.72 cents and near session lows.
• Wheat: March SRW wheat fell 2 1/4 cents to $5.50, nearer the daily low. March HRW wheat rose 2 1/4 cents to $5.59 1/4 and near mid-range.
• Cotton: March cotton fell 21 points to 69.06 cents and near the session low.
• Cattle: February live cattle fell $2.05 to $189.975, near the session low after hitting a nine-month high early on. January feeder cattle fell $2.10 to $255.55 and nearer the session low.
• Hogs: February lean hog futures plunged $2.05 to $83.55 and settled nearer session lows.

— CEOs are feeling a lot more upbeat about the new year; Donald Trump’s win is boosting optimism among the world’s top executives. CEOs of the world’s largest companies are entering 2025 with their most optimistic outlook in years, largely driven by President-elect Donald Trump’s victory. According to a Wall Street Journal report (link) citing a survey by advisory firm Teneo, 77% of public-company CEOs expect the global economy to improve in the first half of next year, a notable jump from 45% last year.

Teneo CEO Paul Keary said, “Trump’s win boosted optimism among executives in both the U.S. and overseas.” The upbeat mood is especially pronounced among CEOs of companies earning over $10 billion annually—50% of whom foresee economic improvement, up from just 16% in 2023.

High-profile leaders like Mark Zuckerberg, Jeff Bezos, and Sam Altman have already contributed $1 million each to Trump’s inaugural fund, signaling efforts to build ties with the incoming administration. However, tariff threats, particularly a proposed 25% levy on imports from Canada and Mexico, remain a point of contention for larger firms.

Notably:
• 80% of CEOs predict a pickup in mergers and acquisitions in 2025.
• Nearly 60% foresee central banks raising interest rates in early 2025, despite market expectations of Fed rate cuts.
• 80% anticipate rising inflation in their regions.

Bottom line: As Trump prepares for his return to the White House, global executives appear poised for growth but remain cautious about potential trade disruptions and regulatory hurdles.

— Biden’s final regulatory push: Trump’s potential policy shifts ahead. Key agricultural and environmental regulations face uncertain future as administration change looms. The Biden administration has released its final regulatory agenda (link), outlining plans for various policy actions in the coming months. However, with the Trump administration set to take office soon, many of these regulations face an uncertain future.

Agricultural regulations. Several agricultural regulations are in the pipeline, particularly focusing on livestock markets and competitiveness:
• Fair and Competitive Livestock and Poultry Markets: USDA aims to finalize this rule by January 2025, clarifying its position on protecting producer welfare and advancing fair trade practices.
• Poultry Grower Payment Systems: Targeting problematic practices in poultry grower payment systems, this rule is also slated for January 2025 finalization.
• Price Discovery in Fed Cattle Markets: Currently in the comment period, the proposed rulemaking is targeted for September, leaving the final decision to the Trump administration.
• Cell-Cultured Meat Labeling: A proposed rule for labeling meat and poultry products made using cell-culture technology is expected soon, with final rulemaking scheduled for November 2025.

Environmental regulations. The Renewable Fuel Standard (RFS) levels and program changes are notable environmental regulations on the agenda:
• RFS: EPA plans to finalize applicable volumes and percentage standards for various biofuels beginning in 2026.
• RFS: Both the proposed rule (March 2025) and final rule (December 2025) will be handled by the Trump administration, potentially signaling shifts in biofuel policy.
• USDA’s Climate-Smart Agriculture Interim Rule Under Review at OMB. USDA’s interim final rule on technical guidelines for climate-smart agriculture crops used as biofuel feedstocks is listed under long-term actions, meaning no regulatory action was initially expected within 12 months. However, as it is under review at the Office of Management and Budget (OMB), USDA may advance it within that timeframe, especially with the Clean Fuel Production Credit (45Z) taking effect on Jan. 1. Notably, Treasury’s regulatory agenda omits 45Z, despite including credits for clean electricity investment (45Y), production (48E), and clean hydrogen production (45V). We have previously reported that before the Biden administration departs prior to the Jan. 20 Trump inauguration, some guidelines could be released with the incoming Trump administration making final rules and regulations on 45Z and other programs.

Regulatory review and potential changes. The incoming Trump administration will have several options for dealing with these proposed regulations:• Finalize the regulations as proposed by the Biden administration.• Modify the proposals before finalization.• Delay or abandon the regulatory actions entirely.

Additionally, regulations finalized by the Biden administration since mid-August 2024 may be vulnerable to the Congressional Review Act (CRA), allowing the new Congress to potentially overturn these rules.

Of note: As the transition to Trump 2.0 approaches, stakeholders in agriculture and environmental sectors should prepare for potential policy shifts and regulatory changes under the new administration.

Market perspectives:

— Outside markets: The U.S. dollar index was higher, with the yen and euro weaker against the greenback. The yield on the 10-year U.S. Treasury note rose, trading around 4.44%, with a positive tone in global government bond yields. Crude oil futures were lower, with U.S. crude around $69.80 per barrel and Brent around $73.10 per barrel. Gold and silver futures were down, with gold around $2,658 per troy ounce and silver around $30.74 per troy ounce.

— Markets brace for FOMC announcement,presser and projections on Wednesday. The Federal Reserve is set to conclude its final policy meeting of the year tomorrow, with markets largely expecting a third interest rate cut since September. However, uncertainty looms as concerns over stubborn inflation and the economic volatility that may arise under President-elect Donald Trump’s policies complicate the path ahead. A divided Fed and Jay Powell’s cautious tone signal a growing belief that rates could stay higher for longer, echoing tensions seen in Trump’s first term. Investors will scrutinize Powell’s forecast and tone tomorrow, especially amid rising worries about inflation and potential trade disruptions. Wall Street remains hopeful, but Powell’s stance could determine whether markets sustain their current rally or face a setback.

Several economists see the central bank cutting its benchmark lending rate three times next year, which Goldman Sachs calculates would put it at around 3.625%, or a quarter percentage point percent higher than what the Fed had predicted in September. Besides the Fed’s outlook on cuts, investors will be eyeing how it will manage its financial holdings.

— USDA daily export sales, all for 2024-25 delivery:
• 170,400 MT corn delivery to Mexico
• 187,000 MT soybeans to Spain
• 132,000 MT soybeans to unknown destinations

— Ag trade update: South Korea purchased 66,000 MT of optional origin corn. Japan is seeking 77,220 MT of milling wheat via its weekly tender. Jordan passed on a tender to buy up to 120,000 MT of optional origin milling wheat. Bangladesh tendered to buy 50,000 MT of optional origin non-basmati parboiled rice.

— NWS outlook: Another Atmospheric River to bring heavy coastal rains and high elevation mountain snow to the Northwest... ...Unsettled, wet weather expected for most of the eastern U.S. Wednesday... ...Periods of snow for the Northern Plains through mid-week with heavier accumulations most likely Wednesday night... ...Much above average temperatures expected for most of the lower 48 into mid-week.

Items in Pro Farmer’s First Thing Today include:
• Quiet overnight grain trade
• Futures could end string of cash cattle strength
• February hogs erase premium to cash index
• Cordonnier adjusts Argentine crop forecasts
• France forecasts jump in wheat acreage

CONGRESS

— AOC eyes historic leadership role on House Oversight Committee. Rep. Alexandria Ocasio-Cortez (D-N.Y.) is vying for a historic victory to lead House Democrats on the Oversight Committee, despite the steering committee favoring her rival, Rep. Gerry Connolly (D-Va.), in a close 34-27 vote. Ocasio-Cortez noted on Bluesky that “a close vote is what we needed,” as both candidates prepare to present their cases to House Democrats today ahead of a final vote. Some believe AOC could prevail, with one lawmaker highlighting the unexpectedly narrow margin given Connolly’s seniority. If successful, Ocasio-Cortez would mark the first Democrat in a decade to overcome a steering committee recommendation.

RUSSIA/UKRAINE

— Top Russian general killed in Moscow bombing. Lt. Gen. Igor Kirillov, head of Russia’s nuclear, biological, and chemical protection forces, was killed in a Moscow explosion early today, Russian investigators reported. Kirillov, accused of using chemical weapons in Ukraine, is the most senior Russian military official to be killed since the February 2022 invasion. Ukrainian security services claimed responsibility, calling him a “war criminal and an absolutely legitimate target.” The blast followed a Ukrainian court’s sentencing of Kirillov in absentia for Russia’s use of banned chemical weapons.

CHINA UPDATE

— China grapples with persistent deflation amid economic uncertainty. Prices for goods leaving Chinese factories have fallen year-over-year for 26 consecutive months, showing little sign of recovery. Concerns are mounting that deflation is becoming entrenched in China. In response, the country’s leaders have pledged increased government support for the economy in the coming year as they prepare for a potential trade war with President-elect Donald Trump.

— China’s soybean shortages deepen amid import curbs; Long wait times at customs disrupt supply chains, crushing operations stall. China’s move to curb agricultural imports has caused significant soybean shortages in Guangdong province, a key oilseed processing hub, traders report. Extended customs delays — now exceeding 20 days instead of the usual five — have forced crushers in Dongguan to suspend operations for weeks, Bloomberg reports (link).

Spot prices for soymeal, essential for animal feed, surged nearly 7% last week, the steepest jump since March. Industry giants like Cargill and Wilmar International face disruptions as officials conduct prolonged quality inspections. The policy, aimed at boosting domestic grain prices amid weaker demand, risks further hampering supply chains.

While the delays appear isolated to Guangdong, China’s reliance on imports — accounting for over 80% of its soybean needs — leaves the nation vulnerable to continued shortages.

— China plans record budget deficit of 4% of GDP in 2025. Chinese leaders agreed last week to raise the budget deficit to a record 4% of GDP next year, while maintaining an economic growth target of around 5%, two sources with knowledge of the matter told Reuters. The new deficit plan compares with an initial target of 3% of GDP for this year and is in line with a “more proactive” fiscal policy outlined by leading officials after last week’s Central Economic Work Conference (CEWC), where the targets were agreed to but not officially announced. The additional one percentage point of GDP in spending amounts to about 1.3 trillion yuan ($179.4 billion). More stimulus will be funded through issuing off-budget special bonds, the sources said.

— China wants Trump, U.S. to ‘make the right choice’ in relationship. China’s Foreign Minister Wang Yi said he hoped the incoming Trump administration would “make the right choice and work with China in a mutually beneficial manner to remove disruptions and overcome obstacles.” Wang told delegates Beijing “firmly opposes the illegal and unreasonable suppression of China by the U.S. and, in particular, must respond firmly and forcefully to the U.S.’ brutal interference in China’s internal affairs, such as Taiwan.”

ENERGY & CLIMATE CHANGE

— Retiring lawmakers decry end of permitting reform effort. An effort to overhaul the federal permitting process collapsed as congressional leaders failed to include it in the stopgap funding bill, marking the end of a contentious three-year fight. The collapse stemmed from partisan disagreements on fossil fuel projects and renewable energy transmission lines. Senate Energy Chairman Joe Manchin (I-W.Va.), who championed the reforms, criticized Congress for missing a “historic” opportunity. Manchin, set to retire, warned that the incoming administration will face significant hurdles, stating that reform cannot be achieved through executive action alone.

The stalemate reflects deep divides, with Democrats opposing changes to the National Environmental Policy Act (NEPA) and Republicans rejecting provisions aimed at expanding clean energy infrastructure. Senate Environment Chair Thomas Carper (D-Del.), also retiring, echoed frustrations, lamenting the missed chance to streamline project timelines.

Of note: Republicans are expected to revisit the issue in the next Congress, prioritizing shorter permitting timelines.

— DOE grants record $15 billion loan to PG&E for climate resilience. The Department of Energy has approved a record $15 billion low-interest loan to PG&E to enhance climate resilience and upgrade electrical grid infrastructure, the Wall Street Journal reports. The loan, the largest ever from the DOE’s Loan Programs Office, will fund hydroelectric infrastructure refurbishments and power line upgrades through phased cash installments over several years. Initially, a $30 billion loan was considered, but PG&E raised concerns about large upfront payments. The loan is expected to close before President-elect Donald Trump takes office, amid anticipated scrutiny of government spending by the incoming administration.

LIVESTOCK, NUTRITION & FOOD INDUSTRY

— Iowa, Michigan report HPAI outbreaks in commercial poultry flocks. Iowa’s Department of Agriculture reported three more outbreaks of highly pathogenic avian influenza (HPAI) in commercial poultry, including a layer flock in Sioux County, a turkey flock in Worth County and a backyard mixed species flock in Monona County. Iowa has reported eight recent HPAI outbreaks. Michigan reported an HPAI outbreak in a commercial poultry flock in Ottawa County, the state’s first case in poultry since May.

HEALTH UPDATE

— Trump effect hits health care. At a news conference yesterday, Donald Trump rattled health care markets with comments targeting pharmacy benefit managers (PBMs.) — companies that control access to prescription drugs. “We’re going to knock out the middleman,” Trump said, after a private discussion with pharmaceutical executives frustrated by PBMs’ influence. Shares of CVS Health, UnitedHealth Group, and Cigna — which own major PBMs — fell sharply. Trump’s remarks come as bipartisan lawmakers push to curb PBM power, citing their role in driving up drug prices. He also questioned mandatory vaccine policies, expressing skepticism about mandates while echoing debunked concerns over vaccines and autism. However, he clarified he wouldn’t restrict access to the polio vaccine, despite dissent within his circle.

KEY LINKS