Fed’s Preferred Inflation Gauge as Expected, Up 0.3% in January from December

Vilsack on CCC, farmer-safety net, fertilizer, foreign ownership of farmland, Prop 12, Packers & Stockyards Act, other issues

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February 29, 2024 09:14 AM

Vilsack on CCC, farmer-safety net, fertilizer, foreign ownership of land, Prop 12, Packers & Stockyards Act, other issues

Today’s Digital Newspaper

MARKET FOCUS

Fed’s preferred inflation gauge came in as expected, up 0.3% in January from Dec.
Bitcoin is surging toward its all-time high
Ag markets today
Large sales of U.S. sorghum to China in latest week
February 2024 outlook for U.S. agricultural trade highlights
Ag trade update
Update on Texas wildfires
Farm Bureau: 2023 crop damage estimates: $21.94 bil. loss, RMA Covers $12 bil.
NWS weather outlook
Pro Farmer First Thing Today items

CONGRESS

McConnell to step down as party leader at year-end
Congressional leaders reach funding deal, averting a potential weekend shutdown

ISRAEL/HAMAS CONFLICT

U.S. reportedly looking into possible airdrops of aid into Gaza

RUSSIA & UKRAINE

Russian President Vladimir Putin issues stark warning to NATO
Russia not interested in restarting Black Sea grain deal

POLICY

Highlights of Senate Ag Committee hearing with USDA Secretary Tom Vilsack

CHINA

China’s Communist Party leadership signals intention to bolster fiscal measures

OTHER ITEMS OF NOTE

Supreme Court agrees to review Donald Trump’s claim of immunity from prosecution

MARKET FOCUS

— Equities today: Asian and European stock markets were mixed in overnight trading. U.S. Dow opened around 70 points higher. In Asia, Japan -0.1%. Hong Kong -0.2%. China +1.9%. India +0.3%. In Europe, at midday, London +0.3%. Paris flat. Frankfurt +0.5%.

U.S. equities yesterday: All three major indices ended with losses. The Dow was down 23.39 points, 0.06%, at 38,949.02. The Nasdaq fell 87.56 points, 0.55%, at 15,947.74. The S&P 500 lost 8.42 points, 0.17%, at 5,069.76.

— Ag markets today: Corn and soybeans favored the downside and are near session lows this morning, while wheat is mostly weaker. As of 7:30 a.m. ET, corn futures were trading 1 to 2 cents lower, soybeans were 7 to 13 cents lower, SRW wheat was mostly a penny lower, HRW wheat was 2 to 6 cents lower and HRS wheat was mixed. Front-month crude oil futures were modestly firmer, while the U.S. dollar index was mildly weaker.

Slow developing cash cattle market. Feedlots passed on steady/weaker cash cattle bids in the Southern Plains on Wednesday, while virtually no negotiations were reported in the northern market. Packers don’t want to raise cash bids again this week given negative margins, while feedlots are in no hurry to move cattle at lower prices.

Cash hog advance slows. The CME lean hog index is up 13 cents to $79.91 as of Feb. 27, though the seasonal advance has slowed the past four days. As of Wednesday’s close, April lean hog futures held a $6.09 premium to today’s cash quote.

— Agriculture markets yesterday:

Corn: May corn rose a nickel to $4.28 1/2, ending the session above the 10-day moving average to the highest close in over a week.
Soy complex: May soybeans rose 4 1/2 cents to $11.45 1/4, while May soybean meal gained $2.60 at $327.50. May bean oil closed down 34 points at 45.19 cents. All three forged mid-range closes..
Wheat: May SRW fell 9 1/2 cents to $5.74 3/4, closing near the session low, while May HRW fell 4 3/4 cents to $5.81 but forged a high-range close. May spring wheat fell 6 1/4 cents to $6.56.
Cotton: May cotton gained 228 points to 101.08 cents, near mid-range and hit a contract and 1.5-year high.
Cattle: The February live cattle contract, which expires at noon today (2/29) slid 95 cents to $184.65 Wednesday, while most-active April fell $1.60 to $186.125. March feeders led that market lower, diving $3.40 to $249.60.
Hogs: April lean hog futures rose 10 cents to $86.00, despite trading as high as $87.20 this morning. Prices settled nearer session lows.

— U.S. PCE Price Index rose 0.3% in January 2024, core inflation up 0.4%. In January 2024, the Personal Consumption Expenditure (PCE) Price Index in the U.S. rose by 0.3% compared to the previous month, meeting market expectations and following a downwardly revised 0.1% increase in December. This increase was driven by a 0.6% rise in prices for services, while prices for goods decreased by 0.2%. The annual rate of PCE inflation slowed to 2.4%, the lowest since February 2021, down from 2.6% in the previous month, and consistent with forecasts.

Monthly core PCE inflation, which excludes food and energy prices and is a preferred measure of inflation by the Federal Reserve, increased by 0.4%, marking the largest increase since February of the previous year. This uptick was higher than the downwardly revised 0.1% rate observed in December and aligned with market expectations.

Food prices saw a 0.5% increase, while energy prices declined by 1.4%. The annual core inflation rate decelerated for the 12th consecutive month to 2.8%, down from 2.9% in the previous period, reaching a new low since March 2021, and in line with expectations.

— February 2024 outlook for U.S. agricultural trade highlights several key points (Link to report):

Increased imports and exports: USDA raised its forecasts for both agricultural exports and imports by $1 billion each. Agricultural exports for fiscal year (FY) 2024 are now projected to be $170.5 billion, up from $169.5 billion in November, while imports are expected to reach a record $201 billion, up from $200 billion.
Trade deficit: Despite the increase in exports, the trade deficit is forecasted to reach a record $30.5 billion, a significant rise from the $16.7 billion deficit in FY 2023.
Factors driving trade: The rise in livestock and dairy exports, along with increased grain and feed exports, contributes to the higher export outlook. However, lower oilseed and product exports, particularly due to increased competition from South America, offset some gains.
Impact of the U.S. dollar: The value of the U.S. dollar continues to influence agricultural trade outlook. A relatively strong U.S. dollar is expected to expand imports while presenting challenges for exports.
Importance of shipping costs: Rising ocean freight and shipping costs, attributed to factors like low water levels in the Panama Canal and geopolitical tensions, also play a significant role in the trade outlook.
Mexico will buy a record $28.4 billion worth of U.S. food and ag exports this fiscal year, only $300 million less than China, the number-one U.S. market. China is now buying more corn and soybeans from Brazil and less from the United States. “Exports to Mexico are forecast at a record $28.4 billion, a $500 million increase over the November estimate,” said USDA. “Strong demand for corn, pork, beef, and sweeteners are the primary drivers behind the higher forecast.”
USDA reduced its estimate of sales to China by $800 million from its previous forecast, “largely due to strong competition on corn and soybeans from South America.” Sales to China of U.S. soybeans were down 29% and sales of corn were down 67% in the first quarter of this fiscal year, compared to the same period in fiscal 2023. “In contrast, China’s imports of both commodities from Brazil surged during the same period,” USDA said. In fiscal 2023, China purchased $33.7 billion and Mexico $28.2 billion worth of U.S. food and ag exports.
Implications: USDA’s forecast suggests that the agricultural sector is entering a period of sizable monthly trade deficits, with imports expected to strengthen and exports likely to slow down. Monthly trade gaps are projected to average $3.5 billion through the end of September, indicating a challenging trade landscape for U.S. agriculture in FY 2024.

Market perspectives:

— Outside markets: The U.S. dollar index was slightly higher, with the euro, yen, and British pound weaker against the greenback. The yield on the 10-year U.S. Treasury note rose, trading around 4.32%, with a mixed-to-positive tone in global government bond yields. Crude oil futures were mixed, with U.S. crude trading steady around $78.45 per barrel and Brent lower at around $82.00 per barrel. Gold and silver futures were down ahead of US trading, with gold around $2,039 per troy ounce and silver around $22.53 per troy ounce.

— Bitcoin is surging toward its all-time high and racking up its biggest monthly gain since December 2020. The latest bull run, which saw bitcoin’s market cap jump to a staggering $1.23 trillion over the past 24 hours, has been fueled by several factors, including the spot bitcoin ETF boom that opened the door for mainstream investors and the upcoming April halving event. Bitcoin is nearing its all-time high of around $69,000 set in November 2021. The value currently stands at just under $63,000, data shows. It is up a whopping 20% in just five days, partly driven by billions of dollars flowing into the crypto industry after the US Securities and Exchange Commission approved bitcoin exchange-traded funds last month.

— Large sales of U.S. sorghum to China in latest week. USDA weekly export sales data for the week ended Feb. 22 included sales activity for China including net sales of 1,883 metric tons of wheat, 9,997 metric tons of corn, 380,341 metric tons of sorghum, 154,518 metric tons of soybeans, and 1,777 running bales of upland cotton. For 2024, net sales of 748 metric tons of beef and 977 metric tons of pork.

— Ag trade update: Japan is seeking 78,974 MT of milling wheat.

— Texas wildfires. A sudden shift of wind direction in the Texas Panhandle this week contributed to the explosion in size of the Smokehouse Creek wildfire, which has burned at least 850,000 acres in Texas and another 31,000 acres in Oklahoma. It is now the second-largest fire in Texas state history, exceeding the size of Rhode Island. The blaze has burned dozens of structures and killed at least one person since igniting on Monday. It is still just 3% contained, according to state forest services.

— Farm Bureau: 2023 crop damage estimates: $21.94 billion loss, RMA covers $12 billion. The updated crop and rangeland damage estimations for 2023 reveal the significant impact of natural disasters on domestic farm production. The assessment indicates total losses from major 2023 disasters amounting to over $21.94 billion, constituting 23.6% of NOAA’s total economic impact figure. Of this total, nearly $12 billion in losses were covered by existing Risk Management Agency (RMA) programs as of February 2024. However, approximately $10 billion in losses were either uninsured through RMA, fell outside policy coverage levels, or did not qualify under existing risk management programs. Link to Farm Bureau report.

Drought, excessive heat, and wildfires emerged as the primary contributors, accounting for over $16.59 billion in total crop losses. Additionally, $3.99 billion was attributed to excessive precipitation, flooding, and hurricane events, while $1.37 billion was caused by hailstorms.

Of note: The estimates provided by the American Farm Bureau Federation do not encompass infrastructure damage, livestock losses, complete horticulture crop losses, or timber losses associated with the specified weather events. Consequently, these estimates should be considered a minimum baseline, as data for estimating these additional categories are not readily available.

— NWS weather outlook: Heavy snow over parts of the Cascades, the Northern Intermountain Region, Northern Rockies, Northern California, and Sierra Nevada Mountains... ...Heavy lake-effect snow southeast of Lake Ontario and over the Upper Great Lakes... ...Rain from the Gulf Coast to parts of northern Mid-Atlantic and shower and thunderstorms along the Central Gulf Coast and Southeast...

Items in Pro Farmer’s First Thing Today include:

• Corn and beans weaker, wheat mixed overnight
• March grains start delivery

CONGRESS

— McConnell to step down as party leader at year-end. Mitch McConnell (R-Ky.), the longtime top Senate Republican, announced on Wednesday that he will step down as the party’s leader at the end of the year, citing differences in national security views with the party, now led by former President Donald Trump. McConnell, who recently turned 82, made the announcement in a speech on the Senate floor, acknowledging the political climate within his party. His decision was not unexpected, given health concerns and disagreements within his ranks over foreign policy and leadership style.

McConnell emphasized the importance of America’s global leadership and advocated for a foreign aid bill supporting Ukraine during a recent White House meeting. His departure could potentially facilitate bipartisan efforts on national security issues. Despite his collaboration with Trump on judicial appointments, McConnell diverged from him on key issues such as the 2020 election results and the Capitol riot.

In his speech, McConnell also reflected on personal loss, suggesting that recent events had prompted him to contemplate his life’s journey and legacy. McConnell’s sister-in-law, Angela Chao, died in a car accident earlier this month.

McConnell said he will serve out the rest of his Senate term, through 2026.

McConnell has had serious health problems, including a fall last year that laid him up for six weeks. McConnell “froze” on camera on two separate occasions as well, leading to more questions about his future.

McConnell faced a leadership challenge at the start of this Congress from conservative Republicans disappointed over their failure to win the majority in 2022. McConnell won that contest handily.

McConnell’s decision starts a race to be the next Republican leader. Obvious candidates are the “Three Johns” – Senate Minority Whip John Thune (R-S.D.), Senate Republican Conference Chair John Barrasso (R-Wyo.) and Sen. John Cornyn (R-Texas). Thune has served as McConnell’s stand-in during the Kentucky Republican’s absences, and many Republicans seek his guidance on legislation. However, sources note former President Donald Trump will likely have a key role in helping decide which GOP senators heads the party.

— Congressional leaders reached a funding deal, averting a potential weekend shutdown. The agreement extends two shutdown deadlines into March, aiming to finalize six funding bills next week. Funding for agencies like USDA-FDA and Transportation-HUD is set to last through September, with text expected by the weekend with Congress clearing the bills next week. More contentious bills, including Pentagon and Homeland Security funding, have a new deadline of March 22. The deal, a result of bipartisan negotiations, prevents a shutdown ahead of President Biden’s State of the Union address on March 7. However, passing a stopgap measure will require cooperation from both parties in Congress. If successful, attention will turn to the next fiscal year’s spending bills for fiscal year 2025, which begins Oct. 1.

“We are in agreement that Congress must work in a bipartisan manner to fund our government,” Senate Majority Leader Chuck Schumer (D-N.Y.), Senate Minority Leader Mitch McConnell (R-Ky.), Speaker Mike Johnson (R-La.), and House Minority Leader Hakeem Jeffries (D-N.Y.) said in a joint statement on Wednesday, along with the heads of the appropriations committees in both chambers. “To give the House and Senate Appropriations Committee adequate time to execute on this deal in principle, including drafting, preparing report language, scoring and other technical matters, and to allow members 72 hours to review, a short-term continuing resolution to fund agencies through March 8 and the 22 will be necessary, and voted on by the House and Senate this week.”

Bottom line: The House will leave town after clearing the CR vote likely today and will return next week. The Senate will try to pass the CR by unanimous consent this evening.

ISRAEL/HAMAS CONFLICT

— Gaza has surpassed 30,000 deaths since Israel’s war with Hamas began in October, according to the health ministry in the enclave. The U.S. reportedly is looking into possible airdrops of aid into Gaza as the dire humanitarian crisis worsens. Earlier this week, Jordan, Egypt, the UAE, Qatar and France airdropped relief aid in various areas of the Gaza Strip.

RUSSIA/UKRAINE

— Russian President Vladimir Putin issued a stark warning to NATO, cautioning that any deployment of troops to aid Ukraine could escalate into nuclear conflict. Speaking during his annual address to the Federal Assembly, Putin emphasized Russia’s military capabilities and potential consequences for interventionist actions. The threat coincides with Russian military advances in Ukraine amid ongoing tensions between Kyiv’s Western allies and Moscow.

Putin’s address came after French President Emmanuel Macron’s refusal to rule out troop deployment to Ukraine, a proposal dismissed by the U.S. and German leaders. As Russian forces continue their offensive in Ukraine, concerns mount over Kyiv’s ability to defend itself, exacerbated by delays in U.S. military aid. European nations are bolstering defense production in response to Russia’s aggression, but Ukrainian officials fear a potential breakthrough by Russian forces unless ammunition supplies increase.

Putin’s speech, lasting a record two hours and six minutes, served as a prelude to Russia’s upcoming presidential election, reaffirming his commitment to the 2022 invasion of Ukraine. Despite facing economic sanctions and monetary challenges, Russia is adjusting to the prolonged conflict, with Putin unveiling plans to boost government support for families and healthcare. Amidst a crackdown on dissent and the recent death of opposition figure Alexey Navalny, Putin’s grip on power remains firm as he seeks to extend his rule in the forthcoming election.

— Russia not interested in restarting Black Sea grain deal. Russia is not interested in renewing the Black Sea grain deal as it has its own grain export capabilities, state-run TASS news agency reported, citing Russian Agriculture Minister Dmitry Patrushev. SovEcon estimates Russia exported 4.6 MMT of grain in February, with the 3.8 MMT of wheat shipments representing a record for the month. SovEcon expects Russia’s wheat exports to remain strong short-term as the competitiveness of supplies on the global market is recovering.

POLICY UPDATE

— Highlights of Senate Ag Committee hearing with USDA Secretary Tom Vilsack. The hearing was chaired by Senate Ag Chairwoman Debbie Stabenow (D-Mich.), who emphasized the importance of bipartisan cooperation in crafting a farm bill to support farmers, rural communities, and address hunger issues. Stabenow highlighted previous bipartisan achievements and stressed the need for creative solutions to current challenges. Link to hearing.

Sen. John Boozman (R-Ark.), the ranking member, expressed concerns about the challenges facing farmers, including declining farm incomes, high input costs, and regulatory issues. He emphasized the importance of ensuring economic viability for farmers of all scales and criticized certain policies impacting the agricultural sector.
Secretary Vilsack provided insights into the state of agriculture in rural America, noting a recent decline in farm incomes despite previous record years. He highlighted the disparity in income distribution among farmers and discussed the long-term impacts of farm consolidation on rural communities. Vilsack outlined USDA’s focus on creating new market opportunities, implementing climate-smart agriculture practices, and supporting renewable energy and local food systems to provide additional income sources for farmers.
Trade policy: Stabenow thanked Vilsack for his cooperation in creating the regional agricultural promotion program, which invested $2.3 billion into marketing assistance, a top request from commodity groups. She inquired about the status of this new trade money and food aid money, emphasizing their importance in building markets and feeding those in need. Vilsack outlined the focus on diversifying trade markets beyond the top four, enhancing specialty crop exports, and working with USAID to distribute food aid efficiently. Stabenow also raised concerns about potential funding revocations and limitations in targeted regions, requesting longer-term contracts and adjustments for future rounds of funding.
Crop insurance: Stabenow pushed for adjustments to reimbursements for delivery expenses, particularly for specialty crops and smaller operations. Vilsack expressed willingness to explore this issue further.
Conservation: Stabenow congratulated USDA on distributing all 2023 IRA conservation funds and questioned Vilsack on how farmers are utilizing the funds and their impact on traditional conservation programs like EQIP. Vilsack highlighted record numbers of NRCS contracts and increased funding for EQIP practices.

Interaction between spending on farm bill programs and nutrition programs. Vilsack said there was no impact on other programs due to the Thrifty Food plan reevaluation. Boozman queried Vilsack on the cost implications of the Thrifty Food plan re-evaluation and USDA’s response to GAO recommendations. Vilsack assured cooperation with GAO and expressed commitment to addressing recommendations.
Farmer safety net and using CCC authority: Boozman raised concerns about the steep decline in farm incomes and questioned Vilsack about using CCC authority to address farm safety net shortcomings. Vilsack clarified his willingness to explore creative use of CCC resources in collaboration with Congress.
Vilsack was questioned about his recent comments alluding to use of the Commodity Credit Corporation (CCC) authority to potentially take some actions relative to increasing reference prices used to determine farmer safety net benefits under Title I – the commodity title – of the farm bill. Boozman asked Vilsack what legal and other guidance he has received on possibly using CCC to boost reference prices. Vilsack responded by commenting that he has not suggested he has a way to boost those reference prices. “What I said was that I’d be happy to work with Congress to find a creative way to utilize the resources of the CCC to try to address some of the concerns that you all have relative to reference prices, as I did when you requested assistance and trade and international food assistance, which I’m more than happy to do, happy to sit down with you,” Vilsack said. He added that the focus needs to not just be on the farm bill but also on the Inflation Reduction Act (IRA), CCC and the annual budget. “I think all of those basically can work collaboratively together to try to address the issues that divide you all in terms of a farm bill today,” he noted.
Noting forecasts of a second year in a row of falling farm income, Republican senators called for more money for farm subsidies. “We’ve got to get it right for production agriculture” in the new farm bill, said Sen. John Hoeven (R-N.D.). Vilsack warned against dipping into SNAP or climate-mitigation funding to pay for the Republican priorities of raising reference prices, which would make it easier to trigger crop subsidy payments, and broadening the crop insurance program, the largest source of farm assistance. “That’s where I think you have some challenges, which is why I have suggested let’s be more creative than that,” said Vilsack. Stabenow. said on Tuesday that she would delay the farm bill into 2025, if need be, to prevent cuts in SNAP and climate funding.
Farmers are coping with record-high production costs, declining commodity prices, high interest rates, and a downturn in farm exports. Farm groups say reference prices are too low to provide an adequate cushion against falling crop revenue.
“We need a safety net that works,” said Sen. Boozman. “We need better risk management tools.” Sen. Roger Marshall (R-Kan.) said, “I’m concerned we’re not spending enough on the front end” of the food supply.
Hoeven highlighted the significant increase in SNAP (Supplemental Nutrition Assistance Program) funding in the farm bill baseline. He emphasized the importance of crop insurance and countercyclical safety net programs for production agriculture, highlighting their role in supporting small family-based farms and ranches. Hoeven and Vilsack discussed the need to sustain and enhance the agricultural system, with Hoeven emphasizing the critical role of crop insurance in risk management. However, Vilsack suggested the importance of considering additional tools beyond crop insurance to support farmers, such as local and regional food systems and alternative revenue streams.
The conversation also touched on the need to update countercyclical safety net programs, including reference prices, to reduce the need for ad hoc disaster programs. Vilsack stressed the importance of ensuring that any changes to these programs do not come at the expense of other opportunities, such as conservation practices.
Hoeven further discussed the importance of voluntary, farmer-friendly conservation programs and transparency and competition in the livestock sector, particularly in pricing and market access for cattle producers. Vilsack expressed support for initiatives to improve price discovery, transparency, and processing capacity at the local and regional levels, including the cattle contract library.
California Proposition 12: Boozman expressed concerns about California’s Prop 12 and potential marketplace disruptions. Vilsack emphasized the need for consistency and clarity in agricultural regulations to avoid chaos for farmers.
Sen. Mike Braun (R-Ind.) also raised concerns about Proposition 12, a California law impacting hog producers, and its potential implications for producers nationwide. He expressed worries about one state’s regulations becoming a de facto standard for the entire country and emphasized the need to balance regulatory consistency with allowing for regional differences. Vilsack acknowledged the challenges posed by Proposition 12 and emphasized the importance of building out local and regional food systems to provide alternatives for producers.
Vilsack agrees with many lawmakers that the U.S. Supreme Court decision on California’s Proposition 12 sets the stage for potential issues for the U.S. hog sector but did not offer any suggestions to lawmakers as to how to address that legislatively.
U.S. Supreme Court does not understand hog market. Vilsack likened the situation with California’s Proposition 12 and Question 3 in Massachusetts to the initial start of the U.S. where states were initially given the ability to make decisions. “And the reality was it was chaos,” Vilsack said. “I don’t think the Supreme Court, when it decided that pork producers had a choice to participate in the California market or not, understood the pork market.” That was a theme that Vilsack returned to several times during his testimony to describe the Supreme Court’s ruling. He also used the issue to tout the administration’s efforts in expanding meat processing capacity at the local level so that producers are not at the whim of a large-scale facility or “a policy that you have a hard time complying with.” But Vilsack was reticent to offer lawmakers any guidance or suggestions on how they should address the situation. “You know, I think you gotta provide some clarity and consistency,” Vilsack said. “Having said that, I don’t envy your capacity to do it. It’s not going to be an easy… not going to be easy to craft that.”
Sen. Corey Booker (D-N.J.) challenged Vilsack’s characterization of the Prop 12 situation, saying that states should be allowed to set their own rules. “I have no problem with the state essentially directing how their farmers in that state should operate. They clearly should have the right to do that,” Vilsack said. “I think the challenge is when they essentially try to extend that to other producers and the court basically made the decision that this wasn’t going to discriminate against hog producers because they had a choice.”
Ag disasters: Sen. Peter Welch (D-Vt.) complemented USDA’s responsiveness to Vermonters’ needs, particularly in the wake of disasters. He emphasized the importance of boosting farm incomes and reducing input costs through programs like the Rural Energy for America Program (REAP). Welch also raised concerns about the challenges faced by small farmers in accessing crop insurance programs and suggested streamlining processes to better assist them. He proposed the idea of providing technical assistance to towns facing emergencies, such as floods, to help them recover more efficiently. He also highlighted the need for risk management tools and expanded coverage options for farmers, especially those growing specialty crops.

Remote work at USDA: Welch also touched on the issue of remote work policies at USDA headquarters, citing concerns raised by employees about low office occupancy rates and difficulties in communication. He questioned Vilsack about monitoring remote employees’ productivity and exemptions from in-office requirements.
Year-round E15: Sen. Joni Ernst (R-Iowa) expressed frustration over delays in implementing year-round E15 sales and sought reassurance from Vilsack about EPA’s plans to issue an emergency waiver. Ernst also voiced concerns about the impact of delayed E15 implementation on Iowa’s families, corn farmers, ethanol producers, and fuel retailers. She urged Vilsack to advocate for nationwide E15 sales this summer and emphasized the importance of supporting Iowa’s agricultural interests.
Tribute to Pat O’Toole. Sen. Michael Bennet (D-Colo.) paid tribute to Pat O’Toole, a cattle and sheep rancher, and his significant contributions to Western agriculture and conservation. He highlighted O’Toole’s dedication to service, advocacy for Western issues, and commitment to his family and future generations. Secretary Vilsack expressed condolences and acknowledged O’Toole’s passion and impact.
Wildfire mitigation: Bennet thanked Vilsack for allocating $35 million for wildfire mitigation in Colorado’s Front Range and raised concerns about staffing shortages in national forests, particularly in relation to fuel reduction work and planning projects. Vilsack acknowledged the concerns and emphasized the importance of addressing budgetary constraints and retaining firefighting personnel.
Southern pine beetle outbreaks in Mississippi. Sen. Cindy Hyde-Smith (R-Miss.) described the devastating impact of the beetle infestation on private forest landowners and stressed the urgent need for assistance. She inquired about ways to improve the Emergency Forest Restoration Program (EFRP) to better support affected landowners. Vilsack expressed willingness to explore ways to streamline the EFRP process and ensure timely assistance for Mississippi’s pine beetle outbreak. Hyde-Smith requested Vilsack’s commitment to expedite necessary authorizations for EFRP assistance in Mississippi and sought assurance of ongoing collaboration to address the challenges faced by landowners. Vilsack affirmed his commitment to addressing the pine beetle outbreak and pledged to work with Hyde-Smith and the department to provide assistance and support.
Nutrient dense foods: Sen. Kirsten Gillibrand (D-N.Y.) inquired about the definition of “nutrient dense foods” in the context of a proposed pilot program and its potential impact on retailers and consumer choice. Vilsack explained that the definition would likely be based on scientific nutrition guidelines and could vary depending on state administration. Additionally, Gillibrand asked about funding needs for nutrition education programs like GusNIP and the feasibility of Puerto Rico transitioning to SNAP. Vilsack emphasized the importance of adequate funding for nutrition education and ongoing collaboration with Puerto Rico to ensure a successful transition. Gillibrand and Vilsack also discussed collaboration between USDA and other agencies to prevent future pandemics, highlighting a White House-led effort and tabletop exercises on pandemic preparedness.
Proposed rule changes to Packers and Stockyards Act were a topic of Sen. Roger Marshall (R-Kan.), who also raised concerns about California’s Proposition 12 and its potential impact on independent pork producers. Vilsack defended USDA’s efforts to support small producers and emphasized the need for adequate disaster funding. Regarding the Packers and Stockyards Act, Vilsack acknowledged the need to craft rules that address concerns raised by courts while striving for a balanced marketplace for producers.
Sen. Chuck Grassley (R-Iowa) noted that via the discussion with Sen. Marshall, that there were some decisions by circuit courts that you had to take into consideration. Grassley asked Vilsack if that enhanced his ability to do stronger enforcement or does it weaken his opportunity to do stronger enforcement? Vilsack said, “it informs our ability to try to figure out how we can create a leveler playing field for the producer, which I know you want, and at the same time, withstand any litigative challenge that may come to the rules. Having said that, there are a series of Packers and Stockyard rules that we’re in the process of completing. We’ve completed the transparency rule where we’re asking folks to provide producers a bit more information about who they’re doing business with. We’re very close to getting the retaliation and discrimination rule out for -- in final form that essentially says you can’t discriminate or retaliate against the producer when he or she exercises their rights. There’s a poultry tournament system rule that is in the process. There’s also a cattle discovery rule that’s in the process. So there’s a series of rules that we’re looking at and the goal here, Senator, is to level the playing field just to provide a balance.”

Dead zone in Gulf of Mexico: Sen. Dick Durbin (D-Ill.) raised concerns about the environmental impact of agricultural runoff contributing to the dead zone in the Gulf of Mexico. He questioned Vilsack on whether current farm programs adequately address this issue and what additional steps could be taken. Vilsack highlighted efforts to expand conservation programs, promote precision agriculture, and incentivize climate-smart practices to reduce nutrient runoff and improve soil health.
Durbin also inquired about the role of investors in farm program participation and whether there are sufficient incentives for them to engage in conservation practices. Vilsack emphasized the long-term benefits of conservation for land productivity and water quality, suggesting that financial incentives and market premiums could encourage investor participation.
The discussion shifted to climate change and the private sector’s role in addressing it. Durbin asked how the farming sector could be brought into the mindset of reducing carbon emissions and adopting sustainable practices. Vilsack outlined USDA initiatives funding climate-smart practices, ecosystem market credits, and bioproduct development using agricultural waste.
Vilsack noted the provided under the Inflation Reduction Act provides some ammunition “to begin to address this issue in a more meaningful way. We’ve expanded the number of cooperative groups that are reaching out to farmers to encourage them to participate in basic conservation that could potentially significantly reduce the need. We’re also funding research… we know that we over apply some of these nutrients. And with precision agriculture, I think we will do a better job of understanding which acre of land actually needs nutrition and which do not. I’ve been told that perhaps as many as 30% of our corn acres in Iowa and Illinois may not require any fertilizer at all, so we would see a reduction in the use of that. We have resources that have been applied from the CCC that we’re utilizing to create alternatives to fertilizers. So, we’re going to look at -different ways to fertilize the land. We have our climate smart agricultural practices and effort where we’re trying to encourage climate smart practices by paying farmers to embrace them, provide a market premium for what they raise sustainably. That should also have an impact. So, if you expand conservation, if you reduce the level of fertilizer being applied, if you create financial incentives for farmers to embrace climate smart practices, and you do research that allows you to be more precise, I think the combination of those factors will significantly over time reduce the risk of the dead zone continuing to expand at the rate it is.”
SNAP fraud prevention; ag trade deficits. Sen. Tommy Tuberville (R-Ala.) focused on SNAP fraud prevention and trade deficits in agricultural exports. He queried Vilsack on potential measures to address fraud in SNAP and USDA’s efforts to promote agricultural exports amid rising imports.
Vilsack emphasized the importance of returning to regular processes for SNAP qualification and the multifaceted nature of addressing trade imbalances, including market access negotiations and domestic economic factors.
Tuberville noted the U.S. has historically been strong on agricultural exports, “but due to President Biden’s economy, U.S. agriculture trade has a trade deficit of over $30 billion due to rising imports and a lack of new market access.” He asked Vilsack to share how USDA is working with U.S. Trade Representative Katherine Tai to underscore the need for a proactive approach “so that our competitors do not continue to gain market share and capture opportunities that would have otherwise been ours?”
Vilsack said “you have to look at what’s driving the import issue. What’s driving it in large part are horticulture and sugar which are two areas. I would also say that sometimes there’s a tendency to focus solely on trade agreements and not understand that there’s work below that process that matters. We’ve calculated roughly $20 billion of trade winds that have occurred in the last couple of years. I’ll just give you a couple of examples. Mexico and potato access, Japan with increased beef quota, India expanding access to apples, the Philippines expanded access to pork, Egypt expanded access to poultry. There’s a substantial number of things that have occurred that don’t get the headlines, but that actually result in increased trade. And the reality is we have a very much stronger economy than the rest of the world has. When China’s economy suffers, that obviously has an impact, an effect on exports as well. So it’s a combination of factors… As far as trade agreements are concerned, the reality is unless you think you can pass Trade Promotion Authority… I haven’t seen that happen here in this body, and until it does, it becomes very difficult for us to negotiate a trade agreement when the people we’re negotiating with believe that there are 535 folks, yourself included, that could renegotiate the deal. It’s hard to have a trade agreement without Trade Promotion Authority.”
Tuberville also raised concerns about poultry processing line speeds and the challenges facing farmers, particularly considering declining farm profitability and regulatory burdens. Vilsack acknowledged the difficulties faced by farmers and outlined USDA efforts to support them through market diversification, renewable energy opportunities, and climate-smart agriculture initiatives. He emphasized the need to create alternative market opportunities and reduce regulatory burdens to sustain the agricultural sector’s viability.
Farmers leaving the ag industry: Tuberville asked Vilsack why he thinks farmers are leaving the industry and the next generation doesn’t want to keep farming.
Vilsack said he has several answers. “One is that there’s been a focus on production. We’re talking about a commodity-based system. We’ve encouraged farmers to produce, we’ve suggested you got to get big or get out. That’s been suggested. What we need to do in my view is to create alternative market opportunities for those small and mid-sized producers so that they aren’t necessarily competing solely and completely in a commodity-based market, which is not really designed for them. That’s why it’s important to have local and regional food systems, that’s why it’s important to invest in renewable energy and create opportunities for that energy to be sold to the local co-op. That’s why it’s important to have climate smart agriculture so that you get a value-added proposition. It’s why it’s important for us to create new products like sustainable aviation fuel that can create new commodities with agricultural waste. There’s a multitude of things that we can and are doing to basically create a better opportunity in the future.”
When Tuberville said, “What I just don’t want to see is what’s going on in Europe. You know, with all the farmers driving tractors,” Vilsack said: “Different — completely different approach.”
Sustainable Aviation Fuel (SAF): Grassley asked Vilsack to speak about his role regarding SAF for airplanes “that grain farmers have a big interest in, but your role in that. And then can we preserve feedstocks being primarily used there without diluting it, like I heard, some people want to dilute it.”
Vilsack: “We have two roles that USDA has with reference to SAF. One is to advocate for as a rule that allows a broad array of feedstocks, including the traditional feedstocks that are used for biofuels to be — to qualify for the tax credits and for the incentives so that it’s financially feasible to use ethanol for example. Part of my responsibility is to articulate the need, the science behind that. I think we’ve been successful in getting the GREET model incorporated in this process. I think we’re now in the process of talking about climate smart agriculture and we’re going to continue to pound the table on that. The second responsibility is for USDA to also provide the science and the data behind the availability of feedstock, the logistics for the supply chain, how you can accelerate adoption and commercialization. I was in Georgia recently at the first commercial scale plant. We need to get to 36 billion gallons. That plant was a 10-million-gallon plant. So obviously we have to accelerate dramatically the commercialization and availability. So we need to figure out the tools that we can use at USDA, our loan programs, and so forth to try to accelerate that.”
Vilsack will not be the longest-serving USDA secretary. Vilsack told Grassley that title belongs to Big Jim Tama Wilson from Tama, Iowa, who served 15 years and 11 months.
Foreign ownership of ag land in the U.S. was a topic addressed by several senators. Sen. John Fetterman (D-Pa) expressed concerns about foreign ownership of agricultural land in the United States, particularly by countries like China. Secretary Vilsack noted that while foreign ownership represents a small percentage, the accuracy of reporting is uncertain. He highlighted China’s limited land ownership in the U.S. and emphasized the need for transparency and security considerations regarding land purchases near defense installations.
Sen. Mike Braun (R-Ind.) Senator Mike Braun addressed concerns about foreign ownership of agricultural land and proposed legislation, the AFIDA Improvement Act, aimed at improving the monitoring of foreign ownership. Vilsack expressed support for the bill but emphasized the limitations of the current self-reporting system and cautioned against expecting significant improvements without addressing this issue.
Labeling of plant-based milk alternatives: Fetterman argued against using terms like “milk” unless products match the nutritional value of dairy milk. Vilsack echoed concerns about consumer confusion and emphasized the need for nutritional transparency in labeling. The conversation then turned to lab-grown meat, with Fetterman expressing reservations about labeling such products as “meat” and highlighting potential challenges for traditional livestock farmers. Vilsack acknowledged ongoing discussions about labeling standards to differentiate between cell-cultured meat and traditional livestock products, ensuring consumer awareness and choice.
Vilsack on the time it takes to prepare for potential gov’t shutdowns: In a discussion with Sen. Raphael Warnock (D-Ga.), Vilsack said “Jus the threat of a shutdown, this is the fourth time that we’ve had to spend staff time planning for a shutdown. And interestingly enough, depending upon the timing of the shutdown, depends on who gets characterized and in what category in terms of the workforce. It is an extraordinary waste of time… It’s just maddening.”
Child hunger: Sen. Warnock said approximately 30 million students are eligible to receive free or reduced-price school meals. However, over the summer months, they often don’t have adequate access to meals. “Hunger doesn’t go on a vacation. How many students are reached by the summer lunch programs?” Vilsack said 21 million out of the 30 million or so that are eligible. There are 13 states that have yet to agree to participate in the program. Warnock said, “Sadly my state of Georgia is one of those states. This summer meal gap is putting our most vulnerable children at greater risk of going hungry, struggling in school, and experiencing long-term health challenges.” Vilsack said that means 1.1 million in the state of Georgia and that the program for Georgia could total $138 million, but “then you have to figure out how it rolls around in the economy. So you’re talking about probably close to a half a billion of economic activity that’s lost.”

CHINA UPDATE

— China’s Communist Party leadership indicated its intention to bolster fiscal measures to support the economy amid ongoing uncertainty regarding the country’s business climate. During a recent meeting of the Politburo, the party’s top decision-makers pledged to enhance policy consistency and ensure a “transparent and predictable” policy environment. This gathering marked the final session before China’s annual parliamentary meetings, where the government work report, detailing economic growth targets and plans for 2024, will be released.

The Politburo emphasized the need to strengthen proactive fiscal policies while maintaining flexibility in monetary policies. Furthermore, it underscored the importance of creating a stable and transparent policy environment. This commitment to supportive policies aligns with previous statements made during the central economic work conference in December, where China vowed to implement growth-oriented policies and revitalize the economy.

Despite recording a 5.2% year-on-year growth in 2023, the Chinese economy faces various long-term challenges, including a property market crisis, declining exports, demographic shifts, subdued consumer spending, geopolitical complexities, and concerns among private enterprises and foreign investors. Economists have urged Chinese authorities to increase government spending, although Beijing has been cautious about launching extensive stimulus measures due to concerns about rising debt levels.

However, recent actions, such as significant cuts to mortgage loan rates, suggest a willingness to improve market sentiment and provide stronger support measures. The Chinese government’s regulatory actions, such as curbing excessive spending on video games and imposing bans on ride-hailing services, have contributed to uncertainties surrounding the business and investment climate. Despite these challenges, the Politburo remains optimistic about China’s socioeconomic performance, emphasizing the importance of economic vitality, risk prevention, and maintaining stability while pursuing reform and technological self-reliance. Additionally, efforts to reduce bureaucracy and streamline administrative procedures were reiterated during the meeting.

OTHER ITEMS OF NOTE

— Supreme Court agrees to review Donald Trump’s claim of immunity from prosecution for actions taken while in office, delaying his trial on charges of conspiring to overturn the 2020 election. The court will consider whether a former president has immunity from criminal prosecution for official acts during their tenure. Trump faces four felony counts related to the election, including obstructing Congress and conspiring to defraud the United States. His legal team argues for immunity, but a D.C. Circuit ruling rejected this assertion. Trump’s trial proceedings in D.C. remain on hold pending the Supreme Court’s ruling. If convicted, the trial could potentially impact his political future, particularly as a leading Republican presidential candidate. Trump is also facing trials in New York and Florida on separate charges, denying guilt in all cases and seeking to delay trials until after the November election. The Supreme Court’s decision comes amid broader legal battles surrounding Trump’s conduct during his presidency and its aftermath.

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