U.S.: China Operates in ‘Predatory’ Manner Re: Trade Policy

News/Markets/Policy Updates: July 17, 2024

(Farm Journal )

MARKET FOCUS

• Deere issues statement backing away from DEI
• Deere & Co. is planning to announce layoffs of salaried employees on July 24
• Elon Musk said SpaceX and X will move their headquarters to Texas from California
• NY Fed Williams tells WSJ needs to see more progress on inflation
• Mortgage Bankers Assn. CEO: federal rent control law would be catastrophic to renters
• Commercial real estate crisis impacting the bond market
• Gold futures settled at all-time high Tuesday
• Port of Long Beach reports strongest total volume for June
• Domestic freight sector continues to face imbalance between demand and supply
• Ag markets today
• Google-backed AI startup Cropin wants to predict crop production
• Egypt makes largest wheat purchase in two years amid slumping grain prices
• Ag trade update
• NWS outlook
• Pro Farmer First Thing Today items

GOP NATIONAL CONVENTION

• Highlights of second day at convention
• Highlights of Donald Trump June 25 interview with Bloomberg Businessweek

CONGRESS

• Sen. Bob Menendez under pressure from Senate leadership to resign

POLICY

• GOP push continues for new farm bill; another extension likely

CHINA

• China ag group warns of tighter phosphate export rules amid price surge

TRADE POLICY

• Thune expresses concerns about Trump’s proposed tariffs
• U.S. WTO delegate: China operates in ‘predatory’ manner
• U.S. to focus on China’s trade policy

ENERGY & CLIMATE CHANGE

• Farm Bureau report: SAF tax credit will have almost no farm impact 2024
• Brazil, Australia raise concerns over EU’s inaccurate deforestation maps
• Department of Energy issues $1.2 billion loan to battery manufacturer Entek

LIVESTOCK, NUTRITION & FOOD INDUSTRY

• Painful surge in grocery prices — causes and analysis

HEALTH UPDATE

• CDC identifies factors to bird flu infections among poultry workers in Colorado

POLITICS & ELECTIONS

• VCU poll of Virginia has former President Donald Trump beating Biden 39%-36%
• Schiff warns Dems
• Rep. Cori Bush (D-Mo.) trailing her Democratic challenger by 23 points

— Equities today: Asian and European stock indexes were mixed overnight. U.S. Dow opened around 80 lower and then moved higher, with the Dow currently up around 160 points. In Asia, Japan -0.4%. Hong Kong +0.1%. China -0.5%. India closed. In Europe, at midday, London -0.2%. Paris -0.3%. Frankfurt -0.5%.

U.S. equities yesterday: All three major indices registered gains on Tuesday in the wake of Retail Sales figures. The Dow gained 742.76 points, 1.85%, at 40,954.48. Not only did the index hit an all-time high and a fresh record close, but it also saw its best session since June 2023. The Nasdaq finished up 36.77 points, 0.20%, at 18,509.34. The S&P 500 rose 35.98 points, 0.64%, at 5,667.20.

Of note: The Russell 2000, an index of stocks with small market values, surged Tuesday with a 3.5% gain. That’s the largest such move for the index since April 2020 and it’s now at its highest closing level since January 2022.

— Elon Musk said SpaceX and X will move their headquarters to Texas from California, blaming the state’s new law that bars school districts from requiring parental notification of a child’s gender identification change. The billionaire announced plans Tuesday to move SpaceX’s HQ from Hawthorne, California, to Starbase, Texas, a company town being built in the southern part of the state. Musk also said his social media platform X will move from San Francisco to Austin, Texas. He explained that the SAFETY Act — a law California Gov. Gavin Newsom signed that would prohibit school districts from requiring teachers to inform parents if a child wants to be identified by a different gender — was “the final straw.” Musk called the law an “attack on families and companies.”

— Deere issues statement backing away from DEI. Deere & Company issued a statement on the social media platform X that they are changing their policies on Diversity, Equity and Inclusion (DEI), noting they have already focused their sponsorships on “supporting the business and brand” with their non-profit sponsorships centering on “priority areas” including hunger, economic development, eliminating poverty, science, technology, engineering and mathematics (STEM), agriculture education, and supporting veterans and the military. Moving forward, Deere said it would “no longer participate in or support external social or cultural awareness parades, festivals, or events,” and that they will focus their business groups on “professional development, networking, mentoring, and supporting talent recruitment efforts.” The company said they would reaffirm that the existence of diversity quotas and pronoun identification “have never been and are not company policy.” Link to full statement.

This decision comes in the wake of recent controversies and public backlash over the company’s previous DEI initiatives. The move aligns with similar actions taken by other companies in the industry, such as Tractor Supply, which recently abandoned its DEI objectives and discontinued support for non-business-related activities.

— Deere & Co. is planning to announce layoffs of salaried employees on July 24, 2024, according to an email sent to employees on July 15. This announcement comes as part of a series of workforce reductions the company has been implementing in recent months.

Key points about the upcoming layoffs:

• The layoffs will affect an undetermined number of salaried workers globally.
• Employees will be notified of the layoffs beginning on Wednesday, July 24.
• Salaried employees whose jobs do not require them to be onsite are asked to work from home from July 24-26 and postpone business travel.
• A global all-employee meeting will be held to provide more details about the workforce update.
• Employees being separated will receive information about severance offers and separation details.

The company cites several reasons for these layoffs:

• Declining customer demand
• Rising costs
• Prevailing economic uncertainties
• Insufficient results from previous cost-containment strategies, including a global hiring freeze

This announcement follows a series of recent layoffs by Deere & Co.:

• 345 Waterloo workers to be laid off effective September 20, 2024
• 280 employees at a Moline, Illinois factory, 299 at John Deere Davenport Works, and 111 at John Deere Dubuque Works, all effective August 30, 2024
• Various other layoffs at facilities in Moline, Urbandale, Des Moines, and Waterloo in May and June 2024

In total, Deere & Co. has laid off nearly 2,000 workers between September 2023 and July 2024. The company’s financial performance has been declining, with a 15% decrease in revenue reported in the second quarter of 2024 and lowered profit forecasts for the full year. These layoffs are occurring against a backdrop of declining farm income, with USDA projecting a 25.5% decrease in net farm income for 2024 compared to the previous year.

— Ag markets today: Corn and soybeans built on Tuesday’s corrective gains overnight, while wheat futures firmed after recent losses. As of 7:30 a.m. ET, corn futures were trading mostly 3 cents higher, soybeans were a nickel higher and wheat futures were 7 to 9 cents higher. The U.S. dollar index was more than 500 points lower and front-month crude oil futures were around 40 cents higher.

Wholesale beef prices drop. Choice boxed beef prices fell $2.23 to $319.26 while Select dropped $3.23 to $301.59, moving the Choice/Select spread to $17.67. Fading wholesale prices are typical for this time of year as demand slows as temperatures rise, especially for non-ground beef.

Pork cutout back above $100. The pork cutout rose $2.58 to $100.87 on Tuesday, fueled by a $9.71 jump in primal ham prices. That’s the first time the cutout topped $100.00 since June 14. The CME lean hog index also firmed 20 cents to $88.62 as of July 15, marking consecutive days of modest gains.

— Agriculture markets yesterday:

• Corn: December corn futures closed up 4 1/2 cents at $4.08 3/4 and nearer the session high.

• Soy complex: November soybeans rose 3 1/4 cents to $10.43 1/4, a near mid-range close, while December soymeal rose $1.80 to $310.10 after losing more than $24.00 over the previous six sessions. August soyoil rose 28 points to 46.70 cents.

• Wheat: December SRW futures sunk a penny to $5.55 1/2 though settled near mid-range. December HRW futures fell 5 1/4 cents to $5.67 and settled nearer session lows. December HRS futures fell 4 cents to $5.97 1/4.

• Cotton: December cotton fell 107 points to 71.37 cents, nearer the session low.

• Cattle: August live cattle futures firmed 55 cents to $182.675 and settled nearer session highs. August feeder cattle futures sunk 15 cents to $258.625.

• Hogs: August lean hog futures rose $2.85 to $91.275 and near the session high, closing at a four-week-high close.

— Quotes of note:

• Federal Reserve Bank of New York President John Williams said inflation data over recent months has been encouraging, but he needs to see more progress. Readings from the last three months are “getting us closer to a disinflationary trend that we’re looking for,” he said in an interview with the Wall Street Journal published Wednesday (link). “These are positive signs. I would like to see more data to gain further confidence inflation is moving sustainably to our 2% goal.” The interview was conducted on Tuesday.

• Mortgage Bankers Association CEO Bob Brokesmit said a federal rent control law would be catastrophic to renters and the rental housing market. Princeton University’s Eviction Lab said eviction filings have been rising, up 46% in Gainesville, Fla., compared with before the pandemic; 44% in Minneapolis-St Paul; and 43% in Las Vegas.

• Election impacts. “The potential for significant swings in economic policy as a result of elections this year, with negative spillovers to the rest of the world, has increased the uncertainty.” — The International Monetary Fund, in a report warning a fresh wave of tariffs could revive inflation.

— The commercial real estate crisis is impacting the bond market, with increasing defaults in popular Wall Street mortgage-bond investments. This situation raises concerns about the future of office buildings and malls across U.S. cities. Investors, including banks, insurers, pensions, mutual funds, and landlords (often private-equity firms), hold approximately $260 billion in single-asset, single-borrower bonds. These bonds were used to finance the purchase of skyscrapers, shopping centers, and other properties, now facing significant financial strain.

Market perspectives:

— Outside markets: The U.S. dollar index was weaker, with the euro and British pound firmer against the U.S. currency. The yield on the 10-year U.S. Treasury note was higher, around 4.18%, tracking a firmer tone in global government bond yields. Crude oil futures were higher ahead of U.S. gov’t inventory data due later this morning, with U.S. crude around $81.30 per barrel and Brent around $84.10 per barrel. Gold and silver futures were mixed, with gold higher after striking a record high Tuesday. Gold was trading around $2,473 per troy ounce while silver was weaker around $31.13 per troy ounce.

— Gold futures settled at an all-time high Tuesday following comments from Federal Reserve officials that ramped up expectations of the first interest rate cut happening in September. Front-month Comex gold for July delivery closed +1.6% to $2,462.40/oz on Tuesday, while front-month July silver finished +1.7% to $31.195/oz. Citi analysts said prices for the yellow metal might keep surging all the way to $3,000/oz, as financial flows show potential for significant expansion. They added that the weakening labor market and broader trend of disinflation are bullish for gold and silver into year-end.

— Google-backed AI startup Cropin wants to predict crop production. Food and agriculture AI startup Cropin Technology Solutions has unveiled a real-time intelligence solution to forecast future yields for 13 crops that account for 80% of global food needs. The company unveiled Sage, powered by Alphabet Inc.’s Google Gemini AI model, which converts the world’s agricultural landscape into a proprietary grid-based map and then delivers precise predictive intelligence based on historical data. The company’s technology fuses generative AI with four decades of climate data, earth data and knowledge graphs to decode each crop country-by-country and predict how a certain crop will behave this season, next year or over the next five years.

The launch of Sage is expected to significantly impact Cropin’s business growth: The company anticipates increasing its customer base by 50% over the next 2-3 years. Cropin aims to double its revenue with the introduction of this platform. Cropin’s focus on AI-driven agricultural solutions is part of a broader trend in the agritech sector. The company previously introduced ‘aksara,’ an open-source micro language model supporting climate-smart agriculture, targeting issues faced by farmers in the global south. With a total funding of $47 million to date, Cropin has allocated approximately 40% of its recent $34 million raised to enhance intelligence capabilities and expand scalable assets.

— Egypt makes largest wheat purchase in two years amid slumping grain prices. Egypt, a major wheat importer, made its largest wheat purchase in two years, securing 770,000 tons in a tender on Tuesday, Bloomberg reports (link). This is the largest deal since June 2022, with most of the supplies coming from Russia. The purchase is a sign that declining grain prices are boosting demand, particularly for countries reliant on imports to feed their populations. Egypt’s state buyer secured 770,000 tons of wheat, mostly from Russia, marking the largest tender since June 2022. Slumping grain prices, with futures nearing a four-year low due to better global supply prospects, have rekindled demand. This tender marks the first time Russia, the world’s top wheat exporter, has dominated sales to Egypt for the new season. Other countries, such as Jordan and Algeria, are also increasing their wheat purchases. China is rapidly buying Brazilian soybeans to capitalize on low prices. Despite a decent harvest, European wheat remains uncompetitive compared to Russian offerings. Traders selling Russian wheat were free to offer at any price in the latest Egyptian tenders, contrasting with previous unofficial price floors enforced by Moscow, according to Bloomberg. Recent weather issues have not significantly impacted Russia’s wheat crop, contributing to the competitive pricing. Bloomberg notes that this significant purchase by Egypt and similar moves by other countries indicate a shift in the global wheat market, driven by falling prices and improved supply conditions.

— Port of Long Beach, the second-busiest U.S. port for seaborne trade, reported its strongest total volume for June and the highest number of inbound containers since mid-2022. This increase is attributed to strong consumer spending, concerns about potential new U.S. tariffs on Chinese goods, and the threat of labor issues at East and Gulf coast ports. Port of Long Beach CEO Mario Cordero noted that the port is regaining market share, with consumer spending driving cargo to their docks as the peak shipping season approaches. Cordero anticipates modest growth for the second half of 2024.

— Domestic freight sector continues to face an imbalance between demand and supply. J.B. Hunt Transport Services, a key player in the market, experienced a 28.3% drop in second-quarter earnings, totaling $135.9 million, according to the Wall Street Journal (link). This decline is attributed to decreasing freight revenue and volumes, along with higher insurance and equipment costs. Revenue fell by 7% to $2.93 billion, missing analysts’ expectations. Despite this, J.B. Hunt saw an improvement in profit from the first to the second quarter, although revenue remained flat, indicating the company’s struggle in a highly competitive market. The intermodal business, a significant part of J.B. Hunt’s operations, saw a 31% decline in earnings, partly due to competition from truckload carriers. Additionally, DAT reported sharp declines in truck and shipment posts on its spot market last month.

— Ag trade update: Taiwan purchased 65,000 MT of corn expected to be sourced from the United States. Egypt purchased 770,000 MT of wheat – 720,000 MT Russian and 50,000 MT Bulgarian. Thailand passed on a tender to buy up to 175,200 MT of optional origin feed wheat. Jordan tendered to buy 120,000 MT of optional origin milling wheat.

— NWS outlook: There is a Slight Risk of severe thunderstorms over parts of the Mid-Atlantic to New England on Wednesday... ...There is a Slight Risk of excessive rainfall over parts of the Mid-Atlantic, Southern Plains/Lower Mississippi Valley, and Southern High Plains/Southern Rockies on Wednesday and over the southern Mid-Atlantic and Southern Rockies on Thursday... ...There are Excessive Heat Warnings/Watches and Heat Advisories over parts of the Pacific Northwest and parts of the Southern Plains to the Lower Mississippi Valley/Southeast, and New England Coast to the Mid-Atlantic Coast.

(NWS)

Items in Pro Farmer’s First Thing Today include:

• Grains firmer overnight
• Farm group lowers German wheat crop forecast
• Eurozone consumer inflation eases in June

— Highlights of the second day of the GOP National Convention:

• The second night’s theme was “Make America Safe Again,” which set the tone for many of the speeches.
• “I’ll start by making one thing perfectly clear: Donald Trump has my strong endorsement, period,” Nikki Haley said in her primetime convention speech. Haley asked voters who also don’t “100%” agree with the former president to support him based on his national security record. “We should acknowledge that there are some Americans who don’t agree with Donald Trump 100% of the time,” Haley said. “Take it from me. I haven’t always agreed with President Trump. But we agree more often than we disagree.”
• Vivek Ramaswamy delivered a passionate speech, strongly endorsing Donald Trump for president. He emphasized that only Trump can effectively lead the country, prompting chants of “Vote Trump” from the audience. Ramaswamy argued that Trump’s presidency represents a return to fundamental American principles, including Merit-based systems, Rule of law and Effective governance. Ramaswamy’s fiery and impassioned delivery, combined with his strong endorsement of Trump, appears to have resonated with the RNC audience, further solidifying Trump’s position as the Republican Party’s nominee for the 2024 presidential election.
• Anne Fundner, a mother who lost her son to a fentanyl overdose in Southern California, blamed President Biden, Vice President Harris, and Democrats for her son’s death. During her emotional speech, Fundner attributed her son’s tragic overdose to what she characterized as the Democrats’ support for open borders. Fundner’s speech received a standing ovation from the crowd at the convention. She delivered one of the most impactful moments of the night, struggling through tears as she shared her personal story and criticized the current administration’s border policies. Her speech was part of a broader strategy by the GOP to highlight what they perceive as the negative consequences of the Biden administration’s approach to border security and immigration.
• Ron DeSantis focused his remarks on Biden: “America cannot afford four more years of a ‘Weekend at Bernie’s’ presidency,’” he said. Despite their previous rivalry in the GOP primary, DeSantis publicly endorsed Trump for the first time since the primaries. DeSantis spent a significant portion of his speech criticizing Democratic policies on issues such as immigration, education, and gender identity. “Donald Trump has been demonized. He’s been sued, he’s been prosecuted, and he nearly lost his life,” DeSantis said. “We cannot let him down, and we cannot let America down.”
• Marco Rubio paid tribute to Corey Comperatore, the 50-year-old father killed at Saturday’s rally. He asked non-Trump voters to reconsider if they’d misjudged red-hatted neighbors like him. “There is absolutely nothing dangerous, or anything divisive about putting Americans first,” he said.
• Getting personal. Various speakers, including Arkansas Governor Sarah Huckabee Sanders and RNC co-chair Lara Trump, shared personal stories aimed at presenting a more positive image of Trump.
• Donald Trump is scheduled to speak at the Republican National Convention on Thursday, while his running mate, Ohio Sen. JD Vance, is set to address the convention later today.

— Donald Trump on June 25 sat down with Bloomberg Businessweek for an extensive 90-minute interview, (link) discussing his views on the U.S. economy, business landscape, and his plans for a potential second term as president. The interview, conducted at Trump’s Mar-a-Lago golf club in Palm Beach, covered a wide range of topics and provided insights into his economic strategy and policy priorities.

Key points from the interview:

Economic Strategy
Trump emphasized the importance of “reduced interest rates and taxes” as central components of his economic plan. He stressed the need to revitalize business activities within the United States and create an environment conducive to economic growth.

Tax Cuts
The former president said he would like to bring the corporate tax rate down from its current rate of 21% to as low as 15%. If that target proves too difficult to achieve, he would be content to bring it down to 20%, a figure he justified by saying he liked its “simplicity.”

Trade Policies
The former president signaled his intention to escalate his protectionist trade policies if elected again. He advocated for increased tariffs, not only on China but also on European countries, marking a significant departure from traditional Republican free trade orthodoxy.

Regulatory Rollbacks
Trump said he would allow more drilling to bolster domestic energy production, scale back regulations and unleash the crypto industry while reining in big technology companies.

Foreign Policy
Trump suggested that Taiwan should pay the United States for protection, indicating a potential shift in U.S. foreign policy regarding the island.

Potential Appointments
In the interview, Trump mentioned he would “consider” asking JPMorgan CEO Jamie Dimon to serve as his Treasury secretary. He also expressed interest in Virginia Governor Glenn Youngkin, stating he would “love” to have him involved in some capacity.

Federal Reserve and Cryptocurrency
The interview touched on Trump’s views on the Federal Reserve and cryptocurrency. Trump indicated he would allow Jerome Powell to finish his term as Federal Reserve Chair, which extends until May 2026, saying that he would keep Powell on “especially if I thought he was doing the right thing.” This marks a shift from his previous stance, as Trump had frequently criticized Powell during his first term. (Note: Even if Trump wanted to fire him, it’s not clear that he legally could.) Trump expressed caution about interest rate cuts before the November election, despite such moves typically being seen as supportive for the economy. Trump appointed Powell, but turned on him over interest rate policy. The former president was displeased when the central banker refused to cut rates to bolster economic growth. President Biden reappointed Powell to a new four-year term that started in 2022.

— Sen. Bob Menendez (D-N.J.) is under pressure from Senate leadership to resign after being found guilty on all counts in his federal corruption trial. “In light of this guilty verdict, Senator Menendez must now do what is right for his constituents, the Senate, and our country, and resign,” Senate Majority Leader Chuck Schumer (D-N.Y.) said. New Jersey Gov. Phil Murphy and a few other Democratic senators voiced support for expelling Menendez if he does not voluntarily resign. Menendez, who will be sentenced on Oct. 29, indicated he would appeal the verdict. “Menendez filed to run for re-election as an independent, facing Democrat Andy Kim.

— GOP push continues for new farm bill; another extension likely. House Agriculture Committee Chair GT Thompson (R-Pa.) and Senate Ag Committee Ranking Member John Boozman (R-Ark.) are actively advocating for a new farm bill. However, they anticipate the necessity of another extension of the 2018 Farm Bill to allow more time for the completion of a new package. Boozman expressed at the Republican National Convention that an extension would be beneficial for farmers, to allow more time to improve key federal programs instead of settling for a bill that won’t do enough to support agricultural producers. “If we can’t make a meaningful change” in crop subsidy spending in the new farm bill, “I think we’re better off having an extension” of current law into 2025, Boozman said. Despite potential Republican gains in the upcoming November elections, Thompson stated that this would not affect their legislative efforts. He emphasized a consistent approach to agriculture legislation, regardless of political changes, expressing a commitment to continued work in this area.

— China ag group warns of tighter phosphate export rules amid price surge. The China Agricultural Means of Production Association (CAMPA) warned that export policies for phosphate may tighten due to surging domestic prices, urging companies to curb speculative buying and stabilize supplies. As of July 15, the average wholesale price index of domestic di-ammonium phosphate (DAP) and mono-ammonium phosphate (MAP) have risen 9.99% and 23.08%, respectively, from a year ago due to higher costs of raw materials and weak seasonal demand, CAMPA said. Companies should “fulfill their social responsibility and actively respond to the national policy requirements of maintaining supply and price stability to ensure that the domestic supply of fertilizers is sufficient,” it said.

— Senate Minority Whip John Thune (R-S.D.) expressed concerns about former President Donald Trump’s proposed tariffs. At the Republican National Convention, Thune, who has previously opposed tariffs, emphasized that any new tariffs should be targeted to minimize negative impacts on agriculture. “I’m not a big fan of tariffs, and I made that clear during the last Trump administration,” Thune said at an event held by Politico and CNN at the convention. He stressed the importance of reviewing the policies before taking a stance but warned that if there are “uniform tariffs across the board,” it would prompt serious discussions. Trump’s tariff plans include a 10% levy on all imports and higher tariffs on Chinese products, which could expose the agriculture sector to retaliatory actions from other countries.

Of note: Thune said he’ll wait to push back until he sees what Trump’s tariff policies will look like. If he imposes “uniform tariffs across the board,” Thune said, “we’re going to have some serious conversations about that.” Thune has consistently pushed for free trade agreements and criticized protectionist policies. He has recently been vocal about the need for a more ambitious U.S. trade agenda, calling on the current administration to pursue comprehensive free trade agreements.

— U.S. WTO delegate: China operates in ‘predatory’ manner. The challenges that China presents to the international trading system are growing, a U.S. delegate to the World Trade Organization (WTO) said, accusing Beijing of “predatory” industrial practices that harm other countries. “The PRC has doubled down on its state-led, nonmarket approach to the economy, to the detriment of workers and businesses in the United States and other countries, including emerging and developing economies,” David Bisbee, deputy permanent representative of the U.S., told a WTO meeting where China’s trade policies are under review.

Key points regarding the U.S. perspective on China’s approach to international trade:

• State-led, non-market approach: The U.S. accuses China of maintaining a state-directed economic model that runs counter to WTO principles and free market norms. This approach involves significant government intervention in the economy and trade.
• Predatory practices: The U.S. characterizes China’s industrial policies as “predatory,” suggesting they are designed to give Chinese companies unfair advantages in global markets.
• Harm to other economies: The U.S. argues that China’s practices negatively impact workers and businesses not only in the United States but also in other countries, including emerging and developing economies.
• Intensification of problematic policies: According to the U.S., China has “doubled down” on its state-led approach, indicating that the situation has worsened rather than improved over time.
• Challenges to the international trading system: The U.S. views China’s practices as a growing threat to the rules-based international trading system established by the WTO.
• Specific concerns: Some of the issues raised by the U.S. include:
— Subsidies and state support for domestic industries
— Intellectual property theft and forced technology transfers
— Market access restrictions for foreign companies
— Discriminatory regulations and practices
— Excess industrial capacity in sectors like steel and aluminum
• WTO compliance: The U.S. asserts that China has a poor record of complying with WTO rules and obligations.
• Limited progress: Despite years of engagement and attempts to persuade China to change its practices, the U.S. believes that little progress has been made in addressing these concerns.
• Need for new strategies: Given the perceived failure of previous approaches, the U.S. is advocating for new strategies to defend against the harmful effects of China’s economic policies, including building resilience and working with like-minded partners.

Bottom line: These statements from the U.S. delegate reflect a broader shift in U.S. trade policy towards a more confrontational stance with China, emphasizing the protection of domestic industries and workers from what it perceives as unfair competition.

— U.S. to focus on China’s trade policy. Assistant US Trade Representative Terry McCartin will be in Geneva today (July 17) for a meeting with the WTO’s trade policy review body regarding China’s trade and practices. This meeting comes amid escalating trade tensions between the two economic powerhouses, with several key developments:

China’s WTO challenge to U.S. electric vehicle subsidies: China has requested a WTO panel to challenge U.S. electric vehicle subsidies provided under the Inflation Reduction Act. This move signifies an escalation in the ongoing dispute over the Act’s provisions and their impact on international trade.

U.S. consideration of tougher chip-related trade restrictions: The Biden administration is reportedly considering implementing more severe trade restrictions on China, particularly in the semiconductor industry. These potential measures aim to limit China’s access to advanced chip technology. The U.S. has informed its allies that it may employ the most stringent trade limitations available if companies like Tokyo Electron Ltd. and ASML Holding NV continue providing China with access to cutting-edge semiconductor technology.

China’s economic reform plans: Concurrently, China’s Communist Party is holding high-level meetings in Beijing to outline strategies for revitalizing its slowing economy. These discussions, which conclude on July 17, are focusing on comprehensive reforms and advancements, drawing parallels to the economic opening-up policies of the late 1970s.

McCartin in Geneva is likely to address several issues:
• The impact of China’s trade practices on global markets;
• Concerns over China’s access to advanced technologies, particularly in the semiconductor industry;
• The legitimacy of U.S. subsidies for electric vehicles under the Inflation Reduction Act;
• Potential new trade restrictions being considered by the U.S. and their implications for international trade relations.

— Farm Bureau report: SAF tax credit will have almost no farm impact 2024 (and what you can do about it). Farm Bureau released an article (link) on the Sustainable Aviation Fuel (SAF) tax credit. USDA recently issued a request for information regarding greenhouse gas emissions associated with biofuel feedstock production. This move follows the Internal Revenue Service’s (IRS) guidance on how corn and soybean-based sustainable aviation fuel (SAF) can qualify for tax credits under specific conditions.

The IRS guidance, part of a pilot program, requires farmers to implement specific climate-smart agricultural practices to meet the 50% greenhouse gas reduction requirement compared to petroleum-based aviation fuel. These practices include planting cover crops, no-till farming, and using energy-efficient fertilizers for corn growers.

Challenges. Farm Bureau says that while this is a step towards recognizing U.S.-grown grains and oilseeds as potential SAF feedstocks, the timing and stringent requirements pose challenges for farmers. Many relevant decisions were made before the rules were announced, and the paperwork requirements are extensive.

Farm Bureau reveals that USDA’s Office of the Chief Economist has been instrumental in providing scientific evidence to keep American crops eligible for these tax credit programs. Their recent request for public input on sustainable agriculture science aims to further demonstrate the range of U.S. crops and farming practices that should qualify for these credits.

The future Clean Fuels Production Credit (Section 45Z) for 2025-2027 presents an opportunity to improve upon the current guidance, according to Farm Bureau. If released earlier with more flexible sustainability practices and reasonable recordkeeping requirements, the analysis says it could lead to more widespread adoption of sustainable agriculture practices.

USDA Secretary Tom Vilsack has highlighted SAF as a significant potential contribution from American agriculture to climate solutions. However, the success of this opportunity, Farm Bureau says, depends on whether programs like the Clean Fuels Production Credit recognize the value of U.S. crops in reducing emissions.

The current system’s focus on specific products and practices can lead to economic inefficiencies that may undercut environmental benefits, the farm group notes. Examples include the importation of Brazilian sugar ethanol and used cooking oil to take advantage of U.S. tax credits, potentially displacing more sustainable domestic options.

Farm Bureau’s bottom line: To maximize the environmental and economic benefits of these programs, a more comprehensive and flexible approach is needed. This should include a scientific framework that captures the full impact of production and transportation, as well as broader eligibility for U.S. row crops in future guidance.

— Brazil, Australia raise concerns over EU’s inaccurate deforestation maps. Brazil and Australia, along with other countries, have raised concerns about the EU’s use of inaccurate deforestation maps to delineate banned areas, according to the Financial Times (link). These maps inaccurately classify long-established farms and ranches as forests, leading to an overestimation of deforestation and potentially penalizing exporters who have not engaged in deforestation. The EU’s plan, intended to leverage its buying power to reduce deforestation-related emissions, is expected to take effect by the end of the year. However, it is likely to face legal challenges due to the complexity and uncertainty of the data.

— Department of Energy issued a $1.2 billion loan to the battery manufacturer Entek to build a factory in Indiana, part of the Biden administration’s push to establish a domestic EV supply chain.

— Painful surge in grocery prices: causes and analysis. The post-Covid surge in grocery prices has been a noticeable and financially painful part of the rising U.S. cost of living. Shoppers couldn’t miss the sharp price increases, such as the doubling cost of a can of tomatoes or the significant rise in beef prices. Economist Thomas Klitgaard from the Federal Reserve Bank of New York analyzed the causes of this increase (link). Here are the key findings:

Stable prices before pandemic: The consumer price index (CPI) for food-at-home was stable for the five years prior to the pandemic, indicating little change in grocery bills from 2014 to 2019.

Sharp increases during pandemic:
• 2020: Prices rose by 4%.
• 2021: Prices increased by 6%.
• 2022: Prices jumped by 12%.

Overall, the food-at-home index increased by 25% from Q4 2019 to Q1 2023.

Key components driving price increases:
• Commodity Prices: The underlying price of commodities, especially grains, saw significant increases. This rise cascaded down to other food items like beef, pork, poultry, eggs, and dairy products.
• Wages: The wage bill at supermarkets rose substantially, contributing to higher grocery prices.

Minor Impact:
• Price gouging: Klitgaard’s analysis suggests that price gouging by companies was not a significant factor in the price increases.

Bottom line: The surge in grocery prices was driven mainly by substantial increases in commodity prices and supermarket wages, rather than price gouging. The stability of grocery prices before the pandemic underscores the dramatic impact of these factors during the early 2020s. While grain prices have slumped since 2022, the wage bill keeps going up — with average hourly earnings up 6% in May from a year before. And Klitgaard warns that may bode ill for shoppers going forward. “An open question is whether grocery inflation can stay as moderate as it has been since early 2023 with grocery worker wage inflation still elevated,” he wrote.

(Liberty Street Economics)

(Liberty Street Economics )

— CDC has identified several factors that may have contributed to the bird flu infections among poultry workers in Colorado:
• Extreme heat conditions at the work site made wearing personal protective equipment (PPE) challenging for the workers.
• Large fans were in use, which likely made it difficult to keep PPE in place and effective.
• The use of PPE, particularly masks and eye protection, was not optimal among the workers.

Dr. Niray Shah, principal deputy director of the CDC, stated that these conditions likely played a role in the workers contracting the virus.

Additional details about the outbreak include:
• Approximately 60 workers at the farm experienced symptoms and were tested.
• Those who tested positive for bird flu reported a mix of mild symptoms.
• DNA analysis from an infected worker suggests that the infections are “largely the same” as those found in some dairy herds, indicating a possible connection between the outbreaks in poultry and dairy cows.

CDC has confirmed four cases of highly pathogenic avian influenza (HPAI) A(H5) virus infection in Colorado poultry workers, with a fifth presumptive-positive case awaiting confirmation. These cases represent the first infections in poultry workers since 2022. CDC is continuing to investigate the origin of the outbreak and has deployed a multidisciplinary team to Colorado to support the public health response. Despite these cases, the CDC maintains that the risk to the public remains low.

Of note: All affected workers reported mild illness, with symptoms including conjunctivitis, eye tearing, fever, chills, coughing, and sore throat/runny nose. CDC emphasizes the importance of avoiding close, long, or unprotected exposures to sick or dead animals, including poultry, and following recommended guidelines for worker protection and PPE use.

— The FDA and FTC have issued warnings to five companies for illegally selling copycat snacks containing delta-8 THC, a psychoactive cannabinoid. These THC edibles have packaging that closely mimics popular foods like Froot Loops cereal and Chips Ahoy! Cookies, raising concerns about accidental ingestion or overconsumption. The FDA emphasized the potential danger of these products being mistaken for traditional foods. The agencies have given the companies 15 days to address the violations, warning that legal action may follow if corrective measures are not taken.

— VCU poll of Virginia has former President Donald Trump beating Biden 39%-36%. The poll, which was taken before the Trump assassination attempt, also shows Biden with only a 36% job approval rating. Key findings from the Virginia Commonwealth University poll:

• Trump’s lead: The poll shows former President Donald Trump leading President Joe Biden by 3 percentage points (39% to 36%) in Virginia. This is particularly notable because Biden won Virginia by over 10 points in the 2020 election.
• Margin of error: It’s important to note that Trump’s lead falls within the poll’s margin of error of +/- 4.8%, indicating a very close race.
• Biden’s approval rating: The poll reports that President Biden’s job approval rating in Virginia is at 36%. This low approval rating could be a significant factor in the current polling results.
• Black voter support: One of the most striking findings is the apparent decline in Biden’s support among Black voters in Virginia. The poll suggests Biden is down by 20 points in this demographic compared to previous elections.
• Third-party impact: Neither major-party candidate surpassed 40% support, leaving room for third-party and independent candidates to potentially influence the race.
• Timing of the poll: The survey was conducted between June 24 and July 3, 2024, with 809 potential Virginia voters participating. As you mentioned, this was before the reported Trump assassination attempt.
• Battleground status: These results suggest that Virginia, which has been leaning Democratic in recent presidential elections, may be reverting to battleground state status for the 2024 election.

Of note: This poll indicates a potentially competitive race in Virginia, with significant changes in voter preferences compared to the 2020 election. However, it’s important to remember that this is just one poll, and the political landscape can change significantly before the election.

— Schiff warns Dems. The New York Times reported (link) that Rep. Adam Schiff, the Democratic nominee for Senate in California, said at a fundraiser in the Hamptons Saturday that his party would lose the House and Senate if Biden remained the nominee.

— Rep. Cori Bush (D-Mo.) is trailing her Democratic challenger by 23 points ahead of next month’s primary, according to a new poll. A new poll conducted by McLaughlin & Associates shows Bush trailing her challenger, St. Louis attorney Wesley Bell, by 23 points. Bell is leading with 56% support compared to Bush’s 33%. The survey was conducted between June 28 and July 1, involving 300 likely Democratic voters. The Democratic primary for Missouri’s 1st Congressional District is scheduled for Aug. 6, 2024

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