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Fed cuts rates, scales back 2025 easing projections... The Federal Reserve cut interest rates another 25 basis points to a range of 4.25% to 4.50% but signaled it will slow the pace of monetary policy easing given a relatively stable labor market and the recent uptick in inflation. Economists expect the Fed to pause its monetary easing in January as it economic assesses data.
Policymakers now project two quarter-point rate cuts in 2025 if the economy grows steadily and inflation continues to decline. In September, officials had penciled in around four cuts next year. Officials also penciled in fewer cuts in 2026, which would leave the Fed funds rate at 3.4% in two years, up from 2.9% in September’s projections.
In their projections, officials increased their core inflation forecast for 2025 to 2.5% from 2.2% in September. They lower the unemployment rate projection to 4.3% from 4.4%.
Fed Chair Jerome Powell said, “With today’s action, we have lowered our policy rate by a full percentage point from its peak and our policy stance is now significantly less restrictive. We can therefore be more cautious as we consider further adjustments to our policy rate.”
Regarding how incoming President Donald Trump’s policies may impact the economy and the Fed’s path of actions, Powell said, “We just don’t know, really, very much at all about the actual policies. So it’s very premature to try to make any kind of conclusion.”
Johnson prepping ‘Plan B’ if CR fails... Congress has not yet passed the continuing resolution (CR). House Speaker Mike Johnson’s (R-La.) leadership team is said to be discussing a Plan B amid conservative opposition and vocal criticism from President-elect Donald Trump’s top allies. Johnson is discussing dropping $100 billion in disaster aid plus other attachments and instead passing a “clean CR” — then dealing with other issues in the new year, according to two Republicans with knowledge of the conversations. That would mean dropping some funding, including $31 billion in disaster and financial aid for farmers and a one-year extension of the farm bill, among other items – at least for now.
Assessing FARM Act Part II as part of CR... The FARM Act is essentially part of the continuing resolution that will be passed to keep the government funded through March 15. Paul Neiffer of Farm CPA Report provides the following assessment.
Key details and differences from the original FARM Act:
- The same eight crops are specifically identified (corn, wheat, soybeans, cotton, rice, peanuts, oats and barley).
- You will be paid on total 2024 planted acres by crop plus 50% of prevent planted acres by crop.
- You will receive a payment based on the GREATER of:
The Sum of:
- Cost of production minus
- Expected Revenue: 10-year average national yield multiplied by December 2024 Marketing Year Average Price.
This difference is then multiplied by 26% (instead of 60% in the original FARM Act)
This equals the payment per acre but is subject to the following minimum payment: 8% of the 2014 Reference Price multiplied by the national average payment yield for PLC. This part was not in the original FARM Act. It is designed so that all crops will receive a payment. Currently, barley would not get a payment without this provision. It will be applied to the other commodities that normally receive either ARC or PLC payments such as canola, dry peas, chickpeas, etc.
The payment limit is lowered from $175,000 to $125,000 and if your Farm AGI exceeds 75% of total AGI, then this is doubled to $250,000. Definition of AGI remains the same and this limit is per entity/ per person. This means an LLC has one payment no matter the number of owners. AGI is based on a three-year average of the 2020-2022 tax years.
Economic aid would come 90 days after enactment. As for ag disaster, the push is on to use the 2020 approach where most payments came out of USDA’s Kansas City office.
Bewildering assessment of soyoil impacts from year-round E15... Concerns expressed by traders center on a potential shift in demand from biodiesel to ethanol due to year-round E15 sales. That is a questionable conclusion. Consider:
- Separate products with different applications. Ethanol and biodiesel are distinct biofuels with different uses and markets: Ethanol is primarily blended with gasoline for use in standard gasoline engines. Biodiesel is typically blended with petroleum diesel for use in diesel engines. This fundamental difference makes a direct substitution between the two unlikely in most applications.
- Potential market impacts. While the products aren’t directly interchangeable, there are some potential indirect effects to consider:
- Fuel blending choices: Refiners and fuel blenders might adjust their overall biofuel strategy, potentially favoring increased ethanol blending if E15 becomes more widely available year-round.
- Feedstock competition: Both ethanol (from corn) and biodiesel (often from soybean oil) compete for agricultural resources. Increased demand for corn-based ethanol could impact crop planting decisions and prices.
- Policy uncertainty: The combination of year-round E15 approval and the upcoming change in administration adds complexity to the biofuels policy landscape, which could affect investment decisions in both ethanol and biodiesel sectors.
- Market reaction may be premature. The sharp drop in soyoil prices likely reflects short-term market uncertainty rather than a definitive shift in demand. Several factors suggest this reaction may be overblown:
- Infrastructure limitations: Widespread adoption of E15 will take time due to the need for compatible fuel pumps and consumer education.
- Separate mandates: The RFS has separate volume requirements for different biofuel categories, including biodiesel.
- Diesel market stability: Demand for biodiesel is also driven by the diesel fuel market, which has different dynamics than the gasoline market.
Significant investments to boost domestic fertilizer production, increase competition... USDA Secretary Tom Vilsack said the agency is awarding more than $116 million through the Fertilizer Production Expansion Program (FPEP) to support eight facilities in expanding innovative fertilizer production across nine states. Vilsack emphasized these investments will drive down input costs, increase options for farmers, create jobs in the United States and support farmer income.
The Fertilizer Production Expansion Program (FPEP), funded by the Commodity Credit Corporation (CCC), provides grants to independent business owners for various purposes:
- Modernizing equipment
- Adopting new technologies
- Building production plants
- Expanding fertilizer production capacity
U.S. confirms first severe human case of H5N1... The U.S. Centers for Disease Control and Prevention said a patient has been hospitalized with a severe case of H5N1 infection in Louisiana, marking the first known instance of a severe human illness linked to the virus in the United States. CDC said partial viral genome data from the infected patient shows the virus belongs to the D1.1 genotype, recently detected in wild birds and poultry in the U.S. and in recent human cases in British Columbia, Canada and Washington state. This genotype of the virus is different from the B3.13 genotype detected in dairy cows, human cases in multiple states and some poultry outbreaks in the country, CDC said.