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Fed starts monetary easing cycle with 50-basis-point cut... The Federal Reserve kicked off its monetary policy easing by cutting short-term interest rates 50 basis points to a range of 4.75% to 5.00%, signaling policymakers have gained greater confidence inflation is moving toward its 2.0% target. Fed Governor Michelle Bowman voted for just a quarter-point cut to start the monetary policy easing cycle.
The so-called “dot-plot” economic projections signal policymakers feel they will need to cut interest rates another 50 basis points by the end of this year. By the end of 2025, policymakers anticipate a policy rate of 3.4%, according to the median of their projections, implying an additional four quarter-point cuts next year. The policy rate was seen at 2.9% at the end of both 2026 and 2027, reflecting what Fed officials see as a neutral rate.
Fed Chair Jerome Powell said there was no sense of urgency with the decision to cut interest rates 50 basis points and policymakers didn’t believe they fell behind the curve before starting to ease monetary policy. “We’ve been very patient... “we’ve waited, and I think that patience has paid dividends” regarding confidence inflation is headed toward the 2.0% target. He said the Fed is in a good position to manage risks of its mandate of promoting maximum employment and stable prices. Powell also noted “nothing” political was discussed when deciding to start with a bigger rate cut.
Smaller cattle placements expected for August... Analysts expect USDA’s Cattle on Feed Report on Friday afternoon to show the large feedlot (1,000-plus head) inventory up 0.9% from year-ago at 11.194 million head. After a 5.8% jump in placements during July, the report is expected to show a 1.0% decline in the number of cattle moved into feedlots last month. Marketings are expected to decline 3.4% from August 2023.
Cattle on Feed | Avg. Trade Estimate (% of year-ago) | Range(% of year-ago) | Million head |
On Feed on Sept. 1 | 100.9 | 100.1 – 102.0 | 11.194 |
Placements in August | 99.0 | 93.5 – 102.3 | 1.983 |
Marketings in August | 96.6 | 96.0 – 97.5 | 1.820 |
Significant disparity in U.S., Brazil ethanol trade policies... That’s a major topic frustrating U.S. corn and ethanol producers, with Brazil maintaining protective tariffs while the U.S. allows tariff-free access for Brazilian ethanol. Details:
Currently, the U.S. does not impose tariffs on Brazilian ethanol imports. Brazilian ethanol can be imported into the U.S. tariff-free. The U.S. market provides free and increasing access to Brazilian ethanol.
As of 2024, Brazil imposes an 18% tariff on U.S. ethanol imports. This tariff was reinstated on Feb. 1, 2023, after a period of suspension. The tariff has fluctuated in recent years:
· Between 2017 and January 2022, Brazil imposed a tariff-rate quota and later a 20% Mercosur common external tariff.
· The tariff was suspended in March 2022 but reimposed in January 2023 at 16%.
· It was then increased to the current 18% rate.
The U.S. ethanol industry views this situation as unfair and imbalanced. U.S. ethanol exports to Brazil have declined significantly due to these tariffs:
· Exports peaked at 499.6 million gallons in 2018.
· In 2023, exports dropped to just 29,779 gallons.
Push for change. U.S. industry groups and lawmakers are pushing for reciprocal market access and the removal of Brazil’s tariffs. The tariff is seen as a protective measure for Brazil’s domestic ethanol industry, but critics argue it increases fuel costs for Brazilian consumers.
Obstacles to exporting U.S. soy products to India... Several Iowa government officials, including Governor Kim Reynolds and officials from the Iowa Soybean Association, U.S. Soybean Export Council and U.S. Grains Council, are in India this week. That prompted us to look at the restrictions India places on imports of U.S. soy products.
There are several obstacles from India regarding imports of U.S. soybeans and soybean meal:
India imposes high tariffs on soybean imports, making them economically unviable. The tariff rate on U.S. soybeans is as high as 56.5%, including goods and services tax (GST) and value added tax (VAT). This high tariff structure acts as a significant trade barrier for U.S. soybean exports to India.
India has traditionally restricted imports of genetically engineered (GE) soybeans and soybean meal. However, in recent years, India has made some temporary exceptions:
· In August 2021, India permitted imports of 1.2 MMT of soybean meal derived from GE soybeans through October 31, 2021.
· In May 2022, India approved an additional import quota of 550,000 MT of soybean meal (including GE-derived) through Sept. 30, 2022.
These exceptions were made to address high domestic soybean meal prices and support the poultry and livestock industries. However, they were temporary measures and not permanent policy changes.
India only allows the import of soybean in crushed form, not in whole form. This restriction limits the options for U.S. exporters, as crushed soybean has a shorter shelf life, making it less viable for trade, especially when combined with high tariffs.
U.S. exporters face challenges related to Food Safety and Standards Authority of India’s (FSSAI) requirements for non-GM soybean products, labeling and phytosanitary issues. These regulations can create additional hurdles for U.S. soybean exports.
When India has allowed imports of GE-soybean meal, it has restricted shipments to containerized cargo through only two ports. This limitation can significantly constrain the volume of imports within the permitted quota period.
India produces about 13 MMT to 14 MMT of soybeans annually and has shown a preference for protecting its domestic soybean industry. This stance often leads to restrictive import policies to safeguard local producers. While India has occasionally opened up imports to address domestic shortages or high prices, these measures have been temporary. The overall policy environment remains challenging for U.S. soybean and soybean meal exports to India due to these various obstacles.
India approves $4 billion in farm support spending... India’s cabinet approved $4 billion in spending to support farmers and stabilize food prices through the 2025-26 fiscal year. The funds will help control price volatility for essential commodities, including wheat, rice and vegetable oils. Additionally, a fertilizer subsidy of 244.75 billion rupees ($2.92 billion) has been allocated for winter-sown crops. The government is attempting to balance farmer profitability with affordable food prices for consumers.
U.S. officials head to Beijing amid surge in cheap Chinese exports... Senior U.S. officials are traveling to Beijing for high-level meetings to address concerns over a surge of Chinese goods flooding global markets. This marks the fifth gathering of an economic working group formed last year to improve communication between the two economic superpowers and includes participation from Federal Reserve officials.