READ the NAFB’s National Ag News for Friday, April 17th

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Coronavirus Impact will likely Limit China’s Phase One purchases

Two experts on the bilateral relationship between the U.S. and China say the impact of the coronavirus on the Chinese economy doesn’t bode well for the Phase One Trade Deal. They tell the South China Morning Post that COVID-19 has likely rendered the pact between the world’s two largest economies “stillborn.” The economic impact will only add to pressure on Beijing to reform its domestic economy. The Post says China had high levels of debt before the virus outbreak, plus, the private sector struggles to regain momentum will likely put a damper on consumption. Rhodium (ROW-dee-uhm) Group founder Daniel Rosen and former Australian Prime Minister Kevin Rudd both say consumption will be limited to the point that it will be almost impossible for Beijing to fulfill its buying commitments. “The extraordinary stimulus that got China out of the financial crisis in 2008-2009, which they were applauded for, is simply not an option today,” Rosen says. “The easy credit given to support the country’s state-owned enterprises in recent years is too high.” Rudd says the Chinese government won’t do another stimulus strategy like the last one, even though the need is much greater.” The negative assessment runs counter to the expectations of President Trump, who says he’s confident China will follow through on its obligations.  

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Refiners in Five States Ask EPA for RFS Waiver

The governors of five oil-patch states are asking the Environmental Protection Agency to waive obligations under the Renewable Fuels Standard for refiners due to COVID-19. Governors from Texas, Utah, Oklahoma, Wyoming, and Louisiana sent a letter to the EPA earlier this week. They claim refiners in their states face financial hardship because of the oil-market disruptions caused by economic shutdowns around the world. They also point out that prices for Renewable Identification Numbers have tripled, further compounding a tough situation. However, Emily Skor, CEO of Growth Energy, calls this an offensive attempt by refiners to steal markets from struggling biofuel producers and farmers. “Any move to unravel the RFS now would dim any hopes of economic recovery in rural America, where so many in the U.S. biofuel industry have been impacted by furloughs and plant closures, all while millions of farmers struggle to stay afloat,” she says. “We’ve seen the courts reject his kind of abuse before.” She also points out that even the oil companies themselves admit that biofuel credits don’t impose a real cost on refiners. “We see this as a non-starter,” Skor adds.

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DHS, USDA Take Action on Farm Labor Supply

The Department of Homeland Security, with support from USDA, announced a temporary final rule that would make changes to some H-2A Program requirements. A USDA release says the changes are designed to help U.S. agricultural employers find and maintain a steady supply of labor, protect the nation’s food supply chain, and lower the impact of COVID-19. At the same time, USDA says the temporary changes won’t weaken or eliminate protections for U.S. workers. Under the temporary rule, an H-2A petitioner with a valid temporary certification, who is concerned that workers won’t be able to enter the country due to COVID-19 travel restrictions, can start employing certain foreign workers who are currently in H-2A status in the U.S. immediately, as soon as the U.S. Citizenship and Immigration Services receives the H-2A petition. To take advantage of the limited-time change in requirements, the worker seeking to change employers must already be in the U.S. and in valid H-2A status. Also, valid H-2A workers are being allowed to stay beyond the three-year maximum allowable period in the U.S. Employers who are worried about finding an adequate supply of legal labor who were previously authorized to work for the employer as H-2A workers, should take advantage of the limited opportunity. The Citizenship and Immigration Service also says it’s never okay to hire illegal aliens to work on your farm or in your ag-related businesses.

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Farmers, Ag Industry Groups Scrambling for Aid

The Small Business Administration has been slow to approve many agricultural banks under the new Paycheck Protection Program. Politico says that the program has been overwhelmed with applications and is expected to run out of its initial $350 billion as soon as this week. “There’s a lot of farmers out there trying to line up for the funding,” says Todd Van Hoose, President of the Farm Credit Council. “By the time they get there, the money will likely be gone.” The Paycheck Protection loans weren’t originally designed for agriculture, but they could be valuable for the hard-hit segments that have larger workforces, such as dairy farmers and specialty crop growers. Van Hoose says farm creditors are in for a “heck of a task” because they have virtually no experience working with the Small Business Administration. While many businesses are focused on getting direct payments or loans, another avenue of aid will likely be commodity purchases.  Ag Secretary Sonny Perdue did confirm on Wednesday that USDA will buy commodities like dairy and meat to help combat food waste and stock the nation’s food banks. “We want to purchase as much of this milk, hams and pork products, as well as other proteins, and then move them into our nation’s food banks, as well as even into international humanitarian aid,” Perdue says.

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Farm Income Drop Could Top $20 Billion

A new economic analysis says crop and livestock farmers are in for much lower incomes in 2020. A DTN report says crop farmers are projected to see an $11.85 billion in revenue during 2020, while livestock farmers are projected to drop a combined $20.24 billion in receipts this year. Early analysis from the University of Missouri’s Food and Agricultural Policy Research Institute is showing crop and livestock farmers combined income dropping by $32.09 billion. That means farm income for 2020 will drop by $20 billion once lower input costs and higher government payments are included in the analysis.  Looking ahead to 2020-2021 crops, the institute is projecting a five-to-ten-percent drop in grain and oilseed prices. FAPRI also sees a 20 percent drop in livestock prices during 2020. Around the nation, FAPRI says the key unknown is whether the coronavirus creates a “V-Shaped” recession that creates a quick recovery, or an economic disruption that lasts into next year. “The speed and duration of the recovery are also a great source of uncertainty,” FAPRI says in its analysis. “The GDP levels for 2021 and possibly later could continue to be below the levels forecast before the emergence of COVID-19.” The institute also says it could take consumers much longer to recover, which would affect energy, manufacturing, and agriculture.

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Farm Lending Activity Slows in the First Quarter

Growth in farm lending continued to show signs of slowing, even prior to the emergence of COVID-19 and the resulting economic conditions the outbreak caused. A report from the Federal Reserve in Kansas City says the volume of operating loans in the first quarter actually increased from 2019. However, the overall demand for non-real estate loans declined. Despite a decline in most types of lending, loans for operating expenses increased by nearly 10 percent from the previous year. The overall decline was driven by a drop of about 30 percent in both livestock loans and miscellaneous loans. At the end of 2019, delinquency rates on farm loans continued to increase slightly, but agricultural credit conditions and farmland values were holding steady. Capital cushions at agricultural banks, which increased steadily in recent years, remained at historically high levels through last year. As the effects of the current economic disruption continue to materialize in the months ahead, the current stability of farm real estate values and financial soundness of farm banks could be key sources of support for the entire agricultural sector.

SOURCE: NAFB News Service

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By Brian Allmer - The BARN

Brian Allmer & the BARN are members of the National Association of Farm Broadcasting (NAFB), the Colorado FFA Foundation, the Colorado 4H Foundation, the Colorado Farm Show Marketing Committee, 1867 Club Board Member, Denver Ag & Livestock Club Member, the Weld County Fair Board, the Briggsdale FFA Advisory Council, Briggsdale 4H Club Beef Leader & Founder / Coordinator of the Briggsdale Classic Open Jackpot Show.