Markets & News: Signal to Noise with Jim WiesemeyerDavis Michaelsen sits in for Chip and Pro Farmer policy analyst Jim Wiesemeyer takes us through various situations going on around the world: from Russia in Kazakhstan, to USDOT Secretary Buttigieg going to the Pacific Coast to assess a potential re-emergence of supply chain disruptions with shipping, to the latest on Build Back Better...and a lot more.
monday morning, january 10 2022. Jim Willis Meyer, Davis Michaelson here on signal to noise. Good morning Jim from Washington
was the
weekend buddy. How was the weekend?
It's a cold but no snow. So looks like congress is going to have to work again.
Oh boy. Okay. Alright. You had quite the snow events uh, last week. Made the news and everything.
Yeah. Well, anything over and drops this town down, but we had eight inches in D. C. At one time, a little bit more where I where I live. We had about four inches. We can handle
that for sure. For sure.
Well, we're glad that you joined us. Everyone. Um, we're here to talk policy and and the goings on in Washington and elsewhere.
And jim, let me just throw you a softball right over the plate. Let's talk a little bit about the Farm Bureau convention. Um, what are, what are your takeaways? What was said? What's uh, what's to know about that?
Well, I can briefly summarize what their president zippy Duvall said because I think it captured it. Uh, he said he they want more bipartisanship in Washington.
They want more trade agreements because there hasn't been any.
So they want like phase two for china, even though Phase one has expired and they want to return to the transpacific partnership that has been renamed and they more and they want more than just climate talk. So I I think that captures it. Ron
We're not going to get a Phase two, are we?
There's, there's no kind of leverage here for that, is there?
Uh, No, but when it comes to china, I tell people in my speeches, china needs commodities, whether they're from the US or you know South America and as we know that that south America is burning up right now and uh
they're going to probably come in for our, you know, new crop beans faster than what
you know, many in the market thought. And that's why I think you've seen the run up in the beans. But bottom line china still needs a lot of worldwide soybeans and corn and that's not been adequately. I think understood of their
continued need for corn because as their whole population comes back and it has, they're gonna need more protein. And that bodes well for worldwide corn imports from them well. And if we can just just
Tiptoe down this rabbit trail just a little bit as far as the Phase one deal goes
as I understand it, they didn't quite live up to the expectation to, you know, they didn't make all the purchases that were expected or agreed to
in that agreement.
But could it be argued that with or without a Phase One agreement in place that they basically would have purchased pretty much what they did either way.
Well, I think that they did purchased more than they would have otherwise. Uh especially in the meat area probably. And but but that that agreement was very good. I think for us ag ag sectors because of the other protocols that they signed onto that hopefully will be extended and this is what we're going to have to know from the biden administration now, the U. S. Trade rep Katherine tai uh later this week, I think on Wednesday this week at at an association
will give a speech. So maybe she'll detail a little bit more
of the biden vision, you know, Davis because of uh we haven't really got much detail as far as where they're going from the trade policy perspective. They had enough time to review the trump administration's trade policy. So, but on china boy, they
they're going to be, I don't care what anybody says. Their demand for protein is just going to be very good
over the next decade as they try to build up their middle class. The first thing you do is you improve your diet and that's protein and they they're very limited on arable land and yeah, they could increase productivity. But
the demand for soybeans and corn
and sorghum milo. Very, very good for the years ahead. With or without an agreement.
Well, and there was a pretty substantial trade pact signed was a two weeks ago with several Asian nations and included Australia but excluded the United States. How much of a problem is that gonna be?
Well, that's sending the signal here in town that they're that they're getting
the commodity groups, farm groups and farm state lawmakers are telling the White House, hey, you know, we're getting behind here. So that's why I think they're going to have to come to grips with some of the to propose some new trade agreements. The problem, Davis is that
the administration subject to changes,
they want to rely on what what we call executive agreement more like an executive order that they don't need Congress
to approve it. Well, you're limited in that area. You can do some, but I guess they think the votes may not be there for trade agreements. The tip off of a possible change in the bind administration's trade policy will be if they formally propose
returning our reauthorizing,
you know, fast track, you know, trade promotion authority T. P. A. Because that has expired. And you're not gonna get any trade agreement without T. P. A. The reason is that that limits an approval or rejection of of a proposed trade agreement that needs the senate
okay with an up or down vote and no amendments. So let that be the signal, you know, for for any change.
Well, and the you had mentioned going back to the Farm Bureau convention,
you mentioned, I don't know what you call it, push back
on a climate based policy of climate focused policy or uh can you, can you meet that out a little bit more for us?
I think it was Duval informed Bureau. Yes, it was it was a polite
pushback
as as he would do. He's a he's a southern gentleman
with the bite also have a bite. Don't get them riled up. I've learned that
uh they're saying, you know enough already we've we we understand your your your initiatives on climate is very important. We agree with with a lot of that. However, there are other very important things to talk about. You know,
the waters of the U. S. Rule that's in abeyance right now. Uh you know, we don't even know when it's
coming out and I was told that that could be more onerous for agriculture than many think now. But I want to see the specifics, there's things such as uh the chemicals that dicamba other chemicals where's E. P. A. Going on that we still have uncertainties regarding
uh the renewable fuel standard, the waivers, you know, so I think that was all embodied in what he was saying. Hey, we've got a series of things here, including a new Farm bill debate.
We're at least gonna have regional hearings this year. For sure. That that's a given
hearings, but probably wait until after the midterms before anything actually becomes more concrete fair.
Absolutely. Any listener or viewer
who hears anything that we're going to have significant details of a new farm bill put your hand on your wallet because it's just not going to happen because the House ag committee republicans know that there's not just high odds, very high odds
that they're going to be in control of the House next year and maybe even the Senate republicans.
But so the so they're going to air out some issues which they should but they're gonna want to put their mark on the bill because we we've had a different change in tone in the House ag committee,
you know, you know, under the current leadership mr scott from Georgia. I don't put any report court on that but it's just a different uh attitude what issues you discuss. I think it will go back to more production agriculture
if and when the republicans come back into play.
Okay, very good.
Um
jim We've gotten an awful lot of questions about whip Plus
and maybe you can fill in some of the details. Give us a status report on whip
Sure. Now I always look for barometers and I would tell again viewers and listeners and if you have questions make sure that you keep them in so so so we can answer them live here. But I think there's there's a spot on the on the on the site to do that. But
the barometer I'm looking for is when does USDA send proposed regulatory changes for whip Plus for eligible 2020 20 and 2021
crops, livestock and dairy. Now it's not over at the O. M. B. Yet. I think they do need to go to O. M. B.
But remember when on Agritalk Secretary of Agriculture Vilsack told us. He thought maybe
the regs could come out yet in december. Uh maybe we were at fault by not asking him what year? Ok, but it took so many months to get all of the kinks worked out
And finally get whipped plus eight out for 2018 and 2019 crops and
you know why change the program other than to meet statutory required changes, you know? And uh USDA has had that bill authorizing it for for 2020 and 2021 for four months now. Now come on that that we're still
dragging their feet
so I know they're looking at ways to streamline um you know, whip plus uh get payments out faster. That's an understatement. Maybe merge whip plus with the quality loss adjustment. That would be a good idea.
And hopefully they're going to address some of the problems such as making sure
uh producers with revenue insurance are not treated punitively like they were. Uh and hopefully they'll work more closely with us days risk management agency because they have all the data to expedite the payments so I don't know what needs to be done. I I know that there's been people retire
from USDA and the brain drain is starting to hurt. Not just USDA but a number of departments and government and and I've seen that so uh maybe it's a function of not having the right people in the right spot but we need information on web plus.
Okay, okay
um
You know, in 2021 we saw cattle producers of all stripes. Kind of coming together on one accord
a singular focus or at least agreement among different different sorts of cattle producers um about what needs to happen in the cattle market now. See some talk coming out of Washington
to me. I don't know if it feels like window dressing or not. What do you make of the conversation on on the meat markets?
We've got politics involved and we have economics involved. Hopefully the economics will prevail. But too often that's not the case when politics enters into it. And I think we we I don't think I know we saw some of that at the White House last week when
Vilsack joined biden and the attorney General on there, there was nothing really new
about that. They're pointing fingers at these big meatpackers and uh but but there there is something a lawmaker, you know senator roger marshall republican from Kansas.
Uh he's offering beef beef labeling legislation and so he's eyeing a rewrite of the product of the USA label. There's three different stages of his labeling. I don't want to get into the details of that. But I will say any revisions to the product of USA label
would be what kind of restrictions are imposed and because it could impact imports of cattle from Canada are our hogs and many of which are imported into this country. So at a young age and then fed in U. S. Feedlots and processed at us meat facilities, But
so that's something to watch this week. I I think that he'll be commenting on that Bill Davis. But as far as the other aspects of
of the pointing the fingers, we never see pointing of fingers when prices at the supermarket for meat are relatively low. It's always when they're high. So I know that there should be some expansion in livestock, you know, processing, that's always
good. But the problem is, is
when you do it
too fast,
are there any new entrants going to be able to withstand a market downturn or their share of the profits? And and that's what usually happens when government gets involved. They help out in the short term. But then the long term, there's pain because
the new entrance don't have the cash flow to survive a market downturn. So that's, I think what we're into right now.
Okay, interesting. I've got a note here from producer joe stack and we have a question in the comments section. Jim, can you see it? I can't see the question,
I have to go look at it, let's see,
yeah,
comments.
I'm hearing more and more coming out of china investing, investing in hydrogen powered vehicles,
any rumblings in D. C. About hydrogen, What's the future? When I was in high school, he says,
Uh, and I graduated in 2001, you're a young whippersnapper,
it
seems like we are looking at nothing but electric. Now, my answer to that is the flow of investment money
will go where opportunities
are evident
and if allowed to. But you really are seeing a big build up in electric cars now, not just in the US, but in china because they're going around the world locking in the, the, you know, critical minerals, lithium, uh, etcetera
for that industry. And let's hope that we can flex our muscles. Now, I've read recent research that in the battery technology, that's what you watch for
battery technology. Uh, there are research, there's research going on relative to the use of sodium assault of which we have a lot. Okay, so we can find the economics, the prevailing economics in that, that could be a game changer. I'm not predicting that. But that's some of the research that, that I've seen. But I can see battery technology improving just in and not just cars, but in the technology I buy of my new Macbook Pro goes 18 hours on a charge. So I could fly from here to get
Thailand which I love.
And I don't have to have a battery charge. So this is this is unbelief and it's gonna get better.
And now you're having the big guys in the automobile industry. Tesla is the innovator. But Mercedes Benz came out with a prototype that they're, they're saying it's gonna come out sooner
uh, publicly than people think on, on an electric car that has like what? 600 mile range on a battery. So hydrogen was the question. Uh, yeah, I'll have to look at the investment flow for hydrogen, but you need infrastructure
for everything. And so we're, we're in the embassy stage of building the infrastructure infrastructure for battery operated vehicles. I don't think we're anywhere close to that in the hydrogen area, but we will check that out. That's a good
well, and that's, that's a good thought to jim is you've got to have that foundation, that infrastructural foundation. And even in my area here in the middle of podunk Iowa,
we've got electric vehicle, charging stations popping up all over town. Um,
do you speak any tie? You mentioned Thailand? Do you speak any tie?
But no.
Well, when I'm sober, I don't, maybe I remember a few words when I'm over there. I do remember the line. I always get when I go to poke it. You can get anything.
I think this is a conversation for friday evening. Not monday
morning.
I
do love Thailand. It's the one place where I,
I rode my first elephant,
you know, it was quite a ride. I loved that, blame the elephants. I will tell you that the tamest elephants are female elephants. Okay. Yes, it's, that's not, Yes, that's not the case.
Transportation Secretary Pete gonna visit California on the ports situation? Porta Los Angeles Port of Long beach. Are we, are we backing up again? Are we second verse same as the first.
The latest data I'm getting in shells were going back to more way. So we're gonna see the spin that Pete boudette edge puts on that
tomorrow. I'm glad that he's going out because you learn stuff
when you go out. So uh yeah, we, we need to get an update on that because I'm not saying nothing has improved. They have. But you know, I wrote an item this morning, the new york ports of all things are having a backup. Now that was new. Uh
not totally, but due to weather,
you know, related events. So I think we're seeing an expansion of some of the problems. Bottom line, what's the upshot here? This logistics problem is, you know, supply chain is gonna last through most, if not all of this year. I hope I'm wrong.
Um, we've talked a little bit about china in, in the news. It's been Russia Russia Russia. It seems like the one that really caught my attention and had me thinking over the weekend and you can steer me back to reality if I'm way off base here. But the Kazakhstan situation um unrest to the degree
that
reports that surface that Russia was sending reinforcements was sending troops over there to try and maintain the peace in the gym. This is that at a time when
we're
seeing Russia asked for NATO to halt its continued expansion eastward.
Is is Russia sending troops to Kazakhstan to demonstrate its ability to maintain the peace
in the face of NATO saying, hey look, we don't need NATO, look, we can fix this Kazakhstan thing. Everything's gonna be fine. Is are they, are they related or am I way off base?
Well, that's that could that could well be part of it. I think, I think that that's a salient to analysis Davis. But but you know what Putin of of not a farmer, you know, once you're a kg beer, you're always a kg beer.
But he takes opportunities of crisis situations to try to go back as much as he can to the farmer soviet union and that's clearly what he's doing. There's a picture, I guess I should have had it with a shotgun
on the cover of the economist magazine. Is this is how Putin negotiates with a gun in his hand, you know, of unrealistic expectations. Does he just want an excuse to further go into Ukraine?
Uh, and as far as Kazakhstan, he just took it as an opportunity to uh, to, to flex his muscles. Now, the latest this morning on the Ukraine,
you know, situation is a soviet, you know, I'm sorry. You know, Russia's foreign minister uh quote, completely ruled out the possibility that Russia would make concessions in talks with the west over Ukraine. Well, I,
you know, they're going to talk today from the military perspective. And then later on this week with NATO, Ukraine, etcetera. So
uh the secretary general of NATO on sunday said the alliance was prepared for, quote again, a new armed conflict in europe should talks fail and Anthony Anthony Blinken who is our Secretary of State,
was very revealing. You usually don't as the Secretary of State
uh forecast specific sanctions that's going to happen. But he did that on the sunday network news shows. So and he also said he didn't expect any breakthroughs. So this thing is not getting less
on the radar screen. It's it's flashing red red lights, literally,
I happened to be in Berlin in 1990 that when the wall was coming down, there have been talks um of course, you know, concerns about segmenting that portion of the world as it was back after World War II.
Is this a legitimate concern?
Well, if it is, you're going to see people rile up from the right like you don't know that, that you talk about more than that to be a wall back, you know, just not. The freedom is an interesting thing
to get it. It's hard to keep its even harder apparently, but you don't want to lose it nonetheless.
Alright, moving on, USDA reports coming out this week. That's exciting.
Oh my goodness. Yeah. And you know, it's always I know brian Grady at pro farmer says you watch the grain stocks report because they have an ability to always surprise frankly. That's one of the USDA is weakest
surveys, both really off farm stocks but but uh we also have a look on the U. S. Winter wheat, we're going to see whether or not we're going to get a surprise to the downside on the bakery seatings for winter wheat. That's what the market's telling me over over the weekend that they're watching out for
and from a from a supply and internationally.
Um I think brazil comments on their soybean production the day before Tuesday.
Um so we're gonna see
some of these private estimates are really dropping brazil's, you know, soybean crop and Argentina's corn crop. Argentina is really flaring up on the temperature side. So USDA usually takes a conservative approach in reducing
Both Brazil and in Argentina crops when they're going down, but they are going down. So those are the things to watch out for and look at that carry over for corn. How will it, will it be closer to 1.3 billion bushels are under because of our ferocious demand for corn. So you've got to look at the ending stocks, you know, forecast
as well because that's what the market will,
yep.
Alright, turn your turn your gaze toward the horizon of this week. What are you going to be watching? What should we be watching out for as the week goes on?
Well Congress not much because this is the week that the Senate Democrats are saying that they want to buy 17 January, do a voting rights legislation, but
You're gonna need 60 votes in the Senate and that means an end to the filibuster because of it. What won't happen
because both Mansion from west Virginia and uh Kirsten cinema democrat from Arizona said they do not want to significantly change or change at all
the filibuster language. So this is just the last attempt
at trying to change the voting rights rules to a federal approach as opposed to what the Constitution says to leave it at the state level. And I don't think you're going to hear much more from Congress this week. It's really, really outside, thankfully,
Congress this week, as far as the build back better, we haven't even mentioned that. That's right, yeah, that's that's news. Well, the Washington post over the weekend had a story that said, uh, basically it's on ice and it's going to get into a tundra pretty soon. The reports is that Senator Manchin has withdrawn
His previous $1.8 trillion dollar counter offer
to the White House? So it looks like this is failing fast, you know, Davis,
is this uh,
is this mansion finally, is this because of, of mansions efforts here? He may have slowed it down and made some people think a little bit, is he getting the nod? The disparaging looks from supporters of it? Is he is he the guy that made this happen?
He's the guy that made this happen and the data is going his way, what with inflation,
the Federal Reserve is that now there's the debate in how soon do they start? The interest rate increases and how often? But this is all cautionary flags that mansion set up in his initial many months ago
comments that he thought that Congress was going too far too fast and
I think he's been proven right.
The Feds feeling a little hawkish these days from, from where I'm sitting. Is that how you're engaging them right now as well?
Yes, the talk, but you know, some Fed watchers including the guy we totally respect doctor, you know, vince malanga of economics, I think his latest is that he only sees
uh, them increasing rates one time. But boy there's other people in the uh, it takes many different viewpoints for traders and and we have it, I want to go back to what I wrote this this morning. I think it was Goldman Sachs that that they have a more than a
More than one. I think that they have up to four
your your interest rate changes probably basically. Yeah, that's a
lot.
So there's a dichotomy there because and I understand it. The Federal Reserve chairman jerome J paul
has been reticent. I think he got too close to the administration and his former boss Janet Yellen whose Treasury Secretary of denying that inflation was not transitory. Now they've made it clear now they made a mistake?
Uh, So, but now if this thing still gets away and inflation keeps at at lofty levels longer than what they currently think, then he's gonna have to get pretty aggressive.
The problem. The conundrum we would say is he's in a maybe the Feds in a box here
because if the omicron variant continues to slow down the US economy, I mean it's rampant throughout the US.
Uh well we have stagflation, in other words, the US economy going down on on a on a G. D. P. Basis levels, not a recession
while at the same time you're having to deal with inflation by raising
interest rates. That's the definition of stagflation and that's that's still up in the air. We don't know. Farmer Treasury Secretary Lawrence Summers over the weekend said that even after the Fed's hawkish pivot, he called it and after the selloff in treasuries,
he said policymakers and investors are still underestimating
what will be required to bring down inflation.
Well, those are signals here, clear signals that they are correct.
We're into we're into some pain later on this year and that's the Fed dilemma that they're into.
Mhm.
Well, jim, I wish we had more time, but we are out of time for today's edition of D. C. Signal to noise. I appreciate your your insights buddy, have a great week. It's good to see you man and be sure and join us next monday morning when we'll listen for the signals and cut out the noise here on signal to noise.
