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President Trump tweeted late Friday that he’d suspended plans to impose tariffs on Mexican goods, saying the U.S. and Mexico had reached an agreement on stemming illegal immigration.

The president says Mexican officials “agreed to take strong measures” to cut down on the flow of illegal immigrants traveling through Mexico and entering the U.S. An Associated Press report says the move puts to an end a threat that had sparked warnings from members of Trumps party, as well as administration officials, about long-term damage to the economy.

The damage would include driving up prices for consumers, as well as put the recently-updated U.S.-Mexico-Canada Trade Agreement in jeopardy. U.S. and Mexican officials met for more than 10 hours on Friday and ended a third day of talks with an agreement that would satisfy Trump’s demand that Mexico crack down on illegal immigration into the U.S.

Republicans in Congress had recently warned the president that they were ready to try and stop imposing tariffs on Mexico that were scheduled to begin on Monday. They were worried about driving up costs to consumers and the damage to the economy.

Despite pushback from U.S. business and Mexico, President Donald Trump doubled down Friday on his threat to slap a 5% tariff on Mexican imports unless America’s southern neighbor cracks down on Central American migrants trying to cross the U.S. border.

U.S. manufacturers said the tariff, set to take effect June 10, would have devastating consequences on them and American consumers. U.S. stocks tumbled on Wall Street in response to Trump’s planned action.

“Imposing tariffs on goods from Mexico is exactly the wrong move,” said Neil Bradley, executive vice president of the U.S. Chamber of Commerce, which is exploring legal action in response to the tariffs. “These tariffs will be paid by American families and businesses without doing a thing to solve the very real problems at the border. Instead, Congress and the president need to work together to address the serious problems at the border.”

Mexican President Andrés Manuel López Obrador dispatched his foreign secretary to Washington to try to negotiate a solution. He said social problems are not solved with coercive measures, but also seemed convinced that Trump just needed to be informed about all the steps Mexico has taken to slow illegal migration.

Mexico has stepped up raids on migrant caravans traveling through the southern states of Chiapas and Oaxaca this year. It has deported thousands of migrants and frustrated thousands more who wait endlessly for permits that would allow them to travel legally through Mexico.

Administration officials told reporters in a briefing call Thursday evening that Mexico could prevent the tariffs from kicking in by securing its southern border with Guatemala, cracking down on criminal smuggling organizations, and entering into a “safe third country agreement” that would make it difficult for those who enter Mexico from other countries to claim asylum in the U.S.

“We fully believe they have the ability to stop people coming in from their southern border and if they’re able to do that, these tariffs will either not go into place or will be removed after they go into place,” said acting White House chief of staff Mick Mulvaney.

Trump said the percentage will gradually increase — up to 25% — until the migration problem is remedied.

“Mexico has taken advantage of the United States for decades,” Trump said in a tweet. “Because of the Dems, our Immigration Laws are BAD. Mexico makes a FORTUNE from the U.S., have for decades, they can easily fix this problem. Time for them to finally do what must be done!”

Trump’s decision showed the administration going to new lengths, and looking for new levers, to pressure Mexico to take action — even if those risk upending other policy priorities, like the United States-Mexico-Canada Agreement, a trade deal that is the cornerstone of Trump’s legislative agenda and seen as beneficial to his reelection effort.

Keeping the economy rolling also is critical to Trump’s reelection, and business was not happy with the president’s planned tariff on Mexican imports.

“These proposed tariffs would have devastating consequences on manufacturers in America and on American consumers,” said Jay Timmons, chief executive officer of the National Association of Manufacturers. “We have taken our concerns to the highest levels of the administration and strongly urge them to consider carefully the impact of this action on working families across this country.”

The stock market’s tumble on Friday all but guarantees that May will be the first monthly loss for the market in 2019. The news hit automakers particularly hard. Many of them import vehicles into the U.S. from Mexico.

“The auto sector – and the 10 million jobs it supports – relies upon the North American supply chain and cross border commerce to remain globally competitive,” said the Auto Alliance, which represents automakers that built 70% of all cars and light trucks sold in U.S. “Any barrier to the flow of commerce across the U.S.-Mexico border will have a cascading effect — harming U.S. consumers, threatening American jobs and investment and curtailing economic progress.”

The response from Trump’s GOP allies on Capitol Hill was notably muted. Republicans have expressed unease with Trump’s trade and tariff wars and tried to reverse some of them.

“There is a serious humanitarian crisis at our southern border, and it is past time for my Democratic colleagues to finally get serious about meaningful action,” Senate Majority Leader Mitch McConnell said.

But the sudden tariff threat comes at a peculiar time, given how hard the administration has been pushing for passage of the USMCA, which would update the North American Free Trade Agreement.

Sen. Chuck Grassley, R-Iowa, a usual Trump ally and the chairman of the Senate Finance Committee, slammed the president’s action as a “a misuse of presidential tariff authority” that would burden American consumers and “seriously jeopardize passage of USMCA.”

Sen. Joni Ernst, R-Iowa, said the livelihoods of farmers and producers from her state are at risk and so is the USMCA.

“The USMCA would provide much-needed certainty to our agriculture community, at a time when they need it,” she said. “If the president goes through with this, I’m afraid progress to get this trade agreement across the finish line will be stifled.”

 In response to President Trump’s plan to impose five percent tariffs on all Mexican imports as of June 10, 2019, David Herring, president of the National Pork Producers Council and a pork producer from Lillington, North Carolina, issued the following statement:

“We appeal to President Trump to reconsider plans to open a new trade dispute with Mexico. American pork producers cannot afford retaliatory tariffs from its largest export market, tariffs which Mexico will surely implement. Over the last year, trade disputes with Mexico and China have cost hard-working U.S. pork producers and their families approximately $2.5 billion.

“Let’s move forward with ratification of the United States-Mexico-Canada trade agreement, preserving zero-tariff pork trade in North America for the long term; complete a trade agreement with Japan; and resolve the trade dispute with China, where U.S. pork has a historic opportunity to dramatically expand exports given the countries struggle with African swine fever.

“We hope those members of Congress who are working to restrict the administration’s trade relief programs take note. While these programs provide only partial relief to the damage trade retaliation has exacted on U.S. agriculture, they are desperately needed. We need the full participation of all organizations involved in the U.S. pork supply chain for these programs to deliver their intended benefits.”

For most of the last year, U.S. pork producers have lost $12 per hog due to trade retaliation by Mexico, which was lifted last week, according to Iowa State University Economist Dermot Hayes. Dr. Hayes projects that the U.S. pork producers will lose the entire Mexican market, one that represented 20 percent of total U.S. pork exports last year, if they face protracted retaliation. As of April 1, 2019, the value of U.S. pork exports to Mexico were down 28 percent from the same period last year.

This spring’s planting decisions may be as clear as mud, yet they carry heavy financial consequences.

“You couldn’t have planned this to be more confusing,” said University of Illinois economist Gary Schnitkey. “The falling out of the trade deal happened right when we were getting to the point of planting corn.”

Then, persistent heavy rains across wide swaths of the Corn Belt kept farmers from their fields, forcing many producers to weigh their options: take a prevented planting payment from crop insurance, plant corn but with lower insurance coverage levels or switch to soybeans.

“So it just becomes a point of looking for the alternative that you think has the highest expected return, even though it’s probably not the return that you’d like,” he said. Many farmers will still be looking at negative incomes as they put pen to paper.

VARIOUS FACTORS

Farmers have to factor in their local weather forecast, fluctuating markets and USDA’s revised Market Facilitation Program. USDA released its proposal on Thursday afternoon — $14.5 billion of direct payments to farmers with a rate based on county-level trade impacts and the total acreage a farmer plants to eligible commodity crops.

“They’ve tried to structure it in a way that doesn’t necessarily favor switching to soybeans sooner, which is what a lot of people were worried about, but it does suggest that people who get toward the end of that (soybean) planting window might wind up stretching it a little farther,” Jim Mintert, director of the Center for Commercial Agriculture at Purdue University, said in a webinar.

While that program could help lift farmers’ bottom lines, USDA hasn’t released payment rates, which it says will be based on trade losses at the county level. (For more details on how the program would work, please read https://www.dtnpf.com/….)

“USDA is going to have to provide some clarification as far as how those payments are going to be computed, but if our interpretation is on track, it’s going to discourage prevented planting,” Mintert said.

DEPENDS ON LOCATION

Determining whether it’s worth it to continue planting corn after the final planting date, which is sometime between May 25 and June 5 depending on where you are in the Corn Belt, is complicated.

Farmers have to consider whether they’ll have a window to plant, what they may be giving up in yield, changes to their insurance protection levels and whether they believe they’ll be able to sell the crop at a profit. Many of those are still moving targets.

Robert Nielsen, Purdue Extension agronomist and corn specialist, said planting date is only one factor in determining yields. After about the middle of May, corn yields decline approximately 1 to 2 bushels per acre per day. So, if you plant corn on June 10, you’re looking at a yield loss of about 30 to 60 bushels per acre.

“That still doesn’t tell us what the actual yield will be at the end of the season,” he said on the webinar. For example, if the rest of the season turns out perfectly, yield potential could have been 260 bushels per acre. Subtract 60 bushels because you planted late, and you’re still looking at a 200 bpa yield. But if the rest of the summer has poor growing conditions, that topline yield could fall to 200 bpa, leaving you with a yield of 140 bpa.

“I accept the fact that we lose yield as we delay planting, but that doesn’t tell me what the actual yield will be at the end of the season, and so we’re playing these what-if scenarios trying to budget in numbers that require yields, not loss. It’s really what’s going to happen the remainder of the season that’s going to dictate the actual absolute yield,” Nielsen said.

TOUGH DECISION

Michael Langemeier, associate director at Purdue’s Center for Commercial Agriculture, said he thinks there’s a danger farmers could pull the plug on corn planting too soon because they’re wary of the yield impact. “If the yield drops are not very big, corn does look like it’s more profitable and has less downside risk than soybeans. It’s a tough decision this year.”

DTN Lead Analyst Todd Hultman concurs that there’s more profit potential in corn this year, even though the marketing year got off to an unusual start. Noncommercial traders made record-large bearish bets early in the season based on the size of Brazil’s and Argentina’s crops. That pushed prices down this spring, limiting farmers’ pricing opportunities.

“So, for a while, it looked like the seasonal pattern in corn wasn’t really forming up, and that actually happens, maybe, one out of four years,” Hultman said. “When it does, we usually see a seasonal peak come later in the year than it normally does.”

Now, with the wet spring and inability to plant corn in May, those noncommercials are being forced to cover their positions, putting the market in a bullish situation. Hultman said it’s tough to guess how high the market will go.

“The planting problem is for real. It’s not because it’s exaggerated by anybody yet,” he said. “The noncommercials being that heavily short just adds fuel to the fire. I think we can continue to bet on higher corn price.”

MARKETING UPSIDE

Mintert said the upside from a marketing standpoint is “clearly on the corn side because it looks like we’re going to pull some acres away from corn, maybe tighten up the supply a little bit. On the soybean side, the failure to negotiate the trade agreement with China is huge.”

The 2018-19 stocks-to-use ratio for soybeans, at 25%, is the highest it’s been since the 1980s.

“If we chart ending stocks-to-use ratios compared to where they have typically traded in the past, we’re talking about cash soybean prices with a $6 in front of them,” Hultman said. “The bearish potential for this situation we’re in is clear and very hard to argue. Why would anybody plant soybeans in that situation? But if they can be assured of getting a bonus check, that certainly might help them.”

Hultman has recommended DTN customers establish a price floor under their 2019 soybean production by buying out-of-the-money puts. A put option allows the owner the right, but not the obligation, to sell the underlying commodity at a set price. When he initially made the recommendation, those options were less than a nickel per bushel. Despite that option price more than doubling to date, Hultman says there is still potential in the strategy.

“This year, I don’t think we can say it’s really a bad price yet because of the potential downside risk.”

For farmers looking to cash in on the corn market’s rally, Hultman suggests a mix of old-crop and new-crop sales. He’s recommended farmers price up to 25% of new-crop corn, being careful not to overestimate their production potential. For old-crop sales, he suggests pricing another 25%.

“That can certainly help boost their cash position, and if we get a little more here in the next few weeks, that would help a lot too,” Hultman said. He suggests feeding this rally, instead of trying to catch the top.

“The big picture for grains in general is still extremely bearish, especially with record wheat supplies and the ending stock numbers we’re talking about for beans. It seems like a real gift to get some better corn prices, so we want to take advantage of it.”

Association of Equipment Manufacturers (AEM) president Dennis Slater issued the following statement supporting the Trump Administration’s decision to end tariffs on steel and aluminum from Canada and Mexico:
“We are encouraged by the Trump Administration’s decision to end tariffs on steel and aluminum from Canada and Mexico. Today’s action responds to the concerns voiced by equipment manufacturers and we strongly support it,” said Dennis Slater, president of AEM. “But there is still a lot that must be done to better support equipment manufacturers and the 1.3 million men and women of our industry. While today’s decision helps our member companies conduct business in North America, we are urging Congress to immediately ratify the United States Mexico Canada (USMCA) agreement. By doing so, Congress will preserve duty-free access to our industry’s largest export markets, Canada and Mexico, and help our farmers sell more of their products at a time of incredible economic difficulty.
Slater continued, “We also continue to urge the President to completely remove all steel and aluminum tariffs on America’s other trading partners around the world, and end all the protectionist tariffs hurting U.S. farmers, American families, and our national economy. We need our elected officials to make it easier, not more difficult, for American businesses, manufacturers and farmers to be competitive in a 21st century global marketplace.”

The Trump administration today announced plans to lift the 25% tariff on steel and the 10% duty on aluminum imports imposed last year on Canada and Mexico. Both countries subsequently retaliated against a host of U.S. products.

“We thank the administration for ending a trade dispute that has placed enormous financial strain on American pork producers,” said David Herring, a pork producer from Lillington, N.C., and president of the National Pork Producers Council. “Mexico’s 20% retaliatory tariff on U.S. pork has cost our producers $12 per animal, or $1.5 billion on an annualized, industry-wide basis. Removing the metal tariffs restores zero-tariff trade to U.S. pork’s largest export market and allows NPPC to focus more resources on working toward ratification of the U.S.-Mexico-Canada Agreement (USMCA), which preserves zero-tariff trade for U.S. pork in North America.”

Last year, Canada and Mexico took over 40% of the pork that was exported from the United States. NPPC has designated USMCA ratification as a “key vote” and will closely monitor support of the agreement among members of Congress. U.S. pork exports to Mexico and Canada support 16,000 U.S. jobs.

“We are also hopeful that the end of this dispute allows more focus on the quick completion of a trade deal with Japan,” Herring added. “U.S. pork is losing market in its largest value market to international competitors that have recently implemented new trade agreements with Japan.”

According to Dr. Dermot Hayes, an economist at Iowa State University, U.S. pork will see exports to Japan grow from $1.6 billion in 2018 to more than $2.2 billion over the next 15 years if the U.S. quickly gains access on par with international competitors. Hayes reports that U.S. pork shipments to Japan will drop to $349 million if a trade deal on these terms is not quickly reached with Japan.

Deere cut its profit and sales expectations for the year as a trade war between the U.S. and China escalates and farmers try to recover from a planting season besieged by heavy rains.

Prices of soybeans targeted by Chinese tariffs last year fell to a 10-year low this week as the countries traded jabs .

“Ongoing concerns about export-market access, near-term demand for commodities such as soybeans, and a delayed planting season in much of North America are causing farmers to become much more cautious about making major purchases,” Deere Chairman and CEO Samuel Allen said in a prepared statement Friday.

The warning from Deere pulled the entire S&P industrial sector down on fears that the nation’s largest manufacturers will see similar damage.

Deere now expects to earn about $3.3 billion in 2019, down from its forecast three months ago for profits of about $3.6 billion. The company is less optimistic about revenue as well, lowering its forecast of a 7% increase, to just 5%.

Company shares slumped 6% to a new low for the year.

China has targeted U.S. farmers , particularly soybean farmers, in retaliation for tariffs put in place by the Trump administration. The effects of China’s actions have not taken full force in the U.S. Farm Belt.

Roughly 60% of U.S. soybeans are shipped to China. But China doesn’t begin most of those purchases until the fall. It typically buys soybeans from South American nations such as Brazil and Argentina during spring and early summer.

Yet the fight being waged across the Pacific is already hitting U.S. farms.

Despite the $11 billion in relief payments that were doled out last year by the federal government, the personal income of farmers declined by $11.8 billion through the first three months of 2019, according to the U.S. Commerce Department. A similar pace of decline is expected in the coming months, according to the Federal Reserve Bank of Kansas City.

And that is hurting Deere.

Deere & Co. earned $1.13 billion, or $3.52 per share, for the period ended April 28, which is 6 cents less than industry analysts had expected, according to a survey by Zacks Investment Research. And it’s less than the $1.21 billion the Moline, Illinois, company earned during the same period last year.

Revenue rose to $11.34 billion from $10.72 billion. Adjusted revenue of $10.27 topped forecasts.

Construction and forestry sales climbed 11% to $2.99 billion on higher shipment volumes and increased prices. It also benefited from the inclusion of Wirtgen’s sales for two additional months. Equipment operations sales increased 5% to $10.27 billion, while agriculture and turf sales climbed 3% to $7.28 billion.

Trade officials from China are in Washington, DC this week as the Trump administration places further pressure on China to reach an agreement with the United States.

Trump will increase tariffs on China Friday, saying talks between the two nations are going too slowly. On Twitter, Trump states he will increase tariffs on $200 billion of goods from 10 to 25 percent. Trade organization Tariffs Hurt the Heartland says the move would cost nearly one million American jobs, and “increase the likelihood of retaliation on American farmers.” China and the U.S. meet this week in what was expected to be the final round of formal talks.

Trump is expected to host his Chinese counterpart Xi Jinping in June, with the expectation the two would sign an agreement. A spokesperson for China’s Foreign Ministry said Monday the negotiations held so far between the two sides have achieved positive progress, adding, China hopes the U.S. will work to “meet each other halfway and strive for a mutually beneficial agreement on the basis of mutual respect.”