A new crack in the farm economy Presented by Boehringer Ingelheim Animal Health

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Quick Fix

— More agricultural producers are turning to nontraditional, high-interest loans as they try to stay afloat amid the farm economy downturn.

— Weather and trade challenges are turning 2019 into a tough year for cotton producers, despite positive conditions early in the growing season compared with other ag sectors.

— Top appropriators are huddling tonight to game out a year-end spending strategy, with a government shutdown deadline approaching next week.

A message from Boehringer Ingelheim Animal Health: When animals are healthy, people are, too. Our 3,100 U.S. employees enhance the well-being of animals and people by guarding against diseases that threaten their health and our food supply. We’re proud to build on our long history of supporting U.S. producers by supplying a FMD vaccine bank for the USDA. Learn more.

HAPPY TUESDAY, NOV. 12! Welcome to Morning Ag. Grab some hot coffee and stay warm out there! Send tips to [email protected] and @ryanmccrimmon, and follow us @Morning_Ag.

Driving the Day

A NEW CRACK IN THE FARM ECONOMY: With weather challenges, trade tension and long-term financial headwinds buffeting the ag sector, more farmers and ranchers are taking on high-interest loans beyond the usual ag lenders just to stay in business, The Wall Street Journal reports.

Traditional farm banks are offering less money and placing tighter restrictions on loans, forcing cash-strapped farmers to look elsewhere for capital. Financial services providers that are less regulated can offer a lifeline to desperate producers — but those same loans can prove treacherous for farmers that fall behind, with interest rates twice as high as those from standard farm banks.

“If you don’t make a crop and you have a bad year, they’ll clean your clock,” said Heath Jobe, an Arkansas farmer who filed for bankruptcy after he lost a recent crop due to dry weather. Jobe said his loan payments with 9 percent interest had started piling up and his request for a new loan was rejected.

Producers have increasingly been falling behind on their loans this year, squeezing ag lenders and threatening to send the rural economy toward a full-blown meltdown after years of pressure, as POLITICO reported in June. Farmers are expected to hold nearly $416 billion in debt this year — the most since the farm crisis in the 1980s.

Dive deeper: The American Bankers Association and Federal Agricultural Mortgage Corporation released a survey of ag lenders on Monday. Among the findings: About 57 percent of farm borrowers were profitable in 2019, but 82.5 percent said their profits were declining. Dairy, livestock and grains were seen as the most concerning sectors.

The bottom line: “The agricultural economy and farm income remained stressed in 2019 with limited signs of improvement in 2020,” according to the report. Read it here.

COTTON FEELS THE TRADE WAR PINCH: There’s been significant coverage of the trade war’s impact on a few hard-hit sectors of agriculture, like soybean farmers, but the fallout has been widespread. Cotton growers are also having a tough year that might not improve much even if the U.S. and China sign a partial trade deal in the coming weeks, Bloomberg reports.

The cotton sector was off to a good start in 2019 compared with other commodity producers, like corn and soybean growers who faced historic planting delays because of heavy spring rains and flooding. But the wet weather (which was helpful for cotton growers) gave way to scorching heat in key cotton states like Texas, which damaged the crop, while President Donald Trump’s trade fight with China cut down U.S. exports to the world’s largest cotton market.

Crop status: Cotton production for 2019 is expected to exceed last year’s crop by 13 percent. Farmers harvested 23 percent more acres this year than in 2018, but yields are down 65 pounds per acre, according to the Agriculture Department’s latest estimates.

SPENDING TALKS ON TAP AS DEADLINE NEARS: With both chambers of Congress back in session today, the top four House and Senate appropriators are set to meet tonight to discuss the endgame for fiscal 2020 — including reaching an agreement on how to divvy up defense and domestic spending among the 12 appropriations bills, per our Pro Budget colleagues.

The House is expected to pass another short-term stopgap next week, before the current continuing resolution expires on Nov. 21. Congressional leaders have yet to determine an expiration date for the next CR, but they appear to be converging around the idea of extending temporary funding through mid- to late-December.

Trade Corner

EU TELLS U.S. ‘GO FISH’ ON LOBSTER DEAL: European Trade Commissioner Cecilia Malmström shot down a request from U.S. Trade Representative Robert Lighthizer to slash tariffs on U.S. lobsters and chemicals, reports POLITICO Europe’s Jakob Hanke.

“Dear Bob” — In a letter to Lighthizer, Malmström said any reduction in duties should be part of a broader trade deal on industrial goods, which would also include the U.S. cutting tariffs on European cars and machines.

The outgoing EU trade chief also sent a new proposal to Lighthizer that would make it easier for U.S. exporters to certify their products for the European market, and vice versa. (Read more here.)

Duty decision delayed: Trump has until Wednesday to decide whether to slap tariffs on European cars and auto parts. But the president is expected to punt the decision for another six months, report POLITICO’s Ben White and Doug Palmer.

Row Crops

— Russian pork producer Cherkizovo is hoping to start supplying pork to China amid the African swine fever outbreak that has wiped out Chinese pig herds and driven up demand for imported proteins. Russia hasn’t sold pork to China because of its own ASF outbreak, but Cherkizovo is now in talks with Chinese firms about setting up a joint pork venture, Bloomberg reports.

— The EPA is getting set to scale back the scientific research used to develop public health regulations. A draft proposal would require scientists to disclose all the raw data (including confidential medical records) behind academic studies before the agency can consider their conclusions, The New York Times reports. (ICYMI: USDA has also taken steps to bury its own climate science and faced accusations of cracking down on scientific research more broadly.)

— Mercy for Animals has started a program aimed at directly helping farmers rather than animals, The Atlantic writes, in another look at the tough conditions for chicken farmers.

— Roberta Wagner is joining the Grocery Manufacturers Association as vice president of regulatory and technical affairs, starting in December. (The group will soon rebrand as the Consumer Goods Association.) Wagner was previously assistant administrator at USDA’s Food Safety and Inspection Service, per POLITICO Influence.

— Amazon confirmed its plans to launch a new grocery store line as an alternative to Whole Foods, which the tech giant purchased in 2017. The stores will open in California next year, CBS reports.

— Ryan Talley was elected chairman of the Western Growers board of directors, succeeding Ron Ratto. Talley will fill the role for one year, the group announced.

A message from Boehringer Ingelheim Animal Health: At Boehringer Ingelheim Animal Health, we know people and animals are connected in deep and complex ways, and we’re dedicated to enhancing the well-being of both. We also believe no animal should suffer from a preventable disease. Our portfolio includes some of the most highly regarded and broadly used vaccines, parasite-control products and pharmaceuticals to help protect livestock, pets and horses. Across the U.S., in places like Georgia, Iowa, Missouri and Minnesota, our 3,100 U.S. employees nurture the inextricable link between animals and people, inspired by the vision of creating a healthier tomorrow for animals and people. We’re proud to build on a long history of supporting U.S. livestock producers by fulfilling a USDA contract to help supply a foot-and-mouth disease vaccine bank. That bank will protect cattle and swine in the event of an FMD outbreak in the U.S. Learn more about Boehringer Ingelheim Animal Health in the U.S.

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