American farmers are set to receive another bailout from Trump's tariffs. The holdup is due to the lack of any additional money that lawmakers can deliver, as well as furloughed administration staffers to finalize and implement the aid package.

 

Readers may recall that during Donald Trump's first tariff war, which occurred in 2018-2019, farmers were devastated as China retaliated by suspending purchases of U.S. agricultural imports. It took $20 billion of taxpayer money to stop the bleeding. Once again, the same scenario is unfolding as the administration prepares another multibillion-dollar bailout.

 

Under the first bailout, farmers who earned less than $900,000 a year and produced one of the agricultural products affected by the U.S.-China trade war could apply for relief. The bailout's limit of support for a single farmer was $125,000 per person of a legal entity. 

 

This time around, we are still unclear about the details or how the government will fund it. That is because the government shutdown has removed the administration’s ability to determine if they can use tariff money to pay for it or the need to ask Congress for the funds. Last time around, Trump used funds from an Agriculture Department entity called the Commodity Credit Corp. That avenue is no longer viable since the CCC has depleted its cash.

 

I still recall the televised announcement when the President claimed he had made a significant trade deal with China, promising to purchase $200 billion of U.S. agricultural products over two years. It turned out that, through 2021, China had only managed to buy 83 percent of that commitment.  

 

While some argue that China deliberately reneged on that promise, I suspect the COVID-19 pandemic had a much more significant impact on the shortfall in purchases, as China struggled to contain the epidemic. Through the Biden years, China continued to purchase farm products. It was only after President Trump restarted the trade war in his second term by increasing tariffs on China by 100 percent that purchases ceased.

 

Last year, China accounted for more than half of the 24.5 billion of U.S. exports of soybeans. Currently, thanks to Trump's tariffs, China has ceased buying American soybeans since May and increased its purchases from producers in South America. Since the 1950s, the U.S., Brazil, and Argentina have accounted for 80 percent of global soybean production. Soybeans are the second-largest crop in the U.S., with 85 million planted acres over the past five years. That is about the size of the entire Northeast.

 

That crop contributes, on average, about $124 billion per year to the economy. There are approximately 280,000 soybean farmers in the country, primarily located in the Midwest, with four out of the five largest producers based in states that supported the president in the last election. However, just two multinational corporations, Corteva and Bayer, control more than half of all soybeans (as well as corn and cottonseed) production in America.

 

Farmers' incomes have been sucking wind for years. Most have lost money over the past two years, and thanks to several different variables, losses will likely mount this year and into 2026. Costs for fertilizer, machinery, and seeds have increased at a rate higher than inflation, while prices for almost every row crop are below the cost of production. Interest rates and climate change have also taken their toll.

 

The Biden administration and Congress passed a $10 billion bailout for farmers in December 2025, but that is just a drop in the bucket. Republican lawmakers estimate that farmers will need as much as $50 billion in economic support today. Right now the talk centers around  another $10 to $14 billion in aid. The American Soybean Association president, Caleb Ragland, called that "putting a Band-aid on an open wound."

 

While my heart goes out to America's farming community, I cannot help but wonder why farmers have been singled out for relief once again. At the same time, the rest of us continue to suffer from the same fallout from tariffs, including higher food prices that exceed the inflation rate, and increased health care costs as the Republican-controlled Congress continues to reduce benefits.

 

Is it because the farmers are mainly from states where Trump voters are prevalent? Is it because our Secretary of the Treasury Scott Bessent owns thousands of acres of soybean farmland? Will half the spending end up in the pockets of the two major corporations that control the soybean market?

 

The last bailout was limited to those who earned less than $900,000 per year. There are many small businesses throughout the country that earn less than that. Where is their bailout? What is the solution to turning around our farmers' plight? It is simple. Drop the irrational tariffs on China.

 

Bill Schmick is the founding partner of Onota Partners, Inc., in the Berkshires. His forecasts and opinions are purely his own and do not necessarily represent the views of Onota Partners Inc. (OPI). None of his commentary is or should be considered investment advice. Direct your inquiries to Bill at 1-413-347-2401 or email him at bill@schmicksretiredinvestor.com.

Markets turned higher this week on news of the government shutdown on Oct. 1. It isn't the market's first rodeo in this area, so most investors are taking the long view.

 

The facts are that every government shutdown in history has been followed by a government reopening 100 percent of the time. Present betting indicates that this one could last anywhere from 10 to 29 days, but Oct. 15 seems the most popular bet.

 

It wasn't too difficult to predict this government shutdown. Both parties sought the drama, hoping to galvanize their partisan constituencies. Thus far, only the media, politicians, and federal employees have expressed much concern about the fallout. For Wall Street, the absence of specific key economic data, such as today's lack of the jobs report, is uncomfortable and inconvenient but not dire.

 

At a time when so much depends on timely information, such as the Consumer Price Index and non-farm payrolls reports, the market is in the dark to some extent. The Fed, for example, is expected to cut interest rates again at the October meeting, but that depends on the job data. No data means less confidence. Of course, the last few months of labor reports from the Bureau of Labor Statistics have been nothing to write home about, so missing a report or two may not be all that disastrous.

 

My conspiracy theory of last week has proven more accurate than I suspected. I wrote that a shutdown would likely occur, sending the dollar and bond yields lower still, which are tactical goals of U.S. Treasury Secretary Scott Bessent. Better still, the president wants to cut spending in what he sees as liberal programs of the Democrats. So far, he has axed $8 billion in funding for green energy projects in 16 blue states, as well as $18 billion in infrastructure projects in New York. In addition, the shutdown provides him with an opportunity to reinvigorate his court-stalled DOGE agenda by firing more government employees.

 

All of this can be accomplished in a shutdown while blaming the Democrats every step of the way. I am surprised that the Democrats fell for it, but politics is not my bailiwick. Given their experience thus far under a second Trump administration, they must question whether discussions with Republicans without this shutdown would ever yield a compromise solution.

 

I do understand their desire to safeguard the health and well-being of millions who depend on Medicaid and Obamacare. And I do believe that Trump and his Republican legislators are worried about the optics of these issues as well, going into elections despite their tough stance today. Much of these spending cuts and firings, if they occur, will be overturned in the courts anyway, but it is the narrative, not the substance, that counts among voters today.

 

As for investors, they are much more interested in the government's continued commitment to opening the floodgates of state capitalism. This week, it was all about Big Pharma. In exchange for reduced drug pricing, along with company commitments to invest in the U.S., Trump offered tariff relief on pharmaceutical imports.

 

Pfizer was first to tip the scales by cutting drug prices on a host of older drugs in its pipeline. The president is also expecting more investment announcements from companies in that sector that will further his goal of relocating drug manufacturing back to the U.S.

 

However, that is just the tip of the iceberg. The administration is working on deals across as many as 30 industries, talking to dozens of companies that the government deems critical to national or economic security. The flurry of activity encompasses various segments of the economy, from semiconductors and quantum computing to non-tech areas such as energy, shipbuilding, battery production, critical minerals, and now pharmaceuticals. The administration maintains a list of 54 crucial minerals it is targeting, which is updated almost weekly. Six more minerals were added this week, along with potash, the most recent addition.

 

Interest in equity stakes in companies now includes foreign companies as well. For example, the U.S. government has offered to purchase equity in Australian critical mineral companies as part of a funding package aimed at expanding its supply and reducing its reliance on China.

 

At the same time, the proliferation of new tariffs on industry and/or specific products has replaced the more sweeping country-wide levies that are now being adjudicated in the courts. As I advised readers in past columns, the courts may slow the tariff war but not end it. A "Plan B" is already in progress. In preparation for a possible defeat of his use of the Emergency Powers Act, these new tariff efforts will follow a more traditional route.

 

Section 232 of the Trade Expansion Act of 1962 authorizes Trump to impose tariffs or quotas on imports if the product or industry is deemed to threaten national security. They are not subject to challenge. It is the reasoning behind his announcements of fresh investigations into lumber, movies, semiconductors, drugs, trucks, jet engines, and commercial aircraft, among others. The list can go on forever.

 

If these investigations determine that the products are a threat (and they will, since the investigators are all Trump supporters), tariffs are sure to follow. While these tariffs would be far less sweeping than his reciprocal tariffs, they offer significantly stronger legal protection. The race is on to accomplish all of this before the mid-term elections.

 

Stocks, bonds, commodities, and other assets continue to gain. The global bull market remains alive and well, with new highs almost daily. October, as we all know, is a dangerous month for the markets from a historical and seasonal perspective.

 

The risks are that this shutdown could provide the volatility that traders need to justify a sell-off if it lasts too long or takes an unexpected turn for the worse. Another concern is that the Fed might hold off on reducing rates again at the end of the month until it sees more data. I give that a lower probability.

 

However, on the other side of the ledger, there is a high probability that the Fed will cut interest rates again this month. Quarterly earnings announcements are also forecasted to be robust. My conclusion: stay invested, hedge a little if you feel worried, but otherwise ride the inflows higher.

 

Bill Schmick is the founding partner of Onota Partners, Inc., in the Berkshires. His forecasts and opinions are purely his own and do not necessarily represent the views of Onota Partners Inc. (OPI). None of his commentary is or should be considered investment advice. Direct your inquiries to Bill at 1-413-347-2401 or email him at bill@schmicksretiredinvestor.com.

Sept. 19 was National Coffee Day. Starbucks, Dunkin', Dutch Bros., and other coffee chains offered discounts on coffee. That did little to relieve the sticker shock most consumers are feeling now. The 20 percent price hike year over year for their morning brew has been hard to swallow.

 

In the futures market, Arabica coffee has traded as high as $4.18 per pound in September, the highest price in almost a year. In grocery aisles, ground roast coffee prices recently reached $8.41 per pound before falling back over the last two weeks. Overall, the cost of coffee imports to the United States has increased by more than 300 percent since the lows of 2020. Five years ago, a bag of coffee was fetching roughly $80 per standard bag (132-154 pounds or so). Today, that same quantity is approaching $368.

 

More than 99 percent of the coffee Americans drink is imported, as only Puerto Rico and Hawaii grow significant quantities of the crop. Coffee is the second most popular beverage in the U.S., after bottled water, with 63 percent of Americans drinking it daily.

 

Like most commodities, the prices of soft commodities fluctuate according to supply and demand. Last year, for example, I discussed the skyrocketing cost of cocoa and its impact on chocolate prices. Since then, cocoa prices have dropped from a high of $12,626 per ton to $6,759 today. Coffee prices react similarly.

 

Consumers may also notice a price differential depending on whether they purchase their caffeine fix from a grocery store, a restaurant, or a coffee chain. Supermarket prices fluctuate more than a cup of coffee at Starbucks or other coffee chains. That is because grocers are quick to raise store prices as coffee prices rise and reverse just as quickly when they fall. Coffee chains, on the other hand, prefer to draw down on their existing coffee inventories rather than buy expensive beans on the open market.

 

The primary factor underlying the price of coffee (like cocoa) is climate change. Coffee cultivation and yield are highly sensitive to the environment. Extreme weather in both Brazil and Vietnam, major coffee-producing countries, has damaged the coffee crop frequently in the past few years. A severe drought in Brazil during last summer season decimated the coffee crop. Given that Brazil supplies 40 percent of the world's coffee, the shortfall had a significant impact on import prices for the U.S., which accounts for 32 percent of Brazilian coffee exports.

 

The number two producer, Vietnam, also suffered a drought, resulting in a 20 percent reduction in coffee production last year. Making matters worse, the nation experienced precipitation whiplash (an increasingly common occurrence in climate change). That is where drought is followed by heavy rainstorms, wiping out even further production. Supply chain disruptions are also contributing to the rising cost of coffee, as are global inflation and trade policies. The price of coffee reached a near-50-year high in February of this year.

 

 In the last two weeks, prices in the futures market for coffee have declined slightly, trading around $376 per pound. Traders are hedging their bets ahead of a meeting between U.S. President Trump and his Brazilian counterpart, President Lula da Silva. After bumping into each other during the U.N. General Assembly last Tuesday, the president said that "we agreed to meet next week."

 

A deal could provide some price relief. What do presidential politics have to do with the price of coffee? Plenty. The president has levied a 50 percent tariff on Brazilian imports, including coffee. Once one of our strongest allies in South America, Brazil is now at odds with the president. The country refused to drop charges against its former President Jair Bolsonaro, a friend and ally of Donald Trump.

 

Bolsonaro was subsequently tried and convicted of plotting a coup and sentenced to 27 years in prison. As a result, an angry Trump slapped tariffs on the country. He justified these levies by claiming that Bolsonaro's conviction somehow created an economic emergency for the U.S. America has a $6.8 billion trade surplus with Brazil, meaning it imports more than it exports from the U.S.

 

A bipartisan group in Congress is well aware of that. They claim the tariffs put a new tax on coffee every morning and have recently introduced the "No Coffee Tax Act." The legislation would repeal the Trump-era tariffs on coffee imports from Brazil, Vietnam, India, Mexico, and Indonesia. Good luck with that. I wouldn't count on Congress for much of anything without the president's approval.

 

Bill Schmick is the founding partner of Onota Partners, Inc., in the Berkshires. His forecasts and opinions are purely his own and do not necessarily represent the views of Onota Partners Inc. (OPI). None of his commentary is or should be considered investment advice. Direct your inquiries to Bill at 1-413-347-2401 or email him at bill@schmicksretiredinvestor.com.

Investors experienced a rare occurrence this week. All three main averages were down for three consecutive days. That was a good thing.

 

Readers are aware that the markets have been in a melt-up mode for the last few weeks and are both overextended and overbought. Under these conditions, any excuse, no matter how flimsy, can trigger a bout of profit-taking. A government shutdown could provide the turbulence for a much-needed market sell-off.

 

With only five days to go before such a potential event, investors are getting nervous. Doubly so, because the administration is asking federal agencies to consider mass firings (not just layoffs) if the shutdown happens, this is thought to be a political tactic to get Democrats on board in passing another budget continuing resolution. If so, it has fallen flat, as Democrats say, "Bring it on."

 

A lengthy shutdown would likely send the dollar lower still, and with it the yields on government debt. It just so happens that those are two critical tactical goals of the U.S. Treasury Secretary, Scott Bessent. He is struggling to sell billions in government debt without raising interest rates. A shutdown could help him there. Better still, the president could blame the Democrats for the shutdown, his firing of government employees, and a weaker dollar and yields. It may also help his pressure campaign against the Federal Reserve Bank.

 

Now that the FOMC meeting and subsequent interest rate cut are behind us, investors have immediately jumped to the conclusion that further cuts will take place through the end of the year. As it stands today, the betting on Polymarket indicates a 79 percent chance of a 25-basis point cut in October and a 68 percent chance of a similar size cut in December.

 

Now, Chairman Jerome Powell did not promise further cuts, although several Trump-appointed members of his committee continue to advocate for more cuts. The Personal Consumer Expenditures Index, released on Friday, indicated that inflation was rising, but moderately so. However, it is the employment data that most believe now takes precedence over inflation in the Fed's thinking. The jury is still out on labor weakness.

 

That brings us right back to the possible shutdown scenario where more job losses would add further pressure on the Fed to cut rates. If all this sounds like a conspiracy theory, rest assured, it is. I just figured I should add my two cents' worth to the conspiracy theory.

 

What happens when the Fed cuts rates in a growth economy? If one looks back through history, the stock market did exceptionally well. This week, the government's significant revision of its previous estimate for second-quarter growth bolstered the case for further growth.

 

Readers may recall that the first-quarter growth rate was an anemic 0.6 percent, caused by Trump's trade wars. Since then, the period from April to June, which was initially thought to have gained 3.3 percent, has now been upgraded to 3.8 percent due to an increase in consumer spending. For the first half of the year, the economy averaged  1.6 percent, which was not great, but is still much better than initially thought.

 

Tuesday will mark the end of the quarter. It would be highly unusual (but still possible) that we escape a downturn in October. Investors indeed evaded that happening in September. Even if we did have a pullback, it could be negligible compared to the gains we have accumulated this year. Remember that the anticipation of imminent monetary easing by the Fed can give a powerful boost to any stock market. The declining dollar and the relatively moderate range in bond yields to date have been the main macroeconomic trends supporting higher stock and commodity prices. Adding the Fed's easing into the equation, markets could see further upside ahead.

 

My call on precious metals has been remarkably successful, and now platinum is demanding its turn in the spotlight. China has performed well, as have emerging markets, AI plays, and increasingly speculative stocks on the ledger. Crypto, however, has given up some of its gains after substantial increases earlier in the quarter. Some argue that what happens to cryptocurrency happens to the stock market, but with a lag. 

 

I see some elements of the kind of stock action I experienced during the Dot-com bubble. Remember, however, it took many more months before that frothy exuberance ended in disaster. Don't chase, stay invested, and expect pullbacks.

 

Bill Schmick is the founding partner of Onota Partners, Inc., in the Berkshires. His forecasts and opinions are purely his own and do not necessarily represent the views of Onota Partners Inc. (OPI). None of his commentary is or should be considered investment advice. Direct your inquiries to Bill at 1-413-347-2401 or email him at bill@schmicksretiredinvestor.com.

The latest rumored acquisition will be a 10 percent stake in Canada-based Lithium Americas. The Trump administration is considering the stake as part of negotiations over a $2.26 billion Department of Energy loan for the company's lithium project in Nevada. Expect more of the same as Washington intervenes in industries that it considers critical to national security.

 

Many would have you believe that today's shift toward state capitalism is sudden, unwarranted, and autocratic. However, for countless decades, this country has had a long and varied history of intervening in the American economy when it deems necessary.

 

The difference this time around is that Donald Trump is running roughshod over the consensus-building process that the country has historically required to legislate this kind of interference in the economy. For better or worse, depending on your affiliation, he is ignoring the rules and regulations that have both acted as guardrails and barriers to the kind of rapid-fire change we are experiencing today.

 

Others believe that the constant stream of executive orders occurring now is long overdue. To many, the U.S. is simply recognizing and responding to the fundamental transformation that has happened and is ongoing in this ever-changing world. We have exited a past that no longer applies, in exchange for what many hope is a promising new future.

 

At the same time, the role of government, in the view of a large segment of the population, has also undergone significant changes. According to numerous polls, many in the younger American generation believe that the economic and political systems in the U.S. no longer serve their interests in this rapidly changing set of circumstances. These are the victims of globalization, the 2008 Financial Crisis, the COVID pandemic, and the widening income inequality. 

 

I suspect that if asked, they might want their government to do even more in the years ahead. Many would like to replace what they see as the "Deep State" with government programs that will narrow income inequality, while at the same time preserving private ownership.

 

The downside of state capitalism is well known. Centrally planned economies of the Chinese variety usually get it wrong. Granted, we are still a long way from that particular model of control, but we are certainly moving in that direction. In many instances, government control reduces economic efficiency. That often leads to slower economic growth. Innovation and entrepreneurship suffer, replaced mainly by cronyism and corruption. Long-term results give way to short-term fixes.

 

Just last week, for example, the government invoked its golden share ownership of U.S. Steel (a condition of Nippon Steel's purchase of the company) to block the closing of the company's Granite City plant in Illinois. According to management, the work done at the plant should be transferred to more efficient locations; however, the government disagreed.

 

The 10 percent stake in Intel, engineered by the administration (after threatening to fire its CEO), has set into motion several interesting transactions involving other companies with ties to the government. Some question why Nvidia, the premier global semiconductor giant, suddenly decided to invest $5 billion in this troubled semiconductor company, when other companies might make more business sense. This deal occurred after Nvidia and Advanced Micro Devices agreed to pay the Trump administration a portion of their sales from artificial intelligence to China.

 

This week, the government announced a U.S.-based joint venture with investors to take control of TikTok, a Chinese-owned platform with 170 million American users. The deal coveted by nearly every media company in the U.S. ultimately fell into the hands of Oracle, among others. Oracle, run by its billionaire founder, Larry Ellison, is a close personal friend of the president. Over the weekend, the administration also announced sudden changes to the H-1B visa program that will directly impact many of the nation's largest technology companies.

 

The H-1B allows immigrants with highly specialized skills to work in the U.S. when companies cannot find U.S. citizens to perform the same job. The government, citing concerns that many companies abuse this program, is considering a one-time charge of $100,000 (up from $2,000) to obtain such a visa. This has thrown many companies, especially in the tech sector, into turmoil.

 

It is interesting to note that the Chinese, who followed this same path years ago, are now wrestling with the downside of many of the same issues today. As such, government officials over there are moving to liberalize many conditions and regulations. They are relinquishing more control to the private sector as a result. At some point in the future, it is entirely possible that the Chinese and American brands of state capitalism may converge.  

 

The advent of artificial intelligence promises both great opportunities and significant challenges for the future. As time passes, government intervention might steadily increase to safeguard the labor market. Legislators could direct AI initiatives toward areas perceived as most productive. However, history indicates that, over time, in this country, the pendulum swings from right to left, and economic systems tend to oscillate between more and less government involvement. Intervention follows a crisis, which is then followed by liberalization. Inefficiencies become apparent and market forces reassert themselves. We have seen this happen repeatedly in this country. Exactly when and how long it will take is the real question.

 

Bill Schmick is the founding partner of Onota Partners, Inc., in the Berkshires. His forecasts and opinions are purely his own and do not necessarily represent the views of Onota Partners Inc. (OPI). None of his commentary is or should be considered investment advice. Direct your inquiries to Bill at 1-413-347-2401 or email him at bill@schmicksretiredinvestor.com.