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Central Banks Shouldn’t Fight Deflation

Currently we can observe a general slowdown in the annual growth rate in price inflation across major countries around the world.

For instance the yearly growth rate of the US consumer price index (CPI) fell to 1.5% in February from 1.6% in January and 2.2% in February last year. In Europe, the yearly growth rate of the EMU CPI stood at 1.5% in February versus 1.4% in January and 2.3% in October 2018.

The annual rate of China’s CPI has also eased in February falling to 1.5% from 1.7% in January and 2.9% in February the year before.The growth momentum of the UK CPI also displays softening with the yearly growth rate standing at 1.8% in February against 2.1% in the month before and 3% in January 2018.

Most commentators are of the view that deflation generates expectations for a decline in prices. As a result, it is held, consumers are likely to postpone their buying of goods at present since they expect to buy these goods at lower prices in the future. This weakens the overall flow of spending and in turn weakens the economy. Hence, such commentators believe that policies that counter deflation will also counter the economic slump.For many commentators and economic experts to counter a decline in the annual growth of the CPI, which they fear could develop into a general decline in prices; they advocate that central banks should maintain a very loose monetary stance. For these experts a possible decline in prices — which they label as deflation — poses a major threat to the economy.

It would appear that if deflation leads to an economic slump then policies that reverse deflation should be good for the economy. Reversing deflation will simply involve introducing policies that support general increases in the prices of goods, (i.e., price inflation). By this way of thinking, inflation could actually be an agent of economic growth.

According to most experts, a little bit of inflation can actually be a good thing. Mainstream economists believe that inflation of 2% is not harmful to economic growth, but that inflation of 10% could be bad for the economy.

Why should a rate of inflation of 10% or higher be regarded as a bad thing? If anything at inflation rate of 10% it is likely that consumers are going to form rising inflation expectations, and according to popular thinking, in response to a high rate of inflation, consumers will speed up their expenditure on goods at present, which should boost economic growth. Clearly, there is a problem with the popular way of thinking.

Inflation Is not Essentially a Rise in Prices

Inflation is not about general increases in prices as such, but about the increase in the money supply. As a rule, the increase in money supply sets in motion general increases in prices. This, however, need not always be the case.

The price of a good is the amount of money asked per unit of it. For a constant amount of money and an expanding quantity of goods, prices will actually fall. Prices will also fall when the rate of increase in the supply of goods exceeds the rate of increase in the money supply.

For instance, if the money supply increases by 5% and the quantity of goods increases by 10%, prices will fall by 5%.

A fall in prices however, cannot conceal the fact that we have inflation of 5% here because of the increase in money supply.

The reason why inflation is bad news is not of increases in prices as such, but because of the damage inflation inflicts to the wealth-formation process. Here is why.

The chief role of money is to fulfill the role of the general medium of exchange. Money enables us to exchange something we have for something we want. Before an exchange can take place, individuals must have something useful that they can exchange for money. Once they secure the money, they can then exchange it for the goods they want.

Now, consider a situation in which money is created out of “thin air.” This new money is no different from counterfeit money. The counterfeiter exchanges the printed money for goods without producing anything useful. He in fact exchanges nothing for something. He takes from the pool of real goods without contributing to the pool.

The economic effect of money that was created out of thin air is the same as that of counterfeit money — it impoverishes wealth generators.

The money created out of thin air diverts real wealth towards the holders of new money. This weakens wealth generators ability to generate wealth and this in turn leads to a weakening in economic growth. Note that as a result of the increase in the money supply what we have here is more money per unit of goods, and thus, higher prices.

What matters, however, is not price rises as such but the increase in money supply that sets in motion the exchange of nothing for something or “the counterfeit effect.”

The exchange of nothing for something weakens the process of real wealth formation. Therefore, anything that promotes increases in the money supply can only make things much worse.

Changes in prices are just a symptom, as it were, and not the primary causative factor. So, countering a falling growth momentum of the CPI by means of loose monetary policy (i.e., by creating inflation) is bad news for the process of wealth generation and hence for the economy.

Moreover, in order to maintain their lives and well-being, individuals must buy goods and services in the present. Therefore, from this perspective, a fall in prices as such cannot be bad for the economy.

Furthermore, if a fall in the growth momentum of prices emerges on the back of the collapse of bubble activities in response to a softer monetary growth, then this should be seen as good news. The less non-productive bubble activities the better it is for the wealth generators and hence for the overall pool of real wealth.

Likewise, if a fall in the growth momentum of the CPI emerges because of the expansion in real wealth for a given stock of money, obviously this is great news since more people could now benefit from the expanding pool of real wealth. We can thus conclude that contrary to the popular view, a fall in the growth momentum of prices is always good news for the wealth generating process and hence for the economy.



A recent article from CNN says that keeping up with comedians like “John Oliver” is the same as being informed about the news.

Source: InfoWars

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Mexican president promises not to seek re-election

Mexican President Andres Manuel Lopez Obrador has signed an open letter promising to not seek re-election after his six-year term ends in 2024.

That move was prompted by opposition fears that a proposal to let voters oust the president midway through his term might actually end up letting him serve longer.

The president's supporters in Congress advanced legislation last week that would call a referendum halfway through presidential terms — an idea Lopez Obrador had campaigned on.

But critics suspect it could undermine Mexico's constitutional prohibition on re-election. Conservative opponents have long compared Lopez Obrador to Venezuela's late Hugo Chavez and other leaders of the Latin American left who made moves to extend their time in office.

Lopez Obrador said Tuesday that in 2024 he'll retire to his ranch.

Source: Fox News World

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American tourist captured in Uganda did not take mandatory armed guard with her, officials reveal

The American tourist and her driver who are being held hostage inside a wildlife park in Uganda defied regulations by setting off into the vast expanse without an armed guard, officials revealed Thursday.

The announcement from the Uganda Wildlife Authority comes as the woman’s whereabouts inside the Queen Elizabeth National Park remain unknown following her reported capture Tuesday. Two armed men held four tourists at gunpoint before two were rescued and alerted police. The assailants since have been using the woman’s phone to make ransom demands of $500,000, police have told Fox News.

“We have armed ranger guides, if you’re going out on a drive in the park you’re supposed to have one but these tourists went out on their own without a guard,” Bashir Hangi, the UWA’s spokesperson, said in an interview with Reuters.

“From their camp in the park, they just got into a vehicle and went out,” Hangi added. “They should have notified us and informed us that they’re going out for a game drive and then we would have availed them a guard but they didn’t do this.”

Fox News' Hollie McKay contributed to this report.

Source: Fox News World

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German high-speed train hit by projectiles, no one hurt

German police say a high-speed train appears to have been hit by shots fired from an air pistol and which damaged windows and doors. No one was hurt.

Federal police said railway operator Deutsche Bahn told them the ICE train traveling from Berlin to Saarbruecken was hit by unidentified projectiles late Thursday evening near Mannheim in southwestern Germany. They said Friday that only the outer panes of double-glazed windows were damaged but that none of the projectiles got inside the train.

Investigators found nine points of impact on four cars of the train and said an object such as an air pistol appeared to be responsible. Police said they believe several people shot at the moving train.

Some 150 people were on board the train at the time.

Source: Fox News World

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Man shot dead after robbery at Albania’s airport

Albanian police report that a man has been shot dead after a group of unidentified individuals robbed money at the country's international airport.

In a statement, police said the robbery by masked and armed people took place on the tarmac at the Mother Teresa Rinasi International Airport, slightly north of the capital Tirana, on Tuesday afternoon.

Details of the amount or who the money belonged to were not immediately available.

One of the robbers was shot dead in an exchange of fire with police about one kilometer from the airport.

Special police forces and a helicopter still are combing the area.

Only one flight, to Vienna, was cancelled.

Source: Fox News World

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Conference featuring 2020 Dems begins with fiery chant quoting fugitive cop-killer Assata Shakur

A conference featuring eight prominent 2020 Democrat presidential hopefuls kicked off in Washington, D.C,. with the fiery rallying cry of a fugitive cop-killer on Monday, as the labor and political groups in attendance shouted in unison, "We have nothing to lose but our chains."

Jamal Watkins, the Vice President of Civic Engagement at the NAACP, began by telling the audience at the We the People conference that he would invoke the words of Assata Shakur, whose real name is Joanne Chesimard.

Shakur was convicted of the 1973 murder of a New Jersey state trooper when she was in the Black Liberation Army. After escaping from prison in 1979, Shakur fled to Cuba, which granted her asylum even as she remains on the FBI's list of most-wanted fugitive terrorists.

"Now I came here not to talk at you -- it's gonna be a long and powerful day," Watkins said. "But I want you to do something with me. I'm gonna actually have you participate with me in repeating some words from a leader by the name of Assata Shakur. So if you could stand up -- if you can't stand, it's okay -- but I want you to repeat after me."

Watkins then quoted Shakur, pausing to let attendees repeat after him: “It is our duty to fight for our freedom. It is our duty to win. We must love each other and support each other. We have nothing to lose but our chains.”

Shakur's words, in turn, were appropriated from the final sentences of Karl Marx and Frederick Engels' Communist Manifesto: "The proletarians have nothing to lose but their chains. They have a world to win. Proletarians of All Countries, Unite!"

Among the groups in attendance were the Sierra Club, MoveOn.org, Planned Parenthood Action Fund, SEIU and Communications Workers of America.

They were drawn to the conference to hear from a series of speakers that included 2020 Democratic White House contenders Cory Booker, Julián Castro, Beto O'Rourke, Amy Klobuchar, Bernie Sanders, Elizabeth Warren, Jay Inslee  and Kirsten Gillibrand.

Although there was no indication the candidates embraced Shakur's comments, Democrats and progressives have long embraced the convicted murderer. California Democrat Rep. Maxine Waters, for example, wrote in 1998 to then-Cuban President Fidel Castro to apologize for voting for a resolution that called for Cuba to stop harboring Shakur.

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"I, and some of the Members of the Congressional Black Caucus, mistakenly voted for House Concurrent Resolution 254 which called on the Government of Cuba to extradite to the United States Joanne Chesimard and all other individuals who have fled the United States from political persecution and received political asylum in Cuba," Waters wrote to Castro. "Joanne Chesimard was the birth name of a political activist known to most Members of the Congressional Black Caucus as Assata Shakur. For the record, I am opposed to the resolution. I unequivocally stated that a mistake was made and I would have voted against the legislation."

Notably absent from the conference on Monday was former Vice President Joe Biden, who is grappling with accusations of unwanted touching from two women.

Source: Fox News Politics

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German Scientists Urge to Stop Sending Signals Into Space to ‘Capitalist Aliens’

While numerous astronomers and scientists have gazed into space looking for signs of intelligent life, two German scientists warn the first contact may not be as pleasant as some believe and have called to cease all attempts at communicating with potential extra-terrestrial beings.

Professor Michael Schetsche and Dr Andreas Anton at the University of Freiburg are warning humanity about a possible catastrophe if Earth makes contact with an alien race “with a similar kind of capitalist economic structure”. The two scientists have come up with a grim scenario in their latest book “The Alien Society — Introduction to Exosociology”.

Schetsche and Anton draw parallels with our own history, when more developed societies with capitalistic mind-set conquered and almost annihilated less-developed ones, as it happened with Americas’ natives, when Europeans first arrived on their continents.

“[It’ll be] a showdown between Bambi and Godzilla, and we would be Bambi in this case”, Michael Schetsche said.

The scientists predict that a direct confrontation with aliens is not the only thing that could threaten Earth. Humanity could also stumble upon a piece of extra-terrestrial technology, for example an alien probe, during its exploration of space and then bring it back to Earth for further studies. However, in their lust for knowledge and advanced technologies, governments and private corporations could doom our planet as the technology might be dangerous for us to study, Schetsche and Anton warn.

In order to prevent such a tragic outcome for Earth and all of humanity, the German scientists suggest the UN must issue a binding declaration, banning research groups and individuals from sending any signals into space that might alert aliens about our existence. They also call for forging an Earth-wide alliance under UN supervision so that the planet could face extra-terrestrial challenges as a united front.


Owen Shroyer presents and breaks down video footage from a local news report out of San Francisco that details how a man was harassed for hanging an “Impeach President Trump” sign out of his window. Could this be the next MAGA hate crime hoax? Watch, and decide for yourself.

Source: InfoWars

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FILE PHOTO - A worker sits on a ship carrying containers at Mundra Port in the western Indian state of Gujarat
FILE PHOTO: A worker sits on a ship carrying containers at Mundra Port in the western Indian state of Gujarat April 1, 2014. REUTERS/Amit Dave/File Photo

April 26, 2019

(Reuters) – India has once again delayed the implementation of higher tariffs on some goods imported from the United States to May 15, a government official said on Friday.

The new tariff structure was to come into force from May 2, the spokeswoman said without citing reasons for the delay.

Angered by Washington’s refusal to exempt it from new steel and aluminum tariffs, New Delhi decided in June last year to raise the import tax from Aug. 4 on some U.S. products including almonds, walnuts and apples.

But since then, New Delhi has repeatedly delayed the implementation of the new tariff.

Trade friction between India and the U.S. has escalated after U.S. President Donald Trump announced plans earlier this year to end preferential trade treatment for India that allows duty-free entry for up to $5.6 billion worth of its exports to the United States.

In a further blow, U.S. on Monday demanded buyers of Iranian oil stop purchases by May or face sanctions, ending six months of waivers which allowed Iran’s eight biggest buyers including India to continue importing limited volumes.

(Reporting by Manoj Kumar in New Delhi and Kanishka Singh in Bengaluru; Editing by Anil D’Silva and Raissa Kasolowsky)

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One of Joe Biden’s newly-hired senior advisers has seemingly had a very recent change of heart.

Symone Sanders, a prominent Democratic strategist and Sen. Bernie Sanders, I-Vt., staffer in 2016, was announced as one of the big-name members of Team Biden on Thursday.

But Sanders, who has also served as a CNN contributor, is seen in resurfaced footage from November 2016 expressing her opposition to a white person leading her party after Donald Trump’s election.

“In my opinion, we don’t need white people leading the Democratic party right now,” Sanders told host Brianna Keilar during a discussion on Howard Dean potentially becoming DNC chairman.

BIDEN HIRES FORMER BERNIE SANDERS’ SPOKESPERSON AS SENIOR ADVISER

“The Democratic party is diverse, and it should be reflected as so in leadership and throughout the staff, at the highest levels. From the vice chairs to the secretaries all the way down to the people working in the offices at the DNC,” she said.

Sanders wrapped up her remarks by saying: “I want to hear more from everybody. I want to hear from the millennials and the brown folks.”

Footage of the interview was resurfaced by RealClearPolitics.

After news of her hiring broke on Thursday, Sanders backed her new boss on Twitter.

TRUMP ASSESSES 2020 DEMS; TAKES SWIPES AT BIDEN, SANDERS; DISMISSES HARRIS, O’ROURKE; SAYS HE’S ROOTING FOR BUTTIGIEG

“@JoeBiden & @DrBiden are a class act. Over the course of this campaign, Vice President Biden is going to make his case to the American ppl. He won’t always be perfect, but I believe he will get it right,” she wrote.

The hiring of Sanders has been viewed as another indication of the expected tough fight that Biden and Sanders are in for as the two frontrunners battle a deep Democratic field.

While Sanders himself didn’t torch Biden as he jumped into the race, it’s clear that many of his progressive supporters view the former vice president as a threat.

Biden’s entry into the race – at least in the early going – sets up a battle between himself and Sanders, who thanks to his fierce fight with eventual nominee Hillary Clinton for the 2016 Democratic nomination, enjoys name ID on the level of the former vice president.

BIDEN VOWS THAT ‘AMERICA IS COMING BACK,’ SPARKING ‘MAGA’ COMPARISONS

Justice Democrats — who also called Biden “out-of-touch” – is an increasingly influential group among the left of the party. They’ve championed progressive Rep. Alexandria Ocasio-Cortez of New York as well as Sanders. The group was founded by members of Sanders 2016 presidential campaign.

Biden has pushed back against the perception that he’s a moderate in a party that’s increasingly moving to the left. Earlier this month he described himself as an “Obama-Biden Democrat.”

And Biden said he’d stack his record against “anybody who has run or who is running now or who will run.”

Former Democratic National Committee chair Donna Brazile – a Fox News contributor – highlighted that “Joe Biden can occupy his own lane in large part because he’s earned it. He’s earned the right to call himself whatever.”

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But she emphasized that “elections are not about the past, they’re about the future…I do believe he has the right ingredients. The question is can he find enough people to help him stir the pot.”

Fox News Andrew O’Reilly contributed to this report.

Source: Fox News Politics

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Baltimore Mayor Catherine Pugh, who is facing increased calls for her immediate resignation, remains in poor health and is not “lucid” enough to decide whether to step down, her attorney told reporters late Thursday.

Steve Silverman, speaking outside one of Pugh’s residences which was raided by the FBI and IRS earlier in the day, said the embattled city leader could make a decision as early as next week.

“She is leaning toward making the best decision in the best interest in the citizens of Baltimore City,” he said, adding that Pugh has “several options” to consider.

“She just needs to be physically and mentally sound and lucid enough to make appropriate decisions.”

BALTIMORE MAYOR CATHERINE PUGH, ON LEAVE AMID BOOK PROBE, HAS HOMES AND CITY HALL OFFICE RAIDED BY FEDS

Silverman said Pugh met with a doctor at home Thursday and plans to do so again Friday, the Baltimore Sun reported.

In the latest image-tarnishing scandal for struggling Baltimore, the first-term Democratic mayor faces accusations that she used children’s book deals to cover up kickbacks for favorable treatment as a state lawmaker and city leader that earned her roughly $800,000 over several years.

BALTIMORE’S ACTING MAYOR SAYS HE ‘WOULD HATE TO SEE’ EMBATTLED MAYOR RETURN AFTER BOOK SCANDALS

As a state senator, 69-year-old Pugh sold $500,000 worth of her self-published “Healthy Holly” illustrated paperbacks to the University of Maryland Medical System, a major state employer whose board she sat on for nearly 20 years.

Baltimore police officers stand outside the house of Baltimore Mayor Catherine Pugh in Baltimore, MD., Thursday, April 25, 2019. Agents with the FBI and IRS are gathering evidence inside the two homes of Pugh and also in City Hall. (AP Photo/Jose Luis Magana)

Baltimore police officers stand outside the house of Baltimore Mayor Catherine Pugh in Baltimore, MD., Thursday, April 25, 2019. Agents with the FBI and IRS are gathering evidence inside the two homes of Pugh and also in City Hall. (AP Photo/Jose Luis Magana)

UMMS reportedly paid Pugh for 100,000 copies of her books between 2011 and 2018 with the stated intention of distributing the books to schools and day care centers. But some 50,000 copies remain unaccounted for and officials are probing if they were even printed.

Pugh also made $300,000 in bulk sales to other customers including health carriers that did business with the city of Baltimore.

BALTIMORE CITY COUNCIL CALLS ON EMBATTLED MAYOR CATHERINE PUGH TO RESIGN IMMEDIATELY

The politically isolated Pugh slipped out of sight on April 1 after a hastily organized press conference where she called her no-contract book deals a “regrettable mistake.” That same day, Maryland’s governor called on the state prosecutor to investigate allegations of “self-dealing.”

Pugh took an indefinite leave of absence, citing her health deteriorating intensely after a bout with pneumonia.

Federal agents arrive at the Maryland Center for Adult Training in Baltimore. MD, Thursday, April 25, 2019. Agents with the FBI and IRS are gathering evidence inside the two homes of Baltimore Mayor Catherine Pugh and in City Hall, as well as the office of her lawyer and the home of a top aide.

Federal agents arrive at the Maryland Center for Adult Training in Baltimore. MD, Thursday, April 25, 2019. Agents with the FBI and IRS are gathering evidence inside the two homes of Baltimore Mayor Catherine Pugh and in City Hall, as well as the office of her lawyer and the home of a top aide. (Loyd Fox/Baltimore Sun via AP)

On Thursday morning, agents with the FBI and IRS searched her two Baltimore homes, her City Hall offices, and a nonprofit organization she once led. The home of at least one of Pugh’s aides was also scoured.

Silverman said federal agents also served a subpoena at his law firm, retrieving Pugh’s original financial records. They did not seek any attorney-client privileged communications, he said.

Pugh’s attorney said she was “emotionally extremely distraught” following the searches by FBI and IRS agents.

“There was nothing incriminating that came out of her home,” Silverman said.

UMMS spokesman Michael Schwartzberg told reporters that the medical system received a grand jury witness subpoena seeking documents and information related to Pugh.

Other probes against Pugh include a review by the city ethics board and the Maryland Insurance Administration.

BALTIMORE MAYOR’S $500G DEAL FOR ‘HEALTHY HOLLY’ CHILDREN’S BOOKS DRAWS SCRUTINY

In recent weeks, the calls for Pugh’s resignation have intensified with the strongest voice coming from Republican Gov. Larry Hogan, who did not mince words after Thursday’s early morning raids.

“Now more than ever, Baltimore City needs strong and responsible leadership. Mayor Pugh has lost the public trust,” he said. “She is clearly not fit to lead. For the good of the city, Mayor Pugh must resign.”

Federal Bureau of Investigation, and Internal Revenue Service agents search the home of Baltimore Mayor Catherine Pugh in Baltimore, MD., Thursday, April 25, 2019. Agents with the FBI and IRS are gathering evidence inside the two homes of Baltimore Mayor Catherine Pugh and in City Hall.

Federal Bureau of Investigation, and Internal Revenue Service agents search the home of Baltimore Mayor Catherine Pugh in Baltimore, MD., Thursday, April 25, 2019. Agents with the FBI and IRS are gathering evidence inside the two homes of Baltimore Mayor Catherine Pugh and in City Hall. (Jerry Jackson/Baltimore Sun via AP)

Many of her fellow Democrats, including those on Baltimore’s demoralized City Council and state lawmakers, are also insisting that Pugh put the citizens’ interests above any attempt to preserve her political career.

City Council member Brandon Scott called the Thursday raids “an embarrassment to the city.”

However, only a conviction can trigger a mayor’s removal from office, according to the city solicitor. Baltimore’s mayor-friendly City Charter currently provides no options for ousting its executive.

Six of Pugh’s staffers joined her on paid leave earlier this month; three of them were fired this week by the acting mayor.

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Pugh came to office in late 2016 after edging out ex-Mayor Sheila Dixon, who had spent much of her tenure fighting corruption charges before being forced to depart office in 2010 as part of a plea deal connected to the misappropriation of about $500 in gift cards meant for needy families.

She would certainly face a bruising 2020 Democratic primary if she were to return and run for reelection. Veteran City Council leader Bernard “Jack” Young, who is serving as acting mayor, said as she went on leave that he would merely be a placeholder. But this week, before the raids, he said “it could be devastating for her” if she tried to return.

The Associated Press contributed to this report.

Source: Fox News National

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FILE PHOTO: Cases of Pepsi are shown for sale at a store in Carlsbad
FILE PHOTO: Cases of Pepsi are shown for sale at a store in Carlsbad, California, U.S., April 22, 2017. REUTERS/Mike Blake/File Photo

April 26, 2019

By Amit Dave and Mayank Bhardwaj

AHMEDABAD/NEW DELHI (Reuters) – PepsiCo Inc has sued four Indian farmers for cultivating a potato variety that the snack food and drinks maker claims infringes its patent, the company and the growers said on Friday.

Pepsi has sued the farmers for cultivating the FC5 potato variety, exclusively grown for its popular Lay’s potato chips. The FC5 variety has a lower moisture content required to make snacks such as potato chips.

PepsiCo is seeking more than 10 million rupees ($142,840.82) each for alleged patent infringement.

The farmers grow potatoes in the western state of Gujarat, a leading producer of India’s most consumed vegetable.

“We have been growing potatoes for a long time and we didn’t face this problem ever, as we’ve mostly been using the seeds saved from one harvest to plant the next year’s crop,” said Bipin Patel, one of the four farmers sued by Pepsi.

Patel did not say how he came by the PepsiCo variety.

A court in Ahmedabad, the business hub of Gujarat, on Friday agreed to hear the case on June 12, said Anand Yagnik, the lawyer for the farmers.

“In this instance, we took judicial recourse against people who were illegally dealing in our registered variety,” A PepsiCo India spokesman said. “This was done to protect our rights and safeguard the larger interest of farmers that are engaged with us and who are using and benefiting from seeds of our registered variety.”

PepsiCo, which set up its first potato chips plant in India in 1989, supplies the FC5 potato variety to a group of farmers who in turn sell their produce to the company at a fixed price.

The All India Kisan Sabha, or All India Farmers’ Forum, has asked the Indian government to protect the farmers.

The farmers’ forum has also called for a boycott of PepsiCo’s Lay’s chips and the company’s other products.

The Ministry of Agriculture & Farmers’ Welfare did not immediately respond to an email seeking comment.

PepsiCo is the second major U.S. company in India to face issues over patent infringement.

Stung by a long-standing intellectual property dispute, seed maker Monsanto, which is now owned by German drugmaker Bayer AG, withdrew from some businesses in India over a cotton-seed dispute with farmers, Reuters reported in 2017. (reut.rs/2ncBknn)

(Reporting by Amit Dave in AHMEDABAD and Mayank Bhardwaj in NEW DELHI; Editing by Martin Howell and Louise Heavens)

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FILE PHOTO: The Archer Daniels Midland Co (ADM) logo is displayed on a screen on the floor of the NYSE in New York
FILE PHOTO: The Archer Daniels Midland Co (ADM) logo is displayed on a screen on the floor of the New York Stock Exchange (NYSE) in New York, U.S., May 3, 2018. REUTERS/Brendan McDermid/File Photo

April 26, 2019

By P.J. Huffstutter and Shradha Singh

CHICAGO/BENGALURU (Reuters) – Archer Daniels Midland Co said on Friday it was considering spinning off its ethanol business after slim biofuel margins and Midwestern floods slammed the U.S. grains merchant’s profit, which tumbled 41 percent in the first quarter.

ADM said it was creating an ethanol subsidiary, which will include dry mills in Columbus, Nebraska; Cedar Rapids, Iowa; and Peoria, Illinois.

The ethanol subsidiary will report as an independent segment, the company said, allowing options “which may include, but are not limited to, a potential spin-off of the business to existing ADM shareholders.”

Results were hit by the “bomb cyclone” blizzards that devastated the Midwest and Great Plains this year, causing massive flooding across Nebraska, Iowa and Missouri, washing out rail lines and wreaking havoc in the moving and processing of corn, soybeans and wheat. One-sixth of U.S. ethanol production was halted.

In March, ADM warned Wall Street that flooding and severe winter weather in the U.S. Midwest would reduce its first-quarter operating profit by $50 million to $60 million.

“The first quarter proved more challenging than initially expected,” said Chairman and Chief Executive Officer Juan Luciano, with earnings down in its starches, sweeteners and bioproducts unit. Luciano said impacts of the severe weather ultimately “were on the high side of our initial estimates”.

Ongoing problems in the ethanol industry added to the problems and “limited margins and opportunities” for ADM, Luciano said.

The ethanol industry has been in the midst of a historic downswing due to the U.S.-China trade war, excess domestic supply and weak margins.

ADM, which had been an ethanol pioneer, signaled to Wall Street in 2016 that it was hunting for options and considering sales of its U.S. dry ethanol mills. Luciano told Reuters this year that offers ADM had received for the mills were too low.

In addition, ADM said it planned to repurpose its corn wet mill in Marshall, Minnesota, to produce higher volumes of food and industrial-grade starches.

Other major traders are alsy trying to distance themselves from struggling ethanol businesses. Louis Dreyfus Company BV spun off its Brazilian sugar and ethanol business Biosev in 2013. Rival Bunge sold its sugar book and has sought a buyer for its Brazilian mills since 2013.

ADM, which makes money trading, processing and transporting crops, such as corn, soybeans and wheat, has been looking to strengthen its core business. Last month it said it would seek voluntary early retirements of some North American employees and cut jobs as part of a restructuring effort.

The company expects to lower 2019 capital spending by 10 percent to between $800 million and $900 million.

Net earnings attributable to the company fell to $233 million, or 41 cents per share, in the three months ended March 31, from $393 million, or 70 cents per share, a year earlier.

Revenue fell to $15.30 billion from $15.53 billion. On an adjusted basis, the company earned 46 cents per share, while analysts on average had estimated 60 cents, according to IBES data from Refinitiv.

(Reporting by Shradha Singh in Bengaluru; Editing by Shounak Dasgupta, Chizu Nomiyama and David Gregorio)

Source: OANN

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