Consumer Prices Rose 0.3% in January, More Than Expected; Annual Rate of 3.1%

Senate clears foreign aid package to Israel, Ukraine and Taiwan; House GOP balks

MARKET FOCUS

• CPI report hotter than expected
• Fed Chair Powell among officials meeting with Dems at annual retreat
• Biden focuses on ‘shrinkflation’
• Japan's main stock index, the Nikkei 225, saw a notable surge of 2.9%
• Earnings reports from food and beverage companies show positive results
• OPEC maintaining optimistic outlook on global oil demand for 2024 and 2025
• Ag markets today
• Houthi rebels fire missiles at corn cargo ship in Red Sea destined for Iran
• Port of Antwerp disrupted by Belgian farmers’ protests
• Ag trade update
• NWS weather outlook
• East Coast braces for major Nor'easter
• Pro Farmer First Thing Today items

CONGRESS

• Senate clears foreign aid package to Israel, Ukraine and Taiwan; House GOP balks
• Credit card fee hearing April 9
• While FY 2024 funding decisions unresolved, House & Senate to exit
   

RUSSIA & UKRAINE

• Ukraine considers skipping EU ag subsidies for eased green deal requirements
• Ukrainian farmers to reduce spring plantings 3.7%
• EU considers sanctions on firms linked to Russia's war efforts
   

POLICY

• USDA's $306 million Phase 1 ERP payments reflected in latest data
• CBO: Crop insurance costs to surge 29% over next decade
   

CHINA

• WHO: Low risk in China’s human case of bird flu
   

TRADE POLICY

• Emails reveal left-wing influence on Biden trade policy
• WTO deputy chief optimistic ahead of MC13: Restoring dispute settlement a priority
• Indonesia files WTO case against EU regarding import duties on fatty acids
   

ENERGY & CLIMATE CHANGE

• Fuel retailers push Sen. Carper on year-round E15 sales
• Biden administration introduces Working Lands Climate Corps
   

LIVESTOCK, NUTRITION & FOOD INDUSTRY

• NIH launches $190 million study on personalized diets
   

POLITICS & ELECTIONS

• High-stakes special election in New York's third congressional district
   

OTHER ITEMS OF NOTE

• Indian police used tear gas against farmers marching towards New Delhi

— Equities today: Asian and European stock markets were mixed to weaker in overnight trading. China is celebrating its Lunar New Year holiday this week. Many China markets are closed much of this week for the annual holiday. U.S. stock index futures are set to open lower today on profit taking and a hotter-than-expected CPI report. In Asia, Japan +2.9%. Hong Kong closed. China closed. India +0.7%. In Europe, at midday, London -0.3%. Paris -0.5%. Frankfurt -0.6%.

     Japan's main stock index, the Nikkei 225, saw a notable surge of 2.9%, briefly surpassing 38,000, its highest level since 1990, before settling just below that mark. The rally was predominantly driven by tech companies. The index has marked a 13% increase this year, following a substantial 28% rise in 2023. Foreign investors are capitalizing on low valuations, the weak yen, and shifts in Japanese corporate governance, including increased buybacks and dividends.

     U.S. equities yesterday: The Dow managed to notch a new record close while the Nasdaq and S&P 500 ended lower. The Dow was up 125.69 points, 0.33%, at 38,797.38. The Nasdaq fell 48.12 points, 0.30%, at 15,942.55. The S&P 500 was down 4.77 points, 0.09%, at 5,021.84.

— Tuesday's earnings reports from food and beverage companies showed positive results. Coca-Cola surpassed Wall Street's revenue expectations, generating $10.85 billion compared to the anticipated $10.68 billion. Higher prices offset a volume decline in North America for the beverage giant. Restaurant Brands International, owner of Tim Hortons and Burger King, also exceeded both revenue and profit forecasts. Tim Hortons' strong performance, with a same-store sales increase of 8.4%, outpaced StreetAccount's estimate of 4.7%.

— Ag markets today: Corn, soybeans and wheat held in tight trading ranges during a quiet overnight session. As of 7:30 a.m. CT, corn futures were trading around a penny higher, soybeans were 1 to 3 cents lower, winter wheat markets were 2 to 3 cents lower and spring wheat was mostly 3 to 5 cents lower. Front-month crude oil futures were around 45 cents higher, and the U.S. dollar index was about 100 points lower.

     Cattle futures pull back despite jump in cash prices. Live cattle futures faced corrective selling on Monday, despite confirmation of a $3.35 jump in the average cash cattle price to $181.15 – the highest level since the week ended Nov. 3 of last year. Cash cattle prices have firmed for four straight weeks, gaining $7.68 over that period. Given negative margins and recent big purchases, packers will try to slow play cash cattle negotiations this week and reduce kills as they attempt to manage supplies without actively raising bids again this week.

     Cash hogs, pork cutout firm. The CME lean hog index is up a dime to $73.70 as of Feb. 9, snapping a two-day skid. Wholesale pork prices rebounded from last week’s losses with a $2.57 gain on Monday, led by more than $5.00 gains in bellies and hams, moving the cutout back into the upper-$80.00 range.  

— Agriculture markets yesterday:

• Corn: March corn rose 1 1/2 cents to $4.30 1/2, a near mid-range close.  
• Soy complex: arch soybeans surged 9 1/2 cents to $11.93, closing nearer session highs. March soymeal closed $2.1 higher to $348.90, after trading as high as $355.9. March soyoil dropped 36 points to 46.90 cents.   
• Wheat: March SRW wheat closed up 3/4 cent at $5.97 1/2. March HRW wheat closed down 2 3/4 cents at $5.98 3/4. Prices closed nearer their mid-ranges. March spring wheat futures fell 1 3/4 cents to $6.82 1/2.
• Cotton: March cotton fell 125 points to 90.53 cents, but still ended high range. December cotton rose 8 points to 83.30 cents and closed higher for the eleventh straight session.  
• Cattle: April live cattle fell 80 cents to $185.925 and nearer the session low. Prices hit a three-month high early on. March feeder cattle closed up $1.675 at $248.825, near mid-range and hit a 3.5-month high early on.
• Hogs: April lean hog futures fell 2.5 cents before settling at $81.125, near mid-range.
   

— Items of note:

• Inflation perspective. CPI is up by 17.8% since January 2021, while average weekly earnings are up by 12.8%. “Prices are not going up as quickly, but wages still haven’t caught up to the inflation we’ve seen over the last couple of years,” said Heritage Foundation public finance economist EJ Antoni. “That’s a big reason why people are so down on this economy and will continue to be so until that changes.”
   
• Fed Chair Jerome Powell is among the top officials scheduled to meet with House Financial Services Democrats today at their annual retreat.
   
• A bit of advice. “We'd be surprised to see anything but bitcoin and ether being approved by the SEC.” — Cathie Wood, founder of ARK Investment Management, said in an interview with WSJ's Take on the Week podcast, on why she isn’t expecting the Securities and Exchange Commission to approve spot exchange-traded funds holding cryptocurrencies other than bitcoin and ether.
   
• Credit card fee hearing. Senate Judiciary Chair Dick Durbin (D-Ill.) is calling on the CEOs of Visa, Mastercard, United Airlines and American Airlines to testify about credit card fees. The hearing will be April 9.
   

— The annual inflation rate in the U.S. fell back to 3.1% in January 2024 following a brief increase to 3.4% in December, but came higher than forecasts of 2.9%. Compared to the previous month, the CPI edged up 0.3%, the most in four months, and above forecasts of 0.2%. Also, annual core inflation held steady at 3.9%, compared to expectations it would slow to 3.7%. The monthly rate edged up to 0.4%.    

Market perspectives:

— Outside markets: The U.S. dollar index was weaker as the euro, British pound and Swiss franc were all firmer against the greenback. The yield on the 10-year U.S. Treasury note was lower, trading around 4.15% ahead of CPI data, with a mostly higher tone in global government bond yields. Crude oil futures were rising, with U.S. crude around $77.55 per barrel and Brent around $82.65 per barrel. Gold and silver were higher ahead of inflation data, with gold around $2,042 per troy ounce and silver around $22.93 per troy ounce.   

— OPEC is maintaining its optimistic outlook on global oil demand for 2024 and 2025, projecting growth of 2.25 million barrels per day (bpd) and 1.85 million bpd, respectively. The organization also raised its economic growth forecasts for these years, anticipating a positive trend that could further boost oil demand. Despite concerns about high interest rates, conflict in the Middle East and supply disruptions have supported oil prices, with Brent crude trading around $82 a barrel. OPEC's forecast for oil demand growth in 2024 exceeds that of the International Energy Agency (IEA), which is expected to update its forecasts soon.

     OPEC's long-term outlook for oil demand, extending to 2045, sees no peak in demand, a view that differs from the IEA's perspective. OPEC and its allies have implemented output cuts since late 2022 to stabilize the market, with a new cut for the first quarter of this year already in effect. OPEC's report also noted a decrease in OPEC oil production by 350,000 bpd in January due to voluntary output cuts by the OPEC+ alliance.

— Port of Antwerp disrupted by Belgian farmers’ protests. Operations at the port of Antwerp, one of Europe’s biggest container ports, were seriously impacted on Tuesday as hundreds of farmers on tractors blocked the roads around the port demanding looser environmental rules and better protection against cheap imports. The delays this is causing for freight handling come on top of the problems that port companies are already experiencing as attacks on vessels in the Red Sea force shipping companies to stay away from the Suez Canal and opt for longer routes instead.

— Ag trade update: South Korea purchased 68,000 MT of corn expected to be sourced from South America or South Africa. Jordan purchased 60,000 MT of optional origin hard milling wheat. Algeria tendered to buy up to 160,000 MT of Brazilian or Argentine corn and 35,000 MT of optional origin soymeal. Japan is seeking 115,035 MT of milling wheat in its weekly tender.

— NWS weather outlook: Strong nor'easter to impact portions of the northern Mid-Atlantic and southern New England today with areas of heavy snow, strong winds, and coastal flooding... ...New storm system to arrive across the Northwest over the next couple of days which will bring locally heavy rain and mountain snowfall.

Items in Pro Farmer's First Thing Today include:

     • Quiet grain trade overnight
     • Cordonnier cuts South American crop estimates
     • France cuts wheat seedings estimate

— The Senate early this morning passed a $95 billion foreign aid package to send money to Israel, Ukraine and Taiwan. The vote was 70-29 and includes $60 billion for Ukraine. The bill will now go to the House, but House Speaker Mike Johnson (R-La.) Monday evening issued a statement essentially saying the current Senate aid approach is dead on arrival without significant border security protection language. “Now, in the absence of having received any single border policy change from the Senate, the House will have to continue to work its own will on these important matters. America deserves better than the Senate’s status quo,” Johnson said.

     Of note: The House is out Feb. 19-27, and the Senate is about to take off and will return Feb. 26.  

— Ukraine considers skipping EU agriculture subsidies for eased green deal requirements. Ukraine is contemplating forgoing agriculture subsidies from the European Union (EU) in exchange for leniency regarding the EU Green Deal requirements. Discussions about Ukraine's potential accession to the EU are scheduled to begin next month.

     To access approximately 96.5 billion euros ($103.95 billion) in subsidies under the Common Agricultural Policy (CAP) over seven years, Ukrainian farmers would need to comply with the Green Deal requirements. However, Ukrainian officials argue that these requirements could hinder their business operations. They propose negotiating fewer trade and environmental restrictions for Ukrainian farmers in exchange for subsidies. Protecting the competitiveness of Ukraine's agriculture sector is a priority in these negotiations.

     This stance suggests that Ukraine's accession to the EU may face significant challenges, particularly as previous reports hinted at potential subsidy cuts for existing EU members if Ukraine were to join, leading to farmer protests within the EU.

— Ukrainian farmers to reduce spring plantings 3.7%. Ukrainian farmers plan to reduce the sown area to spring crops by 3.7% (500,000 hectares) this year, mostly by lowering the area for corn, a survey from Ukraine’s ag ministry showed. The survey said farmers plan to reduce corn plantings by 9% but could increase the area sown to sugar beets, rapeseed and soybeans, while they are still undecided on seedings of sunflowers.

— EU considers sanctions on firms linked to Russia's war efforts. The EU is considering imposing new sanctions on 21 businesses, including some in China and India, with ties to Russia's war efforts in Ukraine. These sanctions would prohibit European firms from supplying components to the sanctioned companies that could be utilized in weapons or drones. If approved by member states, these sanctions would mark the EU's first action against mainland Chinese companies since Russia's invasion of Ukraine two years ago.
 

— USDA's $306 million Phase 1 ERP payments reflected in latest data. USDA's recent announcement of approximately $306 million in final Phase 1 Emergency Relief Program (ERP) payments is evident in the program's latest data. As of Feb. 11, a total of $8.56 billion has been disbursed under ERP, with $7.68 billion allocated to Phase 1. Prior to the USDA's announcement, Phase 1 payments totaled $7.45 billion. Meanwhile, Phase 2 payments have increased slightly to $882.6 million. With USDA imposing a deadline for county office action on Phase 1 final payments by Feb. 16, it is anticipated that Phase 1 payments will rise further in the upcoming data for the week ending Feb. 18.

— CBO: Crop insurance costs to surge 29% over next decade. The Congressional Budget Office (CBO) projects (link) that federally subsidized crop insurance will cost an additional $27.7 billion over the next decade, with the government covering roughly 62% of premiums. Crop insurance costs are estimated to rise by 29% to nearly $125 billion for the decade ending in 2033. Despite this increase, USDA spending on crop and livestock subsidies and land stewardship programs is expected to remain stable. Livestock insurance has seen significant growth since 2018 due to increased premium subsidy rates, covering $26.4 billion in liabilities in 2023. The popularity of forage policies is expanding the reach of the crop insurance program. With over 539 million acres enrolled, crop insurance enjoys strong support from farm-state lawmakers.

— WHO: Low risk in China’s human case of bird flu. China on Jan. 27 reported a case involving a person infected with combined H3N2 and H10N5 strains of avian influenza. The World Health Organization says, “the likelihood of human-to-human spread is considered low.”

— Emails reveal left-wing influence on Biden trade policy. The Biden Administration's trade policy is under scrutiny due to emails revealing how Federal Trade Commission Chair Lina Khan and left-wing groups influenced U.S. Trade Representative Katherine Tai, the Wall Street Journal noted in a commentary item (link). Tai outlined the administration's new anti-trade agenda, criticizing previous administrations' efforts to promote trade policies benefiting businesses and consumers. Tai withdrew support for digital trade principles at the World Trade Organization and in negotiations for the Indo-Pacific Economic Framework trade deal, citing the need for domestic tech regulation debates. Left-wing groups like Rethink Trade influenced this decision, advocating for policies that prioritize domestic policy space over international trade agreements. The WSJ item says these actions, criticized by business groups like the U.S. Chamber of Commerce, undermine efforts to protect intellectual property and promote digital trade, benefiting various industries.

     Bottom line: The involvement of Khan and her associates raises concerns about the influence of anti-trade agendas on U.S. trade policy and its implications for global trade relationships.

— WTO deputy chief optimistic ahead of MC13: Restoring dispute settlement a priority; modest prospects for ag reform; fisheries agreement implementation underway. WTO Deputy Director-General Angela Ellard discussed the state of reform talks ahead of the 13th Ministerial Conference (MC13). She remains hopeful for the restoration of the full WTO dispute settlement system in 2024. While prospects for agricultural reform at the ministerial are modest, Ellard believes the gathering can help define a path forward on currently intractable issues. Implementation of the fisheries agreement is also highlighted, with initial funding to assist developing members meet new commitments under the accord. Ellard emphasized the importance of addressing various reforms across WTO functions and acknowledges differing views among members, particularly regarding public stockholding for food security. Despite the challenges, Ellard sees MC13 as an opportunity to achieve progress and set a roadmap for the future. Additionally, efforts are underway to support developing countries in implementing the fisheries agreement through a trust fund established by WTO members.

     Ellard said members must decide whether to retain the two-tiered structure with dispute panels and an appeals body, or something different. “That is an issue they are they are still working on,” she remarked. Broader WTO reforms are also on the table, Ellard said, noting that some could be handled rather quickly while others may need a longer timeline to accomplish. As has been the case for years, public stockholding remains one of the main unresolved issues as MC13 approaches, Ellard said, adding that it may well be that countries cannot reach a permanent resolution. “There's a healthy debate right now about whether agriculture negotiations should be to cover all of these issues, or whether they should focus on just a few issues — and whether and to what extent food security should be to be the focus,” she said.

— Indonesia initiated a WTO case against the European Union (EU) regarding import duties on fatty acids from Indonesia that use palm oil. The EU's duties range from 15.2% to 46.4%, but Indonesia argues they violate WTO guidelines. Indonesia has requested consultations with the EU, the first step in the WTO dispute process. If no resolution is reached within 60 days, Indonesia can request a dispute settlement panel, which the EU can initially block. However, if a second request is made, the panel process will proceed, lasting 12-18 months. Currently, the appeals process at the WTO is inactive due to the US blocking the appointment of new judges, leaving 31 appeals pending.

— Fuel retailers push Sen. Carper on year-round E15 sales. Fuel retailers are pressuring Sen. Tom Carper (D-Del.), who chairs the environment committee and is not seeking re-election, to support legislation allowing the year-round sale of gasoline blended with 15% corn ethanol (E15). They argue that such a move would promote environmentally friendly fuel, lower costs for consumers, and encourage investments in lower-carbon transportation energy. These retailers claim that Carper's opposition is the main obstacle to passing such bills. They assert that allowing year-round sales of E15 would prevent disruptions, complexity, and price increases in the gasoline market. However, independent refiners oppose E15 legislation and seek broader changes to the nation's renewable fuel mandate. Carper has previously shown sympathy toward the concerns of independent refiners.

— Biden administration introduced a new initiative called the Working Lands Climate Corps, aiming to train over 100 young people in conservation and climate-smart agricultural practices. Part of the broader American Climate Corps, this initiative seeks to hire 20,000 young individuals for temporary roles focused on climate change mitigation and preparation. The program aims to promote climate-smart agriculture nationwide while encouraging a new generation to adopt practices that can generate additional revenue for farms and ranches. USDA's Working Lands Climate Corps will involve partnerships with organizations like AmeriCorps, The Corps Network, and the National Association of Conservation Districts. Interested state and local partner organizations can submit proposals to sponsor members of the program until March 8.

— NIH launches $190 million study on personalized diets. The National Institutes of Health (NIH) is conducting a groundbreaking $190 million study involving 10,000 participants to investigate individual responses to various diets. This ambitious project aims to provide personalized dietary guidance by understanding how different people react to different dietary approaches. The goal is to address the often-conflicting advice regarding nutrition and offer tailored recommendations to individuals. Link for details via the Wall Street Journal.

— McDonald's said it reached its goal of serving only cage-free eggs in the U.S. this month, ahead of its 2015 pledge to be cage-free by 2025. Link for details via Restaurant Business.

— High-stakes special election in New York's third congressional district. The special House election in New York's third congressional district, encompassing parts of Queens and Nassau County, has garnered significant attention due to its potential implications for the Nov. 5 elections. With the seat vacated by expelled Republican George Santos, the historically swing district may offer insight into broader political trends. Though Joe Biden won the district by ten points in 2020, Republicans aim to retain the seat with Mazi Melesa Pilip as their candidate. Conversely, Democrats, represented by former congressman Tom Suozzi, seek to reclaim the seat. Polls indicate a tight race between the two contenders. Pilip has focused on the border crisis, while Suozzi dismisses such claims. The district's swing nature makes it a crucial battleground, as observed by Ronald Reagan's analogy likening heaven to Nassau County for Republicans and a challenging terrain for Democrats.
 

— Indian police used tear gas against farmers marching towards New Delhi as thousands demand a guaranteed minimum price for their produce and higher wages. This protest echoes previous demonstrations in 2021, where angry farmers camped outside India's capital for nearly a year. At that time, Prime Minister Narendra Modi proposed market deregulation, allowing farmers to sell outside of state-controlled wholesale markets, but ultimately backed down in the face of fierce opposition.

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