CFAP 3 payouts later rather than sooner? | Schumer details Senate agenda
In Today’s Updates
• Traders and analysts react strongly to USDA’s Tuesday reports
• Fed Beige Book arrives this afternoon
• Oil extending steady recovery into 2021
• Argentina removes daily limit on corn exports
• Ukraine port authority restricts grain cargo operations at some ports
• Maersk Line doesn’t expect container shipping’s capacity squeeze to ease soon
• Transportation briefs
• Conab trims its Brazilian soybean, corn and cotton crop forecasts
• Brazilian soybean exports well under year-ago in January after planting delays
• Mounting pressure from feed users for Ukraine to cap corn exports
• Newton: CFAP 3 payouts may not come until end of this quarter or early in second quarter
• OMB finishes review on final rule covering hemp production
• Schumer lays out Senate agenda
• Quote to note from China President Xi
• State Department halt on travel by diplomats covers Taiwan visit by U.S. official
• Biden’s USTR nominee signals some trade policy items
Energy & Climate Change:
• Outgoing EPA Administrator Wheeler talks to Washington Post
• Senators ask Biden to bolster Renewable Fuel Standard
• Focus continues on potential EPA biofuel action
Food & Beverage Industry Update:
• Surplus of lobster in Australia
• Couche-Tard, Canadian convenience-store giant, in talks to buy French grocer Carrefour
• U.S. gov’t will require international airline passengers show negative Covid-19 test
• Additional vaccine doses to be released
• China has imposed new lockdowns affecting 28 million people
• Chinese vaccine used in Brazil less effective than initial indications
Politics & Elections:
• House votes to ask Pence to remove Trump from power using 25th Amendment
• Biden picks ex-UN Ambassador Power to head U.S. aid agency
• Ex-CFTC chief Gensler likely SEC nominee
• Biden intends to appoint acting agency heads across federal gov’t
• Sen. Brown: ‘Wall Street doesn’t get to run this entire economy’
• Schumer wants Capitol rioters barred from flights
• Trump administration lawyers say forgiving student debt is illegal
Other Items of Note:
• Report: $13 trillion infrastructure investment needed
• Walk of shame in Canada
Equities today: U.S. futures are slightly lower. Investors are shrugging off the likely impeachment of Donald Trump. The House will begin to debate impeaching Trump for a second time shortly after 9 a.m. Eastern Time, with a vote likely to conclude by 5 p.m. While Trump is likely to become the first U.S. president to be impeached twice, it is still not clear what happens with the Senate, with a conviction before President-elect Joe Biden is inaugurated viewed as very unlikely. Trump, in his first public appearance since the riot last week, said he did nothing wrong and showed little regret for urging supporters to march on Congress in a speech before the riot. Overnight the MSCI Asia Pacific Index added 0.5% while Japan's Topix index closed 0.3% higher.
U.S. equities yesterday: The Dow rose 60.00 points, 0.19%, at 31,068.69. The Nasdaq was up 36.00 points, 0.28%, at 14,072.43. The S&P 500 was up 1.58 points, 0.04%, at 3,801.19.
On tap today:
• U.S. consumer price index for December is expected to rise 0.4% from a month earlier and 1.3% from a year earlier. Excluding food and energy, the CPI is expected to rise 0.1% and 1.6%. (8:30 a.m. ET)
• U.S. federal budget figures for December are out at 2 p.m. ET.
• Federal Reserve speakers: St. Louis’s James Bullard on the economy and monetary policy at 9:30 a.m. ET, governor Lael Brainard on the economic outlook and full employment at 1 p.m. ET, Philadelphia’s Patrick Harker on the economic outlook at 2 p.m. ET, and Vice Chairman Richard Clarida on the Fed’s new framework at 3 p.m. ET.
• Fed releases its Beige Book report on U.S. economic conditions at 2 p.m. ET.
• Japan machinery orders for November are out at 6:50 p.m. ET.
Beige Book arrives this afternoon. The Fed’s anecdotal recap of economic conditions in the 12 Federal Reserve districts is released at 2 pm ET today, with attention on the comments in the update relative to stimulus actions and the release of Covid vaccines — both elements that were not yet unfolding when the prior FOMC session took place in December. The recap is likely to continue to relate uncertainty among business contacts relative to the economic outlook, but the vaccine/stimulus could start being reflected in perhaps more optimistic — or less pessimistic — views. The report arrives two weeks before the conclusion of the next Federal Open Market Committee (FOMC) meeting Jan. 26-27.
• Outside markets: The U.S. dollar index is higher. Nymex crude oil futures prices are slightly higher, hit another 10-month high overnight, and are trading around $53.40 a barrel. The yield on the benchmark 10-year U.S. Treasury note stands at 1.126%.
• Crude prices have eased from earlier overnight advances ahead of the U.S. trading start, with U.S. crude trading around $53.40 per barrel and Brent around $56.70 per barrel. Prices rose in Asian action after the American Petroleum Institute (API) reported a draw in inventories. U.S. crude was up 61 cents at $57.30 per barrel while Brent crude was up 96 cents at $53.21 per barrel.
• Oil is extending a steady recovery into 2021, aided by fresh signals that the world’s biggest producers won’t turn on the spigots and flood the market, the Wall Street Journal reports (link). U.S. crude futures recently rose above $50 a barrel for the first time since last February, the latest milestone in a rebound powered by an uptick in travel and economic activity following the easing of coronavirus restrictions. Output cuts by large suppliers from Saudi Arabia to U.S. companies are turbocharging the advance, giving traders confidence that demand will exceed supply.
• Comments from analysts and traders regarding USDA’s Tuesday reports:
— “USDA January reports are known for shocks and this year was no exception. It was not so much the ending stocks but how the USDA got to the numbers.”
— “USDA is just biting the bullet and adjusting their balance sheets to account for several years of wrong numbers.”
— “Why even bother putting out production numbers through the season if you are going to be this far off at the end of the season. What was the point? USDA might as well adopt Canada's method of putting one estimate out at the beginning of the season and one at the end.”
— Regarding USDA’s big decline in U.S. cotton production: “USDA just caught up to where the cotton industry has been for months.”
— “First we had USDA’s World Board so behind in its forecast of China’s corn imports, now we have USDA’s NASS making big reductions in corn, soybean and cotton production this late… what is going on at USDA?”
— “These changes certainly suggest NASS has some data issues between their farmer surveys and objective yield surveys.”
— “Perhaps NASS/WAOB are becoming like weather… we are in a pattern of more fluctuations in data after an extended period where fewer dramatic changes took place. Data warming perhaps?”
— “USDA left Brazil’s bean crop at 133 million tons… they will likely lower it next month based on the past as USDA likes to wait until February for more data.”
• Argentina removes daily limit on corn exports. Just days after removing their ban on corn exports through Feb. 28 and replacing it with a daily export limit of 30,000 tonnes, Argentina’s Ag Ministry has now removed that limitation and will set up a commission to monitor domestic corn prices. “These meetings allow us to continue advancing in making private interests compatible with the need of the state to guarantee essential goods throughout the national territory,” the ministry said in a statement. Farmers were angered over the export halt and the daily limit on corn exports, embarking on a three-day strike. The Argentine policy change was also announced on a day when U.S. corn futures closed limit up in the first three contract months in the wake of tighter-than-expected U.S. corn supplies released by USDA.
• Ukraine port authority restricts grain cargo operations at some ports. Grain cargo operations at several Black Sea Ukrainian ports have been restricted, according to a statement from the country’s seaport authority, citing poor weather conditions. The statement signaled the Kherson and Mykolayiv ports in the Odessa region have been affected.
• Ag demand news: Egypt cancelled an international tender to buy wheat amid low participation. Jordan’s state grains buyer issued an international tender to buy 120,000 MT of animal feed barley after making no purchase in its tender yesterday for that amount of barley. Algeria tendered to buy around 35,000 MT of soymeal from optional origins. South Korea’s Feed Leaders committee bought around 66,000 MT of corn in a private deal, reportedly from South America. A group of South Korean flour mills bought around 50,000 MT of milling wheat from Australia in a tender. Turkey provisionally bought around 130,000 MT of feed barley from optional origins in a tender. Japan’s ag ministry is seeking to buy 80,000 MT of feed wheat and 100,000 MT of feed barley via a simultaneous buy and sell auction.
• Maersk Line doesn’t expect container shipping’s capacity squeeze to ease anytime soon. Robbert van Trooijen, the carrier’s senior vice president for Latin America and the Caribbean, told the Wall Street Journal (link) that Maersk is instead focusing on efficiency efforts to improve the flow of goods along seaborne and inland transportation networks that have been rattled by bottlenecks and unyielding backups. The delays are coming as suppliers and carriers are adapting to extensive disruptions in supply chains under the coronavirus pandemic. With idled ship capacity at a historic low and new-build orders muted, the backups “could continue for some time,” van Trooijen says. Some big shipping lines have added or are weighing new orders for mega-vessels, but those ships won’t enter service anytime soon. And Maersk isn’t planning to add significant capacity in the near future, preferring to focus on expanding its inland logistics footprint, the WSJ article notes.
• Transportation briefs:
— An investment bank forecasts tanker earnings on the spot market will fall to about half of break-even levels on falling crude demand. (Lloyd’s List)
— Some European freight forwarders are starting to charter full cargo vessels to get around bottlenecks in Asia. (The Loadstar)
Items in Pro Farmer's First Thing Today include (Link to subscribe to FTT):
• Conab trims its Brazilian soybean, corn and cotton crop forecasts
• Brazilian soybean exports well under year-ago in January after planting delays
• Mounting pressure from feed users for Ukraine to cap corn exports
— Farm Bureau economist: CFAP 3 payouts may not come until end of this quarter or early in second quarter. “In conversations that we’ve had with current USDA staff, I think there is some IT infrastructure that needs to be developed, the paperwork needs to get developed, FSA staff may need to be trained, so I’d say stay tuned on that,” the American Farm Bureau Federation’s chief economist, John Newton, said on a panel during the organization’s online convention.
The aid producers have received since 2018 via trade mitigation (Market Facilitation Program/MFP) and CFAP shows, according to Farm Bureau economists, Iowa has received the largest amount at $4.6 billion, followed by Illinois ($3.8 billion), Minnesota ($3.1 billion), Nebraska ($3 billion), Kansas ($2.6 billion) and Texas ($2.5 billion). California has received about $1.9 billion.
— OMB finishes review on final rule covering hemp production. The Office of Management and Budget (OMB) has completed its review of USDA’s final rule to establish a domestic hemp production program as directed in the 2018 Farm Bill. The delay in getting the rule finalized resulted in Congress stepping in to allow those states operating under the 2014 Farm Bill pilot program rules on hemp production to continue to do so through Sept. 30.
The final rule is to be published in February, according to the action regulatory agenda released by the Trump administration in December.
— Schumer lays out Senate agenda. Sen. Chuck Schumer (D-N.Y.) — who is set to become majority leader — said the Senate would prioritize legislation that would contain money for vaccine distribution and additional $1,400 checks for Americans. In a call with Schumer and House Speaker Nancy Pelosi (D-Calif.) on Friday, President-elect Joe Biden stressed the need for “immediate economic relief for families and small businesses, funding for Covid-19 response, including vaccinations, testing, school reopening, and state and local frontline workers,” according to a readout from the Biden transition team.
Schumer said the immediate relief bill would contain the additional money, on top of $600 individual payments Congress approved last month, to fulfill the promise of $2,000 payments that Biden made to voters in Georgia’s runoff elections this month: “We will get that done.” He also said it would contain money for vaccine distribution, schools, small businesses and assistance for state and local governments, which was left out of the last Covid package in a dispute with Republicans. Schumer said senators would also prepare broader legislation to address climate change, infrastructure, manufacturing, immigration, criminal justice, inequality and elections.
— Quote from China's President Xi: "The world is undergoing profound changes unseen in a century, but time and the situation are in our favor... This is where our determination and confidence are coming from."
— State Department halt on travel by diplomats also covers Taiwan visit by U.S. official. The Jan. 13-15 visit to Taiwan by U.S. Ambassador to the UN Kelly Craft will not take place as part of the halt in all travel by U.S. diplomats as part of the coming transition to a Biden administration. The Craft visit had produced an angry response from China as it claims Taiwan as a its own territory. "China will continue to take all necessary steps to firmly defend its sovereignty and security interests," Foreign Ministry spokesman Zhao Lijian said at a Beijing news briefing. Taiwan’s government said that they regretted the U.S. decision, but expressed “understanding and respect” for the action.
— U.S./China Phase 1 tracker: China’s purchases of U.S. goods. Link.
— How much will trade policy change under incoming Biden administration? President-elect Joe Biden’s trade policy will focus on helping American workers by ensuring trade agreements protect and enhance U.S. jobs — and not just ensure low prices of imported goods for consumers, his nominee for the top trade-policy job said Tuesday. Katherine Tai, in her first speech since Biden nominated her for U.S. Trade Representative, said the new administration’s policy priorities also include confronting China over its trade practices and enforcing the U.S.-Mexico-Canada Agreement (USMCA) signed by President Trump last year.
“The president-elect’s vision is to implement a worker-centered trade policy,” Tai said in a video-streamed speech to the National Foreign Trade Council, a business-advocacy group. “What it means in practice is that U.S. trade policy must benefit regular Americans, communities and workers. And that starts with recognizing that people are not just consumers. They are also workers and wage earners.”
Tai said the U.S. faces stiffening competition from China, “whose economy is directed by central planners, who are not subject to the pressures of political pluralism, democratic elections, popular opinion.” She has said in the past that Beijing needs to be confronted strongly and strategically.
“The USMCA is notable for incorporating groundbreaking labor and environmental provisions, including enforcement mechanisms that address longstanding wounds and grievances suffered by regular working people,” Tai said. She added that the challenge now is to make sure the agreement lives up to its promises and potential through enforcement actions and some course correction.
Biden has said he didn’t plan to enter new trade agreements until he addresses key domestic issues.
ENERGY & CLIMATE CHANGE
— Outgoing EPA Administrator Wheeler talks to Washington Post. In a wide-ranging interview Tuesday with the Washington Post, EPA Administrator Andrew Wheeler said it would be a mistake for the incoming administration to concentrate on climate change to the exclusion of other environmental priorities. “I hope that they aren't as single-focused — the Biden administration — as the Obama administration was,” said Wheeler, who has highlighted marine litter, getting lead out of the nation’s water supply and cleanup of Superfund sites during his tenure. Biden has picked North Carolina regulator Michael Regan to succeed him. Link to interview details.
— Senators ask Biden to bolster Renewable Fuel Standard (RFS). A group of Democratic senators led by Sen. Tammy Duckworth (D-Ill.) urged Biden to take several actions to shore up the RFS, according to a letter (link) yesterday. “It’s critical that the integrity of this policy be restored, and that biofuels be part of your efforts to combat climate change,” the lawmakers, also including Democratic Whip Dick Durbin (D-Ill.) and Agriculture Committee top Democrat Debbie Stabenow (D-Mich.), said.
The lawmakers urged Biden to quickly publish renewable volume obligations, approve pending applications for corn kernel fiber ethanol and update the EPA’s biofuels emissions modeling, among other actions.
— Focus continues on potential EPA biofuel action. Bloomberg is the latest to focus on the biofuel policy decisions that are rumored to be coming from the Trump EPA before they leave office Jan. 20, with the service reporting what others have indicated — EPA is considering exempting some refiners from their 2019 mandates under the Renewable Fuel Standard (RFS).
Bloomberg is also reporting that EPA is considering a formal extension of deadlines for refiners to prove compliance with the RFS for 2019 and 2020 — to Jan. 31, 2022 for 2019 and June 1, 2022 for 2020.
Bloomberg also said that EPA officials have downplayed the potential that a flurry of exemptions could be issued, telling some stakeholders not to expect waiver approvals soon. The Supreme Court this week announced it would review a 10th Circuit Court decision which invalidated three small refinery exemptions (SREs) for the 2016 compliance year. EPA Administrator Andrew Wheeler told the American Fuel and Petrochemical Manufacturers in November that EPA was waiting on the “ultimate results” of the appeal of the 10th Circuit Court decision by the Supreme Court before deciding on 2019 waiver requests.
The American Coalition for Ethanol sent a letter to EPA’s inspector general seeking assurances that the agency was not about to grant SREs for the 2019 and 2020 compliance years as media outlets have reported.
Biofuel policy will be an issue clearly confronting the incoming Biden administration with strong views from both biofuel supporters and refiners that create a potential policy quagmire similar to the one that has confronted and confounded the Trump administration.
FOOD & BEVERAGE INDUSTRY
— Surplus of lobster in Australia has locals coming up with creative ways to cook what was once a rare treat. Link for details via the WSJ.
— Couche-Tard, a Canadian convenience-store giant, is in talks to buy the French grocer Carrefour, whose market cap is currently $17 billion. Details via Bloomberg.
— Summary: Global cases of Covid-19 are at 91,669,273 with 1,963,934 deaths, according to data compiled by the Center for Systems Science and Engineering at Johns Hopkins University. The U.S. case count is at 22,846,810 with 380,796 deaths.
— U.S. gov’t will require all international airline passengers to show proof of a negative Covid-19 test before boarding flights to the country, the Centers for Disease Control and Prevention said Tuesday. U.S. airlines have voiced support for the new requirement but continued to say that the ramped-up testing protocols should supplant bans on most travel from Europe, the U.K. and Brazil.
— Additional vaccine doses to be released. The Trump administration shifted strategy to vastly expand the pool of those eligible for coronavirus vaccines, releasing second doses that were originally reserved for booster shots. The change comes as the U.S. reported its highest daily number of deaths from Covid-19, and newly reported cases again exceeded 200,000.
— China has imposed new lockdowns affecting 28 million people. The National Health Commission reported 42 new cases of locally transmitted symptomatic infections on Tuesday, after recording 85 cases the day before, its highest daily total in six months.
— New data from a trial conducted in Brazil demonstrated that CoronaVac, a Chinese vaccine, has just a 50.4% efficacy rate against Covid-19. Last week researchers had declared the jab, made by Sinovac, to be 78% effective against “mild-to-severe” cases. Those data reportedly hid a group of milder infections.
POLITICS & ELECTIONS
— House of Representatives voted in favor of asking VP Mike Pence to remove President Donald Trump from power using the 25th Amendment. But Pence had already rejected the idea, saying it was not “in the best interest” of the country. The House will vote later today on whether to impeach Trump, who has been charged with “incitement of insurrection” over last week’s riots in Washington, DC. The Democrats, who have a majority in the House, are likely to support impeachment, as are several Republicans. House GOP Conference Chairwoman Liz Cheney (R-Wyo.) said she would vote to impeach Trump, the first member of the party's leadership to take that stance.
— Biden picks ex-UN Ambassador Power to head U.S. aid agency. President-elect Joe Biden named Ambassador Samantha Power to head the United States Agency for International Development (USAID). Biden revealed he would make the post part of the National Security Council, a signal his administration will emphasize the role of development in maintaining security around the world. In her tenure as U.S. ambassador to the United Nations during the Obama administration, Power marshaled efforts to fight an Ebola epidemic and mitigate climate change. Power is an immigrant from Ireland who began her career as a journalist reporting from Bosnia and other war-torn countries.
— Ex-CFTC chief Gensler likely SEC nominee. President-elect Joe Biden is widely expected to choose Gary Gensler, a former financial regulator and Goldman Sachs executive, to head the Securities and Exchange Commission (SEC). During the Obama administration, he spearheaded the overhaul of derivatives markets mandated by the 2010 Dodd-Frank Act and oversaw enforcement actions against investment banks accused of manipulating benchmark interest rates. Gensler led the Commodity Futures Trading Commission from 2009 to 2014.
— President-elect Joe Biden intends to appoint acting agency heads across the federal government once he takes office because of delays to his transition and Senate consideration of his nominees. The move will enable Biden to prevent any of President Trump’s political appointees from staying at the helm of cabinet agencies past Jan. 20. So far, Senate confirmation hearings for Treasury Department nominee Janet Yellen, Defense Department pick Lloyd Austin, Homeland Security nominee Alejandro Mayorkas and State Department pick Antony Blinken have been scheduled.
— “Wall Street doesn’t get to run this entire economy,” said Sen. Sherrod Brown (D-Ohio), on his agenda when he takes over as chairman of the Senate Banking Committee. Among his priorities, he told reporters, will be to expand housing and banking services for low-income Americans and address climate and racial equality.
— Schumer wants Capitol rioters barred from flights. Senate Democratic Leader Chuck Schumer (D-N.Y.) is calling on the FBI to add anyone identified breaching the Capitol during last week’s violent riot to the federal no-fly list. Schumer sent a letter yesterday to FBI Director Christopher Wray, saying the attack on the Capitol as Congress was voting to affirm President-elect Joe Biden’s win was “domestic terrorism.” He said those who stormed the Capitol should qualify as “insurrectionists for the No-Fly List.” The federal no-fly list is part of the U.S. government’s Terrorist Screening Database and prohibits anyone who “may pose a threat to civil aviation or national security” from boarding a commercial aircraft. Generally, in order to be placed on the list, the government must have information that the person presents “a threat of committing terrorism” to the aircraft or the U.S. homeland or U.S. facilities.
Schumer's letter comes as the FBI said in a briefing Tuesday on the riots that they are considering such an action as a tool that could "possibly" be used that they are "actively" looking at it, FBI assistant director Steven D'Antuono said.
— Trump administration lawyers say forgiving student debt is illegal. Congressional Democrats and progressive groups have urged President-elect Joe Biden to forgive most or all of the $1.6 trillion in federal student debt in his first 100 days in office, but lawyers said it would require Congress to pass a law.
OTHER ITEMS OF NOTE
— Report: $13 trillion infrastructure investment needed. As much as $281 billion a year, or almost $13 trillion, is need for highways, bridges, rail, transit, airports and six other infrastructure elements through 2039 to avoid a hit to the U.S. economy, according to a new report by the American Society of Civil Engineers. Planned investments so far only total $7.3 trillion, leaving a $5.6 trillion investment gap by 2039. If the gap persists, infrastructure defects could cost every U.S. household an average of more than $3,300 per year through 2039, as well as a loss of $10 trillion in gross domestic product and more than $23 trillion in business productivity.
— Walk of shame in Canada. A couple in Canada have been fined roughly $1,200 dollars each after police found a woman walking her husband on a leash, in contravention of Quebec’s strict curfew rules. According to local media, the woman told police she was merely out “walking her dog,” one of the few activities allowed during the 8 p.m. to 5 a.m. curfew.