Inauguration Day: Pandemic, Economic Recovery and Executive Orders Key Focal Points

Posted on 01/20/2021 7:41 AM

Trump EPA does last-minute RFS waivers | GOP resistance to $1.9 trillion aid proposal


In Today’s Updates


Market Focus:
• Biden set to become 46th president of U.S.
• Yellen: ‘World has changed’
• S&P 500 gained about 13% since Election Day 2020
• Yellen: U.S. won’t seek weaker exchange rate to gain advantage over other nations

• Yellen: Cryptocurrencies are a particular concern
• Biden's rescue plan could boost 2021 GDP growth to 11.4%: JPMorgan
• Cost of shipping goods from China to Europe has more than quadrupled in eight weeks
• Ag demand update
ANEC raises January corn export outlook for Brazil
• Smaller Russian grain crop expected this year
• Japan’s use of corn in feed still above year-ago in November

Policy Focus:
• New round of PPP
• Yellen ran into Republican resistance to $1.9 trillion relief plan
• CFAP 2 payments move up to $13.2 billion
• Yellen: Nothing more important to housing than what we do with Fannie & Freddie


China Update:
• Biden admin. prepared to take on China’s “abusive” trade, economic practices
• U.S. says China is committing genocide against Uighur Muslims
• Jack Ma reappears
• China relying heavily on exports of manufactured goods
• Beijing’s ban against Australian coal imports is upending global flows
• Chinese soybean imports top 100 MMT in 2020, setting records
• Outgoing USTR Bob Lighthizer talks China with Financial Times


Trade Policy:
• DST determinations for UK, Austria & Spain to be published in Federal Register


Energy & Climate Change:

• Trump EPA clears two SREs for 2019, reverses a prior denial for 2018
• DOE plans additional SPR sales in FY 2021

Coronavirus Update:
• U.S. on Tuesday surpassed 400,000 deaths from coronavirus pandemic
• Germany today to extend its lockdown
• Moderna on track to produce doses to help meet Biden’s goal
• Biden calls for 100 days of wearing masks


Politics & Elections:
• Biden’s inauguration takes place at Noon ET
• Outgoing President Donald Trump announced 143 pardons and commutations  
• GOP in conflict
• Federal prosecutors end an insider-trading inquiry into Sen. Burr

Other Items of Note:
• Parler tries to return, with help from a Russian company
• South Korea’s new foreign minister
• U.S./Saudi relations




Equities today: Global stock markets were mixed but mostly higher overnight. U.S. stock indexes are pointed toward firmer openings. the MSCI Asia Pacific Index added 0.6% while Japan's Topix index slipped 0.3%. Today at noon ET brings the presidential inauguration of Democrat Joe Biden. His initial moves: at least 15 executive actions that will reverse some of President Donald Trump's key polices. The U.S. will rejoin the Paris climate agreement and the World Health Organization and stop construction of the wall on the Mexican border. Biden will also end the travel ban against some predominantly Muslim countries and revoke the permit for the Keystone XL pipeline. He will also introduce measures to reduce inequality and ease student debt burdens. Biden plans to sign a “Safe Travel” executive order mandating mask use on public transportation including aircraft, trains, intercity buses, and at airports. Biden plans also include an executive order that would direct agency action on Medicaid, Pell Grants, SNAP and unemployment insurance; and plans to announce a Climate Leaders’ Summit, hosted by the U.S. on April 22. Biden is also focused on immigration, where he'll propose a shortened pathway to citizenship for millions of undocumented migrants in the U.S and is likely to continue with some hardline policies toward China.


     U.S. equities yesterday: The Dow rose 116.26 points, 0.38%, at 30,930.52. The Nasdaq gained 198.68 points, 1.53%, at 13,197.18. The S&P 500 was up 30.66 points, 0.81%, at 3,798.91.


     Perspective: The S&P 500 has gained about 13% since Election Day 2020, marking the best post-election market performance for a new president in modern history, according to CFRA Research. Other performances? From Election Day to Election Day, the S&P 500 rose 57% under President Trump and climbed 53% and then another 52% under President Obama.


On tap today:


     • Bank of Canada releases a policy statement at 10 a.m. ET.
     • National Association of Home Builders housing market index for January is expected to tick down to 85 from 86 a month earlier. (10 a.m. ET)
     • Joe Biden is set to be sworn in as president at about 12 p.m. ET.
     • Bank of England Gov. Andrew Bailey speaks at a virtual Citizens’ Panel forum at 12 p.m. ET.
     • Japan's provisional trade figures for December are out at 6:50 p.m. ET.


“The world has changed,” Yellen, a former Federal Reserve chair and Biden’s Treasury secretary nominee, said with regard to interest rates. “In a very low interest-rate environment like we’re in, what we’re seeing is that even though the amount of debt relative to the economy has gone up, the interest burden hasn’t.”


     “The most important thing we can do is to defeat the pandemic, to provide relief to American people and to make long-term investments that make the economy grow and benefit future generations,” said Yellen, who could be confirmed as soon as tomorrow according to a timeline presented by incoming Senate Finance Chairman Ron Wyden (D-Ore.). Failure to address the crisis now “would likely leave us in a worse place fiscally,” she said.


Market perspectives:


     • Outside markets: The U.S. dollar index is slightly lower as bulls are fading this week following the recent good rebound from a 2.5-year low scored earlier this month. Nymex crude oil futures prices are higher, trading around $53.50 a barrel and near a 10-month high. The yield on the benchmark 10-year U.S. Treasury note stands at 1.12%.


     • Crude oil futures have backed off of highs seen earlier in action ahead of the U.S. trading start, and markets will not have the government inventory data to assess as it will be released Friday (Jan. 22). US crude is trading near $53.35 per barrel while Brent crude is trading near $56.15 per barrel. Crude prices firmed in Asian activity, with U.S. crude up 24 cents at $53.22 per barrel while Brent crude was up 30 cents at $56.20 per barrel.

     • Yellen said the U.S. won’t seek a weaker exchange rate to gain advantage over other nations and said if confirmed as Treasury secretary that she will work against any moves by other countries to pursue such a strategy. “The United States does not seek a weaker currency to gain competitive advantage and we should oppose attempts by other countries to do so,” Yellen said Tuesday at the Senate Finance Committee’s confirmation hearing for her coming formal nomination as Treasury chief. Yellen said she would work “to oppose any and all attempts by foreign countries to artificially manipulate currency values to gain advantage in trade.”


     • “Cryptocurrencies are a particular concern,” Yellen told a Senate panel Tuesday. “I think many are used — at least in a transactions sense — mainly for illicit financing. And I think we really need to examine ways in which we can curtail their use.”


     • Biden's rescue plan could boost 2021 GDP growth to 11.4%. JPMorgan's chief global strategist said the plan could also cut the unemployment rate to below 5% by the end of 2021.


     •  The cost of shipping goods from China to Europe has more than quadrupled in eight weeks amid a shortage of empty containers, reports the Financial Times (link/paywall). Meanwhile, charter rates for large container ships are pushing to new highs.


     • Ag demand: Jordan purchased around 60,000 MT of animal feed barley to be sourced from optional origins in an international tender. Taiwan’s MFIG purchased around 65,000 MT of animal feed corn that’s expected to be sourced from the U.S. in an international tender. Bangladesh has received offers in its tender to buy 50,000 MT of rice. The United Nations has purchased 120,000 MT of wheat from the Black Sea region to be shipped to Ethiopia, which has struggled with drought and locusts. Japan’s ag ministry will seek 80,000 MT of feed wheat and 100,000 MT of feed barley in a simultaneous buy and sell auction to be held Jan. 27.


Items in Pro Farmer's First Thing Today include (Link to subscribe to FTT):

     • ANEC raises January corn export outlook for Brazil
     • Smaller Russian grain crop expected this year
     • Japan’s use of corn in feed still above year-ago in November




—  New round of PPP. Around 60,000 borrowers were approved for more than $5 billion in forgivable loans during the first week of the reopened Paycheck Protection Program (PPP), the Small Business Administration (SBA) said Tuesday. The small-business coronavirus relief effort relaunched Jan. 11 after closing last August. The first wave of applications was largely handled by community and small lenders after the SBA set aside time for them to process the loans exclusively. The program’s restart comes as many small businesses continue to struggle with the fallout from the pandemic. One-third of small businesses surveyed between Jan. 4 and Jan. 10 said they would need financial assistance or additional capital in the next six months, according to the Census Bureau, up from nearly 25% in mid-November.


     PPP Ag


— Yellen ran into Republican resistance to the $1.9 trillion relief plan during her confirmation hearing in the Senate yesterday. The Biden administration will need 10 GOP senators to vote in favor of the package in order for it to have a swift passage into law. Some Republicans are balking at both the size and at components tied to longstanding Democratic goals such as raising the minimum wage to $15 an hour and expanding family and medical leave.


     “Now is not the time to enact a laundry list of liberal structural economic reforms,” Sen. Chuck Grassley (R-Iowa) said in his opening remarks. He noted that Congress just approved a $900 billion pandemic relief bill in December. He pointed to criticism that Biden’s proposal isn’t well targeted, and said, “It is important to focus efforts on pandemic relief.”


     Regarding boosting the minimum wage to $15 an hour, Yellen noted that analysis of states that boosted the minimum wage shows that job losses are “minimal, if anything.” Yellen, who specialized as a labor economist early in her career, said that the recession has “disproportionately hit the service sector and the workers who are employed in that sector —and it’s been particularly brutal in its impact on minorities and women.”


— CFAP 2 payments move up to $13.2 billion. Payments under the Coronavirus Food Assistance Program 2 (CFAP 2) totaled $13.23 billion as of Jan. 18, according to Farm Service Agency data, with 891,719 applications approved.


     The total includes $6.2 billion in acreage-based payments, $3.42 billion for livestock, $2.36 billion for sales commodities, $1.2 billion for dairy and $56.1 million for eggs/broilers.


     The total for CFAP 1 is put at $10.55 billion, including $5.05 billion for livestock, $2.66 billion for non-specialty crops, $1.8 billion for dairy, $930.1 million for specialty crops, and $119.7 million for aqua nursery flora.


     The latest totals for the two programs do not appear to include any of the top-up payments to hog producers under CFAP 1 and producers were able to start amending their prior CFAP applications Jan. 19 for additional assistance announced by USDA Jan. 15. 


— “Nothing is more important to the future of housing than what we do with Fannie and Freddie,” Treasury secretary nominee Janet Yellen said. She did not commit to the Trump administration’s plan to privatize the lenders, but said, “I need to look carefully at what’s been put in place, and ultimately we need to find a solution that has bipartisan support.”




— Biden administration is prepared to take on China’s “abusive” trade and economic practices, Treasury secretary nominee Janet Yellen said Tuesday. “China is undercutting American companies by dumping products, erecting trade barriers and giving illegal subsidies to corporations.” The tools, Yellen said, include “sanctions and enforcement actions that can serve to dismantle financial and support networks of those who seek to do us harm.”


— U.S. says China is committing genocide against Uighur Muslims. The Trump administration delivered a forceful condemnation to Beijing over a mass repression campaign that has yet to prompt tough international action. The determination puts pressure on other nations to consider sanctions and take other steps to condemn China's policies.


— Jack Ma reappears. The Alibaba co-founder spoke at an event honoring teachers in China’s village schools today, his first public appearance in three months. He has kept a low profile since Chinese regulators began cracking down on his business empire. The 50-second video was enough to send shares in the e-commerce giant surging, with Alibaba up 8% in premarket trade.


— China is relying heavily on exports of manufactured goods to the U.S. and elsewhere. Domestic consumption has lagged, with retail sales shrinking 3.9% in 2020 from the previous year and demand for imported goods falling slightly. Following the pandemic, many Chinese employers cut salaries or hours, leaving consumers anxious. Many opted to save more. China’s government also didn’t hand out checks to consumers as the U.S. did, choosing instead to focus stimulus on helping factories and other businesses, the Wall Street Journal reports (link).


     China retail


— Beijing’s ban against Australian coal imports is upending global flows of the energy commodity, leaving dozens of loaded ships stranded off the Chinese coast and reshaping the direction of the seaborne trade. China is the world’s largest buyer of coal on international markets, and the country has stepped up purchases from Indonesia and other suppliers.


     China coal


— Chinese soybean imports top 100 MMT in 2020, setting records. China imported 25.89 MMT of soybeans from the U.S. in 2020, a dramatic 52.8% jump from the 16.94 MMT it purchased from the U.S. in 2019, according to customs data out today. While this was a big year-over-year jump, some note the country would have needed to buy around 40 MMT of soybeans from the U.S. to meet its purchase commitments for the first year of the Phase 1 trade deal.


     The annual tally included 5.84 MMT in U.S. bean purchases in December, a 2.75-MMT (89.0%) jump from year-ago. China’s 2020 soybeans from Brazil were even stronger at 64.28 MMT, an 11.5% jump from the year prior. This helped push China’s total soybean imports for 2020 to a record-high 100.33 MMT. Strong Chinese bean purchases are expected to continue as it works to rebuild its hog herd and fulfill purchase commitments under the Phase 1 trade deal.


— Outgoing USTR Bob Lighthizer talks China with Financial Times. President Trump’s U.S. Trade Representative, Bob Lighthizer, told the Financial Times in an interview last Friday that  trade negotiators are never pessimists and stressed the value of the Phase 1 deal in other areas. There were “an awful lot of changes” that China had made to IP protections, Lighthizer said, noting there are new and clear rules that China cannot force the transfer of technology from U.S. companies to Chinese companies, and they’ve done some work towards opening up their financial services. Divisions within Beijing allowed him to make progress in his trade negotiations even as the Trump administration took various national security actions against China, including putting telecoms company Huawei on a government blacklist and using export controls to cut off Chinese companies from crucial U.S. technology.


     Lighthizer said that while occasionally Chinese officials would register “disagreement” with Trumps actions, he was able to appeal to officials who wanted more openness on trade. “China is a lot of different things and people vying for different policies, and I think that there are people over there who are hardliners, and for whom the whole thing is about security and trying to get an advantage,” he said. “And then there are others who are not liberal in the sense that we use that word at all, but they think that there’s an advantage to China in having more commerce and a somewhat less regimented economy.”


     As for the incoming Biden administration and his USTR nominee Katherine Tai, Lighthizer said he has no insight into whether and how quickly new talks can happen, but that he expects that Chinese officials will look to quickly begin talks “with the objective of accomplishing nothing.” FT concluded “trade negotiators can be pessimists after all, it seems.”


U.S./China Phase 1 tracker: China’s purchases of U.S. goods. Link




— DST determinations for UK, Austria and Spain to be published in Federal Register. The Office of the US Trade Representative will publish in the Federal Register Jan. 21 the determinations they announced Jan. 14 on findings in the Section 301 investigations into digital service taxes (DSTs) by Austria (link), Spain (link), and the U.K. (link). USTR said no actions were being taken at this time. They further noted that the agency was continuing its investigation (link) into DSTs in place or proposed in Brazil, the Czech Republic, the European Union (EU) and Indonesia. The eventual resolution of the DST situation now lands with the Biden administration, adding to a list of trade issues that the incoming administration will have to address.    




—  Trump EPA clears two SREs for 2019, reverses a prior denial for 2018. The Trump administration Tuesday night announced they had granted two small refinery exemptions (SREs) that were pending for the 2019 compliance year, leaving 30 still pending for that compliance year. EPA also reversed a prior decision to reject an SRE for the 2018 compliance year and approved it.


     There are still 20 SREs pending for the 2011-2018 compliance years. EPA data also now shows another SRE requested for the 2020 compliance year, bringing the total to 15. There are still 30 SREs pending for the 2019 compliance year.


     The Renewable Fuels Association (RFA) reacted harshly to the action, noting the approval of the 2019 SREs reduced U.S. biofuel demand by 150 million gallons and the 2018 reversal resulted in the additional loss of 110 million gallons of renewable volume blending. RFA CEO Geoff Cooper said the two approved for 2019 are “completely without legal merit. It flouts both the statute and recent court decisions that clearly limit EPA’s authority and ability to grant these exemptions.” RFA January 12 warned Trump EPA Administrator Andrew Wheeler it would challenge “any action” EPA took to grant SREs for the 2019 compliance year. Cooper also said the group expects decisions to be changed by the new administration, stating they expect “the new Biden administration will most certainly act quickly to restore the volumes erased by these waivers.”


     “This disappointing action further undermines the integrity of the Renewable Fuel Standard (RFS) program by destroying demand for additional gallons of biofuel,” Kurt Kovarik, vice president for federal affairs at the National Biodiesel Board, said in a statement.


     Bottom line: The situation makes clear that U.S. biofuel policy is not going to fade from focus, especially with the scores of pending SREs and the still-to-be-proposed 2021 biofuel and 2022 biodiesel levels under the RFS. Biofuel advocates, including some farm-state lawmakers, had pushed the Trump administration to hold off on approvals, with the U.S. Supreme Court set to hear arguments in a case testing EPA’s ability to grant them. The EPA decision on the 2019 SREs comes after the agency’s recent Federal Register notice which indicated they were delaying the 2019 compliance date for small refiners due to the Supreme Court review of the 10th Circuit Court decision invalidating three SREs as they did not reflect continuous SREs for the refiners involved. That suggests that the two approved by the Trump EPA apparently were granted to refiners that have received SREs continuously since the 2011 compliance year referenced by the 10th Circuit decision.    


— DOE plans additional SPR sales in FY 2021. The Department of Energy (DOE) is planning to sell crude oil from the Strategic Petroleum Reserve (SPR) in fiscal Year (FY) 2021, with deliveries expected to begin in May 2021, but could be moved up to April 2021 if market conditions warrant.


     “DOE remains confident in the long-term health of crude oil markets,” the agency said. “During the current period of economic recovery, the Department recognizes that a conservative approach to oil sales is prudent.” Given that situation, DOE said the “precise timing and amount of the sale(s) is to be determined.”


     Background: Under the Bipartisan Budget Act of 2015 and the Consolidated Appropriations Act of 2018, mandatory sales of slightly more than 10 million barrels would be required during FY 2021. Further, the CARES Act of 2020 allows DOE to sell additional oil to raise up to $450 million for infrastructure modernization, a move that could require up to 10 million barrels of additional sales. After DOE establishes the FY 2021 sales plan, all sales will be publicly announced.




 Summary: Global cases of Covid-19 are at 96,269,168 with 2,059,772 deaths, according to data compiled by the Center for Systems Science and Engineering at Johns Hopkins University. The U.S. case count is at 24,254,283 with 401,777 deaths.

       Link to Covid Case Tracker
       Link to Our World in Data


     Lights surrounded the Lincoln Memorial Reflecting Pool during the Presidential Inaugural Committee's memorial to the 400,000 American lives lost to Covid.


     Lights and Covid
     Photo: Al Drago/Bloomberg via Getty Images

— U.S. on Tuesday surpassed 400,000 deaths from the coronavirus pandemic, as the pace of fatalities has accelerated following a fall surge that left few corners of the country untouched by the virus and overwhelmed hospitals in many parts of the U.S.

     Germany today is set to extend its lockdown, Slovakia will allow commuting to work only with a negative coronavirus test, France has imposed a nationwide curfew of 6 p.m., Italians are barred from traveling outside their home region for at least another month. The tightening restrictions are fueling frustration in many countries, and compliance is dwindling.

     Covid cases


— Moderna said it is on track to produce enough doses to help meet President-elect Biden’s goal to administer 100 million vaccine doses in his first 100 days.


— Biden calls for 100 days of wearing masks. One component of a flurry of executive orders issued by the new Biden administration is a “100 Days Masking Challenge.” The effort asks Americans to wear masks for 100 days. Masks and social distancing will be required in all federal buildings, on all federal lands and by federal employees and contractors. Reports indicate that masks will also be required in some modes of transportation.


     The Biden administration will also re-engage with the World Health Organization (WHO), including Dr. Tony Fauci as head of the U.S. delegation which will attend the WHO Executive Board meeting Jan. 21 as they seek to reengage on the Covid-19 situation. The actions also include the creation of the position of Covid-19 Response Coordinator that will report directly to President Joe Biden.




— Biden’s inauguration takes place at Noon ET. Link to schedule of events via the New York Times. His inauguration speech will focus on the need to bring the country together following the storming of the U.S. Capitol and extreme partisanship in both chambers of Congress. Biden’s first-day actions are meant to signal a more aggressive Covid-19 approach, end some key Trump policies and set the agenda for the next four years. Some significant executive orders are already anticipated, as previously detailed, as well as policy changes to combat the coronavirus pandemic. Some 25,000 National Guard troops will stand watch over proceedings within a heavily fortified “Capitol Green Zone” that has sprung up since the attack on the U.S. Congress only two weeks ago.




— Outgoing President Donald Trump announced 143 pardons and commutations — including a pardon for Steve Bannon. Trump revoked an executive order, signed eight days after he took office, that limits his appointees' lobbying for five years after leaving the administration. Trump’s final pardons also included Elliott Broidy, former top Republican fundraiser who pleaded guilty to conspiring to violate foreign lobbying laws. Rapper Lil Wayne, who had pleaded guilty to a gun charge.


— GOP in conflict. In a speech on the Senate floor on Tuesday, Republican Senate leader Mitch McConnell (R-Ky.) said he believed Donald Trump “provoked” the mob that attacked the U.S. Capitol on Jan. 6 as the soon-to-be-ex-president’s Senate impeachment trial approaches. Facing a possible Republican revolt during his trial, Trump is preparing a counterpunch. The Wall Street Journal reports that Trump has suggested to aides that he would form his own political party called the “Patriot Party.”


— Federal prosecutors end an insider-trading inquiry into Sen. Richard Burr (R-N.C.). The Justice Department won’t pursue criminal charges against Burr over trades following senators-only briefings. Burr maintained that he had acted appropriately but stepped down as chairman of the Senate Intelligence Committee.



— Parler tries to return, with help from a Russian company. The social network popular with conservatives, which went offline after Amazon cut off computer services following the Capitol mob action, said it had partnered with a Russian internet firm and hoped to return by the end of the month.


— South Korea’s new foreign minister. South Korean President Moon Jae-in has nominated his former national security advisor Chung Eui-yong to serve as the country’s new foreign minister in order to “breathe new life into the lineup of diplomats and regroup their forces in time for the inauguration of the Biden,” according to a presidential official. At 74, Chung is seen as a seasoned hand, and worked behind the scenes to broker the first meeting between Donald Trump and North Korean leader Kim Jong Un. Moon has called for an early summit with Biden in order to jumpstart North Korea talks.


— U.S./Saudi relations. Under questioning during her Senate confirmation hearing on Tuesday, Avril Haines, Joe Biden’s incoming director of national intelligence, indicated that she would release a classified CIA intelligence report to Congress outlining the murder of Jamal Khashoggi  in 2018 by a Saudi death squad. The report is expected to include a CIA assessment that the killing was ordered by Saudi Crown Prince Mohammed bin Salman, marking an immediate break with the more pro-Saudi policies of Donald Trump.



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