Markets Flash Rising Cost of Money | More Analysts Up Forecasts for U.S. Economy

Posted on 02/22/2021 6:57 AM

USDA changes definition of ‘agricultural products’ in trade data


In Today’s Digital Newspaper


Market Focus:
• Russell 2000 Index of small companies has climbed 15% this year
• 10-year T-yield jumped 14 basis points last week, near highest level since Feb. 2020
• Wall Street transaction tax gets another Democratic look
• Yellen speaks today on how to reboot the economy
• BofA latest to raise U.S. GDP growth targets

• Summers: Fed may be forced to raise interest rates next year
• Crude prices mixed ahead of U.S. trading start
• U.S. copper futures surged past $4.0/lb, hitting highest level since 2011
• Russia says it has found first case of H5N8 bird flu passed to human
• Ag demand update  
Drying trend in Argentina, continued wet weather in northern Brazil bear watching
• Rabobank raises Brazilian corn crop projection
• Argentine cotton workers strike

Policy Focus:
• Timeline for Biden’s first Covid aid package
• Senate hearing Wednesday on Biden’s transportation infrastructure spending
• New restrictions for Paycheck Protection Program


Biden Administration Personnel

• Collins comes out against Tanden
• Merrick Garland will appear before Judiciary Committee today and tomorrow


China Update:
• Barley exports from Argentina to China soar
• China outlines plan to boost rural vitalization, rejuvenation


Trade Policy:
• USDA changes definition of ‘agricultural products’ in trade data


Food & Beverage Industry Update:
• Unusual competition is gaining ground in food-delivery business

Coronavirus Update:
• Number of Americans hospitalized with Covid at lowest since early November
• Global vaccine race


Politics & Elections:
• Return of earmarks in House gets lobbyists’ focus
• Dems hope Justice Stephen Breyer, 82, will soon retire from Supreme Court
• Texas Democratic party's post-election review

Other Items of Note:
• AG Coalition urges Congress for student debt cancellation
• Public lands bill vote in House this
• Boeing calls for grounding another of its airplane models




Equities today: Global stock markets were mostly weaker overnight. U.S. stock indexes are pointed toward lower openings.


     The Russell 2000 Index of small companies has climbed 15% this year, outpacing the S&P 500 by the widest margin in two decades.


     The 10-year Treasury yield jumped 14 basis points last week to 1.34%, close to its highest level since February 2020. It even touched 1.37% overnight, meaning the benchmark rate has moved up 28 basis points so far this month.

      Wall Street transaction tax gets another Democratic look. Some Democrats in Washington are wanting to link the recent frenetic trading in GameStop to push the financial transaction tax long favored by progressives, setting up a battle with Wall Street firms that bitterly oppose the idea. After a House hearing last Thursday to examine the GameStop issue, Rep. Maxine Waters, the California Democrat who chairs the committee, said she is considering such a tax. Investment firms and stock exchanges are lining up lobbyists and public-relations firms in hopes of stopping the tax, which could decrease trading activity and lower earnings. They see it as harmful to the average American trying to save for retirement.


On tap today:


     • Treasury Secretary Janet Yellen on how to reboot the economy in remarks at the NYT’s DealBook DC Policy Project. (9 a.m. ET)
     • Conference Board's leading economic index for January is expected to rise 0.4% from the prior month. (10 a.m. ET)
     • Dallas Fed's manufacturing survey is expected to slide to 5 in February from 7 a month earlier. (10:30 a.m. ET)
     • USDA Grain Export Inspections, 11 a.m. ET
     • European Central Bank President Christine Lagarde speaks at a virtual European Parliament conference on stability, economic coordination and governance at 9:30 a.m. ET.
     • Federal Reserve speakers: Dallas's Robert Kaplan to an International Energy Forum at 9 a.m. ET, Richmond's Thomas Barkin to the Maryland Bankers Association at 10 a.m. ET, Kaplan to the Garland, Texas, Chamber of Commerce at 12 p.m. ET, and governor Michelle Bowman and Kaplan at a Dallas Fed event at 3:30 p.m. ET.


Bank of America chief economist Michelle Meyer was the latest to raise her U.S. GDP growth targets — to 6% for 2021 and 4.5% for 2022. Goldman Sachs last week raised its GDP expectations to 7% for this year (including expectations for 6%, 11%, 8.5% and 6% growth for each of the year's quarters) but 2.4% GDP growth next year.


Summers: Fed may be forced to raise interest rates next year. Former U.S. Treasury Secretary Lawrence Summers warned that the Federal Reserve will likely be pressured into raising interest rates sooner than markets expect, and perhaps as early as next year. An overheating economy and rising prices could force the Fed’s hand, Summers said in an interview with David Westin for Bloomberg Television’s Wall Street Week. Summers, a top official in the past two Democratic administrations, has emerged as one of the leading critics among Democratic-leaning economists of Biden’s $1.9 trillion pandemic plan.


Market perspectives:


     • Outside markets: The U.S. dollar index is weaker. Nymex crude oil futures prices are up and trading around $59.75 a barrel.  

     •  Crude prices have turned mixed ahead of the U.S. trading start, with U.S. futures up on expectations of a slow resumption of production while Brent is weaker on expectations OPEC+ countries potentially easing production cuts. U.S. crude was trading around $59.85 per barrel while Brent was around $63.60 per barrel. Futures were higher in Asian action, with U.S. crude up 50 cents at $59.74 per barrel and Brent up 62 cents at $63.53 per barrel.


     • U.S. copper futures surged past $4.0/lb, hitting the highest level since 2011.


     • Russia says it has found first case of H5N8 bird flu passed to humans. Russia has reported the first case of H5N8 bird flu being passed to human from birds, notifying the World Health Organization (WHO) of the development, according to Anna Popova, head of Rospotrebnadzor, the consumer health agency. The WHO said in an email to Reuters that it had been notified of the situation and said if confirmed, it would mark the first transmission of the strain from animals to humans. Seven workers at a poultry plant in southern Russia were infected with the strain, Russia said. "We are in discussion with national authorities to gather more information and assess the public health impact of this event," the WHO said in its email. Other strains of bird flu — H5N1, H7N9 and H9N2 — have been known to spread to humans. It is not clear how long it will take for the WHO assessment to be completed.


     • Ag demand: Tunisia purchased around 100,000 MT of soft wheat, 92,000 MT of durum wheat and 100,000 MT of barley in an international tender. Saudi Arabia’s state grain buyer agreed to import 355,000 MT of wheat from Saudi Arabian owned farms in Australia, Canada and Ukraine. South Korea’s Nonghyup Feed Inc. has issued an international tender to buy up to 69,000 MT of corn from optional origins.


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

     • Focus on drying trend in Argentina and continued wet weather in northern Brazil
     • Rabobank raises Brazilian corn crop projection
     • Argentine cotton workers strike




— Timeline for Biden’s first Covid aid package. House Democrats plan to pass Biden’s $1.9 trillion coronavirus relief package this week, though many expect the work could spill over into the weekend.


     The House Budget Committee is set to vote today on a large portion of the legislative package. Chairman John Yarmuth (D-Ky.) released the legislative text (link) of the bill. The committee also released a report (link) on the need for coronavirus relief.


     The Congressional Budget Office (CBO) said the stimulus bill slightly exceeds $1.9 trillion, which will force congressional Democrats to make trims before the bill can pass the Senate. The score released on Saturday in a report (link) from the non-partisan CBO finds that the bill would add $1.920 trillion.


     The “Senate is on track to send a robust $1.9 trillion package to the president’s desk before the March 14 expiration of Unemployment Insurance benefits,” Senate Majority Leader Chuck Schumer (D-N.Y.) said in a letter to colleagues Friday.


—  Senate Environment and Public Works Committee will hold a hearing Wednesday on Biden’s plan to boost transportation infrastructure spending. Chairman Tom Carper (D-Del.) has said he was planning a hearing on the reauthorization of the federal surface transportation programs that will include “a strong climate title.” He said he’s aiming to report the bill out of committee in May.


     Chief among the unanswered questions: how much the administration’s plan for 550,000 new electric vehicle chargers by 2030 is going to cost, who’s going to pay for it, and where they should go. by 2030. That amount if about 10 times what the U.S. has now. California alone would need as many as one million to meet its 2030 goal of putting 5 million zero-emission vehicles on the road. Putting those stations where they get the biggest bang for the buck in boosting EV purchases is a crucial factor for a variety of groups. So is making sure that the stations benefit those who are nowhere near a plug — drivers in rural areas and poorer urban communities.


     Timeline: The White House and congressional Democrats are working on a strategy for the infrastructure proposal, which could be unveiled next month, kicking off a legislative process that may culminate by August.


— New restrictions for the Paycheck Protection Program (PPP). For two weeks beginning on Wednesday, only businesses with fewer than 20 employees will be eligible to apply for loans from the glitch-prone emergency aid program. Separately, the Small Business Administration (SBA) will revise how it calculates loans to help self-employed individuals. The SBA will provide new guidance making it clear that U.S. residents who are not citizens, such as green card holders, cannot be excluded from the program. It will also eliminate exclusions that prohibit a business owner who is delinquent on student loans from participating. Other planned changes include allowing broader access to the program for applicants with non-fraud felony convictions.


     Background: The Biden administration has not said whether it will seek to extend the PPP after the current tranche of funding expires on March 31. The loan program approved a total of 5.3 million loans worth about $521 billion over the course of 2020, of which 1.7 million (or $151 billion) were forgiven. An additional 1.8 million in PPP loans totaling $133.5 billion have been approved so far in 2021, according to data from the SBA. Most of them were "second-draw" loans granted to businesses that already received loans last year.



—  Collins comes out against Tanden. Sen. Susan Collins (R-Maine) said today that she will vote against President Biden’s choice to lead the Office of Management and Budget (OMB), becoming the second senator in days to come out against Neera Tanden and putting her nomination in jeopardy. “The Director of OMB is responsible for overseeing the development and implementation of the federal budget and plays a significant role in any Administration’s fiscal and regulatory agenda. Congress has to be able to trust the OMB director to make countless decisions in an impartial manner, carrying out the letter of the law and congressional intent," Collins said in a statement obtained by multiple news agencies. "Neera Tanden has neither the experience nor the temperament to lead this critical agency. Her past actions have demonstrated exactly the kind of animosity that President Biden has pledged to transcend,” Collins added.


— Merrick Garland will appear before the Judiciary Committee today and tomorrow as Biden's pick to lead the Justice Department. Garland plans to tell the Senate that if confirmed, he will strive to lead an agency committed to battling discrimination in American life and extremist attacks on democracy, according to reports. If confirmed, as expected, Judge Garland would oversee politically sensitive investigations begun under the previous administration, including a criminal tax investigation into Biden’s son, Hunter, and any decisions the department makes about whether to prosecute former President Donald Trump over the Capitol attack.



Barley exports from Argentina to China soar. China’s diplomatic snarl with Australia has provided a windfall for Argentina as the country has sold at least 1 million tonnes of barley to China, according to Reuters. Australia has typically been the dominant supplier to China of the feedgrain, but the political dustup between the two has seen other countries gain access to the Chinese market. Beyond Argentina, the report noted, France, Canada and Ukraine have also benefitted from the situation. However, the U.S. has yet to ink any deals to sell barley to China even though the two sides worked out details regarding U.S. barley access to China. And the purchases by China from other suppliers has not created additional demand for U.S. barley as export commitments stand at 32,608 tonnes, the smallest since they were at just 17,317 tonnes at this point in 2017.


— China outlines plan to boost rural vitalization, rejuvenation. Revitalizing rural areas and accelerating the modernization of agriculture and rural areas is the focus for the Communist Party of China “No. 1 central document” for 2021 unveiled in the latest five-year plan. Agriculture and rural areas have been “high on the agenda for 18 consecutive years since 2004,” Xinhua noted in recapping the document. "China will make the comprehensive advancement of rural vitalization a major task in realizing the great rejuvenation of the Chinese nation and will speed up the modernization of agriculture and the countryside with the efforts of the whole Party and society," according to the document. The country aims to keep planted area steady—a “red line” of 180 billion mu (120 million hectares)—and grain output above 650 million tonnes, “further improve the quality of agricultural products and food safety and ensure that the growth of farmers' incomes outpaces that of urban residents, said the document. The country plans about 500 agricultural modernization demonstration zones by 2025 and will advance the “green development of agriculture” and it calls for “industrial application of biological breeding” which is a term that covers GMO crops and other technologies, Xinhua said. Tang Renjian, agriculture minister, said in unveiling the plan that “uncertainty and instability of the external situation has increased significantly. On grain security, we mut not take it lightly for one moment.” Building a modern animal farming system is another goal outlined, with Tang telling a briefing that China’s hog herd will be at 2017 levels by June, but said the country needs to find ways to make their hog herd more stable and stop farmers from sending sows to market when prices fall.


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




—  USDA changes definition on ‘agricultural products’ in trade data. USDA will shift its definition of “agricultural products” in terms of U.S. export data in the January 2021 trade data to be released March 5. The change will adopt the WTO definition of “agricultural products” to include ethanol, distilled spirits, and tobacco products. Those products are not currently considered ag products under USDA’s current definition. The change will put the USDA numbers on agricultural products in line with the Office of the U.S. Trade Representative (USTR). USDA’s Foreign Agricultural Service is updating its historical datasets for the March 5 change and said it would “make data available under both definitions in its Global Agricultural Trade System (GATS) database.”



— Unusual competition is gaining ground in the food-delivery business. App-driven companies like DoorDash, Grubhub and Uber Eats are facing growing pushback from restaurants over their often-hefty delivery fees, the Wall Street Journal reports (link), and the conflict is drawing a new generation of food-ordering tools aimed at getting around the apps. The services are promising restaurants lower costs in part by allowing the restaurants to arrange more of the deliveries themselves. The strategy effectively splits the technology behind ordering food online from the costly and complicated physical logistics of getting meals from eateries to homes. Sales on third-party food-delivery services have more than doubled during the pandemic. The new service providers may help preserve that momentum by cutting costs for consumers and restaurants. They’re also pushing the more-familiar apps to provide stronger services aimed at keeping the eateries on board.


     Food to go






 Summary: Global cases of Covid-19 are at 111,415,030 with 2,467,200 deaths, according to data compiled by the Center for Systems Science and Engineering at Johns Hopkins University. The U.S. case count is at 28,134,275 with 498,901 deaths. The Johns Hopkins University Coronavirus Resource Center said that there have been 63,090,634 doses administered, 18,865,319 have been fully vaccinated, or 5.77% of the U.S. population.

     Perspective: The number of Americans hospitalized with Covid is at its lowest since early November.

       Link to Covid Case Tracker
       Link to Our World in Data


— The global vaccine race. Australia began its mass coronavirus vaccination drive today as wealthy countries increase their lead in the vaccine race. The United Kingdom plans to offer a vaccine to all adults by the end of July, bringing forward a previous target by a month. Israel still leads the way, with 50 percent of its population having received at least one vaccine dose. Bloomberg estimates that, at current rates, it will take roughly five years to vaccinate 75% of the world’s population with a two-dose vaccine.




— Return of earmarks in House get lobbyists’ focus. Government affairs firms are preparing for the return of congressional earmarks in the House and likely later in the Senate. Top House Democrats are crafting an overhauled version of the legislative tool, which was banned in 2011 amid criticism that it led to wasteful spending. The work could start quickly, with infrastructure and spending bills as prime vehicles.


— Many Democrats hope that Justice Stephen Breyer, 82, will soon retire from the Supreme Court — and they have suggested replacements. Link to NYT article for details. Although there isn’t a Supreme Court vacancy yet, Rep. James E. Clyburn (D-S.C.) is “already maneuvering to champion candidates that might come as soon as this summer,” the article notes. His pick? District Court Judge J. Michelle Childs. Childs, 54, “did not attend an Ivy League university [but] won a scholarship to the University of South Florida. She later graduated from the University of South Carolina’s law school and became the first Black woman to make partner at one of the state’s major law firms.”


— Texas Democratic party's post-election review is a look at what went wrong in 2022 elections and what it thinks it needs to turn the state blue by 2024. Link to read the report.



— AG Coalition urges Congress for student debt cancellation. New York Attorney General Letitia James (D) and Massachusetts AG Maura Healy (D) co-led a group of 17 state AGs in a letter Friday asking Congress to pass resolutions to cancel up to $50,000 in federal loan debt per student borrower. The attorneys general (AG) said relief was needed for borrowers grappling with “unmanageable student loan debt” exacerbated by the pandemic and financial crisis.


— Public lands bill vote in House this week. More than 2.5 million acres of federal land in Colorado, California, and Washington would be designated as wilderness, conservation, or recreation areas, and more than 1,200 miles of river segments in those states would be protected under legislation (HR 803) the House is set to consider later this week. The measure combines eight standalone bills and is broadly similar to three measures passed by the House during the 116th Congress. The House Rules Committee is scheduled to meet tomorrow to set the terms of floor debate, setting up a vote later in the week.


— Boeing calls for grounding another of its airplane models. The company recommended a worldwide halt to flights using its 777 model with a particular Pratt & Whitney engine. The move came after a United Airlines flight suffered engine failure over Colorado, shedding debris over neighborhoods before landing safely in Denver. There were reports of property damage, but no one was injured, including the 241 passengers and crew members onboard the flight. United is the only U.S. operator of the planes, and the only other airlines using them are in Japan and South Korea.



Add new comment