U.K. inks trade agreement with Japan | Dems want dairy changes for CFAP 2
In Today’s Updates
* Get ready for more China corn imports and a USDA change in its China estimate
* USDA: export sales of 100,000 metric tons of corn to unknown destinations
* Americans opening food-related businesses at a pre-pandemic clip
* Eurozone economic activity contracted in October
* World central banks became net sellers of gold for first time in a decade
* Copper prices have risen to their highest levels in nearly 2½ years
* Rosario exchange slashes Argentine wheat crop peg
* StoneX expects 70% of Brazil’s soybean crop to be sold when harvest gets underway
* Ukraine has already shipped more than half its wheat export quota
* French soft wheat sowing nears half complete
* Democrats want key change in CFAP 2
* Reuters: China seen issuing more corn import quotas
* China’s imports of corn, wheat and sorghum up sharply from year-ago
U.S. food & beverage industry update:
* USDA to seek more input on cell-based meat
* Restaurants latest to file suit on poultry pricing issues
* France reported more than 40,000 new cases for the first time
* Remdesivir is cleared as Covid-19 treatment
Politics & Elections:
* Special report on last night's presidential debate
* Will Scalise challenge Minority Leader Kevin McCarthy in leadership race?
Other Items of Note:
* U.K. signs trade deal with Japan
* Full Senate begins debate on confirmation of Supreme Court nominee Barrett
* Goldman Sachs admits it broke U.S. corruption laws, agreed to pay billions of dollars
* Politico reports Pompeo to weigh in on France block of LNG deal
* California Supreme Court rejects Bayer appeal of glyphosate cancer case
* Steve Kopperud
Equities today: Global stock markets were mixed, with Asian shares mixed and European shares mostly firmer. U.S. stock index futures signal a slightly higher open.
U.S. equities yesterday: The Dow gained 152.84 points, 0.54%, at 18,363.66. The Nasdaq was up 21.31 points, 0.19%, at 11,506.01. The S&P 500 rose 17.93 points, 0.52%, at 3,453.49.
On tap today:
• IHS Markit's U.S. manufacturing index for the first weeks of October is expected to rise to 53.7 from 53.2 at the end of September, and the services index is expected to increase to 55 from 54.6. (9:45 a.m. ET)
• The Baker Hughes rig count is out at 1 p.m. ET.
Americans are adapting to Covid-19 and opening food-related businesses at a pre-pandemic clip, according to Yelp. "One would be hard-pressed to find new restaurants opening with elaborate fine dining interiors, but pandemic-optimized eateries are opening, debuting some combination of features such as large patios, spaced-out tables, order-ahead menus and efficient-service cuisine," the review site said in a quarterly report (link).
Eurozone economic activity contracted in October as a second wave of Covid-19 infections dragged down the region's service sector. The latest purchasing managers surveys showed output in service industries — often businesses that require face-to-face interaction — deteriorated at the sharpest rate since May. That outweighed the strongest output growth for manufacturing since February 2018. “The eurozone is at increased risk of falling into a double-dip downturn," said IHS Markit economist Chris Williamson.
The euro area’s IHS Markit purchasing-managers’ index covering both goods and services slipped to 49.4 in October, from a reading of 50.4 in September, where any figure under 50 indicates contraction. Germany’s remained largely unchanged, while France’s and Spain’s fell as their economies were hit by another wave of Covid-19 infections.
• Outside markets: The U.S. dollar index is weaker. Nymex crude oil prices are higher and trading around $40.75 a barrel. The yield on the benchmark U.S. 10-year Treasury note is 0.84% today.
• USDA announced export sales of 100,000 metric tons of corn for delivery to unknown destinations during the 2020-2021 marketing year.
• Crude oil futures are higher as traders balance concerns over Covid with the potential for an extension of OPEC+ output reductions. US crude was trading around $40.80 per barrel and Brent around $42.65 per barrel. Crude oil was little changed in Asian action, with US crude up five cents at $40.69 per barrel and Brent crude was up six cents at $42.52 per barrel.
• World central banks became net sellers of gold for first time in a decade in the third quarter, according to Reuters. The report said gold demand is down 30%, year-on-year, mostly due to the Covid-19-induced damage to the world economies. Jewelry fabrication remained the worst impacted sector.
• Copper prices have risen to their highest levels in nearly 2½ years, highlighting the strength of China’s economic recovery along with investors’ anticipation that the transition to electric cars will stoke demand for the industrial metal. Most actively traded copper futures rose to nearly $3.20 a pound on Wednesday, hitting their highest level since June 2018 and bringing their rebound in the past six months to around 40%. Prices retreated Thursday.
Items in Pro Farmer's First Thing Today include (Link to subscribe to FTT):
• Rosario exchange slashes Argentine wheat crop peg
• StoneX expects 70% of Brazil’s soybean crop to be sold when harvest gets underway
• Ukraine has already shipped more than half its wheat export quota
• French soft wheat sowing nears half complete
Add Barbie to the list of the pandemic’s biggest winners. Mattel’s flagship doll posted a 29% sales increase in the third quarter, leading the toy company to 10% revenue growth in the period. One driver of sales: Parents say they are looking for ways to entertain their children that don’t involve a screen and many are gravitating to familiar toys, the Wall Street Journal reports (link).
— Democrats want key change in CFAP 2. Senate Agriculture ranking member Debbie Stabenow (D-Mich.) and 14 Democratic Senate colleagues, including lawmakers from top dairy states, called on the USDA to reverse an "arbitrary decision" that excludes lost meat sales by dairy farmers during the pandemic as eligible for Covid-19 aid payments. Of note, no Republicans signed a letter on this topic.
The senators noted that losses from meat produced from breeding animals was included in the first Coronavirus Food Assistance Program (CFAP) 1 but not in the second (CFAP 2). “This change will affect the livestock industry and will be particularly harmful to dairy farmers who often operate at extremely tight margins,” wrote the senators. “The decision is even more troubling considering that USDA clearly has sufficient resources to cover these losses. Additionally, it is less complicated for both USDA and farmers to cover all livestock and avoid confusion about what animals are covered or excluded.”
— Update on China:
- Reuters: China seen issuing additional corn import quotas. The Chinese government is expected to issue additional import quotas to “buy millions of tonnes of additional corn in the new crop marketing year,” according to industry sources quoted by Reuters. They reported that China has already booked around 12 million tonnes from the U.S. and around 5 million tonnes from other countries for 2020-21. USDA's World Board has China's total corn imports for 2020-21 at only 7 million tons.
Sources cited in the Reuters report said the country was considering issuing more lower-tariff quotas for buyers amid tight supplies. The report quoted another source as saying that the China bookings that have gone well beyond the 7.2 million tonne low-tariff quota as COFCO received and used special low-tariff quotas of at least 5 million tonnes to book mainly U.s. corn supplies for delivery through April 2021. The source said the terms of that extra quota were that “COFCO will import the corn at the lower tariff rate, but its profits will be capped at 30 yuan ($4.49) per tonne and any additional windfall will go to the state.” Some observers wonder why Reuters could find this out and not USDA's World Board.
With Chinese corn prices moving to record levels and indications as the country rebuilds their hog herd, they will need increased volumes of corn for feed, other reasons why USDA has been confusing the trade as to the anemic China corn import estimate.
Beyond USDA, the clear trade expectation has been that China will take actions to allow more corn to come into the country. Through the week ended Oct. 15, China U.s. corn commitments stand at more than 10.5 million tonnes and their total import needs are expected to be at least 18 million tonnes, with some industry analysts in the 25 million ton area.
Bottom line: Other than USDA's slow-walking, actions to allow for additional corn imports beyond the initial quota level are not a surprise.
- China’s imports of corn, wheat and sorghum up sharply from year-ago. Customs data released by China shows the country has already imported 6.67 MMT of its 7.2 MMT corn TRQ for 2020, with three months remaining in the calendar year. That’s up 72.5% from year-ago and would represent the first time the country has ever used all of its quota. That included 1.08 MMT in corn imports during September, which was a 675% surge from year-ago. China’s imports of wheat, barley and sorghum were also up sharply from year-ago in September at 1.07 MMT, 1.34 MMT and 570,000 MT, respectively. Beijing’s year-to-date wheat imports of 6.06 MMT are up 168% from year-ago and closing in on its wheat TRQ of 9.636 MMT. Its sorghum imports through September have surged 463% from year-ago to 3.5 MMT. Its barley imports of 4.64 MMT are up marginally from year-ago.
- U.S./China Phase 1 tracker: China’s purchases of U.S. goods. Link.
— Food and beverage industry update:
- USDA to seek more input on cell-based meat. USDA’s Food Safety and Inspection Service (FSIS) plans to gather more information about cell-based meat and poultry products before it issues labeling regulations. The agency intends to publish an Advanced Notice of Proposed Rulemaking (ANPR) seeking public comments to inform future labeling rules for cell-based meat and poultry products. “The ANPR will help ensure that a public process, allowing stakeholder comments, is used to develop labeling regulations,” according to FSIS. The agency did not provide specifics on when it would release an ANPR but said the rulemaking will be listed in the fall Unified Regulatory and Deregulatory Agenda and then published in the Federal Register.
- Restaurants latest to file suit on poultry pricing issues. Three national restaurant chains have filed suit against poultry companies, seeking damages for price fixing. Cracker Barrel Old Country Store, White Castle and Golden Corral have filed suits against alleging Tyson Foods Inc., Pilgrim’s Pride Corp and other poultry companies conspired to limit competition in the broiler chicken market, misrepresented the broiler chicken supply and manipulated price indices associated with wholesale broiler prices. The suits come on the heels of the Department of Justice probe into chicken price-fixing, which has resulted in the indictment of a slew of poultry industry executives and other employees. These latest suits make clear that the matter is going to take a while to come to a conclusion.
— Coronavirus update:
- Summary: Global cases of Covid-19 are now at 41,771,162 with 1,138,181 deaths, according to data compiled by the Center for Systems Science and Engineering (CSSE) at Johns Hopkins University (JHU). The U.S. case count is at 8,409,312 with 223,051 deaths.
Link to Covid Case Tracker
Link to Our World in Data
- France reported more than 40,000 new cases for the first time, while Italy, Germany and at least eight other nations also recorded record infections. French authorities expanded curfews beyond Paris and some other big cities, ordering about 46 million people to stay at home from 9 p.m. to 6 a.m. starting at midnight. Major cities including Milan and Athens are also under curfew, and one is being considered for Madrid.
- Remdesivir is cleared as a Covid-19 treatment. The FDA formally approved the drug, making it the first official treatment for the disease; shares in Gilead, which manufactures it, rose on the news. Separately, experts pushed the agency to gather more data on Covid-19 vaccine candidates before approving any of them.
POLITICS & ELECTIONS
— 2020 Presidential Election Interactive Map
— The Green Papers
— Real Clear Politics
— 2020 Political Atlas
— 2020 Demographic Swingometer
— Days until election
- President Trump and Joe Biden clashed over Covid-19, oil policy, immigration and ethics in their final substantive debate. Link to Special Report on the debate.
- If Republicans suffer a double-digit loss in the House, some GOP members speculate Minority Whip Steve Scalise could challenge Minority Leader Kevin McCarthy in a leadership race, writes David Wasserman, House editor for the Cook Political Report. “But others consider it more likely that NRCC Chair Tom Emmer would take the fall and forgo a second term, with vice presidential brother Rep. Greg Pence (IN-06) and Rep. Elise Stefanik (NY-21) among the possible contenders for that role,” Wasserman adds.
This week, Wasserman shifted ratings in 12 districts, all but one in Democrats' direction. The one exception is DCCC Chair Cheri Bustos (D-Ill.), who Wasserman says “remains the favorite for re-election but faces a slightly more competitive race than in 2018.” Overall, the Cook Political Report is revising its outlook in the House from a Democratic net gain of five to ten seats to a gain of between five and 15 seats.
OTHER ITEMS OF NOTE
- The U.K. signed a trade deal with Japan, its first with a major economy since Brexit, as the clock runs down on British efforts to reach an agreement with the EU by the end of the year. Liz Truss, the UK’s international trade secretary, signed the agreement with Toshimitsu Motegi, the Japanese foreign minister, in Tokyo today. “It used to be said that an independent U.K. would not be able to strike major trade deals or they would take years to conclude,” said Truss at a joint press announcement with Motegi. “But today we prove the naysayers wrong with this groundbreaking, British-shaped deal that was agreed in record time.”
The deal largely preserves the terms under the existing EU-Japan deal, according to Japan’s Ministry of Foreign Affairs. While it has an extra chapter on digital trade, it lacks the quotas for agricultural exports such as cheese that Brussels wrested from Tokyo during years of talks. Instead, the deal allows the U.K. to use any agricultural quotas left over by the EU. British officials are confident there will be enough space in the quotas to maintain and increase the UK’s food exports to Japan.
Impacts: It’s expected to boost Britain’s GDP by 0.07% compared to 2018 levels over the next 15 years, the U.K. government has said.
- Full Senate will begin debate today on the confirmation of Supreme Court nominee Amy Coney Barrett ahead of an expected final vote on Monday. The Senate Judiciary Committee on Thursday voted out her nomination, 12-0, with panel Democrats boycotting the vote. She needs only a simple majority of 51 votes in the full Senate for confirmation.
- Goldman Sachs admitted it broke U.S. corruption laws, agreed to pay billions of dollars to global regulators and financially punished its top executives to resolve investigations into its role in a Malaysian bribery scandal. Goldman took back $174 million in compensation from executives and agreed to pay nearly $3 billion to officials in four countries to end a yearslong investigation into its dealings with Malaysian investment fund 1MDB. It will also cut pay this year for the current chief executive, David Solomon, and his top lieutenants. Its check to the U.S. government is the largest such fine ever paid. In all, the penalties exceed $5 billion, or about eight months of profit for the Wall Street firm.
- Politico reports Pompeo to weigh in on France block of LNG deal. The French action to block a deal by a French company for U.S. liquefied natural gas (LNG) will now see the involvement of U.S. Secretary of State Mike Pompeo, according to a report by Politico. The situation relates to a potential 20-year contract between French energy company Engie and U.S. firm NextDecade. Engie indicated the delay was due to a situation where “the project required a more detailed examination.”
- California Supreme Court rejects Bayer appeal of glyphosate cancer case. The California Supreme Court rejected Bayer’s appeal of a California state jury verdict that found legacy company Monsanto liable for failing to warn a school groundskeeper about the cancer risks from its Roundup herbicide. The court on Wednesday (Oct. 21) denied Bayer’s request to reverse an appeals court ruling that upheld a San Francisco jury’s 2018 decision finding exposure to the glyphosate-based herbicide likely caused Dewayne Johnson to develop cancer.
More sad news came on word that good friend and fellow journalist/analyst Steve Kopperud passed away Monday during a trip to Minneapolis. I met Steve my first year in Washington in 1978; he was working for Feedstuffs at the time. Steve went on to be a Washington consultant on food and livestock issues and former senior vice president of the American Feed Industry Association. I fondly remember the lunches I had with Steve and Mary Kay Thatcher, sessions where we would compare notes and of course tell each other the latest gossip. We took turns paying for the lunch. The next lunch was Steve's turn.... RIP Steve... will miss your acerbic wit and beautiful writing.