Fed notes some cautions on U.S. economy | Flexible H-2A farm worker visa rule
In Today’s Updates
* Filings for jobless benefits rose last week
* Big weekly soybean sales to China
* U.S. equity futures fall on concerns about next U.S. aid plan, jobless claims
* FOMC minutes dampen stock market euphoria
* Pro Farmer Crop Tour wraps up tonight
* U.S. refiners report 16% slide in distillate sales
* Pandemic only slightly delays electric vehicle growth
* Copper rose above $3 a pound for first time in more than two years on Wednesday
* Trump administration extends flexible H-2A farm worker visa rule
* White House officials more optimistic about scaled-back relief package
* White House open to providing $25 billion to the U.S. Postal Service
* USDA to publish updates on payment limits, eligibility called for in 2018 Farm Bill
* China says trade confab with U.S. on tap in coming days
* Local Chinese officials hid the virus’s dangers from Beijing in January
* U.S. ends extradition treaty, other agreements with Hong Kong
* Canada’s Maple Leaf Foods halts pork exports to China
U.S. food & beverage industry update:
* FDA and OSHA release new checklist resource for food and ag companies
Update on re-opening America... and around the world:
* Trump pushes for in-person classes at colleges
* Restrictions extended on travel between U.S. and Canada, Mexico
* Qantas warned that international flights would be on hold for nearly a year.
* Coronavirus infections are surging again across much of Europe
* FDA puts emergency approval of blood plasma on hold
Politics & Elections:
* Kamala Harris accepts Democratic vice-presidential nomination
* Biden will formally accept Democratic Party’s nomination for president tonight
* Disappearing act in Democratic platform regarding fossil fuels
* Melania Trump to speak from Rose Garden
Other Items of Note:
* Trump seeks to restore all Iran sanctions
* Michigan to pay Flint residents $600 million
* Kim Jong Un gives dire warning on economy
* Putin rival hospitalized after suspected poisoning
Equities today: Global stocks and U.S. equity futures fell after the Federal Reserve signaled continued concern over the pandemic weighing on the world’s biggest economy and weekly U.S. jobless ticked higher. U.S. stock futures slid as investors worried that an impasse among lawmakers will result in a smaller-than-anticipated stimulus package or further delays in the new legislation. Overseas, the pan-continental Stoxx Europe 600 declined 0.8%. An Asian MSCI equities benchmark headed for its biggest drop since mid-July.
U.S. equities yesterday: The Dow fell 85.19 points, 0.31%, at 27,692.88. The Nasdaq declined 64.38 points, 0.57%, at 11,146.46. The S&P 500 was down 14.93 points, 0.44%, at 3,374.85.
On tap today:
• USDA Weekly Export Sales report, at 8:30 a.m. ET.
• European Central Bank releases minutes from its July 15-16 meeting at 7:30 a.m. ET.
• U.S. jobless claims for the week ending Aug. 15 (8:30 a.m. ET)
• Philadelphia Fed manufacturing survey for August is expected to fall to 20.0 from 24.1 a month earlier. (8:30 a.m. ET)
• Conference Board's leading economic index for July is expected to rise 1.1% from the prior month. (10 a.m. ET)
• San Francisco Fed President Mary Daly speaks on the future of work at a virtual event hosted by her bank at 1 p.m. ET.
• Japan's consumer price index for July is out at 7:30 p.m. ET.
Filings for jobless benefits rose last week. Filings for jobless benefits rose to 1.106 million last week, vs 983,000 expected, suggesting an uptick in layoffs as the economy slowly recovers from the pandemic’s effects. Initial claims for the previous week were also revised higher by 8,000 to 971,000.
Federal Reserve officials last month saw the need for additional support for the economy. Minutes from the Fed’s July 28-29 meeting released Wednesday showed officials believed more government spending would be needed to prevent a longer or deeper downturn amid difficulties suppressing the coronavirus. A number of officials also believed more stimulus from the Fed could be required.
Some cautions from the Fed: While the Fed's policy-setting committee was surprised by how strong household spending grew since its June meeting, it was quick to caution that uncertainty over the economic outlook is "highly elevated", according to FOMC minutes for the July 28-29 meeting. Risks to the outlook include new waves of the coronavirus and the possibility that government fiscal support wasn't enough. Some Fed officials worried that banks and financial institutions might come under "significant stress" if they face a more adverse scenario due to increased Covid-19 infections. Several participants suggested that additional accommodations might be required to promote economic recovery and return inflation to the FOMC's 2% objective.
Fed cutting one-week dollar swaps with central banks. Starting Sept. 1, the Federal Reserve will cut seven-day swap operations with major central banks from three tenders per week to one due to the improved funding environment. The Fed will maintain the one per week pace for the 84-day tender schedules for a few banks, including the European Central Bank, the Bank of England, and the Bank of Japan.
• Big weekly soybean sales to China. China’s purchases of U.S. ag goods the week ended Aug. 13 included more than 1.6 million tonnes of soybeans.
Sales activity to China for 2020-21 included 54,000 tonnes of sorghum, 1,654,000 tonnes of soybeans and 56,783 running bales of upland cotton.
For 2020, activity included net reductions of 482 tonnes of beef and net sales of 6,502 tonnes of pork (after sales reductions of 6,700 tonnes).
For 2019-20, there were net sales of 8,631 tonnes of corn, 48,366 tonnes of sorghum and net reductions of 32,775 tonnes of soybeans.
Exports of upland cotton totaled 421,500 running bales, but that included 47,900 running bales that were late reported.
• On Day 3 of the Pro Farmer Crop Tour, scouts measured an average corn yield potential of 189.4 bu. per acre for Illinois, up from 171.2 bu. last year on Tour and 181.5 bu. for the three-year average. Pod counts in a 3’x3’ square came in at 1,247 for the state, also up notably from 998 pods in 2019 and 1,186 pods for the three-year average.
Pro Farmer also released the results for the western-most three districts of Iowa last night. Corn yields were down from year-ago in Districts 1, 4 and 7 and down from the three-year average in all but the southwest District 7. Pod counts were down from the three-year average in all three of these districts. The full results for Iowa won’t be released until tonight. Minnesota results will also be released this evening. Pro Farmer production and yield estimates (informed by Tour data, but separate) will be released at 1:30 p.m. CT on Friday.
• U.S. refiners supplied 17 million barrels of fuel a day last week, a drop of 11% from the week before and the lowest level since May, according to data released Wednesday by the Energy Information Administration. The decline was recorded across all fuel types but was mainly driven by a 16% slide in distillate sales.
• Pandemic only slightly delays electric vehicle growth. Global electric vehicle (EV) sales are set to reach 45 million per year by 2040, according to a new Wood Mackenzie research report, 2% lower than pre-pandemic forecasts but still strong growth driven by clean energy recovery plans in China and Europe and climate commitments by major automakers. That level of growth in sales would put at least 323 million electric vehicles on the roads by 2040, the firm says. Wood Mackenzie expects commercial EV sales to grow, too, with a tipping point occurring when cost of ownership becomes more favorable for electrified options. The firm projects commercial EV sales to hit at least 5.5 million by 2040, with sales driven by electric buses until 2026 and light-duty truck sales dominating after that.
• Copper prices reached their highest level in more than two years on steady Chinese demand and disruptions to global supply. With Wednesday’s gains, copper is now up about 8% for the year and roughly 25% in the past three months, making it one of the best performing major assets over that span.
— Update on China:
- China says trade confab with U.S. on tap in coming days. China and the U.S. will hold trade talks on the status of the Phase 1 agreement between the two countries “in the coming days,” according to Chinese Commerce Ministry spokesman Gao Feng. He made the remarks during a briefing but did not offer any details. White House Chief of Staff Mark Meadows said this week that no talks had been scheduled as of yet. “There are no rescheduled talks ... at this point,” Meadows told reporters. “Ambassador Lighthizer continues to have discussions with his Chinese counterparts involving purchases and fulfilling their agreements.” This comes as White House trade advisor Peter Navarro acknowledged China’s stepped-up purchases of U.S. farm products as part of their commitments made under the Phase 1 trade deal. Chinese Ambassador to the U.S. Cui Tiankai said at a Brookings Institution event last week that the U.S. needed to make decisions on bringing bilateral ties between the two countries back to a normal track.
President Trump and Chinese President Xi Jinping haven’t spoken by phone since late March.
Details of Phase 1 purchases. As of June, China’s purchases of all products covered by the trade pact were $33.3 billion, only at around 47% of their year-to-date targets, according to Chad Bown, a senior fellow and trade expert at the Peterson Institute for International Economics. Chinese negotiators are expected to seek adjustments of the agreement to take into account the price fluctuations, the Wall Street Journal reports.
Liu He, China's chief negotiator, plans to raise technology issues, citing the Phase 1 agreement’s language that calls on both sides to resolve “existing and any future trade and investment concerns as constructively and expeditiously as possible,” Chinese officials said. He also plans to argue that China is working hard to meet purchase targets.
- U.S./China Phase 1 tracker: China’s purchases of U.S. goods. Link.
- Local Chinese officials hid the virus’s dangers from Beijing in January, U.S. agencies found, adding to evidence that their secrecy fueled the spread. The report concluded that officials in the city of Wuhan and in Hubei Province, where the outbreak began late last year, tried to hide information from China’s central leadership. The assessment of the differences in fault between Chinese leaders and local officials potentially has significant policy implications.
The report, originally circulated in June, has classified and unclassified sections, and it represents the consensus of the CIA and other intelligence agencies. It still supports the overall notion that Communist Party officials hid important information from the world, U.S. officials said. And senior officials in Beijing, even as they were scrambling to pry data from officials in central China, played a role in obscuring the outbreak by withholding information from the World Health Organization.
- U.S. ends extradition treaty, other agreements with Hong Kong. The U.S. State Department Wednesday said it was three agreements with Hong Kong as it continues to implement its policy response over the national security law that China imposed on Hong Kong. “As part of the ongoing implementation measures, we notified the Hong Kong authorities on Aug. 19 of our suspension or termination of three bilateral agreements,” State Department spokesperson Morgan Ortagus said. “These agreements covered the surrender of fugitive offenders, the transfer of sentenced persons, and reciprocal tax exemptions on income derived from the international operation of ships.” The U.S. actions, Ortagus said, “underscore our deep concern regarding Beijing’s decision to impose the National Security Law, which has crushed the freedoms of the people of Hong Kong.”
- Canada’s Maple Leaf Foods halts pork exports to China. Maple Leaf Foods announced it was temporarily suspending its pork exports to China, following Chinese government protocols for Canadian companies that report positive cases of Covid-19. "We are confident in our Maple Leaf Safety Promise — providing consumers with safe, great tasting food made in a safe working environment — but, we respect China's new import protocols for Canadian products and are working cooperatively with Canadian and Chinese authorities to resume exports quickly," said Michael McCain, president and CEO. The company also said it has been impacted by “short-term increases in absenteeism.” But the firm said the situation was hopefully going to be temporary and not have a financial impact on the company.
— Trump administration extends flexible H-2A farm worker visa rule. The Trump administration, responding to problems farmers may have getting workers during a pandemic, will extend some regulatory changes that allowed agricultural employers to continue hiring farm workers holding H-2A visas who are already in the United States. U.S. Citizenship and Immigration Services, the Homeland Security Department agency that handles immigration applications, plans to issue a temporary final rule that would continue changes made in April to give U.S. farmers more flexibility in hiring H-2A agricultural workers. The rule is published in today's Federal Register (link).
Employers can apply for workers under the temporary hiring changes until Dec. 17, and new work contracts will be generally be good for a year. The temporary final rule expires Aug. 19, 2023. “Notwithstanding the availability of the H-2A program, U.S. farmers are continuing to experience labor shortages as fewer workers are able to get to the United States,” the rule notes.
“This rule will help U.S. employers fill critically necessary agricultural job openings, protect their economic investments in their agricultural operations, and contribute to U.S. food security. In addition, it will benefit H-2A workers already in the United States by making it easier for employers to hire them," USCIS says in the rule. "As this rule helps fill critical labor needs for agricultural employers, DHS believes this rule will help ensure a continual food supply chain in the United States.”
In 2019, U.S. agriculture employed an estimated 250,000 H-2A guest workers.
Under the rule change, workers who have valid H-2A visas with expiring labor contracts can be hired by a different employer rather than return to their home countries. Workers can start new jobs before the USCIS has approved an employer’s petition if that employer has a valid temporary labor certification and if the agency notifies the employer that an extension request for the worker has been received.
Another change: Employers have the ability to put H-2A workers to work quickly without having to meet a requirement that they are in good standing with E-Verify, a web-based system that allows participating employers to verify that workers are legally able to work in the United States.
As a trade-off, USCIS says it will enforce permanent regulations that bar farmers from hiring H-2A visa holders who have reached the three-year limit for the visas. These workers are required to leave the U.S. for three consecutive months. Under the changes made in April, employers were allowed to hire workers with expiring H-2A visas and keep them in the United States. “The Department believes that granting H-2A workers the option to begin employment with any new H-2A petitioner as soon as the H-2A petition is received by USCIS will also benefit U.S. agricultural employers and help provide stability to the U.S. food supply chain during the unique challenges the country faces because of Covid-19,” the rule says.
— USDA to publish updates on payment limits, eligibility called for in 2018 Farm Bill. USDA is set to release new rules on payment limits and payment eligibility to reflect updated provisions in the 2018 Farm Bill. The actions include that USDA may approve a waiver of the average adjusted gross income (AGI) limitation for participants of certain conservation contracts administered by the Farm Service Agency (FSA) and the Natural Resources Conservation Service (NRCS) on environmentally sensitive land.
Also, the mandatory changes expand the definition of “family member” to include first cousins, nieces, and nephews.
The Office of Management and Budget completed its review of the USDA plan July 29 and the final rule is scheduled to be published August 24 in the Federal Register. The notice stated the changes are effective today (Aug. 20).
— Update on next aid package:
- White House officials are more optimistic about the passage of a scaled-back coronavirus relief package and overall economic recovery. “I think the outlook for a skinny deal is better than it’s ever been, and yet, we are still not there,” White House chief of staff Mark Meadows told reporters on Wednesday. “If Speaker Pelosi moves forward a single bill on postal ... let’s add in the things we can agree upon.”
- The White House said it would be open to providing $25 billion to the U.S. Postal Service ahead of the 2020 election but tied President Donald Trump’s signature to a piecemeal stimulus approach carrying more relief payments and additional funds for small business loans. House Speaker Nancy Pelosi (D-Calif.) plans to hold a vote Saturday on $25 billion in funding for the Postal Service, amid concerns that it doesn’t have the resources to process mail-in ballots in November elections.
— Food and beverage industry update:
- The FDA and OSHA have released a new checklist resource for food and agriculture companies regarding operations during the pandemic. The 16-page document outlines things employers should consider as they try to minimize the spread of coronavirus in their facilities. Link to checklist.
— Update on reopening America... and around the world:
- Trump pushes for in-person classes at colleges. President Trump criticized colleges that have turned to remote learning after Covid-19 outbreaks, saying it would be safer for communities if students stay put on campus. “Colleges should take reasonable precautions,” Trump said at the White House yesterday. “Students who feel sick should not attend class and should limit social interaction as they would for any other illness.” But he said that it would be safer to keep students living with one another than sending them home to live with relatives.
- U.S. Customs and Border Protection to extend restrictions on travel between U.S. and Canada, Mexico. The U.S. Customs and Border Protection is extending restrictions on travel between the U.S. and Canada and the U.S. and Mexico via land ports of entry and ferries. The agency, in two notices to be published in the Federal Register Friday (Aug. 21), said it will “continue to temporarily limit the travel of individuals” from Canada into the U.S. and from Mexico into the U.S. to “essential travel.” The action, the agency said, “should not interrupt legitimate trade between the two nations or disrupt critical supply chains that ensure food, fuel, medicine, and other critical materials reach individuals on both sides of the border.” The action continues restrictions that have been in place since March 20, extending them through Sept. 21.
- Qantas warned that international flights would be on hold for nearly a year. The Australian airline said that it was “unlikely” to resume transoceanic flights before next July, despite the industry’s efforts to convince travelers that flying is safe.
— Coronavirus update:
- Summary: Source: Johns Hopkins University as of 6:30 a.m. ET.
— 22,427,939: Confirmed cases world-wide, and 584,556 deaths
— 47,408: New U.S. cases recorded yesterday
— 5,530,247: Total confirmed cases in the U.S.
— 1,356: Deaths in the U.S. recorded yesterday
— 173,193: Total U.S. deaths
— 69,370,708: Tests conducted in the U.S.
Link to Covid Case Tracker
Link to Our World in Data
- Coronavirus infections are surging again across much of Europe and governments are racing to prevent a full-fledged second wave of the pandemic —without resorting to the kind of broad lockdowns that devastated their economies in the spring.
- FDA puts emergency approval of blood plasma on hold. Needing more time to review data, the FDA has paused the planned emergency authorization for blood plasma as a Covid-19 treatment. Government health leaders including Dr. Francis Collins and Dr. Anthony Fauci had urged caution, citing weak data from the country’s largest plasma study.
POLITICS & ELECTIONS
— 2020 Presidential Election Interactive Map
— The Green Papers
— Days until election
- Kamala Harris accepted the Democratic vice-presidential nomination — becoming the first Black woman to hold that position. Harris, 55, touted Joe Biden’s record of expanding health insurance access, helping to negotiate an economic recovery package after the 2008 financial crisis and she criticized President Trump’s handling of the coronavirus pandemic. “We are a nation that is grieving — grieving the loss of life, the loss of jobs, the loss of opportunities, the loss of normalcy, and yes, the loss of certainty,” she said. “We must elect a president who will bring something different and something better and do the important work. We must elect Joe Biden.”
Meanwhile, former Secretary of State Hillary Clinton, the 2016 Democratic nominee, urged Democrats to vote, reminding them that she won the popular vote but lost the Electoral College, which selects the president.
Biden, 77, will formally accept the Democratic Party’s nomination for president tonight.
- A disappearing act in Democratic platform regarding fossil fuels. Day three included attempts by the DNC to explain why it dropped language from its platform about eliminating subsidies for fossil fuels. In the weeks before the convention, delegates approved a draft of the party platform which included an amendment stating that “Democrats support eliminating tax breaks and subsidies for fossil fuels.” By the time final draft was officially passed on night one of the convention, that language had disappeared.
- Melania Trump to speak from Rose Garden. First Lady Melania Trump will give her address to the Republican National Convention from the Rose Garden, according to reports. She announced in July that she will oversee a renovation of the iconic White House garden that will restore it to its original design from the Kennedy administration.
OTHER ITEMS OF NOTE
- Trump seeks to restore all Iran sanctions. President Trump said he would call on the U.N. Security Council to restore all nuclear-related sanctions on Iran, an attempt to kill off the 2015 nuclear agreement and force Tehran back to the negotiating table. “Mark it down, Iran will never have a nuclear weapon,” Trump said at a White House news conference. “We paid a fortune for a failed concept, a failed policy that would have made it impossible to have peace in the Middle East.”
- Michigan to pay Flint residents $600 million. The state is expected to announce a settlement this week to pay the city's residents to resolve civil claims from the lead-tainted drinking water crisis. The payment is meant to settle claims by tens of thousands of Flint residents that they were poisoned by lead-tainted tap water after officials changed the city’s supply six years ago.
- Kim Jong Un gives dire warning on economy, acknowledging that North Korea’s development goals have been “seriously delayed,” in the latest sign that sanctions, flooding and the coronavirus have dealt a triple blow to the country’s already anemic economy.
- Putin rival hospitalized after suspected poisoning. Alexei Navalny’s spokesperson said that he was taken ill while on a flight, forcing his plane on to make an emergency landing. The Russian politician is currently unconscious in hospital and suspected to have been poisoned. Mr Navalny is an outspoken critic of Vladamir Putin, Russia’s president, whose opponents have a history of finding themselves poisoned.