U.S. Economy Shed 140,000 Jobs in December as Pandemic Worsened

Posted on 01/08/2021 8:30 AM

Trump concedes as support craters | Gro Intelligence | China corn demand | U.S. ag trade update


In Today’s Updates


Market Focus:
• U.S. ends seven months of job growth
• Harker says Fed may begin paring bond purchases in late 2021
• U.S. trade gap for goods in November highest on records going back to 1992
• China’s corn prices keep moving higher and now are over $11

• Bitcoin continued its blistering start to 2021, crossing $40,000 for first time
• Ag demand update
Some decent rains could be coming for Argentina
• Argentina considers lifting corn export suspension
• Welcome moisture headed for dry areas of the Black Sea region
• French soft wheat exports pull back a bit from November’s impressive showing

Policy Focus:
• U.S. economic forecasts for 2021 and 2022 being upgraded ahead of more stimulus
• USDA-supplied questions & answers on Quality Loss Adjustment (QLA) program
• AMS publishes notice of fees for inspection, weighing services


China Update:
• USDA: 204,000 MT soybeans to China during 2020-2021 marketing year
• Will EU’s investment deal with China change its relations with Biden?
• China hog futures fall in trading debut


Trade Policy:
• USTR indefinitely suspends tariffs over French Digital Services Tax
• November U.S. ag exports top $15 billion for second month in a row


Energy & Climate Change:

• IRS final guidance on federal tax incentives for carbon capture and storage
NYT’s Andrew Sorkin on bid by Gro Intelligence to become benchmark of climate risk

Food & Beverage Industry Update:
• Conagra Brands believes changes in consumer food habits will outlast pandemic

Coronavirus Update:
• Mexico’s president pledges coronavirus vaccines to undocumented immigrants in U.S.
• Britain announces travelers to country will need to show a negative Covid-19 test result
• European Commission extends deal with Pfizer and BioNTech


Politics & Elections:
• Trump acknowledged Biden’s incoming admin., pledges peaceful transfer of power
• Wall Street Journal editorial board calls on Trump to quit
• Two members of Trump’s Cabinet, Betsy DeVos and Elaine Chao, resigned
• USDA Sec. Perdue, EPA chief Wheeler, Tsy Sec. Mnuchin to stay on until Jan. 20

Other Items of Note:
• Boeing agreed to pay $2.5 billion to settle criminal charges
• Chinese and Russian state media criticized U.S. following storming of Congress
• Indian agriculture talks continue
• Death: Neil Sheehan, New York Times reporter who obtained Pentagon Papers
• Simon & Schuster cancel publication of Sen. Josh Hawley's forthcoming book
• Last episode of “Jeopardy!” featuring Alex Trebek airs today




Equities today: Global stock markets were mostly up overnight. U.S. stock indexes are pointed toward higher openings. The Hang Seng Index rose 329.70 points, 1.20%, at 27,878.22. The Nikkei rose 648.90 points, 2.36%, at 28,139.03. The Shanghai Composite, however, was down 6.10 points, 0.17% at 3,570.11. European markets are seeing gains in early action


     U.S. equities yesterday: U.S. stock indices finished at record marks Thursday as traders looked past the political drama in Washington. The Dow gained 211.73 points, 0.69%, at 31,041.13. The Nasdaq moved up 326.69 points, 2.56%, at 13,067.48. The S&P 500 rose 55.65 points, 1.48%, at 3,803.79.


On tap today:


     •  U.S. nonfarm payrolls for December are expected to increase by 50,000 from a month earlier and the unemployment rate is expected to tick up to 6.8% from 6.7%. (8:30 a.m. ET) Update: Dec. payrolls -140k, ending seven months of jobs growth; Oct/Nov payrolls revised up a combined 135k; 6.7% unemployment rate. Analyst says: “basically a wash with the Dec decline but still weaker than expected jobs market.” The slowing trend in jobs was expected as fresh Covid-related restrictions have been put in place, the delay in additional stimulus and extra jobless benefits and the arrival of winter/cold weather that has negatively impacted restaurants’ ability to have outdoor dining. However, with the late-December stimulus effort and expectations for additional economic stimulus early this year and the rollout of Covid vaccines, expectations are the jobs market will be improving ahead. 




        Unemployment rate

     • U.S. wholesale inventories for November are expected to fall 0.1% from a month earlier. (10 a.m. ET)
     • Fed Vice Chairman Richard Clarida speaks on the economy and monetary policy at 11 a.m. ET.
     • Baker Hughes rig count is out at 1 p.m. ET.
     • U.S. consumer credit for November is out at 3 p.m. ET.
     • CFTC Commitments of Traders report, 3:30 p.m. ET.


Harker says Fed may begin paring bond purchases in late 2021. The U.S. central bank may begin paring back its bond-buying program as soon as the end of this year, Federal Reserve Bank of Philadelphia President Patrick Harker said. The Fed is currently buying $120 billion of U.S. Treasury and agency mortgage-backed securities each month to suppress longer-term interest rates as part of its efforts to support the economy during the coronavirus pandemic.


     Meanwhile, the Federal Reserve officials shouldn’t intervene to slow rising bond yields because that is expected to happen as the U.S. economy recovers, said Federal Reserve Bank of Dallas President Robert Kaplan. U.S. 10-year Treasury yields rose above 1% Wednesday for the first time since March and stayed above that threshold yesterday. Rising yields are anticipated as activity picks up amid more widespread coronavirus vaccinations and increased consumer spending, Kaplan said. The U.S. economy will likely grow 4.5% to 5% this year, Kaplan said, revising his previous estimate of 3.5%,


U.S. trade gap for goods in November was the highest on records going back to 1992, led by strong demand for consumer goods such as cellphones, appliances, jewelry and toys. The foreign-trade gap in goods and services expanded 8% from the prior month to a seasonally adjusted $68.14 billion in November, the widest deficit since August 2006. The goods deficit was the widest on record. Imports increased 2.9% from October, while exports rose 1.2%.


     Trade gap


     Trade deficit


Market perspectives:


     • Outside markets: The U.S. dollar index is slightly higher, while Nymex crude oil futures prices are up, hitting a 10-month high overnight and are trading around $51.50 a barrel.

     • Crude oil futures continued to move higher ahead of the U.S. open, building on gains seen Thursday and in overnight action. U.S. crude was trading above $51.45 per barrel and Brent above $55.15 per barrel. Crude oil prices moved higher in Asian action, with U.S. crude up 32 cents at $51.15 per barrel while Brent moved up 29 cents at $54.67 per barrel.


     • China’s corn prices keep moving higher and now are over $11.  Corn market is looking for China's corn business to continue from the world with increased numbers from the United States. An analyst notes that the cash corn market remains firm with the CIF values over delivery. 


     • Bitcoin continued its blistering start to 2021, crossing $40,000 for the first time on Thursday. The digital currency didn't hold the $40,000 level for long Thursday. The cryptocurrency roughly doubled in price over the past month.


        Bit coin


     • Ag demand update: Japan’s ag ministry purchased 27,650 MT of food-quality wheat from the U.S., 44,390 MT of the grain from Canada and 48,188 MT of food wheat from Australia. South Korea’s Major Feedmill Group reportedly made no purchase in a private inquiry about buying around 65,000 MT of animal feed wheat. Syria tendered to buy 25,000 MT of wheat from the Black Sea region.


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

     • Some decent rains could be coming for Argentina
     • Argentina considers lifting corn export suspension
     • Welcome moisture headed for dry areas of the Black Sea region
     • French soft wheat exports pull back a bit from November’s impressive showing




—  U.S. economic forecasts for 2021 and 2022 are being upgraded after Democrats secured control of the U.S. Senate, boosting odds of more fiscal stimulus. “Our best guess...is a spending package of around $900 billion passed in the next few months. If realized this would boost GDP growth this year by about 1.5%-points to 5.3% (Q4/Q4), and 0.5%-point next year to 2.6%. This would also leave the level of GDP at the end of 2022 above the pre-pandemic path that it was on,” J.P. Morgan Chase’s Michael Feroli writes in a note to clients.


     What about monetary stimulus? Federal Reserve Bank of Cleveland President Loretta Mester said she didn’t believe ramped up fiscal stimulus under the incoming Democratic administration would pave the way for a pull-back on monetary policy this year. “I don’t really see it impacting the need for monetary policy to support the recovery because I don’t think we’re going to be necessarily back to our goals,” Mester said yesterday.


— USDA-supplied questions and answers on Quality Loss Adjustment (QLA) program. USDA’s Farm Service Agency in Washington previously posted training modules covering QLA Program requirements and held two separate question and answer sessions with state and county FSA offices. Link for details.  


— AMS publishes notice of fees for inspection, weighing services. USDA’s Agricultural Marketing Service (AMS) has published regarding the 2021 fee schedule for official inspection and weighing services performed under the US Grain Standards Act. The Federal Register notice (link) includes the annual review of Schedule A fees calculation and the resulting fees. The new fee scheduled went into effect Jan. 1, 2021.




 USDA daily export sale: 204,000 MT soybeans to China during 2020-2021 marketing year.


— Will the EU’s investment deal with China change its relations with Biden? Link to NYT article on topic.


— China hog futures fall in trading debut. Expectations for increasing hog supplies and what some termed a lofty initial listing price combined to result in losses for the trading debut of live hog futures at China’s Dalian Commodity Exchange. The spot September contract fell 12.6% at 28,290 yuan ($4,376.95) per tonne from the initial listing price of 30,680 yuan. Trading volume was put at 91,056 lots, which Reuters noted paled in comparison to the Dalian most-active soymeal contract which was at 1.4 million lots. The news service also reported spot cash hog prices in the Shandong were at 35.8 yuan per kilogram Thursday. The live hog futures contract in China has been in the planning for around 10 years and marks the first such contract for live hogs outside the U.S. and it is also the first live animal futures contract in China with physical delivery. Some noted that margin requirements (8% of contract value) will result in speculators being key participants in the market even as major producers like New Hope have signaled they will use the futures contract to manage risk.


     The price drops reflect expectations that China’s hog population — the world’s largest — will continue to expand after earlier being decimated by the deadly African swine fever in 2018 and 2019.


     China hog prices


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




— USTR indefinitely suspends tariffs over French Digital Services Tax (DST). The U.S. will not impose tariffs as a result of the Section 301 investigation of France’s DST, according to a statement from the Office of the US Trade Representative (USTR), handing the decision over the incoming Biden administration. USTR notified of additional tariffs in July that were to have taken effect Jan. 6, but that date arrived with no formal action or announcement from USTR. “The U.S. Trade Representative has decided to suspend the tariffs in light of the ongoing investigation of similar DSTs adopted or under consideration in ten other jurisdictions,” USTR said. While those investigations have “significantly progressed,” USTR said, they have “not yet reached a determination on possible trade actions.” 


     The matter now lands with the incoming Biden administration, which has indicated that trade matters are going to be further down the list of their focal points as combatting the Covid pandemic and rebuilding the U.S. economy will take center stage. However, given the potential impacts such tariffs could have on services trade, this is a decision that could well be viewed as an economic matter which could elevate it as a focal point for the new administration.


     Bottom line: France and other countries feel American companies are profiting enormously from local markets while making only limited contributions to public coffers. Paris has offered to withdraw the tax as soon as an OECD deal is reached, while other countries are looking at implementing their own DST. As noted, the USTR decision puts the responsibility of the tax disputes on the incoming Biden administration. "America is going to have to respond," declared Sen. Ron Wyden (D-Ore.), the likely next chairman of the Senate Finance Committee. "Many of these unilateral taxes have been designed to target American companies that are generating high-skill, high-wage jobs."


— November U.S. ag exports top $15 billion for second month in a row. U.S. agricultural exports in November were valued at $15.48 billion, marking the second consecutive month above that level after they were at $15.13 billion in October. November ag imports totaled $11.37 billion, down from $11.62 billion in October, but still a second straight month above $11 billion. The result was a trade surplus of $4.11 billion, up from $3.52 billion in October.


     U.S. agricultural exports are typically the highest at the start of the fiscal year in October and then usually work lower from that point. Ag imports usually do not peak until the March-May timeframe.


     The November total for U.S. ag exports did not register a new monthly record as that was set in November 2013 when export totaled $15.81 billion.


     U.S. ag imports in Fiscal Year (FY) 2020 were at or above $11 billion for five months and the data sets the stage for another strong run for imports, especially with expectations that the U.S. economy will improve. But the export outlook could also remain strong with the U.S. dollar under pressure, making U.S. ag exports more competitive on the world market. USDA forecasts U.S. ag exports at $152 billion for fiscal year (FY) 2021, up from $135.9 billion in FY 2020, with imports at a record $137 billion, up from a record $136.0 billion in FY 2020.


     Ag Exports




— IRS issued final guidance outlining how it will implement federal tax incentives for carbon capture and storage. The IRS guidelines set out what the agency will require from project developers to qualify for the incentives, including how companies must demonstrate they are securely storing carbon underground. The guidelines also detail in what situations the government can reclaim the tax incentive if projects fall short of requirements and how to divvy up the tax credit if multiple parties collaborate on a single carbon capture facility.


     The IRS made several important changes from its proposal that will help build confidence among investors. One was to shorten the timeframe in which projects could be subject to losing the tax credit if the carbon isn’t properly and securely stored underground. The IRS had originally proposed a timeframe of five years but shortened it to three years.


     A new provision in the final guidelines allows smaller carbon capture facilities to combine into one project to qualify for the tax credit. Observers note that is important for reducing emissions in sectors like ethanol and heavy industry, where projects may not capture the 100,000 tons per year required to earn the federal incentive.


— NYT’s Andrew Sorkin details a bid by Gro Intelligence to become the benchmark of climate risk. The DealBook writer notes that the data company Gro Intelligence is devising indexes that it says can track climate risks down to specific locations or assets — and could create a new class of financial investments. Sorkin says the company is offering indexes to measure conditions like drought, floods, temperature and more. Its drought index, for example, aggregates 46 variables that the company’s software transforms into a measure of drought severity on a scale from zero to five. The indexes could be used to build an array of derivatives, like swaps that companies and investors can use to hedge climate risks, Gro Intelligence co-founder and CEO Sara Menker, a former Morgan Stanley commodities trader told Sorkin.


     Gro’s indexes are based on standardized data that allows for comparisons of assets around the world, Menker said. And unlike many existing indexes, she said, her company’s products can be applied to assess the risks to specific physical assets like individual farms or factories.


    Gro recently signed up a new board member: Gary Cohn, the former Goldman Sachs president and Trump economic adviser, who was initially asked to find weak spots in Gro’s indexes.




— Conagra Brands believes the past year’s changes in consumer food habits will outlast the coronavirus pandemic. The food supplier is bulking up its manufacturing capacity while modernizing its recipes and packaging, the Wall Street Journal reports (link), as it looks to maintain the sales momentum it gained from homebound consumers in 2020. Conagra was among the corporate winners in the upheaval in consumer trade last year, as populations limited by lockdowns turned to eating at home. The WSJ article notes that Conagra’s plan is the company’s answer to the question facing firms over whether pandemic-driven changes in demand will outlast the coronavirus crisis. “The investment may be a risky bet that could derail Conagra’s supply chains, however, if consumer behavior returns to historic norms, demanding a potentially expensive retreat.” Conagra Chief Executive Sean Connolly says Conagra is “meeting consumers where they are.” Of course, setting long-term investments also means meeting consumers where the company expects them to be.




 Summary: Global cases of Covid-19 are at 88,140,964 with 1,900,380 deaths, according to data compiled by the Center for Systems Science and Engineering at Johns Hopkins University. The U.S. case count is at 21,581,749 with 365,321 deaths.

       Link to Covid Case Tracker
       Link to Our World in Data


— Mexico’s president pledged to provide coronavirus vaccines to undocumented immigrants in the U.S. after Nebraska GOP Gov. Pete Ricketts said they would likely not get vaccinated because of their immigration status, Reuters reports (link).


— Britain’s government announced that travelers to the country will need to show a negative Covid-19 test result before being allowed entry. Meanwhile, Britain’s regulators approved two anti-inflammatory drugs, tocilizumab and sarilumab, for use in Covid-19 patients admitted to intensive-care units, which could cut the relative risk of mortality in ICU patients by nearly a quarter.


— European Commission extended its deal with Pfizer and BioNTech, two pharmaceutical firms, to purchase an additional 300 million doses of their joint Covid-19 vaccine. The Commission bought an initial 300 million doses in November, but these were only enough to vaccinate a small share of the bloc’s population. The extra jabs could be available across the EU as early as April.




— President Donald Trump acknowledged Joe Biden’s incoming administration and committed himself to a peaceful transfer of power. Trump Thursday evening conceded defeat in the presidential election, saying in a video posted on Twitter that a “new administration will be inaugurated on January 20th.” Trump did not mention President-elect Joe Biden by name, but said, “Now tempers must be cooled, and calm restored. We must get on with the business of America. My focus now turns to ensuring a smooth, orderly and seamless transition of power.”


     He also condemned violence and destruction that took place at the Capitol building. “To those who engaged in the acts of violence and destruction, you do not represent our country. And to those who broke the law, you will pay,” Trump said in the video. His remarks were in contrast to those Wednesday that many viewed as inciting the events that unfolded with rioters entering the Capitol building. The video on the social media site had been viewed more than 32 million times as of early this morning and came after Twitter removed its block of Trump’s account. It was a complete change in substance and tone from Trump's claim that he won the election by a landslide and that victory had been stolen from him.


     Meanwhile, Biden characterized the mob that stormed the Capitol as domestic terrorists.


     Trump also took a hit from the Wall Street Journal editorial board, which called on him to quit. "If Mr. Trump wants to avoid a second impeachment, his best path would be to take personal responsibility and resign," the board wrote. Link for details.


— Two members of Trump’s Cabinet, Betsy DeVos and Elaine Chao, resigned over Trump’s role in this week’s mob storming Congress. Tyler Goodspeed, acting head of the Council of Economic Advisers, also decided to step down. Several lawmakers, both Democrat and Republican, called for Vice President Mike Pence to invoke the 25th Amendment to remove Trump from office. Others want him impeached.


     USDA Secretary Sonny Perdue says he’s not leaving early, noting at an event in Georgia that while he was “disappointed” in Trump, not to have a peaceful transition of power was “not the right thing to do,” and that is why he was not going to resign from his post atop USDA. He also said that he had not been in contact with other Cabinet officials relative to invoking the 25th Amendment to the Constitution to remove Trump from office, nor did he expect to.


     EPA Administrator Andrew Wheeler and Energy Secretary Dan Brouillette both signaled they would remain in their posts until January 20. Reports note that Treasury Secretary Steven Mnuchin and his senior staff at the agency have agreed they will remain in their jobs to ensure an orderly transition amid the pandemic-induced economic crisis. Mnuchin and his deputy secretary, Justin Muzinich, are currently on a seven-country swing through northern Africa and the Middle East and do not plan to cut the trip short due to developments in Washington.


— President-elect Joe Biden continued to fill his Cabinet, picking Gina Raimondo, the governor of Rhode Island, as his secretary of Commerce, putting another climate-change advocate in place in his administration. Raimondo is a moderate Democrat who once co-founded her own venture-capital company. Biden also selected Marty Walsh, the mayor of Boston, to serve as his Labor secretary. He will also pick California Office of the Small Business Advocate Isabel Guzman to head up the Small Business Administration (SBA).


     Because of delays in Congress, Biden may not have a single Cabinet official confirmed before his inauguration, a break from the norm.



—  Boeing agreed to pay $2.5 billion to settle criminal charges that it misled safety officials who were investigating the firm’s 737 MAX airliner. Department of Justice said the planemaker had chosen “the path of profit over candor” by withholding information following two crashes in 2018 and 2019, which killed 346 people. Some $500 million will go towards compensating victims’ families.


— Chinese and Russian state media criticized the U.S. following the storming of Congress, calling out what they described as hypocrisy.


— Indian agriculture talks continue. Indian Farmers union representatives meet with the Indian government today for the eighth round of talks following weeks of protests over proposed deregulation of the Indian agriculture sector. Speaking on Thursday, farmer union leader Rakesh Tikait warned that more disruptive protests are on the way. “The tractor march today was a trailer, the full movie will be shown on Jan. 26.”


— Neil Sheehan, the New York Times reporter who obtained the Pentagon Papers, died yesterday. He was 84.


— The last episode of “Jeopardy!” featuring Alex Trebek, who started as host in 1984 and died in November, will air today.


— Simon & Schuster has decided to cancel publication of Sen. Josh Hawley's (R-Mo.) forthcoming book, The Tyranny of Big Tech, after "witnessing the disturbing, deadly insurrection that took place on Wednesday in Washington, D.C." The publisher said it "will always be our mission to amplify a variety of voices and viewpoints," but "at the same time we take seriously our larger public responsibility as citizens and cannot support Sen. Hawley after his role in what became a dangerous threat to our democracy and freedom."


     Hawley responded: "This could not be more Orwellian. Simon & Shuster is canceling my contract because I was representing my constituents, leading a debate on the Senate floor on voter integrity, which they have now decided to redefine as sedition. Let me be clear, this is not just a contract dispute. It's a direct assault on the First Amendment. Only approved speech can now be published. This is the Left looking to cancel everyone they don't approve of. I will fight this cancel culture with everything I have. We'll see you in court."



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