U.S. Equities Set to Plunge Again on Big Rise in Covid-19 Cases; Ditto Europe

Posted on 10/28/2020 8:11 AM

Traders: USDA's U.S. corn export estimate too low; Ukraine corn forecast too high



In Today’s Updates


Market Focus:
* Is USDA significantly underestimating U.S. corn exports? Ukraine corn crop?
* Surging U.S. and Europe Covid cases helping to plunge equities
* WSJ: Tariffs didn’t fuel revival for American steel
* Ag retailers fret over electric vehicles; big negative impact on ethanol

* Crude oil futures posting sizable losses
* USDA announces daily export sales
* U.S./Vietnam Pork Consortium want to boost U.S. pork sales to Vietnam
* Gulf Coast braces for Hurricane Zeta
* Cepea reports Brazilian corn prices hit a new record

* EU + Britain’s soft wheat exports down 30% from year-ago


Policy Focus:
* EPA announces actions on dicamba registrations; no major surprises


U.S./China update:
* China giving investors more power in setting value of yuan
* China continues efforts to alter views on Xinjiang
* First commercial shipment of U.S. rice unloads in China
* China suspends imports from Russian fishing vessels and Netherlands warehouse

U.S. food & beverage industry update:
* U.S. cheese industry reeling from months of chaos following oronavirus pandemic
* Tyson to shift some meat inspection responsibilities in-house
* Cornell to use computer modeling on Covid transmission in food processing facilities

Coronavirus update:
* German Chancellor Angela Merkel will push for tougher curbs
* Europe Covid cases surge
* Pfizer all but rules out coronavirus vaccine before Election Day
* Novavax delaying Phase 3 trial


Politics & Elections:
* WSJ survey shows no swing to Trump among wavering voters
* Biden leads Trump narrowly in Michigan, significantly in Wis.: Post-ABC polls
* Republicans could suffer from Chinese company’s failure to buy Montana beef: WaPo
* Almost 70 million people have already mailed in ballots or voted early
* Democrats betting they can expand electoral map in final week of 2020 campaign
* Puerto Rice statehood update
* How President Trump dodged financial ruin in Chicago
* Can you tell a Trump voter from a Biden voter by contents of their fridge?

Other Items of Note:
* Annual cattle industry convention and NCBA trade show postponed
* WTO set to pick its first female leader




Equities today: European stocks sank to a five-month low and U.S. equity futures slumped as rising Covid cases and tighter lockdowns renewed fears about economic growth. A surge in new Covid-19 cases continues to weigh on market sentiment, with U.S. stock index futures sliding over 1% overnight and crude futures off 4% to under $38/bbl. Many European nations are tightening restrictions on business activity, clouding the global economic outlook and recovery. In Asia, major stock benchmarks ended the day on a mixed note. Japan’s Nikkei 225 dropped 0.3% while China’s Shanghai Composite Index closed up 0.5%.


     U.S. equities yesterday: The Dow fell 222.19 points, 0.80%, at 27,463.19. The Nasdaq was up 72.41 points, 0.64%, at 11,431.55. The S&P 500 was down 10.29 points, 0.30%, at 3,390.68.


On tap today:


     • U.S. advance economic indicators report for September is out at 8:30 a.m. ET.
     • Bank of Canada releases an interest-rate announcement and monetary policy report at 10 a.m. ET.
     • Chief executives of Facebook, Twitter and Google appear before the Senate Commerce Committee starting at 10 a.m. ET. They are scheduled to appear virtually before the Senate over Section 230 of the Communications Decency Act. The law allows social media companies to be exempted from the content third parties post on their platforms — because they are not deemed to be "publishers" — but critics take issue with the classification, given their current moderation policies. In prepared testimony, Mark Zuckerberg said Congress needs to "update" Section 230, while Jack Dorsey feels "eroding" the legislation would "collapse how we communicate on the Internet."


Tariffs didn’t fuel revival for American steel. President Trump made good on his 2016 campaign pledge to the steel industry, slapping 25% tariffs on foreign-made steel to revive an industry that once symbolized American manufacturing might. The tariffs succeeded in pushing down steel imports and — for a short time — resulted in higher prices for domestic steelmakers. They also encouraged newer steel companies to expand operations in the South and Southwest. Yet the tariffs haven’t produced the steelmaking renaissance and robust job growth in America’s industrial heartland that Trump promised, the Wall Street Journal reports (link). “What’s more, the tariffs have hurt U.S. manufacturers, including those in the automotive and appliance sectors, who say the duties on steel and aluminum continue to keep their metal costs higher than what overseas competitors pay.”


     Steel tariffs


Ag retailers fret over electric vehicles; big negative impact on ethanol. The Agricultural Retailers Association says U.S. light-duty and freight vehicle consumption of ethanol would drop drastically if internal combustion engines are banned. A new study (link) notes that if internal combustion engines are banned by 2035, then by 2050 ethanol consumption could drop by up to 90%, to 1.1 billion gallons, and biodiesel consumption could decline by up to 61%, to 0.8 billion gallons.


Market perspectives:


     • Outside markets: The U.S. dollar gained, Treasury yields dropped and the VIX rose above 35.

     • Crude oil futures are posting sizable losses after the American Petroleum Institute reported a build in crude supplies and Covid cases have risen, raising fresh demand worries. U.S. crude is trading under $37.75 per barrel and Brent under $40.10 per barrel. Crude oil futures weakened in Asian action on the supply rise, with U.S. crude down 91 cents at $38.66 per barrel while Brent crude fell 79 cents at $40.82 per barrel. The American Petroleum Institute said stockpiles of U.S. crude rose by 4.6 million barrels in the past week, exceeding consensus forecasts of 1.1 million barrels. Energy Information Administration data are due out later today.


     * USDA announced following daily export sales:
        — Optional origin sales of 207,000 metric tons of corn fto South Korea during 2020-2021 marketing year. An optional origin contract provides that the origin of the commodity may be the U.S. or one or more other exporting countries;
        — 110,000 metric tons of soybeans for delivery to Egypt during 2020-2021; and
        — 120,000 metric tons of soybeans o unknown destinations during 2020-2021


     • U.S./Vietnam Pork Consortium formed, aiming at boosting U.S. pork sales to Vietnam. The U.S. embassy in Hanoi announced a memorandum of understanding (MOU) has been signed with Smithfield Foods and other U.S. pork producers to form a “U.S./Vietnam Pork Consortium” aimed at selling up to $500 million in U.S. pork annually. The effort is aimed at Vietnam Trade Alliance buying U.S. chilled and frozen pork and pork products for further processing and distribution in Vietnam. The country is in the process of rebuilding its hog herd after African swine fever (ASF) forced it to cull an estimated 20% of its hog herd. U.S. pork exports to Vietnam have reached $35 million through August.


     • Negative viewpoints on USDA's World Board demand forecasts continue. This time it is about overall U.S. corn exports and besides an unrealistic World Board forecast of overall China corn imports, the latest criticism is on total U.S. corn exports which some peg at 2.7 billion bushels vs USDA's demand forecast of 2.325 billion bushels for 2020-21. Traders note Ukraine’s crop is smaller than USDA's, meaning lower Ukraine exports and some switches to U.S. corn.


     • Gulf Coast braces for Hurricane Zeta. Gulf of Mexico operators have shut roughly half of all oil and gas production in the basin ahead of Hurricane Zeta. The storm is forecast to be a Category 2 at landfall and could make a direct hit on New Orleans. Already this year, Louisiana has been hit by two tropical storms and two hurricanes: Laura, which caused at least 27 deaths after it struck in August, and Delta, which worsened Laura's damage in the same area weeks later.


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

     • Cepea reports Brazilian corn prices hit a new record
     • EU + Britain’s soft wheat exports down 30% from year-ago




EPA as expected announced actions on dicamba registrations. EPA announced new five-year registrations for two dicamba products and extended the registration of one dicamba product, putting additional control measures in place for their use.


     Details: EPA announced new registrations for two “over-the-top” (OTT) dicamba products — XtendiMax with VaporGrip Technology and Engenia Herbicide — and extended the registration for an additional OTT dicamba product — Tavium Plus VaporGrip Technology. The announcements were made by EPA Administrator Andrew Wheeler at a Georgia farm.


     These registrations are only for use on dicamba-tolerant (DT) cotton and soybeans and will expire in 2025, the agency said.


     EPA also put new control measures in place to address drift of the herbicide, including that a pH-buffering agency be tank mixed with OTT products, a downwind buffer of 240 feet and 310 feet will be required in areas where listed species are located. OTT applications will be prohibited after June 30 on soybeans and July 30 on cotton and there will be simplified label and use directions.


     The 2020 registration labels also offer new flexibilities for growers and states, including the use of certain hooded sprayers to reduce the downwind spray buffer. EPA said they believe the action addresses issues raised in the June 2020 Ninth Circuit Court of Appeals ruling and the control measures now requested means the registrations “do not affect or are not likely to adversely affect endangered or threatened species.


     Some environmental groups decried the EPA action and they will likely seek to challenge this latest decision in court.

Update on China:

  • China is giving investors more power in setting the value of the yuan, a move analysts said was likely intended to boost the currency’s international appeal rather than to drive it lower, according to the Wall Street Journal (link).

    China yuan

  • China continues efforts to alter views on Xinjiang. China has continued its efforts to deflect criticism of actions in Xinjiang, releasing a recent report that migrant workers in the textile industry in Xinjiang Uygur Autonomous Region are “all voluntary and have vastly improved the quality of life and enjoyed more development opportunities,” according to a recap of the report by the Xinhua News Agency. The state-run media outlet today ran a profile of a cotton grower in Xinjiang that now owns over 86 hectares producing the fiber under the headline “Profile: A cotton farmer keeping pace with the times in China’s Xinjiang.”

    China has faced criticism from numerous countries and trade actions linked to what Western countries maintain are forced labor conditions in the textile and cotton industry in the region, and some commercial firms have begun to include provisions in contracts that require no Xinjiang cotton is contained in the products. China has consistently maintained that there is no forced labor in the region.

  • First commercial shipment of U.S. rice unloads in China. A shipment of premium, medium grain Calrose rice grown in California and sold to China by ADM Rice was unloaded in China Tuesday (Oct. 27), the first commercial sale of U.S. rice to China, according to USA Rice. Under the terms of the phytosanitary agreement reached between the U.S. and China, all rice entering China must be milled and packaged according to specifications and originate from a pre-approved export facility, the group noted. There are currently 32 approved export facilities spread across the six major rice-growing states. U.S. rice entering China under their tariff rate quota faces a 1% in-quota duty besides a 25% retaliatory duty, but the group noted, “In most cases, importers in China may apply to waive the retaliatory duty.” USDA’s Weekly Export Sales report recently reported the shipment of 20 tonnes of U.S. rice to China that was purchased earlier this year.
  • China suspends imports from Russian fishing vessels and Netherlands warehouse. China’s customs office announced it will no longer accept products from three Russian fishing vessels and one warehouse in the Netherlands for a week, after the province of Shandong detected Covid-19 on the outer packaging of imported aquatic products.
  • U.S./China Phase 1 tracker: China’s purchases of U.S. goods. Link.

Food and beverage industry update:

  • U.S. cheese industry is reeling from seven months of chaos as the coronavirus pandemic causes upheaval in prices and demand. Prices for cheeses from mozzarella to cheddar hit near-record highs this month, but cheese makers are on edge after sharp swings in demand have thrown their production plans into disarray, the WSJ reports (link). “Those soaring prices have also scrambled planning for buyers from pizza chains to grocery stores, prompting restaurants to limit purchases to avoid getting stuck with expensive inventories if the pandemic slashes business again.”

    Cheese prices

  • Tyson to shift some meat inspection responsibilities in-house. Tyson Foods announced plans to have company employees take on the responsibilities of more than a dozen federal inspectors at its plant in Holcomb, Kansas in January after receiving a waiver from inspection requirements from USDA. Tyson says doing so would improve food safety and efficiency as part of its process to modernize inspections. But activist worry about there being less oversight. USDA told Reuters it will continue to inspect all carcasses and parts, but “quality assurance and trimming tasks” will shift to Tyson. The company will hire 15 people per shift to check carcasses and Tyson says it worked with Iowa State University to develop training materials for workers. Jennifer Williams, vice president of food safety at Tyson, says that eventually the company plans to use cameras and computer imaging to evaluate carcasses, an effort that has been accelerated by the Covid-19 pandemic.
  • Cornell researchers to use computer modeling on Covid transmission in food processing facilities. Researchers at Cornell University will be using computer modeling to find ways to minimize Covid-19 among workers are food facilities via a $1 million grant from USDA’s National Institute of Food and Agriculture (NIFA). The researchers will partner with a dozen firms in the meat, dairy and produce industry, including Taylor Farms, Del Monte Fresh Produce and Tyson Foods.

Coronavirus update:

  • Summary: Global cases of Covid-19 have topped 44 million to stand at 44,010,870 with 1,167,817 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 8,779,703 with 226,723 deaths.

    Link to Covid Case Tracker

    Link to Our World in Data

  • German Chancellor Angela Merkel will push for tougher curbs, including shutting bars and restaurants until the end of November, when she meets with regional leaders today. French President Emmanuel Macron will address the nation later today.

    Europe Covid cases

  • Pfizer all but rules out a coronavirus vaccine before Election Day. The drugmaker’s CEO said during an earnings call that clinical trials were going more slowly than expected.

    Meanwhile, Novavax said it was delaying its Phase 3 trial for its potential vaccine in the U.S. until the end of November because of manufacturing delays.




  • Links
    2020 Presidential Election Interactive Map
    The Green Papers
    Real Clear Politics
    2020 Political Atlas
    2020 Demographic Swingometer
    Days until election

  • WSJ survey shows no swing to Trump among wavering voters. With the U.S. increasingly polarized, only a very small portion of voters remain undecided in the 2020 election. Link to poll results.
  • Biden leads Trump narrowly in Michigan, significantly in Wisconsin, according to Post-ABC polls. Former vice president Joe Biden continues to outpace President Trump in two crucial Midwest battlegrounds, currently holding a slight lead over the president in Michigan while showing a much more substantial advantage in Wisconsin, according to a pair of Washington Post-ABC News polls. The surveys show Biden narrowly ahead of Trump among likely voters in Michigan by 51% to 44%, with Libertarian Party nominee Jo Jorgensen at 3%. In Wisconsin, likely voters favor Biden by 57% to 40%, with Jorgensen at 2%.
  • Republicans could suffer from Chinese company’s failure to buy Montana beef,” says an article in the Washington Post (link). It says the U.S./China Phase 1 deal “seemed like great news for Montana ranchers: Chinese retailer JD.com had promised to buy $200 million worth of beef and spend an additional $100 million building a slaughterhouse in the state. But nearly three years after the accord was announced on the sidelines of President Trump’s first official trip to Beijing, the big orders have yet to materialize and there’s no sign of any new meatpacking plant.” The topic has surfaced in the state’s U.S. Senate race, a close one between incumbent GOP Sen. Steve Daines and challenger, Democratic Gov. Steve Bullock. It is one of several contests that could determine whether the Republicans retain control of the chamber or surrender it to the Democrats. “The vanishing beef deal shows how the souring of the U.S./China relationship is reshaping U.S. politics, making a liability of once-beneficial ties and placing a premium on hard-edge rhetoric toward Beijing” the article concludes. The latest MSU poll effectively shows a dead heat with Daines trailing Bullock 49% to 47%, well within the margin of error, but the RealClearPolitics average shows Daines up by 3 points.
  • Almost 70 million people have already mailed in their ballots or voted early, about half of the total number of votes that were cast in the 2016 election.
  • Democrats are betting they can expand the electoral map in the final week of the 2020 campaign with a late foray into several traditionally GOP-leaning states, leaving President Trump largely playing defense in many battlegrounds he won four years ago. Following his Tuesday trip to Georgia, Joe Biden heads this week to Iowa, while his running mate, Sen. Kamala Harris, will travel to Texas and Arizona. Trump, meanwhile, is traveling this week to at least five states he won in 2016 and that are key to a victory this time.
  • Puerto Rice statehood update. Residents of Puerto Rico are American citizens who have no voting representation in Congress. Next week, they will vote on a referendum about whether they want to change that — and have the island become a state. Ultimately, the decision is up to Congress and the president. Link for more details from an Orlando Sentinel editorial.
  • How President Trump dodged financial ruin in Chicago. When his skyscraper ran into trouble, Trump defaulted on his loans, sued his lender, got its debt forgiven — and avoided paying taxes, the New York Times reports (link), drawing on his financial records. The project “is a case study in doing business the Trump way.”
  • Can you tell a Trump voter from a Biden voter by the contents of their fridge? Link to NYT article to find out.



  • Annual cattle industry convention and NCBA trade show postponed. The Cattle Industry Annual Convention and the National Cattlemen’s Beef Association trade show has been postponed the in-person event to Aug. 10-12, 2021. The event is still slated to occur at the Gaylord Opryland Resort and Convention Center in Nashville, Tennessee. The event was originally scheduled for Feb. 3-5, with the convention. But NCBA will hold some of its traditional business meetings in the January or February timeframe, the association said.
  • World Trade Organization (WTO) is set to pick its first female leader, offering a fresh start to a body weakened by fights between the U.S. and China. The organization’s 164 members are choosing between former Nigerian Finance Minister Ngozi Okonjo-Iweala and South Korean Trade Minister Yoo Myung-hee. The WTO will say as soon as today which candidate has won broader backing. That could allow the organization to formally pick its new director-general ahead of Tuesday’s U.S. presidential election, which is likely to affect global trade tensions. Link for more via WSJ article.


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