Covid aid | Peterson pushes more RFS SRE transparency | FOMC today
In Today’s Updates
* Focus on Fed guidance, forecasts ahead of FOMC meeting conclusion
* OECD projects global economy will contract by 4.5% in 2020
* What people were buying in August likely shifted
* Oil is on the rise again
* Bloomberg Dollar Index extended its longest losing streak in a month
* Pelosi says Congress should skip break if no stimulus deal completed
* Negotiators want agreement on details of stopgap funding measure this week
* Coalition letter to congressional leaders pushes CCC funding
* Don't expect much from the WTO ruling against Trump's tariffs on China
* Peterson talks about CCC, aid, farm bill, CRP, meat processing, RFS, broadband
* Is USDA and most industry analysts way too low on China's corn imports?
* China suspends poultry imports from Arkansas plant
U.S. food & beverage industry update:
* Kraft Heinz sells natural cheese business to Lactalis for $3.2 billion
* Kansas and Tennessee report highest tallies yet of virus-related deaths
* Trump again raised hopes about swift U.S. approval for a coronavirus vaccine
* Bill and Melinda Gates urge Congress to include $4 bil. for vaccine to poor nations
Politics & Elections:
* Pence: Trump sees Florida, Minnesota, Arizona as keys to 270 electoral votes
* Monmouth Univ. poll: Biden has edge of five points over Trump in Florida
Other Items of Note:
* Trump gets another Mideast diplomatic victory
* Suga Yoshihide elected by Japan’s Diet as prime minister
* Peterson's RFS/SRE transparency language part of House energy bill
* Number of uninsured people in the U.S. at some point in 2019 was 29.6 million
* Highway, flood insurance in stopgap bill: Hoyer
* Shelton reportedly lacks vote for Fed position
* Trump administration moved to drop tariffs on Canadian aluminum
Equities today: Global stock markets were mostly up overnight. U.S. stock futures signal higher openings.
U.S. equities yesterday: The Dow inched up 2.27 points, less than 0.1%, to 27,995.60. The S&P 500 added 17.66 points, 0.5%, to 3,401.20. Nasdaq climbed 133.67 points, 1.2%, to 11,190.32.
On tap today:
• U.S. retail sales for August are expected to rise 1.1% from the prior month. (8:30 a.m. ET)
• U.S. business inventories for July are expected to rise 0.1% from the prior month. (10 a.m. ET)
• National Association of Home Builders housing market index for September is expected to hold steady at 78. (10 a.m. ET)
• Federal Reserve releases a policy statement and economic projections at 2 p.m. ET; Chairman Jerome Powell holds a press conference at 2:30 p.m. ET.
Focus on Fed guidance, forecasts ahead of FOMC meeting conclusion. The conclusion of the Federal Open Market Committee (FOMC) meeting today at 2 pm ET will bring the post-meeting statement and updated forecasts from Fed officials. Those updated forecasts are looked to paint an improved picture of the U.S. economic outlook — likely a less-negative U.S. economic outlook for 2020 but potentially a less-positive set of forecasts for 2021. The unemployment rate has already fallen below the levels Fed officials expected in their latest forecasts delivered in June.
The post-meeting statement will be combed for whether the Fed updates it forward guidance in light of the recently adopted long-term strategy which indicated the Fed will be okay with letting inflation run beyond its 2% target. But there may not be as many specifics in terms of that forward guidance just yet. That is why the updated forecasts from Fed officials may be the most important forward guidance—expectations are they will likely signal no expectations for interest rates to rise through 2023.
Other areas of focus will be on whether the Fed adjusts their bond buying effort and shift toward longer-dated securities in the mix. Fed Chairman Jerome Powell’s post-meeting presser will watch for how he responds to questions about the Fed’s current forward guidance, particularly if it does not shift much from prior Fed statements. Some also expect there could be some updated guidance from the Fed on their Main Street Lending effort. Markets will have a lot to potentially digest in the final portion of the trading day.
OECD projects the global economy will contract by 4.5% in 2020, which is a bit better than its June forecast of a 6.0% contraction. The OECD also said the world economy could grow by 7.0% in 2021, provided Covid restrictions are lifted and an effective vaccine is found. The less-gloomy view reflects recent positive developments in U.S. employment and better-than-expected China data. The Paris-based research body warned that the global recovery is set to slow from this month and remains vulnerable to fresh outbreaks.
What people were buying in August likely shifted because of disruptions to routines from the pandemic. Back-to-school shopping, typically a big part of August spending, is likely to look different with many school districts teaching classes online. That means fewer clothes and school supplies purchases while computers and electronics could post gains, the Wall Street Journal reports (link).
• Oil is on the rise again as Hurricane Sally disrupted more than 25% of U.S. offshore oil and gas output and the API showed a big drop in U.S. crude stockpiles. U.S. crude is trading around $39.20 per barrel with Brent around $41.45 per barrel ahead of the U.S. trading start. The factors helped prices move higher in Asian action, with US crude trading at $38.96 per barrel and Brent at $41.18 per barrel.
• Bloomberg Dollar Index extended its longest losing streak in a month with a fourth consecutive day of declines.
— Pelosi says Congress should skip break if no stimulus deal completed. House Speaker Nancy Pelosi (D-Calif.) said Congress should remain in session until lawmakers and the administration reach an agreement on another coronavirus stimulus package. “We’re committed to staying here until we have an agreement,” she told CNBC. “We are optimistic that the White House at least will understand that we have to do something.” House Democratic Caucus Chairman Hakeem Jeffries (D-N.Y.) said “the overwhelming consensus among the members is that we stick around” until an agreement is reached.
Democrats are still pushing their $2.2 trillion offer and some Republican senators have spurned any stimulus approaching even half that amount. A 50-member group of House Democrats and Republicans, the Problem Solvers Caucus, on Tuesday released a $1.52 trillion coronavirus stimulus plan in a long-shot attempt to break a lengthy deadlock. House Majority Leader Steny Hoyer (D-Md.) criticized the plan after it came out, arguing Democrats should not agree to less than $2 trillion, and Senate Majority Whip John Thune (R-S.D.) called the bill “problematic.”
President Trump’s son-in-law and senior adviser, Jared Kushner, said that a new stimulus may have to wait until after the Nov. 3 election. “We do think there’s a need for another intervention. We’ve reached out to Congress. We’ve been negotiating,” Kushner told CNBC.
The House is scheduled to break for the election after Oct. 2. Rep. Hoyer suggested lawmakers can go home and not actually stay in town, subject to a recall for any vote, the procedure they used during their August recess.
— Negotiators want agreement on details of a stopgap funding measure this week ahead of a possible House vote next week, as the Sept. 30 deadline approaches.
The House will likely vote on the unreleased stopgap spending bill early next week. "I think it’ll come to the floor earlier in the week, rather than later in the week. And I think clearly it has enough time to pass the Senate," said Houe Majority Leader Steny Hoyer (D-Md.).
An ag sector focus will be whether the White House gets its funding replenishment for USDA's Commodity Credit Corporation (CCC) — see next item for details.
A House vote next week would give the Senate time to vote on the bill before Sept. 30. House Speaker Nancy Pelosi (D-Calif.) has previously said she negotiates with Treasury Secretary Steven Mnuchin, but not with White House Chief of Staff Mark Meadows, nor directly with President Trump.
Lawmakers are still discussing the duration of the spending bill. Some Democrats want to extend it into 2021, but Senate Appropriations Committee Chairman Richard Shelby (R-Ala.) said Dec. 18 was a date under consideration.
— Coalition letter to congressional leaders pushes CCC funding. The American Farm Bureau Federation and more than 40 other agriculture organizations are asking Congress to ensure USDA has the tools necessary to help farmers in times of crisis. The group sent a letter (link) to House and Senate leadership requesting they immediately provide replenishment for the Commodity Credit Corporation (CCC) through the continuing resolution. Without immediate replenishment, funding for farm bill programs could run out while farmers struggle against low commodity prices, natural disasters and the coronavirus pandemic.
In a separate release, Farm Bureau wrote, “USDA is expected to announce a much-needed second round of CFAP support in the coming weeks. The second CFAP relief program is expected to cover a portion of the price or revenue losses associated with Covid-19 incurred by farmers and ranchers for the remainder of 2020. The magnitude of the next support package is unknown. However, given that CCC resources were used to partially fund the first round of CFAP and will be used for the newly announced Seafood Trade Relief Program, USDA likely does not have sufficient resources to meet upcoming farm bill and conservation program payments beyond October without an immediate replenishment of the CCC in a continuing resolution. Absent CCC replenishment, key farm bill commodity support and conservation program funding — which had overwhelming bipartisan support two years ago — would be delayed.” Farm Bureau economists’ estimates USDA owes producers $4.6 billion in farm program payments in October plus another $2.3 billion in conservation program payments. Farm Bureau stressed that “now is not the time for policymakers to further risk the farm economy by delaying much-needed financial resources.” Link to Farm Bureau item.
— Don't expect much from the WTO ruling against Trump's tariffs on China. The World Trade Organization (WTO) ruled Tuesday that some U.S. tariffs against China broke international trading rules, but likely will have no consequence for American tariff policy because the organization’s appellate system currently doesn’t function.
Lighthizer responds. The Office of the U.S. Trade Representative BobLighthizer, President Trump’s top trade adviser, criticized the WTO’s ruling, saying that it underscored the problems with the Geneva-based WTO. The Trump administration has said the system has failed to adapt to the rise of China’s economy. “This panel report confirms what the Trump administration has been saying for four years: The WTO is completely inadequate to stop China’s harmful technology practices,” said Lighthizer. “Although the panel did not dispute the extensive evidence submitted by the United States of intellectual property theft by China, its decision shows that the WTO provides no remedy for such misconduct,” Lighthizer said. “The United States must be allowed to defend itself against unfair trade practices, and the Trump administration will not let China use the WTO to take advantage of American workers, businesses, farmers, and ranchers.”
The panel's finding: “China has demonstrated that the additional duties apply only to products from China and thus fail to accord to products originating in China an advantage granted to the like product originating in all other WTO Members,” the panel said. The ruling formally pertains to only some of the Trump administration’s tariffs in its multiyear trade war with China — tariffs imposed on $34 billion of goods in June 2018 and $200 billion of goods in September 2018, a large share, but not all, of U.S. tariffs that cover about $370 billion of Chinese imports.
China responds. The Chinese Ministry of Commerce said in a statement that it thought the ruling was “fair and objective” and hoped the U.S. would comply.
The U.S. argued the WTO shouldn’t rule in the case because the U.S. and China struck a deal Jan. 15 pausing their tariff escalations. China, however, didn’t agree that the deal made its case unnecessary, and the WTO went ahead with the ruling.
— Highlights of House Ag Chairman Collin Peterson's (D-Minn.) comments to National Farmers Union on Tuesday:
• USDA's Commodity Credit Corporation (CCC): Favors giving the CCC authority to confront problems such as those that came up when meat plants were forced to close or slow down operations due to Covid-19. “The pork producers are too efficient,” Peterson said. “They were so efficient that everything had to fall in place for everything to work out OK. When the plants shut down, everything backed up, especially in my district.” USDA Secretary Sonny Perdue said he could not address the problems in the pork plants because he only had authority to deal with animals that are sick. Peterson said he wants to provide USDA authority to deal with disaster situations whether it is a human pandemic, African swine fever, foot-and-mouth disease or another round of avian influenza.
• Meat processing: Saying it appears “people in the United States don’t want to own processing,” which has led to Smithfield being sold to the Chinese and other plants sold to JBS, which is Brazilian. “This is not a good situation,” Peterson said, asking, “How could we attract American capital to provide other choices to farmers? Can we do something at the federal level to start more federally inspected plants that can be available?”
Rep. Frank Lucas (R-Okla.) also spoke to the NFU. The elaborated on some of the legislative efforts relative to foreign investment in the meatpacking sector. Lucas pointed to legislation he has co-sponsored with Rep. Marcia Fudge (D-Ohio) that would add food and agriculture to the categories falling under review by the Committee on Foreign Investment in the United States (CIFUS), which reviews the national security implications of foreign investments in U.S. businesses. ”If an entity from outside the United States wants to buy a packer, or major slice of the packing industry or the food processing industry, they’d have to be cleared, and we’d put the Secretary of Agriculture on that board oversees it,” Lucas explained. Still, Peterson stressed that aid to farmers from USDA remains a critical need. “Farmers are not making any money. I mean, without these government payments, we’d be in big hurt,” he said.
• Aid to farmers. Peterson faulted Trump administration efforts on the Market Facilitation Programs (MFP 1 and 2) and Coronavirus Food Assistance Program (CFAP 1), saying they “were basically done without much consultation” with Congress. Relative to CFAP, he cited issues with the period of covered losses and the lack of coverage of some crops as issues with the program and linked them to a failure to work closely with Congress.
• The next farm bill: During the second year of the next Congress, Peterson said his Ag committee should start looking at the next farm bill, which needs to be written in 2023. “I would rather focus on these other problems first. If we get more processing plants we have to get more money [for inspectors]. We don’t have money in the Ag Committee to fund these things.”
• Biden and the ag sector. Asked what Democratic presidential candidate Joe Biden could do for farmers, Peterson said Biden “could find $60 billion to send out to the farmers.” Noting the money the Trump administration sent to farmers from the CCC for trade and coronavirus aid was needed, Peterson said he was “not sure it was spent properly.”
• The current dairy safety net, Peterson said, “is the best safety net in all of agriculture” and that it comes close to equaling the cost of production, at least for smaller farmers.
• Regarding the Conservation Reserve Program (CRP), Peterson said, “If we keep oversupplying the market, it is probably the best and cheapest way to take care of the oversupply and you get benefits of soil health, water quality and wildlife. We are looking at that whole program to see how we can make it better and more affordable.”
• Ethanol and the RFS: Peterson said that President Donald Trump agreed to stop waivers to oil companies only after pressure. “I'm tired of solving problems the administration has created,” Peterson said. “We were promised 15 billion gallons of corn ethanol; we are at about 12.5 because of these waivers.”
As for the Trump administration’s proposal to allow gas stations to use E10 pumps for E15, Peterson said, “Anybody who thinks is E15 is going to solve this problem, you're kidding yourself.” He cited regulatory and other hurdles that remain before the fuel becomes widely available to consumers.
• On rural broadband, Peterson said that he and Rep. Don Young (R-Alaska) have proposed a bill that would change the Universal Service Fund so that the money in it would be used for providing Internet service rather than landlines and that instead of bringing service to “underserved areas” it would serve “unserved areas.” Bottom line, according to Peterson: “If you don’t have high-speed Internet and you are in agriculture, you are in big trouble.” Earlier efforts saw mixed success, he said, because money was often spent to “overbuild” areas with existing coverage.
— Update on China:
- Is USDA and most industry analysts way too low on China's eventual corn imports from all origins? Could be based on talks with several China watchers.
The case is building for higher Chinese corn imports. Three typhoons since August that brought high winds and heavy rains to China’s main corn producing region in the northeast have stoked speculation about the extent of crop damage. Zhang Dalong, an analyst with COFCO futures, told Reuters that “corn output in the northeastern region would fall 5-10 million tonnes this (crop) year” relative to China’s official 2020-21 forecast of 264.71 MMT.
Chinese corn futures have climbed to record highs as images and videos of flattened corn circulated, spurring concerns about supply shortages for the world’s second-largest consumer of the grain that has reportedly depleted its stockpiles.
Further, China is still working to rebuild its hog herd and has cracked down on swill use. There is also concern about the quality of knocked down corn, with analysts fearing the loss of test weight and mold.
Meng Jinhui, senior analyst with Shengda Futures, estimates corn production in China’s northeast will slide about 5 MMT. The ag consultancy Cofeed says production losses in China’s top corn producing Heilongjiang province could be up to 20%. Provincial Chinese governments are downplaying the impact.
As for some Pro Farmer China watchers, some have lofty corn import estimates of 15 to over 20 million tons. If that eventually proves accurate, it would be one of the biggest USDA World Board misses on demand, and lead to calls for a reassessment of China's future corn import needs. USDA currently projects total China 2020-21 corn imports at 7 million tons.
China's corn output to fall after typhoons flatten crops, damage quality. China's corn crop is expected to fall by up to 10 million tonnes, or nearly 4%, from the latest government estimates after heavy wind and rains toppled crops in major production areas in the northeastern cornbelt, analysts told Reuters. Expected production losses have pushed Chinese corn futures to a record high and stoked worries over supply shortages after it ran down once-mammoth state stockpiles and boosted imports.
- China suspends poultry imports from Arkansas plant. China has suspended imports of poultry from an OK Foods plant in Fort Smith, Arkansas, due to Covid-19 cases at the plant, according to the USA Poultry & Egg Export Council. This is the second poultry plant in the U.S. that has seen China block shipments from due to Covid. The suspension of the plant’s ability to ship poultry to China was effective Sept. 13, according to USDA’s Food Safety and Inspection Service (FSIS). The agency currently lists eight U.S. facilities as being ineligible to ship product to China, with two — Tyson Foods plant in Springdale, Arkansas, and OK Foods in Fort Smith, Arkansas — added to that list since the Covid-19 outbreak began.
- U.S./China Phase 1 tracker: China’s purchases of U.S. goods. Link.
— Food and beverage industry update:
- Kraft Heinz sells natural cheese business to Lactalis for $3.2 billion. The transaction, which includes Breakstone’s, Knudsen, Polly-O, Athenos, Hoffman’s and Cracker Barrel in the U.S. only, is expected to close in the first half of 2021. Proceeds will be used to pay down debt.
— Coronavirus update:
- Summary: Global cases of Covid-19 are now at 29,593,883 with 935,446 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 6,606,562 with 195,942 deaths.
Link to Covid Case Tracker
Link to Our World in Data
- This week, Kansas and Tennessee each reported their highest tallies yet of virus-related deaths in a seven-day period. And Missouri, Wisconsin and North Dakota reported record numbers of new cases. North Dakota now has the highest number of new cases per capita in the country.
- President Donald Trump again raised hopes about swift U.S. approval for a coronavirus vaccine, saying at a town hall event hosted by ABC News that the shot could be ready within four weeks. “The previous administration would have taken perhaps years to have a vaccine, because of the FDA and all the approvals,” Trump said yesterday. “We’re within weeks of getting it. You know, could be three weeks, four weeks.” Trump’s timetable is far more optimistic than estimates by drug industry executives or other government officials, including National Institute of Allergy and Infectious Diseases Director Anthony Fauci. He said to expect a vaccine approval closer to the end of the year with broad distribution next year.
- Bill and Melinda Gates are lobbying Congress to craft a stimulus package that includes $4 billion to help distribute a coronavirus vaccine to poor countries. A report released on Monday by their foundation argued that twice as many deaths could be avoided if vaccines were distributed based strictly on countries’ populations, rather than given to the richest countries first.
POLITICS & ELECTIONS
— 2020 Presidential Election Interactive Map
— The Green Papers
— Real Clear Politics
— Presidential debates: Scheduled to occur Sept. 29, Oct. 15 and Oct. 22.
— VP debate: Scheduled for Oct. 7.
— Days until election
- Pence: Trump sees Florida, Minnesota, Arizona as keys to 270. President Trump’s campaign is focused on winning in Florida and Arizona to create a path to 270 electoral votes and four more years in office, Vice President Pence told The Hill in an exclusive interview aboard Air Force Two. Pence, in the midst of a cross-country trip aimed at bolstering Trump and the Senate GOP ahead of Election Day, said those two states and Minnesota, which hasn’t voted for a GOP presidential candidate since 1972, are all top Trump targets. Link for details.
- Monmouth University poll released yesterday found Biden with an edge of five percentage points over Trump among likely voters in Florida. That difference was within the margin of error, but nonetheless more encouraging for the former vice president than projections in some other recent surveys of the state.
OTHER ITEMS OF NOTE
- In a Mideast diplomatic victory for the Trump administration, the United Arab Emirates, Bahrain and Israel formally signed a deal normalizing relations among the three countries. The new agreements outline how the three countries will open embassies and forge economic ties. In a ceremony at the White House President Donald Trump said that “five or six” other Arab nations, which he did not name, are close to following suit.
- Suga Yoshihide was elected by Japan’s Diet as prime minister. He replaced Abe Shinzo in a smooth succession within their center-right Liberal Democratic Party. Abe stepped down in poor health, soon after becoming the country’s longest-serving prime minister. Suga, a chief cabinet secretary with a reputation for diligence, is to serve out the final year of Abe’s elected term.
- Peterson's RFS/SRE transparency language part of House energy bill to be considered next week. House Ag Chairman Collin Peterson (D-Minn.) has language in the proposed Clean Economy Jobs and Innovation Act. It would set an annual deadline for refiners to request exemptions from the Renewable Fuel Standard (RFS) and require EPA to publicly release the name of refiners requesting a waiver, the number of gallons requested to be waived and the number of gallons of biofuel that will not be blended as a result of the waiver. “I’m getting tired of solving problems that were created by the administration in the first place. “The provisions of my bill will require EPA to pull back the curtain and show the American people how they justify granting these waivers that have greatly impacted profitability for biofuels producers and farmers across the country.” The Senate will not likely consider the measure, but Democrats want to push an energy bill and Peterson is in a close re-election race with Republican challenger Michelle Fischbach.
- Number of uninsured people in the U.S. at some point in 2019 was 29.6 million, or 9.2% of people, up from 28.6 million or 8.9% of people in 2018, according to data released Tuesday by the U.S. Census Bureau.
- Highway, flood insurance in stopgap bill: Hoyer. Language to extend the nation’s surface transportation and flood insurance laws will be a part of a government funding measure aimed at avoiding a federal shutdown at the end of the fiscal year Sept. 30, said Rep. Steny Hoyer (D-Md.). Surface transportation law expires Sept. 30 and must be renewed to keep funds flowing to state and local transportation agencies. Top lawmakers said last week they’d back a one-year extension.
- Shelton reportedly lacks vote for Fed position. Judy Shelton, President Trump’s controversial nominee for the Federal Reserve board, doesn’t have enough support in the Republican-controlled Senate to win confirmation, Sen. John Thune (R-S.D.) said. Shelton’s nomination remains a priority for the White House, and GOP leaders will move forward on her nomination before the election if she can gain the 51 votes that would be required, Thune said.
- Trump administration moved to drop tariffs on Canadian aluminum, a swift reversal of a policy that had drawn widespread criticism from U.S. businesses and had dented U.S./Canada relations. The Office of the U.S. Trade Representative (USTR) said it expects that imports of the type of aluminum subject to the 10% tariffs are likely to decline in coming months after surging earlier in the year. As long as they decline as expected, the USTR said the tariffs won’t apply. The decision came as Canada finalized its list of U.S.-made goods that would be targeted with counter-tariffs, set to kick in today.