USDA World Board Head Defends Keeping China Corn Import Estimate at 7 MMT

Posted on 10/29/2020 8:12 AM

3Q GDP growth at 33.1% vs expectations of 31.0% | Jobless claims dip

 


In Today’s Updates


 

Market Focus:
* GDP 3Q growth: 33.1% vs pre-report forecast of 31.0%
* Jobless claims: 751,000 vs estimate of 775,000
* USDA's NASS talks about recent Grain Stocks report
* U.S. states facing biggest cash crisis since Great Depression
* Bank of Japan leaves monetary policy steady but cuts economic outlook
* ECB, as expected, makes no policy changes

* Bank of Canada left benchmark overnight interest rate unchanged at 0.25%
* Cboe Volatility Index, falling today, remains near highest level since June
* USDA announces daily export sales
* Silver futures on Wednesday dropped 4.9%, gold fell 1.7% and copper shed 1%
* Cotton futures retreat some after settling at 18-month high on Monday
* USDA's NASS offers some explanation of its June 1 corn stocks shocker
* Tropical Storm Zeta ‘racing’ across Southeast U.S.
* Attaché in Argentina has lower prod., export forecasts than USDA for corn & wheat

• Argentine oilseed crusher workers’ union warns more strikes likely

• Dutch authorities culling chickens after bird flu detection

 

Policy Focus:
* Election impact on stimulus package; Pelosi talks
* U.S. blocks selection of former Nigerian official to lead WTO

 

U.S./China update:
* USDA World Board leader tries to defend China corn import figure
* China again big buyer of soybeans, beef; starts on 2021 pork buys


U.S. food & beverage industry update:
* Grubhub reported a narrower loss compared with earlier in the year
* Underperforming IHOP restaurants in U.S. could be closed over next six months


Coronavirus update:
* Germany, France resurrect lockdowns
* Russia’s deputy prime minister updates on Covid-19
* Walt Disney World laid off 720 actors and singers
* Seniors, people in private health-insurance plans won’t be charged for getting vaccine

 

Politics & Elections:
* Election predictions
* More than 76 million Americans have already voted
* More than 16 mil. voters who did not cast a ballot in 2016 already voted this year
* Supreme Court declined to disturb extended ballot deadlines in N.C. and Pa.
* Cook Political Report's final 2020 Senate overview: 'Dems favorites to take Senate'
* Two election forecasters declared presidential race in Texas to be a 'tossup'
* GOP Senate candidates in Michigan andMinnesota within striking distance
* Election spending for president, Senate and House races: $14 billion
* Joe Biden and Barack Obama will campaign together on Saturday in Michigan
* NYT: Biden win could renew a Democratic split on trade policy


Other Items of Note:
* Trump will open up more than half of Alaska’s Tongass National Forest to logging
* Senate panel talks to high tech execs
* DHS proposing to effectively replace the H-1B visa lottery
* Ethanol groups want court to force EPA to eveal those seeking SRE waivers

 


MARKET FOCUS


 

Equities today: U.S. futures are volatile, turning slightly higher (then lower) after the third quarter GDP estimate of 33.1% was released, above expectations of 31.0%. Initial jobless claims came in at 751,000 vs an estimate of 775,000. Continued These numbers come a day after the benchmark posted its steepest fall since June 11. Contracts linked to Nasdaq-100 climbed almost 1%. Jobless claims and third-quarter GDP this morning are the focus reports. Also, a policy update is coming from the European Central Bank. In the Asia-Pacific region, stock benchmarks were mixed at the end of trading. The Shanghai Composite Index edged up 0.1% while Australia’s benchmark S&P/ASX 200 declined 1.6%.

 

     U.S. equities yesterday: The Dow dropped 943.24 points, 3.43%, at 26,519.95. The Nasdaq fell 426.48 points, 3.73%, at 11,004,87. The S&P 500 was down 119.65 points, 3.53%, at 3,271.03.

 

On tap today:

 

     • U.S. gross domestic product for the third quarter, due at 8:30 a.m. ET, is expected to rise at an annual pace of 32% from the prior quarter. See related item for update.
     • U.S. jobless claims, due at 8:30 a.m. ET, are expected to fall to 778,000 in the week ending Oct. 24 from 787,000 a week earlier. See related item for update.
     • USDA Weekly Export Sales report, 8:30 a.m. ET See update on China buys.
     • European Central Bank releases a policy statement at 8:45 a.m. ET and ECB President Christine Lagarde holds a press conference at 9:30 a.m. ET See related item for update.
     • U.S. pending home sales for September, due at 10 a.m. ET, are expected to rise 3% from a month earlier.
     • Japan’s Tokyo consumer prices for October are out at 7:30 p.m. and preliminary industrial production for September is out at 7:50 p.m. ET.

 

The U.S. economy grew 7.4% in the third quarter, a 33.1% annual rate, the biggest gain ever, beating expectations of 31.0%.

 

     GDP third quarter

 

     GDP change

 

U.S. jobless claims saw another 751,000 people applied for jobless claims last week, a seven-month low, and down about 40,000 from the week before, in what is the final unemployment report released before the election.

 

     Continuing claims

 

U.S. states are facing the biggest cash crisis since the Great Depression. The drop in income and sales tax revenue has created a historic crisis for states, with a total shortfall expected in the hundreds of billions of dollars. The Wall Street Journal notes (link) the projected gaps are greater than 2019’s K-12 education budget for every state combined, or more than twice the amount spent that year on state roads and other transportation infrastructure.

     Deficits have already prompted tax increases and cuts to services. State workers are being laid off and are taking pay reductions, and the retirement benefits for government workers are under more pressure. Even after rainy-day funds are used, Moody’s Analytics projects 46 states coming up short, with Nevada, Louisiana and Florida having the greatest gaps as a percentage of their 2019 budgets.

 

    State tax revenue

 

     State governments

 

Bank of Japan leaves monetary policy steady but cuts economic outlook. The Bank of Japan made no policy change at the conclusion of its meeting today (Oct. 29), but downgraded its outlook for the Japanese economy. While expectations are conditions will improve, the BOJ said, “risks to both economic activity and prices are skewed to the downside, mainly due to Covid-19.”

 

     BOJ Governor Haruhiko Kuroda said the bank could extend its March 2021 deadline for its Covid response program and could take additional steps. “We will extend the deadline, if we deem it necessary and appropriate,” he remarked at a post-meeting briefing. "There's also plenty of room to expand the scale of easing for each element of our crisis-response program.”

 

     The BOJ’s focus remains on addressing the Covid impacts, he observed. "As the pandemic's impact subsides, there may come a time when debate on how to stimulate growth and achieve our 2% price target will move to the forefront," Kuroda said. "But for now, what's most important is to respond directly to the fallout from Covid-19 using the package of measures."

 

    As for its forecasts, the BOJ now expects Japanese GDP to contract 5.5% in the fiscal year ending March 2021 compared with a prior outlook for a 4.7% contraction. However, the BOJ now expects the Japanese economy to expand 3.6% in the next fiscal year, up from a prior outlook of 3.3%.

 

     The BOJ appears to be following the lead of other central banks relative to continuing their current pandemic-induced policy moves and indicating those policies will be in place for an extended period of time and that the pandemic will continue to dictate how those actions unfold ahead.

 

ECB, as expected, makes no policy changes. The European Central Bank (ECB) left its monetary policy unchanged, but left the door open for adjustments in December. The ECB said it would "recalibrate instruments, as appropriate" based on its December update and that staff forecasts in December "will allow thorough reassessment of the economic outlook."

 

Bank of Canada left its benchmark overnight interest rate unchanged at 0.25% on Wednesday and offered reassurance that it is expected to remain at that level until at least 2023. The central bank said the economy has entered a prolonged and uneven recuperation phase, which could be dampened by a recent resurgence in infections.

 

Market perspectives:

 

     • Outside markets: The U.S. dollar index is firmer. Nymex crude oil prices are lower and hit a 4.5-month low, trading around $35.85 a barrel. The yield on the benchmark U.S. 10-year Treasury note is 0.78% today.


     • Crude oil futures have moved lower as continued concerns over Covid reducing crude oil demand are weighing on values. U.S. crude is trading around $35.60 per barrel and Brent around $37.90 per barrel. Crude oil edged up in Asian action, with U.S. crude rising 18 cents at $37.57 per barrel while Brent crude was up 12 cents at $39.76 per barrel.

 

     • The Cboe Volatility Index, a gauge of investors’ expectations for swings in U.S. stocks, fell on Thursday, but remains near its highest level since June.

 

     • USDA daily export sales:

        — 1,432,550 metric tons of corn for delivery to Mexico. Of the total, 891,540 metric tons for 2020-2021 and 541,010 metric tons for 2021/2022 marketing year.
        — 140,000 metric tons of corn to unknown destinations during 2020-2021.

 

     • Most actively traded silver futures on Wednesday dropped 4.9%, gold fell 1.7% and copper shed 1%. The threat of new coronavirus lockdown measures around the world dragged down raw materials prices, raising concerns that investments tied to the global economy are set for another painful selloff.

 

     • Cotton futures closed at 70.17 cents a pound Wednesday after settling at an 18-month high of 72.11 cents on Monday.

 

     • USDA's NASS offers some explanation of its June 1 corn stocks shocker. At yesterday’s data user meeting, officials with USDA’s National Ag Statistics Service (NASS) spent some time on their surprise 205 million-bu. June 1 corn stocks revision to the downside. NASS indicated that the need for a June 1 revision was only apparent after the Sept. 1 survey data had been collected and analyzed. That analysis showed implied quarterly disappearance and residual, in particular, were well out of the normal range. Therefore, NASS adjusted the June figure to bring those relationships more in line. USDA did not indicate why the numbers were such an outlier.

 

     • Tropical Storm Zeta ‘racing’ across Southeast U.S. Now-Tropical Storm Zeta is “racing toward the northeast near 39 mph,” according to the National Hurricane Center (NHC). “An even faster northeastward motion is expected later today, followed by a rapid east-northeastward motion tonight and Friday. On the forecast track, the center of Zeta will move across portions of the southeastern U.S. this morning, across the Mid-Atlantic states this afternoon, and emerge over the western Atlantic by tonight.” High winds and heavy rainfall are expected to be the major impacts now that the storm is inland. “Zeta will likely become extratropical by the time it reaches the mid-Atlantic states this afternoon,” NHC said. Zeta is the fifth named storm to strike Louisiana this year and initially brought 110 mph winds and heavy rain when it arrived as a Category 2 hurricane.

 

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

     • Attaché in Argentina has lower prod. and export forecasts than USDA for corn and wheat
     • Argentine oilseed crusher workers’ union warns more strikes likely
     • Dutch authorities culling chickens after bird flu detection

 


POLICY FOCUS


 

Election impact on stimulus package; Pelosi talks. With the polls suggesting a Biden victory next week, House Speaker Nancy Pelosi (D-Calif.) said stimulus measures under discussion could change after the election. “There’s very little that we have a commitment from them on. We have, shall we say, narrowed our differences,” Pelosi said in an interview. “What [Treasury Secretary Steven Mnuchin] and I have agreed upon — on how we would go forward — is not necessarily what the Republican Senate will vote on,” Pelosi said. “That is up to the president to convince them that the agreement we have with him is one that will be honored by them.”

     “The political calculation from the Democrats is to make sure that no deal is struck, because that could be perceived as helping the president and Senate Republicans,” said Sen. Shelley Moore Capito (R-W.V.).

 

     Pelosi said Democrats still wanted to reach an agreement during the lame-duck period, but she also acknowledged that negotiations would be different if Democrats have full control of the government next year. “It’s certainly night-and-day in terms of negotiating an agreement in 2021 if we have the White House, the Senate and the House,” she said. “We’re motivated by meeting the needs of the American people and doing so as expeditiously as possible.”

     “We’ll come back in November,” Senate Appropriations Chairman Richard Shelby (R-Ala.) said Monday. “The question might be, will there be something then?”

 

     Pelosi will be interviewed in the noon hour ET on Bloomberg TV’s Balance of Power.

 

U.S. blocks selection of former Nigerian official to lead WTO. The process of selecting a new Director General for the WTO went from what had been a relatively smooth process to one of uncertainty Wednesday when the U.S. blocked the selection of former Nigerian Finance Minister Ngozi Okonjo-Iweala to lead the trade body.

 

     Instead, the U.S. backs Korean Trade Minister Yoo Myung-hee. “Minister Yoo is a bona fide trade expert who has distinguished herself during a 25-year career as a successful trade negotiator and trade policy maker,” the Office of the U.S. Trade Representative (USTR) said in a statement late Wednesday. “She has all the skills necessary to be an effective leader of the organization. This is a very difficult time for the WTO and international trade. There have been no multilateral tariff negotiations in 25 years, the dispute settlement system has gotten out of control, and too few members fulfill basic transparency obligations. The WTO is badly in need of major reform. It must be led by someone with real, hands-on experience in the field.”

 

     This raises another issue for the world trade body that has seen the Appellate Body process grind to a halt at U.S. insistence that changes must be made, a situation reiterated in the U.S. announcement supporting Yoo to lead the WTO.

 

     A senior U.S. official said the U.S. opposition to Okonjo-Iweala is because she has no background in trade while Yoo has an extensive background in trade policy.

 

     This sets the stage for a vote at a Nov. 9 General Council meeting. Some reports indicate the links between Okonjo-Iweala and former WTO chief Pascal Lamy and former World Bank President Robert Zoellick — she held the number-two spot at the World Bank under both Lamy and Zoellick — could have been a factor in the U.S. stance. Others have suggested the U.S. could use its position to extract actions in other areas at the world trade body. Still, this represents yet another challenge for the WTO.

 

Update on China:

  • USDA World Board leader defends China corn import figure. USDA’s forecast that China’s 2020-21 corn imports from all sources will be at 7 million tonnes has prompted many questions about the forecast in no small part because U.S. export commitments for corn to China alone stood at over 10 million tonnes as of Oct. 15.

    "Keep in mind that export sales ... do get canceled at times," World Ag Outlook Board (WAOB) Chairman Mark Jekanowski said during a USDA data users meeting.

    China’s tariff rate quota for corn was maintained at 7.2 million tonnes for calendar 2021, but expectations are that China’s government will issue additional import quotas or take other actions to bring more corn in than the announced TRQ level in 2021. And the fact there has been no formal announcement factors into the WAOB decision, Jekanowski said.

    “One of the things we try not to do is forecast changes in policy, including changes in policy by foreign countries,” he noted.

    Chinese corn prices have hit lofty levels as demand for corn is high in the country as they seek to rebuild their hog herd that was decimated by African swine fever (ASF) and the country has sought to dramatically reduce the use of swill to feed hogs.

     
  • China again big buyer of soybeans, beef; starts on 2021 pork buys. China’s purchases of U.S. ag commodities were notable for soybeans and beef the week ended Oct. 22, with a 20,000-tonne sale of soymeal wiped off the books in the weekly update from USDA’s Foreign Ag Service.

    Sales activity for 2020-21 included 60,000 tonnes of wheat, 1,645 tonnes of corn, 118,838 tonnes of sorghum, 1,073,880 tonnes of soybeans, 81,394 running bales of upland cotton and 10,614 running bales of Pima cotton.

    For 2021-22, the first sales of sorghum were reported at 68,000 tonnes, but there were reductions of 2,640 running bales of upland cotton.

    For 2020, sales of beef were at 4,280 tonnes with 2,545 tonnes of pork. Sales of 1,302 tonnes of pork for 2021 were reported, the first such sales for the coming year.

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

Food and beverage industry update:

  • Grubhub reported a narrower loss compared with earlier in the year as the food-delivery company prepares to be acquired by Dutch firm Just Eat Takeaway.com NV.
     
  • As many as 100 underperforming IHOP restaurants in the U.S. could be closed over the next six months as they have taken a blow from Covid-19 indoor-dining restrictions.

Coronavirus update:

  • Summary: Global cases of Covid-19 are at 44,500,017 with 1,174,314 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 8,858,088 with 227,700 deaths.

    Link to Covid Case Tracker

    Link to Our World in Data

     
  • Germany, France resurrect lockdowns. Germany will undertake a partial lockdown after Covid-19 cases doubled over the last week, with the action shutting restaurants, bars, gyms, concert halls and theaters for one month, starting Nov. 2. Schools and daycare centers will remain open. Germany said it would cover up to 75% of lost sales for businesses with less than 50 employees during the new restrictions.

    France on Friday will see a lockdown put in place for at least one month where people will have to remain in their homes with the restaurants and non-essential shops to be closed. Factories and schools would remain open. While the actions are less drastic than lockdowns earlier this year, they are still expected to have a negative economic impact. President Emmanuel Macron said that the coronavirus is now spreading faster than the most pessimistic projections had allowed. French people venturing outdoors will need to carry special documents for police to check (though schools will remain open).

    Covid perspective world

     
  • Russia’s deputy prime minister reported that 90% of hospital beds were full in 16 of the country’s 49 regions.
     
  • Walt Disney World on Wednesday laid off 720 actors and singers as the theme park has not resumed live shows and entertainment due to the Covid-19 pandemic, according to the Associated Press. The news comes weeks after Walt Disney Co. announced that it was laying off 28,000 people at theme parks in Florida and California.
  • Seniors and people in private health-insurance plans won’t be charged for getting a coronavirus vaccine under a Trump administration rule designed to ensure that as many people as possible get vaccinated once a shot becomes available.

POLITICS & ELECTIONS


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

     
  • Election predictions: Democrats are currently expected to maintain and possibly expand their majority in the House, according to nonpartisan election watchers, while control of the Senate is seen as up for grabs. Trump trails Democrat Joe Biden in national polls, and in some surveys of battlegrounds states he won in 2016. The president says the polls are understating his strength.
     
  • More than 76 million Americans have already voted, according to the U.S. Elections Project (link), representing nearly 56% of the 2016 turnout.
     
  • More than 16 million voters who did not cast a ballot in 2016 have already voted this year, a sign that record-high enthusiasm in November’s elections will lead to an unprecedented turnout across the country. Already this year, more than 4 million people between the ages of 18 and 29 have cast ballots, suggesting the surge is partly fueled by younger voters who have been targets of turnout operations funded by Democratic groups, and by minorities who are motivated to turn out in large numbers. Link to more details from The Hill.
     
  • Supreme Court declined to disturb extended ballot deadlines in the battleground states of North Carolina and Pennsylvania, leaving the states more time to receive mail-in ballots postmarked by Election Day.
     
  • In Senate races, GOP candidates John James in Michigan and former Rep. Jason Lewis (R-Minn.) are within striking distance of incumbent Sens. Gary Peters (D-Mich.) and Tina Smith (D-Minn.), respectively.
     
  • Cook Political Report's final 2020 Senate overview: “Democrats remain favorites to take Senate, Mississippi shifts to likely Republican.”
     
  • Two election forecasters declared the presidential race in Texas to be a “tossup.” Cook Political Report changed its rating in the state from “Lean Republican” to “Tossup,” while Inside Elections moved it from “Tilt Republican” to “Tossup.” Both ratings reflect a competitiveness for a state that has voted for Republican presidential candidates in every cycle since 1980.

    The RealClearPolitics polling average in Texas currently shows Trump leading by a slim margin, 48% to 45%.

    The Lone Star State boasts 38 electoral votes.

     
  • Spending on races for president, the Senate and the House of Representatives will add up to $14 billion this year — double the amount of four years ago.
     
  • Joe Biden and Barack Obama will campaign together on Saturday in Michigan, a state Obama won twice, and Trump flipped in 2016. Today, both Trump and Biden will campaign in Tampa.
     
  • NYT: A Biden win could renew a Democratic split on trade policy. Democrats have been unified by their desire to oust President Trump. But if that happens, deep divisions on the issue of trade are likely to reappear, says the New York Times in an article (link).

 


OTHER ITEMS OF NOTE


 

  • Trump will open up more than half of Alaska’s Tongass National Forest to logging and other forms of development, according to a notice posted by the government on Wednesday, stripping protections that had safeguarded one of the world’s largest intact temperate rainforests for nearly two decades. Because of the decision, it is legal beginning today for logging companies to build roads and cut and remove timber throughout more than 9.3 million acres of forest.
     
  • American lawmakers accused the chief executives of Alphabet (the parent company of Google), Facebook and Twitter of abusing their power at a Senate hearing. Congress wants to update Section 230 of the Communications Decency Act, which gives online platforms legal immunity from the content users post. The tech leaders, appearing virtually, defended the rule.

    Republicans voiced concern that the content liability shield has been misused to censor conservative views, while Democrats expressed fears over disinformation campaigns and political polarization. While the CEOs denied any political bias, they conveyed varying degrees of openness toward amending Section 230, including more transparency around content moderation.

     
  • Department of Homeland Security is proposing to effectively replace the H-1B visa lottery with a selection process that gives priority to jobs with the highest salaries. The White House is also developing a plan to create a new biometric database that prospective immigrants or visitors would need to enter before they apply for visas to come to the U.S.
     
  • Ethanol groups want federal court to force EPA to disclose names of companies requesting small refinery exemptions and the facility locations. Growth Energy and the Renewable Fuels Association asked the United States District Court for the District of Columbia to order the Environmental Protection Agency (EPA) to respond to several Freedom of Information Act (FOIA) requests filed by the biofuels industry regarding the small refinery exemption (SRE) program and EPA’s escalation in granting SREs in recent years. Emily Skor, CEO of Growth Energy, and Geoff Cooper, president and CEO of the Renewable Fuels Association, said in a news release, “For the last several years, biofuels interests have pleaded with EPA to lift the veil of secrecy that it has held over the issuance of small refinery exemptions under the Renewable Fuel Standard. These clandestine agency actions have destabilized markets and allowed numerous refineries to avoid their RFS compliance obligations at the expense of renewable fuel producers and supporters, including America’s farmers. “Fundamentally, this request is about fairness and transparency in government. If an agency decides to relieve a refinery from the obligations Congress imposed under the Clean Air Act or any federal law, it should be done in the public view.”

 

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