Warnock Declared Winner in Georgia; Ossoff Ahead as Dems Happy & Republicans Fret

Posted on 01/06/2021 8:10 AM

Looks like Dems will have a trifecta/blue wave in winning White House, House & likely Senate

 


In Today’s Updates


 

Market Focus:
• Warnock wins, Ossoff leads, Dems happy, Republicans upset
• 10-year Treasury yield hits 1% first time since March as traders focus on Ga. election
• World Bank revises down estimate for global growth in 2021
• Oil stocks, prices rise after Saudi announces surprise production cut
• FOMC minutes due today
• CME adjusts margins for corn, soybean, wheat and crude futures
• USDA daily export sales: 102,616 metric tons of corn to unknown destinations 2020-2021

• Gold rally halts with lower values today
• Russia doubling its coal exports to China
• Bird flu culls, actions continue globally
• Argentine farmers to strike, Urgara work stoppage continues

• Ukraine’s grain exports running well behind year-ago

• Another ethanol plant stops production of the biofuel

 

Policy Focus:
• Treasury Dept. sends more than $112 billion in Covid/stimulus checks
• USDA opens signup for Quality Loss Adjustment (QLA) disaster help

 

China Update:
• Expansion in China’s services sector slows
• War on Chinese tech
• China beefs up its national seed bank

 

Trade Policy:
• USTR releases determinations on sugar/sugar-containing products from several countries
• USTR formally publishes changes to Section 301 tariff actions in Airbus dispute

 

Energy & Climate Change:

• Saudi Arabia to unilaterally cut 1 million barrels a day of crude
• RIN prices rise as Valero sues firm over biofuel credits


Food & Beverage Industry Update:
• Oatly hires underwriters for an IPO


Coronavirus Update:
• WHO expresses disappointment with China
• Can you get Covid-19 even after taking vaccine?

 

Politics & Elections:
• Dems win at least one Georgia Senate runoff race (Warnock), other too close to call
• Impacts if Dems control the Senate

• Georgia election gleanings

• Trump allies in Congress to challenge Biden’s election win

• Government Publishing Office issues new edition of quadrennial Plum Book,


Other Items of Note:
• Russia formally identified as ‘likely’ culprit behind a huge hack on U.S.
• Kim Jong Un, North Korea’s leader, admits economic development plans failed

 


MARKET FOCUS


 

Equities today: European stocks rose in midday trading. The Hang Seng Index rose 42.44 points, 0.15%, at 27,692.30. The Nikkei fell 102.69 points, 0.38%, at 27,055.94. U.S. stock indexes are pointed toward mixed openings. Tuesday’s vote for two U.S. Senate seats in Georgia sees one Democrat (Raphael Warnock) declared the winner and the other Democrat (Jon Ossoff) with a very slight lead — Ossoff declared victory in Georgia's Senate runoff election this morning.

 

     U.S. equities yesterday: The Dow finished up 167.71 points, 0.55%, 30,391.60. The Nasdaq was up 120.51 points, 0.95%, at 12,818.96. The S&P 500 gained 26.21 points, 0.71%, at 3,726.86.

 

On tap today:

 

     • ADP employment report is expected to show private-sector employers added 135,000 jobs in December. (8:15 a.m. ET). Update: ADP says private sector lost 123,000 jobs in December.
     • Bank of England Gov. Andrew Bailey appears virtually before the Treasury Select Committee at 9:30 a.m. ET.
     • IHS Markit's U.S. services index is out at 9:45 a.m. ET.
     • U.S. factory orders for November are expected to increase 0.8% from the prior month. (10 a.m. ET)
     • Federal Reserve releases minutes from its Dec. 15-16 meeting at 2 p.m. ET.

 

World Bank again lowers projections for global growth as the pandemic exacerbates trends already hampering the world economy. Before Covid-19, the bank projected that potential global growth between 2020 and 2029 would slow to a yearly average of 2.1%, from 2.5% in the previous decade, as a result of aging populations and lower productivity growth. On Tuesday the bank lowered its projection to 1.9%. The semiannual Global Economic Prospects report attributes the long-term downgrade to lower trade and investment caused by uncertainty over the pandemic, along with disruptions in education that will hamper gains in labor productivity.

 

     World Bank

 

Yield on the benchmark 10-year U.S. Treasury note hit 1% for the first time since March after returns from Georgia spurred bets that Democrats could win narrow control of the Senate. Wins in both races would effectively give Democrats 51 votes in the Senate, when counting the tiebreaking vote of Vice President-elect Kamala Harris. That would likely result in greater spending on pandemic-relief efforts and other Democratic priorities such as infrastructure projects. Increased government spending without corresponding tax increases tends to push up Treasury yields partly because it portends more government borrowing and a larger supply of bonds.

 

     Treasury notes

 

FOMC minutes due today. Minutes from the Dec. 15-16 Federal Open Market Committee (FOMC) meeting will be released today at 2 pm ET and will be watched for commentary from FOMC members on the state of the U.S. economy and their expectations for the nation’s economic activity ahead. The meeting came prior to the agreement reached on Covid aid, so it will likely reflect the ongoing view from Fed officials that additional fiscal stimulus will still be needed to help provide a solid footing for the U.S. economy. The advent of a press conference by the Fed chair following each FOMC meeting is taking some of the “surprise” out of the release of minutes from each meeting. But they still often times reveal additional signals on the Fed mindset relative to the policy and economic direction ahead.

 

Market perspectives:

 

     • Outside markets: The dollar is lower. Hitting another 2.5-year low in early U.S. trading as it appears the Democrats will take control of the Senate. Bitcoin crossed $35,000 as analysts signaled a Democratic Senate would likely lead to another round of large fiscal stimulus, crimping demand for assets like the dollar. February Nymex crude oil futures prices are higher, at a 10-month high, and trading around $50.30 a barrel. The yield on the benchmark 10-year U.S. Treasury note futures is currently around 1.02%, a 10-month high. For perspective, the German 10-year government bond (bund) sees its yield currently at -0.54%.

 

     • CME adjusts margins for corn, soybean, wheat and crude futures. Maintenance margin adjustments were announced by the CME Group that take effect after the close of business Jan. 6. For wheat, maintenance margins will be raised to $1,650 per contract, up 10% from a current $1,500 for March 2021; soybeans will rise to $2,750 per contract, up 14.6% from a current $2,400 for January 2021; corn will rise to $1,100 per contract, up 12.9% from the current $1,100 for March 2021; and NYMEX crude oil futures will decline to $4,525 per contract, down 4.7% from a current $4,750 for February 2021.

 

     • USDA daily export sales: 102,616 metric tons of corn for delivery to unknown destinations during the 2020-2021 marketing year. 

 

     • Crude oil futures have turned mixed, with some profit-taking likely after sizable advances in prices Tuesday. U.S. crude is trading under $49.90 per barrel while Brent is still slightly higher, trading above $53.65 per barrel. Prices were higher in Asian action, with U.S. crude up 17 cents at $50.10 per barrel and Brent up 32 cents at $53.92 per barrel.


     • Ag demand: Jordan purchased around 60,000 MT of feed barley to be sourced from optional origins; it also issued a new tender for 120,000 MT of barley. Ethiopia cancelled deals to buy around 600,000 MT of wheat in international tenders in November 2020. Turkey’s state grain board issued an international tender to buy 155,000 MT of animal feed barley. Bangladesh’s state grains buyer issued another international tender to buy 50,000 MT of milling wheat from global origins, excepting Israel. Japan is seeking a total of 120,228 MT of food-quality wheat from the U.S., Canada and Australia in a regular tender. Bangldesh issued another international tender to buy 50,000 MT of milling wheat.

 

     • Most actively traded gold futures for February delivery climbed more than 3% in the first two trading sessions of the year, settling at $1,954.40 a troy ounce Tuesday. Today, gold and silver futures are under pressure, with gold moving under $1,935 per troy ounce and silver under $27.45 per troy ounce.

 

     • Russia is doubling its coal exports to China as it expands transports of a range of energy products to the country.

 

     • Bird flu culls, actions continue globally. South Korea said it has now culled 13.6 million birds as a preventive measure as the case count for H5N8 highly pathogenic avian influenza have reached 46. The culls include 10.2 million chickens, according to the country’s Ministry of Agriculture, Food and Rural Affairs. Meanwhile, China’s General Administration of Customs said that the country has stopped imports of poultry from France due to H5N8 highly pathogenic avian influenza, with the halt effective from Jan. 5. This comes after the French farm ministry Tuesday said it would cull 600,000 birds due to bird flu — 200,000 have already been culled with plans to cull another 400,000 birds. The country confirmed 61 outbreaks as of Jan. 1, with 48 in the Landes region alone, a key duck breeding area that supplies the foie gras industry. India has now started the cull of poultry in the country, planning to cull at least 36,000 birds after both domestic and wild birds have died from bird flu. The country found its first case of the H5N8 bird flu one week ago, with the government now issuing a “high alert” and is calling on states to take “urgent measures” to prevent the spread. China has emerged as a key market for U.S. poultry, becoming the second largest for U.S. broiler exports based on January-October 2020 trade data so trade blocks on other countries could provide some additional potential for U.S. broiler/chicken exports to the country.

 

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

     • Argentine farmers to strike, Urgara work stoppage continues
     • Ukraine’s grain exports running well behind year-ago
     • Another ethanol plant stops production of the biofuel

 


POLICY FOCUS


 

—  Treasury Department has sent out more than $112 billion in Covid/stimulus payments electronically, meaning that about two-thirds of the second round of payments approved by Congress Dec. 21 is already in households’ bank accounts, according to data released Tuesday. The payments — $600 per adult and $600 per child — were estimated to cost about $164 billion in all. They are part of a broader relief law last month that also includes unemployment insurance and money for small businesses.

 

— USDA opens signup for Quality Loss Adjustment (QLA) disaster help. USDA today is opening signup for the Quality Loss Adjustment (QLA) Program to provide assistance to producers who suffered eligible crop quality losses due to hurricanes, excessive moisture, floods, drought, tornadoes, typhoons, volcanic activity, snowstorms, and wildfires occurring in calendar years 2018 and 2019. USDA also published a final rule for the effort in Federal Register (link) today (Jan. 6).

 

     USDA also amended provisions for the Wildfire and Hurricane Indemnity Program Plus (WHIP+) to be consistent with the Further Consolidated Appropriations Act, 2020, by adding excessive moisture and drought occurring in 2018 and 2019 as qualifying disaster events and clarifying eligibility of sugar beets.

 

     Comments: USDA officials on Tuesday admitted that the programs were complex. Perhaps with the latest information, some state and county FSA offices will have the necessary information to accurately inform farmers about the programs. One farmer emailed Pro Farmer and wrote: “FSA County Offices have had to cut a lot of corners to get programs and funds in farmers’ hands. Covid working restrictions have created many limited staffs. They cannot get everything done from working at home. A lot of issues to deal with and catch up to do. I just checked on CRP General Signup and this is a process that is going to be difficult if not in some cases impossible to get done under current Covid work restrictions environment. I know the signup just started but an extended signup may be needed.”
 


CHINA UPDATE


 

— Expansion in China’s services sector slows. The Caixin/Markit China services PMI for December came in at 56.3, down from 57.8 in November and a three-month low. New restrictions put in place in several countries are weighing on consumers and businesses. Sub-index readings for several areas were down, including on new business and new export business. Plus, input prices rose as firms increased prices charged at the fastest pace since January 2008. The Caixin/Markit composite manufacturing and services PMI for China also fell to 55.8 in December, down from 57.5 in November on a decline in manufacturing. The PMI data from China continue to underscore that while economic expansion continues, the rise in Covid-related restrictions continues to slow the pace of that growth.

 

— War on Chinese tech. A Trump administration executive order has banned eight Chinese-made mobile payment apps, including ones made by giants Tencent and Ant Group in the latest move targeting the Chinese tech sector. The order blamed the apps for practicing “bulk data collection,” putting U.S. national security at risk. It’s unclear whether the ban can take effect in the short-term: A similar ban on the Chinese-owned TikTok app is held up in litigation.

 

— China beefs up its national seed bank. China plans to complete a new national germplasm bank this year, its Ag Minister Tang Renjian said today. The bank is meant to boost the country’s ability to develop new crop varieties and boost food security. The bank has capacity for 1.5 million copies, nearly four times the size of the existing bank. It will be the world’s largest seed bank, the ag ministry indicated. The Covid-19 pandemic has renewed attention on guaranteeing food supplies. “The new national crop germplasm resource bank must not only be well established, but also be used well,” Tang said, noting that China’s fragmented seed industry lags the innovation ability of those in developed countries.

 

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

 


TRADE POLICY


 

— USTR releases annual determinations on sugar/sugar-containing products from several countries. The Office of the U.S. Trade Representative (USTR) has released its annual determination relative to the trade surplus in certain sugar and syrup goods and sugar-containing products of Chile, Morocco, Costa Rica, the Dominican Republic, El Salvador, Guatemala, Honduras, Nicaragua, Peru, Colombia, and Panama. “The level of a country's trade surplus in these goods relates to the quantity of sugar and syrup goods and sugar-containing products for which the United States grants preferential tariff treatment” under trade agreements between the U.S. and those countries, according to the Federal Register notice from USTR (link).

 

— USTR formally publishes changes to Section 301 tariff actions in Airbus dispute. The U.S. has now published a notice in the Federal Register (link) outlining the changes to its Section 301 tariffs relative to the Airbus dispute with the European Union (EU). The Office of the U.S. Trade Representative (USTR) announced the adjustments Dec. 30, and they will take effect Jan. 12, according to the notice. Additional goods from France and Germany will be subject to additional tariffs under the action, USTR said, including aircraft manufacturing parts from France and Germany, certain non-sparkling wine from France and Germany, and certain cognac and other grape brandies from France and Germany.

 


ENERGY & CLIMATE CHANGE


 

— Saudi Arabia said it would unilaterally cut 1 million barrels a day of crude production starting next month, a surprise move signaling the kingdom’s worry that a resurgent coronavirus is threatening global economic recovery. The announcement Tuesday came after Riyadh agreed earlier in the day with other big producers to keep the group’s collective output flat. Oil prices soared Tuesday after the news. West Texas Intermediate futures, the U.S. benchmark, were up 5.2% to $50.11 a barrel, passing through the $50 mark for the first time since last February, though it settled up 4.6% at $49.93.

 

     Details: Most other OPEC+ countries will hold production steady. Russia and Kazakhstan will be allowed to increase their output by 75,000 bpd in February and another 75,000 bpd in March under the agreement reached between the OPEC+ countries. The increased Covid-19 lockdowns have prompted the actions by the cartel as they seek to shore up market prospects amid expectations that demand for crude will be negatively impacted by the additional activity curtailments linked to Covid-19. The actions announced Tuesday will bring the OPEC+ cuts to 8.125 million bpd in February and to 8.05 million bpd in March. OPEC+ countries will meet in early March to decide on April output volumes.

 

     Meanwhile, a Saudi-led bloc of Arab states agreed to restore ties with Qatar following a three-year trade and travel blockade. The Gulf dispute erupted in 2017 after Riyadh accused the nation of being too close to Iran and supporting terrorism.

 

     OPEC

 

— RIN prices rise as Valero sues firm over biofuel credits. Prices for Renewable Identification Numbers (RINs) rose Tuesday as Valero filed suit in court against Sundive Commodity Group for failing to deliver RINS in September, October and November under a contract between the two companies. Valero said the failure of Sundive to deliver the RINs — biofuel credits refiners can purchase to demonstrate compliance with the Renewable Fuel Standard (RFS) — resulted in the refiner having to purchase RINs on the open market at a cost of $10 million more than what it would have paid under the contract with Sundive.

 

     RIN prices Tuesday rose to their highest level in over three years on the news. The issue of biofuel policy will come into greater focus in 2021 as lawmakers consider RFS policy as EPA’s RFS authority expires at the end of 2022.

 


FOOD & BEVERAGE INDUSTRY


 

— Oatly, the oat milk brand backed by Blackstone and Oprah Winfrey, has hired underwriters for an IPO that could reportedly raise $1 billion. Link for details.

 


CORONAVIRUS UPDATE


 

 Summary: Global cases of Covid-19 are now at 86,510,936 with 1,870,856 deaths, according to data compiled by the Center for Systems Science and Engineering at Johns Hopkins University. The U.S. case count is at 21,051,001 with 357,385 deaths.

 

       Link to Covid Case Tracker
       Link to Our World in Data

 

— WHO expresses disappointment with China for delaying the travel of experts to the country to investigate the origin of the coronavirus. It comes despite months of planning between Chinese officials and the World Health Organization (WHO) team, fueling concerns that Beijing is obstructing efforts to trace the origins of a pandemic that’s killed more than 1.8 million people worldwide. Mike Ryan, the head of the WHO’s emergency response said he hoped the decision was “just a logistical and bureaucratic issue that can be resolved very quickly.” Talks between the WHO and Chinese authorities on carrying out the investigation have been ongoing since July. The news comes as Chinese state media has mounted a face-saving information campaign to cast doubt on the coronavirus origin story.

 

— Can you get Covid-19 even after taking vaccine? Yes, because the vaccines aren't 100% effective, and some require two doses to be fully effective. It can also take weeks for a person’s body to build up immunity after getting vaccinated. "That means it’s possible a person could be infected with the virus that causes Covid-19 just before or just after vaccination and get sick," the Centers for Disease Control and Prevention says. "This is because the vaccine has not had enough time to provide protection."

 


POLITICS & ELECTIONS


 

— Dems win at least one Georgia Senate runoff race (Warnock), with the other too close to call, but Dems sense another victory. Democrat Raphael Warnock defeated incumbent Kelly Loeffler in a Georgia runoff, according to the Associated Press, becoming the state’s first Black senator. The other race remained too close to call, but Democrats appeared far more upbeat about their chances than Republicans in the race between incumbent David Perdue and Democratic challenger Jon Ossoff, who is ahead by more than 16,000 with most of the uncounted votes remaining in the heavily Democratic Atlanta area (margin is still within the limits of allowing for a recount; many media outlets have not yet called the race). If Democrats win both seats, they will take control of the Senate with Vice President Kamala Harris casting the tie-breaking vote. Ossoff this morning declared himself the victor.

 

     Warnock would be the first elected Black Democratic senator from the South and the seventh elected Black senator. Including appointed senators, 10 Black Americans have served in the chamber. He helped drive strong Black voter turnout.

 

     The winners will be sworn in once results are certified, and Secretary of State Brad Raffensperger (R) has until Jan. 22 to certify statewide results. Perdue's term ended on Jan. 3. The seat he held will be vacant until results are certified. Loeffler was appointed to temporarily serve the term Johnny Isakson (R) won, which ends in January 2023. Loeffler will remain a Senator until the results are certified.

 

     In Georgia, a candidate may request a recount within two business days of when results are certified if the margin between the candidates is less than or equal to 0.5%. Additionally, an election official may order a recount if it appears there is a discrepancy or error in the returns.

 

— Impacts if Dems control the Senate:

  • Here comes more Covid aid/stimulus. In the short term, the narrowness of Democratic control — a 50-50 Senate, with ties broken by incoming Vice President Kamala Harris, and a slim majority in the House — means that stimulus is more likely than changes to taxes, observers note. “We consider it unlikely that the new Treasury secretary, Janet Yellen, would pursue policies that could stifle the U.S. economic recovery. Given her dovish leaning, her focus will likely be on more stimulus instead,” wrote Holger Schmieding of Berenberg Bank.
  • Manchin is the man to watch. Jon Lieber and Clayton Allen of the political risk consultancy Eurasia Group suggested looking to the policy preferences of “the most moderate Democrat in the Senate and a name you will hear a lot in the coming months: West Virginia Democratic Sen. Joe Manchin.” Increasing direct payments to $2,000 per person and extending unemployment insurance are among the likeliest priorities, they wrote. Analysts at Goldman Sachs predicted “a Democratic Senate majority to allow for greater fiscal policy changes,” including additional stimulus, perhaps followed later by “a limited amount of tax increases.”
  • Democratic leaders will now be able to push through billions of dollars in aid to governments in Democratic states like New York and elsewhere.
  • President-elect Joe Biden will be able to fill his Cabinet and his administration without major obstacles and the Senate will consider and confirm most of the judges he nominates. Biden now may nominate an attorney general he may not have had the Democrats not captured the Senate.
  • As long as the filibuster survives — and that seems more likely — many Democratic priorities will need 60 votes in the Senate. Moderate Democrats such as West Virginia’s Joe Manchin will have the key swing votes, along with any moderate Republicans (such as Alaska’s Lisa Murkowski) who might be willing to cut deals in some policy areas.
  • Key committee leaders: Sen. Bernie Sanders (I-Vt.) would be chairman of the Budget Committee and will likely push reductions in defense spending. Sen. Ron Wyden (D-Ore.) would chair the tax-writing Finance panel. He wants to tax gains in capital assets each year even if they are not sold. Sen Sherrod Brown (D-Ohio) would chair the Banking panel and Sen. Elizabeth (D-Mass.) on the financial institutions subcommittee would try to change rules to steer lending and capital to their priorities and cut lending to fossil-fuel companies. Sen. Dick Durbin (D-Ill.) will lead the Judiciary Committee.

— Georgia election gleanings:

  • Black voters in the state voted in far greater numbers than most thought.
  • Stacy Abrams is another Democratic winner. Abrams is gearing up for a rematch against current Georgia GOP Governor Brian Kemp in 2022, after narrowly losing to him in 2018 and spending years building a coalition that helped Joe Biden win Georgia and, ultimately, the presidency.
  • Many election “experts” took the easy way out and called the races toss-ups. Don't you wish you had a job like that?
  • Sabato’s Crystal Ball was incorrect when it said total Georgia votes much above 4 million would signal a likely GOP victory. It appears votes will total between 4.5 and 4.6 million.
  • Georgia is now a “purple” state after being an entrenched Republican state for decades.
  • Republicans did not come out in the numbers needed. It appears they did not garner the number of Latino voters that Trump garnered in the Nov. 3 election.
  • President Trump’s actions following the Nov. 3 elections may well have tempered the number of Georgia Republicans voting in the runoff elections. But some observers note that Barack Obama, after two terms, left the White House, House, and Senate in the hands of the opposition party. So did George W. Bush. Bottom line: Voters get tired of presidents and seek change.

— Trump allies in Congress to challenge Biden’s election win. In a joint session, some GOP lawmakers will make a last-ditch attempt to throw out some states’ results to secure a second term for President Trump. Today at least a dozen Republican senators and as many as two-thirds of the House Republican caucus plan to object to the results. None of the challenges from Republicans are expected to succeed (Democrats have a majority in the House, and 24 Senate Republicans have said they will not object), but they could extend the session well into the night or longer.

 

— Government Publishing Office issued the new edition of the quadrennial Plum Book, which details more than 9,000 federal positions across government. These include more than 4,000 political appointments to be made by Biden and other members of the executive leadership.
 


OTHER ITEMS OF NOTE     


 

— Russia was formally identified as the “likely” culprit behind a huge hack. U.S. intelligence agencies said not only that the widespread breach of government and corporate computer systems had probably been ordered by Moscow, but also that it was still “ongoing.”

 

— Kim Jong Un, North Korea’s leader, admitted that his economic development plans had failed. Speaking at the country’s full party congress Kim said that almost all sectors fell short of objectives outlined at the previous congress in 2016. Decades of economic mismanagement and Kim’s preoccupation with expensive nuclear weapons have crippled the country’s finances; Covid-19 has only worsened matters. Kim is expected to lay out new five-year plans in the coming days. He is also set to announce changes to the country’s leadership structure — with a more senior role for Kim Yo Jong, Kim’s sister, a possibility.

 


 

Add new comment