Aid Talks Continue with Likely Post-election Timeline

Posted on 10/09/2020 8:22 AM

Perdue hit with Hatch Act slap | USDA WASDE | Pelosi's 25th Amendment attempt

 


In Today’s Updates


 

Market Focus:
* Ag market traders await USDA monthly supply and demand updates
* China continues to report positive economic news
* Diminishing odds for U.S. recession: WSJ survey of economists
* CBO: FY 2020 deficit at $3.1 trillion

* Demand for passenger flights this year to decline by more than half vs 2019
* Electric car growth sparking $300 billion budget loss for states
* World’s thirst for oil may already have crested in U.S., other wealthier countries
* Vessel traffic heating up along Arctic Circle
* 2.1 million containers were imported into major U.S. ports
* Hurricane Delta strengthens to Category 3; hurricane warning

 

Policy Focus:
* Pelosi nixes stand-alone airline aid bill without broader package accord
* Wis. doesn't produce a drop of oil or gas, but U.S. fracking slump hits state hard

 

U.S./China update:
* China’s exports of rare-earth metals are falling
* China makes no changes to production or import projections on major commodities


U.S. food & beverage industry update:
* McDonald’s comparable U.S. sales rose 4.6% in third quarter
* Wealth factor has focus of discount retailer Dollar General
* U.K. won’t ban food imports produced under lower farming standards
* Universities rewriting their supply chain and logistics program


Update on re-opening America... and around the world:
* Disney World is open but Disneyland is closed


Coronavirus update:
* China joins WHO-backed effort on Covid-19 vaccines
* McConnell shies away from going to White House

 

Politics & Elections:
* White House still declining to say when Trump last tested negative for Covid-19
* Trump trails Biden by 9.7 percentage points nationally, 5. to 7 points key states
* Charlie Cook of the Cook Political Report on presidential election
* A GOP-leaning analyst countered: “Well, I heard all of this in 2016...”
* Biden again withholds stance on Supreme Court seats
* Special counsel: Perdue crossed political line at taxpayer expense
* Trump looks to return to rallies as he shuns virtual debate
* Did Pence best Harris in VP debate?
* S.C. Democratic challenger wants Graham to take Covid-19 test before debate
* Pelosi launches commission on using 25th Amendment to remove Trump


Other Items of Note:
* U.N. World Food Program (WFP) awarded Nobel Peace Prize
* Down at the farm... at Harvard
* Cotton AWP rises

 

 


MARKET FOCUS


 

Equities today: Though few investors or lawmakers think sweeping aid measures will be introduced before the Nov. 3 election, U.S. stock futures were higher, suggesting the S&P 500 is on track for its biggest weekly advance since late August. The Dow this morning opened up 108 points. The small-cap Russell 2000 Index has risen 8% so far this month, more than triple the rise of the S&P 500. Global stock markets were mostly firmer overnight. China’s main stock markets reopened Friday after an eight-day holiday.

 

     U.S. equities yesterday: The Dow finished up 122.05 points, 0.41%, at 28,425.51. The Nasdaq rose 56.98 points, 0.50%, at 11,420.98. The S&P 500 was up 27.38 points, 0.80%, at 3,446.83.

 

On tap today:

 

     • Richmond Fed President Thomas Barkin speaks to Fredericksburg Regional Chamber of Commerce at 9 a.m. ET.
     • U.S. wholesale inventories for August, due at 10 a.m., are expected to rise 0.5% from a month earlier.
     * USDA Crop Production and WASDE reports, noon ET.
     * Baker Hughes rig count is out at 1 p.m. ET.

 

China’s Caixin services purchasing managers index (PMI) for September rose for a fifth straight month, coming in at 54.8 versus 54.0 in August, and beat expectations for a reading of 54.3. It was the highest mark for the reading since June. This marks the fifth straight month of expansion in the sector with hiring rising for a second straight month even though the pace of hiring remains somewhat subdued.

     Growth was supported by a marked rise in total new business, though new export work continued to decline. A sustained rise in overall client demand led firms to expand their payrolls for the second month in a row amid increased capacity pressures. Companies also retained a positive outlook regarding activity over the year ahead, with business confidence improving since August.

 

Diminishing odds for U.S. recession, according to a WSJ survey of economists (link). More than half of business and academic economists polled this month said they didn’t expect the labor market to claw back until 2023 or later all the jobs lost as a result of coronavirus-related shutdowns.

 

     Recession odds... WSJ

 

CBO says FY 2020 deficit hit $3.1 trillion. The U.S. budget deficit for fiscal year (FY) 2020 that ended Sept. 30 surged to $3.1 trillion, according to figures released by the Congressional Budget Office (CBO), up sharply from $984 billion in FY 2019. The budget red ink reached 15.2% of GDP, the largest since World War II and reflected a rise in spending to address the Covid-19 pandemic and reduced government receipts to $3.4 trillion, down 1% from FY 2019. Most of that decline took place since March when efforts to combat the pandemic resulted in closures and restrictions linked to the pandemic. Government outlays surged 47% to hit $6.5 trillion.

     The Treasury Department’s recap of FY 2020 is due to be released this month, but Treasury said the exact date will be dictated by completion of year-end reporting requirements.

 

     Budget deficit

 

Market perspectives:

 

     • Outside markets: Gold prices are sharply, partly on the reopening of China’s markets following a long holiday and the upbeat Chinese economic data (see above) that will likely prompt better consumer demand for the precious metal. The U.S. dollar index is lower. Nymex crude oil prices are weaker and trading around $40.85 a barrel. The 10-year U.S. Treasury note yield is presently trading around 0.77%.


     • Oil futures are under pressure as the U.S. open approaches, taking back a portion of their Thursday gains. U.S. crude is trading around $40.75 per barrel while Brent crude is trading around $43 per barrel. Crude oil prices weakened in Asian action, with U.S. crude down nine cents at $41.10 per barrel and Brent crude was down eight cents at $43.26 per barrel.

 

     • Demand for passenger flights this year is likely to decline by more than half compared with 2019, the Organization of the Petroleum Exporting Countries said Thursday. Fuel consumption in the aviation sector won’t surpass pre-coronavirus levels until closer to 2025, the group said in its annual report on oil’s long-term future.

 

     • Electric car growth sparking $300 billion budget loss for states. States are being forced to adapt to dwindling tax revenues from sales of gasoline and automobiles that will trigger large shortfalls in their budgets over the next two decades. One economic model suggests the states could lose more than $300 billion annually by 2040 if they fail to modify their tax codes to adjust to electric and self-driving vehicles. New transportation business models such as shared vehicle ownership and network-owned vehicle organizations will also impact state revenue. Recent actions by states or companies to promote eco-friendly vehicles raise significant questions about the long-term viability of state road funds and the federal Highway Trust Fund, and about the future of the Renewable Fuel Standard (RFS) which relies on gasoline consumption.

 

     • World’s thirst for oil is unlikely to peak for two more decades but may already have crested in the U.S. and other wealthier countries, according to a forecast by OPEC; the group forecasts oil demand will plateau in 2040 at 109.3 million barrels a day — some 10% above its 2019 level.

 

        Oil demand

 

     • Vessel traffic is heating up along the Arctic Circle. A record number of ships sailed the Northern Sea Route along Russia’s Siberian coast in the first half of this year, the Wall Street Journal reports (link), as they took advantage of clear seas in the region’s warmest summer on record. The route from Alaska to the Baltic Sea counted 71 vessels and 935 sailings in the first six months of 2020, a virtual traffic jam on a sea lane that’s usually frozen over for a big part of the year. Some backers point to the lane’s potential role in global trade, but the new sailings suggest both its benefits and its limitations. Most of the traffic serves Russia’s energy sector, including big oil and gas projects on the northern coast. “Global operators including container lines are shying away, citing infrastructure limitations and the troubling environmental impact,” the WSJ article concludes.

 

     • 2.1 million containers were imported into major U.S. ports, in 20-foot-equivalent units, in August, according to the Global Port Tracker, up 8% from the year before and 9.7% from July to the highest level ever in records dating to 2002.

 

Hurricane Delta strengthens to Category 3; hurricane warning. Officials urged people in southern Louisiana to prepare or evacuate as the storm headed toward a section of the state still recovering from August’s Hurricane Laura. The storm is expected to hit the state this afternoon or evening. A hurricane warning has been issued relative to Hurricane Delta High Island, Texas to Morgan City, Louisiana, according to the National Hurricane Center (NHC). The storm is currently ranked as a Category 3 storm on the Saffir-Simpson scale, with the NHC saying the current forecast track will take the center of Delta inland within the hurricane warning area this evening. “Slow weakening is expected to begin as Delta approaches the northern Gulf coast later today, with rapid weakening expected after the center moves inland,” NHC said. Hurricane-force winds extend outward up to 40 miles (65 kilometers) from the center and tropical-storm-force winds extend outward up to 160 miles (260 kilometers).

 


POLICY FOCUS


 

Pelosi nixes stand-alone airline aid bill without broader package agreement; talks return to a large-scale aid package. The White House again shifted on economic aid, signaling that the administration is again leaning toward a large-scale stimulus bill after House Speaker Nancy Pelosi (D-Calif.) pushed back on the idea of relying solely on individual measures — such as stand-alone airline aid — for parts of the economy hit by the Covid-19 crisis. Pelosi has said airline aid could move through Congress before a comprehensive deal is voted on — if there is agreement on a broader package. There has been a 70% decline in air passenger volume from a year ago. The steep decline in global travel has crushed airlines, contributing to tens of thousands of planned airline worker layoffs this month.

 

     Timeline. Even if Pelosi and Treasury Secretary Steven Mnuchin come to an agreement, negotiations among House Democrats and the Senate’s calendar make it unlikely that a comprehensive stimulus package or a stand-alone bill to help airlines will reach the president’s desk before the end of October.

 

     Republican Sens. Pat Toomey (Pa.) and Mike Lee (Utah) said they oppose a bailout for the airline industry without some protections for taxpayers and the ability to make changes to the legislation.

 

     President Donald Trump yesterday claimed that multiple separate measures are on the table. “We started talking again. And we’re talking about airlines and we’re talking about a bigger deal than airlines,” Trump said in a Fox Business interview. White House spokeswoman Alyssa Farah said the administration is “open to going with something bigger.” She reiterated opposition to the $2.2 trillion plan from House Democrats.

 

     Bottom line: Stimulus talks are on again but a deal remains elusive. In the most recent proposals, the two sides were roughly $600 billion apart on overall price tags and $250 billion apart on funds for state and local governments — which remains the main sticking point in any deal. Senate Majority Leader Mitch McConnell (R-Ky.) spoke for many when he said, “The discussion from day to day can be confusing for all of us to follow.”

 

Wisconsin may not produce a drop of oil or gas, but the U.S. fracking slump has hit the state hard. Dozens of open-pit sand mines along the Mississippi River have been idled this year, the Wall Street Journal reports (link), dealing a blow to a region that supplies a key material used in hydraulic fracturing. “The impact across parts of the Midwest highlights the broad industrial ecosystem that has been formed to support the energy trade,” the article notes. “Companies that supplied trucks, lubricants and drilling tools have gone bankrupt and steelworkers providing oil pipes have lost their jobs.”

 

     The flame-out is particularly strong in Wisconsin, whose plentiful Northern White sand is considered ideal for fracking. Demand for the high-grade commodity fell as Texas drillers sought cheaper sand nearby, and the shift is reverberating across supply chains. U.S. railroads carried 223,705 fewer loads of crushed stone, sand and gravel — a category largely made up of frac sand — in the first nine months of this year than they hauled in the same period just two years ago, according to the Association of American Railroads.

 

     Fracking

     Wisconson sand

 

Update on China:

  • China’s exports of rare-earth metals are falling. Analysts note this could be a problem for countries reliant on China for minerals used in the electric vehicle market.
     
  • China makes no changes to production or import projections on major commodities. China made no major changes to its 2020-21 production forecasts for major crops this month, with the ministry saying weather during September was better than average and encouraged good corn production. Many have speculated recent typhoons damaged corn and other crops. China’s ag ministry held its corn production estimate steady with September at 264.71 MMT, with imports again projected at 7 MMT — right in line with USDA’s projection last month. China also made no change to its soybean balance sheet, with imports expected to total 95.10 MMT. USDA is calling for China to import 99.00 MMT of the oilseed. China’s cotton crop will likely total 5.85 MMT in 2020-21, with imports likely to total 2.00 MMT, according to the ag ministry. Again, this is unchanged from its September projections.
     
  • U.S./China Phase 1 tracker: China’s purchases of U.S. goods. Link.

Food and beverage industry update:

  • Notable Quotables:

    McDonald’s comparable U.S. sales rose 4.6% in the third quarter after declining sharply earlier in the year. (WSJ)
    The wealth factor: Discount retailer Dollar General plans to open a new brand of stores targeting wealthier customers. (WSJ)
    The U.K. government won’t ban food imports produced under lower farming standards. (Bloomberg)
    Universities are rewriting their supply chain and logistics programs to include lessons from the coronavirus pandemic. (Financial Times)

Update on reopening America... and around the world:

  • Disney World is open, but Disneyland is closed. It’s a tale of two Orange Counties as Florida and California take different approaches to reopening their economies during pandemic, the Wall Street Journal notes (link). The dichotomy shows the way rules and regulations that vary by jurisdiction are affecting the reopening plans of national and global businesses. “With Disney, standing to be affected are the livelihoods of tens of thousands of workers, as well as local entrepreneurs, cash-strapped municipalities and the health of two well-populated counties,” the article concludes.

Coronavirus update:

  • Summary: Global cases of Covid-19 are now at 36,554,915 with 1,062,533 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 7,607,249 with 212,784 deaths.

    Link to Covid Case Tracker

    Link to Our World in Data

     
  • China joins WHO-backed effort on Covid-19 vaccines. The World Health Organization (WHO) COVAX effort that aims to deliver at least 2 billion doses of a vaccine for Covid-19 by the end of 2021 now counts China as a member of the effort. "We are taking this concrete step to ensure equitable distribution of vaccines, especially to developing countries, and hope more capable countries will also join and support COVAX," foreign ministry spokeswoman Hua Chunying said in a statement. Some 171 countries have joined the effort, but the U.S. and Russia have not.
     
  • McConnell shies away from going to White House. Senate Majority Leader Mitch McConnell (R-Ky.), 78, said that he has not been at the White House since early August in part because of the lack of seriousness in their handling of the novel coronavirus on the premises. McConnell made the remark during a stop in Kentucky, saying that while he speaks with Trump frequently, he has not been at the White House since Aug. 6. “Because my impression was their approach to how to handle this was different from mine and what I insisted we do in the Senate, which was to wear a mask and practice social distancing,” McConnell told reporters. At a second stop in Kentucky, McConnell added that he had avoided going to the White House because he “personally didn't feel that they were approaching the protection from this illness in the same way that I thought was appropriate for the Senate.”

 


POLITICS & ELECTIONS


  • Links
    2020 Presidential Election Interactive Map
    The Green Papers
    Real Clear Politics
    2020 Political Atlas
    2020 Demographic Swingometer
    — Presidential debates: Scheduled to occur Sept. 29, Oct. 15 and Oct. 22.
    — VP debate: Scheduled for Oct. 7.
    Days until election

     
  • White House still declining to say when Trump last tested negative for Covid-19. "Doctors would like to keep it private," spokeswoman Alyssa Farah said. It was unclear why it might be the medical personnel who would be making the request. "My understanding is that it's his private medical history," Farah said.
     
  • Trump now trails Biden by an average of 9.7 percentage points nationally, and by about 5 to 7 points in key battleground states, according to the RealClearPolitics average of polling. Clinton enjoyed a 5.3-point lead against Trump, on average, the same number of days before the election four years ago. But observers note there are crucial differences this time, including a much higher favorability rating for Biden than Clinton enjoyed and Biden’s competitiveness in several states Trump carried in 2016, which also could shrink the president’s possible paths to re-election. Others say polls also may slightly exaggerate Biden’s lead if some Trump voters are undercounted.
     
  • Charlie Cook of the Cook Political Report on the presidential election ahead: “Longtime GOP pros are expressing emotions ranging from deep concern to resignation and deep depression. One told me they were resigned to a “Reagan-Carter style blowout,” referencing the 1980 election in which the challenger beat the incumbent by nearly 10 percentage points in a 489-49 Electoral College win. (It was a bad night for down-ballot Democrats, too.) Others weren’t quite so expressive, but let’s just say they’re still greatly concerned. The fears among Republicans are either that the president’s political problems have metastasized to down-ballot candidates, or that disillusioned Republicans will opt to stay home, dooming GOP Senate and House candidates.”

    A GOP-leaning analyst countered: “Well, I heard all of this in 2016. Not till I sat down and watched the election was I disabused of the imminence of a democratic landslide the size of Reagan’s. And if the Ds win as they say, it will be the end of the country as most Americans know it. At what stage it becomes unbearable I don’t know but if it happens, I do plan to leave. I just wish we all did not have to wait for Joe Biden to get elected for him to tell us all his secrets to the Covid virus and how he would have saved all 200,000-plus lives. It seems cruel we should have to all wait. Since his election is inevitable, why can’t he just tell us now to save lives.”

     
  • Biden again withholds stance on Supreme Court seats. Democratic presidential candidate Joe Biden said yesterday he will share his view on adding additional seats to the Supreme Court if he wins the presidential election. “They’ll know my opinion on court packing when the election’s over,” he told reporters in Phoenix. Biden said if he revealed his opinion on the issue, “the headline in every one of your papers will be about that, rather than focusing on what’s happening now.”
     
  • Special counsel: Perdue crossed political line at taxpayer expense. USDA Secretary Sonny Perdue crossed the line in August when he told a North Carolina audience during an official visit that they could get another four years of a “decider-in-chief” if America votes for President Donald Trump, the U.S. Office of Special Counsel said Thursday. The watchdog said Perdue’s comments at the Aug. 24 event in Mills River, N.C., violated the Hatch Act, but that there will be no disciplinary action if he quickly reimburses the U.S. Treasury for travel costs paid for by taxpayers. The law generally bars federal employees from engaging in political activities while on duty but exempts the president and vice president.

    The action came in response to a complaint filed by the Citizens for Responsibility and Ethics in Washington (CREW) that Perdue’s comments during the trip with Trump and an adviser to the president, Ivanka Trump, to tout a $1 billion boost to the USDA’s Farmers to Families Food Box Program constituted political activity while doing official government work.

    CREW Executive Director Noah Bookbinder welcomed the reprimand of Perdue. “Misusing the federal government to help keep the president in power seriously undermines democracy. This administration has shown its lack of concern about these anti-democratic abuses, but it’s a good thing the Office of Special Counsel still values upholding this important law,” Bookbinder said in a statement.

    Perdue noted that people along the roads leading from the airport to Mills River were among the “forgotten people” who had voted for Trump in 2016. Perdue addressed Trump and said, “They and many others are going to vote for you for four more years in 2020. Because they understand, under your administration, they’ve not been forgotten.” But the special counsel's office said the USDA’s justification for comments have no legal basis and runs counter to the Hatch Act. “Taken as a whole, Secretary Perdue’s comments during the August 24 event encouraged those present, and those watching remotely, to vote for President Trump’s reelection,” the letter from the special counsel's office said.

    "His first words were not about USDA, but about the president’s 2016 and 2020 campaigns. Secretary Perdue described why those in Mills River voted for the president in 2016 and gave them a reason to vote for him again in 2020 — because under a Trump Administration, they will not be 'forgotten,'" the special counsel's office said.

     
  • Trump looks to return to rallies as he shuns virtual debate. Plans for President Trump and Joe Biden to meet for two more debates this month were in question after the president refused to participate in a virtual debate next week, leading the Democratic nominee’s campaign to schedule a town hall for the same day. Trump said he wanted to hold a rally Saturday in Florida, after the White House physician said he had completed his Covid-19 therapy.
     
  • Did Pence best Harris in VP debate? Pollster and GOP political analyst Frank Luntz, who questioned a focus group of self-identified undecided voters immediately following the Pence-Harris event, told Bloomberg TV that the group thought Pence bested Harris in demeanor and “presidential” qualities. They objected to what they saw as the senator’s “condescending” expressions, Luntz told anchor David Westin. “There’s a certain decorum you expect from your candidate and she did not live up to it.”

    If Trump walks away from one or both of the remaining debate opportunities, he effectively cedes the election because he is unlikely to close the gap with Biden, who is leading in national and battleground polls, Luntz said.

     
  • Testing, testing. In South Carolina’s Senate race, Democratic challenger Jaime Harrison asked Sen. Lindsey Graham (R) to take a Covid-19 test before they debate tonight. Graham responded that he has listened to medical experts, followed their advice and “will continue to follow the guidance of my doctors, not my political opponent.”
     
  • The 25th time House Democrats want to take down President Trump? House Speaker Nancy Pelosi (D-Calif.) on Thursday said she and House Democrats will release legislation today to create a commission to determine whether a president is fit for office amid concerns over Trump’s status with Covid-19. Pelosi's office announced that she and Rep. Jamie Raskin (D-Md.) will formally introduce the bill at a news conference on Capitol Hill this morning. Earlier Thursday, she hinted to reporters that "we're going to be talking about the 25th Amendment.”
     
  • Trudeau braces for post-election U.S. Canada is preparing for the potential of a disputed election in the U.S., Prime Minister Justin Trudeau said. Trudeau offered his clearest comments yet on such a possibility yesterday. “What happens in the United States is going to be impacting Canada after the election, but our job is to be ready for all outcomes,” Trudeau told reporters.

 


OTHER ITEMS OF NOTE


  • U.N. World Food Program (WFP) awarded the Nobel Peace Prize. The Norwegian Nobel Committee recognized the WFP for its efforts to combat hunger, its contribution to improving conditions for peace in conflict areas, and toward preventing the use of hunger as a weapon in war.
     
  • Down at the farm... at Harvard. Harvard is spinning out its natural-resources team, ending a long chapter. The university’s endowment has spun out its natural-resources team into an independent investment firm that will take over some of the endowment’s portfolio of orchards, farms and plantations.
     
  • Cotton AWP rises. The Adjusted World Price (AWP) for cotton rose to 51.48 cents per pound, effective today (Oct. 9), up from 50.67 cents per pound the prior week and is the highest since the week of July 10 when it was also 51.48 cents per pound. This leaves the potential for an LDP of 52 cents per pound. Meanwhile, USDA announced that Special Import Quota #25 will be established Oct.15 for 25,499 bales of upland cotton, applying to cotton purchased not later than Jan. 12 and entered into the U.S. not later than April 12.

 

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