U.S./China tit-for-tat actions mount | Dairy prices rebound | ARC/PLC signup deadline
In Today’s Updates
* Another lawmaker puts another hold on EPA nominee in another RFS dispute
* China to put visa restrictions on U.S. officials over Hong Kong
* Profits of Chinese industrial firms rose 6% versus a year earlier in May
* Dairy prices have rebounded significantly
* Brazilian real's rebound was short-lived
* ARC/PLC signup deadline for the 2020 crop year is Tuesday, June 30
* Essential fertilizers ride the coronavirus storm
* U.S. rice wants elimination of duty-free treatment for all rice imports under GSP
* U.S. food supply update
* Conagra and General Mills to report second quarter results this week
* Borden Dairy CEO Tony Sarsam will step down
* Update on reopening America... and around the world
* EU mulls which countries can bring visitors into Europe
* Coronavirus update
* World has 10 million confirmed cases of Covid-19 and 500,000 deaths
* HHS secretary warns 'window is closing' for U.S. to get coronavirus 'under control'
* Dr. Fauci gives another gloomy assessment
* Trump under pressure to wear a mask as U.S. coronavirus cases surge
* Covid-19 drug Remdesivir to cost $3,120 for typical patient on private insurance
* Trump nominated William Perry Pendley to be director of BLM
* Polish voters denied President Andrzej Duda’s bid for quick re-election
* French voters reject Macron candidates in local polls
* BP is selling its petrochemicals business to Ineos in a $5 billion deal
* Trump: Neither he nor Pence were briefed on alleged Russian bounties on U.S. troops
* Nearly six million properties across the U.S. have a substantial risk of flooding
* Chesapeake Energy filed for bankruptcy protection
* Boeing can start test flights for the 737 Max
Equities today: Global stocks were mixed as investors mulled whether the acceleration of coronavirus infections in the U.S. would lead to further tightening of lockdown measures that hold back economic recovery. U.S. equity futures are mixed ahead of the openings. Meanwhile, more than 40% of the companies in the S&P 500 have pulled their guidance because of uncertainty surrounding the pandemic.
U.S. equities Friday: The Dow dropped 730.05 points, 2.84%, at 25,015.55. The Nasdaq declined 259.78 points, 2.59%, at 9,757.22. The S&P 500 was down 74.71 points, 2.42%, at 3,009.05. The S&P 500 fell 2.4% and finished below its 200-day moving average, a key technical level which previously had provided support. Bank stocks came under pressure after the Fed said it would cap dividends and halt buybacks in the third quarter. The Fed put fresh limits on the U.S. banking industry after annual stress tests found that several institutions could get close to minimum capital levels in scenarios tied to the coronavirus pandemic.
For the week, the Dow and S&P fell 3.3% and 2.9%, respectively, while the Nasdaq edged 1.9% lower.
On tap today:
• Germany's provisional consumer price index for June is out at 8 a.m. ET.
• U.S. pending home sales for May are expected to rise 15% from a month earlier. (10 a.m. ET)
• Dallas Fed's manufacturing survey for June is out at 10:30 a.m. ET.
• San Francisco Fed President Mary Daly speaks at a higher education conference at 11 a.m. ET, and New York Fed President John Williams moderates a panel discussion with IMF Managing Director Kristalina Georgieva at 3 p.m. ET.
• Japan's preliminary industrial production figures for May are out at 7:50 p.m. ET.
• China's official manufacturing index for June is out at 9 p.m. ET.
The pandemic’s economic fallout is global: The World Bank predicts more than 90% of world economies will experience a recession this year.
Profits of Chinese industrial firms rose 6% versus a year earlier in May, signaling the economy is continuing to recover from the coronavirus shutdowns. Premier Li Keqiang, meanwhile, announced the country could increase support to protect smaller and labor-intensive companies and help key trade enterprises solve problems to stabilize jobs.
China's central bank made boosting the economy a higher priority and vowed better fiscal, monetary and employment policy coordination following its quarterly policy committee meeting. More from Xinhua.
U.S. Federal Reserve is reviewing the Reserve Bank of Australia's yield-curve control program as it considers a new tool to keep U.S. interest rates low. More from WSJ.
• Extended U.S. maps are developing a ridge. Key will be duration and strength of the ridge.
• Dairy prices have rebounded significantly as farmers have adjusted their milk production, consumers have boosted retail demand, and government purchases have also kicked in to help offset lost food-service sales, Peter Vitaliano, chief economist for the National Milk Producers Federation, said in a podcast. “That has resulted in a very, very rapid change in the market price outlook,” Vitaliano said. “The markets currently are looking like there’s going to be a very strong rebound, and prices will get to a more normal level in the second half of this year,” he said.
• Crude oil prices have climbed from earlier losses and have nudged into positive territory. U.S. crude has moved to being around 0.2% higher at $38.55 per barrel while Brent crude is up around 0.2% and trading near $41 per barrel.
• Copper continues to rally, exceeding expectations.
• Demand for large-sized bulk carriers sent shipping costs soaring.
• Brazilian real's rebound was short-lived. Separately, Brazil's Ibovespa index has significantly underperformed the rest of the world during the pandemic.
— Ernst blocks EPA deputy nominee over refinery biofuel waivers. Sen. Joni Ernst (R-Iowa) said she will block President Donald Trump's nomination of Doug Benevento to be EPA's Deputy Administrator from advancing until the agency reveals how it plans to handle the dozens of new requests from refineries for exemptions from their biofuel blending requirements. “Until EPA tells us exactly what they plan to do with the ‘gap year’ waivers, Mr. Benevento does not have my vote,” Ernst said in a statement. “Iowa’s hardworking ethanol and biodiesel producers are sick of being yanked around by Andrew Wheeler and the EPA. Our producers need certainty; until we get that, no EPA nominee is getting my vote.”
Benevento currently serves as the EPA’s associate deputy administrator. He was tapped to become the deputy administrator in February. GOP leaders have scrapped plans for a vote this week.
Perspective: The EPA-hold strategy has been used several times before, one time by RFS opponent, Sen. Ted Cruz (R-Texas). If you think the RFS waiver issue has been around for a while, you are correct. If anything involving EPA is ever settled, things should soon come to a head with the agency nearing an announcement on RFS mandated levels, something which usually brings complaints as usual from both sides of the topic. Ernst is up for re-election in November against Democratic businesswoman Theresa Greenfield, who’s slammed Ernst for voting to confirm Wheeler and former Administrator Scott Pruitt.
— ARC/PLC signup deadline for the 2020 crop year is Tuesday, June 30. Although program elections for the 2020 crop year remain the same as elections made for 2019, all producers need to sign a 2020 enrollment contract. FSA offices are maintaining a registry for producers to sign up for an appointment if no appointments are available prior to the June 30 deadline. FSA is also waiving all late-filing procedures for 30 days after the acreage reporting date. Link for details.
USDA's Risk Management Agency (RMA) is also providing relief extending the correction time period for an acreage report for an additional 30 days. Link for details.
— Essential fertilizers ride the coronavirus storm. The domino effect of the coronavirus, as it has spread across the globe, has so far had a limited impact on the fertilizer industry. Fertilizer makers have benefited from cheap feed and energy costs meaning that even marginal producers have continued to operate, and the markets have not felt any shortness of availability. That insight comes from Julia Meehan, Managing Editor, Fertilizers, ICIS. Her report (link) examines the impact that the pandemic has had on the fertilizer market and how this is affecting other interconnected areas such as food-supply chains.
— U.S. rice industry wants the Trump administration to eliminate duty-free treatment for all rice imports under the Generalized System of Preferences (GSP) program. The USA Rice Federation filed a petition in March asking for the action. But the U.S. Trade Representative's office, in a set of questions (link) to the rice group and countries that would be affected by the action, noted the U.S. rice industry was still a “significant rice exporter,” with foreign shipments of $1.9 billion last year. “Could you please advise whether increased rice imports have harmed U.S. rice production or exports, and if so, how specifically?” USTR asked. “Please describe for us the U.S. parboiling industry, its employment levels and locations, and the degree to which it might be injured by imports.”
— Update on China:
- U.S./China relations continue to be topsy-turvy as the Wall Street Journal on Friday reported (link) China has told Washington that ‘meddling’ in Hong Kong, Taiwan and other matters could jeopardize Chinese goods purchases under the Phase 1 trade deal. According to some Chinese officials, by using words like “atmosphere,” Chinese leader Xi Jinping’s point man on U.S./China trade negotiations, Vice Premier Liu He, was delivering a reminder to the U.S. of growing hard-line sentiment in China and the difficulty its leaders will have at home justifying massive purchases of U.S. goods amid a firestorm of Washington criticism. “You can’t keep asking us to buy your stuff and at the same time keep beating up on us,” said Mei Xinyu, an analyst at a think tank affiliated with China’s Commerce Ministry. “That’s not how it works.” The WSJ noted that “to some business officials who have closely tracked the trade talks, the Chinese warnings remind them of the spring of 2019. The U.S. side then was confident that it was about to conclude a deal and misread the political situation in Beijing, where opposition was growing. In May 2019, the deal fell apart, the U.S. responded with tariffs and threats, and it took another seven months to cobble together a less sweeping agreement.”
The latest up-down with China follows developments last week which saw a comment from White House trade advisor Peter Navarro sending assets and ag markets whipsawing on Monday. In an interview on Fox News, Navarro said a hard-won U.S./China trade deal was "over," though he later clarified that his remark had referred to the "lack of trust" in the Chinese administration. President Trump later confirmed the trade deal between the U.S. and China was "fully intact," adding he hoped Beijing would continue to live up to the terms of the agreement. That and more were reflected in an interview U.S. Trade Representative Bob Lighthizer had with Agri-Talk (link).
- China to put visa restrictions on U.S. officials over Hong Kong. The move is in retaliation for Washington’s decision last week to restrict visas for Chinese officials who undermine Hong Kong’s semi-autonomous status. Announcing the restrictions today, Chinese foreign ministry spokesman Zhao Lijian said any efforts by the U.S. to hinder Beijing’s introduction of a national security law in Hong Kong “would not succeed.” On Friday, U.S. Secretary of State Mike Pompeo announced U.S. visa restrictions on serving and former Communist Party officials “believed to be responsible for, or complicit in” undermining Hong Kong’s autonomy, rights, and freedoms. “In view of the erroneous actions of the U.S., China has decided to impose visa restrictions on U.S. officials who behave egregiously on Hong Kong-related issues,” Zhao said, without saying who or how many officials would be targeted.
- A new set of American export controls comes into force today, designed to keep advanced technology out of the hands of China’s armed forces. The rules, drawn up by America’s Department of Commerce, treat exports bound for Chinese “military end use” with the same high level of licensing requirements that already applies to exports to Russia or Venezuela.
- U.S. presses Europe to uproot Chinese security company. The U.S. says the expanding presence of Nuctech — China's largest maker of security-screening equipment — in Europe is a threat to Western security and businesses.
- China dominates the worlds rare-earth minerals. The country has used government subsidies to bolster its rare-earth industry, and U.S. researchers believe China is prepared to use it as a geopolitical weapon against the West. More on topic via WSJ.
— Food and beverage supply/industry update:
- Conagra and General Mills will report second quarter results Tuesday and Wednesday, respectively, giving a sense of how the food industry fared.
- Borden Dairy CEO Tony Sarsam will step down as head of the bankrupt milk processor in late July, after a court on Friday approved the company’s sale to Capitol Peak Partners and KKR & Co. Borden’s business will remain intact, including all plants, branches and branding, and the newly reorganized company will keep on its 3,300 workers. More details from Food Dive.
— Update on reopening America... and around the world:
- Florida and Texas reversed the reopening of their states as America set a new daily record of Covid-19 infections, according to a tally by Johns Hopkins University, which counted nearly 40,000 new cases on June 26. Texas closed all its bars; Florida banned the sale of alcohol in them.
- The European Union is putting together a list of 15 countries that are not bloc members and whose nationals will be allowed to visit from Wednesday. The final list, which may not include Americans, will be announced later today or Tuesday morning. The U.S. could be excluded because of the high level of new cases, and ongoing measures are likely to be reciprocated.
- Casinos are considering cashless gambling to help fight the coronavirus.
— Coronavirus update:
- Summary: Case counts and deaths from Covid-19 crossed two milestones — 10,154,984 cases and 502,048 deaths globally, according to data from the Center for Systems Science and Engineering (CSSE) at Johns Hopkins University (JHU). The U.S. case count stands at 2,549,069 with 125,803 deaths.
Cases continued to surge over the weekend in some states. Florida, Texas, California and Arizona have accounted for much of the recent rise, prompting authorities to impose new restrictions in those states and retreat on reopening plans.
Europe has seen the most deaths of any continent, although its overall caseload is declining. The situation in the Americas is more concerning: Two countries — the U.S. and Brazil — account for roughly 35 percent of all COVID-19 deaths worldwide and both countries are still seeing new cases in the tens of thousands daily.
- Public transit use is associated with higher coronavirus death rates, researchers find. African-Americans may be dying at higher rates than white people from Covid-19 in part because of black people’s heavier reliance on public transportation for commuting, two new studies by economists suggest. Link to WSJ article.
- How Princeton Energy Advisors sees the ramp up on U.S. numbers. Traditional forecasting “is all but impossible under current circumstances,” the group said in a research note. “Notwithstanding, we can template one scenario for the future based on the recent past. Clearly, the number of new cases [in the U.S.] has been accelerating rapidly. In the first phase of the outbreak during March, this rapid acceleration in cases lasted three weeks with the peak about 30,000 / day above the base. If we apply this model to the current circumstances, new cases could peak above 50,000/day around July 7 and fall to approximately 33,000 on August 31 — this assuming prior experience holds.”
- HHS secretary warns 'window is closing' for U.S. to get coronavirus 'under control.' Health and Human Services (HHS) Secretary Alex Azar warned that the U.S. is running out of time to combat the spread of the coronavirus as the country sees cases spiking in some regions. On Sunday, Azar credited the progress made in two months since lockdowns began to protect the public from the virus but expressed concern about increased hospitalizations related to the illness, particularly as cases surge in the South. "Things are very different from two months ago," he told CNN's State of the Union. "We now have three therapeutics. We have hospital capacity. We have reserves of personal protective equipment. We're speeding our way toward having vaccines. So, it is a very different situation, but this is a very, very serious situation, and the window is closing for us to take action and get this under control." Azar said the federal government plans to continue doing asymptomatic testing for those who are not showing any signs of the virus. He also encouraged anybody who resides in a hot spot or hasn't been wearing face masks or social distancing to get tested.
“If you have engaged in behaviors in the last couple of weeks where you have not exercised appropriate social distancing, and if you couldn’t make yourself socially distant, worn face coverings, we encourage you: get tested, protect vulnerable members of your household and others," he said. "Get tested because you could put yourself, but more importantly, you could put our most vulnerable citizens at risk of severe complications or even fatality.”
- Dr. Anthony Fauci, in remarks aired on Sunday, gave a gloomy assessment of the chances for a vaccine to be taken up by enough of the U.S. population to be effective. “There is a general anti-science, anti-authority, anti-vaccine feeling among some people in this country — an alarmingly large percentage of people, relatively speaking,” Fauci said, adding that a massive public health education campaign would be necessary should a vaccine prove viable.
- Trump under pressure to wear a mask as U.S. coronavirus cases surge. Nearly 39,000 cases were recorded nationwide on Sunday. Congress pressed President Trump to start wearing a mask in public, saying it might help reduce the political stigma associated with the practice.
- Covid-19 drug Remdesivir to cost $3,120 for typical patient on private insurance. Gilead Sciences detailed its pricing plans for Covid-19 drug remdesivir, saying it will charge U.S. hospitals $3,120 for a typical patient with commercial insurance. The drugmaker disclosed its pricing plans as it prepares to begin charging for the drug in July. The U.S. has been distributing remdesivir donated by Gilead since the drug was authorized for emergency use in May.
- India, the world’s second-most-populous country, saw its largest daily increase in Covid-19 infections, registering more than 18,000 new cases on Friday. Total recorded infections have surpassed 500,000, with more than 15,000 deaths; the actual numbers are thought to be higher. India’s stringent nationwide lockdown expired at the beginning of June, though local lockdowns are still in effect in many states.
- Almost 80% of deaths linked to Covid-19 in Europe were in people over 75, a major toll on the region’s oldest citizens that is shaping public-health policy as authorities look ahead to the fall and winter.
OTHER ITEMS OF NOTE
- Trump nominated William Perry Pendley to be director of the Bureau of Land Management (BLM). Pendley, who has supported privatizing federal lands, has led BLM in an acting capacity since last summer.
- Polish voters denied President Andrzej Duda’s bid for quick re-election, forcing him into a runoff that risks halting a nationalist makeover of the eastern European country. Exit polls suggest Andrzej Duda, the incumbent backed by the populist Law and Justice Party, failed to breach 50% of the vote. He will probably face Rafal Trzaskowski, a liberal.
- French voters reject Macron candidates in local polls. Greens are set to win Lyon and Strasbourg, while Socialists hold Paris.
- BP is selling its petrochemicals business to Ineos in a $5 billion deal, as part of the energy giant’s plan to transition to lower-carbon energy.
- Trump: Neither he nor Pence were briefed on alleged Russian bounties on U.S. troops. President Trump said that neither he nor top members of his administration had been briefed on an intelligence assessment that found Russians offered a bounty to those who conducted lethal attacks on U.S. troops in Afghanistan.
- Nearly six million properties across the U.S. have a substantial risk of flooding that isn’t disclosed by federal flood maps, according to a nonprofit research firm. Details from the WSJ.
- Chesapeake Energy filed for bankruptcy protection. The fracking pioneer helped pave the way for the U.S. energy boom, but a coronavirus-induced drop in oil demand and a huge debt load forced its hand.
- Boeing can start test flights for the 737 Max. The FAA gave the company permission to begin flights to demonstrate that the troubled jet is safe. It was grounded in March last year in the wake of two crashes that killed 346 people.