Corn and soybean market bears have grip on market | U.S./Japan leaders meet Friday
— African swine fever (ASF) has spread to all parts of China; island province of Hainan reports first cases of the disease. ASF, deadly to pigs but not harmful to humans, has now spread to all Chinese mainland provinces since the first case was confirmed early last August.
China's Ministry of Agriculture and Rural Affairs on Sunday said 146 pigs had died from the highly contagious virus at six farms on the southernmost province of Hainan. The first confirmed cases on the tropical island were reported on Friday, when officials said 77 pigs had died from the disease at four farms.
This means the virus has spread to all 31 mainland provinces, municipalities and autonomous regions in less than nine months since it was first confirmed at a pig farm not far from China’s border with Russia.
Pork prices already shot up in March and could rise by as much as 70% in the second half of this year, according to Tang Ke, head of China's agriculture ministry’s market and economy information department. A separate survey from the ministry of the weekly changes in agricultural product prices showed pork had surged 22.8% last week from the same time last year.
Livestock numbers are falling, with 18.8% fewer pigs on farms in March from a year ago. The number of breeding sows also fell 21% from a year earlier, the largest decline in a decade.
Chinese inflation numbers being watched. “A new hog cycle has started, and this round could be more long-lasting and much stronger, given the outbreak of African swine fever,” Lu Ting, chief China economist at Nomura, wrote in a research note. “Pork prices are set to become a major source of consumer inflation this year,” he said.
Impact: more pork imports, higher prices. In the first two months of 2019, China's pork imports increased 10% to 207,000 tonnes, the agriculture ministry said. Since then, USDA has announced several big U.S. pork purchases (and some actual shipments of pork) via the weekly Export Sales report. China is estimated to have about 200,000 tonnes of pork in its reserves, just a fraction of the supply needed to satisfy demand.
China expects surge in pork imports. Pork prices are likely to see "drastic" increases in 2019 due to ASF and imports of pork are expected to rise more than 40% from last year and hit 1.7 million tonnes, according to a report released at the China Agricultural Outlook Conference sponsored by the Agricultural Information Institute which is a part of the Chinese Academy of Agricultural Sciences. Xinhua said the report also indicated that the area planted to rice, wheat and corn will remain around 95.87 million hectares in 2019, with soybean area to increase by about 666,666 hectares. The report also indicated that imports of cotton, edible oils, sugar and dairy products will continue to rise this year, but the Xinhua recap did not specify any tonnages.
— U.S./China trade policy update:
- The U.S. and China are now aiming to conclude a trade deal in late May or early June. Recall that even after an agreement in principle is announced, it could take up to two weeks to get the final language ready for a signing ceremony between President Donald Trump and Chinese leader Xi Jinping.
- There has been a major decline in investment flows between China and the U.S., which plunged to just over $19 billion last year, down from a 2016 peak of $60 billion.
- Businesses see U.S.-China strains lingering. Even as a trade accord apparently nears completion, rattled businesses on both sides of the Pacific are skittish about rushing back in to revive the once-booming investment activity between Washington and Beijing. Link to Wall Street Journal article.
— ITC: New USMCA/NAFTA 2.0 deal would yield modest jobs gains, but... The International Trade Commission (ITC) on Thursday concluded that the Trump administration's proposed NAFTA replacement trade deal would modestly increase the U.S. workforce and its gross domestic product. Link to read the full report.
The ITC, which is required to review new trade deals, said that President Trump's U.S.-Mexico-Canada Agreement (USMCA) would add 176,000 jobs over time and bump up gross domestic product by 0.35%.
The Trump administration offered a more optimistic view of the deal, releasing a report saying the agreement would mean $34 billion in investments in the U.S. auto industry and add 76,000 jobs to the auto sector.
Perspective: The “but” in any analysis is the solid gains in many U.S. ag markets following the initial North American Free Trade Agreement (NAFTA). To continue the market access gains is a solid reminder that whatever President Trump has said about the initial NAFTA, it is not “the worst trade agreement ever” — not when it comes to most of the U.S. ag sector. And should the USMCA not be approved by the U.S. Congress, the threat at least is possible that an angry President Trump would seek to withdraw the U.S. from the initial accord after giving U.S. lawmakers a six-month notice. That possibility should be in any analysis.
— Final rule sets up health insurance exchanges for 2020. The Trump administration on Thursday finalized a rule setting up the health insurance exchanges ahead of the 2020 coverage year, which officials said would lead to more affordable insurance plans on the individual market.
The 401-page rule, which instructs insurers ahead of this year’s open enrollment period, would slash the user fees that insurers pay to offer plans on the exchange from 3.5% to 3% and from 3% to 2.5% for state-based exchanges on the federal platform. The Centers for Medicare and Medicaid Services said that would lower premiums. The average monthly rate for plans sold on the exchanges fell this year for the first time since 2014. “The rule issued today will give consumers immediate premium relief for 2020 by reducing the federal Exchange user fees thanks to successful efforts to improve the efficiency of the Exchange,” said CMS Administrator Seema Verma. “At CMS we have improved the operations of the Exchange to deliver a better consumer experience at a lower cost.”
The administration also finalized changes to the way premiums are indexed that the agency warned would raise premiums and shrink the subsidies that help eligible people afford their monthly payments. The changes to how premiums are indexed would start including projected premiums for the individual and group markets, instead of just the employer-sponsored group insurance market, CMS said. Those changes would increase net premiums by $181 million each year between 2020 and 2023, or roughly 1% of the net premium for the 2018 benefit year, CMS said in the final rule. The change would lower federal spending on advance premium tax credits by between $980 million and $1.15 billion in that timeframe because of fewer people enrolling in the exchanges and a subsequent change in subsidy eligibility.
The final rule would create a new special enrollment period for people who were covered by a plan outside the exchange whose income fell mid-year, making them eligible for financial assistance.
The rule also finalized an update to the risk adjustment program, which adjusts payments to account for high-cost patients. The change is meant to improve the data used to calculate the program’s cost and payments to insurers.
CMS also finalized proposals designed to help advance the administration’s efforts to lower prescription drug prices. One of those changes would allow insurers to adjust their formularies mid-year so they could cover newly available generic versions of drugs.
— Other items of note:
Energy Secretary Rick Perry is finalizing the timing and details of his departure from the Trump administration, including preparing Deputy Secretary Dan Brouillette for the transition, according to reports. Others have said his exit is not imminent, but that Perry has considered leaving for weeks. Energy Department spokeswoman Shaylyn Hynes said Perry is not leaving any time soon.
Supreme Court to hear arguments on public’s right to food stamp data. Legal arguments over whether SNAP/food stamp retail data should be made public will be heard at the Supreme Court today. Link for details from the Argus Leader, which said, “In 2011, reporters at the Argus Leader requested data about the government's food assistance program, previously known as food stamps. They thought the information could lead to a series of stories and potentially help them identify fraud in the now $65 billion-a-year program. They sent a stream of what they thought were routine requests for information to Washington. Government officials eventually sent back some information about the hundreds of thousands of stores nationwide where the food program's participants could use their benefits. But the government withheld information reporters saw as crucial: how much each store received annually from the program.”
Environmental Protection Agency will not regulate pollution that enters surface waters from underlying groundwater, the agency said in an interpretive statement, explaining that passage through groundwater "breaks the causal chain" between the pollution and the surface water.
The U.S. Supreme Court denied a trade association and utilities' challenges to zero-emission credit programs for nuclear plants implemented by New York and Illinois, leaving intact rulings last September that determined the credits do not intrude on the jurisdiction of the Federal Energy Regulatory Commission.
Agriculture groups and farm lenders sent an action alert on stalled disaster aid via a letter to President Trump and congressional leaders calling for a quick resolution of differences to get the money out. The groups said droughts, floods, hurricanes, wildfires and volcanic activity have caused billions of dollars in cropland damage.
Legislation to raise the legal age to purchase all tobacco products, including vaping devices, from 18 to 21, will be introduced by Senate Majority Leader Mitch McConnell (R-Ky.).
America's biggest supermarket company struggles with online upheaval. Kroger is adjusting operations and investing in technology to try to hang on to customers who no longer like to buy their food in stores. "We’ve got to get our butts in gear," says Chief Executive Rodney McMullen. Link to Wall Street Journal article.
— Markets. U.S. financial markets were closed Good Friday, April 19. They resume today.
For the week, the Dow gained 147.24 points, 0.6%, to close at 26,559.54, while the S&P 500 dipped 0.1% to 2,905.03, and the Nasdaq Composite advanced 0.2% to 7,998.06.
The S&P 500 is on track for the best four-month start to the year in more than three decades, gaining 16% to be less than 30 points from a record.
U.S. to halt Iran's oil waivers in bid to push its exports to zero. The U.S. State Department today is expected to announce the end of waivers for countries to import Iranian oil, part of the Trump administration’s effort to drive Iran’s exports to zero, people familiar with the decision told the Wall Street Journal.
The car is in reverse. In a challenge for Detroit, teens are putting off getting their licenses and buying cars. About a quarter of 16-year-olds had a driver’s license in 2017, a sharp decline from nearly half in 1983. Link to Wall Street Journal article. Remember when you were a teenage how many miles you drove just “having fun'? This is one of several reasons why gasoline consumption is declining, and with hybrid and EV cars, SUVs gaining popularity, the development will be key for the future of the Renewable Fuels Standard program which the corn industry sector has said is their Holy Grail issue.
“Progressive Capitalism Is Not an Oxymoron,” writes Joseph E. Stiglitz in an op-ed for the New York Times. “We can save our broken economic system from itself,” he observes. Stiglitz is a Nobel laureate in economics. He is a professor of economics at Columbia University and the recipient of a John Bates Clark Medal. He is also the former senior vice president and chief economist of the World Bank. He was also a former member and chairman of the former President Bill Clinton's Council of Economic Advisers. In the NYT op-ed he writes, “As an economist, I am always asked: 'Can we afford to provide this middle-class life for most, let alone all, Americans?' Somehow, we did when we were a much poorer country in the years after World War II. In our politics, in our labor-market participation, and in our health we are already paying the price for our failures.” Link to Stiglitz op-ed in New York Times.