Biden Has Aggressive Agenda for Climate Change Initiatives

Posted on 11/25/2020 8:00 AM

Deere reports strong 2021 forecast fueled by improving farm economy


In Today’s Updates


Market Focus:
• Equities may take breather after recent surge
• Friday after Thanksgiving is usually one of slowest U.S. trading days of the year
• Oil futures seeing gains
• Deere reports strong 2021 forecast fueled by improving farm economy
• SovEcon raises its Russian wheat production and export forecasts

• Ukraine’s economy ministry expects a 13% dive in Ukraine’s 2020 grain crop

• Egypt will pay VAT on wheat imports

• Another day, another Argentine strike threat

• Bird flu still spreading in Japan

• Rise above key moving average triggers more buying in cattle futures


Policy Focus:
• Treasury Secretary Mnuchin will put unspent aid money out of easy reach


U.S./China update:
• Chinese imports of U.S. soybeans ramped up last month
• More reports small Chinese importers washing out U.S. soybean purchases
• India banned 43 more Chinese apps; China reacts


Trade Policy:
• U.S. unveils prelim. duties on phosphate fertilizer imports from Morocco & Russia
* USDA boosts FY 2021 ag export forecast


Energy & Climate Change:

• Biden has aggressive energy/climate change for early agenda

Food & beverage industry update:
• Market for turkeys has been upended
• House panel probes USDA food box contract
• Farming sector is looking up in Singapore, quite literally: WSJ

Coronavirus update:
• Number of people hospitalized in U.S. hit a record for 15th straight day
• Countries plan to relax Covid-19 restrictions
• AstraZeneca’s global network of manufacturing and distribution partners
• YouTube temporarily bans One America News Network re: Covid-19 misinformation


Politics & Elections:
• Pennsylvania certified its election results with Joe Biden as the winner
• Biden credits Trump administration with ‘sincere’ help
• Michigan Senate candidate James concedes race
• Trump reportedly told aides of plans to pardon Michael Flynn

Other Items of Note:
• French tax authorities have begun demanding digital tax payments from U.S. tech giants
• Michelin and Zagat postpone ratings guides to New York City restaurants for 2021




Equities today: Global stock markets were mixed overnight. U.S. stock indexes are also pointed toward mixed opening. The Hang Seng Index was up 81.55 points, 0.31%, at 26,669.75. The Nikkei rose 131.27 points, 0.50%, at 26,296.86. Equities in Europe are mostly lower. The Stoxx 600 was recently down 0.4% with regional markets seeing gains and losses of under 0.6%.

     Equity markets have surged recently on hopes that vaccines for Covid-19 could soon become widely available — analysts say vaccines will help the economy heal, corporate profits rebound, and stock market continue its upward trajectory.  The easing of political concerns around the presidential transition have also boosted investor sentiment. Plus, Joe Biden’s pick of former Federal Reserve head Janet Yellen for Treasury secretary has increased hopes of sizable stimulus measures.


     U.S. equities yesterday: The Dow surged 454.97 points, 1.5%, to 30,046.24, its ninth record close of 2020. The index is up 62% from its March lows and 5.3% for the year. The S&P 500 also set a fresh record. The index gained 57.82 points, 1.6%, to 3,635.41. The Nasdaq rose 156.15 points, 1.3%, to 12,036.79, its second-highest close ever.


     Perspective: It took 18 years for the Dow to get from 10,000 to 20,000, but less than four years to climb from that level to 30,000, and that during a pandemic. Investors say the fundamentals of the strong run are still intact, particularly for tech companies, whose growth is more appealing in a world of ultra-low interest rates.


    Dow 30,000


On tap today:


     • U.S. jobless claims are expected to fall to 733,000 in the week ending Nov. 21, down from 742,000 a week earlier. (8:30 a.m. ET) Update: U.S. weekly jobless claims totaled 778,000. Jobless claims rose for the second straight week in a sign the surge in virus cases was starting to weigh on the labor-market recovery. It was the first back-to-back increases since July.
     • U.S. durable goods orders for October are expected to rise 0.6% from the prior month. (8:30 a.m. ET) Update: Bookings for durable goods increased 1.3% from the prior month. Also, the September reading was revised up to a 2.1% rise.
     • U.S. gross domestic product is expected to expand at a 33.1% annual pace in the third quarter, unrevised from an earlier estimate. (8:30 a.m. ET) Update: The government’s first estimate of earnings for the period showed a record $495.3 billion annualized increase, or at a 27.1% annual rate. The improvement followed a 10.3% decrease in the April-June period and a 12% decline in the first quarter that was the biggest since the end of 2008.
     • U.S. advance economic indicators report for October is out at 8:30 a.m. ET.
     • U.S. consumer spending for October is expected to increase 0.3% from the prior month, personal income is expected to fall 0.1%. (10 a.m. ET)
     • University of Michigan's final consumer sentiment index for November is expected to be unchanged from a preliminary reading of 77. (10 a.m. ET)
     • U.S. new-home sales for October are expected to rise to an annual pace of 973,000 from 959,000 a month earlier. (10 a.m. ET)
     • Baker Hughes rig count is out at 1 p.m. ET.
     • Federal Reserve releases minutes from its Nov. 4-5 meeting at 2 p.m. ET.


U.S. home prices gained a record 3.1% in the third quarter as historically low mortgage rates drove outsized demand.


Deere reports strong 2021 forecast fueled by improving farm economy. The company reported (link) net income of $757 million for the fourth quarter, which ended Nov. 1, or $2.39 per share, compared with net income of $722 million, or $2.27 per share, for its quarter that ended Nov. 3, 2019. Overall, Deere reported net income of $2.751 billion for its entire fiscal year 2020, or $8.69 per share, compared to $3.253 billion, or $10.15 per share, in fiscal 2019. Deere revealed that net income in its fiscal year 2020 was impacted by impairment charges and employee-separation costs of $211 million and $458 million after-tax, respectively, the company said Wednesday. That follows at least two rounds of buyouts for salaried employees that took place over the fiscal year, as well as layoffs in the last fiscal quarter on the salaried worker end as the company continues to restructure its operating model.


     In the year ahead, Deere expects to benefit from improving conditions in the farm economy and stabilization in construction and forestry markets, according to CEO John May. "Higher crop prices and improved fundamentals are leading to renewed optimism in the agricultural sector and improving demand for farm equipment. At the same time, we are looking forward to realizing the benefits of our smart industrial operating strategy, which is designed to accelerate the delivery of solutions that will drive improved profitability and sustainability in our customers' operations." For fiscal 2021, Deere sees worldwide agriculture and turf equipment sales climbing 10%-15% from the 2020 level, while construction and forestry equipment sales are expected to rise 5%-10%. Net income for fiscal 2021 is forecast to be in a range of $3.6 billion to $4 billion, versus guidance issued in May of between $1.6 billion to $2 billion.


Market perspectives:


     • Outside markets: The U.S. dollar index is near steady early today. The other important outside market sees January Nymex crude oil futures prices firmer, hitting an eight-month high overnight and trading around $45.40 a barrel. The yield on the benchmark 10-year U.S. Treasury note futures is currently trading at 0.86%.

     • Friday after Thanksgiving is usually one of the slowest U.S. trading days of the year.


     • Oil futures are seeing gains. U.S. crude is trading around $45.20 per barrel and Brent crude around $48.10 per barrel. Crude oil prices rose in Asian action, with U.S. crude up 29 cents at $45.20 per barrel while Brent crude was up 32 cents at $48.10 per barrel.

       Crude oil prices


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

SovEcon raises its Russian wheat production and export forecasts
• Ukraine’s economy ministry expects a 13% dive in Ukraine’s 2020 grain crop
• Egypt will pay VAT on wheat imports
• Another day, another Argentine strike threat
• Bird flu still spreading in Japan
• Rise above key moving average triggers more buying in cattle futures




—  Treasury Secretary Steven Mnuchin will put unspent aid money out of easy reach. Mnuchin plans to place $455 billion reclaimed from the Fed’s emergency-lending facilities into the department’s general fund. Using it would require congressional approval, a potential hurdle for the Biden administration’s economic recovery plans.



Chinese imports of U.S. soybeans ramped up last month. China imported 3.4 MMT of soybeans from the U.S. during October, a 196.4% surge from imports of 1.147 MMT a year ago, according to China’s General Customs Administration. This also marked a big jump from imports of 1.17 MMT during September. Customs data shows China also imported 4.233 MMT of soybeans from Brazil during October, an 11.6% increase from year-ago, as previously booked cargoes cleared shipments. But that’s actually down notably from the 7.25 MMT the country shipped China during September. China’s imported a total of 8.69 MMT of soybeans during October, a 41% jump from October 2019.


— More reports small Chinese importers washing out U.S. soybean purchases. Reuters is now reporting that Chinese soybean importers and processors are working to cancel deals for U.S. cargoes of soybeans booked for shipment in December and January, according to three trade sources. This follows similar reports from AgriCensus yesterday. The strong rally in soybean futures has caused crush margins to collapse. One of the sources indicated those trying to wash out shipments are “small private soybean importers” who “bought cargoes but did not [set the] price in the futures market. One of the sources also noted a 30-cent drop in spot export basis at the U.S. gulf since early this month. A washout refers to when a buyer and seller mutually agree to cancel a deal. It’s still unknown how many deals were canceled or washed out.


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


— India banned 43 more Chinese apps in its latest move to pressure China online, as tensions fester following a deadly border clash. China called on the Indian government to reverse its ban. The Chinese government said the move violates global free-trade agreements and discriminates against companies. This in turn risks causing “greater damage to the cooperation” between the two countries, said a Chinese spokesperson.




— U.S. announces preliminary duties on phosphate fertilizer imports from Morocco and Russia. The preliminary action (link) was taken following an investigation showing the countries were subsidizing exports, according to the Commerce Department. The U.S. imported about $729 million worth of phosphate fertilizer from Morocco and about $299 million from Russia in 2019, according to Commerce. A final Commerce Department decision is expected Feb. 8, followed by the International Trade Commission’s (ITC) final decision on March 25, with the issuance of an order on April 1.


     The announcement came amid opposition from some GOP farm-state senators, who urged Commerce not to impose the tariffs out of concern they will increase input costs for American farmers. “U.S. farmers depend on affordable phosphate fertilizers to produce a variety of crops, including corn, soybeans, cotton, wheat, sorghum, sugar beets, and fruits and vegetables,” Republicans told the Commerce Department and the U.S. International Trade Commission in an Aug. 3 letter.


     Details: The decision was to be released Nov. 23, but was released Nov. 24, one day later than scheduled. The department set preliminary duties of 23.46% on imports from Morocco's OCP Group and other producers in the country, 20.94% on those from Russia's Phosagro, 72.50% on EuroChem and 32.92% on all other Russian producers. The decision follows an investigation launched in July on petitions filed by U.S.-based fertilizer company Mosaic Co.

     Impacts: Josh Linville, director of fertilizer at StoneX, at Kansas City, is not sold on all the predicted outcomes. He told RealAgriculture’s Shaun Haney (link), “After the announcement the paper was up 10% to 15% per short ton over the day prior but this puts into place inefficient trade flows as production has not been cut globally,” he says. Linville has been watching prices rise ($100 per ton) since June in anticipation of this decision, but even with the tariff rate, Morocco may still be able to afford to ship to the United States. Bernstein analysts say the ruling imposed higher tariffs than expected, believing Wall Street likely was pricing in a 60% probability of a positive ruling and expectations of ~15% tariffs, according to Bloomberg; actual preliminary duties were in the 23-73% range. Amid the probe, prices jumped the most in a decade and have held at elevated levels since then. A final decision to impose the tariffs could solidify a new normal of higher U.S. phosphate prices, some note. Mosaic shares soared to their highest in more than a year after the Commerce announcement. Trade flows have shifted in the second half of the year as U.S. importers opt out of the countries’ sales which could face retroactive duties. Moroccan and Russian product has bypassed the U.S. largely for Brazilian, Indian and Canadian ports, while Mosaic has imported from its joint venture in Saudi Arabia for the first time to help make up the difference, the Tampa, Florida-based company said earlier in November. “There’s no question — some of the buyers may have decided any risk was a risk they didn’t want to take,” Joc O’Rourke, Mosaic’s chief executive officer, said in a telephone interview this month with Bloomberg.


— USDA boosts FY 2021 ag export forecast amid higher export values, strong demand from China. U.S. agricultural exports are now expected to reach a value of $152.0 billion in fiscal year (FY) 2021, up from $140.5 billion in August, while the value of imports is now seen at $137.0 billion, up from $136.0 billion, with higher soybean and corn export values and strong demand cited as catalysts for large export bump. The outlook would leave a trade surplus of $15 billion.


     For FY 2020, USDA saw exports at $135.9 billion, up slightly from the $135.0 billion forecast in August, while the value of imports is now seen at $133.2 billion, up from $131.7 billion. Those totals leave the FY 2020 ag trade surplus at just $2.7 billion.


     The impacts of Covid-19 continue to inject uncertainty, the Economic Research Service (ERS) said. While economic growth has recovered “from the initial lockdown contractions,” it warned “recovery forecasts are still marked by uncertainty and prone to future setbacks.” Recent Covid-19 vaccine developments, however, “have provided increased optimism, pushing global equity markets higher and adding to hopes that GDP growth may return strong in 2021,” it added.


     Global real GDP growth in 2020 is seen declining by 4.4% compared with 2019 with the U.S. result now expected at a decline of 4.3%. Their prior outlook was at negative 5.8%, showing a modestly improving U.S. economic picture. For 2021, ERS sees the U.S. economy returning to growth, with GDP forecast to climb 3.1%.


     In contrast with the U.S., USDA is now expecting a “more severe” economic contraction in the Eurozone, at negative 8.3%, a steeper decline than the 7.1% decline forecast in August. That, however, is expected to result in a “larger correction” in 2021, with Eurozone growth pegged at 5.2%.


     The outlook hinges on the strength of ongoing economic recoveries, USDA noted, which in turn “will be dependent on the status of the pandemic and public health initiatives, including the successful distribution of vaccines,” it said.


     On specific commodities, grain and feed exports are forecast at $35.6 billion for FY 2021, up $4.6 billion from the August forecast, “on higher corn, sorghum, and wheat exports.” The corn export forecast saw a strong upward revision to $13.2 billion — an increase of $4.2 billion over the August projection — with USDA crediting “expectations of both higher unit values and record volumes.”


     Also boosting grain and feed export prospects is “reduced competition from Ukraine, where exportable supplies are severely diminished, and anticipated higher demand from China,” USDA detailed.


     More modest export forecast revisions were noted for sorghum, with exports now pegged at $1.5 billion in FY 2021, up $100 million from August, “on higher unit values as sales and shipments to China remain strong.” Wheat also saw a modest boost, with exports seen at $6.2 billion, up $200 million from August and again credited to higher unit values.


     U.S. soybean exports are now projected at a record $26.3 billion for FY 2021, an increase of $5.9 billion from the August forecast. “A smaller U.S. crop, reduced stocks, and strong demand from China have significantly strengthened U.S. prices,” USDA explained, adding, “soybean export volumes are also forecast at record levels due to growing demand in China and reduced near-term competition from Brazil.”


     Cotton exports are forecast at $5.3 billion for FY 2021, an increase of $300 million from August, on higher unit values. Cotton prices have been boosted by “recent surges in other commodity prices, as well as increased speculator interest in cotton futures positions,” USDA said.


     Meanwhile, USDA left FY 2021 livestock, poultry, and dairy export forecasts unchanged from their August estimate of $32.3 billion “as lower exports of pork and hides and skins offset increases in beef and poultry.”


     USDA revised its export forecast for China sharply higher, with FY 2021 exports now seen at $27.0 billion, up $8.5 billion from August. It said the change comes “primarily as a result of strong soybean and corn demand and reduced competition from other exporters.” If the forecast holds, USDA notes it would place China once again as the top U.S. ag export market, a title it last held in FY 2017.


    In Southeast Asia, USDA revised export forecasts for Japan (up $600 million) and South Korea (up $500 million) on higher expected corn and beef exports. Meanwhile, it boosted the export forecast for Taiwan by $300 million “on improved corn and soybean prospects.” Export forecasts for Indonesia, Thailand, and Vietnam were revised up $100 million each, and Philippines up $200 million.


     Other regions seeing a boost in their export forecast include Central America (up $200 million), South America (up $500 million), the Middle East (up $200 million) and North Africa (up $100 million). USDA left the export forecast for the European Union (EU) unchanged at $11.4 billion as “higher unit values of soybean and soybean meal are expected to be offset by lower miscellaneous horticultural product sales.”


     Overall, the numbers paint a positive picture for U.S. ag exports headed into FY 2021, but USDA sounded a note of caution given potential impacts from a resurgence in Covid-19. That is tempered by recent news that multiple vaccines have shown efficacy against the virus — though production and distribution continue to be a focus there.


     Going forward is the future of the Phase 1 U.S./China trade deal, and whether the incoming Biden administration agrees to or seek changes to the agreement. So far, there has not been much talk of adjustments, though China is thought to favor them.


     Another attention point is outgoing President Donald Trump, who has signaled a desire to take an even more aggressive posture towards China in his final days in office. It remains unclear whether any moves could disrupt the existing trade agreement.




— Biden has aggressive energy/climate change for early agenda.

     1. Wants to convene a global “climate summit’ his first 100 days in office.
     2. Selects John Kerrey as special presidential envoy for climate.
     3. Elevates climate issue into foreign and national security policy with Kerry as lead.
     4. Will name a White House climate director later, at same level of Kerry, who will coordinate policies implemented by federal agencies.
     5. Will use regulations and tax incentives to help implement climate change policies.
     6. Supports Federal Reserve rejoining the international Network for Greening the Financial System. The Fed recently declared climate change as a potential danger to financial stability.
     7. Biden’s Treasury will play an important coordinating role when it comes to managing climate risk.
     8. Will pursue a clean electricity mandate.
     9. Wants to provide over 500,000 EV charging stations throughout U.S. (Currently just over 27,000 charging stations, according to the Dept. of Energy.)
     10. Will rejoin Paris climate change accord and to develop a new stricter U.S. target for cutting emissions out to 2030 ahead of the next United Nations climate talks in Glasgow late next year. Biden intends to pressure other countries to agree on more ambitious targets for reducing greenhouse gas emissions, according to John Kerry. “At the global meeting at Glasgow one year from now all nations must raise ambition together or we will all fail together,” he said during a news conference Tuesday.
     11. Wants to develop and implement an ag carbon bank program with USDA and private industry, utilizing funding via the Commodity Credit Corporation.
     12. Wants to return to the Corporate Average Fuel Economy (CAFE) standards set in place under former President Barack Obama.




— Market for turkeys has been upended. “Expectations that people will gather in smaller groups for the holidays this year is resulting in increased demand for smaller turkeys for Thanksgiving tables,” USDA analysts wrote in a recent report (link), in which they trimmed their forecast for fourth-quarter turkey production by 5 million pounds. Although average wholesale prices are up, there are deals to be had as retailers offload larger birds.




— House panel probes USDA food box contract. Rep. James Clyburn (D-S.C.) is stepping up a probe of a $16.5 million contract awarded to a California supplier of the Farmers to Families Food Box Program. Clyburn, chair of the Select Subcommittee on the Coronavirus Crisis, said questions have been raised about the contract to Yegg, Inc., a business finance company, that received the money to supply dairy products for hunger relief. Clyburn sent two letters to the company’s president, the newest one just this week after receiving additional information about the company.  According to Clyburn, “Yegg reported that it delivered almost $3 million of food boxes, including 38,956 dairy boxes and 171,000 fluid milk boxes to an organization named Helping Feet. This entity is not a Southern California food bank. Rather, it is an organization that you founded, with no public information indicating a mission, experience, or capacity to deliver food to people in need.”


     The company has refused to hand over all the records due to concerns the documents would disclose pricing and volume information, Clyburn said in his Nov. 22 letter. But that is not a valid reason, he said. “The price Yegg charged to taxpayers and Yegg’s performance on this contract are material to the Select Subcommittee’s investigation of potential waste, fraud, and abuse in Farmers to Families Food Box Program.” Documents are due by Dec. 4.


— Farming sector is looking up in Singapore, quite literally. Businesses in the tiny, skyscraper-studded nation are trying to reinvent agriculture, the Wall Street Journal reports (link), by converting industrial buildings into vertical farms outfitted with climate-controlled rooms and special lighting. The projects are part of the city-state’s attempt to address its near-total dependence on the outside world, a reliance that has grown more troubling amid coronavirus-related border closures and international trade fights. Food security has become a concern around the world during the pandemic, but it’s particularly pressing in Singapore. The government wants 30% of the island’s nutritional requirements produced in Singapore by 2030, up from less than 10% today. “That’s a heavy lift in a country with only about 500 acres of farmland. High-tech farms have been springing up to meet the demand, but they need to increase their scale to make a dent in the country’s food needs,” the WSJ article concludes.




 Summary: Sources: Johns Hopkins University as of 6:30 a.m. ET; Hospitalization figures from the Covid Tracking Project as of yesterday.

       • 59,888,630: Confirmed cases world-wide, and 1,411,972 deaths
       • 172,953: New U.S. cases recorded yesterday
       • 12,597,510: Total confirmed cases in the U.S.
       • 2,146: Deaths in the U.S. recorded yesterday
       • 259,976: Total U.S. deaths
       • 88,080: People currently hospitalized in the U.S.

       Link to Covid Case Tracker
       Link to Our World in Data


— Number of people hospitalized in the U.S. because of the coronavirus hit a record for the 15th straight day.


— Countries plan to relax Covid-19 restrictions. Britain and France announced moves to loosen lockdowns before the December holidays, including letting stores reopen and allowing some in-person gatherings. In the U.S., the CDC is considering shortening self-quarantining guidelines to seven to 10 days, down from 14, hoping to increase compliance.


— AstraZeneca has assembled a global network of manufacturing and distribution partners as it looks to deliver more than three billion doses of a Covid-19 shot. The efforts reflect the broader actions pharmaceutical companies, logistics operators and transport carriers have been undertaking to ensure vaccines are delivered to as many people as possible, the Wall Street Journal reports (link).

     The New York Times reports that close to “mid-December, 6.4 million doses of Pfizer’s Covid-19 vaccine will be shipped out across the U.S. in an initial push after it receives an expected emergency authorization, officials leading Operation Warp Speed, the administration’s push to fast-track a vaccine, said on a call with reporters on Tuesday. These first doses will be allocated based on the population of each designated area. HHS Secretary Azar said, “We wanted to keep this simple.” Politico reports Azar said that once the FDA authorizes a vaccine, an advisory committee will meet and make recommendations on who should be given priority access, but governors will have the “final say.”




—YouTube temporarily banned One America News Network, the conservative media outlet favored by President Trump, for spreading Covid-19 misinformation. Link for details via Bloomberg.




— Pennsylvania certified its election results with Joe Biden as the winner, after the state's highest court rejected the Trump campaign's bid to throw out thousands of ballots with minor errors. Nevada also certified its results. Michigan certified its election results on Monday.


— Joe Biden credited the Trump administration with offering its “sincere” help, a day after the sitting president formally cleared the way for an orderly transfer of power. Biden is expected to start receiving national security briefings, and his advisers to begin working with current health officials on plans to distribute a covid-19 vaccine. Regarding foreign policy, Biden said, “America is back” and “ready to lead the world.”

     Biden’s teams have begun to coordinate with their counterparts in the Trump administration. About 20 meetings took place yesterday, including at the Department of Homeland Security and the Education Department.


— Michigan Senate candidate James concedes race. The Washington Times reports Republican Senate candidate John James announced Tuesday his decision to concede the 2020 race to incumbent Sen.Gary Peters (D-Mich.), while also “saying that while he still had questions about the voting.” James “said he donated more than $1 million of his campaign money to charitable causes ahead of Thanksgiving.”


— President Donald Trump reportedly told aides of plans to pardon Michael Flynn, his first national-security adviser. Flynn twice pleaded guilty to lying to the FBI about Russian contacts during Robert Mueller’s investigation into election interference. Trump says Flynn was the victim of an Obama administration plot.



— French tax authorities have begun demanding digital tax payments from U.S. tech giants like Amazon and Facebook, as talks over a global tax agreement have stalled.


— Michelin and Zagat postponed their coveted ratings guides to New York City restaurants for 2021. “Ratings are not appropriate when so many restaurants are closed,” a Michelin representative said.



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