China-Australia Trade Fracas Escalates as EU Proposes Alliance with U.S.

Posted on 11/30/2020 7:07 AM

OPEC+-ministers can’t reach agreement | Biden breaks foot playing with dog


In Today’s Updates


Market Focus:
• Oil futures remain under pressure as focus on future of OPEC+ actions
• Panel of OPEC+ ministers couldn’t reach agreement
• Dow has added nearly 13% since the end of October
• India’s GDP shrank by 7.5% year-on-year in three months to end of September
• China’s manufacturing purchasing managers’ index rose

• S&P Global is in advanced talks to acquire IHS Markit for about $44 billion: WSJ
• Brazil’s northern areas are having a near historical drought
• Copper prices in Shanghai hit a more-than-eight-year high today
• Russia's Ag Ministry: will likely increase its grain export quota
• Congestion at Southern California’s ports
• 2020 hurricane season set to officially close today
• Rains forecast for South America this week, but… 

• Demand for Chinese wheat auctions continues to ease


Policy Focus:
• Grassley vows to “continue building consensus” on antitrust enforcement in ag
• Biden has promised to undo most — if not all — of Trump’s immigration reforms
• Canada adjusts dairy aid plan for those impacted by trade pacts


U.S./China update:
• EU plans to ask U.S. to form alliance to stand up to China
• China announces tariffs of up to 212% on Australian wine
• Australia to take action against China at WTO over tariffs on barley imports
• China a big buyer of sorghum, which unlike corn does not require TRQs
• Nike and Coke lobby against bill banning imports from Xianjiang region of China


Trade Policy:
• Ractopamine brouhaha in Taiwan parliament


Energy & Climate Change:

• EPA not expected to meet statutory deadline to announce RFS volume requirements

Coronavirus update:
• Moderna to ask FDA for emergency clearance later today
• New York City will reopen public elementary schools


Politics & Elections:
• Biden breaks foot while playing with dog
• Rep. Valadao wins close California race

Other Items of Note:
• Angry Indian farmers protested in and around the capital over the weekend
• Supreme Court update
• Postponing 2020 Olympics in Tokyo by one year could cost $1.9 billion




Equities today: Global stock markets were mixed and U.S. stock indexes are also pointed toward mixed openings.


     U.S. equities Friday: The Dow edged up 37.90 points, 0.1%, to 29,910.37, its third-highest close in history. The S&P 500 added 8.70 points, 0.2%, to 3,638.35, notching its 26th record close of the year. The Nasdaq added 111.44 points, 0.9%, to 12,205.85, its highest close ever. The stock market closed at 1 p.m. ET. on Friday and was shut Thursday for the Thanksgiving holiday.


     The Dow has added nearly 13% since the end of October, on track to its biggest monthly advance since 1987. The S&P 500 and Nasdaq Composite have risen 11% and 12%, respectively, their biggest month-to-date gains since April.


On tap today:


     • Chicago Business Barometer for November is expected to fall to 59.1 from 61.1. (9:45 a.m. ET)
     • U.S. pending-home sales for October are expected to rise 2% from the prior month. (10 a.m. ET)
     • Dallas Fed's manufacturing survey for November is out at 10:30 a.m. ET.
     • USDA Export Inspections, 11:00 a.m. ET.
     • China's Caixin manufacturing index for November is out at 8:45 p.m. ET.
     • The Reserve Bank of Australia releases a policy statement at 10:30 p.m. ET.


India’s GDP shrank by 7.5% year-on-year in the three months to the end of September. That follows a record drop of 24% in the previous quarter, triggered by a strict nationwide lockdown to fight covid-19. Although forecasters said the economy had fared better than predicted, mostly because businesses had reopened, India is now officially suffering its first recession in decades.


China’s manufacturing purchasing managers’ index rose from 51.4 in October to 52.1 in November (above the 51.5 expected), the ninth consecutive reading above 50, which indicates activity is expanding. The result is the highest in more than three years, and a sign that the world’s second-biggest economy is recovering from covid-19 shutdowns. Promotions in e-commerce helped to boost consumer demand. The non-manufacturing PMI came in at 56.4 in November compared to 56.2 last month and 56.0 expected. The official manufacturing PMI reading was the highest since September 2017, while the mon-manufacturing PMI was the highest reading since June of 2012.


     China mfg


S&P Global is in advanced talks to acquire IHS Markit for about $44 billion in a deal that could be announced as soon as today, according to a WSJ report (link). The Wall Street Journal, which first reported the talks, said the deal would be an all-stock transaction which would combine two of the world’s biggest financial data providers. It’s the latest move to capitalize on the value of data, following the London Stock Exchange’s $27 billion offer for the analytics firm Refinitiv, Intercontinental Exchange’s $11 billion purchase of Ellie Mae and others. The IHS and S&P transaction is being labeled a strategic merger by IHS’ CEO.


Market perspectives:


     • Outside markets: The U.S. dollar index is lower and hit a 2.5-year low early today. The other important outside market sees January Nymex crude oil futures prices weaker and trading around $44.75 a barrel. The yield on the benchmark 10-year U.S. Treasury note futures is currently trading at 0.85%.


     • Oil futures remain under pressure as attention remains on the future of OPEC+ actions relative to output targets (see next item) and Covid vaccine developments. U.S. futures are around $45 per barrel and Brent is around $47.60 per barrel. Crude oil prices were lower in Asian trading, with U.S. crude down 48 cents at $45.05 per barrel while Brent crude was down 48 cents at $47.70 per barrel.

     • Panel of OPEC+ ministers couldn’t reach an agreement on whether to delay January’s oil-output increase, leaving the matter unresolved before today's full meeting of the cartel and its allies, Bloomberg reports. Most participants in an informal online discussion on Sunday evening supported maintaining the production curbs at current levels into the first quarter, said a delegate. Yet while Russia spoke in favor of postponing the supply hike that’s currently scheduled to happen in the new year, the United Arab Emirates and Kazakhstan were opposed, said the delegate, asking not to be named because the talks were private. Unless the agreement is revised this week, they will restart about 1.9 million barrels a day of halted output, potentially pushing the global market back into surplus and undermining the recent surge in crude prices.


     • Brazil’s northern areas are having a near historical drought, says one industry analyst, adding that South America weather is the major variable for the soy market and markets in general. For areas North of Parana, Sept. to Nov 30 has been extremely dry.


     • Copper prices in Shanghai hit a more-than-eight-year high today, while prices in London are at a more-than-four-year high.


     • Russia's Ag Ministry has indicated it will likely increase its grain export quota to 17.5 million tonnes for the period from Feb. 15-June 30 from a prior mark of 15 million tonnes. The plan still has to be reviewed by the country's trade ministry.


     • Congestion at Southern California’s ports is leaving some of the season’s hit toys tied up in shipping containers. Link to New York Post for details.


     • The 2020 hurricane season is set to officially close today, and this year surpassed 2005 as the busiest ever on record with 30 named storms forming over the Atlantic basin. The season, which officially runs from June 1 to Nov. 30, set a record-breaking pace almost from the start, ending with Hurricane Iota, the season’s first Category 5 storm. Link to WSJ article.




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

Rains forecast for South America this week, but…  
• Demand for Chinese wheat auctions continues to ease




—  Sen. Chuck Grassley (R-Iowa) vows to “continue building consensus” in the next Congress on antitrust enforcement in agriculture, warning about the big gap in beef prices received by livestock producers and meatpackers, in a Q&A post (link) on Medium.

     As for what else is on Grassley’s radar at USDA, he said: “The GAO says the USDA isn’t routinely reviewing FSA operations to ensure compliance meets the “actively engaged” standards to qualify for payments. Monitoring and tracking this data is vital to protect taxpayer dollars and keep intact support for the nation’s farm safety net. Farmers who work every waking hour to make sure Americans have food on the table ought to qualify for help when natural disasters or unforeseeable events put their operations and the nation’s food supply at risk. However, long-lost relatives — who’ve never lifted a finger on the farm or had a grain of harvest dust invade their eye and take up residence in their nasal cavity — should not get away with collecting farm payments. I’ll continue working with the USDA to implement changes to FSA operations to fix what’s broken. What’s more, I’m deeply concerned about its recent proposal to roll back rules that put teeth in the definition of “actively engaged in farming.” Make no mistake, I’ll continue riding herd on the USDA and building support for common sense payment limit reforms in the next farm bill.


— Joe Biden has promised to undo most — if not all — of President Trump’s immigration reforms. He’s pledged to immediately end the ban restricting foreigners from several Muslim-majority countries from entering the U.S. and re-instate protections from deportation for the roughly 650,000 people who arrived in the U.S. illegally as minors, known as Dreamers (DACA).


     Congressional stalemate? While Biden has laid out an ambitious plan for immigration, a divided Congress could mean barriers to policy changes like comprehensive immigration reform, which includes, among other things, a pathway to citizenship for the estimated 11 million undocumented immigrants in the U.S., including Dreamers.


     Biden has also promised to rescind the so-called “Muslim ban” on his first day in office, putting an end to travel bans from 13 countries, many of which are home to Muslim-majority populations.


     Biden also pledged that on the first day of his presidency, he will appoint a task force to track down the parents of 545 children who have still not been found three years after Trump’s Zero Tolerance Policy was enacted.


     Another immediate reversal Biden plans to make is in relation Trump’s controversial border wall. About 400 miles of border wall went up in California, Arizona, New Mexico and Texas during the Trump administration, which includes repairs to already existing barriers. “There will not be another foot of wall constructed in my Administration,” Biden told NPR’s Lulu Garcia-Navarro during an August roundtable with the National Association of Hispanic Journalists.


     By 2021, Trump will have reduced legal immigration by up to 49% since becoming president — without any change in U.S. immigration law, according to a National Foundation for American Policy (NFAP) analysis.


     As for refugee caps, the Trump administration lowered the cap on the number of refugees admitted into the U.S. each year. In October, the White House announced it was setting the fiscal year 2021 cap at 15,000 refugees, an all-time low. Biden has promised to increase the refugee admittance cap to 125,000 people — a higher ceiling than during the Obama-Biden Administration — “and seek to raise it over time commensurate with our responsibility, our values, and the unprecedented global need,” according to his campaign website. According to the UNHCR, at the end of 2019 there were an estimated 26 million refugees worldwide.


     High-skilled immigration via H-1B visas. Approximately 75% to 80% of fulltime graduate students in key technology fields at U.S. universities are international students. Stephen Miller, the chief architect of the Trump administration’s immigration policies, focused a lot on restricting H-1B visas. In October 2020, the Trump administration issued three new regulations that would change — and broadly restrict — H-1B visas. Biden plans to increase the number of high-skilled visas, including the H-1B, and eliminate the limit on employment-based visas by country.


     Biden wants to make the H-2A and H-2B process less cumbersome from employers in the hope of discouraging the circumventing of the process. He wants to provide a path to lawful residency for agricultural workers who have worked for years on U.S. farms and continue to work in agriculture.


     Biden has stated that he will support family-based immigration by preserving family unification as a foundation of the U.S. immigration system by allowing any approved applicant to receive a temporary non-immigrant visa until the permanent visa is processed, and by supporting legislation that treats the spouse and children of green card holders as the immediate relatives they are, exempting them from caps, and allowing parents to bring their minor children with them at the time they immigrate.


— Canada adjusts dairy aid plan for those impacted by trade pacts. The Canadian government has narrowed its timeline to release the remaining C$1.4 billion ($1.1 billion) of federal aid to supply managed dairy farmers by about five years and set separate aid for poultry and egg producers. The Ministry of Agriculture and Agri-Food had originally announced C$1.75 billion would be provided to compensate Canadian dairy farmers over eight years. Agriculture Minister Marie-Claude Bibeau said Saturday in Ottawa that after the initial C$345 million payout was awarded between December and January; it has now set a schedule to deliver the remaining funds in three years. Canada has promised funds to dairy and poultry farmers whose market share was hurt by free trade deals with Europe and countries on the Pacific Rim.


     Dairy farmers will receive, on the basis of their milk quota, cash payments of C$468 million in 2020-21, C$469 million in 2021-22 and C$468 million in 2022-23.


     “Our government is fully behind our supply management sector, which supports our family farms and the vitality of our rural areas,” Bibeau said in a statement. “Today’s announcement of a substantial compensation package for our dairy, poultry and egg farmers shows our support for a strong supply management sector for many generations to come.”


     Canada also announced C$691 million in funds for Canada’s chicken, egg, broiler hatching egg, and turkey producers. “Farmers have waited a long time to see action on this file, and we believe that this is a step in the right direction,” said Brian Bilkes, chair of Canadian Hatching Egg Producers.



— EU pitches new post-Trump alliance with U.S. in face of China challenge: FT. The European Union (EU) will call on the U.S. to seize a “once-in-a-generation” opportunity to forge a new global alliance, in a detailed pitch to bury the tensions of the Trump era and meet the “strategic challenge” posed by China. A draft EU plan for revitalizing the transatlantic partnership, seen by the Financial Times, proposes new co-operation on everything from digital regulation and tackling the Covid-19 pandemic to fighting deforestation. Link for details (paywall).


Having accused Australia of using subsidies to dump underpriced product on the Chinese market, China announced tariffs of up to 212% on Australian wine. The move is the latest instance of a decline in Sino-Australian relations. Simon Birmingham, Australia’s trade minister, said they would amount to a “devastating blow” for Australian business — China buys 42% of Australia’s wine exports.


— Australia is preparing to take action against China at the World Trade Organization over tariffs on barley imports. China in May placed tariffs of 80.5% on Australian barley, saying it was being sold at unfairly low prices with the help of subsidies. Australia rejected that finding and directly appealed to Chinese authorities to reverse the duties but was rebuffed. “So now the WTO appeal for barley is the next step,” Australian Trade Minister Simon Birmingham said Sunday. The government is holding talks with the local grains industry and other sectors to gauge support for filing a complaint, he added.


     Australia has rejected Chinese claims that it is selling products below cost on international markets. “If you stand by the rules-based system, you should also use that rules-based system, which includes calling out where you think the rules have been broken and calling in the international umpire to help resolve those disputes,” Birmingham said.


     Australian barley exports to China were worth around $1 billion annually before Beijing decided to impose tariffs, according to analytics firm IHS Markit. China previously bought around 70% of the country’s barley exports. Shipments of Australian barley were stable in the three months through September, even though exports to China mostly ceased after the tariffs were introduced, as producers sent more cargoes to Japan, Qatar and Thailand, according to government data.


— China has been a big buyer of sorghum, which unlike corn does not require TRQs. China recently approved imports of sorghum from Mexico. On Oct. 29, the governments of China and Mexico officially signed phytosanitary protocols that allow Mexico to export sorghum to China for human consumption. In the first year, the sorghum export volume to China is expected to be between 50,000 and 100,000 tons. Approximately 1,500 sorghum producers will contribute to this figure, mainly from the northern state of Tamaulipas. The U.S. is China’s largest source of imported sorghum, but amid escalating China — U.S. trade tariffs in 2019, China entered talks with Mexico to diversify its sorghum sources. Mexico had previously been exporting sorghum to China for animal consumption, but different phytosanitary protocols are required to export sorghum for human consumption.


     U.S. export commitments for sorghum were at 3.353 million tonnes as of Nov. 19, with outstanding sales of 2.350 million tonnes.


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


— The Trump administration's seven-day extension of a divestiture order that directs the Chinese company ByteDance to sell its TikTok short video-sharing app expires Dec. 4. Under pressure from the U.S. government, ByteDance has been in talks for a deal with Walmart Inc and Oracle Corp to shift TikTok's U.S. assets into a new entity.


— Nike and Coke lobby against a bill that would ban imports from the Xianjiang region of China. They are among several big companies pushing to weaken the legislation, which would prohibit goods made with forced labor by persecuted Muslim minorities in the region. Opponents of the bill say they oppose human rights violations but also fear disrupted supply chains. Link for more via the NYT.




— Ractopamine brouhaha in Taiwan parliament. Taiwan’s decision to open its market to American meat imports sparked a kerfuffle on the floor of Taiwan’s parliament over the weekend, with members from the opposition Nationalist party throwing pig guts and punches at members of the majority Democratic Progressive Party. The differences were over a recent agreement between President Tsai Ing-wen and the U.S. to import American pork and beef, which contains the growth hormone ractopamine, banned in the European Union, China and elsewhere. Link to CNN for a video and link to the Associated Press for more details. did a nice writeup.




— EPA not expected to meet statutory deadline to announce RFS volume requirements. Previously citing Covid-19 factors, EPA is not expected to meet its legal deadline today regarding announcing renewable volume obligations (RVOs) relative to the Renewable Fuel Standard (RFS) program — 2021 mandate for corn-based ethanol and 2022 for biodiesel.


     EPA could let the incoming Biden administration reveal the volume mandates, and also postpone dealing the 41 requests for exemptions/waivers from small refiners that have been struggling with fuel demand because of the pandemic.


     The delay has occurred previously. The Obama administration issued its final rule for 2014 through 2016 only in late 2015.




 Summary: Global cases of Covid-19 are at 62,804,417 with 1,460,437 deaths, according to data compiled by the Center for Systems Science and Engineering at Johns Hopkins University. The U.S. case count is at 13,385,95 with 1,460,437 deaths.


       Link to Covid Case Tracker
       Link to Our World in Data


— Moderna says new data shows Covid vaccine is more than 94% effective, plans to ask FDA for emergency clearance later today. Moderna’s two-dose vaccine regimen was 94% effective at preventing illness in a 30,000-person clinical trial, the company said. The finding from the complete set of data is in line with an analysis of earlier data released on Nov. 16 that found the vaccine to be 94.5% effective. Experts anticipate there will be enough doses to inoculate 20 million people this year between Moderna’s vaccine and a second from Pfizer and the German firm BioNTech.


— New York City will reopen public elementary schools. The abrupt reversal came after Mayor Bill de Blasio was criticized for shutting the nation’s biggest school system, while letting businesses like indoor restaurant dining stay open. Middle and high schools will remain shut.




— Biden breaks foot while playing with dog. Joe Biden will likely wear a walking boot for the next several weeks as he recovers from breaking his right foot while playing with one of his dogs, his doctor said. Biden suffered the injury on Saturday and visited an orthopedist in Newark, Delaware, on Sunday afternoon, his office said. “Initial x-rays did not show any obvious fracture,” but medical staff ordered a more detailed CT scan, his doctor, Kevin O’Connor, said in a statement. The subsequent scan found tiny fractures of two small bones in the middle of his right foot, O’Connor said.


— Rep. Valadao wins close California race. David Valadao (R-Calif.) is a dairy farmer from the Central Valley district, among the nation’s top dairy districts. He served three terms before losing his seat in 2018. The race was one of the most competitive in California, with both candidates and outside groups spending large amounts of money on the race. Republicans have picked up their 11th seat overall in the U.S. House and the third seat in California, as Valadao reclaimed the seat he lost in the farm belt two years ago. The former congressman defeated Democratic Rep. TJ Cox, who ousted Valadao in the 21st Congressional District two years ago by 862 votes. Cox campaigned on health care and immigration reform in a district with a large Latino population. Valadao stressed support for more water for agriculture, while accusing Cox of lining up with radical environmentalists. In an online video, Valadao pledged to pass a coronavirus relief package and improve the health care system “so that everyone can get the care they need when they need it most.” The California Republican has faced a set of financial woes. Valadao and his wife filed for bankruptcy protection for their dairy and cattle businesses early in 2020. During his previous House tenure, he was among the poorest members of Congress due to his business debts.



— Angry Indian farmers protested in and around the capital over the weekend, worried that Prime Minister Narendra Modi’s decision to deregulate agricultural markets will leave them without a safety net. For details, link to Wall Street Journal article. Economists widely welcome them as examples of the reform the farming sector needs. The farmers have refused government requests for talks and threatened further blockades.


— Today, the U.S. Supreme Court considers arguments on President Trump’s order to exclude undocumented immigrants from the census count used to allocate House seats. On Tuesday, the high court will hear a case in which former child slaves in Ivory Coast have sued Nestlé over alleged human rights violations at cocoa farms.


—  Postponing the 2020 Olympics in Tokyo by one year could cost ¥200 billion ($1.9 billion) in refunds, cancellation charges and ongoing salaries. The organizing committee will meet the metropolitan and central governments in December to work out how the cost will be met. The games, now due to start next July, were already expected to cost ¥1.35 trillion.



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