Senate Covid relief plan delayed over disagreements
In Today’s Updates
* China retaliates against U.S. by closing American consulate in Chengdu
* China may defy U.S. order to close consulate: Politico
* Trump says China trade deal 'means less to me now'
* Pompeo calls for an end to ‘blind engagement’ with China: NYT
* Chinese leaders are trying to avoid a complete breakdown in relations with the U.S.
* Trade data upping expectations China will fill its TRQs
* Longer timeline likely for next Covid-19 relief & stimulus measure
* Senate Republicans’ Covid relief plan delayed over disagreements
* Assessing next ag relief packages in House and Senate
* Peterson to hold press briefing this morning re: Covid relief for ag
* Stabenow vote on Senate aid plan conditioned on boost in SNAP/food stamps
* Economists argue against raising the cap on USDA's CCC
* Gold trades near $1,900 an ounce, edging closer to all-time high
U.S. food & beverage industry update:
* Meatpacking employees in Pennsylvania sues OSHA
Update on reopening America... and around the world:
* CDC released additional guidance for schools
* Trump cites school meals as one reason children should return to school in person
* AMC Entertainment pushing back reopening of its U.S. theaters to mid-to-late August
* Permanent business closures now outnumbering temporary ones
* Virus deaths in the U.S. rose by more than 1,000 for a third consecutive day
* China said it will have Covid-19 vaccine ready this year
Politics & Elections:
* Trump cancels GOP convention events in Jacksonville, Fla.
* Democrats favored to take back Senate: Cook Political Report's Jessica Taylor
* 76% of Americans eligible to vote able to cast a ballot by mail in the fall
* A look at the Democratic Party Platform
Other Items of Note:
* WSJ: U.S. says jet fighter came close to Iranian passenger plane over Syria
* U.S. and Britain accuses Russia of developing space-based anti-satellite weapon
* Late Rep. John Lewis will lie in state at the U.S. Capitol Monday and Tuesday
* USMCA implementation update
* Cotton AWP falls
Equities today: Shenzhen stocks plunged 5% and shares in Shanghai plunged nearly 4% as U.S./China tensions flare. Markets in Japan are closed for a holiday. Other Asia Pacific markets also chalked up losses. China announced today that it ordered the U.S. to shut its consulate in Chengdu, following the U.S. demanding the closure of the Chinese consulate in Houston. Preceding that, Secretary of State Mike Pompeo slammed China in a speech on Thursday. He said Washington will no longer tolerate Beijing’s attempts to usurp global order. European equities also declined amid the latest U.S./China clash. U.S. equity futures signal a lower opening.
U.S. equities yesterday: The Dow fell 353.51 points, 1.31%, at 26,652.33. The Nasdaq dropped 244.71 points, 2.29%, at 10,461.42. The S&P 500 lost 40.36 points, 1.23%, at 3,235.66.
On tap today:
• House Ag Chairman Collin Peterson (D-Minn.) press availability at 11 a.m. ET on the status of Covid relief for agriculture.
• IHS Markit releases its Manufacturing and Services Purchasing Managers’ Indexes for July, at 9:45 a.m. ET. Consensus estimates are for a 52 Manufacturing PMI and a 51 Services PMI. This compares with 49.8 and 47.9 in June, respectively.
• Census Bureau reports new residential home sales data for June, at 10 a.m. ET. Sales of new single-family homes are expected to rise 4.9% to a seasonally adjusted annual rate of 705,000.
• Baker Hughes rig count is out at 1 p.m. ET.
• Japan's yen, which serves as an investor haven in times of geopolitical uncertainty, climbed 0.4% to ¥106.40 per dollar, its strongest level in about eight weeks.
• Price of gold traded near $1,900 an ounce, edging closer to its all-time high set almost nine years ago. The safe-haven metal is up almost 34% over the past 12 months. A weaker U.S. dollar and continued uncertainty about the future have helped it appreciate.
• Crude oil prices have built on gains from Asian trade as the U.S. dollar index remains weaker and that is keeping support under prices despite demand worries. Crude futures are gaining around 1%, with U.S. crude trading around $41.45 per barrel and Brent around $43.70 per barrel.
• Both new crop corn and soybean to date are 4th best to date.
— It may take until the second week of August before a Covid-19 relief and stimulus measure clears Congress... potentially longer, says a key contact. “We may need to hunker down for a long August,” said the contact close to the situation.
Meanwhile, Senate Majority Leader Mitch McConnell (R-Ky.) was forced to delay the announcement of a $1 trillion economic support package amid disagreements with the Trump administration. Senate leaders and the Trump administration are at odds over multiple provisions, including how to extend unemployment benefits and White House requests for spending unrelated to the pandemic.
Lawmakers of both parties rejected the administration’s suggestion that Congress consider temporarily extending the enhanced unemployment insurance benefits and funding schools in a smaller bill while the larger stimulus package is hashed out.
“The administration has requested additional time to review the fine details, but we will be laying down this proposal early next week,” said McConnell. The final elements, he said, would be revealed by Republicans on Monday after final negotiations with the administration. “The sum of these efforts will be a strong, targeted piece of legislation aimed directly at the challenges we face right now,” he added.
Sen. Marco Rubio (R-Fla.) said he expected the legislation to include at least $200 billion — in new funds and reallocated aid from previous packages — to assist small businesses. That would include allowing certain hard-hit small businesses to apply for a second round of loans from the Paycheck Protection Program (PPP), which lawmakers created in March, and giving recipients more flexibility in how they could spend the money. The proposal would also restrict the number of eligible businesses, including by requiring evidence of steep revenue losses.
Rubio would also create an alternative loan program that would allow eligible businesses in low-income communities to receive long-term, low-interest loans that would cover their operating expenses through the expected duration of the crisis.
— Regarding the coming ag aid package, the Senate calls for $20 billion in new funding and directs the Ag Secretary to use $14 billion in USDA Commodity Credit Corporation (CCC) funds. The House provides $68 billion total for agriculture, with $33 billion of that assistance for farmers and ranchers, including $16.5 billion in direct payments to producers, but no help for 2020 crops, with the rest for nutrition programs. Many lawmakers insist the 2020 crop needs to be covered.
USDA is considering more commodities for CFAP but does not think a third round of trade-related MFP is needed with China increasing ag buys, but is considering using the MFP-2 model to pay Covid-related losses because it is easy for USDA to administer and many farmers prefer that approach, with adjustments.
Specific ag-related programs are contained in the House package passed in May. Sources are not sure if the Senate will provide for all of these, choosing instead to provide broad authority allowing the Ag Secretary to do much and providing money to do it. The House is, for the most part, very specific.
For ethanol aid, the House measure would pay 45 cents a gallon to qualifying fuel produced between Jan. 1 and May 1. The Senate bill also addresses aid to the ethanol industry caused by a drop in transportation fuel use due to Covid-19 restrictions on travel to limit transmission of the virus.
Bottom line: Democrats want specific legislation providing aid. Many Republicans prefer specific legislation as well, but the Senate may start out with broad, general authority. The House bill is better for livestock, specialty crops, and dairy because it fixes issues with the current CFAP. But, it is not good for row crops (no 2020 crop help) and not good for livestock, dairy, or specialty crops if losses occur in the third and fourth quarter as those are also uncovered. Both chambers will have to work together to come up with a good plan; neither has an adequate one right now. House Ag Chairman Collin Peterson (D-Minn.) will hold a press availability at 11 a.m. ET on the status of Covid relief for agriculture. Finally, the odds of still another Covid-related aid package are rising. Reason: Do you think the virus is going away anytime soon?
— Stabenow says her vote on Senate aid plan conditioned on boost in SNAP/food stamps. Sen. Debbie Stabenow (D-Mich.), ranking Democrat on the Senate Agriculture Committee, said Republicans will have to reach a deal with Democrats on higher Supplemental Nutrition Assistance Program (SNAP) benefits to secure her support. Stabenow said she compromised in March and backed farm aid in an economic recovery bill. She said she won't do that this time because need is increasing and people who have never asked for help to feed their families are showing up at food banks. "If we do not get help for families that need it in the form of a SNAP increase, I am not supporting anything else as it relates to agriculture," Stabenow said.
Background. In their bill passed in May, House Democrats would continue prohibitions on the USDA from using funds to move forward with proposed rules that would reshape SNAP by toughening work requirements for able-bodied adults without dependents, tighten eligibility requirements and change the way monthly benefits are calculated. They also propose a temporary 15% increase in the monthly SNAP maximum benefit from June 1, 2020, through Sept. 30, 2021. Democrats also included language raising the minimum food stamp benefit of $16 a month to $30 a month.
Discussions on the SNAP/food stamps will be finalized by leadership. That was the process in the March recovery bill.
— Economists argue against raising the cap on the Commodity Credit Corporation, in an op-ed published in The Hill written by former USDA top economist Joe Glauber and Vincent Smith, director of agriculture studies at the American Enterprise Institute and professor of economics at Montana State University (link).
— Update on China:
- China ordered the U.S. to close its consulate in the southwestern city of Chengdu, after the U.S. government this week forced China to leave its mission in Houston, citing alleged spying. The Chengdu consulate serves as a key U.S. listening post for developments in Tibet, where Communist Party efforts to suppress dissent have long been a focus of tensions between China and the United States. “The current situation between China and the United States is something China does not want to see, and the responsibility rests solely with the United States,” the foreign ministry said. “We once again urge the U.S. to immediately revoke the erroneous decision to create necessary conditions for the return of bilateral relations to normal.”
China did not provide a timeline for the Chengdu closure, but Hu Xijin of the state-owned Global Times newspaper said the U.S. was given 72 hours. Hu on Wednesday said China had been given 72 hours to close Houston.
Opened in 1985 by then-Vice President George H.W. Bush, the Chengdu consulate offers U.S. citizen and visa services and promotes cooperation in agriculture, trade and education, in addition to other matters. It normally has about 200 staff, including around 150 locally hired Chinese employees, according to its website.
The U.S. has seven diplomatic missions in China, including the embassy in Beijing and consulates in five mainland Chinese cities — including Guangzhou, Shanghai, Shenyang and Wuhan — and a consulate general in Hong Kong.
- China may defy U.S. order to close consulate. The head of the Chinese Consulate in Houston said he could not commit to closing the facility by today — a direct threat to defy the State Department’s order this week to shutter operations by Friday. In an interview with Politico, Consul General Cai Wei said his government is protesting the U.S. order and his office will remain open “until further notice,” but declined to provide more detail.
- Trump says China trade deal 'means less to me now.' President Trump during a White House coronavirus briefing said the U.S./China trade agreement “means less to me now than it did when I made it. It just means much less to me, can you understand that?” The president noted that earlier this week ““was a record corn day” for Chinese purchasing” and said the U.S. had to turn the economy off “because of what China did.”
- Secretary of State Mike Pompeo slammed China in a speech on Thursday. He said Washington will no longer tolerate Beijing’s attempts to usurp global order. “The truth is that our policies, and those of other free nations, resurrected China’s failing economy, only to see Beijing bite the international hands that fed it,” Pompeo told an audience at the Richard Nixon Presidential Library in Yorba Linda, California. “We opened our arms to Chinese citizens, only to see the CCP exploit our free and open society. It sent propagandists into our press conferences, our research centers, our high-school and college campuses,” Pompeo said, adding that the Chinese government had also “ripped off our prized intellectual property” and “sucked supply chains away from America.”
- How the Cold War between China and U.S. is intensifying. In defense, trade, technology, media and diplomacy, among other areas, the rancor between the Trump administration and China’s ruling Communist Party is worsening. Link to NYT item.
- Chinese leaders are trying to avoid a complete breakdown in relations with the U.S., according to a New York Times article (link). China is already clashing with India, Britain, Canada, Australia and many other countries, and its economy is reeling from the pandemic.
- Three years after record-breaking Syngenta acquisition, ChemChina struggling under debt mountain. SOE’s $43 billion purchase of Swiss firm has left it with bills it is still grappling with. Even a planned IPO may not be the lifeline it’s hoping for. Link to Caixin article.
- China economy, coronavirus and trade war on agenda for Xi Jinping at top-level Politburo meeting. A meeting of China’s top decision-making body, scheduled for the end of this month, will be closely watched by economists and analysts keen on signals from the top Chinese leadership over what Beijing will do next, after the nation saw surprising economic growth in the second quarter. Link to SCMP article.
- Trade data upping expectations China will fill its TRQs. China trade data released Thursday points to the country having imported 3.66 million tonnes of corn over the January-June period and 3.35 million tonnes of wheat. Reuters reports that traders and analysts view the data thus far as a signal China is likely to use all of its annual tariff rate quotas (TRQs) on corn and wheat this year. Trade data through June put corn imports at 51% of the 7.2 million tonne TRQ for that commodity and wheat at 35% of the 9.64 million tonne TRQ. China used just over two-thirds of its corn TRQ in 2019 and only one-third of its wheat TRQ.
- China’s wheat imports surge to seven-year high amid food concern. China’s monthly wheat imports jumped to the highest in almost seven years in June, official customs data showed Thursday, as the world’s largest consumer of the grain seeks to increase food supplies amid the coronavirus pandemic and take advantage of cheap global prices. Link to Bloomberg article.
- U.S./China Phase 1 tracker: China’s purchases of U.S. goods. Link.
— Food and beverage industry update:
- Meatpacking employees in Pennsylvania sued the Occupational Safety and Health Administration this week, alleging a failure to protect frontline workers during the pandemic. The lawsuit alleges the company has failed to take safety precautions to prevent the spread of Covid-19 such as providing cloth face coverings, allowing for social distancing, or providing hand-washing opportunities.
— Update on reopening America... and around the world:
- The Centers for Disease Control and Prevention released additional guidance for schools considering how to reopen during the coronavirus pandemic. CDC Director Robert Redfield said the resources will help decision-makers make "safety-focused decisions" as the school year begins.
- President Trump on Thursday cited school meals as one reason that children should return to school in person in the fall. During a press briefing, the president briefly cited increased food insecurity and that 30 million children rely on school meals in public schools.
- AMC Entertainment is pushing back the reopening of its U.S. theaters to mid-to-late August, after several summer blockbusters delayed their release dates. The nation’s largest theater chain previously said it would reopen at the end of July. U.S. theaters closed and Hollywood studios halted the release of major motion pictures in March as the pandemic took hold, and they remain in a holding pattern as several states are experiencing a resurgence in Covid-19 cases.
- The economic crisis caused by the novel coronavirus pandemic has entered a new phase, with permanent business closures now outnumbering temporary ones, new data shows, according to a Washington Post article (link).
— Coronavirus update:
— 15,526,057: Confirmed cases world-wide, and 584,556 deaths
— 68,663: New U.S. cases recorded yesterday
— 4,038,864: Total confirmed cases in the U.S.
— 1,114: Deaths in the U.S. recorded yesterday
— 144,305: Total U.S. deaths
— 48,794,970: Tests conducted in the U.S.
Source: Johns Hopkins University as of 6:30 a.m. ET.
Virus deaths in the U.S. rose by more than 1,000 for a third consecutive day, as Health and Human Services Assistant Secretary Brett Giroir said the nation has about 200,000 infections daily, warning that testing and contact tracing would no longer be enough to contain the rampant outbreak.
Link to Covid Case Tracker
Link to Our World in Data
- China said it will have Covid-19 vaccine ready this year. Chinese companies are making headway in the global race to produce the first coronavirus vaccine. Liu Jingzhen, chairman of state-owned China National Pharmaceutical Group, also known as Sinopharm, said on state broadcaster CCTV that clinical trials that began in Abu Dhabi last week should be completed in roughly three months, paving the way for a vaccine to go to the market this year. Liu Jingzhen, the Sinopharm chairman and an engineer by training, told CCTV that he had tested CNBG’s vaccine on himself in late March, before clinical trials even kicked off in China. He said that the first two phases of testing in China showed the company’s vaccines to be 100% effective and with no cases of serious side effects. “In the next step, everyone should be able to use it with peace of mind,” he said.
POLITICS & ELECTIONS
— 2020 Presidential Election Interactive Map
— The Green Papers
- President Donald Trump canceled the Republican convention in Florida, the biggest event of his re-election campaign, due to the latest figures on the outbreak in one of America’s worst-hit states. Some events are scheduled to take place in Charlotte, North Carolina, the original venue, but most will move online. So, the Republicans’ convention will now resemble the Democrats', which party officials had announced in June would be mostly virtual.
- Almost 100 days out, Democrats are favored to take back the Senate, says Cook Political Report's Jessica Taylor. “While GOP incumbents are trying to run races independent of the president, if Trump’s polling numbers remain this dismal come November, that’s an unenviable and likely unsuccessful strategy, according to several top party strategists. As of now, Democrats are a slight favorite to win the Senate majority,” Taylor said. Meanwhle, Taylor said “Iowa is the newest worry for Republicans, a race we are shifting from Lean Republican to Toss Up.” Freshman Republican Sen. Joni Ernst’s re-election numbers previously were showing signs of softening. “Now they’re in a very perilous position,” Taylor notes, “and this race could become the tipping point of control in the Senate.”
- As of now, nearly 180 million Americans who are eligible to vote would be able to cast a ballot by mail in the fall — or 76% of Americans, according to an analysis in the Washington Post (link).
- Link to Democratic Party Platform. Some comments on ag, biofuels and trade:
— Carbon credits: “Democrats will partner with America’s farmers, ranchers, and forest landowners to make the U.S. agriculture sector the first in the world to achieve net-zero emissions, which will spark a revolution in agriculture and open up new revenue streams for farmers in energy and waste products, and grow bio-based manufacturing jobs.”
— Biofuels: The document pledges to strengthen the Renewable Fuel Standard, backing E15 blends, and other policies that support R&D for biofuels.
— Subsidies to smaller operations/farm policy: The platform favors “taking steps” to limit foreign ownership of American farmland and reforming farm policy so that subsidies flow toward better supporting small- and mid-sized farms. It also backs the right to repair farm equipment “rather than being forced to rely on large corporations for even the simplest fixes.”
— Food stamps: The document calls it “a moral abomination that any child could ever go to bed hungry,” and pledges increased funding for programs like the Supplemental Nutrition Assistance Program, WIC and school meals. It also pledges to “remove barriers” that keep formerly incarcerated people from getting access to nutrition programs.
— Global trade: The document criticizes President Donald Trump’s "reckless" tariff war with China while pledging to protect American workers from unfair foreign competition and ensuring that Democrats first invest in "American competitiveness at home” before initiating new trade deals. “Democrats believe that if the United States does not work with its allies and partners to shape the terms of global trade, China will shape them for us — and American working families and the middle class will pay the price. That’s why we will work with our allies to mobilize more than half the world’s economy to stand up to China and negotiate from the strongest possible position,” the draft says.
— Immigration/farmworkers: Platform promises to extend new wage and hour protections to farmworkers and to provide undocumented agricultural employees a path to citizenship.
— Broadband: Document pledges to extend broadband to all Americans, including by ensuring that municipalities and rural co-ops can build publicly-owned broadband networks.
OTHER ITEMS OF NOTE
- WSJ: U.S. says jet fighter came close to Iranian passenger plane over Syria. An American F-15 came within 1,000 meters of the plane, which was in the vicinity of a U.S. base. Passengers on an Iranian commercial airliner suffered minor injuries after it was forced to drop altitude suddenly to avoid a collision with a U.S. fighter jet over Syrian airspace. The plane had been traveling from Iran to Beirut with approximately 150 passengers on board. A U.S. Central Command spokesman said the U.S. F-15 was conducting a “standard visual inspection” on the plane as it was flying close to the U.S. military base at al-Tanf.
- U.S. and Britain accused Russia of developing and testing a space-based anti-satellite weapon. United States Space Command claimed that a Russian satellite, Cosmos 2543, launched a projectile; the Russian defense ministry admitted it was testing space equipment. The advent of in-orbit anti-satellite weaponry marks a new stage in the militarization of space.
- The late Rep. John Lewis will lie in state at the U.S. Capitol, House Speaker Nancy Pelosi (D-Calif.) and Senate Majority Leader Mitch McConnell (R-Ky.) said in a joint statement on Thursday. The civil-rights icon, who died July 17 of pancreatic cancer at age 80, will be honored at an invitation-only arrival ceremony at 1:30 p.m. ET on Monday, July 27, the Democratic and Republican leaders said.
- USMCA implementation update. The Labor Department is moving too slowly and must tell lawmakers how it is using $180 million to support labor changes in Mexico under the U.S.-Mexico-Canada trade agreement, said Ways and Means Democrats and working group members.
- Cotton AWP falls. The Adjusted World Price (AWP) for cotton declined to 40.04 cents per pound, effective today (July 24), down from 50.26 cents per pound the prior week and the first time under 50 cents per pound since the week of June 26. USDA said that Special Import Quota #14 would be established July 30 for 17,878 bales of upland cotton, applying to cotton purchased not later than Oct. 27 and entered into the U.S. not later than Jan. 25.