Final hemp production rules released | Contract broilers big winner in latest USDA aid release
In Today’s Updates
• U.S. markets closed for Martin Luther King Day
• Dollar slightly higher on Yellen’s reported testimony on Tuesday
• China’s GDP China’s jumped 6.5% in the final quarter
• Pakistan plans to import 500,000 tons of sugar to boost stocks
• Philippines may triple pork imports to cool soaring prices.
• USDA releases final hemp production rules
• Graphical look at USDA’s latest Covid aid
• China produced 41.1 million tons of pork in 2020, down 3.3% from 2019
• China inventory of 406.5 million hogs as of end-2020, +31% y/y
• Engineered-rice theft by Chinese companies to be probed at ITC
Energy & Climate Change:
• Biden will rescind permit for TC Energy’s Keystone XL pipeline on first day in office
Food & Beverage Industry Update:
• Groceries prove a pandemic bright spot for BP and Shell
• Newly reported Covid-19 cases in U.S. down from day earlier
• Drugmakers racing to develop new generation of Covid-19 medicines
Politics & Elections:
• Biden names all women for No. 2 position at USDA, Transp., HHS, Interior, Ed.
Other Items of Note:
• Russia police detained opposition leader Alexey Navalny, critic of President Putin
Equities today: Global stocks were mixed with U.S. markets closed for Martin Luther King Day. The Toronto Stock Exchange, London Stock Exchange, Shanghai Stock Exchange, and the Tokyo Stock Exchange are all open for the U.S. holiday. Chinese stocks advanced after data showed the world’s second-largest economy enjoyed its best quarter of year-over-year growth in two years. The benchmark Shanghai Composite Index rose 0.8% by the close. Japan’s Nikkei 225 fell 1% while Korea’s Kospi Composite dropped 2.3%. Investor sentiment was knocked by a Reuters report that the Trump administration has notified Huawei suppliers that it is revoking certain licenses to sell to the Chinese company.
U.S. equities Friday: The Dow fell 177.26 points, 0.57%, at 30,814.26. The Nasdaq lost 114.14 points, 0.87%, at 12,998.50. The S&P 500 was down 27.29 points, 0.72% at 3,768.25.
For the week: The S&P 500 and Nasdaq Composite each fell more than 1% for the week. The Dow Jones Industrial Average lost 0.9% over that time period. It was the first weekly decline for the Dow in five weeks. The Nasdaq also snapped a four-week winning streak. The numbers: Dow -0.9%. S&P 500 -1.5%. Nasdaq -1.5%. Russell 2000 +1.5%. CBOE Volatility Index +12.9% to 24.34.
The Dow and S&P 500 are up 0.7% and 0.3%, respectively in the new year. The Nasdaq is up 0.9% in January.
On tap today:
• U.S. holiday: federal offices and markets are closed.
China’s gross domestic product jumped 6.5% in the final quarter, topping forecasts and pre-pandemic growth rates. By comparison, China’s GDP rose by 3.2% and 4.9% in the second and third quarters of the year, respectively, after suffering a historic 6.8% contraction in the first. The data means the Chinese economy was the only major one to avoid contraction in 2020, having grown by 2.3% in 2020, but it was the country’s weakest annual economic expansion since Mao Zedong’s death in 1976. Forecasters expect China to grow by another 8% or more in 2021 as other parts of the economy continue to make up for the lost time last year. Data released today showed employment and wages remain robust, which could help support consumption. Industrial output rose 7.3% in December from a year earlier, accelerating from 7% growth in November and beating expectations for a 6.8% increase. China’s statistics bureau said retail sales rose by just 4.6% in December from a year earlier, lower than November’s 5% increase and a 5.5% expansion expected by economists. For the full year, retail sales fell 3.9% in 2020 from a year earlier, compared with 2019’s 8% growth.
• Outside markets: The U.S. dollar gained over the last two weeks, buoyed by the president-elect’s proposal for a $1.9 trillion stimulus package. Most developing-nation currencies have slumped in that span. The dollar rose slightly today. Brent-crude futures, the benchmark in international energy markets, edged up 0.1% to $55.14 a barrel.
• Pakistan plans to import 500,000 tons of sugar to boost stocks, according to the minister for Industries and Production.
• Philippines may triple pork imports to cool soaring prices. The Southeast Asian nation is looking at increasing the 54,000 metric tons of pork it imports annually, Agriculture Secretary William Dar said, according to a transcript sent by his agency on Monday. Deliveries to the main Luzon island are being rushed, while a program to repopulate hogs is underway, he said. Prices of pork products have reached 400 pesos ($8.3) a kilogram in the capital from 225 pesos last year, according to Agriculture Department data. Accelerating food prices pushed inflation to 3.5% last month, topping economists’ expectations. The Philippines was expecting a shortfall in pork supply by end-2020 due to African swine fever. Its swine production is expected to continue falling this year due to ASF and related restrictions, according to USDA’s Foreign Agricultural Service.
— Final rules for hemp production released. USDA late Friday released a final rule package that is the framework for the U.S. hemp industry. The 301-page package (link) includes some changes from an October 2019 interim final rule that provided initial guidelines to implement the 2018 Farm Bill which removed hemp from the Controlled Substances Act and set a legal definition for hemp as 0.3 delta-9-tetrahydrocannabinol (THC) on a dry weight basis. The finished regulations come after 5,900 public comments and letters from members of Congress.
The final rule package takes effect March 22 and provides steps for USDA to review and approve plans submitted by state, territorial and tribal governments for regulating hemp production. The rules also lay out how the department will regulate farmers in states or tribal lands that have not outlawed hemp but also have not submitted plans.
Under the final rule, farmers will not be labeled as negligent if test samples of their hemp crop register at 0.5% (THC) on a dry weight basis. The regulation would put the negligent threshold at 1% THC. Being declared negligent three out of five years could result in a farmer being barred from hemp production for five years. The hemp industry argued that given the volatile nature of THC in hemp plants that a farmer who followed all the rules could still exceed the 0.5 percent threshold.
The rule also would allow farmers with crops that test above 0.3% THC level to continue to dispose of so-called hot plants by plowing the plants under to amend the soil, cutting and blending the plants with manure or other material to make compost and burning the plants. The options allow farmers to get some use out of the plants or avoid more costly methods of destruction.
Farmers would get more time for testing and harvesting their plants. The interim final rule gave them 15 days before a planned harvest to get THC testing necessary to determine if the crop met the legal definition for hemp. The final rules expand that window to 30 days for testing and the start of harvesting. The hemp industry had complained that the tight window for testing would result in logjams at labs and delay harvesting.
The final rule keeps a requirement that samples for pre-harvest testing must come from the hemp flower, which farmers argue boost THC readings. However, USDA now will allow flower samples that include floral material and five to eight inches of the plant. Hemp groups had sought changes that would allow samples from the whole plant as one way to even out high readings in areas where THC is concentrated.
States with USDA-approved plans will get more flexibility on how the testing is done, particularly for plants that are raised for clones or other purposes and never reach the flowering stage. USDA requires that all testing be done by labs registered with the Drug Enforcement Agency, but facilities interested in being hemp facilities will have time to register. The department will not begin enforcement of the requirement until Dec. 31, 2022.
USDA has approved plans from 45 states and tribes, but many are still in the process of putting the plans into action. Twenty states and nine tribes submitted reports to the department by November 2020 that showed 6,166 acres were planted under the 2018 farm bill regulations.
Congress included language in the fiscal 2021 omnibus spending bill that will allow states to continue to operate under their 2014 plans until Jan. 1, 2022.
— China produced 41.1 million tons of pork in 2020, down 3.3% from 2019, as its domestic hog herd recovers from African swine fever, according to data published by the National Bureau of Statistics on Monday. Key figures:
• Pork decline eased from 21.3% slump in 2019
• China has inventory of 406.5 million hogs as of end-2020, +31% y/y
• Number of pigs slaughtered in 2020 fell 3.2% y/y to 527 million
• China’s 2020 total meat output at 76.4 million tons, -0.1% y/y
• Beef production +0.8% to 6.7million tons
• Poultry +5.5% to 23.6 million tons
• Eggs +4.8% to 34.7 million tons
— U.S./China Phase 1 tracker: China’s purchases of U.S. goods. Link.
— Engineered-rice theft by Chinese companies to be probed at ITC. The U.S. International Trade Commission (ITC) has begun an investigation into allegations that a Chinese company is importing genetically engineered rice seeds for medical uses that copy patented technology owned by Kansas developer Ventria Bioscience, Bloomberg reported. Ventria said it developed rice seeds to produce a protein called albumin used in the manufacture of medicines like immunotherapy drugs, gene therapies and vaccines, including ones for Covid-19. Wuhan Healthgen, a company founded by a former Ventria scientist, is making a plant-based albumin using techniques patented by Ventria, according to the complaint. Ventria said it had filed a civil trade secret suit against the former employee but the case ended in 2013 when he refused to return to the U.S. and Chinese officials refused to serve or enforce subpoenas. The new complaint accuses Wuhan Healthgen of copying manufacturing techniques covered by two U.S. patents. Commission investigations typically take 15-months.
ENERGY & CLIMATE CHANGE
— President-elect Joe Biden will rescind the permit for TC Energy’s Keystone XL pipeline on his first day in office, according to reports. Environmentalists have long opposed the extension, which would connect Canadian tar-sand producers to American refineries. Barack Obama blocked it in 2015; Donald Trump approved it in 2017. The oil developer plans to announce a series of overhauls — including a pledge to use only renewable energy, pledging zero carbon emissions — in a bid to win President-elect Joe Biden’s support for the controversial project.
FOOD & BEVERAGE INDUSTRY
— Groceries prove a pandemic bright spot for BP and Shell. Oil majors bet offering more fresh food and services at gas-station stores can help offset declining oil income. Link to details via the WSJ.
— Summary: Newly reported Covid-19 cases in the U.S. were down from a day earlier, as were deaths and hospitalizations. Sources: Johns Hopkins University as of 6:30 a.m. ET; Vaccination data from the Centers for Disease Control and Prevention as of yesterday; Hospitalization figures from the Covid Tracking Project as of yesterday.
• 12,279,180: Vaccine doses given so far in the U.S.
• 177,918: New U.S. cases recorded yesterday
• 1,749: Deaths in the U.S. recorded yesterday
• 124,387: People currently hospitalized in the U.S.
• 397,600: Total U.S. deaths
• 95,118,418: Confirmed cases world-wide, and 2,032,446 deaths
— Covid medicines currently available are cumbersome to use, and doctors worry that virus variants could make them less effective. Drugmakers are racing to develop a new generation of Covid-19 medicines that are easier to give to patients and to stay ahead of virus mutations that could make some current drugs less effective. Link to WSJ article for details.
POLITICS & ELECTIONS
— Biden names all women for No. 2 position at USDA, Transportation, HHS, Interior, Education. President-elect Joe Biden on Monday nominated five deputies to serve in the second spots of federal agencies. The nominees, who must be confirmed by the Senate, are:
• Jewel H. Bronaugh at USDA,
• Polly Trottenberg at Transportation,
• Andrea Palm at Health and Human Services,
• Elizabeth Klein at Interior, and
• Cindy Marten at Education.
Klein, Palm, Bronaugh and Trottenberg worked in their same departments during the Obama administration. Bronaugh would be the first Black woman to serve in the senior role at USDA. Biden had been under pressure to nominate a Black person to be Agriculture secretary but went with Tom Vilsack, who had the role under President Barack Obama.
Marten is currently superintendent of the San Diego Unified School District. She began her career in education as a classroom teacher. She has stressed the need to reopen schools closed due to the pandemic.
OTHER ITEMS OF NOTE
— Russia police detained opposition leader Alexey Navalny, an outspoken critic of President Vladimir Putin, as he arrived in Moscow after being treated in Germany for poisoning. The 44-year-old's capture at passport control was shown on a live video feed on his YouTube channel. “This is my home,” he told reporters shortly before he was detained. “I’m not scared of anything.” Aides said he wasn’t allowed access to a lawyer and was being held at an undisclosed location. The U.S. condemned Russia’s decision and called for Navalny’s immediate and unconditional release, echoing similar demands from the European Union.