Disagreement on How Long to Clear Up Suez Canal Backlog

Posted on 03/30/2021 7:44 AM

Biden plans up to $4 trillion infrastructure spending; $3 trillion in tax increases

 


In Today’s Digital Newspaper


 

Market Focus:
• Disagreement on how long it will take to clear up Suez Canal backlog
• 10-year T-yield at 1.77% at highest level since last January
• U.S. dollar index hits another 4.5-month high
• Surging Baltic Freight Index slipping back to start this week
• Corn prices expected to rise further on recovering economy & ethanol demand
• Ag demand update

Pre-USDA-report positioning continues
• Cordonnier: U.S. corn plantings of 93 million acres, soybean plantings of 90.5 million
• Consultant raises Brazilian bean crop projection on improved weather for RGDS
• Mix of improvement and degradation for U.S. winter wheat
• Ukraine’s wheat exports unlikely to bump up against cap
• Russia extends price cuts on sugar and sunflower oil
• Argentina suspends 15 meat exporters for dodging industry regulations

 

Policy Focus:
• Biden plan: Up to $4 trillion in new spending; more than $3 trillion in tax increases
• Biggest tax-related issue ag sector is watching: stepped-up basis
• Three-month extension to national eviction moratorium

 

Biden Administration Personnel

• Biden plans to announce first slate of judicial nominees
• Biden taps Oscar Gonzales to assistance secretary at USDA

 

China Update:
• China’s WH Group: 2020 hog processing tumbled 46% as ASF cut supplies
• Exports of China’s corn a focus

 

Trade Policy:
• U.S. suspended trade relations with Myanmar

 

Energy & Climate Change:

• Biden administration wants to offer wind-power developers fast-track leasing
• Biden launches task force to probe scientific integrity


Coronavirus Update:
• Declining number of U.S. adults saying will not get vaccinated

 

Politics & Elections:
• Lisa Murkowski gets a Republican challenger
• Pompeo remains ‘combative’ as he considers presidential run
• Poll shows Lara Trump leading North Carolina GOP Senate primary field


Other Items of Note:
• Mount Rushmore shuts down after South Dakota wildfires force evacuations

 


MARKET FOCUS


 

Equities today: U.S. futures are mixed and volatile, as the focus continues on the fallout from Archegos Capital Management’s liquidation of more than $30 billion in stocks in recent days. In Asia, most major benchmarks closed higher. South Korea’s Kospi rallied 1.1% and Hong Kong’s Hang Seng added 0.8%. China’s benchmark Shanghai Composite Index rose 0.6%. European equity markets are showing modest gains in early trading.

 

     U.S. equities yesterday: The Dow finished up 98.49 points, 0.30%, at 33,171.37. The Nasdaq declined 79.08 points, 0.60%, at 13,059.65. The S&P 500 was 3.45 points lower, 0.09%, at 3,971.09.

 

On tap today:

 

     • S&P/Case-Shiller 20-city home-price index for January is expected to rise 10.8% from a year earlier. (9 a.m. ET)
    • Conference Board's consumer confidence index for March is expected to rise to 96.8 from 91.3 the prior month. (10 a.m. ET)
     • International Monetary Fund Managing Director Kristalina Georgieva delivers a spring meetings curtain-raiser speech at 11 a.m. ET.
     • Federal Reserve speakers: Vice Chairman Randal Quarles about the Financial Stability Board at 9 a.m. ET, Atlanta's Raphael Bostic on the post-Covid economy at 12 p.m. ET, and New York’s John Williams at a virtual event on over-50 entrepreneurs at 2:30 p.m. ET.
     • Japan's preliminary industrial production figures for February are out at 7:50 p.m. ET.
     • China's official purchasing managers indexes for March manufacturing and services are out at 9 p.m. ET.

 

Wait until Bernie Sanders and Elizabeth Warren see this: If the minimum wage had grown at the same rate as Wall Street bonuses since 1985, workers would be paid $44 an hour today.

 

Market perspectives:

 

     • Outside markets: The U.S. dollar index is higher and hit another 4.5-month high overnight. In bond markets, the yield on the 10-year Treasury note rose to 1.772% — near its highest level in more than 14 months — from 1.721% Monday. Yields rise when prices fall. Gold prices are solidly lower again today and hit a three-week low overnight, as the yellow metal feels the pressure of rising bond yields, a stronger U.S. dollar and a wobbly crude oil market. Gold and silver futures have slumped ahead of the U.S. trading start, with gold under $1,686 per troy ounce and silver under $24.27 per troy ounce.

 

     • Crude oil futures have weakened considerably ahead of the U.S. trading start, with U.S. crude around $60.30 per barrel and Brent around $63.80 per barrel. Prices eased in Asian action, with U.S. crude down 13 cents at $61.43 per barrel and Brent down 21 cents at $64.77 per barrel.


     • Huge 220,000-ton container ship Ever Given that blocked the Suez Canal for six days was freed and began moving north to an anchor point Monday, opening the critical waterway, as hopes grew that global supply delays will ease. Nearly 13% of global maritime trade and 10% of seaborne oil shipments travel through the canal. Over 420 vessels were held up waiting for the Ever Given to be moved, and at least 113 of those were expected to cross through the canal by Tuesday morning (Egyptian time). Estimates signal it will take at least 10 days to clear the backlog, despite port authorities saying it will only take three days to clear the backlog. Canal authorities gave priority to livestock carriers that had been stuck in the prior traffic jam.

 

     • Baltic Freight Index tracking bulk shipping rates reached its highest level since September 2019 last week before slipping back to start this week. Shipping trade group Bimco says carriers are scrambling to add capacity, with 279 vessels trading hands so far in 2021 and sales of second-hand ships on track for a record year.

 

     • Corn prices have hit their highest levels in almost eight years. Analysts say they are likely to get a further boost from motorists. Drivers returning to the road are expected to lift demand for ethanol. About 40% of the U.S. corn crop goes to producing the gasoline additive, and consumption has plunged amid the pandemic. Now ethanol producers envision a rebound powered by economic reopenings and a potential wave of bioenergy-friendly regulations from the Biden administration, the Wall Street Journal reports (link).

 

     • Ag demand: Algeria issued an international tender to buy milling wheat. The Baltic countries are expected to do the business.  At today's wheat values in the U.S. and basis levels, a good part of the HRW is priced as a feed crop, competing for feed demand. 

 

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

     • Pre-report positioning continues
     • Cordonnier: U.S. corn plantings of 93 million acres, soybean plantings of 90.5 million
     • Consultant raises Brazilian bean crop projection on improved weather for RGDS
     • Mix of improvement and degradation for U.S. winter wheat
     • Ukraine’s wheat exports unlikely to bump up against cap
     • Russia extends price cuts on sugar and sunflower oil
     • Argentina suspends 15 meat exporters for dodging industry regulations

 


POLICY FOCUS


 

— Up to $4 trillion in new spending and more than $3 trillion in tax increases is the possible bottom line when President Biden on Wednesday unveils his infrastructure proposals and how to pay for them. Whatever is unveiled Wednesday will not likely be the final package as additional tax features are still being pondered.

 

     The plan will center on proposals to repair the nation’s physical infrastructure, including its bridges, railways, ports, water systems and more, while reviving domestic manufacturing, investing in research and development, expanding clean energy investments, and creating a nationwide infrastructure for electric vehicles with 550,000 charging stations.

 

     The second “social infrastructure” part of the plan, to be unveiled late in April, will likely include initiatives to expand childcare; provide paid family and medical leave; approve an expansion of health care and the Affordable Care Act; and extend a larger child benefit recently approved by Congress, among other measures.

 

     The pay-fors: White House press secretary Jen Psaki said Monday that Biden would propose ways to pay for the entirety of the infrastructure plan. The White House is studying a range of tax hikes on wealthy investors, corporations and rich people to pay for the package and amount to the largest federal tax increases since World War II. Raising the corporate tax rate to 28% from 21%, collecting more taxes on multinational companies’ foreign earnings and raising the top income-tax rate are all also options Democrats are considering. During the campaign, the Biden administration endorsed raising the top income-tax rate to 39.6% from 37%.

 

    Legislative strategy: No decisions have been made about which of the proposals they would aim to move through Congress first.

 

     Disagreement not just among Republicans, but some Democrats. Two moderate Democrats — Reps. Josh Gottheimer (D-N.J.) and Tom Suozzi (D-N.Y.) — told Axios they won't consider Biden's tax proposals unless he agrees to reinstate the State and Local Tax (SALT) deduction capped under Trump. Republicans put a $10,000 cap on previously unlimited federal deductions for state and local taxes paid to help finance 2017 tax cuts, a cost primarily borne by high-tax blue states such as California and New York. Senate Majority Leader Chuck Schumer (D-N.Y.) on Friday signaled that he plans to bring up the return of the full deduction when negotiations begin over reforming the tax code as a means to pay for Biden’s next initiatives.

 

     As for Republicans, Senate Minority Leader Mitch McConnell (R-Ky.) said Monday that he could support legislation focused on infrastructure — but not tax increases.

 

— Biggest tax-related issue the ag sector is watching: stepped-up basis. Democrats on Monday outlined their thoughts on this issue as far left Democrats released a draft plan (link) to tax unrealized capital gains at death — with a $1 million per-person exemption (indexed to inflation) — as one way to flesh out an idea Biden backed during the 2020 campaign. The Wall Street Journal reported on this topic (link) and said: “Under current law, someone who dies with appreciated assets — including homes, businesses and stocks in taxable accounts — doesn’t have to pay capital-gains taxes on that increase. Instead, the heirs have to pay capital-gains taxes only after they sell and only on gains after the original owner’s death. That ‘stepped-up basis’ is a longstanding feature of the tax code, but it has come under increasing attacks from Democrats who see wealthy people’s profits escaping the income tax.”

 

     “The stepped-up basis loophole is one of the biggest tax breaks on the books, providing an unfair advantage to the wealthiest heirs every year. This proposal will eliminate that loophole once and for all,” Sen. Chris Van Hollen (D-Md.) said in a statement. The congressional Joint Committee on Taxation estimates that the current rule saves taxpayers more than $41 billion a year.

 

     Details: Under the Van Hollen proposal, the first $1 million of that gain would be free from income taxes but the remaining $8 million would be considered a capital gain. The Van Hollen bill would let some taxpayers pay the required taxes over 15 years, if the gains are from assets that aren’t actively traded. The bill also includes several measures that would change how the tax code treats gifts and transfers to trusts.

 

— A three-month extension to a national eviction moratorium was announced by the Biden administration, a move designed to help millions of tenants who have fallen behind on their rent even as courts have disagreed on whether the relief is legal. The Centers for Disease Control and Prevention extended the eviction moratorium through June 30. It had been set to expire Wednesday,
 


BIDEN ADMINISTRATION PERSONNEL


 

— Biden plans to announce his first slate of judicial nominees, elevating U.S. District Judge Ketanji Brown Jackson to the influential appeals court in Washington to succeed Merrick Garland. Jackson is among Biden’s 11 nominations that include three Black women for appeals court vacancies and the first Muslim American to serve on a District Court.

 

— Biden taps Oscar Gonzales to assistance secretary at USDA. Oscar Gonzales, a former USDA employee from the Obama administration, was appointed by President Biden on Monday to serve as assistant secretary for administration at USDA. Gonzales prior positions included being deputy assistant secretary for administration, deputy chief of staff for operations and senior adviser on immigration reform to USDA Sec. Tom Vilsack. He also worked several years for the United Farm Workers Foundation and his wife, Christine Chavez, is the granddaughter of American labor and civil rights legend Cesar Chavez,

 


CHINA UPDATE


 

— China’s WH Group says 2020 hog processing tumbled 46% as ASF cut supplies. The use of illicit African swine fever vaccines in China last year caused infections that cut hog supplies and lifted prices, said Ma Xiangjie, president of Henan Shuanghui Investment and Development, WH Group's domestic unit. China’s largest processor WH Group in an earnings release said hog processing tumbled 46% in 2020 from the year prior due to tight supplies. The company also said it imported 700,000 MT of meat in 2020, with 70% of it coming from the United States. The processor expects hog production to climb in 2021, but it also commented that prices will likely remain well above those of overseas markets.

 

— Exports of China’s corn a focus.  China continues to ship only about 11 million bushels a week. Says trader/analyst Richard Crow: “Somewhere that number has to jump if the corn on the book gets shipped.  Cash corn on the River is inverted, suggesting the pipeline is tight.”

 


TRADE POLICY


 

— U.S. suspended trade relations with Myanmar after soldiers and police backing the military coup there killed more than 90 people. Bilateral trade between the U.S. and Myanmar totaled about $1.36 billion last year. U.S. Trade Representative Katherine Tai said Monday the U.S. was reviewing trade benefits for the country under the now-lapsed Generalized System of Preferences (GSP).

The U.S. imported slightly more than $1 billion worth of goods from the country, including around $621 million of apparel and footwear.

 

— USTR to seek public input on DST actions. The Office of the U.S. Trade Representative (USTR) said Monday it would soon publish a notice in the Federal Register to seek public comment on proposed actions in response to digital services taxes (DSTs) adopted by Austria, India, Italy, Spain, Turkey, and the U.K. In January, USTR determined DSTs put in place in those countries were subject to retaliatory action because they discriminate against U.S. companies, are inconsistent with international tax principles and burden U.S. companies, the result of investigations launched by the Trump administration.

 

     USTR also said it was terminating Section 301 DST investigations for Brazil, the Czech Republic, the European Union (EU) and Indonesia, as they “have not adopted or not implemented the DSTs under consideration when the investigations were initiated.” If any of the four later adopts or implements a DST, USTR said it may initiate new investigations.

 


ENERGY & CLIMATE CHANGE


 

— Biden administration unveils offshore wind energy effort. The Biden administration announced an effort across several agencies to bolster deployment of wind energy, focusing the initial effort on an area off the New York and New Jersey coast. The Bureau of Ocean Energy Management (BOEM) announced the Wind Energy Area in the New York Bight (between Long Island and the New Jersey coast) with BOEM planning to announce a Proposed Sale Notice which will include a public comment period. The goal is for a lease sale late this year or in early 2022.

 

     The administration also announced it would seek to employ tens of thousands of workers to deploy 30 Gigawatts (30,000 megawatts) of offshore wind by 2030, including 44,000 workers in offshore wind by 2030 and 33,000 additional jobs in communities to support the wind activity.

 

     The effort would produce enough electricity for 10 million homes for one year and avoid 78 million tonnes of CO2 emissions.

 

     The Department of Transportation announced a Notice of Funding Opportunity for port authorities and others to apply for $230 million in port and intermodal infrastructure-related projects through the Port Infrastructure Development Program in support of the wind energy effort. The Department of Energy also announced its Loan Programs Office would facilitate access for up to $3 billion in funding under the Title 17 Innovative Energy Loan Guarantee Program as part of the effort.

 

     Perspective: The country has only one offshore wind project online at this time, generating 30 megawatts, off Rhode Island.

 

— Biden launches task force to probe scientific integrity. The Biden administration is looking for experts to help probe whether Trump administration policies wrongly subjected scientific research to political interference. The White House on Monday directed federal agencies to nominate experts to a new Task Force on Scientific Integrity to “review the effectiveness of scientific integrity policies across the federal government.” They have until April 2 to respond.

 


CORONAVIRUS UPDATE


 

 Summary: Global cases of Covid-19 are at 127,675,683 with 2,792,706 deaths, according to data compiled by the Center for Systems Science and Engineering at Johns Hopkins University. The U.S. case count is at 30,331,798 with 550,036 deaths. The Johns Hopkins University Coronavirus Resource Center said that there have been 145,812,835 doses administered, 49,480,294 have been fully vaccinated, or 15.1% of the U.S. population.

 

— Latest Census Bureau survey found about 17% of adults said they would either definitely or probably not get vaccinated, down from 22% in January, while a new CDC study showed vaccines from Pfizer-BioNTech and Moderna were effective in real-world use. President Biden said new vaccine sites are being added, and asked Americans to keep taking precautions. With Covid-19 cases on the rise, the head of the CDC described a feeling of “impending doom.”

 


POLITICS & ELECTIONS



— Lisa Murkowski gets a Republican challenger. Kelly Tshibaka, who leads the Alaska Department of Administration, announced Monday that she would try to unseat her fellow Republican, Sen. Lisa Murkowski, in next year’s Senate race in Alaska. Murkowski voted to convict former president Donald Trump in his second impeachment trial, a move that prompted him to vow to campaign against her next year and drew a censure from the Alaska Republican Party. In a campaign video, Tshibaka seeks to paint Murkowski as cozy with President Joe Biden, saying Murkowski supported Biden for president. The Hill reported in January that Murkowski said she did not vote for Trump in the November election but wrote in another person.” Murkowski is the daughter of former senator and governor Frank Murkowski, and she's been in the Senate since 2002

 

— Pompeo remains “combative” as he considers presidential run. The New York Times reports (link) under the headline “With an Eye on 2024, A Rarely Bashful Pompeo Grows More Combative” that as former Secretary of State Mike Pompeo takes the first steps toward a presidential bid, “he is emerging as the most outspoken critic of President Biden among former top Trump [administration] officials.” In Iowa and New Hampshire over the past week, Pompeo “questioned the Biden administration’s resolve toward China,” and “derided” President Biden “for referring to notes during his first formal news conference.” Pompeo “has notably steered clear of directly criticizing” Secretary of State Blinken, though he has “repeatedly denounced policies in which Mr. Blinken plays a key role.”

 

— Poll shows Lara Trump leading North Carolina GOP Senate primary field. A Meredith College poll of 217 likely North Carolina Republican Senate primary voters (3/12-3/15) has Lara Trump at 27%, ex-Gov. Pat McCrory (R) 17%, ex-Rep. Mark Walker (R-N.C.) 7%, and Rep. Ted Budd (R-N.C.) 6%. The New York Times reports Lara Trump is joining Fox News as a paid on-air contributor.
 


OTHER ITEMS OF NOTE     


 

— Mount Rushmore shuts down after South Dakota wildfires force evacuations. Three “dangerous” wildfires in the Black Hills of South Dakota have forced the evacuations of hundreds of homes and the shutdown of the Mount Rushmore National Memorial, officials said.

 


 

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