Perdue says CFAP 2 coming next week, but no aid to ethanol without Congress
In Today’s Updates
* U.S. economy adds 1.4 million jobs in August | Unemployment rate falls to 8.4%
* More countries reported record-breaking contractions in quarterly GDP
* Rebound in hog futures is accelerating
* Trucking companies are reporting stronger freight demand
* U.S. in July posted its biggest trade deficit in more than a decade
* 881,000 people filed for unemployment benefits in week ending Aug. 29
* Labor Day market schedule
* Perdue: CFAP 2 coming next week
* Is 36% of net farm income from gov't payments sustainable?
* Gap in reaching new aid package continues at $1 trillion
* Perdue comments on Phase 1 accord with China
* U.S. farm products sales are nearly $8 billion YTD; 44% below pace needed
* Trump administration seeks details on all China-related funding
* Trump administration looking into banning more Chinese apps
Update on re-opening America... and around the world:
* USDA plan to return employees to their offices generates concern
* Five NFL teams will let fans into stadiums at reduced capacity
* IHME model projecting 410,451 Covid-19 deaths in U.S. by Jan. 1, 2021
* House panel asks CDC Director Robert Redfield to brief members next week
* Trump’s vaccine chief: Vaccine probably won’t be approved before Election Day
Politics & Elections:
* Economist takes a look at America's 'ugly election'
* Cook Political Report's Amy Walter sizes up presidential contest
* Trump's environmental agenda if he gets second term
* White House spokes tries to defend withholding funds from 'Democratic states'
* Biden’s tax vision
* Rural Americans facing outsize hardship under Trump. Will they still vote for him?
* Facebook says it will remove videos of Trump encouraging people to vote twice
Other Items of Note:
* Suspect in Portland shooting is killed
* Pelosi, Mnuchin agree to avoid government shutdown in October
* You may have heard this before but... Chances dim for Brexit trade deal
* Worst cargo maritime disaster in several years unfolding in East China Sea
* Mexico today begins issuing pre-approval permits on some steel exports
* Justice Department plans to bring an antitrust case against Google
Equities today: U.S. equity futures signal a mixed opening. Focus today is on the monthly report on the U.S. labor market. It showed the U.S. unemployment rate fall to 8.4% in August and U.S. employers added 1.37 million jobs in August, above the 1.3 million jobs analysts expected. International markets were mixed. The Stoxx Europe 600 advanced 0.6%. In Asia, Japan’s Nikkei 225 closed down 1.1%, South Korea’s Kospi Composite lost 1.2% and China’s Shanghai Composite fell 0.9%. Australia’s S&P/ASX 200 fell nearly 3.1%, in its worst session since the start of May.
U.S. equities yesterday: The Dow fell 808 points, 2.8%, to 28,293. The S&P 500 lost 125.75 points, 3.51% to 3,455.06, on track for its first weekly loss in six weeks. The Nasdaq dropped 598.34 points, 4.96%, to 11,458.10, its biggest one-day percentage decline since June 11.
In bond markets, the yield on the 10-year Treasury ticked down to 0.621%, from 0.650% Wednesday. Yields fall when prices rise.
U.S. crude-oil futures fell for the fifth time in six sessions, sliding 0.3% to $41.37 a barrel—their lowest close in nearly a month.
On tap today:
• U.S. nonfarm payrolls for August are expected to increase by 1.321 million from a month earlier and the unemployment rate is expected to fall to 9.8% from 10.2%. (8:30 a.m. ET). Update: The U.S. economy added 1.37 million jobs in August, and the unemployment rate fell below 10% for the first time since the pandemic took hold. The unemployment rate fell to 8.4%, below the pre-release forecast of 9.8%.
• Baker Hughes rig count is out at 1 p.m. ET.
• CFTC Commitments of Traders report, 4 p.m. ET.
U.S. economy adds 1.37 million jobs in August, and the unemployment rate fell to 8.4%, first time below 19% since the pandemic took hold. The unemployment rate was 3.5% in February, a half-century low, just ahead of the pandemic. The improvement in the August jobs report is good news for the economy, which has been showing signs of a rebound from the recession that began with business closures aimed at slowing the spread of the coronavirus.
Another reminder of the economic onslaught caused by Covid-19 was vivid this week as more countries reported record-breaking contractions in quarterly GDP. India’s economy was around a quarter smaller in April to June than in the first three months of the year. Australia’s GDP shrank by 7%, Brazil’s by 9.7%, and Turkey’s by 11%. Those countries are in recession, in Australia’s case for the first time in nearly three decades.
• Rebound in hog futures is accelerating. USDA reported U.S. pork export sales last week jumped 36% from a week earlier to the highest total since last November. Exporters sold 53,600 MT of pork, including 28,700 to China. Domestic retailer demand for pork remains strong, helping keep the rising supply of pork moving through the supply chain. Lower average weights than a year ago have added to perceptions backlogged animals from Covid-19 continue to decline amid large Saturday slaughter levels. Prices are in a four-week-old price uptrend on the daily bar chart. The next upside price objective for the hog bulls is to close October prices above solid chart resistance at the April high of $62.70.
• Prices for Brent crude rose 0.7% to $44.38 a barrel. That still puts the international oil benchmark on course to lose 3.5% this week. That would be its biggest weekly decline since mid-June. Nymex crude oil prices are firmer and trading around $41.75 a barrel.
• Trucking companies are reporting stronger freight demand as retailers and manufacturers move to restock depleted inventories, in a sign of strengthening corporate confidence in the U.S. economy. Old Dominion Freight Line and Saia both said this week that tonnage on their trucks was up in the first weeks of the third quarter, while tight capacity and improving demand are driving prices on trucking’s spot markets to their highest levels of the year, the Wall Street Journal reports (link).
• The U.S. in July posted its biggest trade deficit in more than a decade. The growth of the trade gap reflected a pickup in U.S. demand for foreign-made goods and services as states eased restrictions on business activities across the country. The overall U.S. trade deficit surged to $63.6 billion in July, up sharply from $53.5 billion in June and the largest imbalance since July 2008. The July deficit was driven by a record 10.9% increase in imports, which rose to $231.7 billion. Exports rose by a smaller 8.1% to $168.1 billion. For July, the trade deficit with China totaled $31.6 billion, an 11.5% increase from the June imbalance. The U.S. had an ag trade deficit of $601.5 million in July, as exports totaled $10.314 million against imports of $10.915 million.
Some other nuggets from the report:
— $340 billion trade deficit in the first seven months of 2020 is 12.2% higher than during the same period in 2016.
— Trade deficit with China was $3 billion more on the month at $31.6 billion.
— Deficit with Europe also increased $3 billion from the prior month, to $23.1 billion.
— July 2020 surplus in services trade was the smallest since August 2012, at $17.4 billion.
• Labor Department said Thursday that 881,000 people filed initial claims for unemployment benefits in the week ending Aug. 29, only the second time since March that the number has fallen below 1 million. The latest weekly figure reflects a change in the way the department seasonally adjusts the data.
• Labor Day schedule: Grain and livestock markets will trade normal hours today ahead of the Labor Day weekend. Markets and government offices are closed on Monday, Sept. 7 for the holiday. Grain markets will resume trading with the overnight session starting at 8 p.m. ET on Sept. 7. Livestock markets will resume trading at 9:30 a.m. ET on Tuesday, Sept. 8.
— Perdue says USDA will release rules for the next round of Coronavirus Food Assistance Program payments (CFAP 2) next week. Telegraphing the coming development for weeks, USDA Secretary Sonny Perdue in Iowa on Thursday said details about CFAP 2 would come just ahead of the Sept. 11 deadline for applying for the first round.
Some details of CFAP 2. Speaking at a farm in Radcliffe, Iowa, after touring crop damage from the Aug. 10 derecho, Perdue said the payments would be designed to compensate farmers for losses incurred after April 15 through the end of the year. He also said that CFAP 2 would address concerns among livestock producers that weren’t compensated for post-April 15 losses due to the Covid-19 pandemic.
Also as expected, Perdue said there would be no payments for ethanol producers, textile mills and other processors of agricultural commodities seeking aid, adding USDA would need additional authority from Congress to make those kinds of payouts. As he visited Performance Livestock Analytics in Ames, Purdue was asked about aid for the ethanol industry after millions of acres were damaged. |Right now we don't have any ability to go to the processing side of it. We cover our producers... obviously many of them are invested in ethanol.” Sen. Ernst said the Senate is working on another aid package that would include $20 billion in discretionary funds for USDA.
Perdue also suggested Congress could authorize additional disaster-related aid which would likely be along the lines of WHIP+.
Funding for CFAP 2 would come from USDA's Commodity Credit Corporation (CCC).
Perdue visited an engineered wetland, a fish farm, and two other agribusinesses during his trip to Iowa. During remarks at a Hardin County farm (Eagle’s Catch, an indoor fish farm located in Ellsworth, Iowa), Perdue publicly signed a document so farmers in 42 Iowa counties who had crop or property damage from last month’s derecho may apply for emergency federal loans through the Farm Service Agency — Perdue declared 18 Iowa counties natural disaster areas; 25 contiguous counties are also eligible for disaster relief programs. Perdue said more counties may qualify for aid in the future. Perdue also toured damaged Iowa farmland Thursday to assess the extent of the impact of the Aug. 10 derecho. “Flying over in the national guard helicopter looking down at all the flat corn, that’s not what I’m used to see in Iowa,” said Perdue. “Very disappointing for those people to put their blood sweat and tears a few weeks from harvest here. It’s devastating. That’s why the president came quickly and issued the presidential declaration we just signed for the Governor and Sen. Ernst today.”
Perdue toured damaged crops with Iowa Governor Kim Reynolds, Sen. Joni Ernst (R-Iowa) and State Agriculture Secretary Mike Naig. Perdue said the extent of damage to crops, equipment, facilities, and the ag sector as a whole from the recent derecho is devastating.
— Is 36% of net farm income from gov't payments sustainable? USDA Secretary Sonny Perdue was asked that during his trip to Iowa on Thursday. “No farmer in the country wants to work for a government check,” Perdue said. “They’d much rather have crops or a check coming from the scales at the elevator than coming through the mailbox,” Perdue said of American farmers, “but I can tell you one thing, that President Trump is committed to not to let China, through retaliation, interfere with that. He’s not going to allow Covid to interfere with that and that’s where these funds are coming from.”
— Update on China:
- Perdue comments on Phase 1 accord with China. On Jan. 15, President Trump announced he’d reached Phase 1 trade agreement with China. It cut some U.S. tariffs on Chinese imports, with the expectation that the Chinese would buy $80 billion in agricultural products by the end of 2021. Perdue pointed to recent announcements of hefty purchases of U.S. corn and soybeans. “They got off to a slow start, but it looks like to me that China’s trying to do what it can to fulfill those ag import obligations under phase one,” Perdue said. “…They’ve got to keep their foot on the pedal all the way. We’ve got to have week-by-week good numbers, but they’ve been there the last few weeks.”
- U.S. farm products sales are nearly $8 billion YTD, and 44% below the pace needed for Phase 1 goals, according to “instant analysis” by Farm Bureau Chief Economist John Newton. “We need around $23 billion in sales from August to December, or $4.6 billion per month to reach the Phase 1 target,” he says. (Only one month since 2010 have ag exports to China topped $4.6 billion.)
- U.S./China Phase 1 tracker: China’s purchases of U.S. goods. Link.
- Trump administration seeks details on all China-related funding. The White House has asked U.S. government agencies for extensive details of any funding related to China, according to Reuters. The newswire saw a document from the Office of Management and Budget directing U.S. federal agencies to submit “cross-cutting data on federal funding that aids or supports China, or that directly or indirectly counters China's unfair competition and malign activities and influence globally.” The document, titled "Strategic Competition with China Crosscut," does not say how the information will be used other than that it will "inform policymakers" of the myriad ways U.S. government spending involves China.
- Trump administration is looking into banning more Chinese apps that could pose a threat to national security, White House chief of staff Mark Meadows said late Thursday. An upcoming ban of TikTok in the U.S. has prompted flash takeover talks with parties including Microsoft and Walmart, as well as Oracle, though negotiations are said to have stalled after China updated its technology export restriction list. In a bid to counter the U.S. restrictions, Beijing is also planning to develop a set of sweeping government policies to develop its domestic semiconductor industry.
— Update on next aid package:
- Gap in reaching new aid package continues at $1 trillion. House Speaker Nancy Pelosi (D-Calif.) has said Democrats would be willing to go down to a bill costing $2.2 trillion, while White House officials have talked about going up to $1.3 trillion. During a hearing before a House Oversight and Reform subcommittee this week, Treasury Secretary Steven Mnuchin said Schumer and Pelosi “do not want to sit down at the negotiating table unless we publicly agree on a topline... My own opinion," Mnuchin said, "is we should go piece by piece, and any area of the legislation we can agree on we should have the House and Senate pass.”
— Update on reopening America... and around the world:
- USDA plan to return employees to their offices has generated concern among workers and lawmakers that the Trump administration is not taking proper precautions to protect staff during the pandemic. USDA does not plan to make Covid-19 tests available for employees, screen with temperature checks or notify staff when a colleague tests positive for the disease, according to employees and lawmakers. Lawmakers said in a letter to USDA Secretary Sonny Perdue this week that the department’s plan was “rushed and flawed” and called on the department to pause it.
USDA has said it would put information about positive cases of the novel coronavirus on its intranet site rather than notifying employees directly. It will conduct contact tracing, but the House Democrats said in their letter it was insufficient and deviated from Centers for Disease Control and Prevention protocols. USDA has not provided guidance on how it will adjust potentially problematic issues such as building access and elevator use, cubicle spacing or otherwise enforce physical distancing.
House Democrats called on USDA to delay its recall of employees until it develops a “safe and science-based reopening plan” that would give certainty to workers and more carefully “consider all logistical aspects.”
- With the NFL season set to begin in a week, five teams have said they will let fans into stadiums at reduced capacity, as owners seek to soften the blow of a projected $4 billion revenue hit this season.
— Coronavirus update:
- Summary: Source: Johns Hopkins University as of 6:30 a.m. ET.
— 26,324,219: Confirmed cases world-wide, and 869,076 deaths
— 36,506: New U.S. cases recorded yesterday
— 6,150,999: Total confirmed cases in the U.S.
— 1,070: Deaths in the U.S. recorded yesterday
— 186,798: Total U.S. deaths
— 80,381,085: Tests conducted in the U.S.
Link to Covid Case Tracker
Link to Our World in Data
- IHME model at the University of Washington, one of several used by the White House, is now projecting 410,451 Covid-19 deaths in the United States by Jan. 1, 2021.
- House Energy and Commerce Committee leaders have asked CDC Director Robert Redfield to brief members next week on recent decisions regarding vaccine distribution and testing during the Covid-19 pandemic.
- President Trump’s vaccine chief says a vaccine probably won’t be approved before Election Day. Moncef Slaoui, the top adviser for the White House’s vaccine program, said that there was a “very, very low chance” of such a treatment being ready by then. That runs counter to more optimistic assertions made recently by Trump and other officials.
POLITICS & ELECTIONS
— 2020 Presidential Election Interactive Map
— The Green Papers
— Real Clear Politics
— Presidential debates: Scheduled to occur Sept. 29, Oct. 15 and Oct. 22.
— VP debate: Scheduled for Oct. 7.
— Days until election
- Economist takes a look at America's 'ugly election.' “With the country deeply divided and in the midst of an epidemic, many Americans worry that November could herald a constitutional crisis. We assess these concerns. If President Donald Trump loses by a wide margin, as the polls currently suggest, there will be no way to challenge the result plausibly. But if the election is close, and especially if the result appears to change after election night because of late-counted postal ballots, both candidates might declare victory and their supporters might take to the streets. Things could turn very ugly.” Link to article (paywall).
- Cook Political Report's Amy Walter sizes up presidential contest. “Pollsters and strategists we spoke with over the last couple weeks of August — Republican and Democrat — told us that they didn't see much, if any, real changes taking place in voter perceptions of the election.”
But Cook Political Report House editor David Wasserman writes, “It's too soon to say whether last week's RNC made any dent in the polls. But it did make clear President Trump's chief line of attack going forward: after months of drifting between calling Joe Biden senile or soft on China, Trump and Republicans have settled on recasting Biden as a 'Trojan Horse for the radical left' who would promote lawlessness and disorder, 'abolish' the suburbs and crash stock markets. It's an admission that Trump needs to distract attention away from voters' top concern, Covid-19. And Trump's rhetorical fusillades against 'Democrat-run cities' are a tell of a fall strategy heavy on pumping up his base from 2016: small town, working-class whites.”
And what does Charlie Cook say? The question on a lot of minds over the next week will be whether President Trump and Joe Biden enjoy the customary 5- or 6-point post-convention bounce. He headlines his latest article: “A Bounce Won’t Do It. Trump Needs a Post-Convention Vault.” He notes that Gallup polling from 1964 through 1992 “showed that party nominees on average got a bounce of 6.2%, as Lydia Saad noted four years ago. More recently, the bounces have been somewhat smaller. President Obama, the last incumbent to seek reelection, received a 3-point bounce, as another Gallup analyst, Jeffrey Jones, noted at the time.”
- President Trump would press forward with efforts to ease regulatory burdens on business if re-elected for a second term, while working to ease bottlenecks that have delayed Superfund cleanup projects, Environmental Protection Agency administrator Andrew Wheeler said. In an interview with the Wall Street Journal, Wheeler said a second term for the Trump administration would allow his agency to implement additional measures such as including a cost-benefit analysis of any new regulations. He would also push to expand use of “science transparency,” in which the scientific justification behind new regulations would be disclosed. Wheeler expanded on his priorities for a possible second Trump term Thursday at the Nixon presidential library in Yorba Linda, Calif. President Nixon created the EPA in 1970. “The EPA’s mission has been straight forward since its founding: protect human health and the environment,” he said at the event.
- Defending withholding funds. White House Press Secretary Kayleigh McEnany cited South Carolina v. Dole in explaining the administration's authority to withhold funds from "anarchist jurisdictions," noting the ruling allows the government to withhold funds "so long as the federal program pertains to what you're trying to incentivize." President Trump earlier this week asked the Office of Management and Budget to issue guidance to executive agencies within 14 days asking for reports on all federal funds provided to Seattle, Portland, New York City and Washington, D.C., in an effort to cut what he termed assistance to "cities that allow themselves to deteriorate into lawless zones."
- Biden’s tax vision is twofold: higher taxes on high-income earners and businesses paired with more generous provisions for specific activities and households. According to the Tax Foundation analysis (link), Biden's proposals would raise $3.8 trillion, reduce GDP by 1.51 percent, and result in 585,000 fewer jobs.
Biden’s tax plan would be the fifth largest tax increase since the 1940s, the group estimates. “By historical standards, the tax increases Biden has proposed are significant, ranking alongside tax increases used to help finance World War II, the Korean War, and the Vietnam War. The plan would also have a negative long-run effect on the American economy, lowering long-run output and after-tax incomes across the income spectrum.”
Broad themes of President Trump’s tax agenda include providing tax relief to individuals and tax credits to businesses that engage in desired activities, while the status of expiring Tax Cuts and Jobs Act provisions and tariffs seems uncertain, the Tax Foundation notes.
- Rural Americans have faced outsize hardship under Trump. Will they still vote for him? So asks a Time magazine article (link). The article gets into the controversial RFS waiver issue and its potential impact on some key farm states, especially Iowa. Despite policy and price concerns, the article concludes: “Despite all this, it’s safe to assume that many farmers will stick with Trump regardless....”
- Facebook says it will remove videos of Trump encouraging people to vote twice, unless they're being posted to show he's wrong. Facebook will be taking down videos of the president telling people to vote twice, the company told Axios on Thursday.
OTHER ITEMS OF NOTE
- Suspect in Portland shooting is killed. Members of a federal fugitive task force fatally shot Michael Reinoehl, an antifa supporter suspected in the death of a right-wing activist last weekend, as they moved to arrest him, according to law-enforcement officials.
- Pelosi, Mnuchin agree to avoid government shutdown in October. House Speaker Nancy Pelosi (D-Calif.) and Treasury Secretary Steven Mnuchin agreed to work to avoid a government shutdown right before the election, and not let the stalemate over virus-relief legislation hold up a vital stopgap spending bill. Their informal agreement was made in a Tuesday phone call, according to the Associated Press. The White House and GOP lawmakers prefer a continuing resolution (CR) into December, giving the current Congress and president leverage to negotiate the final fiscal 2021 spending bills before a new Congress convenes in January. It is unclear where Pelosi and Senate Minority Leader Chuck Schumer (D-N.Y.) will come down on this. Some Democrats speculate Pelosi may prefer a stopgap that extends into next year, when Democrats hope they will take control of the Senate and the White House in addition to holding the House.
- You may have heard this before but... Chances dim for Brexit trade deal. Senior Downing Street figures are putting the chances of a Brexit trade agreement with the European Union deal at 30-40%, according to The Times. The two sides are at loggerheads over state aid, with no sign that either London or Brussels is prepared to compromise ahead of a "critical" negotiating round next week. Boris Johnson has also demanded that British fishermen double the size of their catch from coastal waters, though EU negotiators feel that would lead to the loss of one in three fishing boats in Europe.
- The worst cargo maritime disaster in several years appears to be unfolding in the East China Sea. Japan’s coast guard was searching for 42 missing sailors, the Wall Street Journal reports (link), after their cattle-carrying ship sank as a typhoon passed nearby. One crew member was rescued and told authorities the ship’s engine had stopped working and that it capsized after being hit by a large wave. The vessel was carrying around 5,800 live cattle from New Zealand to China, and many of the animals were seen drifting in the sea. Live-animal exports are a lucrative trade for New Zealand and Australia, but the transport conditions have raised strong criticism. The ship is owned by a Jordanian company that was investigated for safety issues after one of its vessels sank in the Black Sea in 2019 with more than 14,000 sheep onboard. Twenty-two crew members were rescued from that ship.
- Mexico today begins issuing pre-approval permits on some steel exports to ensure they aren’t just rerouted from China. The step was negotiated with the U.S. to avoid tariffs that America used against the nation last year on national-security grounds and seems aimed at states that are top producers, including Pennsylvania and North Carolina.
- The Justice Department plans to bring an antitrust case against Google as soon as this month after Attorney General Bill Barr overruled career lawyers who said they needed more time to build a strong case. Link to NYT article.