Financial Markets Cautious as Fed Begins Two-Day FOMC Confab

Posted on 03/16/2021 3:56 AM

Key Democrat signals low odds for comprehensive immigration reform

 


In Today’s Digital Newspaper


 

Market Focus:
• Markets cautious as Fed begins two-day FOMC confab
Corn futures heading for longest winning streak since start of February
• Air travel shows signs of turning a corner
• Ag demand update

Fate of Brazil’s safrinha corn crop hinges on when rainy season ends
Rains this week critical for stabilizing Argentina’s crops
Winter wheat ratings improve in Kansas
Russia may stop interfering with grain exports once markets stabilize

 

Policy Focus:
White House expects 158.5 million households to receive relief/stimulus checks
Yellen proposing global minimum tax on multinationals
Key Democrat signals low odds for comprehensive immigration reform

 

Biden Administration Personnel

• Haaland becomes first Native American Cabinet member
Biden nominates Native American advocate top attorney for USDA
Labor Secretary Nominee Walsh moving toward final Senate vote

Procedural motion on Tai USTR nomination set for this afternoon.

 

China Update:
U.K. declares China in breach of 1984 Hong Kong declaration

Bloomberg: China plans new food-trading giant with Cofco merger and IPO
Chinese pork prices fade

 

Trade Policy:
• U.S./EU tariff suspension in civilian aircraft dispute started March 11
• EU initiates legal proceedings against the United Kingdom
U.S. beef exports to Japan bumping up against limit, higher duties could be triggered

 

Energy & Climate Change:

• Focus on Supreme Court in April re: biofuels policy
• EPA administrator Regan gives first interview to Washington Post
USDA seeks input on climate change efforts
Volkswagen said it would invest in six large battery factories


Food & Beverage Industry Update:
• JBS says 14,000 workers have been vaccinated for Covid
• Danone CEO and Chairman Emmanuel Faber stepped down from the yogurt maker


Coronavirus Update:
• More suspensions for AstraZeneca's vaccine

 

Politics & Elections:
Politico getting called out on social media for saying Biden largely ‘gaffe free’
Washington Post: Biden faces growing political threat from border upheaval
• Ohio House race
• Sen. Warren has big impact on Biden administration’s financial policy appointments


Other Items of Note:
• USDA seeking data from broiler farms on antimicrobial use and resistance
• North Korea issues warning to U.S.
• Mexico’s migrant crackdown

 


MARKET FOCUS


 

Equities today: U.S. stock futures are flat while European stock futures are marginally higher, with equities gaining in Asia and Treasury yields holding declines. Hong Kong’s Hang Seng added 0.7%, Japan’s Nikkei 225 index climbed 0.5%, and China’s benchmark Shanghai Composite rose 0.8%.

 

     U.S. equities yesterday: The Dow gained 174.82 points, 0.57%, at 32,953.46. The Nasdaq rose 139.84 points, 1.05%, at 13,459.71. The S&P 500 moved up 25.60 points, 0.65%, at 3,968.94. The finish saw the Dow notch its fourth consecutive record close with the S&P 500 also setting a new record.

 

On tap today:

 

     • Federal Reserve’s two-day Open Market Committee (FOMC) meeting begins this morning and ends Wednesday afternoon with a statement and new U.S. economic projections and a presser by Fed Chairman Jerome Powell.
     • U.S. retail sales for February are expected to fall by 0.4% from the prior month. (8:30 a.m. ET)
     U.S. import prices for February are expected to rise 1% from a month earlier. (8:30 a.m. ET)
     Carbon markets. Farm Foundation online forum, "Emerging carbon markets in agriculture: Issues and opportunities," 9 a.m. ET.

     • U.S. industrial production for February is expected to rise 0.3% from the prior month. (9:15 a.m. ET)

     • U.S. business inventories for January are expected to rise 0.3% from a month earlier. (10 a.m. ET)
     • National Association of Home Builders housing market index for March is expected to tick down to 83 from 84 the prior month. (10 a.m. ET)
     • Japan's provisional trade figures for February are out at 7:50 p.m. ET.

 

Airports are the busiest they've been since March 2020, and airline executives say they are starting to see a path out of the coronavirus pandemic, the Wall Street Journal reports (link). The article is timely because the writer of this dispatch traveled to Arizona on Monday for an ag industry meeting. Covid-19 brought travel to a near halt last spring. Travel restrictions and fear of infection kept people at home and out of airports for most of the year: U.S. airlines carried 60% fewer passengers in 2020 than in 2019, bringing passenger traffic to the lowest level since the mid-1980s, according to the Bureau of Transportation Statistics. Major U.S. airlines lost about $35 billion in 2020. But on Monday, United Airlines and Delta Air Lines said they could stop bleeding cash this month. Even with the nascent rebound, executives said they remain cautious. The Centers for Disease Control and Prevention still advises against travel, and the number of people passing through U.S. airports is half—or less — of what it was for most days in 2019.

 

     Facts and figures: TSA checkpoint numbers remain under year-ago, 2019 levels. While Transportation Security Administration (TSA) data shows that from March 11-14, more than 1.2 million travelers per day went through TSA checkpoints, those numbers still are below the same four days in 2020 when more than 1.7 million went through TSA checkpoints three out of the four days. In 2019, those levels were from 2.2 million to 2.6 million for the same period.

 

     Travel rise

 

Market perspectives:

 

     • Outside markets: The dollar edged higher. Brent crude slipped 0.9% to $68.24 a barrel. Gold remained flat, at $1,728.40 a troy ounce. The 10-year U.S. Treasury yield edged down to 1.608% from 1.609% on Monday. Yields move inversely to prices.

 

     • Corn futures are heading for their longest winning streak since the start of February, after weekly U.S. export inspections jumped to the highest level in at least 26 years.

 

        Corn prices

 

      • Ag demand: Japan is seeking a total of 135,603 MT of food-quality wheat from the U.S., Canada and Australia in a regular tender.

 

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

     • Fate of Brazil’s safrinha corn crop hinges on when rainy season ends
     • Rains this week critical for stabilizing Argentina’s crops
     • Winter wheat ratings improve in Kansas
     • Russia says it may stop interfering with grain exports once markets stabilize

 


POLICY FOCUS


 

— White House expects 158.5 million households to receive relief/stimulus checks from the $1.9 trillion package signed into law Thursday. The Treasury Department began sending out direct payments over the weekend, though some banks won’t process them until later in the week.

 

— Yellen proposing global minimum tax on multinationals. Treasury Secretary Janet Yellen is working with other countries on an agreement to update corporate tax rules to establish a global minimum tax as the Biden administration considers raising taxes on businesses in order to finance other priorities. The Washington Post reported Monday (link) that the effort could be one of Yellen's biggest accomplishments if an agreement is reached and could be critical to any push from Biden to raise taxes to offset the cost of future spending proposals. Yellen is participating in ongoing negotiations at the Organization for Economic Cooperation and Development (OECD) about how to update global tax rules to reflect the digital economy. One pillar of the group's work is focused on a nonbinding global minimum tax.

 

— Key Democrat signals low odds for comprehensive immigration reform. Senate Judiciary Chairman Dick Durbin (D-Ill.) said that he doesn’t “see a means of reaching” the White House-backed comprehensive immigration bill: “I think Speaker Pelosi has discovered that she doesn’t have the support for the comprehensive bill in the House, and I think that indicates where it is in the Senate as well.”
 


BIDEN ADMINISTRATION PERSONNEL


 

— Senate confirmed, 51-40, Rep. Deb Haaland as President Biden’s Interior secretary Monday, the first time a Native American is a White House Cabinet secretary. The vote was largely along party lines. Republican Sens. Lindsey Graham of South Carolina, Susan Collins of Maine, Dan Sullivan and Lisa Murkowski of Alaska cast votes in favor of the nomination. Opponents noted Haaland’s history of environmental activism — she has called fracking “a danger to the air we breathe and water we drink” especially for Cabinet secretary who oversees drilling on vast tracts of public lands.

 

— Biden nominates Native American advocate top attorney for USDA. President Joe Biden chose an advocate for Native American farmers to be the top legal officer for the USDA as the administration seeks to redress a history of racial discrimination in farm loans and aid. Janie Simms Hipp, a member of the Chickasaw Nation and chief executive officer of the Native American Agriculture Fund, is the president’s intended nominee to be USDA general counsel, the White House announced Monday. The position requires Senate confirmation. Hipp worked with Vilsack during the Obama administration, when he was also USDA secretary, as his senior adviser for tribal affairs and later as director of the department’s office of tribal relations. Vilsack in a statement praised Hipp’s “decades-long career dedicated to protecting and ensuring the legal rights of underserved and underprivileged communities.” USDA in 2010 settled a class action suit brought by Marilynn Keepseagle and other Native Americans charging a pattern of discrimination in making farm aid and loans.

 

— Labor Secretary Nominee Walsh moving toward final Senate vote. Senate Majority Leader Chuck Schumer (D-N.Y.) filed for cloture Monday evening on Marty Walsh’s nomination to serve as U.S. labor secretary, an action that will likely set up a final vote in the coming days.

 

— Procedural motion on Tai USTR nomination set for this afternoon. The Senate this afternoon will hold a vote on whether to invoke cloture (proceed to consideration) on the nomination of Katherine Tai to become US Trade Representative (USTR). She is expected to win confirmation relatively easily having faced little opposition in her confirmation hearing before the Senate Finance Committee.
 


CHINA UPDATE


 

U.K. declares China in breach of 1984 Hong Kong declaration. Dominic Raab, foreign secretary, said radical changes planned by Beijing to restrict participation in Hong Kong elections represented a further clear breach of the legally binding declaration, the Financial Times reported. His comments came ahead of the publication next week of a U.K. foreign and defense policy, which will see Boris Johnson’s government set out its strategy for dealing with China.

 

Bloomberg: China plans new food-trading giant with Cofco merger and IPO. China’s largest food company plans to merge its international trading division with several domestic businesses to create a new agricultural commodity behemoth before embarking on an initial public offering, according to Bloomberg News (link). Cofco Corp. has hired bankers to advise on a plan to combine Cofco International Ltd. with some of its domestic trading and processing assets, Bloomberg reported, citing people familiar with the talks. After the merger, Cofco plans to sell shares in the new company, most likely in Shanghai, the people said. The IPO could value the new company at more than $5 billion, the people said. The new company will compete with the so-called ABCDs, a quartet of global traders which have dominated the industry for decades: Archer-Daniels-Midland Co., Bunge Ltd., Cargill Inc. and Louis Dreyfus Co.

 

Chinese pork prices fade. Chinese pork prices fell 3% from March 8 to March 12, according to an average pork price index covering 16 provincial-level regions tracked by the country’s ag ministry. Prices now stand at 34.8 yuan ($5.35) per kilogram, which is down 28% from year-ago. The update indicated supply exceeded demand. But the market is increasingly skeptical of Chinese data so far as African swine fever and its pork/hog supplies.

 

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

 


TRADE POLICY


 

— U.S./EU tariff suspension in civilian aircraft dispute started March 11. The four-month suspension of retaliatory tariffs between the U.S. and European Union (EU) started March 11 and will extend through July 11 as the two sides seek to find a solution to the long-running dispute. The Office of the U.S. Trade Representative published the notice outlining the action in the Federal Register today (March 16), stating the tariffs will not apply to products of Austria, Belgium, Bulgaria, Croatia, Republic of Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, Netherlands, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, and Sweden, “that are entered for consumption, or withdrawn from warehouse for consumption, on or after 12:01 a.m. eastern standard time on March 11, 2021, and before 12:01 a.m. eastern daylight time on July 11, 2021.” However, the notice also said that items from those countries “admitted into a U.S. foreign trade zone in `privileged foreign status' as defined in 19 CFR 146.41, before 12:01 a.m. eastern standard time on March 11, 2021, will remain subject to the applicable duties.” USTR said the effort will “ease the burden on their industries and workers and focus efforts towards resolving these long running disputes at the WTO. Link to notice from USTR. This sets the parameters of time the two sides have identified in order to resolve the dispute.

 

— European Union has initiated legal proceedings against the United Kingdom for unilaterally changing the terms of trading agreements between the two sides. Under the Brexit deal, a grace period for import checks on some goods arriving in Northern Ireland — which is part of the U.K. but remains in the EU single market for goods — is due to end in March. The British government’s decision to unilaterally extend that grace period to Oct. 1 led to the EU’s legal action.

 

U.S. beef exports to Japan bumping up against limit, higher duties could be triggered. U.S. beef exports to Japan will likely trigger a safeguard tax hike for the first time since August 2017, pushing tariffs from 25.8% to 38.5% for the next 30 days, Kyodo News reports. The Japan/U.S. trade agreement that took effect in 2020 includes a maximum 242,000 MT in U.S. beef exports per fiscal year, at which point higher tariffs take effect. Through the end of February, the U.S. has exported 233,112 MT of beef to Japan. The fiscal year ends this month. The early March import figure will be released Wednesday. Japanese officials say if the accumulated import volume tops the maximum, the safeguard measure would take effect on Thursday.

 


ENERGY & CLIMATE CHANGE


  

— Focus on Supreme Court in April re: biofuels policy. The U.S. Supreme Court April 27 will hear refiners’ appeal of the Tenth Circuit Court ruling that invalidated three small refinery exemptions (SREs). The decision relates to the refiners’ appeal of the ruling that said in order to be granted SREs, the refiners needed to have obtained them continuously from 2010-forward. EPA recently came out in favor of the court ruling and said that it will not act on the pending SREs until after the Supreme Court issues its decision on the matter.

 

     EPA data as of late-February showed 20 so-called “gap year” SREs were pending covering 2011-2018 compliance years, with another 30 pending for the 2019 compliance year and 16 for the 2020 compliance year. Expectations are if the Supreme Court sides with the Tenth Circuit ruling, it would dramatically reduce the granting of SREs moving forward.

 

— New EPA administrator: ‘Science is back’. In his first interview as the nation’s top environmental official, Michael Regan told the Washington Post (link) he is focused on restoring morale at the agency, combatting climate change and lifting up communities burdened by pollution. On Monday, Regan said he wouldn’t rule out the return of experts who fled the EPA. A Washington Post analysis showed that during the first 18 months of the Trump administration, nearly 1,600 workers left the EPA, while fewer than 400 were hired. That exodus shrank the agency’s workforce to 14,172, a level not seen since the Reagan administration.

 

In other remarks, Regan said:

  • EPA will take another look at the Trump administration’s rollback of tailpipe emissions rules for new cars and trucks.
  • EPA will review his predecessors’ efforts to revoke California’s long-standing authority to set its own fuel-efficiency standards for automobiles.
  • Said he is “definitely a fan of statutory authority, and states’ rights and autonomy,” adding, “The transportation sector is very important in our greenhouse gas goals.”
  • A federal court’s recent decision to vacate the Trump administration’s replacement of the Obama-era Clean Power Plan gives his team a “clean slate” to regulate the climate-warming pollution that results from burning coal and gas for electricity.
  • Will look closely at a class of chemicals known as polyfluoroalkyl and perfluoroalkyl substances, or PFAS, found in communities nationwide and linked to an array of health effects.
  • His staff is evaluating the agency’s response to the coronavirus pandemic under former President Trump. Former EPA administrator Andrew Wheeler temporarily waived some enforcement last spring, citing practical constraints during shutdowns.

— USDA seeks input on climate change efforts. USDA is requesting public comment on four areas of USDA policy—Climate-Smart Agriculture and Forestry; Biofuels, Wood and Other Bioproducts, and Renewable Energy; Addressing Catastrophic Wildfires; and Environmental Justice and Disadvantaged Communities. The request does not offer any potential actions on the part of USDA in these areas nor does it discuss a carbon bank which has been touted as an potential action or specifically the use of the Commodity Credit Corporation (CCC) authority for any of efforts. Link for details.

 

— Volkswagen said it would invest in six large battery factories and build out charging infrastructure, one of the biggest efforts in the auto industry to secure supply and increase control of the technology. Besides increasing its stake in Swedish battery startup Northvolt and acquiring Northvolt’s stake in their joint-venture battery plant in Germany, Volkswagen said it planned to build four additional battery factories in Europe to secure at least 240 gigawatt hours of battery capacity. The company, which is looking to make electric cars 75% of its new car sales by 2030, also plans to operate 18,000 public fast-charging stations in Europe by 2025.

 


FOOD & BEVERAGE INDUSTRY


 

— JBS says 14,000 workers have been vaccinated for Covid. JBS USA announced that approximately 14,000 workers in the U.S. have received a Covid-19 vaccine and another 7,000 are scheduled to be vaccinated this week, with the firm saying that will result in about one-third of the more than 60,000 workers for the company will have received at least one dose of the vaccine this week. The company said the effort has taken place at large scale and smaller clinics on site at JBS USA and Pilgrim’s facilities, and at offsite health clinics in partnership with local health departments. The firm announced a $100 incentive in January for all workers to be vaccinated.

 

— Danone CEO and Chairman Emmanuel Faber stepped down from the yogurt maker after a clash with investors, marking a rare victory for activist funds in France. Link to Reuters.

 


CORONAVIRUS UPDATE


 

 Summary: Global cases of Covid-19 are at 120,273,942 with 2,661,798 deaths, according to data compiled by the Center for Systems Science and Engineering at Johns Hopkins University. The U.S. case count is at 29,495,422 with 535,628 deaths. The Johns Hopkins University Coronavirus Resource Center said that there have been 109,081,860 doses administered, 36,914,987 have been fully vaccinated, or 11.28% of the U.S. population.
      

       Link to Covid Case Tracker
       Link to Our World in Data

 

— AstraZeneca vaccine suspended by Italy, France, Germany. The countries joined some smaller European nations that have temporarily stopped giving the Covid-19 vaccine after a small number of cases of blood clotting — Norway, Denmark and Bulgaria suspended their programs last week. Health regulators and AstraZeneca said there is no known connection between severe clotting and the shot. The WHO urged nations not to pause Oxford/AstraZeneca inoculation programs, having said last week there was no sign the problems had been caused by the jab. AstraZeneca has come out forcefully against the decision to pause vaccinations, pointing to the nearly 17 million people who have already received their dose without incident. The company said 15 events of deep vein thrombosis and 22 events of pulmonary embolism have been reported among those vaccinated, which it says is much lower than would be expected in the general population. The European Medicines Agency is set to decide the next steps on Thursday.

 

     Any halt in vaccine distribution will slow an already sluggish rollout for EU member states, who were already at odds with AstraZeneca over delivery delays. Only 7.7 percent of the EU’s population has received a first vaccine dose, far behind the numbers receiving their first shots in the United Kingdom (36%) and the U.S. (21%).

 


POLITICS & ELECTIONS


 

Politico getting called out on social media for declaring that Biden has been 'largely gaffe-free' so far in his time in office. Meanwhile, the Associated Press is getting criticized by Fox News for the AP saying that Republicans are seizing on the Cuomo situation to take away from the achievements of the Biden administration. Link for details. Link for another example.

 

Washington Post: Biden faces growing political threat from border upheaval. The newspaper notes that Republicans are seizing on the surge of migrants to attack the president’s policies and look to 2022 elections. Link for details.

 

— Ohio House race. A crowded Democratic congressional primary for Ohio’s 11th congressional district, which came open after Marcia Fudge was confirmed as secretary of Housing and Urban Development last week, could provide an early test of whether voters want to embrace or challenge the party establishment. Link to WSJ article for more.

 

— Sen. Elizabeth Warren has become one of the biggest influences on the Biden administration’s financial policy, judging by appointments, according to Politico (link).
 


OTHER ITEMS OF NOTE     


 

— USDA seeking input on collecting data from broiler farms on antimicrobial use and resistance. USDA’s Animal and Plant Health Inspection Service (APHIS) is seeking approval to collect new information via the National Animal Health Monitoring System’s (NAHMS’s) On-Farm Monitoring of Antimicrobial Use and Resistance in US Broiler Production Study. The new effort seeks information directly from broiler farms to “measure and track trends” in antimicrobial use (AMU) and antimicrobial resistance (AMR) with those that participate over time, to evaluate the relationship between AMU patterns and AMR measured in samples collected, and to qualify the AMR genes in the litter of sampled farms. The study will “monitor US broiler operations for AMU, AMR, animal health and production practices, and the relationship between AMU, AMR, animal health, production practices, and changes over time.” The agency wants to collect quarterly survey data and litter samples from participating producers. The agency estimates it will collect information from 30 respondents annually. USDA is seeking comments on the request by May 17. Link for details.

 

— Kim Yo Jong, the sister of North Korea’s leader Kim Jong Un, issued a warning to the U.S. as she criticized joint U.S./South Korea military exercises. “If it wants to sleep in peace for coming four years, it had better refrain from causing a stink at its first step,” Kim said, referring to the Biden administration, in a statement carried by state news agency KCNA. The remarks come as U.S. Secretary of State Antony Blinken and Secretary of Defense Lloyd Austin and are to meet with their South Korean counterparts in Seoul. Before Kim’s statement, the White House admitted to failed backchannel diplomatic attempts with Pyongyang.

 

— Mexico’s migrant crackdown. Mexico has launched a crackdown on migrants seeking to reach the U.S. border, with roughly 1,200 migrants apprehended by authorities on train routes between Jan. 25 and Feb. 16, according to Mexico’s immigration agency. A further 800 were detained while traveling on buses and tractor trailers. The agency did not provide comparable data from previous periods, but Mexico’s former immigration chief Tonatiuh Guillen said the scale and frequency of detentions were unprecedented. The apparent increase comes as U.S. border agents recorded more than 100,000 apprehensions and expulsions of migrants at the U.S./Mexico border in February, the highest monthly figure since 2019.

 


 

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