Key USDA, Financial Reports Today

Posted on 01/10/2020 6:54 AM

WASDE comes from USDA; Employment report for December from Labor Dept.


In today's updates:


* Trump will likely wait until after Nov. elections to finalize Phase 2 with China
* Why Beijing has been quiet about Phase 1 details
China release of pork supplies to continue after Lunar New Year holiday
* How JCI sizes up potential China buys of U.S. farm products
* Missile strike may have downed the Ukrainian passenger jet
* House votes to limit Trump’s war powers in Iran, but going nowhere in Senate
* Senate confirms regulatory nominee

* Trump moves to speed infrastructure projects by curbing environmental reviews
* Tom Steyer qualified for next week’s Democratic presidential debate
Cotton AWP moves above 60 cents
* Biggest advertising spenders in the U.S.

* Financial traders focusing on today’s Employment report
* Brexit agreement approved by the House of Commons


Markets: Commodity traders anxiously await USDA’s flurry of reports today, especially the World Supply and Demand Estimates (WASDE). Bullish traders continue to expect a reduction in the corn crop, while others note the tepid demand for U.S. corn exports (South Korea, Japan, Mexico, etc.) may temper or override any production cut.


Trains in France were cancelled, teachers stayed at home and the Eiffel Tower was closed as France witnessed more demonstrations and strikes against the government’s plans to reform its unusually generous pension system. The disruptions, led by trades unions, have now entered their second month. Overall, however, participation in the strikes appears to be declining.


If free tacos for lunch, this may be a job worth seeking… Yum Brands is reportedly offering a $100,000 per year salary for manager-level positions at select Taco Bell locations in the Midwest and Northeast. The development is just one of many examples of the wage inflation pressure being felt in parts of the restaurant sector.



— U.S./China trade policy update:

  • Trump says Phase 1 deal with China to be signed Jan. 15 or shortly thereafter. President Donald Trump has injected a little uncertainty into the situation relative to the Phase 1 agreement with China, telling a television station in Ohio that the deal will be signed on Jan. 15 or perhaps shortly thereafter. "We're going to be signing on Jan. 15 — I think it will be Jan. 15, but shortly thereafter, but I think Jan. 15 — a big deal with China,” Trump told the ABC affiliate. There was no clarification of the comment issued by the White House and it comes after China confirmed that Vice Premier Liu He would be leading a delegation to Washington Jan. 13-16 to sign the deal in Washington. 
  • President Trump reiterated on Thursday that he could wait until after the 2020 election to reach a Phase 2 accord with China. Trump said he thinks he could get a better deal if he waits until after his November reelection bid. The president said his administration will start “right away” negotiating the next piece of an agreement after striking a so-called phase one deal. But he said “it’ll take a little time” to finish an accord and suggested he could have more leverage after his reelection bid in November. “I think I might want to wait to finish ’til after the election, because by doing that, I think we can actually make a little bit better deal, maybe a lot better deal,” Trump told reporters at the White House.
  • The reason Beijing has been quiet about the details of the Phase 1 accord is that China conceded more than it wanted, because President Xi Jinping decided it was time to try to stabilize the relationship, according to Bill Bishop at Sinocism.
  • China release of pork supplies to continue after Lunar New Year holiday. China will continue to release frozen pork into the market before and after the Chinese New Year holiday to ensure stable pork supply and prices, according to a report in the state media outlet China Daily, citing the National Development and Reform Commission (NDRC). The agency said 130,000 tonnes have been released since Dec. 12, 2019, and another 20,000 tonnes were to be released Thursday. The report also said that local governments have released or will release over 90,000 tonnes of pork into the market.
  • How JCI sizes up potential China buys of U.S. farm products:

    JCI and China buys

— Mideast tension update:

  • A missile strike may have downed the Ukrainian passenger jet. Leaders of three countries said that a Ukrainian jet that crashed Wednesday near Tehran was probably brought down by an Iranian missile, likely unintentionally, and called for an international probe of the disaster. The head of Iran’s Civil Aviation Organization said it wasn’t possible that an Iranian rocket hit the plane and Iran and Ukraine have formed a task force to investigate. Ukraine President Volodymyr Zelensky pressed the U.S. and its Western allies today to share their information. All 176 people on board, including 63 Canadians, were killed.
  • Boeing shares rose in U.S. trading after the comments about a possible missile strike causing the Iranian incident, which could rule out a mechanical failure that would affect other Boeing aircraft.

— Trump moves to speed infrastructure projects by curbing environmental reviews. The Trump administration proposed sweeping changes to how the government reviews the environmental impacts of infrastructure projects. The proposed rule announced by the White House's Council on Environmental Quality on Thursday would be the first major shift to implementation of the National Environmental Policy Act (NEPA) in four decades and is intended to streamline the federal environmental review process by allowing the government to approve pipelines and highways at a more efficient clip.


     President Trump touted how it would remove bureaucratic obstacles in the way of infrastructure projects. The American Association of Port Authorities says it now takes three years to review plans to deepen shipping channels. The White House has its eyes on bigger projects, including bridges, highways and pipelines that are a backbone of energy networks.


     Background. Under NEPA, federal agencies are required to assess the degree to which their actions could impact a broad array of environmental factors, including air and water quality and endangered species. The proposed rule would expand the number of projects eligible to avoid comprehensive reviews under NEPA and regulators would be allowed to apply more so-called categorical exclusions, in which officials determine that a project has no significant impact on the environment and does not need a thorough analysis. The rule would state that the federal government does not need to review the "cumulative effects" of a project, which environmentalists believe will result in officials ignoring the impacts that fossil fuel projects like drilling sites and pipelines may have on climate change. It would also set page limits for the length of environmental review documents.


     Democrats blasted the plan, with Speaker Nancy Pelosi (Calif.) saying it “means that more polluters will be right there, next to the water supply, of our children” and House Natural Resources Chairman Raul Grijalva (Ariz.) saying the changes “mean polluting corporations will have an easier time doing whatever they want, wherever they want.”


— Other items of note:

  • Democratic-controlled House approved a resolution to limit Donald Trump’s ability to take military action in Iran, in a largely party-line vote of 224-194, with nearly all Democratic congressman voting for the measure, and Republicans opposing it. Eight House Democrats voted against, and three Republicans voted for the motion. It was largely a symbolic vote as it will go nowhere in the GOP-controlled Senate. The House resolution is nonbinding, which means it won’t even go to Trump’s desk. “This is a statement of the Congress of the United States. I will not have that statement be diminished by whether the President will veto it or not,” House Speaker Nancy Pelosi (D-Calif.) explained.

  • Senate confirms regulatory nominee. The Senate on Thursday confirmed Paul Ray to be President Trump‘s regulatory chief and spearhead efforts to advance the administration’s deregulatory agenda. The Senate voted on party lines 50-44 to confirm Ray as administrator of the Office of Information and Regulatory Affairs (OIRA), a small division in the Office of Management and Budget that reviews major federal regulations and enforces the president’s regulatory policies.

  • Tom Steyer, the billionaire former hedge fund executive, qualified for next week’s Democratic presidential debate based on his performance in two new polls.

  • Cotton AWP moves above 60 cents. The Adjusted World Price (AWP) for cotton rose to 60.08 cents per pound, effective today (January 10), the fifth weekly rise and the highest since the AWP was 61.51 cents per pound the week of June 7, 2019. USDA also said it would establish Special Import Quota #12 for 50.562 bales of upland cotton January 16, applying to cotton purchased not later than April 14 and entered into the U.S. not later than July 13.

  • Biggest advertising spenders in the U.S.:

    Big ad spenders

— Markets.  Another day of records for U.S. stock indices, with the Dow, Nasdaq and S&P 500 all notching new intraday and closing records. The Dow gained 211.81 points, 0.74%, at 28,956.90. The Nasdaq moved up 74.18 points, 0.81%, at 9,203.43. The S&P 500 rose 21.65 points, 0.67%, at 3,274.70. The Nasdaq is up over 100% over the past five years, outperforming the S&P 500 by 30% (on a total-return basis).


     Companies in the S&P 500 are expected to return more money to shareholders through dividends than ever this year, continuing a streak of record payouts dating back to 2012. In 2019, dividend payments increased 6.4% from a year earlier to $485.5 billion, according to S&P Dow Jones Indices, slowing from an 8.7% rise in 2018.


     In recent months, companies spending the most on capital expenditures and research and development have been outperforming those known for large dividends and share buybacks (total return). The trend suggests that market participants now prefer companies to focus on investment rather than "financial engineering."


     Net long speculative positioning in WTI crude oil is at its highest level since April 2019.


     Federal Reserve Vice Chairman Richard Clarida said monetary policy "is in a good place" and that last year's benchmark interest rate cuts were appropriately timed. Going forward, the Fed's policy "is not on a preset course" and officials will evaluate future interest rate moves on a meeting-by-meeting basis.


     Two regional Federal Reserve leaders favor holding interest rates steady. James Bullard and Neel Kashkari said they saw no reason to change short-term rates any time soon.


     Financial traders are focusing on today’s Employment report. Initial jobless claims started 2020 at the lowest level in years. The labor market remains tight. The final U.S. jobs report for 2019 is forecast to show employers added 160,000 jobs in December, which would bring gains for the year to more than 2 million and higher than what economists had expected a year ago. It would still be the slowest growth since 2011 and down from the year before. The unemployment rate is expected to stay at 3.5%, putting it at a 50-year low for a third month in 2019. As is usual, wages will also be a focus with some expecting to see a slightly stronger wage increase than the 3.1 percent rate seen in November. However, others expect just steady wage growth. The participation rate will be another potential key, having ticked down to 63.2% in November after having edged up to 63.3% in October. 


     Approval of the Brexit agreement by the House of Commons Thursday moves the U.K. exit from the European Union (EU) one step closer. Given the parliament had backed the deal in December, the 330-to-231 vote in the House of Commons was expected. The upper chamber, the House of Lords, will take the pact up Monday and debate it for around a week. But it is expected to pass there as well and still faces consideration by the European Parliament which is also expected to clear the plan. That means the Jan. 31 exit from the EU is all but finished. Then the attention will shift to U.K./EU negotiations that will determine the specifics of their relationship moving forward, with U.K. Prime Minister Boris Johnson adamant the talks have to be wrapped up in 2020. Key for the prospects of a U.S./U.K. trade deal will be how closely the U.K. agrees to align its rules with those of the EU. On that topic, U.K. Environment Secretary Theresa Villiers said the government will not accept U.S. poultry processed with antimicrobial treatments — a process that is banned in the European Union — and signaled that U.K. food standards will track closely with those in the EU. “We will not be importing chlorinated chicken. We will not be importing hormone-treated beef. Both of those are illegal under EU law, which we are importing in to our domestic system,” Villiers said in a segment of a BBC interview that aired Thursday.



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