More U.S. farm products to China | CRP payouts | CFAP 1 compliance reviews
In Today’s Updates
* USDA announces several daily export sales, including soybeans to China
* More sales of several U.S. commodities and meat to China via weekly report
* Dow opens higher
* Retail sales rose 1.9% in September, vs 0.7% expected
* U.S. economy has lost millions of jobs, but in many industries, hiring is booming
* Will studying economics make you rich?
* Question for grain traders: Are we now in a demand-pull market?
* Corn prices at level where meal being placed in hog feed at maximum levels
* Tariff threats back on the table
* Argentina's central bank is running out of dollars
* Brazil considers scrapping tariffs on imports of corn and soybeans at a meeting today
* EU wheat sowing expected to rebound
* FranceAgriMer : planting of winter wheat & barley picking up, but behind year-ago
* Egypt’s has seven months’ worth of strategic reserves
* Republicans have intraparty fight over a stimulus package
* FSA sending out annual CRP payments totaling $1.68 billion
* USDA to soon start compliance reviews on CFAP 1
* More big China soybean purchases in USDA weekly update
* Reuters: China tells mills to stop buying cotton from Australia
* China bought Australian wheat and rumored to have bought some French
* Keeping up with China on artificial intelligence
* China set to approve its own tech protection law.
U.S. food & beverage industry update:
* WSJ: Tab, Coca-Cola’s diet-soda pioneer and a ’70s icon, is going away
* School meal programs lost more than $483 million so far during pandemic
* Pfizer will not seek approval of its coronavirus vaccine until late November
* French police search houses of senior officials including health
Politics & Elections:
* Biden and Trump had separate town hall sessions last evening
* Charlie Cook of the bipartisan Cook Political Report on coming elections
* Twitter reverses course on New York Post story about Joe Biden
* Sen. Ben Sasse (R-Neb.) criticizes Trump’s record and ethics
Other Items of Note:
* Panel sets Oct. 22 vote on Barrett Supreme Court nomination
* CFTC adopts position-limit rule on split vote
* Grain Transportation Report returns to showing Illinois river rates
* Three friends and beautiful people
Equities today: Global stock markets were mixed overnight. The Dow is up around 230 points at this writing.
U.S. equities yesterday: The Dow declined 19.80 points, 0.07%, 28,494.20. The Nasdaq fell 54.86 points, 0.47%, at 11,713.87. The S&P 500 was down 5.33 points, 0.15%, 3,483.34.
On tap today:
• U.S. retail sales for September, 8:30 a.m. ET, are expected to rise 0.7% from a month earlier. Update: Retail sales rose 1.9% in September, vs 0.7% expected.
• USDA Weekly Export Sales, at 8:30 a.m. ET.
• U.S. industrial production for September, due at 9:15 a.m., is expected to rise 0.5% from a month earlier.
• U.S. business inventories for August, due at 10 a.m., are expected to rise 0.4% from a month earlier.
• University of Michigan's preliminary consumer sentiment index for October, due at 10 a.m., is expected to tick up to 80.5 from 80.4 at the end of September.
• Baker Hughes rig count is out at 1 p.m.
• Federal Reserve: St. Louis’s James Bullard speaks on monetary policy at 9:35 a.m. and New York’s John Williams discusses culture and community development at 9:45 a.m.
U.S. economy has lost millions of jobs this year, but in many industries, hiring is booming, according to the Wall Street Journal (link). Home-mortgage firms, financial-service companies and tech outfits are advertising thousands of jobs. “The upshot: A two-track recovery is emerging from the country’s pandemic-driven recession as some companies and careers show signs of prospering despite the recession while others in sectors like hospitality fall victim to continued lockdowns and changing consumer behavior.”
Will studying economics make you rich? No but... "We investigate the wage return to studying economics by leveraging a policy that prevented students with low introductory grades from declaring the major. Students who barely met the GPA threshold to major in economics earned $22,000 (46%) higher annual early-career wages than they would have with their second-choice majors. ... The relative observational return to economics increases with age in workers’ 20s and 30s and remains large throughout workers’ careers, resulting in a $536,000 observational net present value of majoring in economics," UC Berkley's Zachary Bleemer and UC Santa Barbara's Aashish Mehta write in a working paper (link).
• Outside markets: The U.S. dollar index is weaker. Nymex crude oil prices are modestly lower and trading around $40.50 a barrel. The yield on the benchmark U.S. 10-year Treasury note is 0.724% today.
• Crude oil futures are still under pressure ahead of the U.S. trading start, with U.S. crude down 1% to trade around $40.55 per barrel and Brent crude is also around 1% lower to trading around $42.65 per barrel. Crude oil prices moved lower in Asian action in part on pandemic concerns, with U.S. crude down 31 cents at $40.65 per barrel and Brent down 41 cents at $42.75 per barrel.
• USDA announced the following daily export sales:
— Export sales of 128,000 metric tons of corn for delivery to Mexico during the 2020-2021 marketing year;
— Export sales of 175,000 metric tons of soybeans for delivery to unknown destinations during the 2020-2021 marketing year; and
— Export sales of 216,150 metric tons of soybeans received during the reporting period for delivery to unknown destinations during the 2020-2021 marketing year.
• Question for grain traders: Are we now in a demand-pull market? Not yet, says one analyst who notes, “Corn export sales have declined for three straight weeks... notable drops the past two weeks.”
• Trader/analyst: Corn prices are at a level where meal is being placed in hog feed at maximum levels.
• Tariff threats back on the table. The U.S. has reportedly made an offer to the EU to remove a host of tariffs if Airbus repaid European governments with billions of dollars in aid, but retaliation is also in the cards after the most recent WTO ruling. "If they strike back, then we'll strike much harder," President Trump told reporters. "They don't want to do anything, I can tell you that." Earlier this week, the bloc won permission to level up to $4 billion in tariffs on American goods in response to subsidies for Boeing, though the EU will likely hold fire until after next month's U.S. election, according to Bloomberg.
• Argentina's central bank is running out of dollars. Behind the shortage is a growing crisis of confidence that now threatens to wipe out the country's dwindling foreign reserves, testing the ability of a nationalist government to avoid another full-blown economic and financial crisis in Latin America’s third biggest economy, the Wall Street Journal reports (link). “Nervous Argentines have been steadily buying dollars or withdrawing them from bank accounts.” Since mid-August, the country’s liquid reserves — dollars it holds in cash or near cash — have fallen to about $1.6 billion from $6 billion, according to economists who monitor Argentina’s central bank. Another sign of financial stress is the growing gap between the official value of the peso, at about 82 per dollar, and what Argentines pay in “caves,” as black-market exchange houses are known in Argentina. This week the black market dollar stood at 167 pesos.
Items in Pro Farmer's First Thing Today include (Link to subscribe to FTT):
• Brazil considers scrapping tariffs on imports of corn and soybeans at a meeting today
• EU wheat sowing expected to rebound
• FranceAgriMer reports planting of winter wheat & barley picking up, but behind year-ago
• Egypt’s has seven months’ worth of strategic reserves
— Republicans have intraparty fight over a stimulus package. President Trump said that he “would go higher” than the $1.8 trillion proposal his administration has put forward in negotiations with Democrats. But Senator Mitch McConnell (R-Ky.), the majority leader, said that would be “a much larger amount than I can sell to my members.”
House Speaker Nancy Pelosi (D-Calif.) and Treasury Secretary Steven Mnuchin pointed to progress after a 90-minute call on Thursday afternoon. It was tempered by a late-night letter she sent House Democrats noting “many other disagreements remain,” and steady Senate Republican opposition to a pricier package. President Trump, meanwhile, continues to say he wants as hefty package and says Pelosi is the only obstacle.
McConnell also said doesn’t believe Mnuchin and Pelosi will strike an agreement. The two agreed to include a national testing strategy. But they remain at odds over some basics beyond the top line: Among others, Pelosi objects to Republicans’ insistence on including corporate liability protections, while Mnuchin opposes the Democratic push to include more support for state and local governments.
“For both sides, I think what they need to keep in mind is that there are Americans that need them (stimulus), that don’t really care about politics, aren’t really tied up in this election and they just need some help.” — Doug McMillon, the CEO of Walmart, on CNBC.
— FSA sending out annual CRP payments totaling $1.68 billion. Contract holders are receiving $1.68 billion in rental payments under the Conservation Reserve Program (CRP) for the 21.9 million acres enrolled in the program.
USDA said the enrollment total at the end of September was 21.9 million acres, with contracts on 5.35 million acres expiring as of Sept. 30. With contracts on 3.4 million acres set to start Oct. 1, that would put CRP enrollments at around 19.95 million acres. There were also another 425,777 acres that were enrolled under continuous signup 53 that ended Aug. 21. USDA data indicates that most of those contracts have a start date in fiscal year (FY) 2021 as the latest update indicated that just over 30,000 acres had a contract start in FY 2020. That would put total CRP acres as FY 2021 starts at around 20.35 million acres.
Under the 2018 Farm Bill, the cap on CRP acres rose to 25 million for 2021, up from 24.5 million in 2020. Contracts on another 3 million acres are scheduled to expire as of Sept. 30, 2021 with another 4 million acres to expire as of Sept. 30, 2022. This would suggest another general CRP signup could be in the offing for FY 2021.
— USDA to soon start compliance reviews on CFAP 1. The Farm Service Agency (FSA) will soon start compliance reviews on applications submitted by producers for the Coronavirus Food Assistance Program 1 (CFAP 1). The agency said in a notice to state and county offices that it will be working with the National Ag Statistics Service (NASS) to “randomly identify a statistically sound number of CFAP applications for review.” The agency also said it was “aware” that some state and county offices have “questioned the validity of applicant certifications” on some CFAP 1 enrollment forms (Form AD-3114). The agency said state and counties would be able to add any applications to the list of those selected by the national office that they believe should be reviewed for compliance. States and counties have until Oct. 23 to submit applications for the spot checks beyond those randomly selected at the national level for spot checks.
FSA also conducted spot checks on the Market Facilitation Program (MFP), basing those reviews on specified percentages of MFP applications where payments were $100,000 or more and for those paid less than $100,000.
— Update on China:
- More big China soybean purchases in USDA weekly update. Sales of U.S. commodities to China continue to rise, with another round of large purchases of soybeans reported in the data for the week ending Oct. 8. The sales for 2020-21 included 57,380 tonnes of wheat, 140,661 tonnes of corn, 1,592,507 tonnes of soybeans, 19,958 running bales of upland cotton and another 13,200 running bales for 2021/22.
On pork and beef, sales for 2020 were 385 tonnes of beef and 5,244 tonnes of pork.
Also of note, the report showed that a shipment of 20 tonnes of U.S. rice that had been purchased earlier this year was reported as being exported during the week ending Oct. 8.
- China reportedly tells mills to stop buying cotton from Australia. China has told cotton mills to stop buying supplies from Australia, Reuters reports, citing an Australian government source and two China-based cotton traders briefed on the matter. China is the biggest buyer of Australian cotton, which is considered the highest quality of all import origins. In 2018-19, China purchased around $637 million worth of the fiber from Australia, with the country shipping 400,000 MT of cotton to China last year. The millers essentially get a quota they can import, and essentially “they're being told they might not get their quota next year if they buy our cotton,” an Australian government source, briefed by Australian officials in China, told Reuters. This is just the latest in a series of Chinese retaliatory moves against Australia who has been critical of Chinese policy and is seeking an independent inquiry over the origins of Covid-19, which originated in China. This comes just days after reports China had halted coal purchases from Australia and was launching anti-dumping/anti-subsidies probes into imports of Aussie wine. Earlier this year, China also essentially banned Aussie barley imports and limited beef shipments from the country.
- China bought Australian wheat and rumored to have bought some French.
- U.S./China Phase 1 tracker: China’s purchases of U.S. goods. Link.
- Keeping up with China on artificial intelligence. Google’s former CEO, Eric Schmidt, called on the U.S. to adopt a national strategy to compete with China on A.I.
- China set to approve its own tech protection law. China's top legislative body, the National People's Congress, is set to adopt a new rule that would restrict sensitive exports vital to national security in a session that concludes on Saturday. The Export Control Law would apply to all companies in China, including foreign-invested ones, and would add to Beijing's regulatory arsenal, which already includes a tech export restriction catalog and an unreliable entity list. Competition has been growing with the U.S. over access to technology, and big Chinese companies including Huawei, ByteDance's TikTok, Tencent's WeChat and Semiconductor Manufacturing International Corp. have already found themselves in Washington's crosshairs in recent months.
— Food and beverage industry update:
- WSJ: Tab, Coca-Cola’s diet-soda pioneer and a ’70s icon, is going away. The beverage maker had held on to the fading brand to appease its loyal fan base, but the coronavirus pandemic prompted a culling of the company’s products. Link for details.
- School meal programs lost more than $483 million so far during pandemic, according to a survey (link) from the School Nutrition Association. The survey includes responses from school nutrition directors in 1,614 school districts across the country.
— Coronavirus update:
- Summary: Global cases of Covid-19 are have risen to 38,966,868 with the deal total put at 1,098,702, according to data compiled by the Center for Systems Science and Engineering (CSSE) at Johns Hopkins University (JHU). The U.S. case count is nearing 8 million with it standing at 7,980,461 with 217,702 deaths.
Link to Covid Case Tracker
Link to Our World in Data
- Pfizer will not seek approval of its coronavirus vaccine until late November. It’s a shift in tone for the drug maker, which had previously emphasized the month of October, aligning itself with Trump’s push for a vaccine before the Nov. 3 election.
In other vaccine news, Gilead’s high-profile antiviral drug, remdesivir, failed to prevent deaths in a 11,000-person WHO study. The company disputed the findings.
- French police searched the houses of senior officials including the health minister and the director of the national health agency. The raids are part of an inquiry into whether the government’s handling of the Covid-19 pandemic was criminally negligent. For the charges to stick, investigators must establish that individuals knowingly failed to take actions that obviously would have saved lives.
POLITICS & ELECTIONS
— 2020 Presidential Election Interactive Map
— The Green Papers
— Real Clear Politics
— 2020 Political Atlas
— 2020 Demographic Swingometer
— Next presidential debate: Scheduled to occur Oct. 22.
— Days until election
- Biden and Trump had separate town hall sessions last evening. Link to our special report on the topic. One commentator on the events said “NBC's Savannah Guthrie's comments about her crazy uncle comment showed everyone her stripes.”
Meanwhile, Former Vice President Joe Biden was not asked one question about a highly publicized news story involving his son Hunter's business dealings in Ukraine.
- Charlie Cook of the bipartisan Cook Political Report: “Whether you’re a Republican or a Democrat, liberal or conservative, predisposed toward labor or business, your eyes should now be squarely pointed to the races below the presidential level. Self-immolation is not the precise word to describe President Trump’s debate performance, but whatever it was, it was enormously self-destructive to his already-challenging reelection prospects and may well cost some Republican members of the Senate and House their seats.”
- Twitter reverses course on a New York Post story about Joe Biden. It will now allow the unverified story to be shared, after originally banning it, but will add a label to provide context about the source of the information. Republicans on the Senate Judiciary Committee said they would subpoena Jack Dorsey, Twitter’s chief, to answer questions about it.
- Sen. Ben Sasse (R-Neb.) criticized Trump’s record and ethics in a call with constituents, marking the sharpest break with the president by a GOP senator in the campaign. Link for details.
OTHER ITEMS OF NOTE
- Senate Judiciary Committee sets Oct. 22 vote on Barrett Supreme Court nomination. The Senate Judiciary Committee has set Oct. 22 for the vote on the nomination of Amy Coney Barrett to be on the U.S. Supreme Court. Senate Majority Leader Mitch McConnell (R-Ky.) announced that the full Senate will immediately take up the nomination. "She will come out of committee next Thursday the 22nd of October, and we'll go forward with her on Friday the 23rd and stay on it until we finish," he told reporters in Kentucky. “We have the votes.”
- CFTC adopts position-limit rule on split vote. The Commodity Futures Trading Commission (CFTC) approved a final rule on position limits for futures and options that has been years in the making, with the vote seeing the three Republican Commissioners voting in favor and the two Democratic Commissioners voting against it. The rule would set limits on 25 “core referenced futures contracts” which are identified as the nine legacy agricultural futures contracts with 16 new non-legacy contracts.
The legacy contracts are corn, oats, soybeans, CBOT wheat, soyoil, soymeal, MGEX Hard Red Spring wheat, ICE cotton no. 2 and CBOT KC Hard Red Winter wheat. The new non-legacy contracts are CBOT rough rice, live cattle, ICE contracts for cocoa, coffee, FCOJ-A, US sugar no. 11, U.S. sugar no. 16, COMEX contracts for gold, silver and copper, NYMEX contracts for platinum and palladium, Henry Hub natural gas, light sweet crude oil, New York Harbor ULSD heating oil and New York Harbor RBOB gasoline.
Spot month limits are set at or below 25% of deliverable supply.
The rule also updates the definition of a “bona fide hedging transaction or position.”
There will be a more-detailed Featured Analysis piece published later this morning under the Policy Channel on the Food and Agricultural Commodities Economics website.
- Grain Transportation Report returns to showing Illinois river rates. On October 13, the U.S. Army Corps of Engineers re-opened the LaGrange Lock and Dam (Versailles, Ill.) after closing it in early July for major rehabilitation and replacement of lock machinery. During the closure, the GTR temporarily introduced figure 8a, which reported barge rates on the mid-Mississippi. Figure 8a substituted for the regular GTR figure 8, which tracks Illinois River barges rates. This week, with LaGrange’s reopening, the GTR has retired figure 8a and resumed updating the regular GTR figure 8. Starting this week, the Illinois River barge rate will also replace the Mid-Mississippi rate as the benchmark to calculate cost index for GTR table 1.
- Cotton AWP posts another rise. The Adjusted World Price (AWP) for cotton will be at 53.43 cents per pound, effective today (Oct. 16), up from 51.48 cents per pound the prior week. The rise has eliminated the potential for an LDP, the first time since the week of March 13. Meanwhile, USDA said that Special Import Quota #26 would be established Oct. 22 for 25,499 bales of upland cotton, applying to cotton purchased not later than Jan. 19 and entered into the U.S. not later than April 19.
— Remembering three friends and beautiful people. There is a reason why this report is later than usual today. This week I had sad news that three good friends passed away.
• Carroll Brunthaver, former CEO of Sparks Companies, passed away following a fall. He had a remarkable career in agriculture, both in the business and government sector. He was also one of my mentors, having worked with him many years. As me, Carroll was an avid reader, and just a few days before he fell, causing a brain-related injury, I talked with him over the phone. As usual, we talked markets and asked each other what books we were reading.
• Marilyn Klumpp passed away earlier this week following a massive stroke. Marilyn was the wife of Elmer Klumpp, 90 years old and still going strong. Elmer was a decades' official at USDA and was instrumental in helping me in my early career, aiding me in understanding the complex world of ag policy. Elmer was far more than that, as I became very good friends with both he and his wife, Marilyn, frequently going on hikes with them, and dinners filled with riveting conversations on a host of topics. The two of them were inseparable, traveling the world and having the kind of marriage one could hold up as one to strive for. In talking with Elmer, he told me he lost his best friend and companion. I lost a very good friend.
• Darryl Allen was the husband of a beautiful lady I dated all of my college life. His death was tragic as it was due to a drunk driver hitting both Darryl and Debbie head-on earlier this week (and leaving the scene). Debbie went to one hospital, Darryl to another. Debbie had to have surgery on her leg and called me from her hospital bed to inform me that her husband would not likely survive, having hit his head hard and his heart stopping to beat three times while en route to the hospital, causing severe brain damage. He passed away yesterday afternoon.