Senate Aid Plan Likely Revealed Soon as Party, White House Resolve Differences

Posted on 07/23/2020 8:08 AM

USDA cattle pricing report signals investigation continues

 


In Today’s Updates


 

* Senate GOP & White House resolved outstanding issues on aid package
* Next ag aid funding level murky if it includes $14 bil. already available for CCC
* Ethanol aid likely in next congressional relief package
* Livestock indemnity funding coming
* Will rise in dairy prices temper next ag aid payment for industry?
* USDA cattle pricing report signals investigation continues
* China warns U.S. to think 'carefully' about where their relationship was heading

* China to close one or two U.S consulates in retaliation against U.S. move
* Canadian views on China: From ambivalence to distrust
* South Korea fell into a recession in the second quarter
* Gold and silver prices continue on a bullish path
* Report: Paycheck Protection Program (PPP) helped save jobs
* U.S. food & beverage industry update:
* Iowa underreported outbreak
* Coca-Cola thinks worst of the pandemic is over
* Struggling U.S. restaurants seek recipe for success
* Update on reopening America... and around the world
* United Airlines to trim more flying this quarter
* Coronavirus update:
* Trump admin. commits $1.95 bil. on 100 mil. doses of potential Covid-19 vaccine
* Covid-19 vaccine success could boost economic output by trillions of dollars

* Politics & Elections:
* Reviewing Biden's proposed tax increases
* Other Items of Note:
* Congress to get intelligence briefing
* Next round of U.S./U.K trade agreement talks will begin Monday
* Sen. Mitt Romney will vote against cloture on the Defense authorization bill
* 9th Circuit decision allows continued use of Enlist Duo
* House sends bipartisan public lands bill to Trump for signature
* Senate panel advances Fed nominations of Judy Shelton and Christopher Waller
* Potential WTO changes to be discussed at Senate Finance hearing July 29
* House clears bill removing statues of Confederate figures, white supremacists

 


MARKET FOCUS


 

Equities today: Global stocks were mostly higher and U.S. futures signal slightly higher openings.

 

     U.S. equities yesterday: The Dow rose 165.44 points, 0.62%, at 27,005.84. The Nasdaq gained 25.76 points, 0.24%, at 10,706.13. The S&P 500 added 18.72 points, 0.57%, at 3,276.02.

 

On tap today:

 

     • USDA Weekly Export Sales is out at 8:30 a.m. ET. See below for China purchases.

     • U.S. jobless claims for the week ending July 18, due at 8:30 a.m. ET, are expected to hold steady at 1.3 million. Jobless claims have declined for 15 straight weeks since peaking at 6.9 million in late March but continue to surpass a million. Update: U.S. weekly jobless claims total 1.416 million, vs 1.3 million expected.
     • Conference Board's leading economic index for June, due at 10 a.m., with economists forecasting a 2.8% increase, to a 102.6 reading, matching May’s gain.
     • European Union's preliminary consumer confidence index for July is out at 10 a.m.
     • Kansas City Fed's manufacturing survey for July is out at 11 a.m.

 

Impact if jobless benefits are cut. With the jobless rate in double digits, many Americans have come to rely on an extra $600 a week in unemployment benefits, a measure set to expire next week. Expiry would cut the weekly income of 20 million households in half. That could lead to American GDP shrinking 2% by year end and 1.7 million fewer jobs nationwide, according to Ernie Tedeschi of Evercore ISI Research.

 

Federal Reserve officials are set to discuss next week how to provide more economic stimulus, though they have signaled comfort leaving policy on hold until they learn more about how the coronavirus pandemic is weighing on the U.S. economy.

 

U.S. spending stalls. Data from Facteus, which tracks transactions by 15 million debit and credit card holders, suggest consumer spending has stabilized with new patterns of winners and losers largely locked in place. Some retail has more than recovered from prepandemic levels but entertainment and travel are still depressed. Since late June, consumer outlays appear somewhere between steady and decelerating.

     Stalling

 

A fresh look at U.S. GDP comes from IHS Markit, which aggregates data that go into gross domestic product to create its own monthly GDP measure. Hard numbers and forecasts show the sharp drop and a quick but only partial rebound in output through June. Since then, though, high-frequency data suggest a slowdown in activity, and IHS Markit's forecast now reflects that.

 

     GDP

 

The U.S. economy has fared better than Europe's in part because of its greater fiscal firepower. The European debt deal this week is all about eliminating that institutional gap, the Wall Street Journal reports (link). Leaders of the EU agreed to finance a €750 billion ($860.64 billion) package with bonds that are the obligation of the EU itself, rather than its individual members. “The breakthrough is widely compared to the infant United States’ assumption of states’ debts at the prodding of Treasury Secretary Alexander Hamilton,” the WSJ item notes. Importantly, the European Central Bank can buy EU bonds with newly created money just as the Federal Reserve buys Treasurys. “That all but eliminates any risk of default. In short, the EU is beginning to acquire economic institutions that may one day rival the U.S.’s in their flexibility and firepower.”

 

     Aid by country

 

South Korea fell into a recession in the second quarter, with GDP falling by 2.9% year-on-year, worse than expected as covid-19 battered Asia’s fourth-largest economy. Exports—accounting for nearly 40% of the country’s economy—fell by their worst level quarter-on-quarter since 1963. Still, South Korea’s finance minister said he hoped for a China-style rebound.

 

     South Korea

 

Market perspectives:

 

     • The dollar index is nearing its March close of 94.895, and beyond that level, the benchmark returns to levels seen in September of 2018. The U.S. dollar index is lower in early trading and hit another 4.5-month low.

 

     • Gold and silver prices continue on a bullish path, as gold set a nearly nine-year high and is closing in on its all-time high of $1,920.70, basis Comex futures. Silver futures also continued soaring, advancing 7.4% to $23.144 a troy ounce to nearly seven-year highs and bringing their climb for the week to 17%.


     • Third-quarter real GDP: S&P Global Economics says the expected “bounce back in third-quarter real GDP growth — of 22.2% (annualized) — in our June forecast is now at risk of weakening.”

 

     • Crude oil prices have sold off from earlier advances in overnight action and are nearly unchanged ahead of the US trading start. US crude is trading around $41.85 per barrel while Brent crude is trading around $44.20 per barrel.

 

     • Natural-gas prices ended Wednesday at $1.681 per million British thermal units—up 13% from June’s 25-year low but 23% lower than this time a year ago.

 

        Natural gas

 

     • Coffee prices rose by most since March due to colder weather hitting southern Brazil.

 

The baseball season is finally here:

 

    Baseball

 


POLICY FOCUS


 

Comparing the House-passed ag relief measures vs what may be in Senate plan:

     House ag spending:

 

     Sec. 60102. Emergency Assistance for Market Ready Livestock and Poultry Losses. $824 mil. out of Treasury.

 

     Sec. 60103. New money for APHIS. $300 million out of Treasury.

 

     Section 60201. Dairy Donation Program. $500 million out of Treasury.

 

     Section 60202. Supplemental Dairy Margin Coverage for small dairies. Such sums from Treasury but scored at $524 million.

 

     Section 60203. Recourse Loan Program for Commercial Processors of Dairy Products. $500 million from Treasury.

 

     Section 60204. Margin Coverage Premium Discount for three-year Sign Up. Scored at $36 million from Treasury.

 

     Section 60301. Specialty Crop Block Grants. $100 million from Treasury.

 

     Section 60302. Support for Local Agricultural Markets. $50 million from Treasury.

 

     Section 60303. Support for Farming Opportunities Training and Outreach. $50 million from Treasury.

 

     Section 60304. Support for Farm Stress Programs. $28 mil. from money not otherwise appropriated.

 

     Section 60305. Support for Processed Commodities. Ethanol producers and textile mills. Scored at $2.361 bil. from funds not otherwise appropriated.

 

     Section 60306. Direct Payments to Ag Producers. $16.5 bil. from Treasury.

 

     Section 60401. Emergency Assistance. Amends the CCC to allow CCC to remove and dispose of surplus livestock and poultry and help processing plants maintain supply chain against disruption. $10 billion. The House is being charged to *authorize* these activities but does not require them. The Senate is expected to authorize the Secretary to do the same using a combination of new money and existing CCC balances.

 

     Section 60501. Emergency Soil Health and Income Protection Pilot Program. $924 mil. as scored by CBO out of Treasury.

 

     Grand total in House HEROES Act: $32.696 bil. if including all of the above. If you subtract the $10 billion in new CCC authority that the Secretary is not required to use, the total is $22.696 billion. If you subtract dollars going to government agencies, $22.318 billion.

 

     On the Senate side, there is $20 billion in new dollars plus a directive to the Secretary to use the CCC balance of $14 billion. That is how some GOP senators get at $34 billion.

 

Ethanol and indemnity funding for livestock producers. The coming Senate bill will contain language giving USDA discretion to make payments to ethanol plants and aid to livestock producers who had euthanize their animals because they could not get them slaughtered. The Senate measure would reimburse ethanol producers on feedstock purchases. The plan would reimburse biofuel producers for their feedstock purchases from Jan. 1, 2020, to March 31 through the Commodity Credit Corporation (CCC). The Senate plan differs from the "Renewable Fuel Reimbursement Program" included in the House HEROES Act, which would provide a 45-cent per-gallon payment for biofuel producers for qualified fuel produced from Jan. 1, 2020, through May 1. Ethanol plants not producing during that time frame could still receive a 22.5-cent credit based on fuel volumes they produced during that time period in 2019 as well.

 

     Former USDA top economist Joe Glauber: 'Don't bail out ethanol'. While ethanol makers have suffered losses due to the coronavirus, they are much smaller than claimed, and aid in the form of payments from the USDA "would misuse legislation that was intended to aid farmers, not downstream industries like ethanol," writes former USDA chief economist Joe Glauber in an essay. Link to The Hill.

 

     Meanwhile, Democratic Sens. Tina Smith and Amy Klobuchar of Minnesota and Senate Minority Whip Dick Durbin of Illinois this week sent Senate leaders a letter (link) urging them to include in the coming aid package payments to pork producers who have had to euthanize their animals, and changes to the CCC charter to allow USDA to disburse aid for the removal and disposal of livestock due to supply chain interruptions.

 

Will dairy aid payment in next congressional package be tempered by recent, significant market rally? The economic recovery in China is helping reverse a coronavirus-driven slump in dairy prices. Demand for products like milk powder, cheese and butter is rising as people there spend more money on food, the Wall Street Journal reports (link), improving the profit outlook for farmers. Milk is among the many commodities that have been roiled by the upheaval of coronavirus lockdowns. China is the world’s largest importer of dairy products, and the reopening of restaurants and cafes there and elsewhere in Asia is helping normalize demand. Dairy prices are rebounding to near levels seen in January after plunging to an 18-month low in May. “The rising prices and exports could help U.S. dairy farmers struggling to adjust to diminished domestic demand as hotels, restaurants and other food-service customers remain closed amid the pandemic,” the WSJ article concludes.

 

USDA considers cattle market changes after volatility concerns. USDA on Wednesday released a report on their investigation into beef price margins in the wake of the 2019 fire at a beef processing plant in Holcomb, Kansas, and the Covid-19 market gyrations that happened this year, but the report reaches no conclusions on whether there have been any violations of law in either instance.

 

     Background. USDA’s Agricultural Marketing Service (AMS) coordinated with USDA’s Office of the Chief Economist to prepare the report (link), which “first summarizes market conditions, fed cattle prices, boxed beef values, and the spread before and after the fire and plant closure at the Tyson Holcomb plant. The report then summarizes market conditions, fed cattle prices, boxed beef values, and the spread before and during the Covid-19 pandemic.”

 

     USDA disclaimer. While providing an explanation of the market conditions, the report summary indicated “It does not examine potential violations of the Packers and Stockyards Act. The investigation into potential violations is ongoing, and therefore, AMS has limited ability to publicly report the full scope and status of the investigation.”

 

     Facts and figures. When the plant fire took place August 9, 2019, the resulting spread between the dressed fed cattle price and the Choice boxed beef cutout value was at $67.17 per cwt., a level USDA said was a record. “That record was later exceeded following the Covid-19 pandemic in 2020,” USDA noted. The then-record linked to the Holcomb fire compared to an average spread of $27.66 per cwt for the week ending August 24 during 2016-2018. The difference between the two was $39.51 per cwt., the report said, or 143%.

 

     The Holcomb plant accounted for about 5% to 6% of U.S. beef production, and despite the loss of the plant, the total number of fed cattle harvested during the first three post-fire weeks actually outpaced that of the three weeks prior to the fire by approximately 5,000 head. “This should not be unexpected as rising boxed beef prices and the higher price spread provided an incentive to packers to increase production,” the report stated, noting it appeared Tyson Foods, owner of the Kansas plant, shipped a significant portion of cattle that would have been processed at that plant to its other facilities.

 

     Covid-19 impacts. The significant disruptions to the U.S. cattle market and processing systems from the Covid-19 pandemic peaked near the last week of April when nearly 40% of U.S. beef processing capacity was idled. “During this Covid-19 pandemic, the largest difference — or spread —between the Choice boxed beef cutout value and dressed fed cattle prices since the inception of Mandatory Price Reporting in 2001 was recorded at just over $279/cwt,” the report detailed. A resulting surge in consumer retail demand combined with the supply shortages caused by the idled capacity “may have contributed to a sharp increase in beef values,” the report said. “From early April until the second week of May, the spread grew from $66/cwt to over $279/cwt, a 323% increase.” While that spread narrowed to $119 per cwt by the beginning of June, USDA said, “It is too early to determine if spread will continue to narrow.”

 

     USDA silent on whether violations occurred. USDA officials testifying before Congress have been repeatedly asked and pressed about the cattle market situation arising from initially the Holcomb plant fire and then the Covid impacts, both of which resulted in a record spread between boxed beef and cattle prices as documented in the report. But USDA’s report reaches no conclusions on whether these record market fluctuations/spreads were the result of any illegal activity by market participants. “Findings thus far do not preclude the possibility that individual entities or groups of entities violated the Packers and Stockyards Act during the aftermath of the Tyson Holcomb fire and the Covid-19 pandemic,” the report stated. “The investigation into potential violations under the Packers and Stockyards Act is continuing.”

 

     USDA cautioned that it “does not solely own investigatory authority over anticompetitive practices in the meat packing industry and has been engaged in discussions with the Department of Justice (DOJ) regarding allegations of anticompetitive practices in the meat packing industry. Should USDA find a violation of the Packers and Stockyards Act, it is authorized to report the violation to DOJ for prosecution.”

 

     USDA further included a section outlining several possible options that could be discussed relative to the current U.S. cattle industry structure. “At the core of many of these discussions is the desire by many market participants for improved price discovery, reinvigorated competition, and a more-transparent relationship between the prices for live cattle and the resulting products.”

 

     USDA discussed issues on price reporting and transparency, noting that there are concerns about price discover that relate to the “declining number of participants in the negotiated cash market.” The report said that a reduction in non-reporting of information under Livestock Mandatory Reporting (LMR) would “provide improved price discovery.” However, there has yet to be an industry consensus on how to potentially address that via a combination or reshuffling of price reporting regions.

 

     Better access to risk management training would also potentially mean that small and medium-sized producers could be better positioned to more-effectively negotiate sales and compete with larger producers, the report said. Use of updated products from the Risk Management Agency (RMA) on gross margin losses for fed cattle and price declines for feeder and fed cattle could also put those producers on more-even footing.

 

     Changes to the Packers and Stockyards Act could also provide a more-competitive atmosphere, with USDA working on rulemaking that would set criteria USDA could consider when determining if there has been an undue or unreasonable preference or advantage that is in violation with the Act. Updates to the Act could also help provide benefits to small and medium-sized producers, the report noted.

 

     More study needed. “It is important that any proposals aimed at addressing these complex issues and others associated with the market disruptions caused by the Holcomb fire and Covid-19 receive careful consideration and thorough vetting given their potential to affect everyone whose livelihood depends on the sale of cattle, beef, or related products,” the report stated. “USDA stands ready to assist stakeholders and policymakers as they continue to explore options to improve price discovery, level the playing field between producers and large meatpackers in negotiating prices and procurement methods, and to foster a more transparent relationship between the prices for live cattle and the resulting products.”

 

     Reaction to the report came from several groups:

 

     NAMI: The AMS report shows that two extreme and unforeseen events affected beef markets — the Holcomb plant fire and the Covid-19 pandemic, according to the North American Meat Institute (NAMI), a Washington-based trade body representing meat processors. “In its analysis of the effects of the fire and the pandemic, USDA found no wrong-doing and confirms the disruption in the beef markets was due to devastating and unprecedented events,” said NAMI President and CEO, Julie Anna Potts. “It is difficult to see how the USDA’s recommended legislative proposals would have changed the outcome of the fire or the pandemic.” But the group pledged to “continue discussions with producer groups, Congress, and the administration to ensure there is a fair and competitive market. It is especially critical in these uncertain times for producers and packers to work together.”

 

     USDA suggested linking meatpackers’ reporting requirements to the number of cattle they buy on the open market, versus cattle secured through contracts with ranchers. The agency said it is also considering changes to the way it collects and disseminates cattle pricing data. Potts said it was unlikely those steps would have changed cattle and beef price movements following the fire and pandemic.

 

     The National Cattlemen’s Beef Association, which represents ranchers, welcomed the report and said the group awaited results from the Justice Department’s inquiry.

 

     United States Cattlemen's Association (USCA) President Brooke Miller, in a statement, said: “USDA's findings do not preclude the possibility that individual entities or groups of entities violated the Packers and Stockyards Act. That investigation is ongoing. We appreciate the work of USDA leadership and staff in thoroughly examining these historic market disruptions and look forward to the findings of the Department of Justice investigation for a complete overview of the allegations of anticompetitive and market distorting practices employed by the meatpacking industry."

 

Update on China:

  • China’s buys of U.S. ag products continue. For the week ended July 16, USDA’s Weekly Export Sales report notes the following sales to China:

    For 2019-20, net sales of 7,079 tonnes of corn, 78,645 tonnes of sorghum, 209,872 tonnes of soybeans, but net reductions of 4,401 running bales of upland cotton.

    For 2020, net sales of 479 tonnes of pork and 7,159 tonnes of beef were reported.

    For 2020-21, net sales of 127,090 tonnes of wheat, 1.960 million tonnes of corn (mostly known via daily sales announcements last week), 175,000 tonnes of sorghum, 1.486 million tonnes of soybeans, and 2,640 running bales of upland cotton.

     
  • USDA this morning reported export sales of 132,000 metric tons of soybeans for delivery to China during the 2020-2021 marketing year.
     
  • China warned the U.S. to think “carefully” about where their relationship was heading, in response to a question about their trade deal after a rise in tensions over the forced closure of Beijing’s consulate in Houston. “China’s position on the China-U.S. relationship is clear and consistent,” Foreign Ministry spokesman Wang Wenbin told a daily briefing in Beijing today. “As to which direction this relationship is heading, it’s an issue for the U.S. to carefully think about.” Global Times Editor-in-Chief Hu Xijin said Beijing would likely respond with moves that inflict more pain on the U.S. than just closing its operation in Wuhan — including potential cuts to its larger Hong Kong consulate. Wang called the Houston closure a “serious sabotage” of China/U.S. relations and said it was “breaking down the friendship bridge between the two sides.”

    China is moving to close the U.S. consulate in the southwestern city of Chengdu, according to the South China Morning Post, citing a source briefed on the decision. Washington maintains five consulates on the Chinese mainland – in Guangzhou, Shanghai, Shenyang, Chengdu and Wuhan – as well as a consulate general for Hong Kong and Macau.

     
  • Canadian views on China: From ambivalence to distrust. The U.S. and the Americas Program at Chatham House — with the support of the Konrad Adenauer Foundation — is leading a multi-year project on transatlantic policy towards China, with a particular focus on national security, trade, technology and human rights. North America and Europe's relationship with China will continue to define international politics for years to come. This week Chatham House published the first of several papers that are part of this project. Professor Roland Paris of Ottawa University draws on recent polling data and contemporary examples to analyze Canadian narratives on China's rise and in doing so evaluates how public opinion is shaping Canadian policy towards China. Link to paper that argues that “hardened sentiments are unlikely to dissipate and Canada–China relations seem to have entered a new, warier phase.”
     
  • China is the dominant global supplier of rare earth minerals, which are crucial to advanced technologies. The ChinaPower Project released a new feature of interactive data visualizations (link) to look at the possible threat China poses to rare earth supply chains.

    Rare earth

     
  • Froth returns to China’s stock market, echoing the 2015 crisis. Chinese stocks are surging. Foreign investors have rushed in. University graduates and factory workers are opening up trading accounts. Is disaster on the horizon? Link to NYT article.
     
  • U.S. dollar payment system debate continues; can America cut China off from Swift? Debates continue among Chinese officials and analysts as to whether the United States has the ability and willingness to reduce or even completely cut off China’s access to the U.S. dollar system, reflecting a sense of uneasiness in Beijing about the potential ramifications of a financial war with Washington. Link to SCMP article.
     
  • Li Ka-Shing’s Horizon Ventures leads funding round in fake-milk maker. Hong Kong’s richest man has a taste for vegan ice-cream. Link to article.
     
  • China allocates flood relief fund to farmers, agriculture production. China has allocated a 330 million yuan ($47 million) disaster relief fund to help farmers and agricultural production in southern provinces, as large parts of the country suffer the worst flooding in decades. Link to Reuters item.
     
  • U.S./China Phase 1 tracker: China’s purchases of U.S. goods. Link.

Update on next aid package:

  • Republicans worked out their intra-party differences and will soon unveil their around $1 trillion aid package. The package will no longer be one bill but a series of bills addressing the ongoing health care and economic crisis, according to Sen. Roy Blunt (R-Mo.). "I think what the leader has decided he wants to do is to have a handful of bills now instead of just one bill,” he said. He didn’t know whether the bills would eventually be packaged together for floor consideration. “I’m not sure how this moves toward conclusion, whether the Senate will be voting on it individually or this becomes a negotiating position,” Blunt said.

    Testing: The plan will include $25 billion in new funding for testing, including $9 billion in earlier funding that hasn’t yet been spent (thus, $16 billion in new spending).

    Schools: More than $100 billion will go toward schools. The legislation will include $70 billion for elementary and secondary education with half of that figure going to every school on a per capita basis and the remaining $35 billion going to schools that will open in some capacity for in-person instruction, according to Blunt. “We’ll come up with language that allows the governors to determine what that means and language that also is clear to school districts and school boards for what they would have to do to be considered in a back-to-school environment,” Blunt said. Another $30 billion would be appropriated for higher education, with no conditions placed on colleges and universities based on whether they plan to reopen this fall. And $5 billion would be flexible funds that could be used, for example, for private school vouchers.

    State aid: The Republican plan includes legislation giving state and local governments more flexibility in using the $150 billion in aid the federal government has already approved, according to Sen. John Kennedy (R-La.). Democrats want $1 trillion in new state and local aid.

    Jobless benefits. The Democrats' package included an extension of the $600 a week in additional unemployment benefits. Republicans are now reportedly considering proposing those more generous payments, set to expire by the end of the month, be cut to $100 a week. Meanwhile, as expected, Senate Republicans are discussing temporarily extending the $600 weekly supplement to regular unemployment benefits authorized by the CARES Act. Sen. Rob Portman (R-Ohio) said Congress should try to pass a full package before the deadline but that a stopgap measure might be needed to prevent a lapse in benefits. “My hope is we can get our work done by the end of next week on the broader Covid-19 package because there’s so many things that are urgent,” Portman said. “But if we can’t get it all done by next week, we cannot allow there to be a cliff in unemployment insurance,” given how high the jobless rate remains, he said.

    A University of Chicago study found 68% of unemployed workers who are eligible for benefits receive more in jobless payments than their lost earnings, with the median payment 34% more than their former weekly paychecks.

    Tax policy: The Republican legislation reportedly includes a proposal that would shield workers from state taxation if they are temporarily outside their home states or normal work locations. The bipartisan proposal from Sens. John Thune (R-S.D.) and Sherrod Brown (D-Ohio) would limit states’ ability to tax workers who may be working remotely from one place during the pandemic instead of their usual job site. It would also set a 30-day requirement before a state can impose taxes on most nonresidents and a 90-day requirement for certain traveling health-care workers. New York lawmakers have objected to similar proposals in the past.

    Tax credit: The Senate measure would provide businesses a refundable tax credit against payroll taxes for 50% of the costs incurred by testing, protective equipment, extra cleaning and reconfiguring office space until the end of the year.

    Next step: GOP, Dem negotiations. Democrats favor a $3.5 trillion bill the House passed in May, and Democratic leaders have said they are waiting to see a Republican plan before beginning negotiations in earnest. Sen. Portman said he’d prefer to wrap up negotiations and votes on the next aid package before the end of next week. If that cannot happen, however, he said Congress must address unemployment benefits. “We don’t want to have a cliff,” Portman said.

Update on implementation of CARES 1, including CFAP:

  • Paycheck Protection Program (PPP) helped save jobs. "We estimate that the PPP boosted employment at eligible firms by 2% to 4.5%, with a preferred central tendency estimate of approximately 3.25%. Our estimates imply that the PPP increased aggregate U.S. employment by 1.4 million to 3.2 million jobs through the first week of June 2020, with a preferred central tendency estimate of about 2.3 million workers," MIT's David Autor and co-authors from the Federal Reserve and ADP write in a new paper (link).

Food and beverage industry update:

  • Iowa underreported outbreak. The first coronavirus outbreak at a meat plant in Iowa was far bigger than state officials initially announced. Although the state reported that 221 workers at the Tyson plant in Columbus Junction had tested positive for the virus, the company said that 522 workers had been infected, according to documents released under the public records law. Link to Associated Press article.
     
  • Coca-Cola thinks the worst of the pandemic is over. The beverages giant said in its latest earnings report that revenue fell 28% in the second quarter. Sales in China and Europe have shown signs of recovery, and executives said they didn’t expect things to get as bad as in spring.
     
  • Struggling U.S. restaurants seek recipe for success. Why social distancing may bring structural changes to the restaurant industry that could last even after a viable Covid-19 vaccine. Link to Morgan Stanley Research analysis.

    Delivery

Update on reopening America... and around the world:

  • United Airlines, which reported a quarterly loss of about $1.6 billion, said it will trim more flying this quarter in response to stalling demand, while cost-cutting efforts will reduce how much cash it burns moving into the fall.
     
  • Walmart stores will close Thanksgiving Day this year and employees will receive $428 million in bonuses as a reward for serving customers during the pandemic.

Coronavirus update:

  • Summary:

    — 15,250,804: Confirmed cases world-wide, and 623,897 deaths
    — 71,695: New U.S. cases recorded yesterday
    — 3,971,343: Total confirmed cases in the U.S.
    — 1,195: Deaths in the U.S. recorded yesterday
    — 143,193: Total U.S. deaths
    — 48,020,777: Tests conducted in the U.S.

    Link to Covid Case Tracker

    Link to Our World in Data

     
  • Trump administration has committed to spend $1.95 billion on 100 million doses of a potential Covid-19 vaccine being developed by Germany’s BioNTech and U.S. pharma group Pfizer, which will be distributed free of charge to American citizens. The first large-scale supply agreement signed by the White House also includes the option for the U.S. government to purchase a further 500 million doses.
     
  • Covid-19 vaccine success could boost economic output by trillions of dollars, and the progress thus far is encouraging, but investors are already giving companies credit for finishing the job, the Wall Street Journal reports (link). Even after a sharp selloff earlier this week, Moderna shares have tripled since March and are up 30% over the past month, while megacaps Pfizer and AstraZeneca have each rallied about 10% in the past month. However significant roadblocks suggest the odds aren’t in investors’ favor.

    Vaccine

 


POLITICS & ELECTIONS


  • Links
    2020 Presidential Election Interactive Map
    The Green Papers

     
  • A proposal by Joe Biden this week to eliminate so called like-kind exchanges above a certain threshold continues to catch attention. Republican lawmakers considered this as part of their 2017 tax cut, but didn’t include it in the final bill. Meanwhile, CNBC has a rundown (link) of Biden’s proposals for individual income taxes, which would raise rates for the rich (on income and capital gains) and eliminate breaks for inherited assets. In brief, Biden has proposed raising the top individual income tax rate to 39.6%, up from 37%. Those with income exceeding $1 million could see long-term capital gains rates rise to 39.6%, from 20%. Taxpayers with earnings in excess of $400,000 would also be subject to the Social Security payroll tax. Currently, wages up to $137,700 are subject to the Social Security tax, of which the employee’s share is 6.2%. Currently, the long-term capital gains tax rate is 20% for single households with more than $441,451 in taxable income ($496,601 for married-filing-jointly) in 2020. Biden has proposed subjecting capital gains to the same rates as ordinary income for households earning more than $1 million. In this case, they would face a levy of 39.6%.“Step up in basis” — a tax break that allows beneficiaries to sell off inherited assets and pay little to no taxes — would be repealed.

 


OTHER ITEMS OF NOTE


 

  • Director of National Intelligence John Ratcliffe said he is willing to appear before Congress in August for a briefing on global threats facing the U.S., in what would be the first such session in nearly 20 months.
     
  • Next round of U.S./U.K trade agreement talks will begin on Monday. The virtual negotiating session is expected to last about two weeks.
     
  • Sen. Mitt Romney said he will vote against cloture on the Defense authorization bill (S 4049), because Senate leaders disallowed a vote on his amendment setting conditions on any reduction of the U.S. troop level in Germany. He said he would still vote for the bill whenever a final passage vote occurs.
     
  • 9th Circuit decision allows continued use of Enlist Duo. Enlist Duo, a Corteva Agriscience herbicide that is a mixture of 2,4-D choline and glyphosate, survived most legal challenges in a 9th U.S. Circuit Court of Appeals opinion Wednesday that will allow its continued use.
     
  • House sends bipartisan public lands bill to Trump for signature. The House easily passed legislation Wednesday to establish permanent funding for a broadly popular land conservation program, the Land and Water Conservation Fund, dealing with objections from oil-state members and pleasing environmental groups, the Interior Secretary and at-risk Republican senators. The final tally was 310-107, with more than 80 Republicans joining nearly every Democrat to vote “aye.” The bill (HR 1957) would permanently fund the Land and Water Conservation Fund, a federal pool of money raised largely from fees and royalties on offshore oil and gas drilling, with $900 million annually. It would also allocate $9.5 billion over five years for the Interior Department to clear some of its backlog of maintenance, including at National Park Service sites.
     
  • Senate Banking Committee advances nominations of Judy Shelton and Christopher Waller to Federal Reserve Board, putting them up for a vote in the full Senate. Mitt Romney, Republican of Utah, said he has “concerns” about Shelton, but it would take more defections to sink her appointment — assuming that all Democrats vote against, which is not assured. Shelton is up for a seat once held by the former Fed chair Janet Yellen, and her term would last until 2024. Waller’s term would run through 2030. If both pass, six of the seven Fed board members will be Trump appointees. Board terms run for 14 years and are staggered (one is up for renewal every other year) to “ensure stability and continuity.” But the seats to be filled by Shelton and Waller have sat vacant for years.
     
  • WTO changes. The Senate Finance Committee announced a July 29 hearing to explore potential changes to the World Trade Organization (WTO).
     
  • The House voted overwhelmingly — with 72 Republicans joining the Democrats — to remove statues of Confederate figures and white supremacists. The GOP Senate may not act on the measure.

 

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