GOP-led Senate having hard time finding votes for scaled-back aid package
In Today’s Updates
* USDA announces more daily export sales to China
* Ed Yardeni: Stocks can fall another 10-15% but market will then make 'comeback'
* China's exports surge
* Freezing temps in Canada and Northern U.S. Plains overnight
* U.S. soybean futures have recovered all the pandemic-related losses
* China’s corn futures up strong
* Ag market insights from CFTC Commitments of Traders report
* Saudi Aramco cuts October official selling price for Arab Light crude
* China’s copper demand spiked this year
* Improved demand combined with tight inventory levels boost copper prices
* Coffee continues to rally
* Lumber futures have sustained down move
* Sales of used cars have taken off during the pandemic
* Robust peak season is taking shape at U.S. seaports
* Downturn in N.A. rail volume hitting transportation equipment market harder
* GOP-led Senate eyes skinny aid bill, but having hard time finding votes
* Peterson again sounds alarm on new Brazil ethanol duties; announcement soon
* Trump raises prospect of 'decoupling' Chinese and American economies
* China unveils Global Initiative on Data Security
* U.S. might soon ban products made with cotton from the Chinese region of Xinjiang
* China’s army said Indian troops crossed countries’ disputed Himalayan border
* Australia whisked two journalists out of China
* Through August, Chinese soybean imports up 15% from year-ago
* Chinese meat imports slow in August
* China to auction more pork, beef and mutton
U.S. food & beverage industry update:
* Covid-19 not a food trade issue: panel
* Beyond Meat signs deal to open new production facility near Shanghai
Update on re-opening America... and around the world:
* NFL regular season set to kick off
* Economic effects of closed schools could equal small-to-midsize recession
* 10-day Sturgis Motorcycle Rally in South Dakota
* India recorded more than 94,000 new coronavirus cases on Sunday, a global record
* Drug makers to issue joint vaccine pledge
* Trump suggests coronavirus vaccine could be delivered by October
Politics & Elections:
* Trump says Pelosi, Schumer holding up stimulus bill to hurt his reelection chances
* Mail ballots start
* Voting is underway in North Carolina
* Trump to unveil Supreme Court list
* Will courts pick the new president?
Other Items of Note:
* Amazon bans foreign sales of seeds in America
* EU/U.K, trade talks hit another snag
* Latvia’s Valdis Dombrovskis named as new European Commissioner for Trade
* Louis Dreyfus in talks to sell stake to Abu Dhabi sovereign wealth fund ADQ
* Germany threatens Russia with Nord Stream 2
Equities today: Global stock markets were mixed overnight, with Asian shares mostly firmer and European shares mostly weaker. The U.S. stock indexes are pointed toward weaker openings.
U.S. equities Friday: The Dow closed down 159.42 points, 0.6%, at 28,133.31. The S&P 500 dropped 28.10 points, 0.8%, to 3,426.96, while the Nasdaq Composite declined 144.97 points, 1.3%, to 11,313.13.
For the week, the S&P slipped 2.3%, its biggest weekly decline since June. The Dow dropped 1.8% and the Nasdaq dropped 3.7%, its worst performance since March.
Veteran bull Ed Yardeni says stocks can fall another 10-15% but the market will then make a 'comeback'. "I'm actually somewhat comforted by the market taking a break here. It's a healthy development," the economist said of last week's sell-off.
On tap today:
• USDA grain export inspections, 10 a.m. ET.
• USDA Crop Progress report, 4 p.m. ET.
• U.S. consumer credit for July is out at 3 p.m. ET.
• China's consumer- and producer-price indexes for August are out at 9:30 p.m. ET.
China's exports surge. China’s exports gained momentum in August as countries gradually recovering from coronavirus lockdowns, including the U.S., snapped up more Chinese-made goods. Outbound shipments from China rose 9.5% in August from a year earlier, marking the third consecutive month of annual growth and a stark turnaround from the start of the year, when the pandemic crippled China’s factories and global shipping networks.
• Private exporters reported to USDA the following activity:
— Export sales of 400,000 metric tons of soybeans for delivery to China during the 2020-2021 marketing year; and
— Export sales of 264,000 metric tons of soybeans received during the reporting period for delivery to China during the 2020-2021 marketing year; and
— Export sales of 101,600 MT of corn for delivery to unknown destinations during the 2020/2021 marketing year.
• Freezing temps in Canada and the Northern U.S. Plains overnight. Temperatures dropped below freezing across portions of the Canadian Prairies and northern U.S. Plains overnight, with temps dropping to the 20s Fahrenheit in Saskatchewan, Canada and ranging from the upper 20s to low 30s F in eastern Montana and northwest North Dakota, according to World Weather Inc. Cold conditions are expected to end the growing season and cause some damage to immature crops, with additional frosts and freezes expected farther to the south tonight and Wednesday. The weather watcher details, “Losses to coarse grain and oilseeds will be greatest in Canada, although some damage will occur southward into the west-central U.S. high Plains. The coldest air in the northern U.S. Plains will move to the south tonight and only slightly to the east which should spare key crop areas in eastern parts of the Dakotas and Minnesota from hard freezes, although some frost will be possible.” Tonight’s cold will likely have the most impact on Wyoming, Colorado and Nebraska, World Weather says.
• U.S. soybean futures have recovered all of the pandemic-related losses. Will or should this impact CFAP aid?
• China’s corn futures were up strong last night. China had strong winds across its northern corn production area last week.
• CFTC Commitments of Traders report (Source: Bloomberg):
— Hedge funds boost net bullish hog bets to one-year high
— Net bullish soybean bets boosted to two-year high
— Net bullish soybean-oil bets boosted to seven-month high
— Net bullish soybean-meal bets rise to 21-week high
— Net bullish Chicago wheat bets boosted to five-month high
— Hedge fund managers flip to net bullish on corn
— Net bullish raw-sugar beets boosted to three-year high
— Net bullish cotton bets boosted to 23-month high
— Funds cut net bullish cattle bets
— Net bullish feeder-cattle bets cut to five-week low
— Net bullish orange-juice bets cut to three-week low
• Saudi Aramco (ARMCO) has cut the October official selling price for Arab Light crude it sells to Asia by the most since May, while the world's top oil exporter also lowered prices to the U.S. for the first time in six months. The move compounded losses in the WTI crude benchmark, which fell 4.5% to $37.98/bbl on the news, after tumbling 7.5% last week as the coronavirus crisis appeared to stage a comeback in parts of Europe, while cases in India surged. U.S. energy firms also added oil and natural gas rigs for the second time in the past three weeks, according to a weekly report by Baker Hughes, while shale producers are stockpiling federal drilling permits in the Permian Basin. Crude oil futures are solidly lower. U.S. crude is down 4.9% to trade around $37.80 per barrel while Brent crude is lower by 2.8% to trade around $40.85 per barrel.
• China’s copper demand spiked this year. Improved demand combined with tight inventory levels has boosted copper prices this year.
• Coffee continues to rally.
• What goes up eventually goes down... case in point: lumber futures.
• Sales of used cars have taken off during the pandemic, as many people try to avoid public transit. That’s driving the price up: In July, the average value of used cars jumped more than 16%.
• A surprisingly robust peak season is taking shape at U.S. seaports. Container imports are flowing back into the U.S. in bigger volumes, the Wall Street Journal reports (link), as U.S. retailers rush to restock while consumer spending remains strong and shipping lines push capacity back into commercial trade lanes. The growth is accelerating at both the Atlantic and Pacific gateways but appears stronger recently on the West Coast, where retailers have faster access to domestic distribution channels primed for e-commerce. The surge comes after several retailers reported that stock shortages limited their sales growth as coronavirus-driven lockdowns wound down and shoppers opened their wallets. The demand is driving freight rates to new multi-year highs, boosting an unexpectedly strong financial year for shipping lines. Research group Sea Intelligence says sector-wide operating earnings reached $2.7 billion in the second quarter, and growing third-quarter volumes should add to the profitability.
• The downturn in North American rail volume this year is hitting the transportation equipment market harder. Railcar manufacturers are extending cost cuts and looking to make some cutbacks permanent, the Wall Street Journal notes (link), as the sector copes with an oversupply of cars and declining freight loads. Dallas-based manufacturer and lessor Trinity Industries is looking at ways to outsource the making of railcars so it can reduce labor costs permanently after losing $206.9 million in the second quarter. Greenbrier Companies had cut its North American workforce by 40% by midsummer and closed 11 rail production lines. Overall U.S. rail volumes fell by 11.8% in the first eight months of the year, according to the Association of American Railroads, pushing operators to park their equipment. Some 29% of North American freight cars were in storage last month, according to the AAR, up from 16% two years ago.
— GOP-led Senate eyes a skinny aid bill, but appears to be having a hard time finding the votes. Senate Majority Leader Mitch McConnell (R-Ky.) will try this week to offer with a scaled-down $500 billion stimulus plan the White House supports. Although only half of what the GOP offered at the end of July, McConnell is struggling to get Republicans fully behind it as newly energized fiscal hawks in the party balk at adding to the estimated $3.3 trillion fiscal 2020 deficit. “I hope by the end of the week, we can begin moving forward with that,” Treasury Secretary Steven Mnuchin said Sunday on Fox News. He called the smaller measure “targeted.”
House Speaker Nancy Pelosi (D-Calif.) and Democrats already nixed the smaller stimulus. They haven’t budged from their proposal for a $2.2 trillion relief package Republicans previously rejected.
For more on the next Covid aid package, see The Week Ahead (link).
— Peterson again sounds alarm on new Brazil ethanol duties; announcement could come this week. House Agriculture Committee Chairman Collin Peterson (D-Minn.) is again sounding the alarm over Brazil’s new tariffs on U.S. ethanol. “Tariff wars have consequences, and our biofuel producers are seeing that firsthand," Peterson said of the higher duties in a Friday (Sept. 4) statement.
Background. Since 2017, Brazil maintained tariff-rate quota (TRQ) allowing tariff-free imports of U.S. ethanol on up to 198 million gallons per year, with a 20% duty on imports exceeding the quota. However, the TRQ expired Aug. 31, leaving all imports of U.S. ethanol subject to the 20% tariff.
The increase could not come at a worse time for US producers, Peterson said. "American corn and ethanol producers are struggling to access domestic markets because of the coronavirus and the Environmental Protection Agency's reckless implementation of the Renewable Fuel Standard," he wrote. "Brazil's move to increase tariffs on American ethanol is more bad news for our producers. The Trump Administration should continue working with Brazilian officials to restore the duty-free access that was in place from 2012 to 2017."
— Update on China:
- President Donald Trump raised the prospect of “decoupling” the Chinese and American economies and warned that if he is not re-elected “China will own this country.”
- China unveiled its new Global Initiative on Data Security, “that reflect the will and respect the interests of all countries,” countering U.S. efforts to persuade like-minded nations to ringfence their networks from Chinese technology.a month after the U.S. announced the Clean Network program, which would exclude Chinese tech providers from internet infrastructure used by America and other nations. In August, the U.S. also amended a rule that looked to effectively cut Huawei off from key semiconductor supplies, while President Trump signed an executive order banning transactions with TikTok owner ByteDance and WeChat owner Tencent.
- Hong Kong-listed shares of Semiconductor Manufacturing International Corporation, China’s biggest chipmaker, lost 23% of their value; on Saturday the Pentagon said it could deny SMIC access to American technology, for national-security reasons.
- This week the U.S. might ban products made with cotton from the Chinese region of Xinjiang, in protest at the abuse of minorities living there. Such an order, which would come from U.S. Customs and Border Protection (CBP), has the potential to affect tens of billions of dollars of U.S. textile and clothing imports that contain cotton, yarn or fabric produced in the Xinjiang Uygur Autonomous Region (XUAR).
It also could impact U.S. cotton producers if Beijing is provoked into retaliation. China may retaliate with countermeasures, such as adopting high tariffs on U.S. cotton or not allocating import quotas to U.S. supplies.
Details. The mandate, known as a Withhold Release Order (WRO), would not be an actual import ban. But goods subject to a WRO have to be re-exported or destroyed if CBP determines they were made with forced labor. The U.S. Commerce Department already has placed close to 50 Chinese operations on its Entity List for involvement in those practices, effectively banning U.S. companies from doing business with them without a special license. The U.S. imported between $40 billion and $50 billion worth of textiles from China last year, and cotton, yarn and fabric from Xinjiang is used by other countries such as Vietnam, Indonesia, Cambodia, Bangladesh and Sri Lanka to make clothing.
- China’s army said Indian troops crossed the countries’ disputed Himalayan border and fired warning shots at Chinese soldiers. India denied that and said Chinese soldiers had fired into the air. Soldiers have clashed previously at the so-called Line of Actual Control, but the latest incident, if confirmed, would mark the first shots fired in anger in 45 years.
- Australia whisked two journalists out of China, after a diplomatic stand-off. ABC’s Bill Birtles and the Australian Financial Review’s Michael Smith had holed up in Australia’s diplomatic missions after being told they were wanted for questioning about Cheng Lei, another Australian journalist, whom China has detained without explanation. They were eventually allowed to flee, after agreeing to a police interview.
- Through August, Chinese soybean imports up 15% from year-ago. China imported 9.6 MMT of soybeans during August, a 4.8% retreat from July, according to the country’s customs administration. This was up 1.3% from its imports last year for the month. Eight months into 2020, China has imported 64.74 MMT of the oilseed, a 15% surge from year-ago. The country has recently ramped up its purchases of U.S. soybeans with South American supplies running low.
- Chinese meat imports slow in August. China imported 832,000 MT of meat in August, a 17% retreat from the previous month’s strong showing, according to Chinese customs data. This was the lowest monthly tally since May. But for the first eight months of the calendar year, China has brought in 6.58 MMT of meat, a 73% surge from year-ago as the country is still in recovery mode after African swine fever wiped out nearly half of the country’s hog herd. China no longer provides a breakdown by type of meat.
- China to auction more pork, beef and mutton. China announced it will auction another 10,000 MT of frozen pork from its state reserves on Sept. 11. The country also plans to sell 2,900 MT of frozen beef and mutton from its reserves on Sept. 10. So far this year, the country has already auctioned 540,000 MT of frozen pork from its reserves to ease supply tightness.
- U.S./China Phase 1 tracker: China’s purchases of U.S. goods. Link.
— U.S. food & beverage industry update:
- Covid-19 not a food trade issue, says panel. A new report by the International Commission on Microbiological Specifications for Foods (ICMSF) says it is “highly unlikely that the ingestion of SARS-CoV-2 will result in illness; there is no documented evidence that food is a significant source and/or vehicle for transmission” of the virus. “It is vital that one differentiates a hazard from a risk, i.e., the mere presence of an infectious agent on food does not necessarily mean that an infection will occur,” said the new eight-page opinion. Frank Yiannas, FDA’s deputy commissioner for food policy and response, tweeted the findings from the “prestigious” ICMSF last week. He quoted the paper’s conclusion that “there are no foods that should be considered a risk or warrant consideration as a vector for SARS-CoV-2.” ICMSF said actions by some countries to restrict food imports, test products and ask for coronavirus-free documents are “not scientifically justified.” The discovery of genetic traces of the virus on foods is not a public health issue and “therefore, should not be a basis for restricting food trade or initiating a food recall,” said the panel, which provides technical advice to food safety professionals.
- Beyond Meat signed a deal to open a new production facility near Shanghai, with the plant-based food maker aiming to reach full capacity by early 2021.
Meanwhile, Starbucks is adding plant-based items to menus across Asia, including offerings from Beyond Meat, Impossible Foods and others.
— Update on reopening America... and around the world:
- NFL regular season set to kick off. The Kansas City Chiefs will host the Houston Texans in Thursday's opener, in front of an expected 16,000 fans — KC is one of five so far in the league that will allow some fans.
- Economic effects of closed schools could equal those of a small-to-midsize recession, researchers say. About 4.3 million workers will have to stop working unless they find other child-care arrangements, according to research from Brevan Howard Asset Management. The calculation is based on the reopening plans of the nation’s 100 largest school districts, which account for around one-fifth of public-school students. If counted as unemployed, those parents would boost the unemployment rate by 2.6 percentage points.
- The 10-day Sturgis Motorcycle Rally in South Dakota brought together about half-a-million people last month. "We show that by Sept. 2, a month following the onset of the Rally, Covid-19 cases increased by approximately 6 to 7 cases per 1,000 population in its home county of Meade. ... [C]ounties that contributed the highest inflows of rally attendees experienced a 7% to 12.5% increase in Covid-19 cases relative to counties that did not contribute inflows. ... We conclude that the Sturgis Motorcycle Rally generated public health costs of approximately $12.2 billion," Bentley University's Dhaval Dave and co-authors write in an Institute of Labor Economics discussion paper. Link to paper.
— Coronavirus update:
- Summary: Source: Johns Hopkins University as of 7:00 a.m. ET.
— 27,356,706: Confirmed cases world-wide, and 893,005 deaths
— 24,257: New U.S. cases recorded yesterday
— 6,301,451: Total confirmed cases in the U.S.
— 267: Deaths in the U.S. recorded yesterday
— 189,221: Total U.S. deaths
— 83,426,990: Tests conducted in the U.S.
Link to Covid Case Tracker
Link to Our World in Data
- India recorded more than 94,000 new coronavirus cases on Sunday, a global record. Its daily figures are now greater than China’s cumulative total. Link to New York Times world map of Covid-19 cases. More than 71,000 people have died from Covid-19, making India the third largest by number of deaths. Prime Minister Narendra Modi’s government initiated the world’s biggest virus lockdown in the country of 1.3 billion people in late March, leading to a GDP contraction of 23.9% in Q2, but the economic and social costs have forced a gradual reopening.
- Drug makers to issue joint vaccine pledge. Covid-19 vaccine developers including Pfizer, Johnson & Johnson and Moderna plan to issue a pledge not to seek government approval until the shots are proven to be safe and effective. The move, possibly this this week, comes as the rivals try to address concerns over a rush to mass vaccination.
- Trump suggests coronavirus vaccine could be delivered by October. In a tweet to Twitter Monday morning, President Trump touted his administration’s handling of the coronavirus and said vaccines “are coming, and fast!” Trump wrote, “Starting to get VERY high marks in our handling of the Coronavirus (China Virus), especially when compared to other countries and areas of the world. Now the Vaccines (Plus) are coming, and fast!” Trump appeared to double down on that claim during a news conference at the White House later Monday.
POLITICS & ELECTIONS
— 2020 Presidential Election Interactive Map
— The Green Papers
— Real Clear Politics
— Presidential debates: Scheduled to occur Sept. 29, Oct. 15 and Oct. 22.
— VP debate: Scheduled for Oct. 7.
— Days until election
- Trump says Pelosi, Schumer holding up stimulus bill to hurt his re-election chances. President Trump said during a White House news conference Monday that he is not negotiating directly with House Speaker Nancy Pelosi (D-Calif.) and Senate Minority Leader Schumer (D-N.Y.) on coronavirus relief legislation because the Democratic leaders “don’t want to make a deal.” Trump said, “I know who I’m dealing with. ... I know Pelosi, I know Schumer very well. I don’t need to meet with them to be turned down.” Trump “said Democrats are holding up a deal to hurt his reelection prospects.” He said, “They think if the country does as badly as possible, even though a lot of people are being hurt, that’s good for the Democrats.”
- Mail ballots start. Officials in North Carolina started sending absentee ballots on Friday, with Alabama to follow this week. Roughly half of the states are set to ship mail ballots this month, including Wisconsin, Michigan and Minnesota.
Early in-person voting is near, too: Sept. 18 in Minnesota and Virginia, Sept. 24 in Michigan.
Link to NYT info on voting by mail.
- Voting is underway in North Carolina after more than 533,000 absentee ballots were sent to voters on Friday — with Democrats holding a big edge in the number of requests so far — and the first debate between the candidates a week from Monday. Democratic nominee Cal Cunningham has doubled current Sen. Thom Tillis’ fundraising this year and consistently led in polling since late spring, though the most recent public survey showed the incumbent only a couple of points behind. Cunningham is an Army veteran and former one-term state senator.
- Trump to unveil Supreme Court list. The Trump administration expects to announce President Donald Trump’s list of proposed Supreme Court justices as early as Wednesday.
- Will courts pick the new president? That's the title of a Wall Street Journal editorial (link) that notes, “If the election is close, the fallout could make Bush v. Gore look like an ice-cream social.”
OTHER ITEMS OF NOTE
- Amazon bans foreign sales of seeds in America after thousands of customers received unwanted packets in the post, many of them sent from China. The deliveries are thought to be part of a scam run by sellers on the e-commerce site to reap positive reviews. USDA warned against planting the seeds, which may carry diseases or pests.
- EU/U.K, trade talks hit another snag. As trade negotiations between the EU and the United Kingdom resume today, progress has been hampered beyond disagreements over fisheries and rules for Britain’s access to the EU market. The British government says it will publish a new bill on Wednesday that will, if no deal is agreed by the end of the year, override parts of the withdrawal agreement, a treaty signed earlier in 2020, relating to trade between Great Britain and Northern Ireland. The agreement keeps Northern Ireland in line with the EU’s customs code and single-market rules. The new bill reportedly being considered by Boris Johnson, the prime minister, threatens to tear up key elements of that compromise. Ursula von der Leyen, the European Commission’s president, has already said that unless existing agreements are respected in full, there can be no deal. Johnson said that he would break off negotiations if the two sides did not reach a deal by Oct. 15, more than two months ahead of schedule. But economists believe that Johnson has plenty of incentives to pursue an agreement.
Market impact: The British pound is seeing selling pressure.
- Latvia’s Valdis Dombrovskis was named as the new European Commissioner for Trade, pending approval from the European Parliament. The move would see him replace Phil Hogan, who was forced to resign after he broke Covid-19 social distancing guidelines during a trip to Ireland in August. Dombrovskis, a former Latvian prime minister, is currently serving as Executive Vice-President for the Commission and acts as EU chief for financial stability, but is now likely to take up the trade portfolio.
- Louis Dreyfus, the family-owned commodities trading giant, is reportedly in talks to sell a stake to the Abu Dhabi sovereign wealth fund ADQ. Link to Bloomberg for details.
- Germany threatens Russia with Nord Stream 2. Tensions are rising over the case of Russian opposition politician Alexey Navalny, who was hospitalized on Aug. 20 after being poisoned with military-grade nerve agent Novichok. "If in the coming days Russia does not help clarify what happened, we will be compelled to discuss a response with our allies," Germany's Foreign Minister Heiko Maas declared. "I hope that the Russians do not force us to change our position on Nord Stream," which is set to carry gas directly from Russia to Germany under the Baltic Sea.