Winter Storm Creates Havoc Across U.S. as Texas Governor Calls for Investigation

Posted on 02/17/2021 6:35 AM

Arctic air lingers over Great Plains & Mississippi Valley; new winter storm taking aim at mid-South

 


In Today’s Digital Newspaper


 

Market Focus:
• Financial traders await today’s retail sales report
• Energy, livestock, transportation markets all impacted by U.S. winter storm
• Texas struggles to restore power to millions during Arctic blast
• ‘There seems to be no stopping oil prices’: ING Economics
• Europe’s new top trade partner is China
• KC Fed’s George adds voice to fiscal policy push

• IMF: Canada needs to further justify planned spending boost
• 10-year Treasury yield hits highest level since February 2020
• U.S. cotton futures are breaking above long-term resistance
• Bitcoin hit another record high overnight and traded well above $50,000
• Ag demand update
• Food companies warn they may pass rising commodity prices on to consumers

• Covid-19 outbreak forces Alberta pork processing plant to close

• Stressful weather should bolster cash market; futures have wide premium factored in

 

Policy Focus:
• Full House may pass Covid aid legislation as soon as Feb. 26; hurdles in Senate
• Restoring earmarks could ease negotiations on an infrastructure bill
• Biden to meet with labor leaders today
* Housing reg review quickly finished by OMB

 

Biden Administration Personnel

• Regan confirmation vote coming
• Tai confirmation as USTR just before Easter recess
• Yellen’s deputy confirmation hearing planned for Feb. 23  
• Haaland to get Feb. 23 hearing
• Dr. Anthony Fauci wins $1 million prize for ‘defending science’

 

China Update:
• China blocked Jack Ma’s Ant IPO

 

Trade Policy:
• Final ITA fertilizer duties published

 

Energy & Climate Change:

• RFA’s Cooper pushes back on EV shift, pledges carbon-free ethanol is coming
• Biofuels picking up steam in shipping sector
• Entirely electric in Europe
• DOE sets sale of crude from SPR


Food & Beverage Industry Update:
• Nestle agreed to sell its bottled-water business in the U.S. and Canada


Coronavirus Update:
• N. Korea tried to hack into servers of U.S. drugmaker
• Amazon sued over Covid-19 safety

 

Other Items of Note:
• Iraq is testing President Biden

 


MARKET FOCUS


 

Equities today: U.S. equity futures are mixed ahead of today’s retail sales results. A deadly winter storm has left millions of Americans without power this week. At least 20 people have died, according to the Associated Press. In Asia, the major indexes ended on a mixed note. Japan’s Nikkei 225 fell 0.6% by the close of trading. Hong Kong’s Hang Seng Index rose 1.1%. Markets in mainland China remained closed for the Lunar New Year holiday.

 

     U.S. equities yesterday: The Dow closed up 64.35 points, 0.20%, at 31,527.75. The Nasdaq declined 47.97 points, 0.34%, at 14,047.50. The S&P 500 was down 2.24 points, 0.06%, at 3,932.59.

 

On tap today:

 

     • Census Bureau reports retail sales data for January. Expectations are for a 1.3% month-over-month rise in consumer spending after a 0.7% decline in December. Excluding autos, sales are seen gaining 1.4%. 8:30 a.m. ET.

     • Bureau of Labor Statistics releases the producer price index for January. Expectations are for a 0.4% month-over-month rise, just a tick above December’s gain. The core PPI, which exclude volatile food and energy prices, is seen gaining 0.2%, roughly even with the December data. 8:30 a.m. ET.
     • U.S. industrial production for January, due at 9:15 a.m., is expected to rise 0.5% from the prior month.
     • National Association of Home Builders releases its NAHB/ Wells Fargo Housing Market Index for February. Economists forecast an 82 reading, one point lower than January’s 83 figure. The index is down slightly from its all-time high of 90 set in November. Demand remains strong in the housing market, but home builders are concerned about rising material costs, especially lumber prices, which have risen more than threefold since last April. 10:00 a.m. ET.
     • U.S. business inventories for December, due at 10 a.m. ET, are expected to rise 0.5% from the prior month.
     • Boston Fed President Eric Rosengren speaks on the challenges of the post-pandemic economy at 10 a.m. ET.
     • The Federal Open Market Committee releases the minutes from its Jan. 26-27 monetary-policy meeting. 2 p.m. ET.

 

Europe’s new top trade partner is China. Recent data from the European Union’s statistics office, Eurostat (link), show that China dethroned the U.S. as Europe’s top trade partner in 2020. EU exports to China grew by 2.2% to €202.5 billion ($245 billion) and imports from China increased 5.6% to €383.5 billion in 2020, while EU exports to the U.S. fell by 8.2% and EU imports from the U.S. dropped 13.2%.

 

KC Fed’s George adds voice to fiscal policy push. Fiscal policy needs to provide additional support for the U.S. economy until the pandemic has run its course, according to Kansas City Fed President Esther George, with the efforts deployed in 2020 clearly helping the U.S. economy. "Until we get to the point where the virus is in the rearview mirror (fiscal policy) is likely to remain important to economic activity," George told a real estate symposium. "The economy needs a bridge." Inflation is not an issue in the U.S. economy, but George cautioned that once consumers start to spend more freely as the pandemic eases, there could be “price pressures.” Even if items like grocery store prices see increases, there are other prices changes like transportation that have declined. George is the latest to add to the nearly unified Fed view that fiscal stimulus is still needed for the US economy even though she — as other Fed officials — have not commented specifically on provisions in the $1.9 trillion package being worked on in Congress.

 

IMF says Canada needs to further justify planned spending boost. Canada’s plan to spend C$100 billion ($78.86 billion) post-pandemic via stimulus efforts needs to be further justified and the country needs to set clear targets for support and stimulus, according to the International Monetary Fund (IMF). "The federal government's commitment to spend up to 4% of GDP over the next three years to support the recovery needs further justification," the IMF said in a mission report. "While the government still has some fiscal space, the additional spending, if deemed unjustified, could weaken the credibility of the fiscal framework.” The IMF said the use of “fiscal guard rails” was a plus, but more clarity is needed and there needs to be a debt anchor to make sure “credibility in the fiscal framework is maintained over the medium term.” Canada has announced it plans to spend 3% to 4% of GDP to boost growth once the pandemic has been brought under control, with details expected when the government puts forth its budget in March or April.

 

Market perspectives:

 

     • Outside markets: The U.S. dollar index is trading higher. Nymex crude oil futures prices are firmer and trading around $60.75 a barrel. In bond markets, the yield on 10-year Treasurys ticked down to 1.286%, from 1.298% on Tuesday. The yield on the 10-year Treasury initially rose above 1.33% in overnight trading, hitting the highest level since February 2020.

 

     • Crude oil prices have resumed their upward climb on adverse U.S. weather affecting production in key Texas. U.S. crude is trading above $60.65 per barrel and Brent above $64.20 per barrel. Crude was mixed in Asian action, with U.S. crude up seven cents at $60.12 per barrel while Brent crude fell 35 cents at $63 per barrel.


     • Texas struggles to restore power to millions during Arctic blast. More than half of energy-rich state’s total power generation capacity remains offline. More than 4 million people in the state were without power early Tuesday. U.S. oil production has fallen by around 3.5MMbbls/d as a result of the freezing conditions.

 

        Texas accounted for 41% of America's oil production in 2019 and a quarter of its marketed natural gas output. Wind power in Texas produced about 28% of all the U.S. wind-powered electricity in 2019, the EIA said. Wind turbines have frozen or needed to be shut down due to the extreme weather. Almost a quarter (23%) of the power in Texas last year was generated by wind power, according to the Electric Reliability Council of Texas (ERCOT). Meanwhile, natural gas and coal-fired power plants need water to stay online. Yet those water facilities froze in the cold temperatures and others lost access to the electricity they require to operate. "The ability of some companies that generate the power has been frozen. This includes the natural gas & coal generators," Texas Gov. Greg Abbott wrote on Twitter. The governor has called for an investigation into the Electric Reliability Council of Texas, which runs the state’s power grid. Combined cycle natural gas (40%) and coal (18%) generated more than half of the state's power in 2020, according to ERCOT. Nuclear also depends on water to operate and at least one unit in South Texas shut down, according to the Nuclear Regulatory Commission. Texas gets about 11% of its power from nuclear. Lesson learned: A lot of companies in Texas did not invest in cold protection for power plants and natural gas facilities.

 

        The Texas livestock industry is reeling from the winter storm and outages. Herds are threatened by low temperatures and a lack of feed, while some milk processors have had to shut down amid power outages — some farmers are being forced to dump tankers of milk on fields because it can’t be processed, and state agriculture officials feared livestock may have to be euthanized if they cannot be watered and fed. Link for details via the WSJ.

 

        Union Pacific effectively shut down much of its intermodal network, telling customers it wouldn’t accept loads at its terminals over the next three days. Many of BNSF Railway’s trains in hard-hit Texas were at a standstill as the freight railroad braced for a new storm in the region. United Parcel Service resumed operations after shutting its main air express hub at the Louisville, Ky., airport on Monday, but UPS and FedEx warned customers of delivery delays.

 

        Politics enters the Texas storm. “The infrastructure failures in Texas are quite literally what happens when you *don’t* pursue a Green New Deal,” Rep. Alexandria Ocasio Cortez (D-N.Y.) tweeted.

 

     • “There seems to be no stopping oil prices,” writes ING Economics, “with ICE Brent now trading comfortably above $60/bbl. Clearly OPEC+ cuts are doing their job, while global recovery hopes are playing a big part. Given the market is set to tighten further, we see further upside for prices.”

 

     • U.S. cotton futures are breaking above long-term resistance. On Tuesday, March cotton futures rose 85 points to close at 88.12 cents and the May contract was up 94 points at 89.60 cents. The futures market set new contract and 2.5-year highs. The next upside price objective for the cotton bulls is to produce a close in May futures above solid technical resistance at 95.00 cents. The next downside price objective for the cotton bears is to close prices below solid technical support at 84.00 cents.

 

     • Bitcoin hit another record high overnight and traded well above $50,000. The keener investor interest in Bitcoin and other crypto currencies could be taking away some of the allure for historical safe-haven assets gold and silver, says analyst Jim Wyckoff.

 

     • Ag demand: Jordan tendered to buy 120,000 MT of animal feed barley after making no purchase in its tender for 120,000 MT of barley earlier on Tuesday. South Korea’s Major Feedmill Group bought around 69,000 MT of corn in an international tender for up to 140,000 MT of the grain, reportedly from the United States. The Philippines tendered to buy around 75,000 MT of feed wheat and another 70,000 MT of milling wheat. Algeria’s state grain buyer has bought up to 60,000 MT of milling wheat, reportedly from France.

 

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

     • Food companies warn they may pass rising commodity prices on to consumers
     • Covid-19 outbreak forces Alberta pork processing plant to close
     • Stressful weather should bolster cash market; futures have wide premium factored in

 


POLICY FOCUS


 

—  Full House may pass Covid aid legislation as soon as Feb. 26, but it could face hurdles in the Senate, where Democrats can't lose a single member of their party due to the 50-50 split in the chamber. Two Democrats — Sens. Kyrsten Sinema of Arizona and Joe Manchin of West Virginia — have voiced opposition to one part of the plan, raising the federal minimum wage to $15 an hour. President Biden signaled during a CNN town hall last night in Wisconsin he is open to negotiating a longer phase-in for the hike, explaining a lower number like $12 to $13 an hour “could be beneficial while having less potential impact on business owners… It's about doing it gradually,” Biden replied without providing specifics. “We're at $7.25 an hour. No one should work 40 hours a week and live in poverty.” Sen. Jon Tester (D-Mont.) has “indicated he’d prefer to allow some regional variation in the wage. House Majority Leader Steny Hoyer (D-Md.) laid out the Covid aid schedule in a letter yesterday. House Speaker Nancy Pelosi (D-Calif.) has said she’ll send the bill to the Senate as soon as it passes the House.

 

— Restoring earmarks could ease negotiations on an infrastructure bill. House Appropriations Chair Rosa DeLauro (D-Conn.) and Senate Appropriations Chair Patrick Leahy’s (D-Vt.) plan to restore lawmaker-directed spending, known as earmarks, which Congress banned a decade ago. The practice allows lawmakers to insert funding for pet projects into legislation and is seen as a useful tactic to get members to back large ambitious bills, but it has been the source of scandal and abuse by some lawmakers. DeFazio, who will have primary jurisdiction over the infrastructure bill, has said he will also bring back earmarks. DeLauro plans to release details about reinstating earmarks in the coming weeks, House Appropriations spokesman Evan Hollander said. It will include more transparency and limits on the total dollar amounts and recipients. DeFazio plans similar transparency measures.

 

     Meanwhile, President Biden is scheduled to meet with labor leaders today to discuss his pandemic recovery plans and “get input on the President’s infrastructure plan,” according to the White House schedule.

 

— Housing reg review quickly finished by OMB. The Office of Management and Budget (OMB) has completed its review of a notice from USDA on relief for Single Family Housing Guaranteed Loan Program (SFHGLP) borrowers impacted by the Covid-19 pandemic under programs operated by the Rural Housing Service (RHS) at the agency. The notice was received by OMB on Feb. 12, with the review showing as completed Feb. 15 “consistent with change.” That means there should be an announcement from USDA shortly on the issue.


 


BIDEN ADMINISTRATION PERSONNEL


 

—  Regan confirmation vote coming. Sen. Chuck Grassley (R-Iowa) said he expects Michael Regan, Biden’s pick as EPA administrator, to get his Senate confirmation vote next week or the following week.

 

— Tai confirmation as USTR just before Easter recess. Because Katherine Tai isn’t a controversial choice to be President Biden’s U.S. trade representative, the Senate will likely not vote on her nomination until late March, just before lawmakers go on their Easter recess, according to Sen. Chuck Grassley (R-Iowa), who used to head the Senate Finance Committee, which oversees trade policy.

 

— Yellen’s deputy confirmation hearing planned for Feb. 23. The confirmation hearing for President Joe Biden’s nominee for deputy Treasury secretary, Wally Adeyemo, is planned for Feb. 23 in front of the Senate Finance Committee.

 

— Haaland to get Feb. 23 hearing. The Senate Energy and Natural Resources Committee will hold a confirmation hearing Feb. 23 at 9:30 a.m. ET for Interior secretary nominee Rep. Deb Haaland (D-N.M.), Sam Runyon, a spokeswoman for Chairman Joe Manchin (D-W.Va.), said. Haaland will face tough questions from Republican senators over the Biden administration’s moratorium on new oil and gas drilling on public lands, as well as her own opposition to fossil fuel energy production. An enrolled member of the Pueblo of Laguna, Haaland would be the first Native American to serve as Interior secretary if confirmed.

 

— Dr. Anthony Fauci won a $1 million prize for ‘defending science.’ The award from Israel also recognizes the US expert’s contributions to fighting AIDS. Link for details.

 


CHINA UPDATE


 

China blocked Jack Ma’s Ant IPO after an investigation revealed likely beneficiaries included well-connected Chinese power players, some with links to political families that represent a potential challenge to President Xi Jinping and his inner circle. The information that they were behind layers of opaque investment vehicles that own stakes in Ant added to concerns about financial risk — and anger at Ma’s outspoken criticism.

 

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

 


TRADE POLICY


 

— Final ITA fertilizer duties published. The International Trade Administration (ITC) published in the Federal Register final duty levels relative to its countervailing duty investigation into the import of phosphate fertilizers from Russia (link) and Morocco (link). For Russia, the countervailing duty rates were set at 47.05% for product from Industrial Group Phosphorite LLC, 9.19% for Joint Stock Company Apatit and 17.20% for all others. For Morocco, the rate is 19.97% for OCP SA and for all others. There is still a determination to be made by the U.S. International Trade Commission, and ITA said that if the ITC “issues a final affirmative injury determination, we will issue a CVD order and require a cash deposit of estimated countervailing duties for entries of subject merchandise.”

 


ENERGY & CLIMATE CHANGE


 

— RFA’s Cooper pushes back on EV shift, pledges carbon-free ethanol is coming. The push to reduce carbon emissions so that U.S. greenhouse gas (GHG) emissions are net-zero by 2050 cannot be achieved without addressing motor fuels, according to Renewable Fuels Association President Geoff Cooper, and there are “tremendous long-term synergies” between ethanol and electric vehicles (EVs). Current ethanol production reduces GHGs by nearly 50% compared with gasoline, he told the group’s annual meeting. There are “meaningful volumes” of cellulosic ethanol being produced from corn kernel fiber in California, he said, that offers a 70% to 80% reduction in GHGs compared with gasoline. “Mark my words, zero-carbon corn ethanol is coming,” Cooper said, claiming carbon sequestration efforts and the use of biogas in ethanol production “could make corn ethanol carbon neutral—or even carbon negative” in the years to come.

 

     As for EVs, Cooper pointed out that there are still GHG emissions associated with those vehicles, including more than two tons of GHGs for the average battery EV and a plug-in hybrid is closer to three tons. “It certainly isn’t zero,” he remarked. He noted a push for more E15 fuel as one way to help with auto emissions, but even higher blends will be needed to get toward net-zero emissions. He also talked up potential for ethanol exports ahead and said the industry is focused on the Brazilian tariffs that recently increased on imports of U.S. ethanol. That push, he noted, is likely to see more action once President Joe Biden’s U.S. Trade Representative-designate Katherine Tai is confirmed (likely before Congress’ Easter recess).

 

     As for 2021 biofuel and 2022 biodiesel levels under the Renewable Fuel Standard (RFS), Cooper said it was not yet clear when that plan will come from the Biden administration. Obviously, RFA wants to expand the market for ethanol and Cooper laid out several areas of potential growth linked to the push to reduce GHG emissions. However, one of the major actions that would restore ethanol demand is getting the pandemic under control and getting consumers back to driving and consuming fuel.

 

— Biofuels are picking up steam in the shipping sector. Maersk Line is fast-tracking its use of the alternative ship fuels, the Wall Street Journal reports (link), with plans to put a biomethanol-powered feeder ship into operation in two years. That could be the first container ship in regular commercial operations running on biofuels, and it follows a trial run by Ocean Network Express and Mitsui O.S.K. Lines that took a container ship across the Atlantic on biofuels blended with conventional fossil fuel. The shipping lines are looking for alternative fuels that will get them closer to a zero-carbon future. Says the WSJ: “Maersk with its vessel capable of carrying 2,000 containers is taking a small, first step in the water with biofuels. But any fuel will have to be available in large volumes and be able to power heavy ships across oceans to gain a real toehold.”

 

— Entirely electric in Europe. Ford is the latest to announce its entire passenger vehicle range in Europe would be "zero-emissions capable, all-electric or plug-in hybrid" by 2024, with a "completely all-electric" offering by 2030. In fact, Ford will invest $1 billion on an EV production facility in Cologne, Germany, retooling an existing assembly plant to produce its next-generation lineup. F +1.6% premarket. "Our announcement today to transform our Cologne facility, the home of our operations in Germany for 90 years, is one of the most significant Ford has made in over a generation," said Stuart Rowley, President of Ford Europe. "It underlines our commitment to Europe and a modern future with electric vehicles at the heart of our strategy for growth."

 

     Ford currently rules the U.S. and European market for gasoline-powered commercial vehicles with a share of 40% and nearly 15%, respectively. Earlier this month, the automaker said it would "double down" on connected electric vehicles, investing $22B in electrification through 2025, nearly twice what it had previously committed to the EV dream.

 

     Background: Last month, General Motors said it would aim for an entirely zero-emissions lineup by 2035, while Volkswagen announced a €35B investment in battery electric vehicles (with roughly 70 all-electric models by 2030). South Korean carmaker Kia is also launching its first dedicated electric vehicle this year, while Jaguar Land Rover said its luxury Jaguar brand would be entirely electric by 2025 and the rest of its lineup by 2030.

 

— DOE sets sale of crude from SPR. The Department of Energy (DOE) Office of Fossil Energy announced a Notice of Sale of crude oil from the Strategic Petroleum Reserve (SPR), intending to draw down and sell 10.1 million barrels from the reserve. The total reflects provisions in the Bipartisan Budget Act of 2015 — 5 million barrels — and the Consolidated Appropriations Act of 2018 — 5.1 million barrels. Under those laws, the sale is to take place during Fiscal Year (FY) 2021 with proceeds of the sale to be deposited in the US Treasury by the end of FY 2021.

 

     The sale will be conducted with crude oil from the following three SPR sites (maximum amount from each site listed):

  • Up to 5 million barrels from Bryan Mound
  • Up to 5 million barrels from Big Hill
  • Up to 5 million barrels from West Hackberry

     Bids are due Feb. 24 and DOE said it would award contracts to successful offerors not later than March 4. Deliveries will take place in April and May, with early deliveries available in March 2021.

 


FOOD & BEVERAGE INDUSTRY


 

— Nestle agreed to sell its bottled-water business in the U.S. and Canada to private-equity firm One Rock Capital Partners for $4.3 billion, as the food giant continues to revamp its portfolio. The sale to One Rock, which is partnering with Metropoulos & Co., involves well-known brands including Poland Spring and Deer Park. Nestle’s international premium brands including Perrier, San Pellegrino and Acqua Panna are not part of the deal.

 


CORONAVIRUS UPDATE


 

—  New Covid-19 cases in the U.S. and other countries have continued their fast post-holidays declines. Tuesday’s U.S. tally of 53,000 was the lowest daily total since mid-October. The prior week saw a total of 633,000 cases and a positivity rate of 5.6%, both the lowest weekly averages since mid-October.

 

     Summary: Global cases of Covid-19 are at 109,579,074 with 2,420,974 deaths, according to data compiled by the Center for Systems Science and Engineering at Johns Hopkins University. The U.S. case count is at 21,305,323 with 361,297 deaths. The Johns Hopkins University Coronavirus Resource Center said that there have been 55,220,364 doses administered, 15,015,434 have been fully vaccinated, or 4.59% of the U.S. population.
 

       Link to Covid Case Tracker
       Link to Our World in Data

 

— North Korea tried to hack into the servers of U.S. drugmaker Pfizer to steal coronavirus vaccine information, South Korean intelligence officials reported Tuesday, despite leader Kim Jong Un's professed view that his isolated dictatorship is untouched by the pandemic.

 

— Amazon is sued over Covid-19 safety. New York’s attorney general filed a lawsuit accusing the online retailer of failing to comply with state cleaning and disinfection requirements at its facilities and not adequately notifying employees of infected co-workers. Amazon said it doesn't believe the filing is an accurate picture of its pandemic response.

 


OTHER ITEMS OF NOTE     


 

— Iraq is testing President Biden. A rocket attack occurred against the U.S.-led coalition in Erbil, Iraq. The attack, which was claimed by an Iraqi Shiite militia linked to Iran. “Initial reports indicate that the attacks killed one civilian contractor and injured several members of the Coalition, including one American service member and several American contractors,” Secretary of State Antony Blinken said Monday. He added that he had told the leader of Kurdistan’s regional government that Washington would help “to investigate and hold accountable those responsible.” As the Wall Street Journal editorial board notes, “The world is watching how he responds to an attack on U.S. forces.” The president, said White House press secretary Jen Psaki, “reserves the right to respond in the time and manner of our choosing.”

 


 

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