Biden, Capito to Confer Again on Infrastructure as Alternative Plans Gain Focus

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Traders betting on $100 oil | U.S. launches trade talks with Taiwan, angering China

In Today’s Digital Newspaper


Market Focus:
• Consumers keep paying down credit cards but debt still rising
• Canola sets all-time high as heat continue to impact the Plains
• Run-up in commodity prices casting cloud over global economic recovery: WSJ
• Traders betting on $100 oil
• Weather continues hot and dry in major portions of U.S.
• Ag demand update
• Grain, soybean futures strengthen overnight after disappointing finishes Monday
Corn CCI rating drops, soybeans start below average
• Already low spring wheat CCI rating plunges
• Consultant cuts Brazilian corn crop peg     
• ABARES raises Aussie wheat crop forecast
• Argentine customs workers striking today, more walkouts could come
• Cash hog price, pork cutout value continue to rise

Policy Focus:
• Biden, Capito hit hurdles, but infrastructure talks continue
• CFAP 2 payouts again edge higher
• OMB completes review of proposed rule on PFAS

China Update:
• Biden administration launching trade and investment talks with Taiwan
• China facing nationalist anger over tempered reaction to U.S. military plane in Taiwan
• Big Chinese port is latest bottleneck for global trade

Trade Policy:
• Biden tasks USTR to safeguard supply chains

Livestock, Food & Beverage Industry Update:
• USDA prerule on labeling of cell-based meat, poultry products under review at OMB

Coronavirus Update:
• 42.6% of U.S. population fully vaccinated

• Earmarks worth $5.7 billion in highway bill headed to markup

Other Items of Note:
• U.S. retrieves millions in ransom paid to Colonial Pipeline hackers
• Supreme Court limits green card path for TPS holders
• VP Harris tells Guatemalans: ‘Do Not Come’ to U.S.
• DOJ releases proposed final judgment on Zen-Noh acquiring facilities from Bunge




Equities today: Global stock markets were mixed in quiet overnight trading. U.S. stock indexes are pointed toward narrowly mixed openings. In Asia, indexes mostly fell as Hong Kong’s Hang Seng declined 0.3% after trading higher 0.7% during the session, Japan’s Nikkei 225 index was lower 0.2%, and China’s benchmark Shanghai Composite shed 0.5% after gaining 0.6% earlier. In Europe, the Stoxx Europe 600 added 0.1% in early trade, and it is at its highest level in a year.

     U.S. equities yesterday: The Dow declined 126.15 points, 0.36%, at 24,630.24. The Nasdaq rose 67.23 points, 0.49%, at 13,881.72. The S&P 500 was down 3.37 points, 0.08%, at 4,226.52.


On tap today:

     • U.S. trade deficit is expected to narrow to $69 billion in April from $74.45 billion a month earlier. (8:30 a.m. ET)
     • U.S. job openings and labor turnover survey for April is out at 10 a.m. ET.
     • China's consumer-price index for May is expected to rise 1.5% from a year earlier, and the producer-price index is expected to rise 8.6% from a year earlier. (9:30 p.m. ET)

Consumers keep paying down credit cards but debt still rising. Consumer credit use expanded again in April, marking the third monthly increase in consumer debt, according to data from the Federal Reserve. The $18.6 billion rise in April was driven mostly by increased use of auto and student loans by consumers, basically matching the March increase of $18.6 billion. Non-revolving credit rose by $20.6 billion, according to the update for April, the biggest since June 2020 when it increased $22.7 billion. But revolving credit — where credit cards are categorized — decreased by $2 billion in April. Revolving credit is down some 12.2% since the peak in February 2020 and consumers have only increased those balances three months since February 2020. The big rise in student loans and auto loans helped to bring total borrowing by consumers to $4.24 trillion in April, 0.4% above the mark of $4.22 trillion set in February 2020. While consumers are using their credit cards less, they are still increasing their debt levels in the current economic situation and have added dramatically to savings. This should mean as the U.S. economy continues to recover, consumers will have the ability to increase their spending, whether via credit cards, savings — or both.

Market perspectives:

     • Outside markets: The U.S. dollar index is slightly higher. The yield on the 10-year US Treasury note is lower, trading around 1.54%, with most other global government bond yields also weaker. Gold and silver futures are little changed ahead of U.S. economic updates. Gold is trading around $1,899 per troy ounce and silver around $27.85 per troy ounce.

     • Crude oil prices have moved lower with losses nearing 1% ahead of the U.S. open. U.S. crude is trading around $68.60 per barrel and Brent around $70.80 per barrel. Futures were lower in Asian action, with U.S. crude down 55 cents at $68.68 per barrel and Brent was 57 cents lower at $70.92 per barrel.

     Canola sets all-time high as heat continue to impact the Plains. Canola extended its rally to a record as searing heat in key growing regions raised supply concerns for the oilseed.  used in in everything from salad dressings to deep-frying. Canola futures are up almost 8% this month.

     • Run-up in commodity prices is casting a cloud over the global economic recovery, slamming vulnerable businesses and households and adding to fears that inflation could become more persistent, the Wall Street Journal reports (link). The world hasn’t seen such across-the-board commodity-price increases since the beginning of the global financial crisis, and before that, the 1970s. Lumber, iron ore and copper have hit records. Corn, soybeans and wheat have jumped to their highest levels in eight years. Oil recently reached a two-year high. Economists are expecting consumer-price data due out this week to underscore the trend. They say China’s producer-price index, a gauge of factory-gate prices, could climb to its highest level since August 2008 amid rising commodity prices. The U.S. consumer-price index, due out Thursday, is expected to show a sharp rise in the 12 months through May, also driven by higher labor costs.

         Commodity costs  

        Coal Corn Copper

     • Traders are betting on $100 oil. They have scooped up call options tied to Brent and West Texas Intermediate crude-oil prices reaching $100 a barrel by the end of next year, the Wall Street Journal notes (link). Oil prices haven’t topped that milestone since 2014. Owners of $100 options — now the most widely owned WTI call contracts on the New York Mercantile Exchange — are making a leveraged bet that oil prices will hurtle higher after already surging more than 40% this year.

        Oil at 100

     • Weather continues hot and dry in major portions of U.S.

        Weather update

     • Ag demand: Jordan issued two separate tenders to buy up to 60,000 MT each of optional origin milling wheat.

Items in Pro Farmer's First Thing Today include:

     • Grain, soybean futures strengthen overnight after disappointing finishes Monday
Corn CCI rating drops, soybeans start below average
     • Already low spring wheat CCI rating plunges
     • Consultant cuts Brazilian corn crop peg     
     • ABARES raises Aussie wheat crop forecast
     • Argentine customs workers striking today, more walkouts could come
     • Cash hog price, pork cutout value continue to rise




— Biden, Capito hit hurdles, but infrastructure talks continue. President Joe Biden’s negotiations on an infrastructure deal with Sen. Shelley Moore Capito (R-W.Va.) appeared to stall yesterday and a bipartisan group of senators say they are ready to step in with an alternative. Capito, who is leading the discussions for Republicans, said she’s bringing no new counteroffer to a conversation with Biden that is scheduled for today after he rejected the latest GOP proposal last week. “The president has been very patient, and at this point if we can’t reach an agreement, we ought to consider alternatives,” Sen. Dick Durbin (D-Ill.), the chamber’s No. 2 Democrat, said Monday. Senator Brian Schatz (D-Hawaii) said Democrats would have to decide in the next few weeks whether they go it alone by using budget reconciliation. While all 50 Democratic senators aren’t on board with that yet, he said he’s confident they will be “when the time comes.”

     Biden and Capito are expected to speak before the president leaves for Europe on Wednesday for a week. White House press secretary Jen Psaki said Monday, “The time is not unlimited here…nor is the president’s willingness to compromise. ... He made clear that the proposal the offer put on the table didn’t meet his own bar. But we’re very open to where the discussion goes from here.” Psaki “signaled three potential paths for moving forward on an infrastructure bill.” One “would be finding an agreement with Capito.” Absent a deal with Capito, “Psaki pointed to other Republican and Democratic lawmakers who have been holding talks of their own on the contours of an infrastructure package.” The third way, Psaki said, “would be to throw the administration’s weight behind The INVEST in America Act, a bill being marked up this week by the House Transportation and Infrastructure Committee.”

— CFAP 2 payouts again edge higher. Payments approved under the Coronavirus Food Assistance Program 2 (CFAP 2) moved up to $13.69 billion as of June 6, up from $13.68 billion as of May 31, including $6.27 billion in acreage-based payments, $3.45 billion for livestock, $2.7 billion for sales commodities, $1.22 billion for dairy and $60.8 million for eggs/broilers.

     Payments approved under CFAP 1 also increased slightly to $10.58 billion.

— OMB completes review of proposed rule on PFAS. The Office of Management and Budget (OMB) has completed its review of a proposed rule by the Environmental Protection Agency (EPA) on Reporting and Recordkeeping for Perfluoroalkyl or Polyfluoroalkyl Substances (PFAS) Under Section 8(a)(7) of the Toxic Substances Control Act (TSCA). The proposed rule was sent to OMB for review March 1. The Trump administration had targeted April 2021 for a proposed rule on the topic and a final rule in June 2022. The matter was required under the National Defense Authorization Act for Fiscal Year 2020 (NDAA) as that legislation amended the Toxic Substances Control Act (TSCA) to include a one-time reporting event of PFAS manufactured (including imported) after January 1, 2011.



Biden administration is launching trade and investment talks with Taiwan. The move will likely cause additional friction with China. Secretary of State Antony Blinken told a House committee on Monday about the plans for trade talks. “We are engaged in conversations with Taiwan, or soon will be — on some kind of framework agreement,” Blinken said in response to a question from Rep. Andy Barr (R-Ky.) during the virtual hearing. Blinken declined to provide more information on the topic and referred questions about details to Katherine Tai, the U.S. trade representative, who wasn’t at the hearing. A spokesman for Tai’s office said that strengthening relations with Taiwan is important, though “we have no meetings to announce at this time.”

     Asked about the trade talks with Taiwan, a spokesman for the Chinese Embassy in Washington said the U.S. should “stop all forms of official exchanges and contacts with Taiwan, stop elevating its relationship with the Taiwan region in any substantive way.” The spokesman urged Washington to adhere to decades-old agreements with Beijing, which commit the U.S. to maintaining only formal ties as a condition for formal relations with China.

     Taiwan is a major source of semiconductors for the U.S., which imported $7 billion last year in chips and $20 billion in other computer and telecommunications equipment out of $60 billion in total imports, double U.S. exports to the island, according to the Census Bureau.

— China is facing nationalist anger over its tempered reaction to a U.S. military plane arriving in Taiwan. The U.S. Air Force C-17 cargo plane made a three-hour stopover in Taipei on Sunday to carry a bipartisan congressional delegation visiting Taiwan. Local media reported that it was the first such visit since at least 1995, but Chinese state media including the official Xinhua News Agency didn’t report on the trip while the Chinese Foreign Ministry sidestepped a question about the plane.

— A big Chinese port is the latest bottleneck for global trade. The partial closure of Yantian International Container Terminals in Shenzhen, amid a Covid-19 outbreak among dockworkers, is putting strains on already embattled supply chains. Vessels have spent as long as five days at port. Link to details via Bloomberg.  Experts point to a possible drag from ongoing problems at Shenzhen's Yantian port since a Covid outbreak among workers, according to Reuters, while manufacturers report efficiency in the industrial region is slipping as authorities undertake more precautions to prevent the spread of the coronavirus. The bottleneck is the latest Covid-related disruption to hit supply chains, with this one hitting China exporters scrambling to meet resurgent demand in the West. Maersk Line issued a customer advisory detailing problems at Yantian that have spread to other facilities, pushing the container line to skip some sailings in the region as dozens of ships remain idled offshore.




Biden tasks USTR to safeguard supply chains. The Biden administration should develop a comprehensive trade policy that includes a focus on building stronger and resilient U.S. supply chains using enforcement actions when necessary and cooperation when possible to tackle unfair practices that undermine critical supply networks, according to an 100-day interagency review. A fact sheet (link) assigns the Office of the U.S. Trade Representative leadership of a strike force that will propose enforcement action the U.S. could take alone and efforts it could take with other countries against trade practices that that have weakened major supply chains. The trade strike force also would review trade agreements as possible tools for bolstering a cooperative approach with partners and allies to build flexibility into shared supply chains.

     More immediately, the Commerce Department should determine if it will launch an investigation under Section 232 of a 1962 trade law into imported magnets made from neodymium, a rare earth material. China is the main source for the U.S. of the neodymium magnets, which are used in motors and other equipment.

     The administration said decades of U.S. public and private policy have contributed to supply chain weaknesses that became apparent in the Covid-19 pandemic and economic crisis. The administration's actions are the result of an assessment of four product areas: semiconductor manufacturing and advanced packaging; large capacity batteries; critical minerals and materials; and pharmaceuticals and active pharmaceutical ingredients. The administration also said it will have strategies within a year for six industrial bases of U.S. economic and national security: defense, public health and biological preparedness, information and communications technology, energy, transportation, and agriculture and food production.

     Background. The Commerce Department under the Trump administration initiated Section 232 reviews into imported steel and aluminum and concluded that U.S. reliance on foreign-made metals posed a national security and economic security risk. President Donald Trump imposed a 25% tariff on most imported steel and a 10% tariff on imported aluminum in 2018 that remain in place. Countries including Brazil and South Korea escaped the tariffs by agreeing to steel quota limits. Argentina did so by agreeing to steel and aluminum limits. Australia is exempted from tariffs and quotas. The steel and aluminum tariffs triggered retaliatory duties from key trading partners such as the European Union.

     The fact sheet underscored the urgency of addressing supply chains with Beijing by calling for it to be a part of Trade Representative Katherine Tai’s review of U.S./China trade policy. The review includes a look at the U.S./China Phase 1 trade deal that took effect Feb. 14, 2020.



— USDA prerule on labeling of cell-based meat, poultry products under review at OMB. USDA’s Food Safety and Inspection Service (FSIS) has sent a prerule on labeling of meat and poultry products made using animal cell culture technology to the Office of Management and Budget (OMB) for review. The Trump administration targeted April of this year to issue an advance notice of proposed rulemaking on the topic but had no final timeline identified when they included it in their regulatory agenda released in the fall of 2020. A prerule is defined as a rule in the earliest stage of rulemaking and may include actions agencies are considering that may or may not ever become actual rules, according to the Congressional Research Service (CRS). So, it is not clear what kind of timeline that the Biden administration has in mind relative to this topic, one that will be very closely watched by the U.S. food and agriculture industry.  



Summary: Global cases of Covid-19 are at 173,660,657 with 3,738,175 deaths, according to data compiled by the Center for Systems Science and Engineering at Johns Hopkins University. The U.S. case count is at 33,378,146 with 597,952 deaths. The Johns Hopkins University Coronavirus Resource Center said that there have been 302,851,917 doses administered, 139,748,661 have been fully vaccinated, or 42.6% of the U.S. population.


— Earmarks worth $5.7 billion in highway bill headed to markup. The highway bill that the House Transportation and Infrastructure Committee will mark up Wednesday will include $5.7 billion in earmarks — a little more than one-third of the $14.9 billion members requested. House Democrats will attach 1,473 local project requests — 1,067 from Democrats, 403 from Republicans, and three bipartisan projects — to the surface transportation reauthorization bill, according to a substitute amendment of the legislation released yesterday. It was “not an easy nor quick task“ to vet the requests, said Committee Chair Peter DeFazio (D-Ore.), but it will “give viable projects the funding they need to get across the finish line.”



— U.S. retrieves millions in ransom paid to Colonial Pipeline hackers. U.S. authorities have recovered millions of dollars in digital currency paid to the hackers who hit a major East Coast fuel pipeline with a ransomware attack last month. Investigators seized 63.7 Bitcoins, valued at roughly $2.3 million, from a virtual wallet — the alleged proceeds from the ransom hack carried out by a suspected Russian-based criminal gang on Colonial Pipeline Co., the Justice Department said. “The sophisticated use of technology to hold businesses and even whole cities hostage for profit is decidedly a 21st-century challenge, but the old adage ‘follow the money’ still applies,” Lisa O. Monaco, the deputy attorney general, said at the news conference at the Justice Department. “The extortionists will never see this money,” Stephanie Hinds, acting U.S. attorney for the Northern District of California, where the seizure warrant was obtained, told reporters. “This case demonstrates our resolve to develop methods to prevent evildoers from converting new methods of payment into tools and extortion for undeserved profits.” (The ransom amounted to 75 bitcoins, of which nearly 64 were recovered. Because the cryptocurrency fluctuates dramatically in value, the dollar value recovered was only a little more than half the dollar value of the ransom payment.)

     “One of the things that President Biden will make clear to President Putin when he sees him (June 16 in Geneva) is that states cannot be in the business of harboring those who are engaged in these kinds of attacks,” Secretary of State Antony Blinken said Monday in congressional testimony. Putin has denied Western accusations about cyberattacks originating in Russia and said on Russian state television last week that it was absurd to suggest any Russian involvement in recent ransomware attacks.

     Colonial Pipeline Chief Executive Officer Joseph Blount is scheduled to testify at the Senate about the hack and pipeline outage today and again before a House committee on Wednesday. Justice Department officials said that Colonial’s willingness to quickly loop in the FBI helped recoup the ransom portion, and they credited the company for its role in a first-of-its-kind effort by a new ransomware task force in the department to hijack a cybercrime group’s profits.

     The Biden administration announced that it would require pipeline companies to report significant cyberattacks and that the government would create 24-hour emergency centers to handle serious hackings.

— Supreme Court: TPS does not confer the right to green card. The Supreme Court on Monday dealt a setback to hundreds of thousands of immigrants who have so-called temporary protected status (TPS), ruling they can’t have a green card if they entered the country illegally. In a 9-0 decision, the justices said federal law protects these immigrants from deportation and it allows them to obtain a work permit, but it does not give them a right to lawful permanent status unless they are here “pursuant to a lawful admission.” That means TPS recipients who entered the county legally as students or tourists and stayed under TPS may obtain a green card, said Justice Elena Kagan. But the same is not true of those who entered illegally. “Because a grant of TPS does not come with a ticket of admission,” she wrote in Sanchez vs. Mayorkas, “it does not eliminate the disqualifying effect of an unlawful entry.” TPS has been extended to about 320,000 immigrants from El Salvador, Haiti, Honduras, Nepal, Nicaragua, Sudan, Venezuela and Yemen. Monday’s ruling is the third in three weeks in which the high court has disagreed unanimously with the 9th Circuit on a matter of immigration law.

— “Do not come,” U.S. Vice President Kamala Harris said during a blunt message on a visit to Guatemala, and also promised economic support as the U.S. tries to deal with thousands of arrivals at its southern border. Meanwhile, Harris completes the second leg of her trip south of the U.S. border with a meeting with Mexican President Andrés Manuel López Obrador in Mexico City today. According to a statement from Harris’s office, the two are expected to sign a memorandum of understanding to establish a “strategic partnership to cooperate on development programs in the Northern Triangle,” collectively referring to Guatemala, Honduras, and El Salvador.

— DOJ releases proposed final judgment on Zen-Noh acquiring facilities from Bunge. The Department of Justice (DOJ) Antitrust Division has published a proposed Final Judgment in the Federal Register (link) relative to the purchase by Zen-Noh Grain Corporation (ZGC) of 35 operating and 13 idled grain origination elevators from Bunge North America located primarily along the Mississippi River and its tributaries. DOJ determined the acquisition would “violate Section 7 of the Clayton Act.” Under the complaint and proposed Final Judgment, ZGC would be required to divest nine grain elevators in five states along the Mississippi River and its tributaries. DOJ said the action is based in part on ZGC operating in some areas along the Mississippi and Ohio Rivers along with its affiliate CGB Enterprises in competition against Bunge. “The acquisition will eliminate competition between ZGC and Bunge in those locations; as a result, many U.S. farmers are likely to receive lower prices and poorer quality service when seeking to sell their grain,” DOJ said in the proposed Final Judgment. ZGC sought to acquire the Bunge facilities for approximately $300 million under an agreement in April 2020. In the proposed Final Judgment, DOJ said there were overlapping draw areas in McGregor, Iowa; Albany/Fulton and Shawneetown, Illinois; Caruthersville, Missouri; Huffman, Osceola and Helena, Arkansas; and Lake Providence and Lettsworth, Louisiana.



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