Biden, Yellen & Harris Meeting with Democrats to Nail Down BBB Package
Midwest senators press USDA on biofuel aid
In Today’s Digital Newspaper
Market Focus:
• Oil hits another multi-year high
• Debt limit hike deadline: Dec. 3
• Money market funds challenger
• Yesterday’s U.S. factory production data for September showed a surprise drop
• Amazon hiring 150,000 U.S. seasonal workers, up 50% from 2020
• Elkhart, Ind., RV capital of the world, tops housing market list
• Ag demand update
• Wheat leads overnight price gains
• Brazil crops off to better-than-average start, dryness an ‘increasing concern’ in Argentina
• Crop Progress & Condition Report highlights
• Egypt opens up freight competition on wheat tenders
• Wholesale beef prices slip
• Cash hog index continues to fall
Policy Focus:
• Uptick in CFAP 2 payments
• Biden discusses spending bills with Jayapal, plans to speak to Manchin today
Afghanistan:
• Khalilzad resigns
Biden Administration Personnel:
• Senate has confirmed just one of President Biden’s foreign ambassador nominees
• Senate panel to take up FERC, DOE nominations
China Update:
• China’s giant housing market slowed substantially in September
• Coal prices in China hit record high
• China denies testing new missile
Trade Policy:
• Groups urge Senate panel to act on USTR agriculture negotiator nominee
Energy & Climate Change:
• Midwest senators press USDA on biofuel aid
• EU climate change chief warns against turning back to coal
Livestock, Food & Beverage Industry Update:
• Albertsons supermarket chain expects inflation to continue through rest of 2021
Coronavirus Update:
• FDA on verge of allowing vaccinated Americans to mix-and-match vaccines
• USDA vaccination mandate deadline Nov. 22, exemption deadline reached
Politics & Elections:
• Trump files lawsuit to block release of Jan. 6 documents
• House Dem retirement rush continues with 2 new departures
• Approval ratings of U.S. leadership across the world have increased substantially
Congress:
• Senate Dems’ FY 2022 funding proposals dead on arrival
Other Items of Note:
• North Korea fired a submarine-based ballistic missile into Japanese
• Colin Powell dies at age 84
MARKET FOCUS
Equities today: Global stock markets were mostly higher in overnight trading. The U.S. stock indexes are pointed to higher openings. Earnings reports today include Earnings include Johnson & Johnson, Procter & Gamble, United Airlines, Travelers, Netflix, Philip Morris, Kansas City Southern, and Canadian National Railway. Asian equities were mostly higher as market attention shifted to U.S. earnings updates. Japan’s Nikkei rose 190.06 points, 0.65%, at 29,215.52. Hong Kong’s Hang Seng was up 377.46 points, 1.49%, at 25,787.21. European equities are seeing modest advances in early trading. The Stoxx 600 is up 0.2% with most regional markets flat to seeing gains of 0.7%. Swiss shares, however, were lower.
U.S. equities yesterday: The Dow lost 36.15 points, 0.10%, at 35,258.61. The Nasdaq gained 124.47 points, 0.84%, at 15,021.81. The S&P 500 was up 15.09 points, 0.34%, at 4,486.46.
The S&P 500 reclaimed a key technical level that bodes well for a year-end rally, according to Fundstrat. Because the index closed above its 50-day moving average Friday, the firm sees stocks continuing to rise.
On tap today:
• U.S. housing starts are expected to fall to an annual pace of 1.61 million in September from 1.615 million a month earlier. (8:30 a.m. ET)
• Senate Majority Leader Chuck Schumer (D-N.Y.) will speak about climate change. 11:30 a.m. ET.
• Federal Reserve speakers: San Francisco’s Mary Daly at a regional bankers forum at 11 a.m. ET, Atlanta’s Raphael Bostic at an event on careers in economics at 1 p.m. ET, governor Michelle Bowman on corporate gender diversity and leadership at 1:15 p.m. ET, governor Christopher Waller on the economy at 2 p.m. ET, and Bostic in an interview with the Hill at 2:50 p.m. ET.
Debt limit hike deadline: Dec. 3. Treasury Secretary Janet Yellen said the debt limit deal enacted by Congress last week will allow the government to keep paying its bills through Dec. 3. In a letter to Capitol Hill leaders, Yellen said the deal “provides only a temporary reprieve” and urged lawmakers to take further action to ensure that the government can continue to borrow money. If Congress doesn’t raise the debt ceiling, the government would have to suspend payments to beneficiaries or delay interest payments, which would constitute a government default, Some private industry analysts pinpoint the debt date a bit later — from mid-December into early January.
Yesterday’s U.S. factory production data for September showed a surprise drop as manufacturers struggled to source materials. The continued shortage of semiconductor chips hit vehicle output particularly hard, with the sector showing a 7.2% fall.
Amazon is hiring 150,000 U.S. seasonal workers, up 50% from 2020, becoming the latest major retailer to announce large hiring plans ahead of the holiday shopping season. Walmart, Target, and Kohl’s are also hiring tens of thousands of workers. Amazon’s temporary jobs are in addition to 40,000 corporate and tech jobs and 125,000 warehouse and delivery jobs. Wages start at $18 an hour, with sign-on bonuses of $3,000, and an extra $3 per hour depending on shift and location. Amazon, which employs 950,000 U.S. workers, said seasonal employees will support its regular workforce at more than 250 U.S. fulfillment centers, sortation centers, regional air hubs, and delivery stations that opened in 2021.
Elkhart, Ind., the RV capital of the world, topped the latest Wall Street Journal/Realtor.com Emerging Housing Markets Index, which identifies appreciating housing markets with appealing amenities. Small cities dominated—the average population of the third quarter’s top 10 is about 330,000—as residents of bigger cities took advantage of remote work to seek cheaper housing and a different lifestyle. The Elkhart area is home to about 206,000 people. Link for details.
Market perspectives:
• Outside markets: The U.S. dollar index is weaker in early action with mild strength in the euro and British pound against the greenback. The yield on the 10-year U.S. Treasury note is firmer, trading around 1.60%, with a mixed tone in global government bond yields. Gold and silver futures are seeing solid gains ahead of U.S. market action. Gold is trading around $1,783 per troy ounce and silver around $23.97 per troy ounce.
• Crude oil prices have moved higher ahead of U.S. trading, with U.S. crude around $83.25 per barrel and Brent around $84.95 per barrel. Futures were firmer in Asian action with U.S. crude up 19 cents at $82.63 per barrel while Brent was up five cents at $84.39 per barrel.
• Money market funds challenger. Fitch Ratings said that the rapid growth of stablecoins like Tether could potentially rival traditional money market funds for influence in the commercial paper market. Should rapid growth of stablecoins continue, and some 20% of reserves of the tokens go into short-term securities, then they will overtake the holdings of money-market funds within two years. Crypto investors, meanwhile, will be closely watching the launch of the first Bitcoin futures exchange-traded funds. The first-ever bitcoin ETF will launch on the New York Stock Exchange today. ProShares will trade its bitcoin futures ETF under the "BITO" ticker, marking another milestone for the digital asset market. The largest cryptocurrency is trading above $62,000 this morning, close to all-time highs.
• Ag demand: Japan is seeking 81,318 MT of wheat from the U.S. and Canada in its regular weekly tender.
• NWS weather: Upper level low going cross country this week to produce heavy mountain snow in the Rockies and severe weather in the Midwest... ...A pair of Pacific storm systems to kickoff an extended period of unsettled weather from the Pacific Northwest to Northern California... ...Temperatures gradually warming up in the East, staying seasonally cool in the West; showers and thunderstorm possible along the central Gulf Coast; Elevated Risk for Fire Weather in the central High Plains.
Items in Pro Farmer's First Thing Today include:
• Wheat leads overnight price gains
• Brazil crops off to better-than-avg. start, dryness an ‘increasing concern’ in Argentina
• Crop Progress & Condition Report highlights
• Egypt opens up freight competition on wheat tenders
• Wholesale beef prices slip
• Cash hog index continues to fall
POLICY FOCUS
— Uptick in CFAP 2 payments. Total payments under the Coronavirus Food Assistance Program 2 (CFAP 2) moved up to $18.7 billion as of Oct. 17, including $13.89 billion in CFAP 2 payments and $4.81 billion in top-up payments that were made for acreage-based commodities. Acreage-based payments account for $11.1 billion of total CFAP 2 payouts, with $3.46 billion for livestock, $2.86 billion for sales commodities, $1.22 billion for dairy, and $66.15 million for eggs/broilers. The payment levels for CFAP 2 could change slightly ahead as the deadline for new or updated applications for that effort was Oct. 12.
CFAP 1 payments stood at $10.6 billion as of Oct. 17, including $5.06 billion for livestock, $2.66 billion for non-specialty crops, $1.81 billion for dairy, $994.12 million for specialty crops and $120.25 million for aqua nursery flora.
— Biden discusses spending bills with Jayapal, plans to speak to Manchin today. As lawmakers returned to Washington for make-or-break negotiations over the president’s infrastructure and social spending proposals, President Biden met Monday with Congressional Progressive Caucus Chair Rep. Pramila Jayapal (D-Wash.). White House Press Secretary Jen Psaki said Monday that Biden will hold separate meetings today with liberal and more centrist factions of congressional Democrats, including centrist Sen. Joe Manchin (D-W.Va.). Treasury Sec. Janet Yellen is attending the sessions. On Wednesday, Biden will travel to his hometown of Scranton, Pennsylvania, “to continue trying to drum up public support for his economic agenda,” Psaki said.
There’s little chance that Congress can complete work on Biden’s economic agenda by the end of the month self-imposed deadline set by his party’s leaders.” Manchin told reporters Monday, “There is an awful lot to go, I don’t know how that would happen. ... Once you come to a meeting of the minds, you might be able to work something out.” When asked about Manchin’s skepticism of the end-of-the-month deadline,” Sen. Dick Durbin (D-Ill.) said, “I want to talk to Sen. Manchin and see if I convince him that time is of the essence.”
On Monday, the White House sent Democrats on Capitol Hill a new memo touting the benefits of each major component of the sprawling legislative proposal that Biden hopes to pass with only votes from his party’s lawmakers. Biden’s aides hope to bolster their case that the plan offers a formula for long-term economic growth.”
Who’s headed to the White House:
Progressives (2 p.m. ET): Reps. Katherine Clark (Mass.), Pramila Jayapal (Wash.), Mark Pocan (Wis.), Ritchie Torres (N.Y.), Debbie Dingell (D-Mich.), Ro Khanna (D-Calif.), Barbara Lee (D-Calif.), Jared Huffman (D-Calif.) and Jimmy Gomez (D-Calif.).
Moderates (4:30 p.m. ET): Reps. Josh Gottheimer (N.J.), Suzan DelBene (Wash.), Ami Bera (Calif.), Tom O’Halleran (D-Ariz.) and Mike Thompson (D-Calif.) plus Sens. Jon Tester (D-Mont.), Catherine Cortez Masto (D-Nev.) and Mark Warner (D-Va.).
Earlier today, Sen. Kyrsten Sinema (D-Ariz.) is expected to meet with Biden at the White House, according to the Arizona Republic. That’s separate from the bicameral group of moderates heading over in the afternoon.
Sen. Manchin spoke at length Monday with Jayapal. And Sen. Bernie Sanders (I-Vt.) also told reporters he met with Manchin one-on-one and that the two would continue talking.
AFGHANISTAN
— Khalilzad resigns. Thomas West begins his first day as the U.S. special envoy to Afghanistan following the resignation of his boss, Zalmay Khalilzad, on Monday. In his resignation letter to Secretary of State Antony Blinken, Khalilzad said he made the decision now that the U.S. is “entering a new phase in our Afghanistan policy.” In a separate development, the Biden administration’s most recent policy decisions in Afghanistan — including the withdrawal from Kabul — will be the subject of an internal investigation by the State Department’s inspector general, Politico reported on Monday.
BIDEN ADMINISTRATION PERSONNEL
— Senate has confirmed just one of President Biden’s foreign ambassador nominees, former Interior Secretary Ken Salazar as U.S. ambassador to Mexico. Today, the Foreign Relations Committee will take up nearly three dozen nominations, with several familiar names on the list. Former Sens. Jeff Flake and Tom Udall, Cindy McCain and Chesley “Sully” Sullenberger are well known — but one of the State Department’s most coveted nominations, U.S. ambassador to NATO, is also on the docket. The nominee, Julianne Smith, will be important for Biden’s stated desire to repair and strengthen trans-Atlantic alliances.
— Senate panel to take up FERC, DOE nominations. The Senate Energy and Natural Resources Committee will hold a hearing today on the nominations of Willie Phillips to be a commissioner on the Federal Energy Regulatory Commission (FERC) and Brad Crabtree to be assistant secretary of Energy for fossil energy and carbon management. Phillips is currently the chairman of the DC Public Utilities Commission and is expected to face questions on the Biden administration’s push to move away from fossil fuels relative to power generation in the United States. Crabtree formerly led the Carbon Capture Coalition and expectations are lawmakers will pose questions along similar lines relative to the administration’s plans.
CHINA UPDATE
— China’s giant housing market slowed substantially in September, as the country’s debt-saddled developers cut spending and demand from home buyers waned. Investments made by property developers fell 3.5% in September compared with last year, according to China’s National Bureau of Statistics. It was the first time property investment had fallen year-over-year since the beginning of the coronavirus pandemic. Home sales by value fell 16.9% in September from a year earlier, while the floor area of new construction projects that were started in the month fell 13.5%. The data paint a bleak picture for China’s property market and the many developers that had banked on strong housing sales to help pay off large amounts of debt. Global investors have turned bearish on the prospects of Chinese real-estate developers, sending their dollar bond prices to deeply distressed levels. The yield on an ICE BofA index of high-yield bonds from Chinese companies climbed above 23% last week, its highest in more than a decade.
— Coal prices in China hit a record high, having risen more than 260% in the year to date. Despite recent attempts to bolster its supply, China faces a coal shortage. It has become reluctant to approve new mines as it strives to reduce emissions. Meanwhile, colder weather has increased demand for electricity. Power shortages have been reported in 19 provinces.
— ‘We just don’t know’ how to defend against possible Chinese hypersonic missile: U.S. ambassador. A new investigative report by the Financial Times asserted that China launched a nuclear-capable hypersonic missile, which circled the earth in a low orbit before cruising toward and narrowly missing a test target. The Chinese regime has officially denied the report’s findings, saying that the object in question was a spaceship. U.S. disarmament ambassador Robert Wood said that Washington is concerned about China’s possible deployment of hypersonic weaponry, and said the U.S. hadn’t developed a means of countering it. “Hypersonic technology is something that we have been concerned about, the potential military applications of it and we have held back from pursuing, we had held back from pursuing military applications for this technology,” Wood said at a press meeting in Geneva on Oct. 18.
The test showed two advances by China, according to the FT. The first is a Fractional Orbital Bombardment System, which means the country could, in theory, send missiles over the South Pole (most U.S. defense systems are concentrated along the northern polar route). The second is the hypersonic glide vehicle itself, which flies at Mach 5 and is maneuverable in flight — compared to the fixed parabolic trajectory of ballistic missiles - making it harder to track.
TRADE POLICY
— Agriculture, commodity and food groups urge Senate panel to act on USTR agriculture negotiator nominee. Action on the nomination of Elaine Trevino to be chief agricultural negotiator at the Office of the U.S. Trade Representative (USTR) was urged last week by 170 national and state agricultural, food and commodity groups. “Trevino is deeply familiar with the food and agriculture industry through her work in several critical roles,” the groups said in a letter to Senate Finance Committee Chairman Ron Wyden (D-Ore.) and Ranking Member Mike Crapo (R-Idaho). In her current role with the Almond Alliance of California and other posts, Trevino “understands the critical need to open and maintain foreign market access and reduce barriers for U.S. food and agriculture workers and exporters for the benefit of consumers in the U.S. and across the globe,” the groups said. Link to letter.
Noting several trade issues facing the sector, such as opening new markets, China, new trade barriers by the European Union and expanding trade issues with Mexico, the groups said Trevino has the “experience and expertise to secure greater market access for U.S. products and ensure enforcement of clear and fair rules with our trade partners so U.S. food and agriculture workers and our industry sectors may fairly compete in the global economy.”
The panel has yet to schedule a nomination hearing for Trevino and she is not expected to face much opposition and is expected to eventually win confirmation.
ENERGY & CLIMATE CHANGE
— Midwest senators press USDA on biofuel aid. Midwest senators are pushing USDA Secretary Tom Vilsack to act on the USDA pledge to deliver aid for biofuel producers, noting that the agency said June 15 that there would be $700 million provided to biofuel producers under USDA’s Pandemic Assistance for Producers effort. USDA said in June it would roll the assistance out within 60 days, but the lawmakers said in a letter to Vilsack, “It is simply unacceptable that it has been over 120 days since your announcement and biofuel producers are still waiting.” Link to letter.
The pandemic effects continue to be seen in the biofuel industry, the lawmakers said, noting feedstock costs are up and many plants are still offline or operating at reduced rates. “With President Biden’s plan to decarbonize the transportation and agriculture sectors, we remind you of the important role of biofuel,” the letter stated. “It is past time our hardworking biofuel producers receive the critical aid that you promised.” The lawmakers, led by Sens. Chuck Grassley (R-Iowa) and Joni Ernst (R-Iowa), noted the aid is “much-needed to ensure biofuel producers are able to survive.”
— EU climate change chief warns against turning back to coal. European Commission (EC) Executive Vice President Frans Timmermans said turning back towards coal amid the current energy crisis would be a mistake. "It will be a tragedy if in this crunch we will start investing again in coal, which is an energy that has no future and is extremely polluting," Timmermans told Reuters Monday (Oct. 18) during a visit to Indonesia. “The smart thing to do is, during this energy crisis, to reduce as soon as possible your dependency on fossil fuels," he said. Timmermans leads the commission's work on climate issues and was visiting Indonesia ahead of next month’s COP26 climate change talks in Scotland. Currently, Indonesia sources around 60% of its power from coal but is looking to phase out the plants as part of its plan to reach net zero carbon emissions by 2060. Timmermans called Indonesia’s plan to boost renewables “laudable and ambitious” and said the EU wants to work with the country “to make sure we can invest and have technology transfers, bring some ideas to the market for offshore wind, or solar, or geothermal.”
LIVESTOCK, FOOD & BEVERAGE INDUSTRY
— Albertsons supermarket chain expects inflation to continue through the rest of 2021, but said consumers are still spending heavily on groceries despite higher prices. Grocery bills are likely to stay high, as PepsiCo, General Mills, and other food companies say their costs have risen.
Of note: Regarding inflation, of the companies to report earnings so far, the word “inflation” has come up more than at any other time in almost the past two decades, with mentions up 900% year-over-year, according to Bank of America.
CORONAVIRUS UPDATE
— Summary: Global cases of Covid-19 are at 241,213,138 with 4,907,377 deaths, according to data compiled by the Center for Systems Science and Engineering at Johns Hopkins University. The U.S. case count is at 45,061,076 with 726,201 deaths. The Johns Hopkins University Coronavirus Resource Center said that there have been 408,265,959 doses administered, 189,141,481 have been fully vaccinated, or 57.6% of the U.S. population.
— FDA is on the verge of allowing vaccinated Americans to mix-and-match a different brand of vaccines for their booster jabs. According to the New York Times the FDA will not object to anyone who has taken two doses of, say, the Pfizer vaccine, from topping up with one of the Moderna, nor vice versa.
— USDA vaccination mandate deadline Nov. 22, exemption deadline reached. USDA employees (and county FSA committee members) must be fully vaccinated by Nov. 22, meaning that they have received their last dose of vaccine two weeks before that, USDA Secretary Tom Vilsack and Deputy Secretary Jewel Bronaugh wrote all USDA employees. They said employees who cannot receive the vaccine for reasonable or religious reasons should have requested an accommodation by Monday, Oct. 18. “As we have said before, this requirement applies to all USDA employees and is essential to limiting the spread of Covid-19, including the new and highly contagious Delta variant, which is 60 percent more contagious than the Alpha variant we dealt with last year,” Vilsack and Bronaugh wrote. The memo also included the deadlines for vaccination.
Comments: USDA sources note the sensitivity of this issue and say time will be spent with those not yet taking vaccines, including educating them of the need for the vaccines.
POLITICS & ELECTIONS
— Former President Donald Trump sued the congressional committee investigating the Jan. 6 Capitol riot, in an attempt to block the release of White House records. He asked a judge to declare lawmakers’ request for materials invalid and cited executive privilege (the president’s right to keep some communications confidential). His lawsuit described the investigation as “a vexatious, illegal fishing expedition.”
— Reps. Price, Doyle will not seek re-election. Reps. David Price (D-N.C.) and Mike Doyle (D-Pa.) announced Monday that they will not seek re-election as their party faces a tough battle to maintain control of the House in the 2022 midterm elections. The House Democrats have served in Congress for more than two decades and are the second and third senior Democrats in the past week to announce plans to exit, just days after House Budget Chair John Yarmuth (D-Ky.) announced last week that he would step aside. Four other Democrats have previously said that they plan to retire, while five members facing tough re-election prospects are seeking other offices.” Price and Doyle represent safe Democratic districts, as does Yarmuth, but the retirements have raised questions about whether veteran lawmakers are heading for the exits because they fear Republicans will win the majority in the next Congress. Doyle's seat is D+13. Price's seat is D+16.
— Approval ratings of U.S. leadership across the world have increased substantially since Joe Biden became U.S. president, according to a new report from Gallup; 36 out of 46 countries surveyed saw an increase in U.S. approval of ten percentage points or more, with Portugal seeing the largest swing, a 52-point increase between 2020 and 2021. Just three countries now have a lower approval of U.S. leadership: Russia, Serbia, and Benin.
CONGRESS
— Senate Dems released their full slate of FY 2022 funding proposals Monday, but they aren’t going anywhere with GOP opposition.
OTHER ITEMS OF NOTE
— North Korea fired a submarine-based ballistic missile into Japanese waters today, according to South Korea’s armed forces, its first in two years. Its measured flight path was more than 248.5 miles — although in effect the range of sub-based munitions is nearly global. The launch prompted Japan’s new prime minister to cut short his first day of campaigning. The U.N. has prohibited North Korea from testing all such missiles but that apparently has done little to slow its weapons program. Last week the country’s leader, Kim Jong Un, vowed to build an “invincible military.”
— Colin Powell dies at age 84. Collin Powell, who helped steer U.S. national-security policy as the country’s first Black Joint Chiefs of Staff chairman, White House national security adviser and secretary of state, died at age 84. In what came to be called the Powell Doctrine, Powell advocated against precipitous war but urged overwhelming force when conflict was unavoidable. His family cited Covid-19 complications for his death, adding he had been fully vaccinated. A longtime aide said Powell had undergone treatment in recent years for a cancer known to weaken the immune system.
