China Announces Actions on Economy, U.S. Sanctions, China Ag Policy

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Focus on Fed: Timing of initial rate rise

In Today’s Digital Newspaper

Market Focus:
• Airline stocks fall after thousands of cancellations, bad winter weather
• Retail sales in U.S. during the holiday season grew by 8.5% vs last year
• Focus on Fed remains on timing of initial rate rise
• New batch of voters on the FOMC 

• Salaried employees joining hourly workers in getting big raises
• Russia’s wheat export tax rises again
• Malaysian flooding boosts palm oil prices

• Grains, soybeans extend rallies
• South American dryness concerns persist
• China will use fiscal policies to promote economic growth
• Russia’s wheat export tax rises again
• Neutral Cattle on Feed Report
• Bullish H&P Report 

Policy Focus:
• VP Harris: White House isn’t giving up on BBB economic package 

China Update:
• China focus remains on grain security, agricultural production
• China’s central bank vows greater support for economy  
• China scraps limits on foreign ownership in domestic auto
• Xinjiang Communist Party boss and U.S. sanctions target Chen Quanguo to leave post  
• China continues to push back against U.S. sanctions on Xinjiang
• Trudeau: China ‘playing’ Western states against each other
• Authorities in Xi’an tightened already-stringent lockdown restrictions
• China to tighten restrictions for Chinese firms that want to go public in international markets 

Energy & Climate Change:
• Carbon-trade threat 

Livestock, Food & Beverage Industry Update:
• Trip to the grocery store set to get more expensive next year

Coronavirus Update:
• Omicron pushes Covid-19 daily cases in U.S. to highest level in nearly a year
• More than 6,000 flights canceled, including more than 1,000 in the U.S.
• Delta Air Lines’ flight to Shanghai turned back because of Covid-19 rules 

Politics & Elections:
• Bitter partisanship in U.S. House shifted into overdrive after Jan. 6 attack on Capitol 

• Senate returns Jan. 3; House comes back Jan. 10 

Other Items of Note:
• $2.5 billion headed to tribes for longstanding water settlements
• Cotton AWP edges back higher
• Russia plans security talks with U.S. before NATO meeting


Equities today: Global stock markets were mostly weaker overnight in quieter, post-holiday trading. Some markets overseas remained closed for the Christmas holiday. U.S. stock indexes are pointed toward slightly higher openings, but airline stocks fell in premarket trading after thousands of cancellations amid the rising Omicron variant and bad winter weather. Europe’s Stoxx 600 Index added to last week’s gains, while the U.K. market remained closed. Asian stocks slipped

     U.S. equities Thursday, Dec. 23: The Dow added 0.55%, 196.67 points, to 35,950.56. The S&P 500 was up 0.6%, 29.23 points, at 4,725.79, its 68th record close in 2021. The tech- Nasdaq rose 0.85%, 131.48 points, to 15,653.37.


On tap today:

     • Dallas Fed’s factory survey at 10:30 a.m. ET is the only economic indicator on today’s calendar.
     • USDA Grain Export Inspections report, 11 a.m. ET.

Retail sales in America during the holiday season grew by 8.5% compared with last year, according to a report compiled by Mastercard, a credit-card firm. E-commerce was particularly strong, growing by 11% during the Nov. 1-Dec. 24 period. Consumers shopped unusually early this year, it said, wary of delays caused by the world’s stretched supply lines.

Focus on the Fed remains on timing of initial rate rise. Economic data continue to indicate an expanding U.S. economy with higher prices being felt by businesses and consumers alike. The inflation situation led the Fed to speed up their tapering of bond purchases which will now wrap up in March. And some Fed officials have signaled that if the economy continues to unfold as they currently expect, that could mean the first increase in the target range for the Fed funds rate would come soon after. The next Federal Open Market Committee (FOMC) meeting after March is May 3-4.

     With the calendar flipping to 2022 that also means a new batch of voters on the FOMC. St. Louis Fed President James Bullard, Kansas City Fed President Esther George, Cleveland Fed President Loretta Mester and interim Boston Fed President Kenneth Montgomery will replace Richmond Fed President Thomas Barkin, Atlanta Fed President Raphael Bostic, San Francisco Fed President Mary Daly and Chicago Fed President Charles Evans as voters for 2022, putting them in position along with Fed governors of deciding when to boost interest rates. This will keep more attention on the remarks from the new voters ahead of each meeting.

Salaried employees are joining hourly workers in getting big raises. Wages for U.S. professionals in management, business and financial occupations climbed in the third quarter at the fastest rate in nearly 20 years, federal data show. A survey from the Conference Board this month found that employers are setting aside an average 3.9% of total payroll for wage increases next year, the most since 2008. Still, many workers nationwide won’t see their paychecks stay ahead of inflation this year.

     Wage jump

Market perspectives:

     • Outside markets: Nymex crude oil prices are lower and trading around $73.00 a barrel. The U.S. dollar index is slightly up early today. Meantime, the yield on the U.S. Treasury 10-year note is presently fetching 1.481%.

     • Russia’s wheat export tax rises again. Russia’s wheat export tax for Dec. 29 to Jan. 11 will be $94.90 per metric ton, up from $94.00 a MT currently. The wheat export tax has surged 239% from the beginning of June when it first started using the sliding scale. Russian wheat with 12.5% protein loading from Black Sea ports for shipment in January was quoted at $330 a MT free on board (FOB) at the end of last week, up $1 from the previous week, IKAR said.

     • Malaysian flooding boosts palm oil prices. Palm oil recently recorded its biggest advance in over four months on concerns about lower production after flooding hit plantations in Malaysia, and as soybean prices rise because of dry weather in South America.

     • NWS weather: Significant snowfall to continue for portions of West Coast mountain ranges and the Intermountain West; record cold for parts of the West Coast... ...A pair of storm systems to bring snow and an icy wintry mix to the Upper Midwest, Great Lakes, and Northeast; Marginal Risk for Excessive Rainfall from the mid-Mississippi Valley to the Ohio Valley on Tuesday... ...Record warm temperatures expected for broad areas of the South; dangerously cold wind chills in the northern High Plains, Elevated Risk for fire weather in the High Plains...

        Wx Today

Items in Pro Farmer's First Thing Today include:

     • Grains, soybeans extend rallies
     • South American dryness concerns persist
     • China will use fiscal policies to promote economic growth
     • Russia’s wheat export tax rises again
     • Neutral Cattle on Feed Report
     • Bullish H&P Report


— VP Harris: White House isn’t giving up on BBB economic package. The Biden administration is seeking a path forward for its “Build Back Better” (BBB) economic stimulus and social spending plan, Vice President Kamala Harris said Sunday. “I’m not giving up, the President’s not giving up,” Harris said in an interview on CBS’s Face the Nation. “Frankly the stakes are too high,” she said. Senator Ben Cardin (D-Md.) said on Fox News Sunday that members of his caucus all want to pass a version of the bill. He also acknowledged that to garner support the legislation may end up being less comprehensive than some progressive lawmakers want. “We’ve got to find that sweet spot,” Cardin said. “Look — a lot of us are going to be disappointed, but we’re not going to let perfection be the enemy of getting something done.”


— China focus remains on grain security, agricultural production. Chinese President Xi Jinping reiterated ensuring grain security and agricultural product supply at a meeting before the two-day Central Rural Work Conference held Dec. 25-26, state-run China Central Television reported.

     Xi urged farmland protection and expanding soybean and oil crops planting. He also called for continued efforts in rural poverty relief and rural revitalization. Xi said that ensuring the supply of primary agricultural products was an important strategic issue, state broadcaster CCTV reported on Sunday. “The food of the Chinese people must be made by and remain in the hands of the Chinese,” he was quoted as saying. “Everyone needs to take responsibility for food security.” Xi called on efforts to boost production, with Xinhua saying the push was on “efforts to safeguard grain security and protect farmland, make down-to-earth structural adjustments, expand the planting of soybean and oil crops, as well as ensure the supplies of pork, vegetables and other agricultural and sideline products.”

     Earlier, Premier Li Keqiang told a State Council meeting that food production needed to be strengthened, agricultural land protected, and the prices of agricultural inputs stabilized.

     Meanwhile, Chinese Minister of Agricultural and Rural Affairs Tang Renjian told the People’s Daily in an interview that abandoned land needed to be brought back into cultivation and that intercropping needed to be used to ensure stable grains acreage in 2022. "Safeguarding supply security of grains, and important agricultural and sideline products is always our top task and main priority," Tang told the paper. China has maintained a consistent focus on food supplies and grain production in recent years. And the mention of increasing production of soybeans and oil crops is likely an effort to trim imports of those products. But China’s soybean production remains well below the level of demand for the oilseed.

     China imported a record high 11.3 million tonnes of corn last year, while soybean imports, mainly from the United States, Brazil and Argentina, jumped 13.3% year on year to 100.3 million tonnes, customs data showed. Food supplies also became a concern in November after the Ministry of Commerce advised households to stockpile enough necessities in case of emergency. The advice sparked panic buying, stoked by fears about the Delta coronavirus variant and tensions with Taiwan.

— China’s central bank vows greater support for real economy. China’s central bank pledged greater support for the real economy and said it will make monetary policy more forward-looking and targeted. There will be more “proactive” use of monetary policy tools, the People’s Bank of China said in a statement on Saturday. It added that there will be “good use” of the monetary policy tools’ quantitative and structural functions, referring to the adjustment of liquidity in the market and policies targeted at certain groups.

     Yuan trading

— China scraps limits on foreign ownership in domestic auto industry.  Beginning Jan. 1, 2022, the country is pulling out all the stops to investment in the sector, allowing full foreign ownership of local passenger car manufacturing. That's according to a release from the Ministry of Commerce and the National Development and Reform Commission, the nation's top economic planning agency. Since 2009, China has been the biggest in the world in terms of automotive manufacturing. In fact, annual automobile unit production in China accounted for over 30% of worldwide vehicle production, which exceeds that of the EU or that of the U.S. and Japan combined, according to database company Statista.

     China still has 31 areas in which foreign investment is banned or restricted, including rare earths, nuclear power, telecom and news companies, and education institutions. In industries like medical organizations, foreign entities must form joint ventures with local partners, which usually have the majority stake.

— Xinjiang Communist Party boss and U.S. sanctions target Chen Quanguo to leave post. State news agency Xinhua reports Chen Quanguo will be moving on to another role and replaced by Guangdong governor Ma Xingrui. Chen has been accused by the West of being behind widespread human rights abuses against Uygurs, but is tipped for further promotion. The changes are part of a wider reshuffle ahead of next year’s party congress, where a new Politburo Standing Committee — the country’s top leadership body – will be unveiled. China has denied US accusations of carrying out “genocide” or using forced labor in Xinjiang.

— China continues to push back against U.S. sanctions on Xinjiang. China is continuing to push back against the U.S. on actions regarding items produced in Xinjiang in the wake of the Uyghur Forced Labor Prevention Act which bans imports of products from Xinjiang on the basis being produced by forced labor. The state-run People’s Daily has run a series of articles in recent days on new reports issued relative to the U.S. law, maintaining that the measure will damage the global cotton industry supply chain and is based on fabrications and lies relative to Chinese activities in Xinjiang. The China National Textile and Apparel Council and 12 industry associations issued a statement on Saturday (Dec. 25) to firmly oppose the U.S. law. The paper also published a 24-page report (link) “U.S. Politicization of Human Rights Erodes Foundations of Human Rights Governance” that was compiled by the China Society for Human Rights Studies. China has consistently maintained that there is no forced labor in the Xinjiang, but the recent passage of the U.S. law has increased the level of activity on this front within China. That would suggest they view the new U.S. law as potentially having some significant impacts on the cotton industry and others that are based in Xinjiang.

— Trudeau: China ‘playing’ Western states against each other. Canadian Prime Minister Justin Trudeau said China has been “playing” Western states against each other and that democracies should present a “united front” in response. “There’s been a bit of competition amongst friends because we’re capitalist democracies trying to do well, especially given the extraordinary economic opportunity of the rise in the Chinese middle class,” Trudeau said in an interview with Global News that aired on Saturday.

— Authorities in Xi’an tightened already-stringent lockdown restrictions as Shaanxi, the central Chinese province of which it is the capital, reported another 150 symptomatic Covid-19 cases on Monday. (China strips out asymptomatic infections from its figures.) Some 162 locally transmitted symptomatic cases were recorded across the country on Sunday, the largest figure since early 2020.

— China is planning to tighten restrictions for Chinese companies that want to go public in international markets. Under a new system proposed by the China Securities Regulatory Commission, a company would have to register with the agency first, and then meet a set of government requirements. China has actively tried to discourage companies from trading in overseas markets out of concern for national security, but the government has stopped short of banning the practice altogether.


— Carbon-trade threat. Researchers say trees set aside as part of California’s cap-and-trade system are releasing carbon as they burn in fires that are more destructive than regulators had anticipated. The state’s stockpile of carbon-dioxide credits is rapidly depleting because of the growing size and intensity of wildfires, they warn. Link for details via the WSJ.


— A trip to the grocery store is set to get more expensive next year, as labor, transportation and ingredient costs keep rising. Food prices are estimated to rise 5% in the first half of 2022, according to research firm IRI, though the level of increases will vary by grocers and regions. Mondelez, General Mills and Campbell Soup have announced some price increases. Higher freight costs are expected to push up the price of potatoes, celery and other heavier vegetables. Staples such as mayonnaise and frozen meals are expected to be more pricey partly because of higher labor, logistics and packaging costs.


Summary: Global cases of Covid-19 are at 280,001,617 with 5,402,083 deaths, according to data compiled by the Center for Systems Science and Engineering at Johns Hopkins University. The U.S. case count is at 52,383,331 with 816,610 deaths. The Johns Hopkins University Coronavirus Resource Center said that there have been 500,222,330 doses administered, 204,740,321 have been fully vaccinated, or 62.37% of the U.S. population.

— Fast-spreading Omicron variant pushed Covid-19 daily cases in the U.S. to the highest level in nearly a year and led to the cancellation of many flights over the holiday weekend. The cancellations came suddenly as a ramp-up in employee absences caught carriers off guard, potentially putting added pressure on federal authorities to ease quarantine guidelines so that workers who aren’t seriously ill can return to their jobs sooner. Meanwhile, school administrators are working through evolving data on the Omicron variant to determine whether to keep schools open after the holiday break.

— More than 6,000 flights canceled, including more than 1,000 in the U.S. Airlines hit operational snags this weekend as millions are still flying while staff and crew call out sick amid the Omicron surge. American and Chinese airlines were hit the hardest. Globally, airlines canceled more than 6,000 flights on Christmas Eve, Christmas and the day after Christmas, according to FlightAware. On Sunday, airlines have canceled 1,202 flights within, into or out of the United States, and another 5,007 flights have been delayed, according to FlightAware.

— Delta Air Lines’ flight to Shanghai turned back because of Covid-19 rules. Delta Air Lines said Monday that new pandemic-related cleaning requirements at a Shanghai airport were behind the turning back of a recent flight from Seattle in midair, a move that had prompted a protest from the Chinese Consulate in San Francisco. The new mandates at Shanghai Pudong International Airport “require significantly extended ground time and are not operationally viable for Delta.” It wasn't clear what the rules are and what prompted the change, but it comes as China tightens its already strict Covid-19 travel restrictions in the face of a growing outbreak in the city of Xi'an and ahead of the Winter Olympics in Beijing in six weeks.


— Bitter partisanship in the U.S. House shifted into overdrive after the Jan. 6 attack on the Capitol, with people of all political stripes saying it has become a deeply unpleasant place to work. Link for details.


— Congress’ timeline. The Senate returns Jan. 3; House comes back Jan. 10.


— $2.5 billion headed to tribes for longstanding water settlements. The federal infrastructure bill signed last month includes $2.5 billion for Native American water rights settlements, a tool tribes have used to define their rights to water from rivers and other sources and get federal funding to deliver it to residents.

— Cotton AWP edges back higher. The Adjusted World Price (AWP) for cotton moved up to 96.27 cents per pound, effective Friday (Dec. 24), up from 94.81 cents per pound the prior week. This marks the twelfth straight week the AWP has been at 90 cents per pound of more. Meanwhile, Special Import Quota #10 for Upland Cotton will be established Dec. 30 for 43,330 bales of Upland Cotton, applying to supplies purchased not later than March 29 and entered into the U.S. not later than June 27.

— Russia plans security talks with U.S. before NATO meeting. Russia will start talks first with the U.S. on its demands for guarantees of an end to NATO’s eastward expansion before a proposed Jan. 12 meeting between the military alliance and Moscow, Foreign Minister Sergei Lavrov said. “We will hold the main round of negotiations with the U.S. which will take place immediately after the end of the New Year holidays,” Lavrov said in a YouTube interview Monday with the Soloviev Live channel. Russia begins the year with a public holiday and Jan. 10 is the first working day. Russia’s top diplomat said his country isn’t presenting the U.S. with any “ultimatums,” but also won’t accept “endless” talks on its demands for legally binding pledges that the North Atlantic Treaty Organization (NATO) will halt further expansion and withdraw forces to the positions they held in 1997.


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