Is Energy Price Spike in Europe a Signal for U.S.?

( )

California governor easily fends off Republican-led recall vote | WaPo comments on Vilsack


In Today’s Digital Newspaper


Market Focus:
• Surging energy prices continue in Europe
• Americans last year saw first significant decline in household income in nearly a decade
• Share of Americans living in poverty fell to record low last year
• Artificial Christmas trees may cost a lot more this year
• Pumpkin prices also on the rise 

• Manufacturers facing highest steel and aluminum prices in years
• Record shipping container production has not freed up supply chains
• U.S. hog futures continue to tumble, driven by weakness in China’s pork prices
• Port Houston container terminals expected to open today
• Ag demand update

• Corn, soybean wheat gains overnight
• Nicholas expected to stall over Louisiana, storms possible in Ohio Valley
• Another light NOPA crush expected to close out marketing year
• ANEC raises Brazilian soybean and corn export forecasts for September
• Cut to French wheat export forecast beyond EU largely offset by boost in trade within bloc
• Olymel pork facility in Quebec adds second shift
• Boxed beef values remain under pressure
• Pork prices surge

Policy Focus:
• Little change in CFAP 2, CFAP 1 data
• Reconciliation updates
• Time for the third batch of monthly child tax credit payments

Biden Administration Personnel:
• Washington Post comments on Vilsack: He’s 'become something of a progressive favorite'

China Update:
FT: Biden’s suggestion of summit with Xi Jinping gets no response; White House denies
• China's slowdown deepens

Coronavirus Update:
• Infections from animals carrying coronaviruses may infect many  
• Vaccinating children
• Vaccine mandate may have big impact

Politics & Elections:
• California voters easily retain Gov. Gavin Newsom

Congress:
• Senate Democrats propose pared-down voting rights bill with a voter ID requirement
• Lawmakers, staff urged to avoid Capitol on Saturday


Other Items of Note:
• Book: Milley feared Trump might order China strike
• Wonder what Socialist Sen. Bernie Sanders (I-Vt.) would say about this


MARKET FOCUS


Equities today: Global stock markets were mostly weaker in overnight trading. The U.S. stock indexes are pointed to modestly higher openings. Asian equities were lower, tracking losses in US markets and on weaker Chinese economic data. The Nikkei fell 158.39 points, 0.52%, at 30,511.71. The Hang Seng Index was down 469.02 points, 1.84%, at 25,033.21. European equities are under pressure in early action though the FTSE is slightly higher. The Stoxx 600 was down 0.4% with losses from 0.2% to more than 1% in regional markets.

     U.S. equities yesterday: The Dow finished down 292.06 points, 0.84%, at 34,577.57. The Nasdaq declined 67.82 points, 0.45%, at 15,037.76. The S&P 500 fell 25.68 points, 0.57%, at 4,443.05.

     Stocks

On tap today (see detailed list of events and reports below):

     • New York Fed's Empire State manufacturing survey is expected to fall to 17.5 in September from 18.3 a month earlier. (8:30 a.m. ET)
     • U.S. import prices for August are expected to rise 0.2% from the prior month. (8:30 a.m. ET)
     • U.S. industrial production for August is expected to rise 0.5% from the prior month. (9:15 a.m. ET)
     • President Biden will host CEOs and business leaders to talk about Covid-19. 1:30 p.m. ET. Biden is also scheduled to speak at 5 p.m. ET about a national security initiative.

Americans last year saw their first significant decline in household income in nearly a decade. An annual assessment of the nation’s financial well-being, released by the Census Bureau, showed median household income was about $67,500 in 2020, down 2.9% from the prior year, when it hit an inflation-adjusted historical high. It came as the U.S. last year saw millions lose their jobs and national unemployment soar from a 50-year low to a high of 14.8%. The last time median household income fell significantly was 2011, in the aftermath of the 2007-09 recession.

     Household income

Share of Americans living in poverty fell to a record low last year, as government relief programs offset pandemic job losses. When government benefits are taken into account, a smaller share of the population was living in poverty in 2020 even as the pandemic eliminated millions of jobs. Link to details via the New York Times.

     Poverty

Artificial Christmas trees may cost a lot more this year, but don’t tell the Fed. Supply-chain disruptions will make decking the halls more expensive for consumers looking for artificial trees this Christmas. Some U.S. retailers are raising prices by 20% to 25% to keep pace with skyrocketing shipping costs and they are warning that certain trees could sell out early because deliveries from overseas producers have been hit by the congestion that has tied up distribution networks from ports in China to freight yards in Chicago. Link to details via the WSJ. (Some initial reports note a big increase in the price of pumpkins.)

Manufacturers are facing the highest steel and aluminum prices in years, another hurdle for U.S. companies already struggling to make enough cars, cans and other products. Rapidly increasing metal costs are pushing manufacturers to take what steel they can get and hire more people to seek out available supplies, company executives said. The rising costs are flowing through to some producers of consumer goods.

     Iron and steel

Record shipping container production has not freed up supply chains. Chinese manufacturers have pushed out a record number of shipping freight containers, but it has failed to make a dent in the supply chain issues that have snarled global commerce, according to the Financial Times. China International Marine Containers (CIMC), Donfang International Container and CXIC Group have increased production and workers’ hours in a bid to pump out more containers. The report said that the container industry is set to produce a record 5.2 million twenty-foot equivalent units (TEUs) this year, up two-thirds from 2020, according to the Drewry consulting firm. Despite the record output of containers, supply chain constrictions with containers out of position is keeping container rates elevated. 

Market perspectives:

     • Outside markets: The U.S. dollar index is slightly higher ahead of U.S. trading with a mixed tone in global currency markets. The yield on the 10-year U.S. Treasury note is weaker, trading under 1.28% with a mixed tone in global government bond yields. Gold and silver futures are under pressure ahead of US economic updates, with gold around $1,803 per troy ounce and silver around $23.81 per troy ounce.

     • Crude oil futures have risen ahead of U.S. gov’t inventory data due out later this morning. U.S. crude is trading around $71.35 per barrel and Brent around $74.50 per barrel. Crude oil was firmer in overnight Asian trade with U.S. crude up 52 cents at $70.98 per barrel and Brent up 56 cents at $74.16 per barrel.

     • Surging energy prices continue in Europe, leading to two energy suppliers that service more than half a million customers in the U.K. going out of business. Utility Point and People’s Energy announced Tuesday it would stop operating — the latest of recent failures at challenger suppliers as power and gas prices climb to record highs. EU climate chief Frans Timmermans said the surge in prices must not undermine the resolve to cut emissions and should instead become a trigger to speed up the green transition. Governments are already acting: Spain moved to ease the cost of energy bills, France is considering it and Greece has announced a subsidy for all households. Energy price records are being broken even in the mild weather and are fueling concerns about inflation. In the U.K., natural gas prices are almost triple their level since the start of the year, and an increase of 70% since early August alone. That is also stoking record electricity prices, as gas is key for power generation. Europe has been phasing out coal plants in recent years, limiting the opportunity to switch fuels when prices rise. Record carbon prices have also made fuel swaps less attractive because coal emits more carbon dioxide when burnt. Russia is frequently cited as another reason for the energy price surge because it is sending less gas to Europe. Reasons include Russia’s need to refill its own storage to suspicions that it is trying to pressure European governments, including Germany, to approve the start-up of the highly controversial Nord Stream 2 gas pipeline.

     • U.S. hog futures continue to tumble, driven by weakness in China’s pork prices.

     • Port Houston container terminals were expected to open today after shutting down Tuesday as Nicholas made landfall as a Category 1 hurricane.

     • Ag demand: Algeria tendered to buy up to 30,000 MT of soymeal. South Korea’s Korea Feed Association bought 68,000 MT of corn from optional origins in a private deal. Jordan is believed to have three participants in its international tender to buy 120,000 MT of wheat. Japan will import 220 MT of feed-quality barley for livestock use via a simultaneous buy and sell auction in which it was seeking 80,000 MT of feed wheat and 100,000 MT of feed barley.

     • NWS weather: Tropical Depression Nicholas to supply copious amounts of rainfall to the central Gulf Coast... ...Passing cold front to trigger showers and thunderstorms from the Ohio Valley to the Northeast, some of which could be severe and produce excessive rainfall rates... ...Mid-September heat wave to continue in parts of the Northeast today, more widespread anomalous heat in the Heartland on Thursday; Elevated fire weather conditions in the Rockies and High Plains.

        NWS
        Wx Today

Items in Pro Farmer's First Thing Today include:

Corn, soybean wheat gains overnight
• Nicholas expected to stall over Louisiana, storms possible in Ohio Valley
• Another light NOPA crush expected to close out marketing year
• ANEC raises Brazilian soybean and corn export forecasts for September
• Cut to French wheat export forecast beyond EU largely offset by boost in trade within bloc
• Olymel pork facility in Quebec adds second shift
• Boxed beef values remain under pressure
• Pork prices surge


POLICY FOCUS


— Little change in CFAP 2, CFAP 1 data. Payouts approved under the Coronavirus Food Assistance Program 1 and 2 (CFAP 1, CFAP 2) were little changed according to data as of Sept. 12. CFAP 1 data shows payments totaling $10.59 billion while those under CFAP 2 were shown at $13.81 billion.

— Reconciliation updates:

  • House committees worked late on components to their $3.5 trillion budget reconciliation package that would enact the second half of President Joe Biden’s economic agenda. Some panels worked past midnight, voting early this morning on some measures.
  • Energy and Commerce and Ways and Means committees are set to resume the final portions under their jurisdiction today, which is the deadline for all panels to submit their portions of the package to the House Budget Committee. Ways & Means plans to finish its work on the tax portion of the $3.5 trillion package today. President Biden continues to urge a fast passage of the plan, saying it would both combat climate change and create high-paying jobs. The House and Senate are working to consider the final measure before the end of the month.
  • Step-up basis plan is short of votes. House Ways and Means Chair Richard Neal (D-Mass.) said yesterday that President Biden’s planned overhaul of the tax system around inherited assets lacks sufficient support in the lower chamber. “There were enough that raised questions about it,” Neal said. “The issue here is very simple and the arithmetic here is very defiant. And that is getting to 218 votes,” he said, referring to the number amounting to a majority in the House. Biden’s proposal to end a tax break on inheritances known as “step-up in basis,” which wipes out the capital gains tax on assets when the owner dies, was already facing obstacles even before the House committee left the provision out of its draft tax legislation released Monday. The committee instead proposed raising the top long-term capital gains rate to 25% from 20%.
  • Democrats say Biden must get more involved in budget fight. The Hill reports that Democrats expect to see President Biden get more involved in the messy budget reconciliation process in the House and Senate to ensure that the $3.5 trillion social spending package gets across the finish line.

— It's time for the third batch of monthly child tax credit payments. The first two payments were sent on July 15 and August 13, while the third payment is being sent today (Sept. 15). The IRS will also be sending out additional payments every month through the end of the year.


BIDEN ADMINISTRATION PERSONNEL


Washington Post comments on Vilsack: He’s “become something of a progressive favorite.”

     “Progressives (far left Democrats) weren’t excited when President Biden announced he’d chosen Tom Vilsack as his Agriculture secretary. The Revolving Door Project called him ‘the wrong choice to lead USDA.’ Groups representing Black farmers criticized his record on civil rights during his eight years as Agriculture secretary in the Obama administration. So it’s a little surprising that Vilsack is now something of a progressive favorite. ‘We’re thrilled — surprisingly so I have to admit,’ said Joe Maxwell, the president of the Family Farm Action Alliance, which criticized the choice of Vilsack in December. “But we’re thrilled that he’s the secretary of the United States Department of Agriculture.”

     Maxwell applauded Vilsack’s support for debt relief for Black and other historically disadvantaged farmers and his efforts to fight consolidation in the industry. And he praised Vilsack’s efforts to diversify the department along with progressive hires such as Andy Green, a Center for American Progress veteran who’s now Vilsack’s senior adviser for fair and competitive markets.

     The article discusses a recent Vilsack op-ed in the Wall Street Journal in which he tried to defend the Biden administration push to alter estate tax policy on the ag sector.


CHINA UPDATE


FT: Biden’s suggestion of summit with Xi Jinping gets no response; White House denies. President Joe Biden suggested he hold a face-to-face summit with Chinese president Xi Jinping during a 90-minute call last week but failed to secure an agreement from his counterpart, leading some U.S. officials to conclude that Beijing is continuing to play hardball with Washington. Biden proposed to Xi that the leaders hold the summit in an effort to break an impasse in U.S./China relations, but people briefed on the call said the Chinese leader did not take him up on the offer and instead insisted that Washington adopt a less strident tone towards Beijing, the Financial Times reported (link/paywall). The White House believes Xi’s no response was partly due to concerns about Covid-19. Xi has not left China since he went to Myanmar in early 2020 before the outbreak of the pandemic.

     Biden later told reporters who asked if he was disappointed that Xi did not want to meet that it was “not true.” The president made the remarks after Jake Sullivan, U.S. national security adviser, denied the FT account of the Biden/Xi call in a statement. The White House had declined to comment earlier on Tuesday when contacted about the story, the FT said. “This is not an accurate portrayal of the call. Period,” Sullivan said. “As we’ve said, the presidents discussed the importance of being able to have private discussions between the two leaders, and we’re going to respect that.”

— China's slowdown deepens. Growth across a range of Chinese economic indicators pulled back sharply in August, as a new outbreak of the Covid-19 Delta variant and tighter government regulations on the property market hit consumer spending and the housing sector. Retail sales, a key gauge of China’s consumption, rose just 2.5% in August from a year earlier, the slowest pace of growth in a year. Separate data from China’s National Bureau of Statistics showed home sales by value falling 19.7% in August from a year ago, the largest drop since April 2020 — at the height of the pandemic. Average new-home prices in 70 major Chinese cities inched 0.16% higher in August from the previous month, the smallest such gain this year. China’s property market has long been a key driver of the country’s growth, while reorienting the economy toward domestic consumption has become a priority for policy makers. The weakness in these two sectors is likely to add to concerns about the growth trajectory in the world’s second-largest economy.

     China slowdown


CORONAVIRUS UPDATE


Summary: Global cases of Covid-19 are at 225,879,178 with 4,650.798 deaths, according to data compiled by the Center for Systems Science and Engineering at Johns Hopkins University. The U.S. case count is at 41,365,255 with 663,936 deaths. The Johns Hopkins University Coronavirus Resource Center said that there have been 381,453,265 doses administered, 179,289,983 have been fully vaccinated, or 54.6% of the U.S. population.

— Infections from animals carrying coronaviruses may infect hundreds of thousands of people a year, according to a study focusing on the ongoing threat of pandemics. Most infections, which can amount to about 400,000 each year, go unrecognized but each spillover can cause the next pandemic, based on researchers with the EcoHealth Alliance and Singapore’s Duke-NUS Medical School.

— Vaccinating children. Pfizer Chief Financial Officer Frank D’Amelio suggested the company would soon offer its Covid-19 vaccine to children as young as 6 months old, as he gave an outline of the company’s plans to file for emergency use authorization with the FDA in the coming months. Speaking to a bank conference on Tuesday, D’Amelio said that results of phase three trials would be released in September, and if promising would lead to an FDA application in October.

— Vaccine mandate may have big impact. President Biden’s push for a corporate coronavirus vaccine mandate could persuade a further 12 million people to get shots, Goldman Sachs estimated.


POLITICS & ELECTIONS


— California voters easily retain Gov. Gavin Newsom. California voters retained Gov. Gavin Newsom (D) in the recall election Tuesday night. Around 66.8% of people were counted as voting “no” in the election, according to the California Secretary of State’s Office, while 33.2% voted “yes,” with 46.1% precincts partially reporting. A  majority vote was required to recall Newsom. Among the replacement candidates, Larry Elder (R) received the largest share of the votes at 43.6%. Newsom’s victory reassures Democrats over policies combating Covid-19. Newsom’s victory came after several high profile Democrats, including President Joe Biden and Vice President Kamala Harris, visited the state to campaign for him. Since 1911, there have been 55 attempts to recall a California governor. The only successful recall campaign was in 2003 when voters recalled then-Gov. Gray Davis (D). Arnold Schwarzenegger (R) was elected as Davis' replacement. In that election, 135 candidates ran and the winner received 48.6% of the vote.


CONGRESS  


— Senate Democrats proposed a pared-down voting rights bill with a voter ID requirement. Sen. Mitch McConnell (R-Ky.) said Republicans would not support it.

— Lawmakers, staff urged to avoid Capitol on Saturday. A demonstration this Saturday in support of people arrested in the Jan. 6 insurrection has prompted security officials to warn members of Congress and their staffs to stay away from the U.S. Capitol on that day. A memo circulated yesterday by the new House sergeant-at-arms, William Walker, also pointed out that fencing would be temporarily re-installed on Capitol Hill starting today, “at the request” of the U.S. Capitol Police. “Members and staff are strongly encouraged to avoid the U.S. Capitol complex on Sept. 18,” Walker wrote. Most representatives and senators will likely not be in Washington over the weekend, as both chambers are not in session.


OTHER ITEMS OF NOTE     


— Fears Trump might launch a strike prompted general to reassure China, book says. In the last months of Donald Trump’s presidency, his top military adviser privately assured Chinese officials that the U.S. would not attack them, according to “Peril,” a new book by the Washington Post reporters Bob Woodward and Robert Costa. “Things may look unsteady,” the chairman, Gen. Mark A. Milley, told Gen. Li Zuocheng of China on Jan. 8, two days after Trump’s supporters stormed the Capitol. “But that’s the nature of democracy, General Li. We are 100% steady. Everything’s fine. But democracy can be sloppy sometimes.” Still, General Milley was so concerned about Trump that later that day he convened a meeting with top commanders to remind them that the procedures for launching a nuclear weapon called for his involvement in such a decision.

     Some Republicans are calling for Milley to resign. Sen. Marco Rubio (R-Fla.) wrote that Milley “has attempted to rationalize his reckless behavior by arguing that what he perceived as the military’s judgement was more stable than its civilian commander. It is a dangerous precedent that could be asserted at any point in the future by General Milley or others.” Rubio said on Hannity that “You don’t have to like Donald Trump to be concerned about this.” Rubio said it “is the essence of a military coup,” and wondered how people would react if a general decided to ignore Biden’s orders because they thought he was senile. Rubio called on Biden to “immediately” fire Milley, and accused him of working to “actively undermine the sitting Commander in Chief of the United States Armed Forces and contemplated a treasonous leak of classified information” with China “in advance of a potential armed conflict.” Moderate Sen. Rob Portman (R-Ohio) said in an interview with Fox News that Milley “might have overstepped his bounds.” Sen. Rand Paul (R-Ky.) thinks Gen. Milley should be court-martialed  if the book account is accurate. Of note, Lt. Col. Alexander Vindman, a key figure in the Ukraine scandal, also said Milley should go because he “broke the chain of command.”

     Milley is set to appear before the Senate Armed Services Committee on Sept. 28.

— Wonder what Socialist Sen. Bernie Sanders (I-Vt.) would say about this. In Cuba, the minimum wage is $17 per month, less than the price of one Cohiba Lancero cigar.


EVENTS AND REPORTS


Wednesday, September 15

· Milk pricing improvements and reform. Senate Ag Livestock, Dairy, Poultry, Local Food Systems and Food Safety and Security Subcommittee hearing on "Milk Pricing: Areas for Improvement and Reform."
· Global shipping. Peterson Institute for International Economics virtual discussion on "The Future of Global Shipping."
· European issues. Economist virtual third annual Climate Risk Europe conference with keynote remarks from Diederik Samsom, head of cabinet for European Commission Executive Vice President Frans Timmermans.
· EPA nominations. Senate Environment and Public Works Committee hearing on the nominations of Amanda Howe to be assistant EPA administrator for mission support; David Uhlmann to be assistant EPA administrator for enforcement and compliance assurance; and Carlton Waterhouse to be assistant EPA administrator of land and emergency management.
· Antitrust actions. Federalist Society for Law and Public Policy Studies forum on "The Antitrust Paradox: Where We've Been and Where We're Going."
· Zero emissions trucks and shipping. The Hill virtual discussion on "The Road to Zero-Emission Trucks: Fleets and Shippers."
· Digital currencies. American Bar Association virtual 2021 Blockchain and Digital Currency Conference.

· Economic reports. Empire State Manufacturing Survey | Import & Export Prices | Industrial Production | Atlanta Fed Business Inflation Expectations   

· Energy reports. EIA Petroleum Status Report | Weekly Ethanol Production

· USDA reports. ERS: Feed Grains: Yearbook Tables | Feed Grains Database NASS: Livestock Historical Track Records | Turkey Hatchery | Broiler Hatchery 


 

Latest News

After the Bell | September 21, 2021

After the Bell | September 21, 2021 Corn ends lower as USDA rating improves and harvest picks up, wheat lower, soybeans higher.

ASF confirmed in Haiti as thousands of migrants swarm the U.S. Border

The presence of the virus in the Americas paired with a surge in Haitian migrants at our southern border heightens concern the highly contagious disease could make its way to the U.S.

First Thing Today Audio | September 21, 2021

Experts believe a bailout is likely for the beleaguered Chinese real estate firm, the Biden administration reopens international travel and the pork product market takes a dive...

Legislative Crisis: Dems Link Debt Limit to Funding Bill Amid GOP Senate Hurdle

OECD boosts global inflation forecasts | Congestion mounts at Calif. Ports | U.S./U.K. trade

Ahead of the Open | September 21, 2021

Ahead of the Open | September 21, 2021 Corn futures seen lower after USDA crop ratings improve and harvest accelerates, soybeans firmer.

First Thing Today | Sept. 21, 2021

Cordonnier warns his U.S. corn & soybean yield forecasts may fall. Gulf terminals slowly coming back online. Inflation will continue to rise over the next two years. Cattle hold up well in the fact of economic jitters.