Focus Today on Release of FOMC Minutes

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PPP fraud | Perspective on big boost in food stamp benefits | Pro Farmer Crop Tour

 


In Today’s Digital Newspaper


 

Market Focus:
• Fed minutes released today will be scoured for more on tapering
• USDA daily export sale: 131,000 MT soybeans to China during 2021-2022 marketing year
• Austin, Texas: Biggest increase in homes selling well above asking price
• Crypto is ‘95% fraud, hype, noise, and confusion,’ Fed President Kashkari says
• Container ships stacking up again off Southern California’s jammed ports
• Historic drought taking heavy toll on California’s almond industry

Pro Farmer Crop Tour update
• Ag demand update

Grains up slightly, soybeans facing pressure
• Day 2 Crop Tour results for Nebraska and Indiana
• Rain still in the forecast for the Northern Plains, Canada’s Prairies
• China’s YTD grain imports up sharply from 2020?
• Anec raises Brazilian soybean and corn export forecasts for August
• Around 37% of Argentina’s bean crop has yet to be sold
• APK-Inform expects Ukraine’s grain exports to surge 25% in 2021-22
• Ukraine pushing for more access to Algeria’s wheat market
• Boxed beef prices nearing its June high
• Pork movement improves

Policy Focus:
• House Dems plan budget vote next week, despite moderates’ hurdle
• Grassley: Inheritance/transfer tax plan is doomed
• Paycheck Protection Program (PPP) produced a lot of fraud

China Update:
• New round of proposed regulations by China’s top market regulator
• China’s YTD grain imports up sharply from 2020

Trade Policy:
• WTO trade barometer hits record high
• Decision delayed on imports of organic soybean meal from India

Energy & Climate Change:
• Michigan DNR to limit logging in Lower Peninsula forest known as the ‘Big Wild’
• Groups seek rehearing in E15 case


Livestock, Food & Beverage Industry Update:
• A look at USDA’s big boost in food stamps/SNAP benefits


Coronavirus Update:
• Biden administration to call for third shot, citing threat from Delta variant
• U.S. extends mask mandate for air travel and other means of transportation to Jan. 18
• Fed’s latest view on Covid-19
• Gov. Greg Abbott of Texas tested positive for coronavirus yesterday  
• New Zealand’s lockdown

Politics & Elections:
Reuters/Ipsos poll: Biden’s approval drops sharply in wake of events in Afghanistan

Congress:
• Democrats unveil plan to update voting law


Other Items of Note:
• Taliban pledged to build an inclusive government, protect the rights of women
Politico reportedly seeking $1 billion valuation in potential deal to be acquired
• Most U.S. wildland firefighters get pay raise


MARKET FOCUS


 

Equities today: Global stock markets were mixed overnight, with Asian shares mostly down and European shares steady to firmer. U.S. equity futures are slipping ahead of the release of minutes from the Federal Reserve’s July policy meeting, which could offer additional evidence of when the central bank may begin scaling back easy-money policies. This afternoon’s minutes from the last FOMC meeting in July will be parsed for any further clues on the timing of policy moves by the Fed. Many market watchers believe the Fed will start tapering this fall. Next week’s annual Jackson Hole Fed symposium is likely to see some clarification on the Fed’s monetary policy and the timing of any upcoming actions by the Fed. Major indexes in Asia ended the day with gains. China’s Shanghai Composite rallied 1.1%, South Korea’s Kospi added 0.5% and Japan’s Nikkei 225 rose 0.6%. European equities are mixed with an eye on the Afghan situation. The Stoxx 600 is up 0.1% with regional markets seeing gains of 0.6% to losses of 0.4%

     U.S. equities yesterday: The Dow closed down 282.12 points, 0.79%, at 35,343.28. The Nasdaq fell 137.58 points, 0.93%, at 14,656.18. The S&P 500 declined 31.63 points, 0.71%, at 4,448.08.

     Stocks

On tap today:

     • U.S. housing starts are expected to fall to an annual pace of 1.59 million in July from 1.643 million a month earlier. (8:30 a.m. ET)
     • Federal Reserve publishes minutes from its July 27-28 meeting at 2 p.m. ET.
     • St. Louis Fed President James Bullard speaks with MarketWatch at 12 p.m. ET, and Dallas Fed President Robert Kaplan discusses the economy with Dallas/Fort Worth International Airport CEO Sean Donohue at 6 p.m. ET.

FOMC minutes to focus on tapering discussion. Minutes of the July 27-28 Federal Open Market Committee (FOMC) meeting will be released at 2 pm ET today and will be scoured for the discussion on tapering of the Fed’s bond purchases which have been taking place at $120 billion per month. The Fed’s stance following the meeting was that no final decisions had been made and that the discussion would continue at future meetings. Given comments from Fed officials since the July meeting, most expect a tapering effort that will start either in late 2021 or early 2022. The pace of the tapering will be key as there have been varying views from Fed officials on how aggressive the Fed needs to be in winding down the purchases. The Delta Covid variant will no doubt get mention in the meeting recap as Fed Chairman Jerome Powell addressed that in his post-meeting presser, noting uncertainty about its potential impact on the U.S. economy, something which he has continued to note (see related item under Covid section). Still, attention will be high on the meeting recap to provide insight on Fed members’ thinking as they plot the path for monetary policy as the U.S. economy continues to pull upward from the pandemic.

Austin, Texas takes the prize for the biggest increase in homes selling well above the asking price. Nearly 2,700 homes in the Texas capital have sold this year for $100,000 or more above their initial listing price, according to an analysis by Redfin Corp. that examined sales through Aug. 11. Link for details.

Crypto is ‘95% fraud, hype, noise, and confusion,’ Fed President Kashkari says. Neel Kashkari, the president of the Minneapolis Federal Reserve, was pressed on his stance on digital assets at a regional economic summit in Montana Tuesday. He claimed that the crypto space bankrolls illegal activities and is full of scams. “I was more optimistic about crypto and Bitcoin five or six years ago,” said the central banker. “So far what I’ve seen is ...95% fraud, hype, noise, and confusion.” Kashkari argued that the dollar remains strong because of restrictions on its creation and use — no one can mint their own U.S. currency, for good reason. “There are thousands of these garbage coins that have been created—some of them are complete fraud Ponzi schemes,” the Fed president said. The central banker also said he has struggled to find people who can articulate how Bitcoin is meant to solve meaningful problems better than existing currencies. “I’ve not seen any use case—other than funding illicit activities like drugs and prostitution—that is legitimate so far that Bitcoin solves,” he said.

Market perspectives:

     • Outside markets: The U.S. dollar index is nearly unchanged with a slightly firmer tone to many foreign currencies relative to the U.S. dollar. The yield on the 10-year U.S. Treasury note has firmed to trade above 1.27%. Gold futures are slightly lower while silver is slightly higher. Gold is trading around $1,786 per troy ounce and silver around $23.68 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 $67.20 per barrel while Brent is around $69.75 per barrel. Crude oil was slightly higher in Asian action, with U.S. crude up seven cents at $66.66 per barrel while Brent crude was up seven cents at $69.09 per barrel.

     • Container ships are stacking up again off Southern California’s jammed ports, as a flood of imports and logjams in domestic logistics networks hit operations at the biggest U.S. gateway for seaborne trade. Thirty-seven container ships were anchored off the adjacent ports of Los Angeles and Long Beach in recent days, according to the Marine Exchange of Southern California, the highest number since February. Aboard are hundreds of thousands of boxes stuffed with goods bound for manufacturers and retailers as U.S. businesses hustle to restock inventories and prepare for the holiday shopping season. Just a couple of months ago, the number of container ships at anchor in the two ports, which together handle more than a third of all U.S. seaborne imports, had dwindled to nine. In normal times, the number is one, or none. The Wall Street Journal reports (link) that the congestion marks a return to the worst logjams seen earlier this year, when up to 40 ships waited for berths. Some businesses such as Adidas are switching to more costly airfreight when possible, and port officials say worried shippers are pulling imports forward, adding to the crush of containers. Most must simply wait it out as a cost of accessing the best-equipped terminals to move tens of thousands of containers inland quickly.

     • Historic drought is taking a heavy toll on California’s almond industry, which produces about 80% of the world’s supply. Link for details via the Associated Press.

     • USDA daily export sale: 131,000 MT soybeans to China, 2021-2022 marketing year

     • Ag demand: Algeria’s state grains agency reportedly bought between 230,000 MT and 250,000 MT of milling wheat in an international tender on Tuesday, with Germany, Poland and the Baltic states are expected to be the main suppliers. Egypt tendered to buy an unspecified amount of wheat from global suppliers. Japan’s ag ministry received no offers in its simultaneous buy and sell auction in which it was seeking 80,000 MT of feed wheat and 100,000 MT of feed barley. Bangladesh reportedly had no offers in its tender to buy 50,000 MT of wheat.

     • Day 2 Pro Farmer Crop Tour results for Nebraska and Indiana. Scouts on Day 2 of the Pro Farmer Crop Tour measured average corn yield potential of 182.6 bu. per acre for Nebraska, which compares to 175.2 bu. per acre last year for the state and 175.6 bu. per acre for the three-year average. Soybean pod counts in a 3’x3’ square averaged 1,226 for Nebraska, which compares to 1,298 pods last year on tour and 1,269 pods for the three-year average.

     Indiana samples resulted in an average corn yield of 193.5 bu. per acre, which compares to 179.8 bu. per acre last year for the state and 174.5 bu. for the three-year average. Pod counts in a 3’x3’ square averaged 1,240 for Indiana, which compares to 1,281 pods last year on Tour and 1,172 pods for the three-year average. Find more perspective from Tour leaders in their “From the Rows” columns.

     Today, scouts on the eastern leg of the Tour travel from Bloomington, Illinois to Iowa City. Scouts on the western leg will travel from Nebraska City to Spencer, Iowa. Tonight, official Tour results for Illinois will be released as well as the district results for western Iowa.

     • NWS weather: Post-Tropical Cyclone Fred will bring heavy rain which may lead to significant flash flooding, gusty winds and a few tornadoes as it tracks north from the upper Ohio Valley into New England today and Thursday. Monsoonal activity across portions of Arizona and Utah may cause flash and urban flooding impacts, especially in the vicinity of slot canyons, arroyos, and dry washes.

        NWS
        Wx Today

Items in Pro Farmer's First Thing Today include:

     • Grains up slightly, soybeans facing pressure
     • Day 2 Crop Tour results for Nebraska and Indiana
     • Rain still in the forecast for the Northern Plains, Canada’s Prairies
     • China’s YTD grain imports up sharply from 2020?
     • Anec raises Brazilian soybean and corn export forecasts for August
     • Around 37% of Argentina’s bean crop has yet to be sold
     • APK-Inform expects Ukraine’s grain exports to surge 25% in 2021-22
     • Ukraine pushing for more access to Algeria’s wheat market
     • Boxed beef prices nearing its June high
     • Pork movement improves

 


POLICY FOCUS


 

— House Dems plan budget vote next week, despite moderates’ hurdle. Top Democrats plan House votes next week on a budget resolution that could clear a path for future passage of a $3.5 trillion, 10-year social and environment package. Majority Leader Steny Hoyer (D-Md.) said in a conference call among House Democrats that he’d like the chamber to approve the budget resolution next Tuesday. The House returns the previous day for what lawmakers hope will be an abbreviated interruption of their August recess. If all Republicans oppose the budget as expected, Democrats could lose no more than three of their own votes and prevail. The budget's congressional approval would prevent Republicans from killing the subsequent $3.5 trillion bill, likely this fall, from bill-killing Senate filibusters.

     House Speaker Nancy Pelosi (D-Calif.)  told her top deputies, “For the first time America’s children have leverage – I will not surrender that leverage. ... There is no way we can pass those bills unless we do so in the order that we originally planned.”  In a phone call Tuesday, Majority Whip James Clyburn (D-S.C.) told lawmakers, “I would hope that none of us… would do or say anything that would jeopardize passing these bills. These bills are critical for us maintaining our majority, and that must reign supreme,” the Wall Street Journal reports (link), citing a person who listened to the call.

— Grassley: Inheritance/transfer tax plan is doomed. Sen. Chuck Grassley (R-Iowa) is saying what has become obvious among most in Washington: Democrats can’t pass a tax proposal that includes a transfer tax on inherited assets that would nullify the benefits of stepped-up basis. “I don’t think they have the votes to do it, and I don’t think you’re going to find it in a bill that comes to the floor of the U.S. Senate,” Grassley said Tuesday.

— Paycheck Protection Program (PPP) produced a lot of fraud. The PPP was an $800 billion small-business rescue plan that was a centerpiece of the government’s pandemic aid efforts. As such, it seemed vulnerable to fraud. And that apparently occurred. Up to 15% of the program’s loans may have been fraudulent — that’s 1.8 million loans worth $76 billion — according to a new study by economists at the University of Texas (link). By comparison, the Great Recession’s much-hated Troubled Asset Relief Program, the official name for the bank bailout fund, was about the same size, with $11 billion in fraud. Despite the waste, PPP had positive effects. Foreclosure and loan default rates didn’t rise nearly as high as they did during the financial crisis, despite worse job loss. And the unemployment rate returned to a low level much faster than after the Great Recession.
 


CHINA UPDATE


— New round of proposed regulations by China’s top market regulator dragged on the U.S.-listed shares of several Chinese technology companies. Alibaba dropped 4.9% on Tuesday to $173.73, its lowest close since October 2019. The ADRs of Tencent fell 4.1% on Tuesday to $55.15, the lowest level in more than a year.

— China’s YTD grain imports up sharply from 2020. China imported 2.86 MMT of corn during July, a 214% surge from year-ago, Chinese customs data released today shows. That pushes the country’s year-to-date (YTD) purchased to 18.16 MMT, an impressive 298% gain compared to last year at this time. China’s barley imports shot 87% higher compared with last year in July to 770,000 MT, with its YTD imports of 6.42 MMT up an impressive 125% from 2020 at this point. The country’s imports of sorghum also climbed a dramatic 114% from year-ago during July to 1.11 MMT, with year-to-date imports of 5.9 MMT up 157% from last year at this time. China’s imports of wheat edged 5% lower during July to 880,000 MT, but its YTD imports of 6.25 MMT is 46% ahead of the 2020 season at this point. Customs also reports China imported 350,000 MT of pork last month, a 19% retreat from July 2020. But seven months into the year, China has brought in 2.66 MMT of pork, up 3.9% from last year at this point.
 


TRADE POLICY


— WTO trade barometer hits record high. The global goods barometer compiled by the WTO hit a record high of 110.4, up 20 points from year-ago levels. All components in the trade measure were above trend in the latest month, with those for air freight, container shipping and raw materials rising faster than average trade growth.

     WTO noted the strength in the index underscores trade expansion but also the depth of the pandemic in 2020. However, the trade body cautioned that while results were above trend, “the index has started to rise at a decreasing rate which could preage a peaking of upward momentum in trade.” The new export orders index echoed that as the WTO said the reading indicated “the pace of recovery is likely to decelerate in the near term.” The trade body also cautioned that the air freight component, which rose reflecting the increase in travel coming out of Covid, could “turn down again suddenly” if Covid prompts a reimposition of restrictions. 

— Decision delayed on imports of organic soybean meal from India. The Department of Commerce’s International Trade Administration (ITA) announced today that the preliminary determination on whether imports of organic soymeal from India are being sold into the US at less than fair value will be postponed. The original deadline for a preliminary determination was Sept. 7, but now the deadline is by Oct. 27.
 


ENERGY & CLIMATE CHANGE



— Michigan's Department of Natural Resources has agreed to limit logging in the Lower Peninsula forest known as the “Big Wild” over the next four decades to create carbon offsets, a climate-change currency that companies use to compensate for emissions.

— Groups seek rehearing in E15 case. The National Corn Growers Association (NCGA), Renewable Fuels Association (RFA) and Growth Energy have petitioned the U.S. Court of Appeals for the DC Circuit for a rehearing in the case but this time by the full court relative to a three-judge panel’s decision earlier this year which ruled EPA’s granting of the Reid Vapor Pressure (RVP) waiver to E15 fuels was in error. In their filing, the groups argued for the full-court rehearing as they maintained there were legal errors with the decision. The groups noted the “acknowledged purpose” of the RVP provision “is to promote increased ethanol use if the fuel’s volatility does not exceed a specified RVP limit.” However, the panel ruling “construed the waiver to be available to E10 but not E15, which has more ethanol and lower RVP than E10.” The initial court decision meant that E15 fuels cannot be sold in the summer months (June 1-Sept. 15).
 


LIVESTOCK, FOOD & BEVERAGE INDUSTRY



— A look at USDA’s big boost in food stamps/SNAP benefits. USDA is increasing benefits by an average of 27% over pre-pandemic levels via its Thrifty Food Plan (TFP) — Congress increased benefits by 15% during the pandemic, though this is set to end in September. The TFP is the basket of foods that the government uses to determine benefit size, which averaged $130 per person monthly before the pandemic. Benefits are adjusted annually for food inflation. Proponents note the basket of foods used to determine the food aid hasn’t changed since 2006 despite the government’s changing nutritional standards, which recommend people eat more lean protein, fruits and vegetables and whole grains — all of which tend to be more expensive.

     A family of four will get up to $835 per month after adjusting for inflation, the Wall Street Journal notes. The average four-person household in the U.S. spent $537 per month on food at home in 2019.

     “USDA hilariously says that Americans need to consume more calories because they are fatter,” the WSJ notes in a commentary. “It has also adjusted its food basket to include more protein and dairy, which happen to be food products whose prices are increasing most. Milk prices were up 6.2% year-over-year in July and meat 5.9%.”

     The U.S. gov’t doesn’t restrict what people can buy with their food stamps. According to government data, food-stamp recipients spend about 20% of their allotment on sweetened beverages, desserts, salty snacks and candy.

     Bottom line, according to the WSJ editorial: “Entitlements before the pandemic consumed two-thirds of federal spending. Now Democrats want to create new entitlements that make the middle class more dependent on government while enlarging existing welfare programs like food stamps, which they plan to pay for by raising taxes and cutting defense. This is a recipe for a weaker and fatter America.”

     SNAP
 


CORONAVIRUS UPDATE


Summary: Global cases of Covid-19 are at 208,653,614 with 4,282,222 deaths, according to data compiled by the Center for Systems Science and Engineering at Johns Hopkins University. The U.S. case count is at 37,017,896 with 623,332 deaths. The Johns Hopkins University Coronavirus Resource Center said that there have been 357,894,995 doses administered, 168,897,604 have been fully vaccinated, or 51.5% of the U.S. population.

— Biden administration is expected today to call for Americans vaccinated with two-shot regimens to get a third shot, citing the threat from the highly contagious Delta variant. Regulators already cleared booster shots for people with compromised immune systems; today’s announcement is expected to expand the rollout to those 65 and older and people in chronic-care facilities, followed by health workers and others.

— The U.S. extended its mask mandate for air travel and other means of transportation to Jan. 18.

— Fed’s latest view on Covid-19: “It’s not yet clear whether the Delta [coronavirus] strain will have important effects on the economy; we’ll have to see about that,” said Federal Reserve Chairman Jerome Powell, speaking to students and teachers on Tuesday.

     Powell gave no indication about Fed policy in responding to questions from students and teachers but did note the economy was unlikely to return to how it was before the pandemic. “The Covid pandemic is still casting a shadow on economic activity,” he observed. “It is still very much with us. We can’t… declare victory yet on that.”

     Attention is already shifting to Powell’s remarks at the Kansas City Fed’s Jackson Hole confab Aug. 26-28, “Macroeconomic Policy in an Uneven Economy.” While Powell and other Fed officials may offer some additional perspective on the monetary policy outlook, it seems unlikely that a definitive announcement on something like the timing and degree of tapering the Fed’s bond purchase program would be offered at that session ahead of the Sept. 21-22 Federal Open Market Committee (FOMC) meeting. However, it has served as a forum for Fed officials to provide additional information or perspective on Fed policy.

— Gov. Greg Abbott of Texas, who has challenged mask and vaccine mandates in court, tested positive for the coronavirus yesterday. He is fully vaccinated and has no symptoms, his office said. Early data hint at a rise in “breakthrough” coronavirus infections. Preliminary numbers in some states showed that vaccinated people accounted for at least one in five new diagnosed cases, and for a higher percentage of hospitalizations and deaths than previously reported (though the absolute numbers remain very low).

— New Zealand’s lockdown. New Zealand has entered a three-day nationwide lockdown — its strictest in over a year — after discovering a single case of Covid-19. Authorities have not been able to tie the case to international travel and do not yet know whether the infection was caused by the delta variant. New Zealand Prime Minister Jacinda Ardern has vowed to “go hard and early” to prevent the virus spreading further, while Director General of Health Ashley Bloomfield has warned that more cases are likely to emerge in the coming days.
 


POLITICS & ELECTIONS



— Reuters/Ipsos poll: Biden’s approval drops sharply in wake of events in Afghanistan.

Reuters reports (link) President Biden’s approval rating dropped by 7 percentage points and hit its lowest level so far following the events in Afghanistan. The Reuters/Ipsos poll, conducted on Monday, found that 46% of American adults approved of Biden’s performance, down from 53% in a similar poll on Friday. A separate Ipsos snap poll, also conducted on Monday, found that fewer than half of Americans liked the way Biden has steered the U.S. military and diplomatic effort in Afghanistan this year. Biden was rated worse than the other three presidents who presided over the United States’ longest war.”
 


CONGRESS  


— Democrats unveil plan to update voting law. House Speaker Nancy Pelosi (D-Calif.) pledged to move quickly and said Democrats plan to pass a voting rights bill when the House returns next week.
 


OTHER ITEMS OF NOTE     



— Taliban pledged to build an inclusive government, protect the rights of women “within the bounds of Shariah law,” and prevent Afghan territory from being used to target any other country. However, reports have already emerged of forced marriages and orders for men to grow beards. Their prior stint in power was marked by an extremely conservative interpretation of Shariah law that saw women face stoning or execution for non-compliance. Meanwhile, the U.S. halted bulk shipments of dollars to Afghanistan to keep cash out of the Taliban’s hands, the WSJ reported. There are increasing concerns about the people being stopped from leaving Afghanistan as Taliban fighters ring the airport with checkpoints.

— Politico is reportedly seeking a $1 billion valuation in a potential deal to be acquired by the German publishing giant Axel Springer, in what would be one of most expensive digital media deals in recent memory. And Forbes is reportedly mulling a merger with a SPAC that values it at more than $650 million.

— Most U.S. wildland firefighters get a pay raise. More than 14,800 of the federal government's wildland firefighters will see a raise, to $15 an hour, in their paychecks next week, the Interior and USDA said. The additional pay will cost nearly $32 million.


 

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