GOP Retakes House by Slim Margin, Setting Stage for Divided Government

Ukraine grain export pact extended for 120 days | Pelosi to announce ‘future plans’ today
 

Today’s dispatch is abbreviated as I am in Baltimore for a speech and then off to St. Louis for a family wedding, with the reception at an unusual place — Anheuser-Busch.

Global stock markets were mostly lower overnight. U.S. stock indexes are headed for weaker openings. Key outside markets today see the U.S. dollar index solidly higher. Nymex crude oil prices are lower and trading around $84.00 a barrel. The yield on the benchmark U.S. 10-year Treasury note is presently 3.736%. I n Asia, Japan -0.35%. Hong Kong -1.15%. China -0.13%. India -0.42%. In Europe, at midday, London -0.50%. Paris +0.10%. Frankfurt -0.50%.

Active followthrough selling overnight. Corn, soybean and wheat futures sharply extended Wednesday’s losses overnight on news the Black Sea grain export deal was extended and pressure from outside markets. As of 7:30 a.m. ET, corn futures were trading mostly around 9 cents lower, soybeans were 12 to 13 cents lower, SRW wheat was 15 to 16 cents lower, HRW wheat was 6 to 7 cents lower and HRS wheat was 4 to 6 cents lower. Front-month crude oil futures are more than $1 lower and the U.S. dollar index was more than 500 points higher this morning.

Steady starter trade for cash cattle. Some light cash cattle trade surfaced around $150 in the Southern Plains on Wednesday, about steady with initial trade in the state last week, though most feedlots held out for higher prices. Cash sources signaled packer interest was picking up, suggesting it’s just a matter of time before firmer prices surface. The northern market remained relatively quiet, though firmer prices are expected to develop there, as well.

Cash hog fundamentals continue to weaken seasonally. The CME lean hog index is down another 22 cents to $88.22 (as of Nov. 15), the lowest level since Feb. 9. The pork cutout value fell $2.07 to $93.63, the lowest price since Feb. 2. Seasonal pressure at this time of year is normal as supplies build seasonally. But we anticipate seasonal lows will be posted relatively soon as slaughter numbers and pork production are expected to peak earlier than normal.

Republicans captured control of the House after falling short of midterm expectations. It’s finally official, the GOP garnered the 218 seats needed to control the House, ushering in an era of divided government and a check on the Biden administration agenda. Most look for Biden to increase his use of executive orders and regulations to fulfill some other goals. It was ironic that it took several GOP House races in liberal California to get the Republicans to 218 votes.

Six more House races need to be called so the GOP majority number could rise by a few seats. “The era of one-party Democrat rule in Washington is over,” Rep. Kevin McCarthy, the House Republican leader from California, said this week on Capitol Hill, as his Republican colleagues nominated him to serve as House speaker. “Washington now has a check and balance.” The majority hands Republicans control of committees with subpoena authority, allowing them to make good on campaign pledges to investigate Biden’s administration and family, as well as social-media companies that conservatives claim are biased against them.

President Biden commented on the GOP win in the House. “I congratulate Leader McCarthy on Republicans winning the House majority, and am ready to work with House Republicans to deliver results for working families,” Mr. Biden said in a statement on Wednesday, adding that “the future is too promising to be trapped in political warfare.” But the president also recognized the surprising strength of the Democratic showing, and the defeat of a series of far-right Republicans who had refused to recognize the legitimacy of the last election. “There was a strong rejection of election deniers, political violence and intimidation,” he said.

Russia agrees to renew Ukraine grain deal by 120 days: U.N. Russia agreed to renew the deal allowing grain and other exports to leave Ukraine through the war-torn Black Sea, U.N. Secretary-General António Guterres said. Wheat and corn prices fell sharply after the U.N. announcement. Ukrainian President Volodymyr Zelenskyy said in a tweet that the “Grain Deal will be prolonged,” calling it a “key decision in the global fight against the food crisis.” It wasn’t immediately clear whether the prolonged agreement had new terms. It was extended for 120 days beyond the original Nov. 19 timeline. Russia is expected to comment on the topic sometime today. Russian officials have also sought action to facilitate exports of Russian food and fertilizer products. Guterres also said that work was being done to allow Russia to export food and fertilizer. The export of Russian ammonia via a pipeline to the Black Sea has not yet been agreed as part of the renewal, a source familiar with discussions told Reuters. The U.N. and Ukraine had sought a one-year extension of the deal.

Turkey again offers to process Russian wheat and export as flour. Turkish President Tayyip Erdogan said Russian grain exports could be processed into flour in Turkey and then shipped to Africa to help relieve food shortages there, reiterating a previous pledge. Erdogan said Russian grain was meant to be delivered to countries such as Mali, Djibouti, Sudan and Somalia free of charge. “We will also contribute to the free delivery of this (Russian grain)... We already have such an agreement. Hopefully, this wheat will come to us (Turkey) and be turned into flour in our country and sent (to Africa) in this form. It will offer a significant relief to them (countries in Africa),” Erdogan said.

Goldman boosts Fed rate call, now sees a peak of 5% to 5.25%. Goldman Sachs Group Inc. has added a quarter percentage point to its forecast for the peak in the Federal Reserve’s benchmark interest rate, thanks in part to the likelihood of inflation remaining “uncomfortably high” for some time. The bank’s economists, led by Jan Hatzius, said in a note to clients on Wednesday that they now anticipate the Fed boosting the key rate to a range of 5% to 5.25%, up from the previous call of 4.75% to 5%. The forecast joins others who have forecast the same outlook.

Timeline for any new farm bill in 2023 largely rests with the House. Reason: The Senate Ag Committee will be led by current Chair Debbie Stabenow (D-Mich.) who is a veteran of getting farm bills over the finish line, and top her liking. In the House, likely new Ag panel leader is Rep. G.T. Thompson (R-Pa.), who will have a governing party that just garnered control. The GOP caucus contains more than a few conservative activists who have made prior farm bills difficult to be completed. While some will not say it publicly, veteran farm bill watchers believe the House will run out of time in 2023 because of the need for hearings and to gear up new members and their staffs on the complexities of farm policy. But Thompson has made it clear he wants a bill in 2023 and wants the House to consider it by the August congressional recess. Look for Thompson to push early action via hearings and others matters early in 2023.

Some farmers and others quickly complained about USDA’s Phase 2 of the Emergency Relief Program (ERP). They are in talks with lawmakers and USDA officials about their concerns, some of which pertain to USDA relying on Schedule F for information, which one naysayer said “doesn’t tell the whole story.” The issue: How will FSA address discrepancies between Schedule F gross income and crop loss?

Pelosi, 82, will announce future plans today. Many but not all believe the current House speaker will announce she’s exiting the leadership, as she agreed to do in a pledge four years ago. But she has changed her mind before on heading her party in the House. Others note the brutal attack against Paul Pelosi, the speaker’s husband, in their San Francisco home, is a key factor in her decision. She has led House Democrats since 2003. The House is expected to leave town for the week today, and leadership elections are slated for Nov. 30,  one day after members return.

Sen. Mitch McConnell (R-Ky.) was re-elected leader of the Republicans in the Democrat-controlled Senate. He beat Rick Scott, who was backed by Donald Trump.

62 Senators, including 12 Democrats, voted to end the Covid national emergency declaration that the Biden Administration is using to justify its student loan write-off. Seven of the 12 Democrats face re-election in 2024, including Tim Kaine (Va.), Amy Klobuchar (Minn.), Joe Manchin (W. Va.), Chris Murphy (Conn.), Kyrsten Sinema (Ariz.), Jon Tester (Mont.), and Jacky Rosen (Nev.). Majority Leader Chuck Schumer joined the emergency terminators. The Biden administration is trying to block consideration of the resolution in the House by threatening a veto.

Same-sex marriage rights bill clears a Senate hurdle. The Senate on Wednesday took a crucial step toward passing landmark legislation to provide federal protections for same-sex marriages, as 12 Republicans joined Democrats to advance the Respect for Marriage Act, putting it on track to become law in the waning days of the Democratic-held Congress.

China leader Xi Jinping dressed down Canada’s prime minister, Justin Trudeau, in an exchange at the G20 summit in Bali. China’s president said it was “not appropriate” that details of their recent dialogue, during which Canada accused China of interfering with its elections and other domestic affairs, were leaked. An uncomfortable Trudeau explained that Canada believes “in free and open and frank dialogue.”

China asks banks to report on liquidity after sudden bond slump. Chinese regulators have asked commercial banks to report on their ability to meet short-term obligations. The request was prompted after a rapid selloff in bonds triggered investor withdrawals from fixed-income products, Bloomberg News reported, citing people familiar with the matter.

The Eurozone reported its October consumer price index at up 10.6%, year-on-year, which was just slightly below expectations for a rise of 10.7%.

U.K. finance minister announces tax hikes and spending cuts, says country is in recession. The U.K. government on Thursday unveiled a sweeping £55 billion ($66 billion) fiscal plan as it seeks to plug a gaping hole in the public finances and restore Britain’s economic credibility, even as the country teeters on recession. Finance Minister Jeremy Hunt, in his inaugural Autumn Statement, outlined around £30 billion in spending cuts and £25 billion in tax hikes. The announced tax changes came in line with market expectations, with main measures including cutting the threshold for the top rate of income tax of 45% to £125,000 and freezing allowances and thresholds for income tax, national insurance, and inheritance tax for a further two years. Also, the budget aims to slash the dividend allowance to £1,000 from £2,000 next year, and then to £500 in April 2024.

U.K. Prime Minister Rishi Sunak said he didn’t discuss a prospective trade deal with President Joe Biden this week, suggesting Britain has given up for now on what was once touted as one of the great prizes of Brexit.

Thanksgiving dinner will cost 20% more this year, according to the Farm Bureau's 37th Annual Survey. The biggest bump is for stuffing mix, which is up 69% due to a flour shortage stemming from Russia's invasion of Ukraine.

WASDE | Crop Production | USDA weekly reports | Crop Progress | Food prices | Farm income | Export Sales weekly | ERP dashboard | California phase-out of gas-powered vehicles | RFS | IRA: Biofuels | IRA: Ag | Student loan forgiveness | Russia/Ukraine war, lessons learned | Election predictions: Split-ticket | Congress to-do list | SCOTUS on WOTUS  | SCOTUS on Prop 12 | New farm bill primer | China outlook |