Pelosi to Meet Taiwanese President; China Sends Warplanes to Taiwan Strait

USDA’s Bonnie: Opportunity for U.S. agriculture to be ‘hero’ on climate change

The U.S. killed al Qaeda leader Ayman al-Zawahiri in a drone strike, President Joe Biden said Monday in a speech from the White House. Zawahiri, one of the masterminds of the 9/11 terror attacks, was killed after months of highly secret planning by Biden and a tight circle of his senior advisers. The news had little impact on markets.

House Speaker Nancy Pelosi is expected to visit Taiwan as part of her tour of Asia, according to a senior Taiwanese government official and a U.S. official, despite warnings from Biden administration officials who are worried about China's response to such a high-profile visit. The Financial Times reports that Pelosi is scheduled to meet on Wednesday with Taiwanese President Tsai Ing-Wen. China sent warplanes to the Taiwan Strait on Tuesday, delivering a warning ahead of Pelosi's visit to the island Tuesday afternoon.

The Ukrainian infrastructure minister said it will be months before grain exports from Odessa and nearby ports return to prewar levels, despite Russia lifting its blockade.

Profits at BP soared to $8.5 billion in the quarter ending in June, the highest figure in more than a decade and triple the amount it reported in the same quarter in 2021. The company also announced a 10% increase in its dividend payout.

USDA undersecretary: Opportunity for U.S. agriculture to be ‘hero’ on climate change. Details below.

The Biden administration filed a brief with the U.S. Court of International Trade defending the duties imposed by the Trump administration on some $320 billion in Chinese goods. Details in Trade Policy section.

The chicken sandwich has become a profitable meal for big chain restaurants, despite rising poultry prices.

USDA will declare salmonella an adulterant in breaded and stuffed raw chicken producty. An adulterant is a substance that compromises food safety.

Primaries are being held in Arizona, Kansas, Michigan, Missouri, Ohio and Washington state.

Equities today: Global stock markets were mostly lower overnight. The S&P 500 fell 0.4% at the opening. The Dow slipped 0.5% Tuesday while the technology-heavy Nasdaq lost 0.6%. Investors are worried about inflamed geopolitical tensions between Beijing and Washington ahead of House Speaker Nancy Pelosi’s expected visit to Taiwan. In Asia, Japan -1.4%. Hong Kong -2.4%. China -2.3%. India -0.3%. In Europe, at midday, London -0.2%. Paris -0.6%. Frankfurt -0.8%.

     U.S. equities yesterday: The Dow was down 46.73 points, 0.14%, at 32,798.40. The Nasdaq declined 21.71 points, 0.18%, at 12,368.98. The S&P 500 fell 11.66 points, 0.28%, at 4,118.63.

Agriculture markets yesterday:

• Corn: December corn futures fell 10 1/4 cents to $6.09 3/4. Corn futures fell in sympathy with a sharp drop in the soy complex, as Midwest weather forecasts appeared slightly less threatening compared to late last week.
• Soy complex: November soybeans fell 62 1/2 cents to $14.06. September soymeal plunged $12.70 to $429.70. September soyoil declined 241 points to 64.09 cents.
• Wheat: September SRW fell 7 1/2 cents to $8.00 1/4. September HRW settled 8 cents lower at $8.66 1/2, while December spring wheat fell 8 1/4 cents to $9.10 1/4.
• Cotton: December cotton fell 268 points to 94.06 cents per pound, the lowest closing price since July 25.
• Cattle: October live cattle rose 40 cents to $142.625. September feeder cattle rose $1.55 to $183.10. Choice beef cutout values early Monday rose $1.26 to $270.50.
• Hogs: October lean hogs fell 40 cents to $96.825. The CME lean hog index rose 84 cents to $121.42 (as of July 28), just $1.26 below last year’s mid-June peak at $122.68. Today’s index is expected to rise another 45 cents to $121.87.
   

Ag markets today: Corn, soybeans and wheat extended Monday’s declines in overnight trade. Soybeans fell below Monday’s lows, while corn held that support and wheat pivoted around yesterday’s lows. As of 7:30 a.m. ET, corn futures were trading 7 to 8 cents lower, soybeans were around a dime lower in most contracts and wheat futures were 15 to 20 cents lower. Front-month U.S. crude oil futures and the U.S. dollar index were both trading modestly above unchanged this morning.

Technical viewpoints from Jim Wyckoff:

On tap today:

     • U.S. job openings are expected to fall to 11.1 million in June from 11.3 million one month earlier. (10 a.m. ET)
     • Federal Reserve speakers: Chicago's Charles Evans on monetary policy at 10 a.m. ET, Cleveland's Loretta Mester on inflation and economic growth at 1 p.m. ET, and St. Louis's James Bullard on the economy and monetary policy at 6:45 p.m. ET.

Market perspectives:

     • Outside markets: The U.S. dollar index is slightly higher in early U.S. trading. The yield on the 10-year U.S. Treasury note is fetching 2.56%. U.S. crude was trading around $94.20 per barrel and Brent around $100.40 per barrel. Gold and silver futures are higher ahead of U.S. trading, with gold around $1,795 per troy ounce and silver around $20.38 per troy ounce.

     • OPEC+ and oil prices. Organization of the Petroleum Exporting Countries and its allies, known as OPEC+, have their regular meeting this week to decide whether to increase supply. BP forecasts that oil prices will “remain elevated in the third quarter” due to reduced levels of spare capacity, with inventory levels significantly below the five-year average and “ongoing disruption to Russian supply.”

     • Ag trade: Japan is seeking 122,103 MT of wheat in its weekly tender. South Korea tendered to buy 50,000 MT each of milling wheat from the U.S. and Australia. Tunisia tendered to buy 100,000 MT of soft wheat and 50,000 MT of feed barley – both optional origin. The Philippines tendered to buy 150,000 MT each of wheat and feed barley – both optional origin.

     • NWS weather: Monsoonal Rains to continue across much of the Southwest U.S. through midweek... ...Some Relief from Record High Temperatures across the Northwest... ...Fire Weather Threat to continue from the Northwest into the Northern High Plains.

Items in Pro Farmer's First Thing Today include:

     • Followthrough selling overnight
     • Consultant again cuts corn, soybean yield forecasts
     • Corn CCI rating slips, soybean rating improves
     • Turkey expects regular daily departures of grain ships from Ukrainian ports
     • Indonesia lowers crude palm oil reference price for the first half of August
     • China says 5.5% GDP growth is guidance, not a hard target
     • Strong start for wholesale beef trade
     • Seller interest limited in hog futures

— Summary: The U.S. will send another $550 million in arms to Ukraine, which will include ammunition for the HIMARS rocket systems. Russia shelled Ukrainian-held territory in the country’s south today, local officials said, as both sides shift their attention toward a looming fight for the area. Ukraine is preparing for what officials said will be a major counteroffensive to retake areas that they lost in the early days of the war. Moscow has been moving troops out of the Donetsk region, in the east, and deploying them to defend territory in the south, according to Ukrainian and British officials.

• The U.N. secretary general, Antonio Guterres, warned that humanity was "just one misunderstanding, one miscalculation away from nuclear annihilation," citing the war in Ukraine among other conflicts.
• Ukraine noted plans to cautiously ramp up grain exports after the first shipment since Russia’s invasion. The first two weeks will be treated as a trial period, with no more than three vessels a day in each direction through new safe-passage corridors. If successful, exports could increase to as much as three million tons per month in four to six weeks’ time. infrastructure minister Oleksander Kubrakov said he expected no more than five vessels to leave in the next two weeks from Odesa, Chornomorsk and Pivdennyi.
• Turkey expects regular daily departures of grain ships from Ukrainian ports. Turkey expects roughly one grain ship to leave Ukrainian ports each day as long as an agreement that ensures safe passage holds, a senior Turkish official said on Tuesday. “The plan is for a ship to leave... every day,” the senior Turkish official told Reuters. “If nothing goes wrong, exports will be made via one ship a day for a while.” The first ship carrying 26,527 MT of corn to Lebanon was expected to anchor at the Joint Coordination Center (JCC) in Istanbul Tuesday night and be inspected on Wednesday.

— House Speaker Nancy Pelosi (D-Calif.) plans to meet Taiwan’s president Tsai Ing-wen on Wednesday. Taiwanese media reported that House Speaker Nancy Pelosi had plans to arrive in Taiwan on Tuesday night, according to the Associated Press (link). President Biden’s aides also said they expected Pelosi to proceed with what would be the highest-level visit to the island by an American official in 25 years, since then-House Speaker Newt Gingrich visited in 1997.

     A spokesman for the National Security Council, warning China not to turn the visit into “some sort of crisis,” said the Biden administration was concerned that China would potentially fire missiles into the Taiwan Strait, send warplanes into Taiwan’s air defense zone or stage activities that cross the Strait’s median line.

     On Monday China intensified its threats. After the People’s Liberation Army conducted live-fire drills on Pingtan, an island in the Taiwan Strait, and other drills in the South China Sea last week, the China Maritime Safety Administration said there would be more exercises from Tuesday to Saturday. “The Chinese People’s Liberation Army will not sit back,” China’s foreign minister spokesperson Zhao Lijian said on Monday.

     Her visit will come just months ahead of the Chinese Communist party’s 20th Congress, at which president Xi Jinping is expected to receive an unprecedented third term as leader.

— Biden administration justifies Trump-imposed duties on Chinese goods. The Biden administration filed a brief with the U.S. Court of International Trade defending the duties imposed by the Trump administration on some $320 billion in Chinese goods. The Office of the U.S. Trade Representative (USTR) said that “China's unfair acts, policies and practices included not just its specific technology and IP policies referenced in the notice of initiation in the investigation, but also China's subsequent defensive actions taken to maintain those policies ... which had resulted in increased harm to the U.S. economy following the one-year period of investigation.”

     Next step: Stakeholders will file a joint status report and propose a schedule for further disposition in the case within 14 days.

— USDA undersecretary: Opportunity for U.S. agriculture to be ‘hero’ on climate change. America’s farmers have an opportunity to be “a real hero in our ability to address climate change” through improvements in productivity and climate-smart practices, but a successful climate program “has to work for agriculture, were comments by Robert Bonnie, Undersecretary for Farm Production and Conservation (FPAC) for USDA at the 37th International Sweetener Symposium yesterday. Bonnie outlined USDA’s approach to addressing climate change through building broad, collaborative partnerships across agriculture. 

     Key is to not dictate approach. “There's so much diversity in agriculture,” Bonnie said, “that the approach to climate change can't be one that dictates practices for low and high. It has to be modern. It has to be producer-led. It has to allow farmers, ranchers, and forest landowners to choose which practices work best for them, and then provides incentives for them to do that.” Initiatives to reduce greenhouse gas emissions must recognize the critical role American farmers play in producing a global supply of food and fiber.  

     “We have to reduce emissions even while we maintain and enhance productivity. We’ve got to feed 9.5 plus billion people in the world by the middle of the century,” Bonnie explained. “U.S. agriculture is really good at productivity, and it’s really good at efficiency. That’s why I’m optimistic about the ability of U.S. farmers and U.S. forest land owners to be able to address climate change.”

     Bonnie stressed the importance of crop insurance as a risk management tool, saying, “crop insurance is critically important for so many folks in agriculture.” He noted that there are ways to increase crop insurance accessibility while improving the products available to farmers.

— The chicken sandwich has become a profitable meal for big chain restaurants, despite rising poultry prices, the Wall Street Journal reports (link). Panera Bread, Popeyes Louisiana Kitchen and other chains have added new chicken sandwiches to their menus in recent months to attract consumers. Meanwhile, KFC, Wendy’s and Burger King have each spent tens of millions of dollars advertising their chicken sandwiches on national television this year. Restaurant owners say they can often make more profit per order on white meat than beef.

     678 million is the number of chicken-sandwich servings fast-food chains dished up in the June quarter, up 3% from the previous three months, according to research firm NPD.

— USDA says salmonella to be declared adulterant in certain chicken products. USDA’s Food Safety and Inspection Service (FSIS) Monday (Aug. 1) said it is declaring salmonella an adulterant in breaded and stuffed raw chicken products, a move aimed at making sure that contaminated products are not sold to consumers. FSIS said it will set the limit at one colony forming unit of salmonella per gram for these products. They will also issue a notice seeking comment on whether a different standard for adulteration would be more appropriate such as zero tolerance or one based on specific serotypes. The proposal is expected to come this fall.

— Summary:

• Global Covid-19 cases at 578,284,562 with 6,402,795 deaths.
• U.S. case count is at 91,472,958 with 1,030,499 deaths.
• Johns Hopkins University Coronavirus Resource Center says there have been 603,693,871 doses administered, 223,245,563 have been fully vaccinated, or 67.75% of the U.S. population.

— Voters in five states will head to the polls today to settle intraparty battles for key governor, Senate and House races. Separately, a referendum in Kansas will test the power of abortion-rights supporters and opponents to shape policy after the Supreme Court overturned Roe v. Wade. Republican voters today will settle fractious primary contests for governor in Michigan and Arizona and for the Senate in Arizona and Missouri, while Democrats will choose between two sitting House members in a competitive primary race outside Detroit.

— A Kaiser Family Foundation poll found that six in ten women voters between 18 and 49 say they are “more motivated” to vote because of the Supreme Court’s decision to overturn Roe v. Wade. The majority, 88%, of that group say they plan to vote for candidates who will protect access to abortions.

— The U.S. killed al-Qaeda leader Ayman al-Zawahiri in a drone strike in Afghanistan over the weekend. “After carefully considering clear and convincing evidence of [Zawahiri’s] location, I authorized a precision strike that would remove him from the battlefield once and for all,” President Joe Biden said at the White House on Monday. “My administration will continue to vigilantly monitor and address threats from al-Qaeda no matter where they emanate from,” he added. Zawahiri was Osama bin Laden’s second-in-command and took control of al-Qaeda after U.S. Navy Seals killed bin Laden in a raid in 2011. The U.S. claims that the Taliban violated a peace agreement by letting al-Zawahri into Afghanistan. The Taliban claims the U.S. violated a peace agreement by conducting the strike.