Several Economic Reports Illustrate Supply-Chain Problems
Wasserman sees GOP winning control of House, Senate following 2022 elections
In Today’s Digital Newspaper
Market Focus:
• USDA daily export sales:
— 199,000 MT soybeans to China during 2021-2022 marketing year
— 125,730 MT soybeans to Mexico during 2021-2022 marketing year
• Several reports illustrate supply-chain problems
• Average new-car price tops $45,000, an all-time high
• Tesla became the latest U.S. company to hit $1 trillion in market value
• Quiet trade overnight
• Attaché sees bigger Argy corn crop, exports than USDA
• Consultant keeps South American crop estimates unchanged
• Crop Progress & Condition Report highlights
• HRW CCI rating below average, SRW crop slightly above normal
• China studying mechanism to stabilize coal prices long-term
• China issues action plan for carbon emission goal
• China to auction cotton reserves
• Wholesale beef market shows more signs of a low
• Pork cutout price decline continues
Policy Focus:
• USDA now reporting top-up payments under CFAP 1
• Updates on BIF and BBB
Afghanistan:
• China-Taliban talks
Biden Administration Personnel:
• FCC will get its first permanent female leader
• Senate confirms OSHA head
China Update:
• China Evergrande Group resumes construction on more than 10 projects
• China studying mechanism to stabilize coal prices long-term
• China issues action plan for carbon emission goal
Trade Policy:
• WTO grants request for dispute settlement panel on China actions on Australian wine
• U.S. still blocking plan to restart WTO Appellate Body
• USDA to restart in-person trade missions
Energy & Climate Change:
• Thune-led letter to Biden re: biofuels
Coronavirus Update:
• Federal officials to do more to get over-the-counter Covid-19 tests to consumers
• Tyson Foods is more than 96% vaccinated
• Vaccine mandate delay?
Politics & Elections:
• Video/Audio link to Signal to Noise chat with David Wasserman
• Canada’s new cabinet
Other Items of Note:
• Mexico threatens court-ordered restart of Trump border policy
MARKET FOCUS
Equities today: Global stock markets were mixed in overnight trading. The U.S. stock indexes are pointed to higher openings. Asian equities finished mostly higher with losses in Hong Kong, China. The Nikkei rose 505.60 points, 1.77%, at 29,106.01. The Hang Seng Index was down 93.76 points, 0.36%, at 26,038.27. European equities are registering solid gains in early trading, with the Stoxx 600 up 0.5% while regional markets are up 0.5% to 0.9%.
U.S. equities yesterday: The Dow closed up 64.13 points, 0.18%, at 35,741.15. The Nasdaq was up 136.51 points, 0.90%, at 15,226.71. The S&P 500 rose 21.58 points, 0.47%, at 4,566.48.
On tap today (see detailed list of events and reports below):
• S&P CoreLogic Case-Shiller National Home Price Index for August is expected to tick down to 19.8% from 19.9% in July (9 a.m. ET) UPDATE: Home-price growth held at a record high in August, as demand from home buyers remained robust despite skyrocketing prices. The index, which measures average home prices in major metropolitan areas across the nation, rose 19.8% in the year that ended in August, unchanged from the prior month. The median existing-home sales price in September rose 13.3% from a year earlier to $352,800, the National Association of Realtors said earlier this month.
• Commerce Department's measure of new home sales is expected to rise to a seasonally adjusted annual rate of 760,000 in September from 740,000 in August. (10 a.m. ET)
• Conference Board's consumer confidence index for October is expected to fall slightly to 108 from 109.3 in September. (10 a.m. ET)
Several reports illustrate supply-chain problems have left containers piled up in warehouses while dozens of ships wait offshore to be unloaded are starting to have broader economic ramifications. New economic indicators from the U.S. and Germany released Monday suggest that economic growth could slow due to the supply-chain bottlenecks and higher prices that have characterized the past few months. An index of national economic activity produced by the Federal Reserve Bank of Chicago found that the economy grew at a slower-than-average pace in September, due to a decline in production-related sectors such as manufacturing. A separate report by the Dallas Fed found that Texas factory output slowed in October from September because of supply constraints and a labor shortage. And a measure of German business sentiment fell for the fourth straight month as firms grapple with disruptions in shipping and higher energy prices.
Average new-car price tops $45,000, an all-time high. For the first time ever, the average price of a new car has edged past $45,000, according to a new report from Kelley Blue Book and data from TrueCar, who provides market analysis and an online marketplace for cars. “We are seeing new transaction prices hit all-time highs,” says Nick Woolard, an analyst with TrueCar. “In September, we saw the average transaction price increase 7.7% over a year earlier.” Woolard says that new-car inventory at dealerships is generally pretty thin right now. “You see dealers parking their vehicles sideways to make it look like they have more vehicles on the lot,” he says, adding that even a modest increase in the availability of new cars may lead to some relief in pricing.
Market perspectives:
• Outside markets: The U.S. dollar index is slightly weaker ahead of U.S. economic updates, with the euro, British pound and yen all slightly higher against the greenback. The yield on the 10-year U.S. Treasury note is weaker ahead of U.S. economic data, trading around 1.62% with a mixed tone to global government bond yields. Gold and silver futures are weaker ahead of the US trading start, with gold around $1,804 per troy ounce and silver around $24.46 per troy ounce.
• Tesla became the latest U.S. company to hit $1 trillion in market value. The electric-car maker’s stock price has more than doubled in the past year on surging sales and rising profit. Helping Tesla cross the mark was news that Hertz had ordered 100,000 vehicles to add to its rental-car fleet. Three years ago, when Tesla was worth $50 billion, the company’s board promised Elon Musk a huge grant of stock if he could, among other things, bolster the company’s market value beyond $650 billion. Last week, Musk collected a stock grant worth roughly $8 billion. He could qualify for another $8 billion stock payout as soon as the middle of next year.
• Crude oil futures are higher ahead of U.S. trading, with U.S. crude around $83.95 per barrel and Brent around $85.40 per barrel. Futures were firmer in Asian action, with U.S. crude up 11 cents at $83.87 per barrel and Brent up 12 cents at $85.29 per barrel.
• USDA daily export sales:
— 199,000 MT soybeans to China during 2021-2022 marketing year
— 125,730 MT soybeans to Mexico during 2021-2022 marketing year
• NWS weather: Nor'easter to generate heavy rain and strong winds across Northeast through Wednesday... ...Deep system responsible for heavy rain across California to emerge over the Plains today, potentially sparking severe weather over the Central/Southern Plains... ...Wet pattern continues across the Pacific Northwest and Rockies through midweek.
Items in Pro Farmer's First Thing Today include:
• Quiet trade overnight
• Attaché sees bigger Argy corn crop, exports than USDA
• Consultant keeps South American crop estimates unchanged
• Crop Progress & Condition Report highlights
• HRW CCI rating below average, SRW crop slightly above normal
• China studying mechanism to stabilize coal prices long-term
• China issues action plan for carbon emission goal
• China to auction cotton reserves
• Wholesale beef market shows more signs of a low
• Pork cutout price decline continues
POLICY FOCUS
— USDA now reporting top-up payments under CFAP 1. Issuance of top-up payments under the Coronavirus Food Assistance Program 1 (CFAP 1) program have boosted total payments to $11.79 billion as of Oct. 24. The total for original CFAP 1 payments was little changed at $10.6 billion, but USDA is now reporting that $1.19 billion in top-up payments to cattle producers have been made. That puts total CFAP 1 payouts for livestock at $6.25 billion, with non-specialty crop payments at $2.66 billion, dairy at $1.81 billion, specialty crops at $943.96 million and $120.20 million for aqua nursery floral.
Payments authorized under the Coronavirus Food Assistance Program 2 (CFAP 2) totaled $18.76 billion as of Oct. 24, including $13.94 billion for original CFAP 2 payments and $4.82 billion in top-up payments for acreage-based commodities, up slightly from the prior week’s total. There have been a total of 912,375 approved applications. There were increases noted for sales commodities which now total $2.9 billion and eggs/broilers which total $66.83 million.
— Updates on BIF, BBB proposals. Key this morning is a House Democratic Caucus meeting. House Speaker Nancy Pelosi (D-Calif.) will likely address the caucus about the week ahead.
Progressives are indicating that a mere BBB framework agreement is insufficient. “You don't really know everything that's in there until the text is drafted,” Rep. Pramila Jayapal (D-Wash.) said. Others still want to see the entire reconciliation bill voted on by the Senate before the House passes BIF.
Bottom line: Different Democratic factions are finding it difficult to get to the finish line. “No one ever said passing transformational legislation like this would be easy, but we are on track to get this done,” said Senate Majority Leader Chuck Schumer (D-N.Y.). The around $1.75 trillion social/climate change package is expected to include universal prekindergarten for 3- and 4-year-olds, subsidized childcare, an expansion of enhanced Affordable Care Act subsidies and several years of healthcare coverage for people in certain states that did not expand Medicaid. Negotiators are looking at a tax on billionaires’ unrealized capital gains to help pay for the bill, but that late-entry has some pushback in the party. Sen. Ron Wyden (D-Ore.), the Senate Finance Committee chair, said he will unveil the “Billionaire Income Tax” in the next several days. At issue is whether a billionaires’ tax is an income tax. (Link to NYT article on that topic.) Meanwhile, top Democrats were pushing to nudge the price tag up to $2 trillion. Sen. Joe Manchin (D-W.Va.) is closer to a “yes” on President Biden’s big spending plan. Manchin said he was open to a plan to tax billionaires’ unrealized capital gains as a way to pay for the expansive budget package. But a potential sticking point remains: the overall cost of the Biden plan. Democrats want to pass the BIF — approved by the Senate over the summer — by Sunday, when a series of transportation programs is slated to expire. Its enactment would also hand the party a legislative achievement days before crucial governors’ elections in Virginia and New Jersey on Nov. 2.
The Associated Press has more on the White House’s possible option on climate: “The emerging proposals would expand grants and loans in the agriculture and industrial sectors to help them shift to clean energy providers with fewer emissions, the official said. There would also be new, refundable home improvement tax credits for tapping solar, wind and other renewable energy sources.” Link for more. Meanwhile, Sen. Joe Manchin (D-W.Va.) was pushing to remove or modify a provision that would impose a fee on emissions of methane, a pollutant that leaks from oil and gas wells.
AFGHANISTAN
— China-Taliban talks. Chinese Foreign Minister Wang Yi will meet with Taliban representatives in Doha today, the highest-level meeting between China and Afghanistan’s new rulers since the group took control of Kabul in August. Wang last met the Taliban when he hosted Mullah Abdul Ghani Baradar, now Afghan deputy prime minister, in China’s northern city of Tianjin in July.
BIDEN ADMINISTRATION PERSONNEL
— FCC will get its first permanent female leader. The White House is expected to name Jessica Rosenworcel as the agency’s formal head, months after she took on the role on an acting basis. Rosenworcel is known for opposing the Trump administration’s efforts to roll back net-neutrality rules.
— Senate confirms OSHA head. The Senate voted 50-41 Monday to approve Douglas Parker to lead the Occupational Safety and Health Administration (OSHA). Parker is the first Senate-confirmed OSHA leader since January 2017. Parker, who led California’s occupational safety and health division, was tapped for the position in April and during his confirmation hearing indicated strong support for California’s move to enact a Covid-19 Emergency Temporary Standard.
CHINA UPDATE
— China Evergrande Group has resumed construction on more than 10 projects as the troubled developer tries to stave off collapse and deliver the homes it has promised, the WSJ reports (link). The company has been trying to avoid defaulting on nearly $20 billion in dollar debt. Evergrande expanded rapidly over the past decade, in part by taking on a lot of debt. But it ran into trouble when regulators started telling developers they needed to reduce their leverage before taking on new debt. The company has had to discount prices on its apartments during the pandemic.
— China studying mechanism to stabilize coal prices long-term. China’s National Development and Reform Commission (NDRC) is looking into the costs and profitability of the coal sector to work out a mechanism to guide prices to move within a reasonable range. The state planner is also considering including coal in a "prohibiting exorbitant profits" category amid the recent energy crunch that caused a surge in prices. The new mechanism would be based on a benchmark price plus a floating range, after considering costs, reasonable margins and market changes. The government has indicated that 500-570 yuan per metric ton is a reasonable range for long-term thermal coal contracts.
— China issues action plan for carbon emission goal. China will take action to reduce waste, promote renewable fuels and reform its electricity network as part of its plan to bring carbon emissions to a peak before 2030, China's cabinet said. The new action plan repeats China's targets to bring wind and solar capacity to 1,200 gigawatts by the end of the decade, to build more hydropower and nuclear plants and further develop natural gas resources. The plan was published just five days before talks get under way in Glasgow on the global battle against climate change. China is set to announce its updated “nationally determined contributions” before the meeting begins.
TRADE POLICY
— WTO grants Australia request for dispute settlement panel on China actions on Australian wine. The WTO Dispute Settlement Body (DSB) approved Australia’s second request for a panel to rule on China putting antidumping and countervailing duties on imports of Australian wine. China blocked the first request in September as allowed under WTO rules. A Geneva trade official said Australia indicated it was ready to hold bilateral talks with China, they had seen no sign that China was willing to respond. For its part, the trade official said that China said it would defend its measures and labeled them “legitimate.” The process of dispute settlement will take more than a year to reach a conclusion so no immediate changes by China will take place relative to its actions on imports of Australian wine.
— U.S. still blocking plan to restart WTO Appellate Body. The U.S. continues to block approval of an agreement from 121 WTO members to restart the Appellate Body which has been idled since December 2019 as the U.S. has refused to allow the naming of new members. While Mexico offered its proposal to restart the selection process for Appellate Body members, a Geneva trade official said the U.S. indicated it was “not in a position to support” the plan as it “continues to have systemic concerns” about the Appellate Body. The U.S. said it wants WTO members to undertake “fundamental reform” of the dispute settlement system. There are some 21 appeals to WTO decisions that are currently on hold as there is no Appellate Body to hear appeals. The U.S. stance against restarting the Appellate Body has not changed, but what is not clear is whether the reforms the U.S. wants have shifted under the Biden administration compared with those from the Trump administration which brought the system to a halt in December 2019.
— USDA to restart in-person trade missions with one to United Arab Emirates in February 2022. USDA announced it will restart its in-person trade missions with one to Dubai, United Arab Emirates Feb. 16-22, 2022. USDA said the trip, the first since November 2019, will provide opportunities for those from the U.S. to have access to markets and consumers in the UAE, noting opportunities for U.S. exporters of dairy products, fresh fruit and vegetables, tree nuts, beef and beef products, chocolate and cocoa products, snack foods, confectionary and baked goods, cereals, pasta, and food preparations. “There is also increasing demand for agricultural commodities, including U.S. corn and soybean meal,” USDA noted.
ENERGY & CLIMATE CHANGE
— Thune-led letter to Biden re: biofuels. Sen. John Thune (R-S.D.) today sent a letter to President Biden regarding the administration’s biofuels policy. Thune led a similar effort in July, which the president ignored. “Mr. President, biofuels are a readily available energy solution that deserve full consideration — not only for helping to stem the recent increase in fuel prices, which has subsequently accelerated inflation — but to serve as a foundational source of transportation emission reductions as part of your energy and environmental agenda,” wrote the senators. “We call on your administration to utilize the full capacity of American agriculture to deliver on both fronts, and we reiterate our request to discuss these matters with you in greater detail.” Link to letter.
CORONAVIRUS UPDATE
— Summary: Global cases of Covid-19 are at 244,167,445 with 4,958,206 deaths, according to data compiled by the Center for Systems Science and Engineering at Johns Hopkins University. The U.S. case count is at 45,545,745 with 737,321 deaths. The Johns Hopkins University Coronavirus Resource Center said that there have been 414,302,192 doses administered, 190,699,790 have been fully vaccinated, or 58.1% of the U.S. population.
— Federal officials said they would do more to get over-the-counter Covid-19 tests to consumers after some manufacturers have struggled to meet demand.
— Tyson Foods is more than 96% vaccinated. Nearly three months after Tyson mandated vaccines for all of its 120,000 U.S. workers, almost all are vaccinated, the company’s CEO, Donnie King, wrote in an employee memo (link) this morning. Those results will be closely examined by other corporate leaders, as they await more details about the Biden administration’s plan to order large employers to require coronavirus vaccination or weekly testing. Nearly 60,000 Tyson employees got vaccinated after the mandate, King wrote. The meatpacking firm announced its policy on Aug. 3, when less than half of its workers were inoculated. Tyson is offering religious and medical accommodations to the mandate. It does not have a cutoff date for evaluating those considerations.
— Vaccine mandate delay? The American Trucking Associations (ATA) is set to meet today with White House officials at the Office of Management and Budget (OMB) for discussions on President Biden's vaccine mandate. The order, which would require businesses with 100 or more employees to ensure they are vaccinated against Covid or tested weekly for the virus, is estimated to cover two-thirds of the private sector. The Occupational Safety and Health Administration (OSHA) delivered its final rule to the OMB on Oct. 12, and the mandate is expected to take effect soon after the agency completes its review. ATA is warning that many drivers will likely quit rather than get vaccinated, further disrupting the supply chain at a time when the industry is short 80,000 drivers. Specifically, the association estimates that 37% of drivers could be lost through retirements, resignations and workers switching to smaller companies not covered by the requirements. Today's meeting at the White House will include dentists, staffing companies and realtors, among others. The Retail Industry Leaders Association has already cautioned that the mandate could trigger staffing problems ahead of the holiday season, while the National Retail Federation and U.S. Chamber of Commerce are asking to delay its implementation until January at the earliest. Some 30% of unvaccinated workers said they would leave their jobs rather than comply with a jab or testing mandate, according to vaccine data analysis firm KFF. Another 56% said they would get tested weekly, while 12% said they would get the shot. The industry concerns come after a record 4.3 million workers quit their jobs in August, the highest turnover in 20 years.
POLITICS & ELECTIONS
— Video/Audio link to Signal to Noise chat with David Wasserman, House editor for the Cook Political Report with Amy Walter. Wasserman at this time predicts Republicans will win six of seven key Senate races, on their way to win control of the Senate after 2022 elections by a count of 53-47. He details the key races. He sees the GOP taking back control of the House by winning a net 25 seats, above the five they need for controlling the chamber. Wasserman gave his thoughts on the Nov. 2 Virginia and New Jersey gubernatorial elections and what he sees shaping up for the 2024 presidential elections, including odds that former President Donald Trump will again seek the post. An interesting observation: Wasserman sees House Speaker Nancy Pelosi (D-Calif.) stepping aside/retiring after she gets much-pushed bills regarding infrastructure (BIF) and social/climate spending (BBB). He also gives his thoughts about elections polls.
— Canada’s new cabinet. Canadian Prime Minister Justin Trudeau will announce a new cabinet today following a hazy victory in September’s snap election. Little is known about the cabinet’s makeup ahead of its unveiling. Chrystia Freeland is expected to remain as deputy prime minister and finance minister. Canadian reports suggest Defense Minister Harjit Sajjan may lose his position after coming under pressure from the Conservative party over his handling of military sexual misconduct claims.
OTHER ITEMS OF NOTE
— Mexico threatens court-ordered restart of Trump border policy. Whether the Biden administration will be able to follow through on the Supreme Court’s order to restart a Trump administration program that made asylum-seekers temporarily live in Mexico will come down to whether Mexican President Andres Manuel Lopez Obrador allows it. But the Mexican leader has yet to weigh in on the program. Mexico had already refused to take back families under Title 42, a coronavirus pandemic restriction that the Trump administration enacted in March 2020 that allowed border officials immediately to turn away any child or adult who came across the border. The Biden administration is still operating under Title 42, but in the spring, it stopped sending back most families to their home countries because Mexican state governments refused to take back migrants who were not from Mexico or Central America.
EVENTS AND REPORTS
Tuesday, Oct. 26
· Agriculture biotechnology. House Agriculture Biotechnology, Horticulture and Research Subcommittee and Livestock and Foreign Agriculture Subcommittee joint hearing on "Agricultural Biotechnology: 21st Century Advancements and Applications."
· USTR, other nominees. Senate Finance Committee hearing on the nominations of Maria Pagan to be a deputy U.S. trade representative; Brent Neiman to be a deputy Treasury undersecretary for international finance and development; Joshua Frost to be an assistant Treasury Secretary for financial markets; Samuel Bagenstos, to be general counsel at the Health and Human Services Department; and Christopher Wilson to be chief innovation and intellectual property negotiator in the Office of the U.S. Trade Representative.
· Pfizer/BioNTech vaccine for those ages 5-11. Food and Drug Administration holds a meeting by teleconference of the Vaccines and Related Biological Products Advisory Committee to discuss a request to amend Pfizer-BioNTech's Emergency Use Authorization for administration of their Covid-19 mRNA vaccine to children five through 11 years of age.
· Bipartisan legislation. Economic Club of Washington, D.C. discussion on "bipartisan legislative efforts and policy priorities."
· Traveling. U.S. Travel Association conference on "The Future of Travel Mobility,” with Homeland Security Secretary Alejandro Mayorkas delivering keynote remarks on "Toward a More Seamless, Secure Travel Experience." Several lawmakers are also scheduled to appear.
· China and clean energy. Woodrow Wilson Center's China Environment Forum virtual discussion on "China's Painful Transition to a Clean Energy Future."
· Afghanistan. Senate Armed Services Committee hearing on security in Afghanistan and in the regions of South and Central Asia.
· China and U.S. markets — risks for investors. House Financial Services Investor Protection, Entrepreneurship, and Capital Markets Subcommittee hearing on "Taking Stock of 'China, Inc.': Examining Risks to Investors and the U.S. Posed by Foreign Issuers in US Markets."
· FEMA and wildfires. House Transportation and Infrastructure Economic Development, Public Buildings and Emergency Management Subcommittee hearing on "Are FEMA's Assistance Programs Adequately Designed to Assist Communities Before, During, and After Wildfire."
· Vaccine requirements. House Education and Labor Higher Education and Workforce Investment Subcommittee and Civil Rights and Human Services Subcommittee joint hearing on "Protecting Lives and Livelihoods: Vaccine Requirements and Employee Accommodations."
· Clean energy transitions. International Energy Agency virtual briefing on recommendations of the Global Commission on People-Centered Clean Energy Transitions.
· IRS issues. House Ways and Means Committee Republicans virtual discussion on "The Devastating Consequences of Biden's IRS Surveillance of Americans' Bank Accounts."
· Washington issues. The Hill virtual conference on "A More Perfect Union," focusing on the most urgent, challenging issues of our time, including House Energy and Commerce ranking member Cathy McMorris Rodgers (R-Wash.) participating in a discussion on "Beyond Broadband: Building A More Connected World, and Interior Secretary Deb Haaland; and White House Chief of Staff Ron Klain participating in a discussion on "The Way Forward: Leadership Through Action."
· Xinjiang issues. Atlantic Council virtual discussion on "The Camp: China's High-Tech Penal Colony," focusing on high-tech surveillance practices in the Xinjiang region against Uyghurs, Kazakhs and Hui.
· EVs. National Academy of Sciences, Engineering, and Medicine (NAS) virtual workshop on "Navigating an Electric Vehicle Future," day two of four.
· Social Security. House Majority Whip James Clyburn (D-S.C.), House Ways and Means Chairman Richard Neal (D-Mass.), and Rep. John Larson (D-Conn.), chairman of the House Ways and Means Social Security Subcommittee, hold a news conference to discuss the introduction of "Social Security 2100: A Sacred Trust," legislation that would "expand benefits and strengthen Social Security."
· Transportation security. House Homeland Security Cybersecurity, Infrastructure Protection and Innovation Subcommittee and Transportation and Maritime Security Subcommittee joint hearing on "Transportation Cybersecurity: Protecting Planes, Trains, and Pipelines from Cyber Threats."
· FDA issues. Federalist Society for Law and Public Policy Studies virtual discussion on "Fixing Food: An FDA Insider Unravels the Myths and the Solutions."
· Europe’s energy crisis. Atlantic Council virtual discussion on "Europe's energy crisis and the path forward."
· Economic reports. S&P CoreLogic Case-Shiller HPI | FHFA House Price Index | New Home Sales | Consumer Confidence | Richmond Fed Manufacturing
· Energy report. API US inventory report
