Two Biggest Rail Worker Unions to Conclude Voting This Weekend

Pelosi stays in House but steps down as Democratic leader for next Congress
 

An abbreviated dispatch today as I am in St. Louis attending a family wedding.

Equity markets: Global stock markets were mixed overnight. Stock futures contracts tied to the three major indices added roughly 1% on Friday, putting Wall Street on track for a higher open. A report Thursday showing declining jobless claims pointed to continuing strength in the labor market, adding to strong economic data that has further raised concerns the Fed will keep raising rates for some time. Capital spending among companies in the S&P 500 in the third quarter is set to top $200 billion even as a potential recession looms. That’s on pace for a jump of about 20% from a year earlier. In Asia, Japan -0.11%. Hong Kong -0.29%. China -0.37%. India -0.12%. In Europe, at midday, London +0.64%. Paris +0.79%. Frankfurt +0.75%.

The Nasdaq Composite is approaching the one-year anniversary of its last record close, which was on Nov. 19, 2021. The index has fallen about 31% since then.

The percentage of investors who say they expect stock prices to rise over the next six months climbed to 33.5% in the week ended Wednesday, from 25.1% in the previous week, according to the latest survey from the American Association of Individual Investors.

Ag markets: Mild corrective buying overnight. Corn futures built on Thursday’s late corrective rebound during overnight trade, while soybean and wheat also firmed on short covering. As of 7:30 a.m. ET, corn futures were trading 3 to 4 cents higher, soybeans were 8 to 9 cents higher, SRW wheat futures were around 7 cents higher, HRW wheat was 2 to 3 cents higher and HRS wheat was mostly 3 to 4 cents higher. Front-month crude oil futures were around 60 cents lower and the U.S. dollar index was around 250 points lower this morning.

Cash cattle prices strengthen. Cash cattle traded in the $151 to $152 area in the Southern Plains on Thursday, up around $1 to $2 from last week. Trade in the northern market turned active in the $154 to $155 range, also around $1 to $2 higher than last week. 

Pork movement slows despite more price pressure. The pork cutout value fell another $1.00 on Thursday amid pressure on all cuts except hams and butts. Despite the weakness, pork movement slowed to just 252 loads on the day, signaling packers may have to further lower prices to encourage retailer demand amid seasonally strong slaughters.

FTX advisors can’t find billions of dollars in assets as meltdowns are reshaping crypto.. From a lack of an accounting department to emoji expense approvals, the situation at FTX is “unprecedented,” according to the new CEO John Ray III, who previously oversaw the bankruptcy of U.S. energy company Enron. “Never in my career have I seen such a complete failure of corporate controls and such a complete absence of trustworthy financial information as occurred here,” he said.

     Senators want more info. Sens. Elizabeth Warren (D-Mass.) and Dick Durbin (D-Ill.) have demanded the now-bankrupt cryptocurrency exchange FTX provide information to shed light on its practices and finances from 2019 to present. "New revelations continue to shed light on what now appears to be an appalling case of greed and deception," the lawmakers wrote in a letter. “The public is owed a complete and transparent accounting of the business practices and financial activities leading up to and following FTX’s collapse and the loss of billions of dollars of customer funds.”

Outside markets today see the U.S. dollar index weaker. Nymex crude oil prices are lower, hit a five-week low overnight, and are trading around $81.25 a barrel. The yield on the benchmark U.S. 10-year Treasury note is presently 3.799%.

Oil futures fell sharply yesterday as Covid cases in China continued to rise, sparking concerns of more economic restrictions while economic data in the U.S. and Europe raised concerns about stagflationary trends emerging in the West. Hawkish Fed speak also weighed on the out-look for the economy, which subsequently pressured the consumer demand outlook. WTI ended down a steep 3.95% at a six-week low.

U.S. natural-gas inventories are back to typical levels, the Energy Information Administration said Thursday, easing concerns about availability this winter.

OPEC is "back in the driver's seat" as the world's top swing oil producer while U.S. shale growth has slowed, Hess CEO John Hess said. Hess told an investor conference in Miami that he sees U.S. oil production reaching around 13M bbl/day in the next few years before leveling off, as shale output is ticking lower due to inventory depletion, inflation and investor pressure to focus on returns over growth. "Shale was thought of as a swing producer … the Saudis and the OPEC have waited this out. Now, really OPEC is back in the driver's seat where they are the swing producer," Hess said, even as OPEC lacks spare capacity to easily increase its production. The CEO expects U.S. oil output will rise by around 500,000 bbl/day this year and next, but many companies "have already hit the wall" with only about a decade of life remaining.

The ruptures at the Nord Stream gas pipelines in September were the result of “grievous sabotage,” an investigation by Swedish prosecutors concluded. The controversial pipelines were created to transport natural gas from Russia to Germany through the Baltic Sea, but tensions over Ukraine meant Nord Stream 2 was never operational. Prosecutors found traces of explosives, but declined to comment on probable suspects.

Food prices will probably decline next year, even as global crop stockpiles stay very tight, especially for oilseeds, said David MacLennan, CEO of agribusiness titan Cargill. “All it takes is one really bad crop, let’s say in North America or South America, to really send prices higher,” he said at the Bloomberg New Economy Forum in Singapore on Wednesday. MacLennan said the solution to the food-versus-fuel debate is to boost global crop production. “We don’t think it’s going to be an either/or dynamic,” he said. “It can be food and fuel.” Regenerative agricultural practices, greater yields and more use of technology can increase output so that it can meet demand from both sectors, he said.

Much reduced supply-chain pressures. American retailers and consumers are entering the first holiday shopping season in three years without crushing supply-chain pressures. Industry executives are projecting full store shelves this year as retailers work through gluts in product categories from toys to furniture, a sharp contrast with the scramble for goods over the past two years. The Wall Street Journal reports (link) that executives credit broad factors for the improved outlook, including a change in supply-chain strategies to emphasize earlier delivery lead times and heftier inventories. That’s carrying a cost for retailers: Target is rolling out deep holiday discounts and shortening lead times for product orders after shipments arrived more quickly than anticipated. The pressures haven’t totally receded: While West Coast container ship delays largely have been resolved, the East Coast has a backlog of 67 ships, according to Goldman Sachs. And truckers report warehouses and inland rail hubs remain clogged.

3.5: Average number of days inbound containers at the ports of Los Angeles and Long Beach waited for inland transport last month, the shortest “dwell time” since August 2020, according to the Pacific Merchant Shipping Association.

The two biggest rail worker unions are expected to conclude voting this weekend on a deal brokered by the White House to stave off a strike. “It must be prevented,” Sen. Roger Wicker (R-Miss.), ranking member of the Senate Commerce, Science and Transportation Committee, said of a potential rail strike in an interview with Bloomberg. “When the moment arrives, and I hope it will not, Congress will step in and impose the Biden administration’s backstop plan.”

Inflation in Japan, which excludes fresh food, accelerated to 3.6% year-on-year in October, its highest level since 1982 — in a country which has worried more often about deflation in the decades since. That exceeded the Bank of Japan’s target rate of 2%, but has not altered expectations that it will not hike interest rates, resisting the hawkish winds that have swept round the rest of the world.

Russian officials signaled they are open to high level talks with the U.S. on strategic stability, which is being taken as another small step towards an ultimate cease-fire.

Millions without power in Ukraine. An onslaught of Russian missiles has left 10 million people in Ukraine without power, according to Ukrainian President Volodymyr Zelenskyy. While Ukraine has made significant advances against Russia’s forces on the battlefield in the southern and eastern parts of the country, its cities are struggling after air attacks on critical infrastructure and civilian areas. The situation has prompted the United Nations to warn of an even greater humanitarian crisis in Ukraine as winter approaches.

U.N. official hopes for longer extension of grain deal next time, working on fertilizers. A senior United Nations official welcomed the 120-day extension of the deal allowing Ukrainian grain exports from Black Sea ports but hopes the next deal will extend beyond that timeframe. Rebeca Grynspan also said there was still work to be done, especially on fertilizers, as there is around 300,000 MT of fertilizers blocked at Russian ports. She said there aren’t problems with U.S. sanctions exemptions on Russian exports, but the situation is more complex with the European Union.

China’s pork imports remain far below year-ago. China imported 160,000 MT of pork in October, which was up 6.7% from September but down 20.6% from last year. Through the first 10 months of this year, China imported 1.38 MMT of pork, down 58.8% from the same period last year.

The FDA approved lab-grown chicken for the first time, greenlighting products from startup Upside Foods for human consumption. If Upside gets USDA approval next, the company said it could start pumping out 50,000 pounds of “no-kill” meat products every year. Upside has garnered over $600 million in funding from names like Bill Gates and meat company Tyson. Meanwhile, Beyond Meat announced it would lay off 19% of staff last month, and retail sales in the plant-based meat industry overall have dropped 10% in the past year.

Nancy Pelosi is to step down as leader of the Democratic Party in the House of Representatives, a position she has held since 2003. Pelosi, 82, was first elected to her California congressional seat during a 1987 special election. She will continue to serve as a representative for her Californian district. The Republican Party has just regained control of the House “History will note she is the most consequential Speaker of the House of Representatives in our history,” President Biden said about Pelosi in a Thursday statement. On farm policy, Pelosi over the years learned to listen to Rep. Collin Peterson (D-Minn.), now an agricultural consultant.

     House Majority Leader Steny Hoyer (D-Md.) also announced Thursday he will remain in Congress next year but won’t seek a leadership position. Rep. Jim Clyburn (D-S.C.), the third-ranking Democrat in the House, said he looked forward to assisting “our new generation of Democratic Leaders,” naming Rep. Hakeem Jeffries (N.Y.) and Reps. Katherine Clark (Mass.) and Pete Aguilar (Calif.), who are expected to seek the top three spots, respectively. Clyburn — who was crucial in securing Biden’s nomination in 2020 — wants to remain in the top tiers of leadership, and is expected to run for the assistant leader role.

Bloomberg analysis: Young voters were key to Democrats’ midterm wins. In an analysis, Bloomberg says young voters’ participation in the midterm elections helped “to win key Senate races and fending off a Republican bid to wrest full control of Congress.” Voters under 30 “were decisive” in Sen. Catherine Cortez Masto’s (D-Nev.) victory, “which officially secured the party’s hold on the chamber.” And Sen. Raphael Warnock (D-Ga.) “might not have been able to force a December runoff against Republican challenger Herschel Walker without them.” According to data analyzed by Tufts University, “outsized support from young voters helped carry Democrats to victory in the Pennsylvania and Arizona Senate contests. ... Some 27% of voters aged 18 to 29 cast ballots in last week’s elections, the second-highest turnout in three decades, according to the analysis.

Possible final House GOP tally. Writes David Wasserman, House editor of the Cook Political Report with Amy Walter: “If every lead in the six remaining uncalled House races holds, Republicans will wind up with a 222 to 213 seat majority — an exact mirror image of the slim majority Democrats hold now. The biggest remaining mysteries are California's Central Valley 13th and 22nd CDs, where Republicans John Duarte and David Valadao hold modest leads but Democrats hope late-counted Modesto and Bakersfield votes propel them ahead.”

North Korea. South Korean and Japanese officials said that North Korea test-fired an intercontinental ballistic missile into the exclusive economic zone off Japan’s western coast. The missile had a range of 15,000km, meaning it could potentially reach America, according to Japan’s defense minister. While North Korea has fired an unprecedented volley of missiles over the past two months, most have been short-range. Observers say another nuclear test may be imminent. At the sidelines of an APEC summit in Bangkok, U.S. Vice President Kamala Harris called an emergency meeting for representatives from Australia, Canada, Japan, New Zealand and South Korea. The Kim Jong Un regime has carried out missile tests on 34 days this year, sometimes firing multiple missiles in a single day, according to a CNN count.

Student debt relief program. The Justice Department indicated in a court filing Thursday that it plans to ask the Supreme Court to reinstate President Joe Biden's student debt relief program. "We are confident in our legal authority to carry out this program, and will be taking this fight to the Supreme Court so that borrowers can get the clarity and relief they deserve quickly," White House spokesman Abdullah Hasan said in a statement. The loan forgiveness program remains on hold as the Biden administration continues to fight several legal challenges. Under the rules of the program, eligible borrowers can receive up to $20,000 under certain terms. But it may take several more months for court action to play out before any federal student loan debt can be canceled.

The Biden administration said that Crown Prince Mohammed bin Salman, Saudi Arabia’s de facto ruler, should be granted legal immunity in a trial over the murder of the dissident Jamal Khashoggi. Link for details via the New York Times.

USDA proposed an update to the WIC program that would let participants buy three, or even four, times as many fruits and vegetables and would broaden the range of foods available through the program to reflect the diversity of the American diet. The expansion of fruit and vegetable allowances would increase WIC spending by 14% and require Congress to appropriate additional money to the $6 billion-a-year program. Under the USDA proposal, the monthly WIC allowance for fresh fruits and vegetables would be $24 per child, $43 for pregnant and postpartum participants, and $47 for breastfeeding participants. Without the increase, the monthly allowance would be $9 per child and $11 for pregnant, postpartum and breastfeeding participants. USDA said the increase would enable participants to purchase approximately half of the recommended daily amount of fresh produce. Public comments on the proposal will be accepted through Feb. 21. Link to proposed rule.

Weather woes moves an NFL game. The Buffalo Bills matchup vs. the Cleveland Browns on Sunday has been moved to Detroit. Reason: The weather forecast signals the Buffalo area could get up to five feet of snow over the next couple days due to an “extreme” lake-effect storm. New York has already declared a state of emergency for 11 counties, and 350+ plows, 5,700 utility crews, and the National Guard will be on hand to clean up the mess when it’s over early Saturday morning.

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 |