White House Supports ‘Product of USA’ Labeling, Meat Pricing Proposals

EPA session on RFS plans on tap today | Mercedes electric car: 621 miles on single charge

Market Focus:
• AT&T and Verizon agree to delay 5G rollout over aviation concerns
• OPEC and its allies are set to modestly raise oil production
• Apple hits $3 trillion mark
• Bridgewater names new chiefs
• AT&T, Verizon agree to delay new
• Thousands of additional U.S. flights were canceled Monday
• Factory supply strains start to ease
• Companies are budgeting for employee-pay raises in the new year.
• $100+ is where Blackstone analyst Byron R. Wien sees WTI crude prices heading
• NatGas supply shows Texas still not ready for cold
• Lingering inflation barometer
• Ag demand update
• Soybean futures built on Monday’s gains overnight; corn and wheat mildly rebounded
• Consultant further cuts South American crop estimates
• Brazilian states declare emergencies due to drought, flooding
• HRW crop conditions plunged in December
• Solid start for wholesale beef
• Prices drop, but packers move a lot of pork

Policy Focus:
• Little change in CFAP figures
• USDA announces November DMC payment

Personnel:
• Biden likely to nominate Jefferson for Fed 

China Update:
• China’s factories expanded in December
• Evergrande shares reopen higher
• Tesla opens a showroom in China’s Xinjiang
• Legacy of China’s one-child policy is dwindling number of women of childbearing age 

Energy & Climate Change:
• Prototype electric car from Mercedes can reportedly drive 621 miles on a single charge
• Ford to double electric F-150 production
• EPA public session on RFS plans on tap today
• Paper outlines challenges ahead for climate-smart agriculture policies
• Nuclear opposition in Germany, not France 

Livestock, Food & Beverage Industry Update:
• Biden to fight meatpackers on inflation
• White House to push tighter labelling standards for ‘Product of USA’ meat products
• White House supports requiring beef processors to buy more cattle on open markets
• State agency: California has sufficient pork supply
• Pork price-fixing alleged

Coronavirus Update:
• U.S. reported over 1 million new cases on Monday
• FDA lowers age for Pfizer Covid booster vaccine to 12
• Experts stressing vaccinations for children are critical now more than ever
• Starbucks requiring U.S. employees be vaccinated or submit to regular testing
• Covid-19 has brought America’s long-running beer-vs.-liquor rivalry to a head: WSJ 

Congress:
• Schumer sets mid-January deadline for trying to change procedures on passing legislation 

Other Items of Note:
• Old-school BlackBerry fans: Your phones will stop working properly today
 

Equities today: Global stock markets were mostly firmer overnight. U.S. Dow opened up 170 points higher. Asian equities finish mostly higher with some markets opening trading for 2022 after Monday holidays. The Nikkei gained 510.08 points, 1.77%, at 29,301.79. The Hang Seng Index finished up 15.09 points, 0.06%, at 23,289.84. European equities are posting advances in early trade action. The Stoxx 600 was up 0.8%, with regional markets up 0.4% to 1.4%.

     U.S. equities yesterday: The Dow gained 246.76 points, 0.68%, at 26,585.06. The Nasdaq rose 187.83 points, 1.20%, at 15,832.80. The S&P 500 gained 30.38 points, 0.64%, at 4,796.56.

     Apple hits the $3 trillion mark. The iPhone maker became the first public company to reach that stratospheric valuation, after hitting $2 trillion just 16 months ago. The company’s in-demand products and shrewd use of cash (in part to buy back its shares) have propelled its stock price higher. The only other company that is currently in Apple's market cap ballpark is Microsoft, which has a valuation of $2.5 trillion. Google parent company Alphabet recently slipped out of the $2 trillion valuation club and was at $1.93 trillion in market cap on Monday. It took Apple just a year and a half to tack on its latest trillion dollars after reaching a $1 trillion valuation in mid-2018 and $2 trillion in value in August 2020. Nearly 1.65 billion people across the globe connect to the internet through an Apple product, like the iPhone, iPad or iMac… quite a significant revenue stream.

     Bridgewater names new chiefs. Bridgewater Associates, the world’s biggest hedge fund, named two new CEOs yesterday after David McCormick, its current chief, said he would step down to consider a run for the U.S. Senate.

On tap today:

     • Institute for Supply Management's manufacturing index is expected to fall to 60 in December from 61.1 one month earlier. (10 a.m. ET)
     • U.S. job openings and labor turnover survey is expected to show there were 11.1 million openings in November. (10 a.m. ET)
     • Minneapolis Fed President Neel Kashkari speaks to the Midwest Economic Forecast Forum at 11:30 a.m. ET.

AT&T, Verizon agree to delay new 5G. AT&T and Verizon have agreed to a two-week delay in rolling out a new 5G service that airlines said might interfere with aircraft electronics and pose a safety hazard. The companies issued separate statements last night, two days before their planned Jan. 5 launch, and one day after rebuffing a request for delay from U.S. transportation officials. The action came after a flurry of calls directed at the industry and the White House from aviation groups seeking a delay, and as airlines were threatening legal action.

     What’s the problem? The New York Times notes that 5G uses a neighboring frequency to altimeters, devices that show pilots on takeoffs and landings how far they are from the ground. The concern is that wireless 5G traffic will bump into signals being sent by altimeters, giving pilots inaccurate altitude readings — or none at all. To prevent that, the agency had warned it may be forced to divert aircraft away from airports where planes could face interference. Experts say airlines are most likely overstating the risk.

Thousands of additional U.S. flights were canceled Monday as a winter storm and Omicron-driven staff shortages continued to disrupt air travel after the busy holiday season. Airlines canceled nearly 3,000 U.S. flights and delayed more than 4,600 flights by Monday afternoon, according to aviation data tracker FlightAware. The airline industry has canceled more than 18,500 flights from Christmas Eve through Monday.

Factory supply strains start to ease. Factories in Europe and the U.S. reported a further easing of supply-chain problems and associated cost increases as 2021 ended, although the rapid spread of Omicron threatens to worsen shortages of labor and supplies. Factories around the world have faced shortages since the end of 2020 as a surge in consumer demand took many by surprise at a time when shipping and other parts of the logistics network were in disarray. Those shortages have held back growth and helped drive a pickup in consumer-price inflation. According to surveys of purchasing managers, there were some signs of a modest easing of bottlenecks in the final months of last year as Asian factories reopened following pandemic-related lockdowns.

Companies are budgeting for employee-pay raises in the new year. Companies are setting aside an average 3.9% of total payroll for wage increases in 2022, the largest increase since 2008, according to a new report from the Conference Board. Inflation is a big reason for the bump, though it doesn’t necessarily mean across-the-board pay increases are on the way — but bosses may be more open to negotiation. The most persuasive arguments emphasize your skills and achievements as an individual, not the outside forces affecting everyone, a negotiation expert says.

Market perspectives:

     • Outside markets: The U.S. dollar index was slightly higher as the euro weakened versus the greenback. The yield on the 10-year U.S. Treasury note was higher ahead of economic updates, trading around 1.66%. Gold futures have moved between small losses and gains while silver is weaker. Gold is trading around $1,800 per troy ounce and silver around $22.74 per troy ounce.

     • Crude oil futures were higher ahead of U.S. market action, with U.S. crude around $76.30 per barrel and Brent around $79.30 per barrel. Futures were also firmer in Asian action, with U.S. crude up 26 cents at $76.34 per barrel and Brent up 35 cents at $79.33 per barrel.

     • OPEC+ meets. The oil producing states of OPEC+ meet today to discuss output policy, with the group expected to stick to plans to increase production by 400,000 barrels per day in February. Crude posted it biggest annual price gain since 2009 last year, and is trading above $76.50 a barrel this morning, so it is little wonder that delegates are on track to ratify a 400,000 barrel per day production increase today. Yesterday the OPEC+ Joint Technical Committee cut its estimate for the global crude surplus in the first three months of 2022 by 25%, saying it sees the impact from omicron as “mild and short-lived.” The possible increase in output comes as some producers are showing signs they are struggling to meet quotas. "Number one driver [of global oil prices] at the moment is management of the supply side of the market by [producer alliance] OPEC+," said Virendra Chauhan, an analyst at Energy Aspects, adding that demand concerns from Omicron are subsiding and the planned release from national strategic petroleum reserves was smaller than expected. Meanwhile, OPEC ministers are also likely to soon sign off on a new secretary-general, with Kuwaiti Haithim al-Ghais considered very likely to replace Nigerian Mohammad Barkindo once his term ends in July.

     • $100+ is where Blackstone analyst Byron R. Wien sees WTI crude prices heading this year as part of his long-running annual list of 10 "surprises” (link).

     • NatGas supply shows Texas still not ready for cold. A plunge in natural gas supplies over the weekend underscores how vulnerable Texas’ energy system remains to extreme weather, almost a year after a winter storm plunged millions into dark for days, Bloomberg reports. Texas gas production on Sunday fell to the lowest since February’s historic freeze, according to BloombergNEF data based on pipeline flows. While volumes are seen rebounding to near-normal levels as the weather warms up, the drop is a stark reminder that the gas industry is still at risk of another weather-related energy crisis.

     • Lingering inflation barometer. Yesterday’s moves in the Treasury market which saw the 10-year benchmark record its worst start to the year since 2009 seem to be indicating that traders don’t see the end of inflationary pressures any time soon. Market pricing now suggests Federal Reserve rate liftoff as soon as May, with a tight labor market possibly exacerbating cost increases.

     • Ag demand: Tunisia tendered to buy 125,000 MT of soft wheat, 75,000 MT of durum and 75,000 MT of feed barley from unspecified origins.

     • NWS weather: Heavy snow for the Cascades, Northern/Central Rockies and Intermountain West through Wednesday... ...Deepening winter storm to produce heavy snowfall over parts of The Upper Midwest/Great Lakes beginning today... ...Cold air pours down into Great Plains through mid-week; Critical Risk of Fire Weather for parts of Southern Plains today... ...Potentially disruptive winter weather to impact parts of the Tennessee Valley on Thursday.

Items in Pro Farmer's First Thing Today include:

     • Soybean futures built on Monday’s gains overnight; corn and wheat mildly rebounded
     • Consultant further cuts South American crop estimates
     • Brazilian states declare emergencies due to drought, flooding
     • HRW crop conditions plunged in December
     • Solid start for wholesale beef
     • Prices drop, but packers move a lot of pork
 

— Little change in CFAP figures. Payments under the Coronavirus Food Assistance Program (CFAP) efforts showed little change as of January 2, with total CFAP 2 at $19.06 billion, original CFAP 2 payments at $14.23 billion ($14.24 billion the prior week) and top-up payments remained at $4.82 billion. Figures for CFAP 1 remained at $11.74 billion, including $10.56 billion in original CFAP 1 payments and $1.19 billion in top-up payments.

— USDA announces November DMC payment. Farmers that selected the $9.50 Tier I margin trigger level will get a 36 cent per cwt. payment minus a 5.7% sequester factor, the USDA announced on Monday.  The actual national average margin for November is $9.14 per cwt., according to USDA.

— Biden likely to nominate Jefferson for Fed. The White House is likely to nominate economist Philip Jefferson for a seat on the Fed board of governors, according to reports, an appointment that would make him just the fourth Black man to hold the position in the central bank’s more than 100-year history. With a doctorate in economics from the University of Virginia, Jefferson is the vice president for academic affairs, dean of faculty and an economics professor at Davidson College in North Carolina. He has worked at the Federal Reserve twice before, serving as an economist in the board’s monetary affairs division from 1996 to 1997, and as a research assistant in the fiscal analysis section from 1983 to 1985. The Wall Street Journal earlier reported the White House was considering him. After nominating Fed Chair Jerome Powell to a second term at the helm and Governor Lael Brainard to be vice chair in November, President Joe Biden has three more seats to fill on the board, including a new vice chair for supervision.
 

— China’s factories expanded in December. China’s official manufacturing purchasing managers index (PMI), which gauges larger and state-owned factories, rose to 50.3 last month from 50.1 in November. China’s Caixin/Markit manufacturing PMI rose to 50.9 in December, signaling expansion of smaller and privately owned firms. That was the highest Caixin/Markit manufacturing PMI reading since June.

— Evergrande shares reopen higher. After trading was halted yesterday, the embattled Chinese real estate developer said today that its contracted sales fell nearly 39 percent last year. Missing was any update on the company’s financial restructuring efforts.

— Tesla opens a showroom in China’s Xinjiang. The move came despite many Western countries’ shying away from the region after accusing Beijing of repressing Muslim ethnic minorities there. But Tesla relies heavily on China for sales growth.

— A legacy of China’s one-child policy is a dwindling number of women of childbearing age as well as a generation of only children who are less eager to marry and start a family, the WSJ reports (link). With the number of births declining year after year, China is now racing in the opposite direction, closing abortion clinics and expanding services to help couples conceive. Infertility appears to be a bigger problem in China than in many other countries. According to a survey by Peking University researchers, it affects about 18% of couples of reproductive age, compared with a global average of around 15%.

— Mercedes breaks 1,000km (621 mile) barrier with electric vehicle prototype. Mercedes has unveiled an electric car that it claims can travel more than 1,000km (621 miles) on a single charge, to convince customers that a lack of charging infrastructure need not be a barrier to buying a battery-powered vehicle. The range, which far exceeded the industry average of about 300km (186 miles), was calculated using internal digital simulations of real-life traffic conditions. A road-legal version of the Vision EQXX, which will be shown off in the spring, the German manufacturer said, will be capable of covering almost double the distance of a fully charged Tesla Model S. That's beyond anything on the road today, even Lucid Motor's 520-mile range luxury Air sedan that began reaching customers a few months ago. And as CNN notes, that's also further than a Toyota Prius hybrid can travel on a full tank of gasoline.

— Ford to double electric F-150 production. Ford Motor Co. said today that it is doubling production capacity for the forthcoming electric F-150 pickup to 150,000 annually to help meet demand for the vehicle. Ford's announcement comes a day before GM unveils its electric Silverado. Ford plans to reach the 150,000 production capacity level by mid-2023. The starting price is $39,974 without federal tax incentives. It ranges up to $92,000, depending on configurations, according to the Detroit Free Press (link).

— EPA public session on RFS plans on tap today. EPA will hold its public listening session on the proposed 2020, 2021 and 2022 Renewable Fuel Standard (RFS) levels, regulatory changes to the RFS and the proposed action to address the court-ordered remand of the 2016 RFS levels. The session is only being held virtual with no in-person testimony. EPA may ask questions of those presenting but will not answer questions from those offering comments. 

— Paper outlines challenges ahead for climate-smart agriculture policies. Deploying climate-smart agriculture (CSA) policies globally will provide benefits from reducing greenhouse gas (GHG) emissions and providing carbon capture, but a report from the American Enterprise Institute (AEI) cautions putting those policies in place with incentives also risk running such efforts afoul of world trade rules. “While government implementation of mitigation and adaptation policies may help address climate change, concerns arise if CSA policies run counter to international trade disciplines,” the report (link) prepared by former USDA Chief Economist Joe Glauber said.

     “In particular, CSA policies could directly conflict with World Trade Organization (WTO) trade rules if those policies distort production and trade.” Efforts tied incentivize new technologies and practices relative to input use could also be ones that would be considered “Amber Box” subsidies under the WTO — ones that potentially can be trade distorting — as opposed to be considered “Green Box” payments — ones that provide minimally trade distorting impacts.

     “Input subsidies to encourage adoption of new GHG technologies would generally be considered amber box programs since they are tied to production or the input itself,” the paper said, as “paying farmers to adopt no-tillage practices would presumably be based on planted area.”

     However, cost-share payments could well be considered Green Box under WTO rules if they are limited to “extra costs or loss of income involved with complying with the government program.”

     Crop insurance efforts are another option, one that the paper said are reported to the WTO by the U.S. as “Amber Box” policies. But Glauber argues that despite these potential pitfalls, the programs should be pursued as they will help agriculture in reducing GHG emissions and helping the sector adapt to climate change. But he also argues that further actions on trade liberalization via reductions in subsidies and tariff/non-tariff trade barriers is also key.

— Nuclear opposition in Germany, not France. Germany on Monday signaled its opposition to an EU proposal to include nuclear technology as part of its climate strategy, a position that puts it at odds with France, which is planning to build new nuclear plants in the coming years. “We consider nuclear technology to be dangerous,” government spokesman Steffen Hebestreit said, citing the problem of nuclear waste disposal.

— Biden to fight meatpackers on inflation. President Biden promised to “fight for fairer prices” for farmers and consumers yesterday as he announced plans to combat the market power of the giant conglomerates that dominate meat and poultry processing. “Capitalism without competition isn’t capitalism, it’s exploitation,” Biden said. “That’s what we’re seeing in meat and poultry.” Biden joined USDA Secretary Tom Vilsack and Attorney General Merrick Garland to meet virtually with ranchers and farmers to hear complaints about consolidation in the industry, ratcheting up a campaign blaming anti-competitive practices in the industry for contributing to surging food inflation. Link for special report on the topic.

     The Biden administration trio met with five farmers and ranchers in a session used to highlight administration efforts to build more competition in the U.S. meat and poultry market. The White House has pointed to meat industry concentration as a factor in food price inflation and the farmers and ranchers echoed that sentiment, according to a White House readout of the session (link), arguing concentration has left them with fewer market options for their livestock and pressing prices lower while those same companies raise prices consumers end up paying for meat. Only remarks from two of the five farmers and ranchers participating in the meeting were made in the public portion of the session with Biden, Vilsack and Garland.

     The White House also said it would press ahead with tighter labeling standards for “Product of USA” meat products, which would hurt large producers and processors that rely on imports in their production process. This could fuel tensions with exporters of meat to the U.S. who have often complained of barriers to access the U.S. market. “Under current labelling rules, meat can be labelled “Product of USA” if it is only processed here — including when meat is raised overseas and then merely processed into cuts of meat here. We believe this could make it hard for American consumers to know what they are getting,” the White House said on Monday.

     Republican and Democratic lawmakers have proposed legislation that would require beef processors to buy more cattle on open markets and would lead to minimum regional prices. A group of senators in June rolled out a separate bill that would appoint a special investigator to enforce meatpacking regulations and probe potential anticompetitive conduct. The Biden administration said Monday it supported such efforts.

— State agency: California has sufficient pork supply. Some hog farmers plan to expand their operations with Proposition 12 in effect, said California agriculture officials in the “Planting Seeds” blog (link) as the voter-approved law took effect over the weekend. “Additionally, we believe there is sufficient product already in the supply chain to carry through for a number of months.” The California state Department of Food and Agriculture (CDFA) said at least two more steps must be completed before regulations for Prop 12 become final. CDFA is currently reviewing public comments on the proposed rules. “As we head into 2022, we have had many discussions with pork producers who are planning not only to be compliant, but to expand their operations,” said the blog. Prop 12 requires farmers to provide at least 24 square feet of space for breeding pigs. Link to our special report on this topic.

— Pork price-fixing alleged. Five supermarket chains filed suit in federal court accusing Hormel, JBS, Seaboard, Smithfield, Tyson and other processors of conspiring to fix pork prices by limiting production. Link for details via Law Street Media.

— Summary: Global cases of Covid-19 are at 292,624,147 with 5,451,204 deaths, according to data compiled by the Center for Systems Science and Engineering at Johns Hopkins University. The U.S. case count is at 56,191,733 with 827,749 deaths. The Johns Hopkins University Coronavirus Resource Center said that there have been 507,657,980 doses administered, 205,811,394 have been fully vaccinated, or 62.70% of the U.S. population.

     The U.S. reported over 1 million new cases on Monday, which is a global record. A total of 1,082,549 Covid-19 cases were tallied Monday, a record high for the US since the pandemic began, according to data compiled by Johns Hopkins University.

— FDA lowers age for Pfizer Covid booster vaccine to 12. The Food and Drug Administration (FDA) Monday authorized a Pfizer-BioNTech booster dose for children ages 12 through 15, accelerating eligibility for a Pfizer-BioNTech Covid-19 booster dose. The action also would change the wait time after a second shot from six months to five months. Eligibility for booster shots is now at five months for people who received Pfizer-BioNTech as a first shot, six months after two Moderna shots, and two months after a Johnson & Johnson shot. Agency officials indicated they could also accelerate the timeline for the Moderna jab. FDA currently allows for a third primary series in younger children who are immunocompromised, while those under 11 that are not immunocompromised are not yet eligible for a third dose. FDA said it would continue to review data.

     Experts are stressing vaccinations for children are critical now more than ever because Omicron causes more upper airway problems that make it more dangerous for children than adults. One pediatric hospital in Houston, for example, reported a four-fold increase in child hospitalizations over the past two weeks, with more than 700 children hospitalized due to the Omicron variant.

— Starbucks is requiring its U.S. employees to be vaccinated against Covid-19 or submit to regular testing, one of the first large restaurant chains to take such a step ahead of potential federal vaccination mandates for large employers.

— Covid-19 has brought America’s long-running beer-vs.-liquor rivalry to a head. Brewers are struggling to retain their dwindling edge, as homebound Americans splash out on pricier booze, the Wall Street Journal reports (link). Lawmakers in several states have handed restaurants the right to sell cocktails to go, similar to what’s allowed for beer in those states, ending decades-old restrictions. Spirits makers have mounted an organized lobbying and marketing campaign to further their gains. They have seen success in expanding distribution and in lowering taxes on canned cocktails in two states.

— Senate Majority Leader Chuck Schumer said the chamber will take a vote on whether to change the Senate's legislative filibuster rules. In recent months, Democrats have discussed various changes to the filibuster rule to avoid stalling legislative decisions on issues like voting rights and the debt ceiling. Schumer (D-N.Y.) has said the tactic has become weaponized in the Senate, and the body must evolve to be more efficient. However, any major changes are unlikely to pass due to widespread resistance from Republicans and Democratic Sens. Joe Manchin (W.Va.) and Kyrsten Sinema (Ariz.). Schumer says he is hoping for a vote by Jan. 17.

     Schumer laid out his plans in a letter to colleagues at the start of the second session of the current Congress and as the country approaches the one-year anniversary of the Jan. 6 attack on the Capitol. Democrats argue that many GOP-led states’ changes to their voting laws were designed to restrict voters’ access to the ballot, and that new federal legislation is required to protect voting rights. Republicans say the Democrats’ proposal would wrest power from the states and glosses over the need to better safeguard elections. They say the effort to change the filibuster rules is a power grab. 

— Old-school BlackBerry fans: Your phones will stop working properly today. Link for details via the NYT.