Schumer Again Says Close to Reaching Deal, But Pelosi-led Opposition Continues

Posted on 03/24/2020 7:08 AM

Trump floats easing social distancing, getting people back to work

In Today’s Updates

* Senate Dems continue to hold out agreeing to Virus Rescue Plan 3, but...
* Senate agreement near with possible vote coming this evening
* Why the Federal Reserve, too, needs the Senate to act
* CCC needs more funding to implement likely next ag relief package
* Next ag aid: more flexible, more decoupled, not called MFP, but more $
* Pelosi's alternative aid plan does not include language on CCC
* Pelosi plan includes non-virus aid via Democratic agenda items
* White House weighs easing social distancing restrictions, getting people back to work
* China to relax quarantine where virus emerged
* WSJ: U.S. domestic flights could virtually shut down
* China’s WH Group to up pork imports from U.S.
* Sanderson Farms slaughterhouse worker in Miss. tested positive for Covid-19
* Trump postpones Oct. 1 deadline to comply with new Real ID travel requirements
* Canada recalling recently retired meat inspectors to address staffing shortages
* Decision day for Trump on RFS waivers court ruling as industry collapses
* Just-in-time has turned out to be just-not-enough for grocery stores
* Malaysia orders shutdowns in palm plantations in three districts
* Senate confirms Mindy Brashears for USDA undersecretary for food safety
* Produce farmers, groups want aid
* The Fertilizer Institute urged governors to note industry is critical infrastructure
* Mark Jekanowski appointed chairman of USDA World Agricultural Outlook Board
* Former field organizers for Bloomberg’s campaign file class-action lawsuits
* A look at the Fed's balance sheet



Markets: Global stocks and U.S. equities rose, bolstered by central bank actions to ease the virus economic pain and signs of a compromise in Congress over a $2 trillion economic package. Contracts on the S&P 500, Nasdaq 100 and Dow all jumped more than 5% to hit their upper trading curbs. If the moves carry through to the underlying gauges, it will be the third week running that the S&P 500 has rebounded following a Monday drop. U.S. political gridlock mattered less internationally as European indexes climbed, with the pan-continental Stoxx Europe 600 rising 4.3% and the German DAX gaining 5.9%. The dollar slumped following a 10-day winning streak, and Treasuries slipped.


Brent crude, the global oil benchmark, rose 4.1% to $30.49 a barrel.


Morgan Stanley expects Thursday’s weekly jobless claims report could show that about 3.4 million Americans filed for benefits, a huge jump from 281,000 a week earlier and nearly five times the previous record.

     Jobless claims

IHS Markit's surveys of purchasing managers in Japan and Europe show overall activity plummeting in March, led by a service-sector collapse as companies pulled out of conferences, tourists canceled travel plans, restaurants and shops closed and governments restricted movements to help contain the novel coronavirus. The IHS Markit purchasing managers’ index for Germany fell from 50.7 points last month (any figure over 50 indicates expansion) to 37.2 in March, its sharpest fall on record. In France it fell from 51.9 to 30.2.

     IIHS Japan and Europe

China’s WH Group to up pork imports from U.S. China’s WH Group said its has seen limited impact from the coronavirus situation on its operations, but indicated it would up its imports of U.S. pork to offset tight domestic pork supplies. The company also said the U.S./China trade battle had little impact on its pork imports and exports in 2019 and it does not see much impact in 2020 due to a major price spread between the two markets.

And you thought toilet paper, sanitizer and paper rolls were the major hoarding items...



Promises, again, on Senate rescue plan 3, but voters want action. Sen. Chuck Schumer (D-N.Y.), the minority leader, said he expected to have an agreement this morning with Treasury Secretary Steven Mnuchin on a nearly $2 trillion economic package to respond to the coronavirus pandemic. Democrats blocked action on the plan again on Monday, demanding stronger protections for workers and restrictions for bailed-out businesses. “There are still a few little differences,” he said, echoing comments made since the weekend.

Why the Federal Reserve, too, needs the Senate to act. The Treasury must replenish its Exchange Stabilization Fund (ESF), which provides the capital backstop. The Senate bill provides $425 billion for the ESF that the Fed could leverage up to many times that amount. The goal is to prevent this government-ordered business liquidity crisis from becoming a solvency crisis that becomes a banking crisis and depression. Schumer now claims there isn’t enough “transparency” in the bill’s replenishment for the ESF, but the rules are essentially the same as they’ve been during previous Democratic and Republican administrations. Observers say that if too many burdens are put on the loans, companies will refuse to take the money to stay in business until it may be too late.

Pelosi released her over-1,000-page bill Monday. House Majority Whip James Clyburn (D-S.C.) was heard last week advising Democrats to view the crisis as a “tremendous opportunity to restructure things to fit our vision.” There are no plans for the House to vote on the measures, which are seen as a list of Democrat demands for inclusion in the Senate bill.

     The Pelosi/Democratic plan does not include replenishment and expansion of funding for USDA's Commodity Credit Corporation (CCC), must-have funding that will be used to announce another ag sector aid program later this year that is expected to be larger than but named different than the Market Facilitation Programs (MFP). The coming ag aid plan would be designed to be more flexible, cover more of the ag sector, including a targeted aid plan for cattle, and be more decoupled than MFP-2, to avoid any WTO-related problems relative to how the funding is classified (amber, green, etc.). The likely price tag for the next aid package is expected to be above the $16 billion level of MFP-2 and could be $20 billion to $25 billion, sources signal.

     Farm-state senators took to the floor on Monday to air their disagreements over how to help producers who are facing economic fallout from the pandemic. Link to a look at the debate — the debate begins at about 11:26 a.m. Meanwhile, here is a link to a letter from farm and commodity groups on the need to replenish and expand CCC borrowing authority.

     The Democratic-agenda items in the Pelosi approach contain a wish list that has nothing to do with the coronavirus, analysts note:

     • A Green New Deal mandate on airlines to offset their “carbon emissions” and publish CO2 emissions for each flight;
     • “Election reform” — requiring states to allow early voting, mail-in voting, and same-day voter registration;
     • Requiring any loan recipient to provide permanent paid leave and a $15 minimum wage;
     • Borrowers would not be allowed to pay a bonus to an executive or dividends to shareholders;
     • Companies would have to provide statistics on the “gender, race, and ethnic identity” of their board members.

Coronavirus update:

  • Summary: World-wide, 383,944 confirmed cases and 16,595 deaths, according to Johns Hopkins University. In the U.S., 46,450 cases and 555 deaths, according to Johns Hopkins.
  • Italy: Both new cases and deaths dropped for two days running in Italy.
  • China’s approach to counting cases raises questions about how many people with the virus are circulating free. Even if these individuals do not become sick themselves, there is evidence that asymptomatic people can infect others. these developments add to doubts that the virus will be fully eradicated in China in the near term. Meanwhile, China’s Hubei province, at the heart of the Covid-19 outbreak, will lift restrictions on people leaving the province tomorrow, for those with a code certifying their health. Officials in Wuhan, China, where the outbreak started, said today that public transportation would resume within 24 hours and that residents would be allowed to leave the city beginning April 8, as infections appeared to be dwindling.
  • President Trump hints at a short shutdown: “I’m not looking at months.” At a White House briefing yesterday, President Trump said that normal economic activity would resume in weeks, not months. “Our country was not built to be shut down,” Trump said, “This is not a country that was built for this. It was not built to be shut down,” although he did not provide a timeline for when he believes normal economic activity could resume. “If it were up to the doctors, they’d say let’s shut down the entire world,” Trump said. “This could create a much bigger problem than the problem that you started out with.” The U.S. is a little over one week into its 15-day social distancing period (which runs until Monday) recommended by public health experts.

    “The president is right. The cure can’t be worse than the disease,” said Larry Kudlow, the director of the National Economic Council. “And we’re going to have to make some difficult trade-offs.”

    What about Fauci? Asked at the briefing whether Anthony Fauci, the head of the National Institute of Allergy and Infectious Diseases, agreed on the primacy of restarting the economy, Trump replied, “He doesn’t not agree.”

    15 days

  • Major U.S. airlines are drafting plans for a potential voluntary grounding of almost all passenger flights across the country, the Wall Street Journal reported. Government agencies are also considering ordering such a move. Link for details. Air traffic is already at a minimal level, with the TSA reporting a drop of 80% on Sunday compared to the same day a year ago.


  • FDA: Don't take an at-home coronavirus test. The Food and Drug Administration is warning people to avoid the kits after a number of companies began rolling them out.
  • U.S. Export-Import Bank says it will hold an open board meeting by teleconference on Wednesday to discuss its responses to the coronavirus pandemic.
  • Trump postponed the Oct. 1 deadline to comply with new Real ID travel requirements due to the coronavirus outbreak.
  • A Sanderson Farms slaughterhouse worker in McComb, Miss., tested positive for the coronavirus, the first publicly confirmed case at a U.S. meatpacking plant. The facility will remain open because the infected worker was contained to a small processing table, according to Sanderson. Link to details from Reuters.
  • Canada is recalling recently retired meat inspectors as it seeks to address staffing shortages amid the Covid-19 situation. The Canadian Food Inspection Agency (CFIA) told meat plants it would trim hours at plants due to staffing shortages. Some reports indicate the reduction could trim Canadian meat output by 10% or more. "There is a challenge around human resources ... mainly for our inspectors," Canadian Agriculture Minister Marie-Claude Bibeau told reporters. The government checking whether provinces could share in the burden, she noted, adding, "We are also in the process of hiring new inspectors, training new inspectors, bringing back inspectors who just retired a year or two ago.”

Decision day for Trump administration on RFS waivers court ruling. Today is the deadline for the Trump administration to appeal or accept the 10th Circuit Court ruling that said three small refinery exemptions (SREs) granted for the 2016 compliance year under the Renewable Fuel Standard (RFS) were invalid.

     Reports and sources indicate that the administration will not appeal the ruling, but Sen. Chuck Grassley (R-Iowa) told reporters Monday he has not gotten the official word from the White House. “We have not been told one way or another officially,” Grassley said, noting that he and Sen. Joni Ernst (R-Iowa) have asked the administration not to appeal the ruling.

     Indications are that if the ruling is not appealed, it would mean only a handful of refiners would qualify for an SRE. There are currently 25 SRE requests pending for the 2019 compliance year.

     The situation comes as the ethanol industry is struggling with negative margins, prompting some biofuel companies such as Poet to announce they have suspended buying corn at some plants and they expect to see a sizable downturn in ethanol demand. Poet expects a 957-million-gallon decline in ethanol demand between March and May, as people stay in their homes and demand for gasoline plummets

Just-in-time has turned out to be just-not-enough for grocery stores. A run on supermarkets in the U.S. is exposing the downside of the food industry’s decadeslong efficiency drive to boost profit margins by paring inventories, the Wall Street Journal reports (link). Producers and grocery stores had gone from keeping months of inventory on hand to holding only a four to six weeks’ supply, and now manufacturers, distributors and retailers are rapidly reversing course as consumers strip shelves bare, the article notes. “Suppliers are tossing out carefully calibrated distribution plans and instead shipping truckloads of goods straight to stores’ warehouses. Retailers are overriding replenishment algorithms and heading straight to manufacturers to restock. Many producers are pressing raw materials suppliers to speed up manufacturing to get more goods into pipelines.” Officials insist plenty of goods are moving, but some worry that an increasingly stretched system could buckle under the pressure.

Other items of note:

  • Malaysia has ordered shutdowns in palm plantations in three districts of the state of Sabah due to workers testing positive for Covid-19. Operations at palm oil plantations and factories will be halted in Tawau, Lahad Datu and Kinabatangan through the end of the month, according to a notice by the state government. "The closure of the oil palm plantations and factories is aimed at preventing the movement of plantation workers as there were some workers in Tawau, Lahad Datu and Kinabatangan areas who have tested positive for Covid-19," the notice said. Sabah accounts for about 25% of Malaysian palm oil output.
  • Senate on Monday night confirmed Mindy Brashears for USDA undersecretary for food safety, nearly two years since Trump first nominated her. Brashears has been deputy undersecretary since January 2019, when USDA Sec. Sonny Perdue sidestepped the Senate and named three long-stalled nominees to deputy posts that don’t require confirmation.
  • Produce farmers, groups want aid. A bipartisan group of House members urged specialty crop producers receive extra assistance to deal with the impact of the pandemic on their businesses. The lawmakers want USDA to use flexibility when promoting fair trade practices in the sector, and to commit to buying fresh fruits and vegetables for federal nutrition programs. They’re also asking for direct support to be provided to producers with customers unable to fulfill their previous purchase commitments. Link to letter.
  • The Fertilizer Institute urged state governors to follow guidance issued by DHS listing the industry as critical infrastructure, allowing employees to continue working during the coronavirus outbreak. The next six to eight weeks are crucial as farmers carry out spring planting activities to grow the food, fuel and fiber for the country, the group said. Link for details.
  • Mark Jekanowski was appointed chairman of USDA's World Agricultural Outlook Board, starting March 29. Jekanowski is the acting chairman of the board, which oversees development of USDA’s monthly World Agricultural Supply and Demand Estimates, an influential source of data for commodity markets. Link for details. Note: The writer of Policy Updates used to work with Mark and can attest to him being a consensus builder with full respect and knowledge of the history and need for what the World Board does. Best yet, he's a good family man and a good listener.
  • Seeking damages. Former field organizers for Michael Bloomberg’s campaign have filed two proposed class-action lawsuits, making the case that the staffers were terminated after being promised jobs and benefits through November.

Markets. The Dow on Monday fell 582.05 points, 3.04%, at 18,591.93. The Nasdaq declined 18.84 points, 0.27%, at 6,860.67. The S&P 500 lost 67.52 points, 2.93%, at 2,237.40.

     Federal Reserve Chairman Jerome Powell on Monday signaled the Fed would do practically anything — extending loans to big and small businesses and purchasing unlimited amounts of government debt — to help an American economy. The Fed cannot own more than 20% of any one ETF, or 10% of individual corporate bonds — and purchases will only be made in investment grade corporate bonds, not high yield. While this is new for the U.S., Japan has been buying ETFs (even equity funds) for several years.

     Fed balance sheet


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