OPEC, Allies Agree to Oil Pact, Incl. U.S., Brazil & Canada; Mexico to Cut Only 100K barrels

Posted on 04/12/2020 1:38 PM

Collapse in food services leads to major boost in food waste, dumping & calls for aid

 


In Today’s Updates


 

* Pandemic causes farmers to lose sales to restaurants, hotels & schools
* Lawmakers urge aid for small farmers, local food growers hit by pandemic
* U.S. testing capacity in ‘ballpark’ for May reopening: Trump top adviser
* Boris Johnson discharged from hospital
* Groups urge making Covid-19 qualifying disaster for USDA funding
* Coronavirus profoundly alters U.S. spending patterns
* If U.S. consumers follow history, savings rate is header higher
* Labor Dept. issues 3rd set of guidance on new categories of unemployment benefits
* USTR cancels hearing on Kenya trade pact talks

 


MARKET FOCUS


 

Markets: The S&P 500 index rose 12% on Thursday, to 2,789.82 — its best week since 1974 — and finished 25% off its March low. The corresponding gain for the Dow was 13%, up 27.8% from its low. The Nasdaq jumped 10.6%, raising it 23% off its low.

 

OPEC+ will cut 9.7 million barrels a day — just below the initial proposal of 10 million. The U.S., Brazil and Canada will contribute another 3.7 million barrels as their production declines. Mexico will only be required to cut 100,000 barrels — less than its pro-rated share, but will reportedly reconsider its position after two months.

 

Gold vs equities. Year to date as of April 9, gold is up more than 15%, versus a more than 14% decline in the S&P 500. After settling at $1,752.80 on April 9, prices now trade at about $171 an ounce away from the all-time intraday high of $1,923.70 on Sept. 6, 2011.

 


POLICY FOCUS


 

With restaurants, hotels and schools closed, many of the nation’s largest farms are facing plunging sales, leading to staggering amounts of food waste. Even as retailers see spikes in food sales to homebound Americans, farmers are being forced to destroy tens of millions of pounds of perishable food they can’t find buyers for. Link to NYT Times article. “Farmers are also learning in real time about the nation’s consumption habits. The quarantines have shown just how many more vegetables Americans eat when meals are prepared for them in restaurants than when they have to cook for themselves. 'People don’t make onion rings at home,'” said Shay Myers, a third-generation onion farmer whose fields straddle the border of Oregon and Idaho.

 

     Grocery Sales

 

     Restaurant Sales

 

Five financial groups called for a fourth economic relief bill to make Covid-19 a qualifying disaster for USDA funding, ease USDA credit and loan restrictions and provide $500 million for farm ownership loans. The organizations wrote (link) to House and Senate leaders, appropriators and authorizers.

 

Lawmakers urge USDA to aid local food growers hit by pandemic. With USDA Sec. Sonny Perdue expected to send a Covid-19 ag impact aid proposal to the White House sometime the week of April 13 (link), more groups and lawmakers are getting in last-minute requests. More than 30 senators from both parties called on USDA to provide substantial aid for small growers and meat producers.

 

     In a letter to Perdue (link), 29 Democrats, independents Angus King of Maine and Bernie Sanders of Vermont, and Republicans Susan Collins of Maine and Lisa Murkowski of Alaska said public health restrictions to contain the spread of COVID-19 have imposed extra expenses for packaging, sanitizing and transportation, or closed restaurants, university dining halls, farmers markets and other venues these farmers depended on for sales.

 

     The letter said small farmers who can show that at least 25% of their total income comes from local sales should be eligible for direct payments administered by the Farm Service Agency to cover lost revenue and additional costs to comply with Covid-19 health guidelines out of $9.5 billion Congress included in the third coronavirus economic relief package as a pool of aid money to address financial distress spreading across various segments of agriculture.

 

     Background. The CARES Act provides USDA with $9.5 billion to “support agricultural producers impacted by coronavirus, including producers of specialty crops, producers that supply local food systems, including farmers' markets, restaurants, and schools, and livestock producers, including dairy producers.” As previously noted, USDA is in the process of developing a program of emergency relief for producers economically harmed by the coronavirus pandemic, and is receiving policy suggestions from industry stakeholders. Specialty crops would include fruits and vegetables, tree nuts, dried fruits, horticulture and nursery crops.

 

     Some put possible losses for farmers selling to local markets and regional food hubs at $1 billion by the end of 2020.
 

Coronavirus update:

  • Boris Johnson discharged from hospital. A Downing Street spokesperson said the British prime minister, 55, will not immediately return to work and will recover at Chequers, the country residence of British prime ministers, as his government begins to assess when or how to ease the lockdown restrictions introduced to limit the spread of the infection. “On the advice of his medical team, the P.M. will not be immediately returning to work,” a spokesman said. “He wishes to thank everybody at St Thomas’ for the brilliant care he has received.”
     
  • U.S. testing capacity in ‘ballpark’ for May reopening: Trump top adviser. Donald Trump’s top adviser on coronavirus testing said that by May the U.S. will be in the “ballpark” of the diagnostic capacity it needs, should the president decide to recommend parts of the country relax economy-crushing social distancing practices. Admiral Brett Giroir said in an interview Saturday the U.S. is working on four forms of diagnostics it needs to reopen the economy: widespread surveillance to catch new flare-ups; testing of people who have specific symptoms; contact-tracing for confirmed cases; and antibody testing to know who’s recovered from the virus, which he said is weeks away. “By May we’ll have a lot more testing than we do now,” Giroir said. “By May, we certainly will be in the ballpark. Whether we are exactly there depends on some factors, including how much is circulating and where regionally this falls out. That is the correct answer, I can’t give you a yes or no.” Link for more on testing results from the Covid-19 Tracking Project. Link to Bloomberg article.

    Testing gap

     
  • The coronavirus has profoundly altered daily life in America, ushering in sweeping upheavals to the U.S. economy. Among the most immediate effects of the crisis? Radical changes to how people spend their money.

    Spending changes

     
  • If U.S. consumers follow history, the savings rate is header higher. The shock from the coronavirus pandemic, coupled with the selloff in markets and job losses, could push consumers to ramp up their savings — including those who are still employed.

    Savings rate

Other items of note:

  • The Department of Labor issued its third set of guidance on new categories of unemployment benefits authorized by the $2.3 trillion economic recovery package, in this case, covering a 13-week extension of benefits for those who have already exhausted their entitlement to unemployment. The benefits are federally funded.
     
  • USTR cancels hearing on Kenya trade pact talks. To comply with Covid-19 restrictions on public gatherings, the U.S. Trade Representative's Office is canceling an April 28 hearing on negotiating objectives for U.S. trade agreement talks with Kenya. In a Federal Register notice publishing Monday, the agency will extend the deadline for written comments to April 28.

 


 

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