Trump in Iowa today, on NBC Thursday in town hall event to compete with Biden on ABC
In Today’s Updates
* China's corn prices reach record high
* IMF: Global economic damage via Covid won’t be as severe as estimated earlier
* IEA warns second round of Covid infections seen tempering crude demand
* Saudi Aramco in talks to sell a stake in its oil pipeline business
* Bank of America profit fell 16% in the third quarter
* Rise in pet ownership during pandemic boosting revenue at animal-health companies
* Market increasingly anxious about calendar and planting delays out of Brazil
* FranceAgriMer’s soft wheat export forecast edges higher, but well below year-ago
• Cattle futures’ ability to reverse higher an encouraging technical signal
* CFAP 1 payments total $10.22 billion
* CFAP 2 payments total $4.5 billion
* WRDA bill negotiations continue
* Senate to vote next week on $500 billion Covid-19 relief package
* USTR vows action if EU adds tariff after win in Boeing case
* Concerns about a corn supply shortage persist
* COFCO reports big jump in hog production during Q3
U.S. food & beverage industry update:
* Pilgrim’s Pride announces plea agreement in broiler/chicken sales case
* At-home meal kits have taken off during the pandemic
* Europe overtakes U.S. in new cases of Covid
* Drugmaker Eli Lilly pausing a study of its Covid-19 treatment
Politics & Elections:
* Trump will conduct event Thursday on NBC, competing with Biden's ABC event
* Trump today holds rally at Des Moines International Airport
Other Items of Note:
* Supreme Court allows Census Bureau to wrap up its 2020 count
* Bayer expects EPA approval for Dicamba soon in herbicide battle
* 1.3% cost-of-living adjustment for Social Security benefits in 2021
Equities today: U.S. equity futures signal a mixed opening. Bank of America, Goldman Sachs and Wells Fargo will report quarterly earnings before the market opens. U.S. hospitalizations are at their highest level since Aug. 29. Investors remain concerned that a continued rise will result in new local restrictions, placing pressure on businesses and economic recovery. In Asia, major benchmarks were mixed. The Shanghai Composite Index closed down 0.6%. Japan’s Nikkei 225 edged up 0.1%. Meanwhile, China’s stock market has hit a record $10 trillion in value.
U.S. equities yesterday: The Dow fell 157.71 points, 0.55%, at 28,679.81. The Nasdaq declined 12.36 points, 0.10%, at 11,863.90. The S&P 500 lost 22.29 points, 0.63%, at 3,511.93.
On tap today:
• U.S. producer price index for September is expected to rise 0.2% from a month earlier. (8:30 a.m. ET)
• Federal Reserve: Richmond’s Thomas Barkin speaks at a West Virginia economic outlook conference at 8:35 a.m. ET, Vice Chairman Richard Clarida speaks on the economy and monetary policy at 9 a.m. ET, Vice Chairman Randal Quarles speaks on financial stability at 10:30 a.m. ET, Dallas’s Robert Kaplan speaks to the Hoover Institute at 2 p.m. ET, Barkin speaks to the Economic Club of New York at 2 p.m. ET, Quarles speaks to the Hoover Institute at 3 p.m. ET, and Kaplan speaks on the economy and monetary policy at 6 p.m. ET.
Global economic damage caused by the pandemic won’t be as severe as estimated earlier, the International Monetary Fund predicted Tuesday, thanks to strong government intervention world-wide and a swift recovery in China. The world’s gross domestic product is forecast to decline by 4.4% this year — not as sharp as the 5.2% drop projected in June but still the most severe downturn since the Great Depression.
In a separate report, the IMF said government spending and other steps to boost coronavirus-stricken economies have limited immediate risks to global financial stability while fueling a debt buildup that could spell trouble later.
• Outside markets: The U.S. dollar index slightly firmer. Nymex crude oil prices are weaker and trading around $40.00 a barrel. In bond markets, the yield on the 10-year Treasury note ticked down to 0.714%, from 0.726% Tuesday.
• Crude futures have been under pressure ahead of the U.S. trading day, with losses of around 0.4%, putting U.S. crude around $42 per barrel and Brent crude around $42.30 per barrel. U.S. gov't crude inventory data is delayed a day by the Monday U.S. gov't holiday, so focus will be on American Petroleum Institute data to be released later today. Prices moved lower in Asian trade, taking back some of the rise scored in Tuesday U.S. trading. U.S. crude was down 17 cents at $40.03 per barrel while Brent crude eased 17 cents at $42.29 per barrel.
• IEA warns second round of Covid infections is seen tempering crude demand. While efforts by the OPEC+ group have had “some success” in tempering crude oil supplies and drawing down crude oil stocks, the International Energy Agency (IEA) is warning that a second round of Covid-19 infections is slowing the oil demand rebound seen this summer. This comes as OPEC+ countries are seen boosting crude oil output by 2 million barrels per day (bpd) from January and the ceasefire in Libya is seen boosting their crude production to 700,000 bpd by December versus 300,000 bpd currently. "There is only limited headroom for the market to absorb extra supply in the next few months," IEA said. "Those wishing to bring about a tighter oil market are looking at a moving target."
• Saudi Aramco reportedly in talks to sell a stake in its oil pipeline business to BlackRock and others in a deal that could be worth $10 billion. Link to details via Reuters.
• Bank of America profit fell 16% in the third quarter, though the bank indicated that it is well prepared to weather the coronavirus recession.
• An uptick in pet ownership during the pandemic is boosting revenue at animal-health companies and making stocks in the sector expensive. Link for more from the WSJ.
• Shocking news: Some Argentine port workers are striking... it's like drinking wine in Paris... expected.
Items in Pro Farmer's First Thing Today include (Link to subscribe to FTT):
• Market increasingly anxious about the calendar and planting delays out of Brazil
• FranceAgriMer’s soft wheat export forecast edges higher, but well below year-ago
• Cattle futures’ ability to reverse higher an encouraging technical signal
— CFAP 1 payments total $10.22 billion. Payments under the Coronavirus Food Assistance Program 1 (CFAP 1) totaled $10.22 billion as of Oct. 11, including $5.0 billion for livestock, $2.6 billion for non-specialty crops, $1.8 billion for dairy, $769 million for specialty crops and $108 million for aqua, nursery and flora crops.
— CFAP 2 payments total $4.5 billion as of Oct. 13, including $2.4 billion in acreage-based payments, $1.3 billion for livestock, $452 million for dairy, $376 million for sales commodities and $109 million for eggs/broilers. By commodity, $1.4 billion has gone for corn (21.2% of the total), $1.0 billion for cattle, $534 million for soybeans and $452 million for milk. On a state level, $449 million has been paid out in Iowa, $352 million in Illinois, $347 million in Nebraska, $343 million in Minnesota, and $277 million in Wisconsin.
— WRDA bill negotiations continue. Lawmakers are still working to pass a two-year reauthorization this year of the Water Resources Development Act (WRDA), major legislation that would authorize multi-million water infrastructure projects across the country. The House passed its version (HR 7575) in July; the Senate Environment and Public Works panel advanced its bill (S 3591) in May. Committee leadership and staff in both chambers are talking and believe they can resolve differences between the bills.
— Senate to vote next week on $500 billion Covid-19 relief package that mirrors earlier Republican proposal, Majority Leader Mitch McConnell (R-Ky.) announced Tuesday. A $1.8 trillion relief offer last week from the Trump administration was opposed by key House Democrats who said it was too small and Senate Republicans said it was too big.
The return to a “skinny” Senate GOP approach has little chance of becoming law.
Details: McConnell said his new package would provide "roughly $500 billion" in relief, including unemployment assistance, more money for schools and health care, and new funding for the Paycheck Protection Program for small businesses. The measure also contains liability protections so businesses, schools and health care providers that follow the appropriate health precautions can't be sued if people get sick. McConnell said another round of tax rebates would be included in the new GOP proposal, unlike the earlier skinny package.
Blame game continues. McConnell blamed Democrats for holding up larger-scale relief. “Republicans do not agree that nothing is better than something for working families,” he said in a statement. “The American people need Democrats to stop blocking bipartisan funding and let us replenish the PPP before more Americans lose their jobs needlessly.” House Democrats have sought at least $2.2 trillion in aid. A bill (HR 925) they passed Oct. 1 over Republican opposition would provide a total of $2.6 trillion in aid with a net cost of $2.2 trillion after accounting for offsetting tax increases and rescission of unused PPP funds. House Speaker Nancy Pelosi (D-Calif.) detailed several concerns with the latest White House proposal in letters to her caucus in recent days. Pelosi said while she appreciates "a couple people" urging her to take the GOP deal, she doesn't think Democrats need to settle now, especially with Trump urging lawmakers to "go big."
— USTR vows action if EU adds tariff after win in Boeing case. The World Trade Organization (WTO) approved nearly $4 billion a year in retaliatory duties the European Union (EU) can impose on U.S. imports in the long-running Boeing Co.-Airbus subsidy dispute, prompting the Trump administration to warn the EU against taking action. The EU sought the okay for hitting $8.58 billion in U.S. goods with tariffs while the U.S. said the level should only be $411.8 million.
"The EU will immediately re-engage with the U.S. in a positive and constructive manner to decide on next steps. Our strong preference is for a negotiated settlement. Otherwise, we will be forced to defend our interests & respond in a proportionate way," tweeted Valdis Dombrovskis, EU Commission EVP for Economy.
The Office of the U.S. Trade Representative said in a statement Tuesday that a WTO arbitrator should not have authorized the retaliation because the Washington state business tax that aided Boeing was repealed April 1, 2020. The repeal ended the subsidy and grounds for damages, the agency said. “Any imposition of tariffs based on a measure that has been eliminated is plainly contrary to WTO principles and will force a U.S. response.”
Lighthizer said the door was still open to the EU to reach a settlement with the U.S. “to find a resolution to this dispute that addresses the massive subsidies European governments have provided to Airbus and the harm to U.S. aerospace workers and businesses.”
Senate Finance Chairman Chuck Grassley (R-Iowa) said the U.S. and the EU need to work something out. “I think we’re at a point where we should negotiate. I want us to negotiate. I’m surprised we’re not sitting down and negotiating,” said Grassley, whose committee is the Senate’s primary trade panel.
Bernd Lange, the European Parliament’s trade committee chairman, also said negotiations would be preferable to imposing tariffs. “After 15 years, the European Union finally got the green light to impose rebalancing tariffs worth $4 billion. I sincerely hope that this decision will work as an incentive to end these disputes through a negotiated settlement,” Lange said.
What's next? The EU can make the formal request for the approval of the sanctions at the next Dispute Settlement Body (DSB) meeting scheduled for Oct. 26. They could seek an expedited request, but that would require at least 10 days’ notice. The U.S. has already hit $7.5 billion in European goods with tariffs after the WTO found that illegal subsidies had been provided to Airbus. It is not clear that the WTO approval of EU sanctions against the U.S. will prompt a resolution in the dispute nor is it clear what kind of offer the U.S. has made to the EU as a potential solution. But this could still point the issue toward a resolution.
— Update on China:
- Chinese corn futures hit record-highs as concerns about a supply shortage persist. Chinese corn futures hit a new record-high at midweek of 2,566 yuan (380.70) per metric ton, as the market remains concerned about crop damage from typhoons earlier this year and dwindling stockpiles of the grain. This contrasts with assurances from the Chinese government that production was not impacted and stockpiles are adequate. “The stockpile has been sold out. The market strongly expects supply shortages, and has gone bullish [on futures],” Meng Jinhui, senior analyst with Shengda Futures, told Reuters. Meanwhile, an operator of a grain drying operation in top-producing Heilongjiang province reports traders and users are scrambling to buy corn amid fears prices will climb even higher. Harvest is underway.
Comments: The above are some of the reasons some corn industry analysts and traders scoff at USDA's estimate of total China corn imports of only 7 million tons. USDA's Foreign Ag Service shows 9.975 million tons of export commitments on corn to China as of Oct 1. and there were no daily corn sales announced to China since then.
- COFCO reports big jump in hog production during Q3. China’s COFCO Meat Holdings Limited reported hog production of 637,000 head for the third quarter, a 140% increase from the year prior, according to a report from the Hong Kong Economic Times. But the company also reported sales of fresh pork stood at 25,500 MT, a 26.2% year-over-year decline.
- U.S./China Phase 1 tracker: China’s purchases of U.S. goods. Link.
— Food and beverage industry update:
- Pilgrim’s Pride announces plea agreement in broiler/chicken sales case. Pilgrim’s Pride announced late Tuesday that they have entered into a plea agreement with the Department of Justice Antitrust Division relative to the investigation of U.S. poultry companies regarding the sale of broiler chicken products. Pilgrim’s Pride agreed to a fine of $110.5 million for “restraint of competition that affected three contracts for the sale of chicken products to one customer in the United States,” the firm said in a release announcing the agreement. Pilgrim’s Pride would not face any further charges in the matter provided it complies with the terms and provisions of the agreement. “Pilgrim’s is committed to fair and honest competition in compliance with U.S. antitrust laws,” said Fabio Sandri, Pilgrim’s CEO. “We are encouraged that today’s agreement concludes the Antitrust Division’s investigation into Pilgrim’s, providing certainty regarding this matter to our team members, suppliers, customers and shareholders.”
Pilgrim's is the first business to admit in court to what prosecutors have alleged was a roughly seven-year effort (from 2012 to early 2019) to inflate prices across much of the U.S. chicken industry. Current and former employees of other chicken companies, including Tyson Foods, have also been charged, and the latter has been cooperating with the government's investigation under a corporate leniency program.
- At-home meal kits have taken off during the pandemic. But a Bloomberg item (link) asks: Would you buy one for $275, even if it’s from a three-star Michelin restaurant?
— Coronavirus update:
- Summary: Global cases of Covid-19 have now climbed to 38,143,788 with the death count reaching 1,086,399, according to data compiled by the Center for Systems Science and Engineering (CSSE) at Johns Hopkins University (JHU). The U.S. case count stands at 7,858,344 with 215,910 deaths.
Link to Covid Case Tracker
Link to Our World in Data
- Europe overtakes U.S. in new cases of Covid as restrictions tighten. This week, Europe overtook the U.S. in a key metric that tracks the virus’ spread while accounting for differences in population size. The 27 countries of the European Union and the U.K. recorded 78,000 cases a day on average over a seven-day period ending on Oct. 12, or 152 cases for every million residents. The U.S. recorded 49,000 a day on average over the same period, about 150 for every million residents.
- Drugmaker Eli Lilly said Tuesday that it was pausing a study of its Covid-19 treatment due to a potential safety concern. Johnson & Johnson, meanwhile, said it hopes to know within days whether it can resume testing its Covid-19 vaccine, which it paused after a study volunteer fell ill. Lilly's therapy, part of the National Institute of Health's "Activ" program and backed by Operation Warp Speed, is similar to a drug from Regeneron that was given to President Trump during his bout with Covid-19.
POLITICS & ELECTIONS
— 2020 Presidential Election Interactive Map
— The Green Papers
— Real Clear Politics
— 2020 Political Atlas
— 2020 Demographic Swingometer
— Next presidential debate: Scheduled to occur Oct. 22.
— Days until election
- President Trump will conduct a town-hall-style event Thursday on NBC, competing with Joe Biden's ABC event on the night the men were to debate. The event will take place in lieu of the second presidential debate between Trump and Democratic nominee Joe Biden, which was cancelled last week after the president objected to new plans for a virtual format. The next and final debate will be held on Oct. 22.
- Trump will hold a rally at the Des Moines International Airport today, on the south cargo apron on the airport's tarmac. He is not expected to leave the airport. He is scheduled to speak at 6 pm CT. Those attending will be temperature screened and given masks with instructions to wear them. Local officials have been told to expect up to 10,000 people for the event.
- Election analysts point to Democratic takeover of Senate. “Democrats are more likely than not going to win control of the Senate,” said Nathan Gonzales, publisher of Inside Elections, a nonpartisan prognosticator. Inside Elections is projecting Democratic Senate gains of three to five seats and leaning toward a Democratic takeover because of Biden’s strength versus Trump. The Cook Political Report is projecting Democratic Senate gains of up to seven seats. The publication's Senate editor this week wrote: “Three weeks from Election Day, Democrats are now the clear favorite to flip control of the Senate. A drop not only in President Trump's re-election numbers following his disastrous first debate performance and coronavirus diagnosis but also in subsequent down-ballot GOP surveys paint a dire picture for Republicans across the board at a very precarious time.” The Republicans are defending a 53-seat majority in the Nov. 3 elections. If Biden wins, Kamala Harris as vice president would cast the deciding votes in case of a 50-50 tie.
OTHER ITEMS OF NOTE
- Supreme Court allows Trump administration to end census count early. The Supreme Court on Tuesday approved Trump administration plans to end the 2020 census before a Oct. 31 deadline, suspending lower court orders requiring the decennial count to continue according to a schedule announced in April. The eight-member court gave no reasons for its unsigned order, which was issued over the dissent of Justice Sonia Sotomayor. As of Monday, the bureau said that 99.9% of 147 million housing units had been counted. It said it had reached its goal of at least 99% in every state except Louisiana, where 98.3% had been counted. About two-thirds of households responded to the census by mail, online or phone, and the rest were counted by a quarter-million temporary workers who fanned out beginning in late July. Civil-rights groups, cities said ending count early would lead to undercount of some Americans.
In a separate case, the administration is asking the Supreme Court to throw out a lower-court ruling that blocked the plan to exclude from the reapportionment count immigrants in the U.S. without legal permission.
- Bayer expects EPA approval for Dicamba soon in herbicide battle. Bayer expects the EPA will soon approve the use of dicamba as the battle over the most common herbicide applied to cotton and soybeans continues. The company, which makes dicamba-based herbicide XtendiMax, is confident approval could come in the fourth quarter and hopeful a decision could be made as soon as the end of the month, Liam Condon, president of Bayer’s crop science division, said in a video interview yesterday.
- There will be a 1.3% cost-of-living adjustment for Social Security and Supplemental Security Income benefits in 2021, the Social Security Administration announced. The maximum amount of earnings subject to Social Security payroll taxes will increase from $137,700 to $142,800.