Covid aid | CFAP 2 payouts clear $9.5 bil. | WRDA on lame-duck agenda | EU tariffs
In Today’s Updates
* USDA S/D report today will key on corn, soybean crop size, China corn imports
* Conab hikes Brazilian soybean crop projection, cuts corn and cotton crop forecasts
* Cordonnier cuts Brazilian corn crop projection
* Consultant’s Argentine soybean crop forecast also lowered
* CFAP 2 payments clear $9.5 billion
* EU to impose tariffs on $3.99 billion of Boeing jets and other U.S. goods annually
* McConnell eyes smaller stimulus after Pfizer data
* RFS, SRE decisions still pending
* Chinese consumer inflation hits an 11-year low on pork price drop
U.S. food & beverage industry update:
* Pandemic got people to brew coffee at home again
* McDonald’s putting emphasis on to-go orders
* When will people start getting vaccinated?
* Fed report: Pandemic remains top risk to U.S. financial system
Politics & Elections:
* Biden moving ahead with transition plans
* Trump's legal team continues to pursue legal avenues to reverse outcome of vote
* Biden likely to begin review of U.S. trade policy under Trump
Other Items of Note:
* EU slaps Amazon with antitrust charges
* WRDA on lame-duck calendar
* Supreme Court to consider challenges to ObamaCare later today
Equities today: U.S. equity futures are mixed to firmer ahead of the openings. Overnight, the MSCI Asia Pacific Index added 0.4% while Japan's Topix index closed 1.1% higher.
U.S. equities yesterday: The Dow finished with a gain of 834.57 points, 2.95%, at 29,157.97. The Nasdaq fell 181.45 points, 1.53%, at 11,713.78. The S&P 500 rose 41.06 points, 1.17%, at 3,550.60.
On tap today:
• U.S. job openings and labor turnover survey for September is out at 10 a.m. ET.
• Federal Reserve: Dallas’s Robert Kaplan speaks to a Bloomberg Future of Finance event at 8:30 a.m. ET, Boston’s Eric Rosengren speaks to a UBS conference at 10 a.m. ET, Mr. Kaplan speaks to a University of Texas at Dallas economic development summit at 10 a.m. ET and to the Council on Foreign Relations at 12 p.m. ET, Atlanta’s Raphael Bostic speaks to an Opportunity Finance Network conference at 12:30 p.m. ET, Kansas City’s Esther George speaks to Monmouth University at 2 p.m. ET, Vice Chairman Randal Quarles appears virtually before the Senate Banking Committee at 2 p.m. ET, and governor Lael Brainard speaks on the Community Reinvestment Act at 5 p.m. ET.
• Outside markets: U.S. Treasury bond and note yields have risen to eight-month highs this week, on the prospects for a solid U.S. economic recovery in 2021. The yield on the benchmark 10-year U.S. Treasury note is currently fetching 0.94%. The U.S. dollar index is higher early today on a corrective bounce after hitting a nine-week low Monday. The other important outside market sees crude oil prices higher and trading around $40.50 a barrel.
• The gold market has rebounded a bit from Monday’s strong losses that were the worst in seven years and pushed prices to nine-week lows.
• Crude futures have shifted back to gains following up on the sharp rise in crude values on Monday. U.S. crude is trading around $40.70 per barrel while Brent crude is around $42.90 per barrel. Crude oil eased in Asian action after the big Monday increase, with U.S. crude down 39 cents at $39.90 per barrel and Brent crude down 27 cents at $42.13 per barrel.
• USDA’s November Crop Production and S&D Reports out today. Analysts surveyed by Reuters on average expect USDA to lower its corn, soybean and cotton production estimates. USDA is also expected to cut its U.S. and global ending stocks forecasts for corn, soybeans and wheat, with the global corn figure likely to receive particular scrutiny. Analysts have been saying USDA has dramatically underestimated China’s corn import needs and an attaché report released earlier this month forecast China would import 22 MMT of the grain this marketing year. USDA has maintained a corn import forecast of 7 MMT for China.
Items in Pro Farmer's First Thing Today include (Link to subscribe to FTT):
• Conab hikes Brazilian soybean crop projection, cuts corn and cotton crop forecasts.
• Cordonnier cuts Brazilian corn crop projection.
• Consultant’s Argentine soybean crop forecast also lowered.
— CFAP 2 payments clear $9.5 billion. With 576,399 applications under the Coronavirus Food Assistance Program 2 (CFAP 2) approved, payouts under the program are just over $9.5 billion.
Acreage-based payments total $4.8 billion, with $2.6 billion for livestock, $1.2 billion for sales commodities, $943 million for dairy, and $23.9 million for eggs/broilers.
By crop, the biggest total has gone for corn ($2.6 billion), followed cattle ($2.1 billion), sales commodities ($1.2 billion), soybeans ($1.0 billion), milk (943.4 million), and wheat ($513.3 million).
— European Union’s top trade official said the bloc will impose tariffs on $3.99 billion of Boeing jets and other U.S. goods annually. The EU action, sanctioned last month by the World Trade Organization, comes 13 months after the U.S. imposed WTO-permitted tariffs on $7.5 billion in Airbus jets and other imported European products, the largest arbitration award in WTO history.
The tariffs will include a 15% duty on imports of all Boeing models, while other goods, including some agricultural products, processed agricultural products and industrial products, will be hit with a 25% tariff.
Europe’s retaliation is essentially a tit-for-tat that EU Trade Commissioner Valdis Dombrovskis said he hopes will lead to a negotiated settlement. Europe and the U.S. both want to rewrite global rules for subsidizing jetliner development, particularly as China gets more active in the field. For now, however, duties will hit all Boeing models, and products including tobacco, spirits sauces, tractors and self-propelled shovel loaders.
From the U.S. side came an expected condemnation of the new tariffs. “The United States is disappointed by the action taken by the EU today,” U.S. Trade Representative Bob Lighthizer said in a statement issued Monday. “The alleged subsidy to Boeing was repealed seven months ago. The EU has long proclaimed its commitment to following WTO rules, but today’s announcement shows they do so only when convenient to them.”
Bottom line: EU trade officials decided to make the move while President Trump is still in office, hoping pressure from affected industries will prompt progress toward a deal before Inauguration Day.
— McConnell eyes smaller stimulus after Pfizer data. Senate Majority Leader Mitch McConnell (R-Ky.) said yesterday that Congress should pass a limited stimulus bill before the end of 2020, in the wake of encouraging data on a Covid-19 vaccine and a slide in unemployment. His comments focused on continued Senate Republican opposition to the larger-scale aid that Democrats want, risking a stalemate into next year.
Senate Democratic leader Chuck Schumer (N.Y.) said Republicans “have proposed totally inadequate solutions” on Covid relief efforts.
— RFS, SRE decisions still pending. EPA’s initial proposed levels for the Renewable Volume Obligations (RVOs) under the Renewable Fuel Standard (RFS) landed at the Office of Management and Budget (OMB) in mid-May and they are still showing as being under review. EPA Administrator Andrew Wheeler had signaled the proposed levels were being revised in the wake of the Covid-19 situation. That discussion is still ongoing, Wheeler told AgriTalk Nov. 2. “The problem is trying to figure out what the markets are going to do,” Wheeler said, including what the Department of Energy projects on driving miles. EPA and DOE are looking at this year’s data, he noted, pointing out that with Covid it is difficult to determine where levels should be as the agency wants to set “realistic numbers,” Wheeler said, noting most of the focus is on advanced biofuel levels. “That’s an active conversation between us and the Department of Energy, but we’re looking at all government data, trying to figure out what the right numbers are.”
Wheeler largely deflected a question on the situation for 2022, the last year covered by the current RFS authority, stating, “We’re trying to make sure we get the 2021 [RFS levels] set in time.” But Wheeler pointed out relative to 2022 that they have not really started working on that yet but did note that actions by California to go with all-electric vehicles are issues that have to be considered ahead. The reference to getting the 2021 RFS levels set in time is relative to the statutory deadline of finalizing the levels by November 30. That has been a focal point by the administration of meeting that deadline in past years.
As for the small refinery exemptions (SREs) that have been a hot-button issue, Wheeler signaled DOE has not yet sent back their recommendations on the 17 remaining gap-year requests and EPA cannot make decisions on those. Plus, the Supreme Court has been asked to assess the 10th Circuit Court decision and Wheeler signaled he did not want to make decisions only to have the court order a different decision.
Wheeler's comments signal the agency is still trying to finalize the 2021 biofuel and 2022 biodiesel levels by the Nov. 30 deadline, but the SRE situation is one that remains somewhat in limbo. Bottom line appears to be that the 2021 biofuel/2022 biodiesel levels could be expected by month-end, but decisions on SREs have no such deadline.
— Update on China:
- Chinese consumer inflation hits an 11-year low on pork price drop. China’s official consumer price index (CPI) climbed just 0.5% in October versus the year prior, which represents a retreat from 1.7% annual inflation in September and marks the lowest level since October 2009 when inflation also stood at 0.5%, according to the country’s National Bureau of Statistics. This was a bit lighter than the 0.8% rise analysts surveyed by Bloomberg expected.
A 2.8% slide in Chinese pork prices helped curb inflation. This marked a dramatic shift from September inflation of 25.5% for pork and marked the first time the figure has turned negative in 19 months.
- U.S./China Phase 1 tracker: China’s purchases of U.S. goods. Link.
— Food and beverage industry update:
- A brewing situation. The coronavirus pandemic achieved in a few weeks what the owners of Folgers and Maxwell House have been trying to do for a decade: get people to brew coffee at home again. As Americans suddenly changed the way they spent their days and their dollars, a fierce sales battle emerged between cafes, coffee brands and makers of home-brewing machines. Retail coffee sales are up about 10% so far this year and sales of coffee makers are up 28% since the start of the pandemic. Dunkin’ and Starbucks, meanwhile, are pushing to get customers back into cafes, the Wall Street Journal reports (link).
- McDonald’s is putting an emphasis on to-go orders and adding new “McPlant” vegetarian items to its menu.
— Coronavirus update:
- Summary: Global cases of Covid-19 surpassed 50 million, standing at 50,913,451 with 1,263,089 deaths, according to data compiled by the Center for Systems Science and Engineering (CSSE) at Johns Hopkins University (JHU). The U.S. case count has passed 10 million at 10,110,552 with 238,251 deaths.
Link to Covid Case Tracker
Link to Our World in Data
- When will people start getting vaccinated? Shots could start becoming available before the end of the year, but initial supplies will be limited: Only the highest risk groups, such as front-line health care workers, could be inoculated in 2020.
Pfizer and German partner BioNTech have been setting the groundwork at staging sites in the U.S. and Europe, and plan to distribute up to 100 million doses this year and another 1.3 billion in 2021. Pfizer has mapped out its logistics strategy outside the U.S. government’s Operation Warp Speed plan but will likely funnel its vaccine into the federal system for final distribution. Link to more from the WSJ.
- Coronavirus pandemic remains a top risk to the U.S. financial system, the Federal Reserve said in a report (link) released Monday, warning that uncertainty over the course of the virus and its economic and financial consequences are unusually high. If the pandemic persists for longer than anticipated — especially if there are extended delays in the production or distribution of a successful vaccine—that could derail the nascent recovery and strain financial markets and institutions. Link to more from the Wall Street Journal.
POLITICS & ELECTIONS
- Joe Biden is moving ahead with his transition plans even as he has yet to be officially designated the winner of last week's election. The president-elect will today speak about the Affordable Care Act, which he has promised to expand, and is likely to name his chief of staff this week. The transition team may sue to force federal agencies to recognize its legitimacy.
- President Donald Trump's legal team continues to pursue legal avenues to reverse the outcome of the vote, and Attorney General William Barr has authorized Justice Department officials to open inquiries into potential irregularities. Richard Pilger, who led the Justice Department’s Election Crimes branch, resigned following Barr's memo. Barr set aside rules that prevented his prosecutors from investigating allegations of electoral fraud. Meanwhile, Senate Majority Leader Mitch McConnell (R-Ky.) celebrated Republicans’ electoral victories while supporting Trump’s refusal to accept defeat. McConnell said Trump is “100% within his rights” to look into allegations of “irregularities.” This comes as Sen. Susan Collins (R-Maine) on Monday became the fourth Republican senator to publicly congratulate Biden on his election victory.
- President-elect Joe Biden is likely to begin a review of U.S. trade policy that under President Trump has been marked by tariffs on a range of global imports. Biden has described his international priority as rebuilding relationships with U.S. allies, many of whom have been angered by Trump’s imposition of tariffs, the Wall Street Journal reports (link). Biden could start to rebuild those relationships by negotiating an end to some of the tariffs, which could also help his administration present a united front in confronting China, the article notes. Despite an accord between the U.S. and China signed in January, tariffs remain on about $370 billion in imports from China. A Biden administration is also set to inherit 25% tariffs on steel and 10% tariffs on aluminum that apply to most trading partners, including traditional economic allies like the European Union and Japan, as well as China and Russia.
OTHER ITEMS OF NOTE
- EU slaps Amazon with antitrust charges for distorting competition in online retail markets. The move comes after the European Commission launched a probe into Amazon in 2019 on the back of concerns over anti-competitive behavior. The EU's competition chief, Margrethe Vestager, accused the e-commerce giant of exploiting data it collects from third-party merchants to boost its own sales. “We must ensure that dual-role platforms with market power, such as Amazon, do not distort competition,” she said.
- WRDA on lame-duck calendar. In the current lame-duck session of Congress, action is needed on spending and perhaps Covid aid if an accord on that sensitive issues can be reached. The House is also anticipated to consider national defense authorization legislation and a conference report on the Water Resources Development Act (WRDA), House Majority Leader Steny Hoyer (D-Md.) said yesterday in a “Dear Colleague” letter updating members on the November and December floor schedules. The water legislation passed the House in July and was reported out of the Senate Committee on Environment and Public Works in May.
- Supreme Court will consider challenges to ObamaCare later today. The Supreme Court takes up California v Texas, which threatens to scrap the Affordable Care Act/ObamaCare. In 2012, Chief Justice John Roberts wrote a 5-4 decision upholding the ACA’s requirement that most Americans purchase health insurance. Texas and 17 other states contend that the mandate became unconstitutional — along with the rest of the law — when Congress reduced its financial penalty to $0 in 2017. The House of Representatives and a group of nearly 20 states say the plaintiffs lack standing to sue and defend the watered-down provision as a legitimate exercise of congressional power. The case could turn on whether lopping off one part of the law dooms the rest. The newly arrived Justice Amy Coney Barrett criticized Chief Justice Roberts’s rationale in 2012 as implausible but emphasized in her Senate confirmation hearing that the issues in California v Texas are quite different. Health coverage for some 23 million Americans during the pandemic hangs in the balance.