Farmers Cautious About Ag Carbon Bank Proposals

Posted on 11/18/2020 7:45 AM

Covid aid talks going nowhere | Congress focus is now on FY 2021 spending

 


In Today’s Updates


 

Market Focus:
* Vaccine optimism continues
* Fed chair: Too soon to say how vaccine would change economic outlook
* Fed's Powell: 'Next few months may be very challenging'
* U.S. retail sales rose in October at slowest pace since the spring

* Report shows credit-card balances declined
* Bitcoin trading above $18,000
* Average spot container freight rates hit all-time highs in recent weeks
* Saudi Aramco sold $8 billion in dollar-denominated bonds Tuesday
* France expected to export up to 2.7 MMT of wheat to China in 2020-21

* FAO says reports of Covid-19 being spread through food trade 'need to be minimized'

 

Policy Focus:
* Pelosi, Schumer ask for aid talks as McConnell sticks with targeted proposal
* Key congressional funding deal decision expected soon
* OMB completes review on USDA plan for Child Nutrition Program
* Ag groups start climate coalition; some farmers cautious

 

U.S./China update:
* Reports indicate China seeks Ukraine barley to replace Australian supplies
* Business Roundtable calls on any Biden administration to roll back tariffs on China


U.S. food & beverage industry update:
* Mars buying maker of Kind bars for $5 billion
* Unilever wants to expand annual sales of plant-based meat and dairy alternatives


Coronavirus update:
* Pfizer Inc. preparing to seek emergency-use authorization for its vaccine
* Grassley tests positive for Covid
* FDA issues emergency use authorization to single-use Covid-19 diagnostic test kit

 

Politics & Elections:
* Rep. Richmond (D-La.) giving up his House seat
* Pelosi and rest of House Democratic leaders are set to retain their positions
* A lot of positions to fill under any new administration
* Trump supporters in rural Georgia angry over his loss, may skip Jan. 5 runoffs


Other Items of Note:
* Judy Shelton’s Fed nomination suffers another setback
* Panel to vote on FERC nominees today
* Tesla, utility companies form trade group
* Fraud-prone aid program sent $7 million to family’s fake farms: Bloomberg
* Congress wants to put a warning label on Big Tech

 


MARKET FOCUS


 

Equities today: U.S. equity futures signal a slightly higher opening. Overnight, the MSCI Asia Pacific Index added 0.3% while Japan's Topix index closed 0.8% lower. Investors are weighing risks to the economy from efforts to contain the spread of Covid-19 against optimism around vaccines. Federal Reserve Chairman Jerome Powell warned it is too soon to say how a potential vaccine would change the economic outlook.

 

     U.S. equities yesterday: The Dow was down 167.09 points, 0.56%, at 29,783.35. The Nasdaq lost 24.79 points, 0.21%, at 11,899.34. The S&P 500 declined 17.38 points, 0.48%, at 3,609.53.

 

On tap today:

 

     • U.S. housing starts for October are expected to rise to an annual pace of 1.45 million from 1.415 million a month earlier. (8:30 a.m. ET)
     • U.S. advance quarterly services report for the third quarter is out at 10 a.m. ET.
     • Bank of England Gov. Andrew Bailey speaks to the Carnegie Institute for World Peace at 11:30 a.m. ET.
     • Federal Reserve: Chicago’s Charles Evans speaks to a summit on regional competitiveness at 10 a.m. ET, New York’s John Williams speaks to the Society for Advancing Business Editing and Writing at 12:15 p.m. ET, St. Louis’s James Bullard speaks to the Rotary Club of Hot Springs National Park at 1:20 p.m. ET, and Atlanta’s Raphael Bostic and Richmond’s Thomas Barkin speak at a Fed education webinar at 7 p.m. ET.

 

Powell cautiously optimistic amid vaccine news. Federal Reserve Chairman Jerome Powell said recent progress on finding a vaccine was welcome news in the medium term, but the U.S. economy still has a “long way to go” before it fully recovers from the pandemic. “The Fed will stay here and be strongly committed to using all our tools” to support the nation’s economy, Powell told a virtual event. “The next few months may be very challenging.”

 

U.S. retail sales rose in October at their slowest pace since the spring, another sign the nation’s economic recovery is losing steam as coronavirus cases surge across the country. The Commerce Department said retail sales, a measure of purchases at stores, restaurants and online, rose a seasonally adjusted 0.3% in October from a month earlier. While spending on vehicles, electronics and at home-improvement stores increased last month, sales slipped in key categories such as grocery store, clothing and restaurant spending. Consumer-spending data from private companies suggest shoppers turned more cautious this month, too, as virus cases accelerated and some officials imposed new restrictions, mask mandates and other mitigation strategies to slow its spread.

 

    Retail slowdown

 

Report from the Federal Reserve Bank of New York showed credit-card balances declined by $10 billion to $810 billion in the third quarter of the year. That followed a $76 billion decline in the second quarter, the steepest drop in data going back to 1999. The big falls reflect both lower levels of spending due to the coronavirus pandemic and an effort by consumers to use extra cash to pay down debt. Overall household debt rose by $87 billion, or 0.6%, to $14.35 trillion in the third quarter compared with the second quarter as Americans borrowed more to buy houses and cars.

 

     Credit card use

 

Market perspectives:

 

     • Outside markets: The U.S. dollar index is lower again early today. The other important outside market sees crude oil prices firmer and trading around $41.80 a barrel. The yield on the benchmark 10-year U.S. Treasury note futures is currently trading at 0.86%.


     • Crude oil futures have gained on reports that OPEC+ countries may opt to delay planned increases in crude oil production ahead. U.S. is trading around $42.35 per barrel and Brent crude around $44.75 per barrel. Crude oil prices eased in Asian action, with U.S. crude down 28 cents at $41.15 per barrel while Brent crude was down 22 cents at $43.53 per barrel.

 

     • Bitcoin is trading above $18,000 this morning as the recent resurgence of the cryptocurrency continues. The digital token has gained 150% this year. Some of the gain can be attributed to Bitcoin's move closer to the mainstream as companies such as PayPal Holdings Inc. allow it to be used on their platform. Volatility remains a feature though, with the cryptocurrency trading within an almost $1,000 range this morning alone. Bitcoin's all-time high hit in 2017 was about $20,000.

 

     • Average spot container freight rates have hit all-time highs in recent weeks, from Shanghai to many regions including the U.S., Australia and South America, according to Jefferies. Rates from North Asia to the West Coast of North America were $3,900 per 40-foot equivalent unit this week, more than double a year earlier, as assessed by S&P Global Platts.

 

     • Saudi Aramco sold $8 billion in dollar-denominated bonds Tuesday, raising funds to meet a dividend pledge.

 

Items in Pro Farmer's First Thing Today include (Link to subscribe to FTT):

• France expected to export up to 2.7 MMT of wheat to China in 2020-21
• FAO says reports of Covid-19 being spread through food trade 'need to be minimized'

 


POLICY FOCUS


 

Pelosi, Schumer ask for aid talks as McConnell sticks with targeted proposal. House Speaker Nancy Pelosi (D-Calif.) and Sen. Chuck Schumer (D-N.Y.) on Tuesday asked Senate Majority Leader Mitch McConnell (R-Ky.) to resume talks on a stimulus package, while McConnell stuck to his insistence on a targeted package. McConnell’s office referred to the GOP leader’s comments from earlier yesterday, when he reiterated his support for a bill of about $500 billion.

 

     In a letter, Pelosi and Schumer cite the surge in Covid-19 cases nationwide as an impetus for quickly crafting another relief bill. Several aid measures passed in the spring have already expired or are set to expire at the end of the year. “It is essential that this bill have sufficient funding and delivers meaningful relief to the many Americans who are suffering,” the Democrats wrote. “For the sake of the country, we ask that you come to the table and work with us to produce an agreement that meets America’s needs in this critical time.”

 

     McConnell said Tuesday he hasn’t spoken with Democrats about a relief bill, which he maintained should be roughly the size that Senate Republicans favor. “I share the view of my colleagues that’s been expressed here that a more narrowly targeted proposal such as we laid out in September and October here in the Senate deals with the actual problem,” McConnell said.

 

Key congressional funding deal decision expected soon. Lawmakers should reach an agreement this week on top-line spending figures for each of the 12 annual funding bills, Senate Majority Leader Mitch McConnell (R-Ky.) said yesterday, a key step toward passing an omnibus appropriations bill by the Dec. 11 deadline. An agreement on top-line spending figures for each of the 12 bills would give lawmakers another three weeks to figure out the details and pass an omnibus bill in both chambers. Lawmakers hope to reach an agreement on the top-line allocations soon.

 

OMB completes review on USDA plan for Child Nutrition Program flexibilities. The Office of Management and Budget (OMB) has completed its review of a proposed rule from USDA that identifies flexibilities for milk, whole grains, and sodium requirements under Child Nutrition Programs. The plan was forwarded to OMB Oct. 28 and one meeting was scheduled on the rule — with the Center for Science in the Public Interest (CSPI) and NANA (National Alliance for Nutrition and Activity) coalition.

 

     The proposed rule comes after a court in April sent the final rule released in 2019 back to USDA for “further proceedings.” CSPI was party to the suit on USDA’s final rule, arguing the final rule did not reflect a logical outgrowth of the interim final rule originally issued by USDA. The U.S. District Court in Maryland agreed, saying the final rule was not keeping with the “original scheme” of the notice and comments that were filed on the interim final rule, as that “spoke exclusively to terms of delaying compliance requirements, not abandoning the compliance requirements altogether.”

 

     The final rule delayed the compliance date for some provisions and eliminated another along with changing requirements on whole grains so that only half of the grain-based foods needed to be whole-grain-rich.

 

     It is not clear when the proposed rule will be released, but child nutrition advocates like CSPI and others will obviously monitor the situation closely to make sure USDA followed the court action.

 

Ag groups start climate coalition, sensing possible new revenue stream for ag sector; some farmers are cautious. Major farm and environmental groups announced yesterday the formation of the Food and Agriculture Climate Alliance, a coalition focused on pushing climate policy priorities. The American Farm Bureau Federation, Environmental Defense Fund, National Council of Farmer Cooperatives, and National Farmers Union co-chair the alliance. The group established more than 40 policy recommendations on soil health, livestock and dairy, forests and wood products, energy, research, and food loss and waste for Congress and the presidential administration.

 

     The joint policy recommendations were in a detailed 51-page document with objectives and specific federal policy moves the groups view as critical to achieving those goals. Explaining the catalyst for creating the alliance, AFBF President Zippy Duvall said the groups were able to break through “historical barriers” and did so with the recognition that “our collective voices are stronger than our individual voice” for advancing new climate policies.

 

    The three guiding principles of the joint recommendations are to support voluntary, market- and incentive-based policies, advance science-based outcomes and promote resilience and help rural economies better adapt to climate change, the alliance said.

 

     Six key areas are the focus of their recommendations: Soil health, livestock and dairy, forests and wood products, energy, research and food loss and waste.

 

     The groups urge a “menu of voluntary federal policy options” to encourage carbon sequestration in the soil, including a new tax credit modelled after the existing “45Q” carbon sequestration credit and a new carbon bank backed by USDA’s Commodity Credit Corporation (CCC). The CCC carbon bank proposal echoes a proposal included in Joe Biden’s campaign climate plan. The carbon bank aims to “establish a price floor for carbon sequestration and GHG reductions.” It would be “contingent upon a significant increase in the CCC borrowing authority” to ensure the effort did not interfere with other CCC operations including the funding of farm program and crop insurance payments. The policy document also calls for a “one-time payment for early adopters” of carbon sequestration efforts and calls for passage of the bipartisan Growing Climate Solutions Act —legislation aimed at promoting farmer participation in new ag carbon credit markets.

 

     For the Renewable Fuel Standard (RFS), the alliance is seeking an updated life cycle analysis of GHG emissions under the program and a streamlining of the Environmental Protection Agency’s (EPA) renewable fuel pathway approval process. The life cycle emissions update would “reflect the latest science, such as efficiency gains associated with updated farming and production practices” impacting the current GHG profile of biofuels, it explained. Citing USDA’s “practical knowledge and expertise on biofuels,” the document calls on EPA to consult with the department “throughout the assessment process.” It also calls on lawmakers to “codify and fund” a new USDA renewable energy infrastructure program.

 

     Sen. Debbie Stabenow (D-Mich.), ranking member on the Senate Ag panel, lauded the effort, saying, “We need to significantly scale up sustainable practices on farms and in forests that benefit producers and address the climate crisis.”

 

     Comments: Some farmers are cautious about the carbon bank proposals, wanting to make sure any implementation is voluntary rather than mandatory. Others suspect the program could benefit ag carbon credit trading companies more than actual producers. Some farmers in interviews said they hope any ag carbon bank would be designed from the bottom up rather than the top down and not allowing lobbyists to dictate the main provisions.

 

Update on China:

  • Reports indicate China continues to seek Ukraine barley to replace Australian supplies. Trade tensions between China and Australia have seen China turn to other suppliers for imports of barley, previously a key item the country imported from Australia. Reports indicate that APK-Inform said that China has imported 2.3 million tonnes of Ukraine barley in 2020/21, nearly three times the amount it did in 2019/20. But even though China agreed to open its market to U.S. barley as part of the Phase 1 agreement put in place earlier this year, China has not yet bought any U.S. barley supplies, somewhat surprising given the country has been seeking to replace imports of Australian barley.
     
  • The head of the Business Roundtable (BRT) called on any Biden administration to roll back tariffs on China. “Unwinding the tariffs, especially with China, shouldn’t be a unilateral act,” said Josh Bolten, the BRT’s chief executive. “It should be an opening to begin a serious negotiation that the Trump administration attempted but, in many respects, made difficult through overly aggressive measures.” Speaking at a news conference, Bolten urged China to also start withdrawing its tariffs on U.S. goods as well. A two-year trade war between the U.S. and China resulted in U.S. tariffs on about $370 billion of Chinese imports to the U.S., and Chinese tariffs on about $110 billion of U.S. goods shipped to China.
     
  • U.S./China Phase 1 tracker: China’s purchases of U.S. goods. Link.

Food and beverage industry update:

  • Mars is buying the maker of Kind bars for $5 billion. The New York Times' DealBook was the first to report that the company behind M&M’s and Snickers will take full control of Kind, which touts its snacks as free from artificial flavors and preservatives. It’s a bet on the continued rise of the healthy snacking industry.
     
  • Unilever is attempting to expand its annual sales of plant-based meat and dairy alternatives to €1B ($1.19 bil.) by 2027, marking a five-fold increase to what the company expects to sell this year. Sales would be driven by new products from The Vegetarian Butcher, a Dutch brand it acquired in 2018, as well as vegan and dairy-free versions of its ice cream and mayo ranges from Ben & Jerry's, Hellmann's, Magnum and Wall's. If multinationals continue to push into this area, industry experts think plant-based products would get cheaper and the market would consolidate. Last month, the European Parliament also ruled that meatless products can continue to label themselves sausages, steaks or burgers, rejecting a meat lobby proposal that called the terms "cultural hijacking."

Coronavirus update:

  • Summary: Global cases of Covid-19 are at 55,695,116 with 1,339,215 deaths, according to data compiled by the Center for Systems Science and Engineering at Johns Hopkins University. The U.S. case count increased to 11,359,803 with 248,707 deaths.

    Link to Covid Case Tracker

    Link to Our World in Data

     
  • Pfizer Inc. is preparing to seek an emergency-use authorization for its vaccine from U.S. regulators after reaching a key safety milestone Chief Executive Officer Albert Bourla said. Pfizer said the shots are 95% effective, have no serious side effects and work for older people, who are more vulnerable to developing severe Covid-19 and who do not respond strongly to some types of vaccines. Pfizer, which developed the vaccine with its partner BioNTech, said the companies planned to apply to the Food and Drug Administration for emergency authorization “within days” and could have enough doses for 25 million people available by year end, raising hopes that a working vaccine could soon become a reality.
     
  • Grassley tests positive for Covid. Sen. Chuck Grassley (R-Iowa), an 87-year-old in the line of succession to the presidency, announced via Twitter he has tested positive for Covid-19, just hours after he had announced he was self-quarantining after being exposed to the virus. “I’ve tested positive for coronavirus. I’ll be following my doctors’ orders/CDC guidelines & continue to quarantine. I’m feeling good + will keep up on my work for the ppl of Iowa from home. I appreciate everyone’s well wishes + prayers & look fwd to resuming my normal schedule soon.” Grassley also missed a vote yesterday in the Senate for the first time in some 27 years due to the situation. The last time Grassley missed a vote was when he was traveling with then-President Bill Clinton to observe flood damage in Iowa in 1993.
     
  • FDA has issued an emergency use authorization to the single-use Covid-19 diagnostic test kit from Lucira Health, a privately held manufacturer based in California. The test (prescription use only) allows users age 14 and older to swab themselves to collect a nasal sample, which is then swirled in a vial of laboratory solution that plugs into a portable device. Results are displayed in 30 minutes as lights labeled positive or negative. While the FDA did not reveal the price of the test, the company's website said it is "intended to cost less than $50."

 


POLITICS & ELECTIONS


 

  • Rep. Cedric Richmond (D-La.) announced in New Orleans that he is giving up his House seat to become the head of public engagement in the White House, a job Valerie Jarrett held in the Obama White House. Richmond, a former chairman of the Congressional Black Caucus, was an early endorser and has been a member of Joe Biden’s kitchen cabinet. He will be a key liaison to the Hill under any Biden administration.

    Richmond's replacement in the House will be quickly announced by Democratic La. Governor John Bel Edwards.

    Richmond’s pick was immediately criticized by the climate advocacy group Sunrise Movement. “Today feels like a betrayal, because one of Biden’s very first hires for his new administration has taken more donations from the fossil fuel industry during his Congressional career than nearly any other Democrat, cozied up to Big Oil and Gas, and stayed silent and ignored meeting with organizations in his own community while they suffered from toxic pollution and sea-level rise,” the group said in a statement.

     
  • Democrats to pick House leaders. The House Democratic Caucus today opens two days of activities to select the party’s leaders for the 117th Congress. Only three races are contested — assistant speaker, caucus vice chair and caucus leadership representative. The virtual meeting will see Democrats use an encrypted application on House-issued iPhones to vote instead of paper ballots.

    House Speaker Nancy Pelosi (D-Calif.), Majority Leader Steny Hoyer (D-Md.), Majority Whip James Clyburn (D-S.C.) and Democratic Caucus Chair Hakeem Jeffries (D-N.Y.) are all running unopposed for their positions.

    Seeking the position of assistant speaker, the number four leadership post, are Reps. Katherine Clark (D-Mass.), the current caucus vice chairwoman, and David Cicilline (D-R.I.), who chairs the Democratic Policy and Communications Committee. For caucus vice chair, Reps. Pete Aguilar (D-Calif.) and Robin Kelly (D-Ill.) are seeking the post.

    The lack of any challenges in the top leadership posts puts to rest speculation that the much-narrower Democratic majority in the House in the 117th Congress could result in shifts atop the House leadership. It also signals the chamber’s path ahead is not likely to veer from what has been seen in the 116th Congress.

     
  • A lot of positions to fill under any new administration. In 2016, there were 1,714 government positions subject to presidential appointment: 1,242 positions required Senate confirmation and 472 did not.
     
  • Some Republicans worry that Trump supporters in rural Georgia, angry over his loss, will skip the Jan. 5 Senate runoffs. In one runoff, Republican Sen. David Perdue is facing Democrat Jon Ossoff, a documentary filmmaker. In the other, Democrat Raphael Warnock, pastor of Ebenezer Baptist Church in Atlanta, is challenging Republican Sen. Kelly Loeffler. Outside of the Atlanta area, Donald Trump won 443,000 more votes than Joe Biden, an increase of 38,000 over his margin in 2016. But inside the metro area, Biden benefited from a boost in turnout, beating Trump by 457,000 votes. Four years ago, Hillary Clinton carried the Atlanta metro area by 193,000 votes. Link to Wall Street Journal article for more on this topic.

 


OTHER ITEMS OF NOTE


 

  • Trump Fed nominee Shelton vote fails in Senate; may be reconsidered. The combination of some GOP opposition and absences from Covid-19 prompted the procedural motion to proceed to consider the controversial nomination of Judy Shelton to be on the Federal Reserve Tuesday on a 47-to-50 vote. Sens. Mitt Romney (R-Utah) and Susan Collins (R-Maine) joined with 45 Democrats and two independents in the vote against advancing the nomination. Sen. Kamala Harris (D-Calif.) even returned to the chamber for the first time since the election to vote on the motion to proceed. The absences of Sens. Chuck Grassley (R-Iowa) and Rick Scott (R-Fla.) due to self-quarantining linked to Covid-19 and the opposition by three Republicans to Shelton’s nomination resulted in the failed vote. But Senate Majority Leader Mitch McConnell (R-Ky.) in the end switched his vote to being against proceeding so that he can use a parliamentary maneuver to potentially bring the nomination up again before the Senate leaves for the year. However, it is not clear what the outcome will be as several developments could impact the situation. Her potential to be on the Fed is still there, but is more remote now. Not much time remains, however, as Republicans will lose a seat in the Senate when Arizona Democrat Mark Kelly takes Martha McSally's place after Thanksgiving.
     
  • Panel to vote on FERC nominees today. The Senate Energy and Natural Resources Committee today will meet to vote on the nominations of Democrat Allison Clements and Republican Mark Christie to be commissioners on the Federal Energy Regulatory Commission (FERC). The panel currently has three members — two Republicans and one Democrat — and the addition of Clements and Christie would fill the panel. However, the full Senate would still need to act on the nominations if they are approved as is expected. It is not clear when that will happen with a declining number of days left for the chamber to be in session.
     
  • Tesla, utility companies form trade group. Tesla is joining rideshare company Uber, utility giant Southern Co. and others to lobby for 100% electric-vehicle adoption by 2030. More than two dozen utilities, EV-charging companies, battery suppliers and EV manufacturers have formed the Zero Emission Transportation Association, which is calling for policies such as consumer incentives and emissions targets that will accelerate the shift to EVs, according to a statement. The trade group also wants more federal investment in charging infrastructure.
     
  • Fraud-prone aid program sent $7 million to family’s fake farms, Bloomberg News reported. The single-family house on Forestview Avenue in Euclid, Ohio, a suburb of Cleveland, shows no signs of farming activity. The only things growing on the one-eighth-acre plot are trees, shrubs and grass. But 20 companies registered at that address, with names like Organic Ohio Berries and Garlic Farming, have won government approval for loans and grants intended to support small businesses hurt by the pandemic.In all, the owner of the Forestview home and his family members created 72 companies with agrarian-sounding names at three Cleveland-area addresses and then used them to get approval for loans and grants totaling $7.2 million from the Small Business Administration’s Economic Injury Disaster Loan program, state and federal records show. There’s no sign of agricultural activity at any of the locations, or that any of the companies were active before Feb. 1, a requirement for pandemic aid. None of them was registered with the Ohio Secretary of State’s office before May, according to the Bloomberg item.
     
  • Congress sought to put a warning label on Big Tech yesterday as lawmakers grilled Twitter's Jack Dorsey and Facebook's Mark Zuckerberg. Republican concerns centered around how the platforms moderate their content, narrowing in on censorship and the ideological makeup of their work forces, while Democrats focused on whether more moderation could help prevent the spread of hate speech and violence. The two tech leaders agreed that reform around how content is moderated should be revisited, with Zuckerberg welcoming a new regulatory moderation framework and Dorsey hoping to give users more tools to control the content they see.

 

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