Comment Period Ends for Climate Policy Priorities

Posted on 04/30/2021 8:11 AM

Signs of weakening in China’s manufacturing sector and a double-dip recession in Europe


In Today’s Digital Newspaper


Market Focus:
• China’s economy falls short of expectations
• Eurozone fell into a double dip recession in Q1 amid slow vaccine rollout •
• Putting the massive U.S. gov’t spending into perspective

• Grain analyst and trader Richard Crow sizes up commodity markets
• Gold ETFs suffered largest outflow since 2016 in first quarter of 2021
• Rally in transportation stocks nears 122-year-old record streak
• Ag demand update

• Profit-taking prevails overnight
Soybean harvest picks up in Argentina, but still less than half last year’s pace
• Another firm comments on Brazil’s sugarcane crop stunted by dryness
• French wheat ratings drop, reflecting impact of cold temps and dry conditions
• As expected, Russia announces plans to lower export duties on soybeans
• Boxed beef prices still climbing
• Pork prices have fallen over the past week

Policy Focus:
• Senate approves $35 billion bill to clean up the nation’s water systems
• NGFA urges USDA prioritize working land conservation programs re:‘ ‘climate-smart’ policies
• Biden tax plan kicks in at over $500,000 for couples
• Agriculture products and farm income focus of Senate hearing


Biden Administration Personnel

• Nelson confirmed to lead NASA


China Update:
• China issues additional cotton import quota
• China/Australia relations update
• China oil spill put at 400 tonnes; maritime agency says clean-up ongoing
• China-Africa trade leaps in first quarter on post-pandemic rebound  
• Fed's Powell: China's approach to digital currency would not work in U.S.
• China to exempt some imported seed from VAT
• Attaché: Chinese swine numbers unlikely to rebound until at least mid-2021


Trade Policy:
• WTO sees China, EU block dispute settlement panels
• U.S. maintains blockade on restarting WTO Appellate Body


Energy & Climate Change:

• EPA’s Regan not pressed on biofuels, ag regulations in second hearing on EPA budget


Coronavirus Update:
• DOJ: Tyson was not directed by federal government to continue pandemic production
• New York City businesses will fully reopen starting July 1
• Cruise operators could restart sailings out of the U.S. by mid-July
• Disney magic returns… in California


Politics & Elections:
• Florida Republicans pass bill tightening voting rules
• Mike Pence criticizes Biden as he eyes possible 2024 bid
• Ex-Rep. Ryan Zinke eyes new House seat in Montana
• Charlie Cook: ‘Democrats’ infrastructure spending could come at a high political cost’
• DSCC targets four Senate states in new ads
• AOC: Biden and team ‘exceeded expectations’ of far left Democrats

Other Items of Note:
• Tragic festival in Israel
• Supreme Court opens door that could let thousands of noncitizens avoid deportation
• Court gives EPA a chlorpyrifos 60-day deadline
• World's longest pedestrian suspension bridge opens in Portugal




Equities today: Equities are down amid rising Covid-19 cases in Brazil and India and signs of weakening in China’s manufacturing sector and a double-dip recession in Europe. U.S. oil majors take the stage this morning as investors see if Exxon Mobil and Chevron recovered from last year's pandemic-driven losses. Asian equities finished with losses as concerns over the global economic recovery from the pandemic surfaced. Japan’s Nikkei returned from a holiday, falling 241.34 points, 0.83%, at 28,812.63. Hong Kong’s Hang Seng was down 578.38 points, 1.97%, at 28,724.88. European equities are mixed in early trading. The Stoxx 600 was down 0.2% with regional markets seeing gains and losses of up to 0.5%.


     U.S. equities yesterday: The Dow gained 239.98 points, 0.71%, at 34,060.36. The Nasdaq was up 31.523 points, 0.22%, at 14,082.55. The S&P rose 28.29 points, 0.68%, at 4,211.47. The U.S. economy grew at a 6.4% annual rate in the first quarter, approaching its pre-pandemic size, and weekly jobless claims fell to their lowest level since the pandemic began last year.


On tap today:


     •  U.S. personal income for March is expected to climb 20% from the prior month and consumer spending is forecast to rise 4% from a month earlier. (8:30 a.m. ET) Update: Household income rose at a record pace of 21.1% in March as federal-stimulus checks helped fuel an economic revival that is poised to endure with an easing pandemic. The surge in income last month was the largest monthly increase for government records tracing back to 1959, reflecting $1,400 stimulus checks and other government aid included in a $1.9 trillion fiscal relief package signed into law in March. Spending was also up sharply, increasing 4.2%, the Commerce Department said today. That was the steepest month-over-month increase since last summer.
     • Personal consumption expenditures price index excluding food and energy for March is expected to rise 0.3% from a month earlier and 1.8% from a year earlier. (8:30 a.m. ET)
     • U.S. employment cost index for the first quarter is expected to rise 0.7% from the prior quarter. (8:30 a.m. ET)
     • Chicago purchasing managers index is forecast to fall to 65 in April from 66.3 a month earlier. (9:45 a.m. ET)
     • Dallas Fed President Robert Kaplan speaks to the Montgomery, Texas, Area Chamber of Commerce at 9:45 a.m. ET.
     • University of Michigan's consumer sentiment index for April is expected to rise to 87.3 from a preliminary reading of 86.5. (10 a.m. ET)
     • Baker Hughes rig count is out at 1 p.m. ET.
     • CFTC Commitments of Traders report, 3:30 p.m. ET.
     • South Korea's exports are forecast to jump 41.3% in April from a year earlier. (8 p.m. ET)


Official gauges across China’s economy fell short of expectations in April, suggesting that the country’s strong pandemic bounceback is starting to lose some momentum. China’s statistics bureau said the national purchasing managers index for manufacturing fell while global chip shortages, international logistics jams and rising delivery costs weighed on operations. Friday’s official readings also showed continued softness in the service sector — underscoring concerns among economists that domestic spending, a persistent weak point in the recovery, would hold back China’s economy in the coming months. The weaker-than-expected readings come after a year in which the country largely defied expectations to become the only major global economy to grow in pandemic-scarred 2020.


     China eases


Eurozone back in recession. The eurozone economy shrank at the beginning of 2021 for the second consecutive quarter, entering its second technical recession in a year. Across the 19 countries that use the euro as their currency, gross domestic product fell by 0.6% in the first quarter, the European Union's statistics agency Eurostat said today. The latest contraction largely reflects continued restrictions on services activity in response to high rates of Covid-19 infection. Many observers see activity rebounding steadily this year amid a pick-up in vaccine rollouts and the gradual relaxation of restrictions.


    EU recession


Putting the massive U.S. gov’t spending into perspective. President Biden’s proposed $6 trillion in new government spending is far more than any recent president has sought at a comparable point in their terms.


     Big spender     


Market perspectives:


     • Outside markets: The U.S. dollar index is higher as the greenback is making a late-week rebound. Nymex crude oil prices are lower on profit taking after hitting a six-week high on Thursday and are trading around $63.80 a barrel. Meantime, the yield on the benchmark 10-year U.S. Treasury note is presently fetching around 1.645%. Government bond yields climbed world-wide after signs of accelerating U.S. economic growth prompted worries that inflation will rise more rapidly than expected. The yield on the 10-year German bund on Thursday rose to minus 0.178%, the highest since March 2020. Gold and silver futures are under light pressure, with gold trading under $1,766 per troy ounce and silver under $26 per troy ounce.

     • Crude oil has remained under pressure on concerns over the global economic recovery. U.S. crude has fallen to trade under $63.45 per barrel and Brent under $66.60 per barrel. Futures were lower in Asian action after gaining in U.S. action Thursday. U.S. crude was down 37 cents at $64.64 per barrel while Brent crude was down 31 cents at $68.25 per barrel.


     • Grain analyst and trader Richard Crow sizes up commodity markets: “The last two weeks, the July options expiring and the first notice day for July contracts influenced the market. The firmness of cash premiums throughout the period brought evidence of the tight supplies. The rally of the markets impacted the cash basis outside the U.S. to where trade flows began to change. A U.S. company has bought some Brazil beans to come to the East coast.  Black sea wheat trades to Mexico. Rumors of some soybean oil trading to the West coast.  All of these activities bring market adjustments. Brazil's weather continues to be dry.  The crop is being reduced to the 100-million-ton level.  The corn market may have a 100-million-ton crop dialed in, but the weather has a dry forecast for another two weeks. Does Brazil’s crop go to 95 or less? A 90-million-ton corn crop causes a lot of World corn trade flow changes. A 100-million-ton crop, U.S. new crop corn exports will increase. Monday’s U.S. planting progress should be good, and the weather keeps the Iowa, S.D, N.D. area dry.  Illinois, East will have interruptions.”


     • Gold ETFs suffered their largest outflow since 2016 in the first quarter of 2021. Demand fell as interest rates rose.


     • Rally in transportation stocks nears 122-year-old record streak. Shares of airlines, railroads and trucking companies are rolling to their longest streak of weekly gains in more than a century, fueled by investors’ optimism that a resurgence in economic growth will boost profits at transportation companies. The Dow’s Transportation Average added 0.8% Thursday and remained on track to advance for a 13th consecutive week. That would be the index’s longest streak of weekly gains since it rose for 15 consecutive weeks ended in January 1899. The Wall Street Journal notes (link) the transportation average has gained more than 23% this year to record levels, beating the Dow’s 11% climb to its own recent highs.


        Transportation stocks


     • Ag demand update: Jordan’s state grains buyer issued a new international tender to buy 120,000 MT of animal feed barley. Tunisia issued an international tender to buy up to 27,000 MT of vegetable oils from optional origins.


Items in Pro Farmer's First Thing Today include:

     • Profit-taking prevails overnight
Soybean harvest picks up in Argentina, but still less than half last year’s pace
     • Attaché expects pullback in Aussie wheat production and exports in 2021-22
     • Another firm comments on Brazil’s sugarcane crop stunted by dryness
     • French wheat ratings drop, reflecting impact of cold temps and dry conditions
     • As expected, Russia announces plans to lower export duties on soybeans
     • Boxed beef prices still climbing
     • Pork prices have fallen over the past week




— Senate clears water infrastructure bill. The Senate passed a bipartisan drinking water and wastewater infrastructure bill that would authorize $35 billion for drinking water and wastewater infrastructure projects, one component of the larger infrastructure effort being negotiated by lawmakers. The Senate passed the bill (S 914) yesterday with broad bipartisan support on a 89-2 vote.


     Attention now turns to the House, where two committees — Energy and Commerce and Transportation and Infrastructure — have jurisdiction over drinking water and wastewater, respectively. The current House proposals contain more money overall for those programs than the Senate legislation.


     The big-ticket infrastructure proposals from the Biden administration and Senate Republicans both would invest significantly in water infrastructure upgrades. Biden’s plan calls for $56 billion for modernizing wastewater, drinking water and stormwater systems, and an additional $45 billion to replace 100% of lead services lines throughout the country. The GOP counterproposal to Biden’s plan is more in line with the funding levels in the bill passed by the Senate yesterday.


— NGFA urges USDA to prioritize working land conservation programs as it develops ‘climate-smart’ policies. In comments submitted to USDA regarding climate policy priorities, the National Grain and Feed Assn. (NGFA) urged the agency to implement “climate-smart” policies in a manner that allows U.S. agricultural producers and agribusinesses to enhance income without idling land or distorting planting and marketing decisions. Thursday was the last day for recommendations to be filed with USDA. As of this morning, over 1,800 comments had been posted. Link to comments.


— Biden tax plan kicks in at over $500,000 for couples. President Biden’s income tax increase proposal for wealthy Americans would hit individuals earning more than $452,700 in 2022 and married couples making at least $509,300, a White House official said. The new top 39.6% tax bracket, proposed in Biden’s American Families Plan, would encompass less than 1% of taxpayers, the official said. The official’s comments suggested the new rate, up from the current 37%, would be applied from 2022.


— Agriculture products and farm income. Diversifying on-farm income was the focus for the first Senate Ag Appropriations Subcommittee hearing chaired by Tammy Baldwin (D-Wis.). Witnesses included Rebekah Sweeney of the Wisconsin Cheese Makers Association and Jason Weller of the sustainability program Truterra by Land O’Lakes. They touched on financial opportunities for agriculture producers to better strengthen rural communities, including sustainability practices and improved market and broadband access



— Nelson confirmed to lead NASA. The Senate by unanimous consent yesterday confirmed former Sen. Bill Nelson (D-Fla.) to be NASA chief.



— China issues additional cotton import quota. China’s National Development and Reform Commission (NRDC) has issued an additional import quota of 700,000 tonnes for cotton imports this year, with a sliding scale for tariffs. The quota is for private trading firms.  This would appear to be another action in China aimed at bolstering their imports of cotton in order to address increasing actions against products using cotton produced in the Xinjiang region. 

— China/Australia relations: as wine exports continue piling up at Chinese ports, Australian officials explore options. Chinese customs officials have continued to detain more Australian wine at ports of entry this year, while sales to China have plunged as Australian trade authorities consider ways to negotiate the release of shipments. Link for details via South China Morning Post.

— China oil spill put at 400 tonnes; maritime agency says clean-up ongoing. About 400 tonnes of oil spilled into the Yellow Sea after a tanker was hit by another ship off China’s largest crude-receiving port on Tuesday, maritime authorities said on Thursday.

— China-Africa trade leaps in first quarter on post-pandemic rebound. Trade between China and Africa rose by 26.9 per cent in the first quarter of this year compared with 2020, helped by the recovery of economies after the devastating coronavirus pandemic.


— Fed's Powell: China's approach to digital currency would not work in U.S. China's rapid development of a digital version of the yuan will not push the Federal Reserve to rush its own digital currency project, Federal Reserve Chair Jerome Powell said earlier this week, adding that China's approach would not work in the United States.

— China to exempt some imported seed from VAT. China announced it will exempt some imported seeds from the value-added tax through the end of 2025. This is part of the country’s effort to support the introduction and promotion of improved varieties.


— Attaché: Chinese swine numbers unlikely to rebound until at least mid-2021. “Swine numbers are not likely to rebound until at least mid-2021 if the current African Swine Fever (ASF) outbreak is brought under control,” says Alexandra Baych, a U.S. attaché in China. The post explains that China experienced a resurgence of ASF in November and December, with a new, lower virulency/lethality strain spreading to a big portion of the herd before being detected. The new strain reportedly causes lameness in breeding sows and higher piglet mortality rates. “During this period, industry sources noted that the mortality rate and/or culling of breeding sows due to ASF infections ranged from 20% to as high as 50%, depending on the area,” Baych writes. In addition, the incorporation of commercial gilts into the breeding herd lowered overall productivity of the herd. She also notes that some producers are delaying restocking due to concerns about new ASF strains and outbreaks, high piglet prices and high feed costs. This will also slow China’s swine herd rebuild in 2021.




— WTO sees China, EU block dispute settlement panels. The WTO meeting this week of the Dispute Settlement Body (DSB) saw China and the European Union (EU) evoke their rights to block a first request for a dispute settlement panel in trade disputes. China blocked a first request by Australia for a dispute settlement panel to examine China’s anti-dumping and countervailing duty actions imports of barley from Australia. The EU action related to a first request for a dispute settlement panel by Malaysia over EU actions on palm oil and palm-oil based biofuels from Malaysia. Under WTO rules, neither country can block a second request.


— U.S. maintains blockade on restarting WTO Appellate Body. The U.S. this week refused to lift its effective block of the WTO Appellate Body, saying the country was still not in a position to back a plan to open the selection process to fill vacancies on the Appellate Body. The proposal not supported by the U.S. has been backed by 121 WTO members. But the U.S. position of blocking new appointments to the Appellate Body goes back to the Trump administration and so far, the Biden administration has not shifted from that position. There has been speculation that the new Biden administration might look more favorably at restarting the Appellate Body. But the new administration has so far indicated they also want to see reforms to the dispute settlement appeals process.


     The WTO Appellate Body has been inactive since December 2019 when the U.S. blocked appointing new members, preventing it from having a quorum to decide on appeals to WTO rulings.




— EPA’s Regan not pressed on biofuels, ag regulations in second hearing on EPA budget. The second appearance before Congress on the fiscal year (FY) 2022 budget for the Environmental Protection Agency (EPA) did not see issues on biofuels raised nor was there a major focus on any agricultural regulatory issues in the House Appropriations subcommittee session.


     EPA Administrator Michael Regan reiterated his stance that EPA will work with all stakeholders on various issues.


     Asked how to address jobs in fossil fuel, coal, natural gas and oil sectors with the push toward electric vehicles (EVs), Regan said EPA would seek to “leverage the technologies to do so,” noting that there need to be a “robust conversation” on who to achieve the goals. He said EPA will come forward in July with its proposal on tailpipe emissions from automobiles and in September relative to methane emissions.


     On agriculture, Regan reiterated he has established a good working relationship with USDA Secretary Tom Vilsack and referenced his actions as a state environmental regulator in terms of addressing issues in the sector.


     No fuel technology being excluded. During his appearance Wednesday before a Senate panel on the FY 2022 budget, Regan said that no fuel technology is being excluded as the agency looks at meeting climate goals. He observed that there needed to be a glide path toward alternatives like EVs, and that “ethanol plays a significant role in providing those resources here and now today and will evolve as we start to look at the new futures for advanced biofuels and electric vehicles.”


     As for corn-based ethanol, Regan said, “Agriculture is at the table and biofuel plays a role in reducing our carbon footprint and so do many of the voluntary practices of our ag community to capture carbon and operate in a sustainable manner.”


     Senate and House Republicans grilled Regan on his role in formulating the Nationally Determined Contribution (NDC) and asked him to provide them with any documents from the agency’s work. Regan said the agency provided support to the White House that included analysis of the agency’s legal authorities and the greenhouse gas inventory it has maintained for many years. As for specific regulations the agency plans to help achieve the NDC, Regan pointed to new tailpipe emission standards expected in mid-July, new methane rules coming in September and new power sector regulations that are expected at an undetermined time. Regan his agency will use every tool it has available. “The Supreme Court has given us the authority to regulate greenhouse gases and we'll use the statutory authority we have to do so,” Regan said.




Summary: Global cases of Covid-19 are at 150,566,232 with 3,166,697 deaths, according to data compiled by the Center for Systems Science and Engineering at Johns Hopkins University. The U.S. case count is at 32,289,255 with 575,194 deaths. The Johns Hopkins University Coronavirus Resource Center said that there have been 237,360,493 doses administered, 91,571,946 have been fully vaccinated, or 27.9% of the U.S. population.


     Elsewhere, India reported record new cases today, while Brazil’s fatalities exceeded 400,000 as the country registered more Covid-19 deaths in the first four months of the year than all of 2020. Several Indian states have run out of Covid-19 vaccines a day before a planned widening of a nationwide inoculation drive.


— DOJ: Tyson was not directed by federal government to continue pandemic production. The federal government never instructed Tyson Foods and other meatpackers to keep their plants open during the early months of the pandemic, according to the Department of Justice in a recent filing in a federal appeals case. “Tyson stitches together government statements confirming the national interest in the continued production of food during the pandemic,” the brief says. “But mere encouragement to maintain private production under private contracts comes nowhere close to establishing federal direction to perform a federal task.”


— New York City businesses will fully reopen starting July 1, marking an end to many Covid-19 lockdown measures that have restricted their operations for more than a year, Mayor Bill de Blasio said Thursday. Officials concede that tourism won’t fully return to prepandemic levels for years, and employers have been largely targeting the fall for bringing workers back to offices.


— Cruise operators could restart sailings out of the U.S. by mid-July, the Centers for Disease Control and Prevention said, paving the way to resume operations that have been suspended for longer than a year.


— Disney magic returns… in California. Closed since March 2020 due to the coronavirus pandemic, Disney's two California theme parks are getting ready for their grand reopening today. Things will still look a little different with guests required to wear masks and Mickey Mouse maintaining social distancing, though the company has called back more than 10,000 cast members. The reopening of Disneyland and California Adventure will also be restricted to California residents, at least initially, despite California allowing vaccinated out-of-state visitors to visit its theme parks.




— Florida Republicans pass bill tightening voting rules. The bill adds new rules for voting by mail, including restrictions on ballot drop boxes, marking another example of GOP lawmakers amending remote-voting systems after the 2020 elections.


— Mike Pence criticizes Biden as he eyes possible 2024 bid. In his first public speech since leaving office, the former vice president was highly critical of the Biden administration, as he positioned himself for a potential White House bid. Link for details via USA Today.


— Ex-Rep. Ryan Zinke eyes new House seat in Montana. Former Interior Secretary Ryan Zinke formed a committee Thursday to raise money to run for a House seat in Montana that will be created based on new census data.  Zinke won two terms representing the state’s current at-large district before leaving to join the Trump administration in 2017.


— Charlie Cook: ‘Democrats’ infrastructure spending could come at a high political cost.’ Charlie Cook, editor and publisher of the Cook Political Report, writes: “There is an idiom about “whistling past the graveyard”—that is, dismissing the potentially dire circumstances at hand. Congressional Democrats are doing just that, with majorities so narrow as to be almost invisible to the naked eye. With a 5-seat edge in the House and a 50-50 tie in the Senate, Democrats are ignoring the economic risk of enacting the spending package that President Biden will be proposing in his address to Congress Wednesday night, and what the scale of his proposal could mean in the midterms. Biden is in jeopardy of becoming the fifth consecutive president to lose both House and Senate majorities, either in a single midterm election like Bill Clinton (1994) and George W. Bush (2006), or over the course of the presidency like Barack Obama (2010 and 2014) and Donald Trump (2018 and 2020). The biggest difference is that Biden and Democrats have smaller margins today than any of his four predecessors did when they lost those majorities.”


— DSCC targets four Senate states in new ads. Bloomberg reports (link) the Democratic Senatorial Campaign Committee is targeting Sens. Ron Johnson (R-Wis.) and Marco Rubio (R-Fla.), and on the GOP-held open seats in North Carolina and Pennsylvania, “in ads criticizing Republicans for not backing President Joe Biden’s efforts to boost the economy and vaccinate Americans against the coronavirus.”


— If you still think President Biden is a centrist Democrat, consider this quote from AOC: "I do think that the Biden administration and President Biden have exceeded expectations that progressives (far left Democrats) had," Democratic Representative Alexandria Ocasio-Cortez (D-N.Y.) said recently. "I'll be frank, I think a lot of us expected a lot more conservative administration."



— Tragedy in Israel. At least 44 people are dead, including some children, following a stampede at a religious gathering at Mount Meron in northern Israel — one of the country’s worst peacetime disasters. It’s not yet clear what caused the crush, with initial reports referencing a grandstand collapse and a resulting stampede. At least 150 people remain in critical condition following the incident.


— Supreme Court opened a door that could let thousands of noncitizens avoid deportation, ruling that federal agencies failed to properly notify individuals about the time and place of removal proceedings. Link to details via Reuters.


— Court gives EPA a chlorpyrifos 60-day deadline. After chastising the EPA for "13 years of interminable delay," the federal appeals court in San Francisco on Thursday set a 60-day deadline for the agency to either ban agricultural use of the pesticide chlorpyrifos or set newer and safer exposure levels for the chemical. The dissenter in the 2-1 decision said the short time frame "virtually guarantees" a ban.


— World's longest pedestrian suspension bridge opens in Portugal. The crossing is not for the faint-hearted. Held up by steel cables and two massive towers on each side, the bridge wobbles a little with every step.





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