OPEC Sticks to Production Plan Despite Elevated Oil Prices | Biden to Again Tap SPR

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After USDA planting intentions, stocks reports today, focus turns to weather outlook

 

                                                In Today’s Digital Newspaper

Ukraine attacks Russian forces near Kyiv, President Biden plans to tap oil reserves and some potential changes ahead for E15 and summer driving.

Moscow dismissed a diplomatic overture by Ukraine in peace talks, while Russian forces hit targets around the capital despite assurances that they would limit attacks there. Meanwhile, European countries are weighing new sanctions—including targeting more banks and additional family members of oligarchs—to raise pressure on Russia’s economy as the U.S. and the EU look to ensure the sanctions already announced can be effectively implemented.

Ukraine’s economy will suffer more than Russia’s in the short term, but the expected slump in Russia will likely turn into a long period of stagnation, the region’s leading development bank said.

Russia’s ruble has staged a remarkable recovery, aided by furious interventions by Russia’s central bank as well as rising oil and gas prices that have boosted its energy revenue. That’s putting pressure on the Biden administration to do even more to help undercut President Vladimir Putin’s ability to finance the war.

The Federal Reserve’s favored inflation measure showed intensifying price pressures in February, rising to its highest annual level since 1983, the Commerce Department reported this morning. Excluding food and energy prices, the personal consumption expenditures (PCE) price index increased 5.4% from the same period in 2021, the biggest jump going back to April 1983. Including gas and groceries, the headline PCE measure jumped 6.4%, the fastest pace since January 1982.

The Biden administration is weighing a plan to release around 180 million barrels of oil from the Strategic Petroleum Reserve, in what be the largest release from stockpile since it was created in 1975. WTI crude futures tumbled 6.7% to $100.53 on the news, while Brent futures fell 7.3% to $110.23. The coming SPR decision would likely see 1 million barrels released daily over the course of six months, but analysts are still debating the benefits and whether it would put a dent in the inflationary forces seen in the current environment. Meanwhile, the IEA has called an emergency ministerial meeting for Friday to discuss oil supply and coordinate a global release by other countries.

According to data from AAA, the national average for a gallon of gas currently stands at $4.23 per gallon, down a penny from a week earlier, but up from $2.87 one year ago.

Oil producer group OPEC+ today decided to stick to its strategy of gradually reopening the taps following reports the U.S. is considering the largest ever draw from its emergency oil reserve. The energy alliance of OPEC and non-OPEC partners swiftly agreed to raise its output targets by 432,000 barrels per day from May 1. Energy analysts had widely expected OPEC+ to rubber-stamp another modest monthly increase despite sustained pressure from top consumers calling for the group to pump more to cool soaring oil prices and aid the economic recovery.

The price of diesel is surging with impacts not only in the U.S. but around the world. U.S. farmers are seeing big expenditures in their diesel bills.

President Biden is considering invoking the Defense Production Act as soon as this week to boost domestic production of minerals used in batteries needed for electric vehicles and other clean-energy technology.

USDA today releases its Prospective Plantings report and Grain Stocks reports. After those figures are released, focus turns to U.S. weather/planting conditions and crop progress. 

China’s manufacturing and services purchasing managers indexes (PMI) fell in March for the first time in nearly two years. The official manufacturing PMI fell to 49.5, a five-month low. The non-manufacturing PMI fell to 48.4, a seven-month low.

U.S. Trade Representative Katherine Tai faced more questions than providing answers during a House hearing yesterday on the Biden administration’s trade policy. She appears today before a Senate panel on the same topic.

South Korea’s current Covid-19 wave of cases is the largest that any developed country has experienced, reaching three times the number of new daily cases per capita than previous peaks in the U.S. and the U.K. Meanwhile, China’s Covid-19 outbreaks slowed manufacturing activity in March as lockdowns hit factories in industrial districts.

 

MARKET FOCUS

Equities today: Global stocks markets were mixed overnight. The U.S. Dow opened around 90 points lower and are down around 120 points at this writing. Asian equities finished with losses following declines on Wall Street Wednesday. The Nikkei was down 205.82 points, 0.73%, at 27,821.43. The Hang Seng Index lost 235.18 points, 1.06%, at 21,996.85. European equities are showing losses in early trading, with most markets now trading loser. The Stoxx 600 was down 0.2% with losses of 0.1% to 0.5% in regional markets.

     U.S. equities yesterday: The Dow declined 65.38 points, 0.19%, at 35,228.81. The Nasdaq fell 177.36 points, 1.21%, at 14,442.27. The S&P 500 was down 29.15 points, 0.63%, at 4,602.45.

     Stocks 033022

Agriculture markets yesterday:

  • Corn: May corn futures firmed 11 3/4 cents to $7.38, while December corn gains 3 1/4 cents to $6.56.
  • Soy complex: May soybean futures rebounded 21 cents to $16.64, while May soyoil climbed 56 points to 72.22 cents and May soymeal gained $7.10 to $473.10.
  • Wheat: May SRW wheat closed up 13 cents at $10.27 1/4. May HRW wheat closed up 20 cents at $10.44 1/2. Spring wheat futures advanced 15 cents to close at $10.58.
  • Cotton: May cotton closed up 303 points at 139.84 cents and December gained 140 points at 112.44 cents — both nearer their session highs.
  • Cattle: April live cattle dropped 72 1/2 cents to $140.175, while June cattle fell 47 1/2 cents to $138.00. April feeder cattle declined 67 1/2 cents to $163.675 and May feeders dropped 50 cents to $168.90.
  • Hogs: Hog futures turned lower Wednesday, with the expiring April contract falling $1.525 to $104.525. Most-active June futures dropped 40 cents to $124.225.

Ag markets today: Corn, soybean and wheat futures held in narrow ranges in quiet, two-sided trade overnight. As of 7:30 a.m. ET, old-crop corn futures were narrowly mixed while new-crop corn was around 4 cents higher, soybeans were trading fractionally on either side of unchanged, SRW wheat futures were 1 to 2 cents higher, HRW fractionally mixed and spring wheat 6 to 7 cents higher. Front-month crude oil futures are down around $6, and the U.S. dollar index was up nearly 400 points this morning.

Technical viewpoints from Jim Wyckoff: “Today is the last trading day of the month and of the quarter, which makes it an extra important day from a technical charts perspective.”

     March 31 corn

     March 31 soybeans

     March 31 crude

     March 31 bonds

     March 31 gold

On tap today:

     • U.S. jobless claims are expected to rise to 195,000 in the week ended March 26 from 187,000 one week earlier. (8:30 a.m. ET) UPDATE: Initial jobless claims, a proxy for layoffs, rose by 14,000 to a seasonally adjusted 202,000 last week, the Labor Department said Thursday, up from the week before when they reached a revised 188,000, the lowest level in more than 52 years. The four-week moving average, which smooths out volatility, decreased to 208,500 from a revised 212,000.
     • U.S. consumer spending for February is expected to rise 0.5% from the prior month. (8:30 a.m. ET) UPDATE: Consumer spending increased 0.2% in February, the Commerce Department said Thursday, a slowdown from the prior month as inflation stayed elevated.
     • U.S. personal consumption expenditures price index excluding food and energy is expected to rise 0.4% from one month earlier and 5.5% from one year earlier in February. (8:30 a.m. ET) UPDATE: The Federal Reserve’s preferred inflation gauge rose 6.4% from a year earlier, more than expected. Core PCE was actually slightly lower at 5.4% vs the expected 5.5% for Core PCE YOY
     • USDA Weekly Export Sales report, 8:30 a.m. ET.
     • New York Fed President John Williams gives opening remarks at a New York Fed conference at 9 a.m. ET.
     • Chicago purchasing managers index is expected to rise to 57.0 in March from 56.3 one month earlier. (9:45 a.m. ET)
     • USDA reports: Prospective Plantings, Grain Stocks at noon ET.
     • Bank of Japan's tankan survey for the first quarter is out at 7:50 p.m. ET.
     • China's Caixin manufacturing index for March is out at 9:45 p.m. ET.

The White House’s proposed budget relies on an upbeat economic outlook to aid President Biden’s deficit push and help make the case that his policy proposals are fiscally responsible. The forecasts are rosier than some outside analysts’ forecasts, partly because they were finalized in November, before the Fed’s interest-rate increases and Russia’s invasion of Ukraine. The budget predicts inflation-adjusted GDP in 2023 will be up 2.5% from a year earlier, compared with the Fed’s median forecast of 2.2% and Goldman Sachs’s 2%, both issued in March. The budget also assumes inflation, running at its fastest pace in 40 years, will slow substantially more than Goldman expects.

Russia’s invasion of Ukraine has hit optimism among euro zone households and businesses, though both remain more upbeat than during the darkest months of the Covid-19 pandemic. A monthly survey conducted by the European Union found that sentiment among businesses and households weakened to its lowest level in a year during the early weeks of March. This was largely a result of a sharp fall in consumer confidence as households quickly marked down their expectations for economic growth over the coming 12 months.

     Euro zone sentiment

In March, Germany's consumer-price index shot up 7.3% from one year earlier, a 40-year high, Spain’s jumped 9.8%, the highest since 1985, and Belgium’s climbed 8.3%. Rising energy prices were the driving force. Full data for the euro zone are out Friday.

     Germany inflation

U.S. ag inflation watch: Fertilizer prices are up some 27% this year and a whopping 130% over the past year.

2021 was the most profitable year for American corporations since 1950. Profits surged 35%, according to the Commerce Department, driven by strong household demand, which was underwritten by government cash transfers during the pandemic. Workers got a bump too — though not as much as shareholders — with compensation rising 11%.

     Profits

Market perspectives:

     • Outside markets: The U.S. dollar index is firmer ahead of U.S. economic data, with a mixed tone in global currencies versus the greenback. The yield on the 10-year U.S. Treasury note has eased to trade around 2.32% with a mostly lower tone in global government bond yields. Gold and sliver prices are lower ahead of economic data, with gold around $1,935 per troy ounce and silver around $25.05 per troy ounce.

     • Crude oil futures are under pressure ahead of U.S. gov’t inventory data, likely from reports the U.S. expected to again tap its strategic reserves (see related item). US crude is trading around $102 per barrel with Brent around $106 per barrel. Futures were under pressure in Asian action, with US crude falling to around $101 per barrel and Brent around $106 per barrel.

     • Expensive diesel poses a big problem for global business… and farmers. The fuel’s price has risen sharply since the invasion of Ukraine, given that Russia is a major supplier. That has rippled through industries including construction and shipping and has hit Europe especially hard. U.S. farmers have already seen their diesel costs surge. “It’s not just the fuel we put into pickups, tractors, combines,” said Chris Edgington, an Iowa corn farmer. “It’s a cost of transporting those goods to the farm, it’s a cost of transporting them away.” Car owners in the United States have been shocked by gasoline prices of more than $4 a gallon, but there has been an even bigger increase in the price of diesel. Fueling stations in Argentina have begun rationing diesel, jeopardizing one of the world’s leading agricultural economies, and energy analysts warn that the same could soon happen in Europe, where some businesses report spending twice as much on diesel as they did a year ago. Link for details via the New York Times.

        Diesel prices

     • President Biden is preparing to announce the release of up to 1 million barrels of oil a day from the U.S. Strategic Petroleum Reserve (SPR). Biden is expected to deliver remarks today on the administration’s efforts to curb the rise in energy prices. The action, first unveiled by Bloomberg, could total 180 million barrels over several months, the report said. The administration previously released 50 million barrels from the SPR in November 2021 and another 30 million barrels in March after the Russian invasion of Ukraine. But the releases have not had a significant downward impact on gasoline prices. Meanwhile, Reuters reported that the administration is considering allowing sales of E15 (15% ethanol/85% gasoline) year-round by removing the restriction on sales during summer months. The Trump administration had put forth rules to allow year-round sales, but the action was struck down in court. Given the intense focus on gasoline prices and the indications that broadening ethanol sales via year-round E15 is under consideration, the administration is not seeking to curtail biofuels use but rather expand it.

        Upshot: The proposal may help the market rebalance this year but won't solve a structural deficit, Goldman Sachs Group said. A release would reduce the amount of necessary price-induced demand destruction, but it’s not a persistent source of supply for coming years. The release would help cap oil prices in the short-term, but it’s unlikely to make up for the losses of Russian oil exports, said Jeffrey Halley, a senior market analyst at Oanda Asia Pacific Pte. In the longer run, it means that the U.S. SPR will be substantially reduced when demand typically climbs over the U.S. summer driving season, a potential upside for oil prices. The move is likely to be insignificant, with the key focus still being Russian exports, said Victor Shum, vice president of consulting at S&P Global. A wide range of outcomes are possible on Russian crude, with up to 7.5 million barrels a day of exports at stake. Any loss of Russian shipments could be replaced through higher output from Saudi Arabia and the United Arab Emirates and release of government-controlled reserves, at least for several months. Should Russian exports fall 3 million barrels a day from pre-invasion levels from April to December, that would be 825 million barrels, well above the 575 million barrels currently held in the already-shrinking U.S. SPR, he said.

        Background: The SPR consists of four underground salt caverns along the Texas and Louisiana coasts that held about 568 million barrels of oil as of March 24, according to the Energy Information Administration (link). That is enough to satisfy U.S. demand for several weeks. The supply is owned by the U.S. government and managed by the Energy Department. Federal law gives U.S. presidents the power to release oil from the reserves to minimize supply disruptions. Congress authorized the SPR in 1975, in the wake of the Arab oil embargo, as a buffer against supply shocks from oil exporters.

        Crude oil

     • Export boom drains U.S. gas supplies. The U.S. is shipping more natural gas than ever overseas, which is keeping domestic inventories lean and power prices high. Natural-gas prices usually decline into spring, when heating demand drops but before air-conditioning season begins. Gas producers and traders use the off-season to build up inventory for summer, socking away fuel in storage facilities until the weather turns and demand and prices rise. This year prices climbed into spring, thanks to record export volumes and promises from the White House to support the shipment of even more liquefied natural gas, or LNG, to allies across the Atlantic to supplant Russian supply. Link for details via the WSJ.

      Natgas 2

           U.S. natural gas futures for May delivery ended Wednesday at $5.605 per million British thermal units, more than double the price from a year ago. So far in 2022, natural-gas prices have risen 50%.

        Nat gas prices

     • Battery backup. President Joe Biden is poised to invoke as soon as this week Cold War powers to encourage domestic production of critical minerals for electric-vehicle and other types of batteries, according to reports. The White House is poised to add battery materials to the list of items covered by the 1950 Defense Production Act. Adding minerals like lithium, nickel, graphite, cobalt and manganese to the list could help mining companies access $750 million under the Defense Production Act’s Title III fund. The move also could aid recycling of battery materials.

        Facts and figures. The number of mineral commodities, excluding fuels, for which the U.S. is reliant on imports for more than a quarter of demand has jumped to 58 products from 21 in 1954, the White House said in a July report on the nation’s supply chains.

        Minerals

     • Talks to hammer out a new labor contract for dockworkers on the U.S. West Coast will start May 12 ahead of the current deal’s expiration on July 1, said Jim McKenna, the chief executive of the Pacific Maritime Association representing carriers and terminal companies. The expiring contract covers about 22,000 West Coast port workers — represented by the International Longshore and Warehouse Union — and their employers, ocean carriers and port operators, represented by the PMA. While wages and benefits are frequent sticking points, the employers’ right to automate could emerge as a particularly thorny issue. ILWU President Willie Adams said he’s optimistic about the negotiations and that the union is looking forward to sitting down with the employers in May.

     • Cotton futures are heading for their longest streak of quarterly gains in more than six decades fueled by a drought threatening key crops in the U.S., the biggest exporter. West Texas, the biggest growing region, probably won’t get rain relief from drought in the next 30 days, said Joel Widenor, a meteorologist with Commodity Weather Group. For the planting season that ends in May, soil moisture conditions at this point are “very severe” and “worse” than during the 2011 drought, when the area lost almost all of its non-irrigated crops. Oklahoma fields are also suffering from extreme dryness. The May contract rose as much as 2.4% to $1.4014 a pound on ICE Futures U.S., approaching 11-year highs. Prices are up 18% for the month, and for the eighth straight quarter, the most since 1959.

     • Cofco wins concession for large grains terminal in Brazil port. Cofco International Brasil SA won a 25-year concession for a new agricultural solid bulk terminal in Brazil’s Santos Port. The company paid R$10 million ($2.1 million) for the grant and will invest R$764 million in the project, Santos Port Authority said in a statement. Cofco must also pay R$3.7 million monthly and R$5.63 per ton moved, which can total to R$100 million per year in revenue for the port. The terminal will expand Cofco’s own port capacity in Brazil to 14 million metric tons per year and “support company plans to increase exports from the country,” Cofco said in a separate statement. Cofco currently operates two port terminals for grain and oilseeds, one processing plant and 19 storage facilities scattered around the country, with some connected by railroad with Santos. The terminal will be operational in 2026 and will run for 25 years, with potential extension to 70 years, according to Cofco. The terminal will be one of the largest in the Port of Santos.

        Santos
        Santos 2

     • 789,428 is the number of coal carloads carried by U.S. railroads in the first 12 weeks of the year, a 10.2% increase over the same period a year ago, according to the Association of American Railroads.

     • Ag trade: Algeria purchased around 600,000 MT of optional origin milling wheat. Saudi Arabia tendered to buy 355,000 MT of optional origin wheat.

     • NWS weather: Severe thunderstorms and excessive rainfall threat on Thursday over parts of the East Coast... ...Light snow over the Upper Great Lakes and the Rockies... ...There is an Elevated Risk of fire weather over parts of the Florida Peninsula on Wednesday.

        NWS 033122
        Wx 033122

Items in Pro Farmer's First Thing Today include:

     • Quiet overnight trade ahead of USDA reports
     • Key acreage, grain stocks data out later this morning
     • China pumps more money into winter wheat crop (details in China section)
     • Bullish H&P Report
     • Light cash cattle trade at steady prices

 

RUSSIA/UKRAINE

Summary: Ukraine’s president said his country’s defense against the Russian invasion was at a “turning point” and again pressed the U.S. for more help, hours after the Kremlin’s forces reneged on a pledge to scale back some of their operations. Russian bombardment of areas around Kyiv and the northern city of Chernihiv and intensified attacks elsewhere in the country further undermined hopes for progress toward ending the conflict. Talks between Ukraine and Russia were set to resume Friday by video, according to the head of the Ukrainian delegation, David Arakhamia. The aim for the next week is to agree enough to set up a meeting between Presidents Vladimir Putin and Volodymyr Zelenskiy. Ukraine said Russia will open a humanitarian corridor today to evacuate people from Mariupol. The U.K. said strikes remain "significant" around Chernihiv despite Russian statements that it intends to reduce activity in the area. A delegation of Ukrainian lawmakers visited Washington on Wednesday to push for more U.S. assistance, saying their nation needs more military equipment, more financial help and tougher sanctions against Russia. Meanwhile, Ukraine’s head negotiator said that it would take at least a year for the country to hold a referendum on whether to become a neutral country. Ukrainian neutrality is a key Russian demand and it was discussed at peace talks in Turkey on Tuesday.

  • Volodymyr Zelenskyy, Ukraine’s president, warned that Russia was preparing for a big offensive in his country’s eastern Donbas region. Speaking at his nightly wartime address, he cast doubt on Russia’s pledge, made during negotiations this week, that it would scale down military operations.
  • Ukraine’s gov’t has asked international marine insurers to stop all dealings with shipping companies carrying Russian fossil fuels in a bid to intensify pressure on Vladimir Putin’s regime.
  • Lawmakers want the SEC to require hedge funds and private equity firms to do more to verify the identities of their investors, to root out Russian oligarch money.
  • U.S. and European officials said Vladimir Putin has been misinformed by his aides about the Russian army’s poor performance in Ukraine. A spokeswoman for the Biden administration said the Russian president’s “senior advisers are too afraid to tell him the truth”. There were suggestions of significant tension between Putin and Sergei Shoigu, his defense minister.

— Market impacts:

  • Romania in talks to aid Ukraine grain exports: Defense minister. Romania is facilitating a transfer mechanism from Ukraine to Constanta port at the Black Sea to aid its neighbor find new routes for its grain exports after the Russian invasion, Defense Minister Vasile Dincu said. “The talks are being held not only among governments, but also between companies and we’re facilitating this transfer mechanism from Ukraine to Constanta,” Dincu said. “This may help Ukraine get funding for its survival. Romania has no issues with grains supply and of course this could benefit the Constanta port as well. And after all, even if there is no benefit, we’re still supporting a neighbor in need.”
     
  • Russia will bar exports of sunflowerseed and put limits on sunflowerseed oil exports. Sunflowerseed exports will be halted from April 1-August 31, the Russian Ag Ministry announced, with an export quota of 1.5 million tonnes on sunflowerseed oil from April 15-August 31. There will also be a export quota of 700,000 tonnes for sunflower meal.
  • Russia is set for a steep slump and long stagnation. The European Bank for Reconstruction and Development said the country's economy will contract by about 10% this year in the wake of the Ukraine invasion. Ukraine will suffer more in the short term because of the extensive damage to its physical infrastructure but bounce back quicker with sufficient outside aid.

    Russia forecast

     
  • Russia reportedly plans to repay foreign investors in a $2 billion bond in dollars, staving off worries about a default or switch to rubles.
     
  • The ruble has regained most of its value since Russia’s invasion, though experts say the recovery may be artificial.

 

POLICY UPDATE

— Drought-hit California wants to pay farmers to cut plantings; $2.9 billion plan could fallow up to 35,000 acres of rice. California, impacted again by a major drought, proposed a $2.9 billion plan to pay farmers to reduce some of their planting to better manage water resources. The voluntary agreement negotiated between government officials and some of the state’s major water agencies is also aimed at protecting salmon and other wildlife and ecosystems. The agreement could leave as much as 35,000 acres of rice unplanted in the northern Central Valley growing region. “Every crop in that region from rice and tomatoes and grapes to irrigated pasture for livestock and tree nuts like almonds, pistachios and walnuts are going to be affected by this,” said Mike Wade, executive director of the California Farm Water Coalition in Sacramento. Rice is more flexible than some other crops for fallowing because it’s not required to be irrigated every year, said Wade. California produces all the U.S.’ domestically grown sushi rice, he said.

— France will allow farmers to cultivate land they had declared fallow for the 2022 growing season, as the war in Ukraine threatens global food security, its agriculture ministry said. Growers can plant spring crops including proteins, oilseeds and grains, or use the area for grazing. Fallow land represents about 741k acres in France, about 1% of total agricultural area. The objective is to aid European food and feed supplies, as well as global reserves, particularly for grain import-dependent countries in Mediterranean and Africa.

 

PERSONNEL

— FTC nominee. Senate Democrats used a parliamentary maneuver to advance Alvaro Bedoya to the Federal Trade Commission (FTC), setting the stage for Democrats to gain a majority on the panel.

 

CHINA UPDATE

— China still buyer of U.S. sorghum, soybeans. USDA’s weekly Export Sales update for the week ended March 24 included net sales to China for 2021-22 of 50,800 tonnes of sorghum, 593,200 tonnes of soybeans, and 177,000 running bales of upland cotton. There were also cancellations of 18,400 tonnes of corn to China, but exports to China totaled 457,600 tonnes for the week.

     China also purchased 7,100 tonnes of beef and 600 tonnes of pork for 2022.

— China’s manufacturing sector contracts in March. China’s official purchasing managers index (PMI) fell to 49.5 in March 2022 from 50.2 in the prior month. This was the first contraction in factory activity since last October, reflecting the impact of widespread Covid-19 outbreaks in key cities, including Shanghai and Shenzen. Beijing will rollout policies to stabilize the economy as soon as possible, as the downward pressure in the economy increased, state media reported. Services-sector activity also tumbled, as Covid-19 and government efforts to smother it kept people away from malls, restaurants and hotels. Darkening the outlook further, the focus of China’s efforts to combat the virus has shifted to Shanghai, China’s most populous city — Covid-19 cases in Shanghai continued to surge, sinking hopes that business and everyday life in China’s financial capital will return to normal in the coming days. Shanghai's phased lockdown will see some 16 million people confined to their homes and continue to strain global supply chains. Tesla will suspend work at its local factory through at least Friday, while VW said it'll maintain some production.

     The Caixin/Markit PMI will be released tonight and is also expected to show contraction in China’s smaller, privately owned factories.

     China data

— SEC Chair Gary Gensler tamped down speculation that a deal is brewing to keep about 200 Chinese stocks from losing their U.S. listings, signaling that only total compliance with American audit inspections will be sufficient. Baidu, Futu, Nocera, iQIYI and CASI Pharmaceuticals were also added to an SEC list of companies that may get booted from U.S. exchanges.

— China pumps more money into winter wheat crop. China has allocated another 2 billion yuan ($315 million) to facilitate the growth of its winter wheat crop, the country’s finance ministry said. China has allocated 5 billion yuan in total from its central finance system to stabilize winter wheat output this crop year. The ministry says the money will be used to help make the crop stronger in 11 main production provinces, without providing any specifics.

 

TRADE POLICY

— U.S. Trade Representative Katherine Tai said that the U.S. must shift the focus of its trade policy to rebuilding its domestic manufacturing industries, and lessening ties to unfriendly economies. Appearing before the House Ways and Means Committee, Tai said that global events such as Russia’s invasion of Ukraine and the supply-chain disruptions triggered by the Covid-19 pandemic point to the need for new priorities. “The problem that we are confronted with today—after two years of Covid and also Russia’s invasion of Ukraine — is that this version of globalization that we are living in has not taken us to a place where we feel more secure,” Tai said.

     Tai gave no indication new trade deals are in the cards despite a bipartisan push. Both Democrats and Republicans on the House Ways and Means Committee Wednesday prodded Tai about reaching new free trade agreements (FTAs) with several countries like the European Union (EU), U.K. and Kenya, but Tai gave no indication that the administration was going to pursue any such deals. Instead, Tai focused her remarks on the Biden administration push to use Trade and Investment Framework Agreements (TIFAs) to achieve U.S. trade goals. While those types of agreements can address certain areas on trade like sanitary or phytosanitary issues relative to agricultural products, they do not address tariff levels or market access.

     As for China, Tai commented that the discussions with Chinese Vice Premier Liu He over their Phase 1 trade agreement commitments had been difficult and resulted in little progress on getting China to live up to their commitments — observations that Tai has made in recent weeks relative to the talks that started in October.

      While Tai pointed to other actions by the administration on trade to reduce tensions and remove tariffs in certain areas, she did not offer any new update on getting Canada to bring its operation of tariff-rate quotas (TRQs) for dairy in line with a U.S.-Mexico-Canada Agreement (USMCA) ruling which found them in violation of the deal. Tai also did not indicate whether the U.S. was ready to push ahead with retaliation against Canada in the matter.

     Tai will appear before the Senate Finance Committee today to discuss the administration’s trade agenda, with the House session setting the stage for the expected focus in today’s session.

     Bottom line: While Tai offered lawmakers some additional perspective on the administration’s trade agenda, the areas she did not comment on speak louder on their trade policy.

— Biden administration Indo Pacific trade strategy still a work in progress. U.S. trade officials met this week with officials from Singapore, Australia, New Zealand and other countries in the Indo Pacific region with the discussions in part focusing on the Biden administration’s push for an Indo-Pacific Economic Framework (IPEF) deal.

     Singapore Prime Minister Lee Hsien Loong said after his meetings that the administration’s effort does not address all the issues countries in Southeast Asia want included. “Let’s take some baby steps toward market access and trade liberalization,” Lee said in remarks to the Council on Foreign Relations, but he acknowledged the IPEF plan could eventually pave the way for such discussions.

     Biden administration strategy. Officials like U.S.Trade Representative Katherine Tai and Commerce Secretary Gina Raimondo have continued to insist that the IPEF is a robust effort that will bring positive results for the U.S. But it is still a work in progress, as Australian trade minister Dan Tehan told Politico in an interview that the discussions so far are on “framing the framework” with discussions on enforcement provisions still to come. The countries working on the framework are the US, Australia, Japan, Singapore and New Zealand, according to Tehan.

     Upshot: The onus is clearly on the Biden administration to deliver results via their IPEF effort given the lawmaker focus and the focus from other countries that tariff removal and market access issues need to be addressed relative to increasing U.S. exports to the region. 

— Bipartisan push for agriculture issues to be addressed in Indo Pacific framework deal. Nearly 90 Democratic and Republican House members have written to USTR Katherine Tai and USDA Secretary Tom Vilsack, calling on them to make sure that several agricultural trade issues are addressed in the administration’s planned Indo-Pacific Economic Framework (IPEF).

     The lawmakers touted climate-related U.S. agricultural practices for several agricultural commodities that have lowered greenhouse gas (GHG) emissions for the sector and have resulted in environmentally friendly U.S. agricultural exports. But they noted that U.S. agricultural exports “continue to face major tariff and non-tariff barriers to entry to many nations in the region.”

     The lawmakers said they understand the IPEF will address standards in several areas, and they want sanitary and phytosanitary issues to be among them. Addressing those issues will “help facilitate trade and protect consumers.” They also urged efforts on regulatory reforms, including improving the ability of U.S. farmers and food manufacturers to export via “timely results that remove or streamline certification or registration requirements,” in other words, getting countries to accept US food safety and animal and plant health oversight systems.

     Reducing tariffs is another ask from the lawmakers, but they noted that even though the IPEF “will not initially be a comprehensive trade agreement that deals broadly with tariffs, this should not preclude efforts to increase agricultural market access by reducing our trading partners’ tariffs.”

     Consensus: Lawmakers from both parties are pushing the administration to broaden their focus on trade issues to address market access and tariffs, items that typically would be addressed in broader trade agreements that do not appear to be a part of the Biden administration’s trade agenda.

 

LIVESTOCK, FOOD & BEVERAGE INDUSTRY

— Bird flu continues to spread in the U.S., threatening Chicken exports. A deadly strain of bird flu that’s been raising egg prices ahead of Easter was discovered in five new U.S. states Wednesday, and the virus increasingly is threatening American poultry exports. Highly pathogenic avian influenza (HPAI) was discovered at a commercial poultry farm in Johnston County, North Carolina, and in backyard flocks in Massachusetts, North Dakota, Ohio and Wyoming, USDA said. Since mid-January, it’s been found in 23 states in flocks totaling nearly 17 million birds. Countries have been temporarily banning imports from U.S. states where bird flu is present as a result, according to USDA. Top buyers such as Mexico, China and Cuba could bring in less poultry following the discovery in North Carolina, a major producer of chicken and turkeys, said Jim Sumner, president of the USA Poultry & Egg Export Council. Bird flu will also make eggs relatively scarce for the Easter holiday, with production still below levels seen prior to the Covid-19 pandemic. Under Organization for Animal Health (OIE), member countries are called on to not impose bans on international trade of poultry commodities in response to notifications in non-poultry or backyard flocks. However, some have opted to make such restrictions.

     HPAI map

— APHIS rule on cattle ear tags moves to OMB for review. USDA’s Animal and Plant Health Inspection Service (APHIS) has sent a proposed rule to the Office of Management and Budget (OMB) for review that states APHIS would only recognize identification devices (e.g., eartags) as the official identification for cattle and bison “if the devices have both visual and electronic readability (EID).” APHIS said the proposed rule would amend animal disease traceability regulations. Other changes in the proposed rule would boost the US traceability system to provide better rapid trading of diseased and exposed animals and containing outbreaks.

 

CORONAVIRUS UPDATE

Summary: Global cases of Covid-19 are at 486,941,058 with 6,139,121 deaths, according to data compiled by the Center for Systems Science and Engineering at Johns Hopkins University. The U.S. case count is at 80,057,277 with 979,870 deaths. The Johns Hopkins University Coronavirus Resource Center said that there have been 560,419,082 doses administered, 217,556,439 have been fully vaccinated, or 66.27% of the U.S. population.

— Covid-19 wave that is tearing through South Korea is the largest that any developed country has experienced, reaching three times the number of new daily cases per capita than previous peaks in the U.S. and the U.K. Yet, South Korea has all but given up on trying to stop the spread of the virus. South Korea is at the leading edge of countries in Asia that kept cases low for much of the pandemic but are now sizing up the virus differently, as high vaccination rates have kept hospitalizations and deaths low. Singapore, Japan and Australia are also among nations in the region dropping restrictions, but South Korea would be the first to downgrade the threat level it assigns to the virus, effectively lifting the emergency powers that it used to contain it.

     Covid compare

 

POLITICS & ELECTIONS

— Border security. Some moderate Democrats have called on the Biden administration to keep in place a pandemic policy that allows migrants to be turned away at the border, set to be lifted in May, until there is a comprehensive plan to handle high numbers of migrants.

 

CONGRESS

GOP Sen. Susan Collins of Maine said she will vote to confirm Judge Ketanji Brown Jackson to the Supreme Court, the first Republican to back President Biden’s nominee.

 

OTHER ITEMS OF NOTE

Treasury Department announced new sanctions against Iran's ballistic missile program in response to a missile attack in Iraq earlier this month. It’s yet another setback for U.S. efforts to reenter the Iran nuclear deal, also known as the Joint Comprehensive Plan of Action.

— EPA expands Enlist herbicide use clearances. EPA earlier this week lifted a ban on use of Corteva Agriscience’s Enlist herbicides in 134 counties in nine states after the agency concluded the pesticides are unlikely to jeopardize listed species or their critical habitats found in those regions. The two products — Enlist One and Enlist Duo — can now be used in “all counties of Arkansas, Kansas, Minnesota, Missouri, Nebraska, Ohio, Oklahoma and South Dakota” and in six Texas counties that were not covered by the original registrations issued in January. Those registrations allow spraying of Enlist One and Enlist Duo on 2,4-D tolerant Enlist cotton, corn and soybeans in 34 states, but barred use in some areas because of concerns over risks to listed species, primarily the American Burying beetle. “EPA now expects that, given the current mitigations on the product labels, these products will not likely jeopardize listed species or adversely modify critical habitats,” the agency said.

— U.S. rural population rose by about 117,000 people in 2021. While less than half a percentage point, it was the largest annual increase in more than a decade, according to an analysis of Census Bureau data. Link for details.


 

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