U.S. Private Job Growth Hits Over 1-Year High

Yellen in China | USTR Tai in Mexico | Europe: Diesel price surge, no reason to block glyphosate renewal

USDA Weekly Export sales report is pushed back to Friday. Due to Tuesday’s government holiday, export sales data for the week ended June 29 will be released Friday morning.

As expected, the Fed minutes reflected policy makers’ desire to resume hiking rates after June’s pause as Chairman Jerome Powell aims to get the annual inflation rate down to the central bank’s target of 2%. More in Markets section.

President Biden will announce a $60 million investment from Enphase Energy Inc., a solar-energy equipment maker, when he travels today to South Carolina. The president has been highlighting a push to add manufacturing jobs, boosted in part by the $370 billion Inflation Reduction Act. More in Energy section.

The surge in Americans quitting their jobs has abated since peaking during the pandemic, another sign that the labor market is cooling. However, U.S. private job growth hit over a one-year high. More in Markets section.

The U.S auto industry is showing signs of recovery, with an alignment between its production and inventory levels with robust consumer demand.

Facebook owner Meta Platforms on Wednesday launched Threads, an app that takes direct aim at Twitter as user unrest on that platform has grown since Musk took it over in October.

Wagner Group leader Yevgeny Prigozhin is said to be in Russia. Prigozhin is back in Russia after his short-lived revolt, according to Belarusian President Alexander Lukashenko, who brokered a deal with the Wagner leader to halt his march on Moscow last month, promising him safe passage to Belarus. More in Russia & Ukraine section.

Beijing is urging Tokyo to reject the United States' policy of restricting exports of advanced chip manufacturing equipment to China.

The diesel market in Europe has experienced a surge, highlighting its susceptibility to shortages following the halt of imports from Russia earlier this year.

India, which accounts for 40% of the world's rice exports and is its cheapest supplier, is set to boost payments to its farmers.

Large-scale U.S. farmers and ranchers have shown slightly increased optimism that a new farm bill will be enacted this year. More in Policy section.

Grain Gates LLC, a company created in the wake of the Ukraine invasion, has become Russia’s top wheat trader in the space of a year

Russian agricultural bank Rosselkhozbank said it was not considering setting up a subsidiary that could connect to the SWIFT global payments system, Interfax reported.

To compete with its rapidly progressing rivals, Subway is bringing a significant change to its meats — they will now be freshly sliced at their approximately 20,000 U.S. locations. More in Food section.

European Commission releases proposal on gene-edited product regulations.

European Food Safety Agency indicates no reason to block glyphosate renewal.

The Army Corps of Engineers is inviting public feedback on a new plan aimed at minimizing flooding in the Yazoo Basin.

Recent data shows that high temperatures in June and July have been setting global records. The global average temperature in the atmosphere reached a peak of 62.9 degrees Fahrenheit on Tuesday, surpassing the previous record set just one day earlier at 62.6 degrees. This data is gathered daily by the National Oceanic and Atmospheric Administration and is analyzed by the University of Maine.

     Adding to this, the Copernicus Climate Change Service, a research agency sustained by the European Union, disclosed that June has been the hottest on record. As per the climate scientists at Copernicus, the record-setting temperatures can be attributed to the industrial emissions of greenhouse gases over a span of several decades, coupled with the development of an intense El Niño weather pattern in the Pacific Ocean.

The U.S. State Department announced it does not anticipate passport processing times to return to pre-pandemic levels until the end of this year.

President Biden may not appear on the New Hampshire primary ballot due to changes he directed in the presidential primary calendar.

Donald Trump raised more than $35 million in the second quarter. The amount was nearly double what the former president raised in the previous three months and shows how multiple indictments appear not to have hurt him politically. Meanwhile, Gov. Ron DeSantis of Florida is still struggling to make a strong case against Trump.

Equities today: Asian and European stock markets were mostly lower in overnight trading. U.S. Dow opened around 200 points lower and then traded over 300 points lower. Hong Kong stocks slumped by the most in seven months as further signs of slowdown in mainland China hurt the nation’s currency. A sell-off in Chinese banks deepened. In Asia, Japan -1.7%. Hong Kong -3%. China -0.5%. India +0.5%. In Europe, at midday, London -1.3%. Paris -1.8%. Frankfurt -1.1%.

     U.S. equities yesterday: All three major indices ended the session with losses with only the Nasdaq able to spend some time in positive territory early in the session. The Dow ended down 129.83 points, 0.38%, at 34,288.64. The Nasdaq was down 15.12 points, 0.18%, at 13,791.65. The S&P 500 declined 8.77 points, 0.20%, at 4,446.82.

     The parent company of Facebook, Meta, has officially launched a new application, "Threads," aiming to compete directly with Twitter. The app has a striking resemblance to Twitter, not only in terms of layout but also in the functionality it offers, which is to foster real-time online conversations — a prime feature of Twitter. Threads thus adds to the growing number of Twitter's rivals but seems to pose a serious threat due to Meta's significant resources and extensive user base. Threads quickly gained popularity, with 10 million sign-ups within the first seven hours of its launch, as stated by Meta's CEO, Mark Zuckerberg, on his certified Threads account. The timing of Threads' launch is crucial because Twitter recently faced an outage, and further, it announced temporary restrictions on the number of tweets users can read daily. Thus, this state of uncertainty at Twitter might pave the way for Threads to get traction among users. It attracted celebrities and politicians like Oprah Winfrey and Representative Alexandria Ocasio-Cortez, Democrat of New York. But the presence of big-name advertisers such as Procter & Gamble and Ford points to the bigger commercial stakes in the fight between Mark Zuckerberg’s new platform and Elon Musk’s Twitter. It’s available in 100 countries, but not in the Europe Union as Meta and privacy watchdogs battle over the company’s handling of user data. There are also no direct-messaging or livestream options, unlike Twitter.

Agriculture markets yesterday:

• Corn: December corn was unchanged at $4.93 1/2, marking a mid-range close after posting the lowest intraday level since October 2021.
• Soy complex: November soybeans rose 1 1/4 cents to $13.55 and near mid-range. August soybean meal fell $1.60 at $410.10 and near mid-range. August bean oil rallied 136 points to 65.03 cents.
• Wheat: September SRW futures rose 32 1/2 cents before settling at $6.74 1/4. September HRW futures led the complex higher, rallying 49 3/4 cents before closing at $8.46 1/4. September spring wheat futures rose 48 1/4 cents to $8.57 1/2.
• Cotton: December cotton fell 118 points to 80.23 cents and nearer the session low.
• Cattle: Cattle futures slipped Wednesday despite firming wholesale prices. August live cattle fell $1.875 to $174.95, while August feeder futures dove $3.325 cents to $244.70.
• Hogs: August lean hog futures rallied $3.125 before settling at $97.45, the highest close in four months. Nearby July futures leapt $3.45 to $101.275.
   

Ag markets today: Two-sided trade was seen in grain markets overnight. Corn finished the session up 3 to 5 3/4 cents. Soybeans were down 3 to 9 cents. SRW wheat was up strongly in the July with other contracts up 5 to 7 cents. HRW wheat was up 7 to 8 3/4 cents. Front-month crude oil futures were modestly lower, while the U.S. dollar index was slightly lower.  around 400 points lower.

Market quotes of note:

• Fed speak. John Williams said Fed policymakers’ projections show they think more work is needed on rates to get inflation back to 2%. “We can take some time and assess and collect more information and then be able to act, knowing that we also communicated through our projections that we don’t think we’re done, based on what we know,” Williams said yesterday during a discussion held at the New York Fed as part of the annual meeting of the Central Bank Research Association. “And obviously we’re absolutely committed to achieving our 2% inflation goal.” That echoed the latest FOMC minutes, which had almost all officials saying additional hikes would probably be appropriate. “Almost all” rate-setters at the Federal Reserve foresee more tightening in 2023, according to minutes released on Wednesday from their mid-June meeting. Last month the Fed kept rates unchanged, in a range of 5-5.25%. Twelve of the 18 policymakers have said that they expect at least two more increases this year. The Fed’s next meeting is July 25-26.
   
• U.S. grain market. Richard Crow, grain trader and analyst, writes: “The market is amid a growing season and is intent on any news. The wheat market had a massive rally yesterday with limited news. The Russian wheat crop was questioned. The rumor of Brazil buying some U.S. HRW. The main factor may be the storms across Kansas for the next 3 to 5 days. Harvest is about 60% completed, and rain could be heavy. Parts of southern Kansas had 5” last night. The harvest is in southwest Kansas north to the border of Neb.”
   
• Negotiations between United Parcel Service and the Teamsters are at a standstill. “We have nearly a month left to negotiate. We have not walked away, and the union has a responsibility to remain at the table.” — UPS spokesman Jim Mayer.
   

U.S. private job growth hits over 1-year high. Private businesses in the U.S. added 497,000 workers to their payrolls in June, marking the most significant increase since February 2022 and exceeding forecasts of 228,000. The latest employment data indicates that the labor market remains tight, reinforcing the notion that the Fed still has progress to make in its efforts to combat inflation.

     The ADP data, which is often unreliable and more volatile than other jobs data, comes ahead of Friday’s official June payrolls report. Economists are expecting 240,000 non-farm payrolls were added last month, a slowing from the 339,000 jobs added in May, according to Dow Jones. However, traders may now be expecting a hotter number that leads to the Fed resuming its hiking campaign this month after a pause. The central bank next decides on interest rates on July 26.

The number of Americans filing for unemployment benefits witnessed a weekly rise of 12,000, reaching 248,000 for the week ending July 1. This was slightly above market expectations, set at 245,000. Some suggest this rise could be because of increased interest rates on the U.S. labor market. Still, despite this increase, the overall labor market remains tight when compared to historical averages.

     The volatility seen in week-to-week figures is mitigated in the four-week moving average, which showed a decrease of 3,500, bringing it to 253,250. In terms of unadjusted figures, claims saw an increase of 20,838, reaching 250,556. Noteworthy upticks were seen in Michigan and New York.

     Meanwhile, data shows a drop of 13,000 continuing claims from the prior week, registering the lowest in five months at 1,720,000. This development may indicate improved conditions for jobseekers.

Americans have quit quitting their jobs. The "quit rate" among American workers, a measure reflecting the percentage of people leaving their jobs voluntarily, has seen a decline since its peak during the pandemic. As of this spring, the rate has dropped to 2.4%, which closely approximates figures seen pre-pandemic. This is a notable decrease from the 3% rate observed a year ago. According to economic analysts, slowdowns in voluntary departures can be a sign of a weakening labor market, possibly due to decreasing employer demand for workers. This may undermine employees' confidence in their ability to find better opportunities or in their negotiation power, leading to fewer resignations. Conversely, a proportion of employees might actually be satisfied with their current roles, leading to the decline in this rate. Link to more via the WSJ.

The U.S auto industry is showing signs of recovery, with an alignment between its production and inventory levels with robust consumer demand. There was a 13% rise in new auto sales across the country in the first half of the year, thanks to easing supply constraints at assembly facilities and strong consumer response paving the way for increasing pent-up demand. While auto sales this year still might not reach pre-pandemic levels, progress in factory output is evident. As reported by Wards Intelligence, the quantity of vehicles on dealership lots or en route to stores last month was approximately 1.9 million, marking a 52% jump from the previous year. This improving momentum is having its impact on the transport networks, with U.S railroads witnessing a 21.1% increase in motor vehicles and auto parts shipments in June, a surge from the 15.3% growth in May, as stated by the Association of American Railroads.

During the Federal Open Market Committee (FOMC) meeting on June 13-14, most Fed officials agreed on the pause in the growth of the Fed funds rate, maintaining its target range at 5 to 5-1/4%. The pause allows officials more time to assess the economy's progress towards the Committee's goals of employment and price stability. Nevertheless, they believed additional rate increases may still be needed this year.

     A few officials argued for a 25-basis-point increase citing the tight labor market, the robust momentum in economic activities exceeding expectations, and a lack of signs that inflation was returning to the Committee's 2% goal.

     While there was a unified agreement on continuing the runoff of the Fed's balance sheet, officials expressed concern over the still "unacceptably’"high inflation rate. Its recent deceleration has been slower than anticipated, despite eased supply chain constraints.

     The housing market, affected by Fed rate increases, is registering a slowdown. Certain officials noted upside risks linked to low home inventories for sale and robust housing demand. In addition, non-housing services continue to exert inflation pressure. Nevertheless, officials still expect returning inflation to the Fed’s 2% goal with the right firming of monetary policy.

     The Fed staff maintains its prediction of a mild recession in the forecast later this year. Both the labor and product markets' tight resource utilization is expected to ease by 2025 with real output going below the potential output estimation and the unemployment rate surpassing its natural rate.

     A unified message from the meeting is that decisions on rates will be made on a meeting-by-meeting basis, suggesting more rate hikes this year. Key factors guiding these decisions will be the July 7 Employment report and July 12 CPI data. The expectation is that another rate increase will be deployed but markets remain wary of more than one increase. If rates remain steady, market speculation is likely to shift towards potential rate reductions rather than increases.

The U.S. State Department has announced that it does not anticipate passport processing times to return to pre-pandemic levels until the end of this year. This declaration comes as many travelers are facing delays and disruptions to their summer plans, as they must allow for several months to procure a new passport before journeying abroad. In March, the wait time increased for new passports: routine applications now take 10 to 13 weeks, and expedited ones (which cost an extra $60) take between seven to nine weeks. This is a considerable extension from pre-pandemic times when the turnaround for expedited cases was two to three weeks and routine passport applications took six to eight weeks. Secretary of State Antony Blinken has stated in Congress that the department is currently handling about 500,000 passport applications each week, which marks around a 40% increase in applications compared to the previous year.

Market perspectives:

     • Outside markets: The U.S. dollar index was weaker, with the euro and British pound managing slight gains against the greenback. The yield on the 10-year U.S. Treasury note was higher, remaining above 4%, with a higher tone in global government bond yields. Crude oil futures remain slightly higher. U.S. crude was around $71.90 per barrel and Brent around $76.70 per barrel. Gold and silver were slightly higher, with gold around $1,933 per troy ounce and silver around $23.44 per troy ounce.         

     • China’s currency has weakened too fast for its central bank. The People’s Bank of China has pledged to “resolutely guard against the risk of sharp fluctuations in the exchange rate,” according to minutes of its second-quarter policy meeting.

     • Iran’s oil exports have hit a five-year high in recent months as the country sells more to China and other countries, adding large volumes of discounted crude to a global energy market already struggling amid concerns over demand.

     • The diesel market in Europe has experienced a surge, highlighting its susceptibility to shortages following the halt of imports from Russia earlier this year. The rise in premiums for instantly accessible deliveries on Wednesday suggests that traders believe the actual market conditions are becoming more strained. Link for more via Bloomberg.

       

     • India, which accounts for 40% of the world's rice exports and is its cheapest supplier, is set to boost payments to its farmers.​ The price of Indian rice exports has jumped 9% to a five-year high, following a hike of 7% last month in the price the government pays farmers for new-season common rice.

     • Romania’s Constanta port ‘suffocating’ in grain. Romania’s port at Constanta is expected to set volume records for grain exports this year as a heavy flow of Ukrainian grain moves through with the Black Sea grain deal hanging in the balance. “Exporters are already no longer signing contracts with Constanta delivery for July-August, there is no more room, a lot of grain is expected to arrive,” Cezar Gheorghe of Romanian grain market consultancy AGRIColumn told Reuters. Constanta’s storage capacity could also be strained by domestic supplies after harvest, along with the flow of Ukrainian grain.

     • Ag trade: Japan purchased 115,717 MT of wheat in its weekly tender, including 58,897 MT U.S. and 56,820 MT Canadian. Taiwan purchased 56,000 MT of U.S. milling wheat. South Korea passed on a tender to buy up to 70,000 MT of optional origin corn.

     • NWS weather outlook: Additional rounds of severe weather with heavy rainfall and flash flooding chances persist across the central Plains through Friday, reaching into the Mid-Mississippi Valley by Saturday... ...Hot weather continues over the interior Pacific Northwest while Excessive Heat Warnings and Critical Fire Risk remain in effect for Arizona.

Items in Pro Farmer's First Thing Today include:

     • Grains mostly firmer this morning
     • French wheat yield expected to be above average despite late dryness
     • Quiet on the cash cattle front
     • August hogs now premium to cash hog index

— Prigozhin in St. Petersburg. Alexander Lukashenko, Belarus’s president, said that Yevgeny Prigozhin, the head of the Wagner group of Russian mercenaries, was in St. Petersburg, not Belarus. Prigozhin has not been seen in public since the rebellion against Russia’s leaders on June 23. He had agreed to stop his march on Moscow in exchange for amnesty for his soldiers and exile to Belarus.

— Grain Gates LLC, a company created in the wake of the Ukraine invasion, has become Russia’s top wheat trader in the space of a year. It has links to Demetra, the country’s No. 2 wheat exporter last season, and is run by the firm’s former head of trading, Ilya Aliev. Link to more via Bloomberg.

— Russian agricultural bank Rosselkhozbank said it was not considering setting up a subsidiary that could connect to the SWIFT global payments system, Interfax reported. Such a move had been reported as a step that could possibly avert the collapse of the Black Sea grain deal due to expire on July 17.

— Looks like there are limits between China and Russia. China's leader Xi Jinping is discouraging Russia from using nuclear weapons in Ukraine. These actions come as part of China's broader strategic efforts to mend its strained relationships with European nations. Xi, during his trip to Russia in March, warned Russian leader Vladimir Putin against engaging in nuclear warfare. This unprecedented move is reported to be part of Beijing's diplomatic strategy to repair relationships with Europe that have been affected by the war in Ukraine.

     China watchers say China's intention appears to be to prevent any further escalation of the conflict, particularly any use of nuclear weapons, which could jeopardize its attempts to divide the political alliances between Europe and the United States. However, experts caution that this should not be seen as a shift in China's backing of Russia. China has previously publicly communicated its aversion toward the use of nuclear weapons, and this viewpoint doesn't fundamentally alter the understanding of Sino-Russian relations.

     Upshot: From a strategic viewpoint, this step to present Xi as a proponent for peace could work in favor of China, says one China watcher. It could help establish more constructive relations with European states and the European Union, effectively aiding China's broader geopolitical ambitions. It remains to be seen how this diplomatic maneuver from China will influence the geopolitics of the region.
 

— Large-scale U.S. farmers and ranchers have shown slightly increased optimism that a new farm bill will be enacted this year, as indicated by a jump of 4 points in the June Survey for the Ag Economy Barometer, according to findings by Purdue University. Even so, 27% of them believe the enactment of a farm bill is unlikely this year, exhibiting a decline of 5 points from the previous reading.

     Discussions surrounding Proposition 12, the Californian animal welfare law, indicated that 36% of these farmers think it highly unlikely that this law will be negated in the new farm bill, with another 40% unsure about the outcome. Only a quarter (25%) believe it's somewhat likely that Congress will address Proposition 12 in the new legislation. Proposition 12, upheld by the Supreme Court after a challenge by the pork industry, mandates California farmers to allot more floor space for egg-laying hens, veal calves, and breeding sows. It also restricts sales of pork, veal, and eggs from farms outside California, which don't meet its defined standards. Farm Belt lawmakers have proposed legislation aimed at forbidding states from interfering in agricultural practices in other states.

     The survey also revealed a 17 point increase in the index measuring producer sentiments in line with the prospect of better financial conditions in the coming year. The June reading of this barometer was 121, mirroring the average figure for the preceding six months.

— $182.91 billion: Amount Customs and Border Control has collected from importers (link) because of the tariffs that former President Donald Trump imposed on Chinese goods under Section 301 of the 1974 Trade Act.  

— Agenda for Treasury Secretary Yellen’s visit to Beijing. Yellen will attempt to persuade her Chinese counterparts that U.S. efforts to deny China access to certain cutting-edge technologies are only intended to protect national security and address human rights concerns, rather than gain an economic advantage.

     Yellen will also stress the need for the two countries to work together to address global issues such as climate change and developing country debt, and try to tamp down concerns about the potential for a complete severing of U.S./China trade and economic ties.

     Yellen got a foretaste of her Beijing reception while meeting on Monday with China’s ambassador to the U.S., Xie Feng. Xie “raised China’s main concerns in economic & trade areas, and required the U.S. side to take them seriously and take actions to resolve them,” Liu Pengyu, the embassy’s spokesperson, tweeted on Tuesday.

     Bottom line: “We seek a healthy economic relationship with China … that fosters growth and innovation in both countries,” a senior Treasury Department official told reporters. “We do not seek to decouple our economies – a full cessation of trade and investment would be destabilizing for both of our countries and the global economy.”

— Increasing tensions surrounding Japan's planned release of over 1 million metric tons of water from its damaged Fukushima nuclear power plant, a decision permitted by the U.S. nuclear watchdog agency. Japan assures the water will be filtered to eliminate most isotopes; however, this initiative has elicited worries from South Korea and China due to potential contamination of seafood.

     China expressed its displeasure over the lack of international consultation on this issue by Japan. They plan to take measures to protect consumers, though specific actions haven't been outlined so far.

     Meanwhile, South Korea intends to increase testing measures but has not imposed any additional bans on Japanese products.

     China, which has already issued import bans from 10 out of 47 Japanese prefectures (including Fukushima), cautioned Japan to be ready to "bear the consequences" of its actions. Notably, China is Japan's most extensive seafood export market, accounting for 22.5% of its seafood shipments, which amount to approximately 87 billion yen ($604 million). Hong Kong follows at 19.5%, with the United States at 13.9%.

— Beijing is urging Tokyo to reject the United States' policy of restricting exports of advanced chip manufacturing equipment to China. During a meeting on Wednesday with a Japanese business delegation, spearheaded by former Foreign Minister and Speaker of the House of Representatives Kono Yohei, Premier Li Qiang voiced his concerns about the politicization of such economic issues.

     Li further warned that the impending Japanese export controls could potentially harm the global economy. This warning comes after China retaliated against Tokyo’s forthcoming technology restrictions by imposing export controls on two essential minerals that Japan uses for high-tech product manufacturing.

     Li suggested that as close neighbors, China and Japan should work towards a more harmonious relationship, aimed at strengthening bilateral ties, which is essential given how closely their economies are intertwined. This sentiment was, however, not officially conveyed by China in their public statement.

     Of note: With Japan’s economy being more closely connected with China’s compared to the United States and the Netherlands, increasing tensions with China could be more detrimental to Japan. This raises the question of whether China can persuade Japan to relax their export restrictions.

— Time for an update on the USMCA as trade officials from U.S., Mexico and Canada meet in Cancún, Mexico.

     • President Trump's goal in renegotiating NAFTA, which was to lessen trade deficits with Canada and Mexico, has not achieved its intended result. Instead, the deficits have increased since Trump's threat of withdrawing from NAFTA in 2017, despite the stricter rule of origin in the new USMCA. The total deficit reached nearly $100 billion in 2022, an increase from $83 billion in 2017. While the U.S. saw a reduction in the passenger cars trade deficit, this was overshadowed by an increased deficit in auto parts and large vehicles.

     The USMCA trade data underscores why the Biden administration and former President Trump talk about “balanced” trade. While some U.S. sectors like the pork industry have benefitted from USMCA, the overall trade balance shows the U.S. is increasing, not decreasing, trade deficits.

     • This week’s talks between U.S. Trade Representative Katherine Tai, Canadian Trade Minister Mary Ng, and Mexican Economy Minister Raquel Buenrostro will allow them to assess the state of the agreement and discuss a series of disputes. Issues include U.S. and Canadian concerns about Mexican energy and biotech policies, U.S. concerns on Canadian dairy barriers, and Canadian objections to U.S. softwood lumber duties. Another issue is auto rules of origin regulations. Canada and Mexico previously contested the Trump administration's approach to implementing these rules, arguing the U.S. interpretation was more burdensome than originally negotiated. Even though they won the case in December 2022, the Biden administration has yet to modify the approach, inviting possible retaliation from Canada and Mexico.

      U.S. business groups want the Biden administration to formally request a dispute settlement panel to challenge Mexican energy policies that they believe are a violation of the USMCA that went into force three years ago. The American Petroleum Institute and more than a dozen other business groups raised the energy concern in an 11-page letter to Tai ahead of her attendance today and tomorrow at a meeting of the USMCA Free Trade Commission in Cancún, Mexico. “We commend the Biden administration’s decision last year to request consultations under the USMCA regarding Mexico’s energy policies,” the groups said in the letter. “However, we are concerned by the Mexican Government’s failure to fix the issues raised by the United States. Mexico continues to hinder the operations of private companies in its energy sector, contrary to its own laws.” Tai requested consultations with Mexico on the energy issues nearly one year ago on July 20, 2022, and was joined by Canada in the dispute. However, neither country has taken the next step of asking for a panel of trade experts to hear their complaint and decide whether Mexico has violated the three-year-old pact.

     Regarding U.S. disputes against Mexico’s biotech corn policies and Canada’s dairy market access barriers, the U.S. has formally requested a dispute settlement panel to issue a decision.

     Bottom line: USTR officials said that while the issues on biotechnology, dairy and energy may come up during the discussions, the dispute settlement process was the “primary” venue for such discussions. “While there are areas of disagreement, of course, some of which may come up in these bilateral meetings, they do not outweigh the productive nature of our trade relationship,” an official said. The official said those items are not “walled off” from being discussed, the primary format on those topics is the consultations that are ongoing.

     • The USMCA has an expiration timeline of 16 years, with the opportunity for extension depending on the consensus of Canada, Mexico, and the U.S. The review process starts in year six (2026), where each country can express desire to extend or can raise issues to be addressed. In the latter case, annual reviews will continue until the issues are resolved or the agreement ends in year 16.

— The EU's introduction of a Carbon Border Adjustment Mechanism (CBAM), with 20% to 35% tariffs on high-carbon exports, could impede India's exports of steel, iron ore and cement, according to the country's finance ministry. The EU plans to levy the tariffs from 2026 and will start requiring reports of carbon content for such exports from Oct. 1, 2023.

     Background. In April, the EU approved the world's first plan to impose a levy on high-carbon goods imports from 2026, aiming to become a net zero emitter of greenhouse gases by 2050, some 20 years earlier than India's target. Reporting of carbon content in exports to the EU would be required beginning Oct. 1, 2023, and the main goods affected would be steel, cement, aluminum, fertilizers, electricity and hydrogen.

— President Joe Biden is set to declare a $60 million investment from Enphase Energy, a solar-energy equipment manufacturing firm, as part of his visit to South Carolina today. This initiative aligns with the president's economic agenda ahead of his re-election bid. The investment is estimated to create approximately 1,800 jobs nationwide, with South Carolina directly benefiting by 600 jobs resulting from a partnership between Enphase and the multinational manufacturing company, Flex. Enphase is planning to launch six new manufacturing lines, which are expected to strengthen clean-energy supply chains and enable a projected one million homes annually to be powered through solar energy.

— “Biden’s hydrogen bombshell leaves Europe in the dust”, says a Politico headline and article (link). It notes that European leaders have invested heavily in the production of hydrogen, a clean energy source, hoping not only to combat climate change but also to stimulate job creation in this sector. However, due to the clean energy subsidies offered by the Biden administration, many of these jobs are now heading to the United States.

     Norwegian company Nel has decided to construct a nearly $500 million factory in Michigan. The facility will manufacture equipment that extracts hydrogen from water, rather than setting up in Europe. This decision, made in May, came nine months after the U.S. Congress approved President Biden's major climate initiative, the Inflation Reduction Act. This move will see 500 new jobs created in the U.S., diverting employment opportunities away from Europe. This has occurred despite the EU's attempts to present itself as an attractive location for investments in clean tech. Additionally, similar moves from other European companies interested in benefiting from the American incentives are anticipated, adding another layer to the ongoing transatlantic trade issues related to green energy.

     Perspective: Similar comments about the U.S. legislation (Inflation Reduction Act/ala the Climate Bill) have been made by other countries, including Canada.

— To compete with its rapidly progressing rivals, Subway is bringing a significant change to its meats — they will now be freshly sliced at their approximately 20,000 U.S. locations. This is the most substantial shift since Subway began updating menu items, ingredients, and renovating restaurants two years ago to improve dropping sales and make themselves an appealing acquisition target.

     Subway faced difficulties in recent years due to stiff competition, and as a part of its revitalization strategy, it introduced meal customization, paralleling the success of many rivals' strategies. This boosted their sales by nearly 8% in American stores last year. Subway also enhanced its ordering options on the app, lifting digital sales. Adding freshly sliced meat signifies another step in this direction, although the results are yet to be observed.

     A majority of the stores will show off the $6,000 slicers near the deli counter, where most of the meat will be sliced multiple times a day. This is a marked departure from Subway's previous approach of pre-slicing meat at factories and delivering it to stores. By slicing cold cuts in-store, Subway aligns its methods with smaller competitors like Jimmy John’s, Jersey Mike’s Subs, and Firehouse Subs, all of which have been expanding in recent years, while Subway has closed about 7,000 locations since 2016.

     Touting the new changes, Subway is launching four new sandwiches spotlighting the fresh slicers.

     Bottom line: Despite the fresh concept, sales from Subway's U.S. outlets are substantially lower than those of competing sandwich chains. However, in 2022, private Subway had a record-breaking year, with sales at North American stores open for at least a year increasing by 7.8% compared to 2021, surpassing predictions by over $700 million. Additionally, the company is potentially up for sale, with an announcement expected in mid-July.

— President Biden may not appear on the New Hampshire primary ballot due to changes he directed in the presidential primary calendar. Under Biden's influence, the Democratic National Committee (DNC) voted to have South Carolina host the first presidential primary, prompting a potential conflict with New Hampshire, which claims it will hold the first vote regardless of the DNC decision. The New York Times suggests (link) this conflict could result in public embarrassment for Biden. If he aligns with the DNC's new calendar, Biden will be omitted from the New Hampshire ballot.

     Meanwhile, Robert F. Kennedy Jr. has reportedly received 20% national support amongst Democratic voters and initiated a vigorous campaign in New Hampshire, where displeasure is brewing over the DNC's alteration to the primary calendar. Ray Buckley, chairman of the state party, emphasized New Hampshire's intent to maintain its status as the first-in-the-nation primary and questioned whether the president will place his name on the ballot.

— Trump campaign’s joint fundraising committee brought in more than $35 million in Q2. Former President Donald Trump's potential 2024 presidential campaign has reportedly raised over $35 million in the second quarter of 2023, nearly doubling the amount raised in the first quarter. The new figure, with an average donation standing at $34, further emphasizes Trump's grassroots backing, the campaign said. The sum solidifies Trump's frontrunner status for the Republican nomination and highlights how the ongoing indictments against him seem to mobilize his base of online donors.

     The fundraising amount is yet to be matched with other candidates, as Trump is the first to release this figure. Full details of the campaigns' receipts and expenditures are due to be reported to the Federal Election Commission on July 15. As a benchmark, DeSantis raised $8.2 million in the first 24 hours of his presidential bid announcement in May but hasn't released the total for the rest of the quarter.

— Bailey to challenge Bost. Darren Bailey, the defeated 2022 GOP candidate for governor, will run against fifth-term Rep. Mike Bost, a member of the House Agriculture Committee, in a Republican primary in southern Illinois. Link for details.

— House hearing on ESG. The House Financial Services Committee will inspect standards of environmental, social, and governance (ESG) investing in an upcoming hearing on July 12. This comes following the committee's Republican ESG Working Group's publication of an interim report last month, outlining lawmakers' top concerns and major issues relating to the impact of ESG policies on capital markets. The report suggests that the current administration may be using financial regulatory bodies to push its ESG-related policy priorities onto private businesses. Furthermore, lawmakers in the report stressed the importance of maintaining corporate boardrooms free from partisan politics to ensure that political agendas do not overrun effective financial management. This hearing will further explore these concerns and the broader implications of ESG investing.  
 

— European Commission releases proposal on gene-edited product regulations. On July 5, the European Commission introduced a proposal that takes steps towards relaxing regulations for certain gene-edited crops. This measure is part of an agricultural and food sector sustainability package, including rules for newly defined "New Genomic Techniques" (NGTs). These techniques involve advanced tech that allows for faster and more precise gene-editing in plants, with the potential to produce crop varieties resistant to drought and pests. The Commission claimed that the current GMO rules are not suited for the range of products potentially derived from gene editing. Thus, the new proposal categorizes NGTs into two groups.

     Category 1 includes gene-edited products with genetic changes comparable to changes that could occur naturally or be created through standard breeding methods. These products would avoid extensive GMO risk assessments and would not be labeled as GMOs.

     Category 2 includes products with more elaborate genetic changes, which would still be assessed under current GMO regulations. Notably, the final proposal does not group herbicide tolerant NGT plants under Category 2, a change from the leaked plan draft.

     The proposal will be further debated by the European Parliament and the Council of Ministers. While production agriculture entities advocate for the plan, environmental groups express concern and argue for rigorous testing requirements for all NGTs, like those in place for GMOs.

— European Food Safety Agency indicates no reason to block glyphosate renewal. The European Food Safety Agency (EFSA) stated there are no "critical areas of concern" that would hinder the renewal of glyphosate's usage within the European Union (EU). Although there were identified data gaps in the understanding of consumer dietary risks, the EFSA affirmed that experts believe glyphosate renewal would not pose any threats to consumers. The next steps involve the European Commission considering the EFSA's recommendation and a report from four EU countries to decide whether to propose renewing approval for glyphosate. Finally, the EU member countries will vote on this approval.

— The Army Corps of Engineers is inviting public feedback on a new plan aimed at minimizing flooding in the Yazoo Basin, an approximately one-million-acre region known as the Yazoo Backwater Area. The scheme proposes the use of pumping systems to protect agricultural lands frequently experiencing crop damage due to floods. Link to Federal Register notice.

     Comments are due August 7 on the strategy, according to the announcement in today's Federal Register. This timeframe allows for a 30-day period to prepare an Environmental Impact Statement. The draft Environmental Impact Statement (EIS) is planned for release in December and that will be followed by public meetings to present the results of the analysis, receive comments and address questions on the preferred alternative plan.

     Concerns noted. Environmental organizations, who have been against many versions of the Yazoo Backwater Area project for several years, are still expressing their concerns. However, the Corps maintains that their latest proposal will not make any alterations to the wetlands, unlike the earlier plans.

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