Biden Discussing Environmental Trade Focus Deal with Mexico, Canada

Vilsack announces several policy updates at Farm Bureau annual meeting

Note: Dispatch is later today due to technical difficulties.

USDA daily export sale: 174,181 metric tons soybeans to Mexico, 2022-2023 marketing year.

President Joe Biden today is meeting with the leaders of Canada and Mexico in Mexico City. He wants to have strengthened trade relations with an environmental focus to create a trading bloc to take on China and Russia. Details in Trade Policy section.

San Francisco Fed President Mary Daly said Monday that lags between the central bank’s interest-rate increases and their effect on the economy could be an argument to raise interest rates by a quarter percentage point rather than a half point. Speaking at a WSJ Live event, Daly suggested it might be a good idea to slow the pace of rate increases to see how previous rate moves have affected the economy. Said Daly: “When you’re being seriously data dependent, doing it in more gradual steps does give you the ability to respond to incoming information and account for those lags.”

Risk appetite in the general marketplace has improved a bit this week as China has been opening up its businesses and its borders in a pivot from its strict Covid restrictions.

The U.S. is struggling to supply effective drone-fighting systems to Ukraine. Meanwhile, a Russian merchant ship’s secretive stop at South Africa’s largest naval base has prompted questions from the U.S.

Russia makes advances, pounds Ukraine. Russian forces have made “tactical advances” in their push to seize territory in the Donbas region. Particularly, they’re aiming to take the town of Bakhmut, which appears to be Moscow’s “main immediate operational objective,” according to the U.K. Ministry of Defense.

Airborne chemicals that destroy ozone are declining for the first time, helping to repair the atmospheric layer that protects humans from the sun’s harmful ultraviolet rays, according to a report by a U.N.-backed panel of scientists.

Emergency in California. Nearly 200,000 homes and businesses in California remain without power early Tuesday as massive storms unleashed torrents of rain across the state, causing power outages, landslides and floods. The National Weather Service has warned that northern and central California are still in the path of a “relentless parade of cyclones,” promising little relief until the middle of the week. The storms have so far caused at least 14 deaths, while 34 million Californians (or about 10% of the U.S. population) are currently under a flood watch. President Biden has declared an emergency in California, authorizing the Department of Homeland Security and the Federal Emergency Management Agency to coordinate all disaster relief efforts and provide appropriate assistance for required emergency measures.

House Republicans eke out another legislative win. They narrowly approved an overhaul of the House’s operating rules, overcoming concerns by moderates about concessions made to the hard right to help Speaker Kevin McCarthy clinch his job. Republicans also voted to cut funding for the IRS but the move is unlikely to pass the Senate.

The House Republican conference meets this morning to vote on ratifying committee chairs selected Monday by the GOP Steering Committee. We have details in the Congress section on some of the top appointments.

What up, docs? The Justice Department is reviewing a batch of potentially classified documents found in the Washington office space of President Joe Biden’s former institute. Special counsel to the president Richard Sauber says “a small number of documents with classified markings” were discovered as Biden’s personal attorneys were clearing out the offices of the Penn Biden Center, where the president kept an office after he left the vice presidency in 2017 until shortly before he launched his 2020 presidential campaign in 2019. Sauber says the documents were found on Nov. 2, 2022, in a “locked closet” in the office.

Biden administration unveiled details of its plan to help low-income student-loan holders wipe out debts more quickly. If enacted, the proposed changes would provide qualifying borrowers with significantly more generous options that could leave them debt-free sooner, while only paying off a fraction of their total loan balances. Details in this dispatch.

Equities today: Global stock markets were mixed overnight. U.S. Dow opened around 30 points lower but is currently up around 90 points. In Asia, Japan +0.8%. Hong Kong -0.3%. China -0.2%. India -1%. In Europe, at midday, London -0.3%. Paris -0.7%. Frankfurt -0.5%.

U.S. equities yesterday: The Dow fell 112.96 points, 0.34%, at 33,517.65. The Nasdaq moved up 66.36 points, 0.63%, at 10,635.65. The S&P 500 was up 2.99 points, 0.08%, at 3,892.09.

Virginia’s Youngkin: ESG transparency has become punitive. Virginia GOP Governor Glenn Youngkin, who ran one of the nation’s biggest investment firms before he took office, said Monday in an editorial board meeting with Bloomberg News that ESG investing is under fire because it has morphed from a philosophy for picking stocks into a weapon for penalizing companies that don’t make the cut. (ESG is Environmental, Social, Governance)

Agriculture markets yesterday:

• Corn: March corn futures fell 1 1/4 cents to $6.52 3/4 today, nearer the session low.
• Soy complex: March soybeans fell 4 cents to $14.88 1/2, nearer the session low, while March soymeal dropped $7.30 to $470.30 and March soyoil rose 18 points to 63.35 cents.
• Wheat: March SRW wheat futures fell 2 cents to $7.41 1/2. March HRW futures dropped 3 1/2 cents to $8.28 1/2. March HRS futures firmed 1/4 cent to $9.02.
• Cotton: March cotton rose 54 points to 86.22 cents after trading as high as 87.97 cents, the highest intraday level since Dec. 22.
• Cattle: February live cattle rose 97 1/2 cent to $157.75. March feeder cattle gained 65 cents to $186.30. Prices closed nearer their session highs.
• Hogs: February lean hog futures firmed 52.5 cents to $80.80. The April through December contract posted gains in the $1.15 to $2.025 range, led by summer-month contracts.
  

Ag markets today: Heavier selling pressure was seen in grain and soy futures overnight, especially the soybean and winter wheat markets, after disappointing finishes on Monday. As of 7:30 a.m. ET, corn futures were trading fractionally to a penny lower, soybeans were 5 to 8 cents lower, SRW wheat was around a dime lower, HRW wheat was 15 to 16 cents lower and spring wheat was 3 to 5 cents lower. Front-month crude oil futures were around 40 cents higher and the U.S. dollar index was about 300 points higher.

Technical viewpoints from Jim Wyckoff:

On tap today:

• Federal Reserve Chairman Jerome Powell speaks on central bank independence in Stockholm, Sweden, at 9 a.m. ET. UPDATE: As expected, there was no mention of monetary policy direction in the Powell prepared remarks (link).
• U.S. wholesale inventories for November are expected to rise 1% from the prior month. (10 a.m. ET)
• STEO: U.S. Energy Information Administration will release the first Short-Term Energy Outlook of the year. Link The STEO is normally released between 12:00 pm (noon) and 12:15 pm EDT (summer)/EST (winter).
• President Joe Biden will have a meeting with Canadian Prime Minister Justin Trudeau in Mexico City, 11:30 a.m. ET.
• Biden will attend the North American Leaders’ Summit, 2:30 p.m. ET. Biden, AMLO and Trudeau will deliver statements at 4:45 p.m. ET.

Fed officials see further rate hikes before holding above 5%. Two Federal Reserve officials said Monday that the central bank will likely need to raise interest rates above 5% before pausing and holding for some time. “We are just going to have to hold our resolve,” Raphael Bostic, president of the Atlanta Fed, told the Atlanta Rotary Club. He said the Fed was committed to tackling high inflation and this warrants raising interest rates into a 5% to 5.25% range to squeeze excess demand out of the economy.

San Francisco Fed President Mary Daly, speaking in a live-streamed interview with the Wall Street Journal, also said she expects the central bank to raise interest rates to somewhere above 5%, though the ultimate level is unclear and will depend on incoming data on inflation.

Neither Bostic nor Daly has a vote on policy this year.

Used car prices increased slightly from November to December, but plunged 14.9% from one year prior, marking the biggest-ever annual decline since at least the late 1990s. The steep slump could bode well for overall inflation, which has long been impacted by supply chain constraints driving up the price of used vehicles.

The NFIB Small Business Optimism Index in the U.S. declined to a six-month low of 89.8 in December of 2022, marking the 12th straight month below the 49-year average of 98 as sales and business conditions are expected to deteriorate. Expectations for better business conditions over the next six months worsened by 8 points to -51%. Also, the net percent of owners who expect real sales to be higher worsened by 2 points to -10%. On the positive side, 41% of owners reported job openings that were hard to fill, down 3 points but historically very high. Finally, inflation remains the single most important business problem with 32% of owners reporting it as their top problem in operating their business. Meanwhile, the net percent of owners raising average selling prices decreased by 8 points to a net 43%, but remained historically high.

Imports drop below 2 million TEU as pandemic-driven shipping surge comes to an end. With a pandemic-driven surge finally over, monthly import cargo volume at the nation’s major container ports has fallen below the 2 million TEU mark and should remain there through most of this spring, according to the Global Port Tracker report released by the National Retail Federation (NRF) and Hackett Associates. “Ports have been stretched to their limits and beyond but are getting a break as consumer demand moderates amid continued inflation and high interest rates,” NRF Vice President for Supply Chain and Customs Policy Jonathan Gold said. “Consumers are still spending and volumes remain high, but we’re not seeing the congestion at the docks and ships waiting to unload that were widespread this time a year ago. It’s good to escape some of the pressure, but it’s important to use this time to address supply chain challenges that still need to be resolved like finalizing the West Coast port labor contract.”

Imports plummeted to a four-year low of 1.37 million Twenty-Foot Equivalent Units – one 20-foot container or its equivalent – in March 2020 as Covid-19 prompted the temporary shutdown of much of the nation’s economy. But cargo soared after the shutdowns ended and pent-up consumer demand was unleashed that summer, topping 2 million TEU by that August and staying there all but one month until this winter.

A return to normal. “After nearly three years of Covid-19’s impact on global trade and consumer demand, import patterns appear to be returning to what was normal prior to 2020,” Hackett Associates Founder Ben Hackett said. “Nonetheless, as inflation eases and consumer spending returns, we project that growth will slowly return going into the second half of the year.”

Market perspectives:

• Outside markets: The U.S. dollar index was firmer. The yield on the 10-year Treasury note was firmer, trading around 3.57%. Crude oil futures have moved into positive territory, with U.S. crude around $74.90 per barrel and Brent around $79.90 per barrel. Gold and silver futures were under mild pressure, with gold around $1,876 per troy ounce and silver around $23.60 per troy ounce.

• Mild weather and robust refinery runs have combined to build East coast diesel and heating oil stocks to almost 34 million barrels now, according to the Energy Information Administration. That makes a shortage this winter unlikely.

• Lumber prices hit lowest since June 2020. Chicago lumber futures bottomed around the $350 per thousand board feet mark, a level not seen since June 2020, as soaring interest rates continued to depress real estate activity. The Federal Reserve’s aggressive tightening cycle has pushed the 30-year mortgage rate to above 6%, dragging down sales and reining in home price growth while putting a severe dent in homebuilder confidence. The latest report from the Census Bureau showed that new permits for home construction, a potential indicator of future activity, plunged more than 10% to 1.351 million units in November, the lowest since June 2020. The benchmark is now down almost 80% since its May 2021 peak of around $1,700, when supply chain issues compounded strong demand.

• Ag demand: South Korea purchased 68,000 MT of corn expected to be sourced from South America. Japan is seeking 89,735 MT of milling wheat in its weekly tender.

• President Biden declared an emergency in California yesterday after several winter storms drenched the state, causing at least 12 deaths, widespread power outages, and flooding. About 34 million Californians, or around 10% of the U.S. population, were under a flood watch, and Montecito was ordered to evacuate.

• NWS weather: Another high impact heavy precipitation event today across much of California with areas of thunderstorms and very gusty winds... ...Same storm system will bring widespread mountain snows across the western U.S. followed by light snow across the central Plains and thunderstorms across the South... ...Next Atmospheric River expected to impact northern California and the Pacific Northwest beginning on Wednesday.

Items in Pro Farmer’s First Thing Today include:

• Followthrough selling overnight
• Consultant further cuts Argentine crop estimates
• India could produce record wheat crop
• Chinese new bank loans rose in December, set record in 2022 (see China section)
• Signs point toward higher cash cattle prices
• Cash hog pressure likely to persist a while longer

— Russian forces are probably in control in most of Soledar, a town near Bakhmut in Ukraine’s eastern Donbas region, according to Britain’s defense ministry. Russia and mercenaries from the Wagner Group may now turn their attention to capturing Bakhmut. Earlier Volodymyr Zelensky, Ukraine’s president, said Soledar’s walls were knocked flat and its ground littered with (Russian) corpses as Ukraine repelled the attack.

— A Russian ship’s secretive stop in South Africa has prompted concerns among U.S. officials. The merchant ship, whose owner has allegedly carried weapons for the Kremlin, turned off its transponder last month before surreptitiously docking at South Africa’s largest naval base, where it delivered and loaded unidentified cargoes, according to witnesses and a senior U.S. official, the Wall Street Journal reports (link).

— The U.K. and allies are considering sending Ukraine heavy tanks. The British government is in talks to send main battle tanks to Ukraine to help its forces roll back Russia’s territorial gains, as other allies consider sending Kyiv their own tanks. The tanks in question are decades old, require extensive training to drive and operate, and aren’t expected, by themselves, to change the trajectory of the conflict. Instead, British officials said, they could create political room for Berlin to approve the provision of its own, German-made Leopard main battle tanks, a shift that could lend significant momentum to Ukraine. Russian forces made headway in gaining control of a strategic Ukrainian town on Tuesday as they continued efforts to encircle nearby Bakhmut, an eastern city the Ukrainians have fiercely defended for months.

— The EU and NATO signed a joint declaration — the first since 2018 — to tighten cooperation against “security threats and challenges” presented by Russia and China. The agreement is a formal recognition of the stronger ties forged between the two organizations since Russia’s invasion of Ukraine. But it was long postponed by fears that the EU’s foray into defense policy would undermine NATO’s role.

— Vilsack again announces several policies during Farm Bureau annual meeting. Farmers have waited for months for some farm policy decision to be made by USDA, notably the Phase 2 provisions of the Emergency Relief Program (ERP). Those were about to be released months ago but were pulled back at the last minute due to lawmaker and farmer complaints about what it appears USDA eventually announced anyway. USDA Secretary Tom Vilsack has a history of making key announcements during visits, and that was the case during his appearance at the American Farm Bureau Federation’s annual meeting in Puerto Rico. Some of them:

• Ag disaster aid: ERP Phase 2. Vilsack announced Phase 2 of the Emergency Relief Program (ERP) which will provide help to producers for production and quality losses of eligible crops, utilizing calculations of a producer’s decrease in gross revenue. USDA said in documentation on file at the Federal Register (link) that using that approach will reflect the losses “without requiring the more extensive calculations and documentation required under previous programs” for disaster-related crop losses. USDA said this streamlines the aid to minimize the burden on producers and processing of applications by county FSA offices. Using that process also means it will address losses for a qualifying disaster event whether it happened before or after harvest. ERP Phase 2 will be available for a decrease in gross revenue in 2020 or 2021, primarily to those with losses not covered by Federal Crop Insurance or the Noninsured Assistance Program (NAP). The application period is Jan. 23-June 2. USDA has already paid out $7.31 billion under ERP Phase 1 as of Jan. 8, up from $7.28 billion the prior week, including $6.23 billion for non-specialty crops ($6.21 billion prior) and $1.09 billion for specialty crops ($1.08 billion prior). A total of $10 billion was earmarked for ERP.

  USDA projects outlays for ERP Phase 2 payments will be $1.2 billion and will likely be pro-rated as USDA projects total gross outlays at $1.5 billion.

  Comments on Phase 2 announcement. Phase I was highly successful and it worked well. Phase 2 has tons of problems. Comparing schedule F in relevant years to past years doesn’t reflect losses. A farmer may have had to sell land or livestock when they didn’t want to. They may have sold a previous year’s crop in the year in question. These and other things skew the schedule F. There is also the issue of forcing farmers to share schedule F info with local FSA offices.

• Pandemic assistance: PARP. Vilsack announced the Pandemic Assistance Revenue Program (PARP), payments for producers that suffered a 15% or greater decrease in allowable gross revenue for the 2020 calendar year compared with either 2018 or 2019. This effort, Vilsack said, aims to “fill in gaps” for losses covered by either Phase 1 or Phase 2 of ERP. The payments will have a factor of 80% (90% for underserved farmers and ranchers) and will be reduced by 2020 ERP payments, and pandemic assistance under either the Coronavirus Food Assistance Program (CFAP) 1 or 2 and other pandemic aid. Payments will be limited to $125,000 per person or entity and USDA may set a lower maximum payment amount per person if total payments exceed available funding and USDA expects that to be the case — PARP outlays are projected at $250 million with gross outlays pegged at $2.66 billion.
• Expanding other ag aid efforts. USDA also will expand payments under prior efforts such as CFAP 2 and others. The total payments USDA projects under the ERP Phase 2, PARP and expanded other programs is $1.82 billion with gross amounts at $4.54 billion.
• U.S. fertilizer production. USDA will seek public comment on 21 potentially viable projects totaling up to $88 million to boost U.S. fertilizer production via the first round of USDA’s Federal Production Expansion Program, a $500 million effort announced earlier this year. The projects are in Alabama, Arizona, Colorado, Florida, Iowa, Louisiana, Massachusetts, Minnesota, Missouri, Montana, Ohio, Oregon, Texas, Washington, and Wisconsin. USDA is seeking comments through Feb. 8 on the environmental impacts of the projects.
• Meat and poultry processing. Vilsack announced three projects in Ohio, Michigan and Minnesota which will expand independent meat and poultry processing capacity via the Meat and Poultry Processing Expansion Program. The projects total $12 million. The projects are in addition to other recently announced efforts in the sector.

— Key comments from Vilsack at Farm Bureau confab:

• He praised farmers for responding to the need to shore up the global food supply in the wake of disruptions created by Russia’s Feb. 24 invasion of Ukraine — despite challenges it created including driving up already lofty prices for key inputs like fertilizer. “Through it all, you still continue to produce, and you produce in a market that oftentimes finds you with limited market opportunities. It’s an incredible story of resilience.
• Farm income: Despite record farm income the past two years, data from USDA’s Economic Research Service (ERS) show that most U.S. farm households continue to rely on things besides farming as their primary source of income. “We’ve looked for ways in which we can encourage and increase the number of revenue streams available to farmers, so that they not only can benefit from the sale of crops or the sale of livestock, but that they have other additional revenue streams available to them,” he said. Vilsack noted USDA’s $3.1 billion Partnerships for Climate Smart Commodities (PCSC) climate-smart ag and forestry pilot project grant funding effort as one example… “a new revenue stream that will lead to more productive soil cleaner water and more efficient use of those important resources.”
• Sustainable Aviation Fuel (SAF). Vilsack talked about initial moves to help the fledgling SAF market get off the ground.
• Expansion of meat and poultry processing facilities or building new ones where processing capacity is lacking. “We’re excited about this opportunity for better bargains and better choices for consumers and better income for farmers,” he said, adding that USDA plans to announce an expansion of the concept to efforts that aim to increase processing for non-meat and poultry processing during the first half of this year.
• Initial project funding under domestic fertilizer: “We wanted to make sure that in establishing this initiative that we focused on independently owned entities, focused on entities that would make product in America that would focus on next gen and innovative approaches that would be sustainable, and most importantly, of all, would be farmer focused. To make sure that we’re hitting the mark, we’re making these 21 potential viable projects public, and soliciting public comment any concerns or issues that folks may have, as we are conducting the environmental reviews before making the final announcements.”

• Next farm bill: Vilsack made a few comments on the next farm bill, including the recent funding of nearly $20 billion in conservation programs under the Inflation Reduction Act (IRA), and their potential to boost climate-smart and sustainable agriculture. “We provided a tremendous opportunity to not only expand on these opportunities with the Inflation Reduction Act resources under the conservation title of that historic act, but also during the course of the discussions about our Farm Bill,” he said. “I appreciate there’s been a conversation here at Farm Bureau about the importance of that farm bill, the need to educate new members of Congress about its importance, and certainly appreciate the acknowledgement that it will be important and necessary for us to continue to link the nutrition aspect of the farm bill and the other aspects of it together to ensure the best chance of getting a new farm bill in 2023,” Vilsack said.

  As for what he hopes to see in the next farm bill, Vilsack urged a focus on expanding marketing opportunities. “We want to create the opportunity for farmers not just to depend on a commodity market, that can change on a whim, to be able to have three, four, five or six different profit centers operating out of their farm to create from those profit centers processing jobs and manufacturing jobs in rural communities,” he said.

— Financial Times article (link/paywall) on China is getting a lot of buzz. The item is titled, Xi Jinping’s plan to reset China’s economy and win back friends. Citing Chinese officials and government advisers, FT says Beijing “is putting together policies aimed at improving diplomatic ties that have soured badly and boosting a deeply strained economy.” The main goals are to restore robust growth to China’s slowing economy, improve the lot of hundreds of millions of Chinese rural workers, stabilize the ailing property market and shore up a crisis afflicting the finances of scores of local governments, the officials and government advisers say. The focus is on ties with Europe, which have been badly damaged by China’s support for its partner Russia throughout Moscow’s war against Ukraine.

— China stopped issuing short-term visas for visitors from Japan and South Korea in retaliation for the two countries imposing covid-19 restrictions on Chinese travelers. China’s embassy in Seoul said it would adjust its policy if South Korea lifted “discriminatory entry restrictions.”

— Chinese new bank loans rose in December, set record in 2022. New bank lending in China unexpectedly rose in December from the previous month, with 2022 setting a high for lending as the central bank continued to support the Covid-hit economy. Chinese banks extended 1.4 trillion yuan ($206.7 billion) in new yuan loans in December, up from November and beating analysts’ expectations, according to data released by the People’s Bank of China. New bank lending hit a record 21.31 trillion yuan in 2022, up from the previous high of 19.95 trillion yuan in 2021.

— The Belt and Road Initiative may be undergoing some belt tightening, but it’s too early to write off China’s overseas infrastructure push entirely. Although the investment plan retrenched in Asia during the pandemic, it is still expanding rapidly in Latin America. And the WSJ’s Megha Mandavia writes in a Heard on the Street column (link) that Beijing is unlikely to abandon its megaprojects, given how much it has already invested. The latest round of political headaches came at the Gwadar Port project in Pakistan, which has drawn sharp local protests. The project is one sign of how many lower-income governments have grown wary of such projects and the debt and local opposition they often create. China has certainly pulled back its foreign-direct investment. But in the U.S.’s backyard, China’s average annual direct investment in Latin American countries actually quadrupled in the 2020-2021 period compared with the five-year period before.

— Biden wants trade with environmental focus to be key for trade relations with Mexico, Canada. President Joe Biden today is meeting with the leaders of Canada and Mexico in Mexico City. He wants to have strengthened trade relations with an environmental focus to create a trading bloc to take on China and Russia. Mexico’s president asked Biden for more U.S. investment into Mexico and wants a coordinated investment into Mexico so there can be growing trade among the U.S., Canada and Mexico. Mexico also wants more money for the U.S. immigration system, saying that for Biden’s plan to work, there must be investment in Mexico for returning people to the country.

John Kirby, NSC Coordinator for Strategic Communications, said “This is foreign aid and assistance and it’s really, quite frankly, a down payment and an investment in regional security and we are trying to get at the root causes of this very historic migration that we’re seeing.” He said there will be deliverables from this summit on immigration. It will focus on technology and information sharing to stop fentanyl from crossing the border. Biden last night said that his relationship with Mexico is a growing friendship. Biden wants to raise the environmental standards for Mexico to boost trade so it can have a robust climate change policy and boost and solar panels and wind manufacturing in Mexico and to increase trade among the three countries.

— Greenhouse gas emissions in the U.S. grew by 1.3% last year, as the nation remains short of meeting the goal of cutting emissions by at least 50% by 2030, compared to 2005 levels, according to a new report from the Rhodium Group. However, the growth in emissions was outpaced by the economic growth rate, suggesting that the carbon intensity of the economy dropped in 2022, as coal was displaced by natural gas and renewable energy in the power sector.

— Power grid. A coalition of companies, including General Motors Co., Ford Motor Co. and Alphabet Inc., along with solar energy producers, will work together to ease loads on the power grid by creating standards for virtual power plants, which pool together decentralized energy from resources like electric vehicles or electric heaters. The Virtual Power Plant Partnership, hosted by energy nonprofit RMI, will use advanced software to switch household batteries from charge to discharge mode and reduce consumption from other devices during electricity shortages, with permission from customers. Link for more via Reuters.

— A hole in the Earth’s ozone layer, which protects the planet from the sun’s ultraviolet radiation, is expected to heal within the next four decades if current policies remain in place, according to a scientific assessment published every four years by a United Nations-backed panel. The ozone layer is forecast to gradually recover to 1980 levels by 2040, the report said.

— Federal regulators fined former McDonald’s CEO Stephen Easterbrook $400,000 on Monday for charges related to fallout from the sex scandal that resulted in his termination from the fast-food giant. Easterbrook was fired in 2019 after intentionally misleading investors by not disclosing improper relationships in the workplace, according to the Securities and Exchange Commission.

— Japan to cull record numbers in bid to halt HPAI. Japan will cull a record of more than 10 million chickens to combat highly pathogenic avian influenza (HPAI), the agriculture ministry announced after finding another case in southwestern Japan. Culls in 2022 totaled 10.08 million chickens in 57 cases, taking out the prior record of 9.87 million chickens culled in November 2020-March 2021 which was from 52 cases of HPAI. There have been 23 prefectures affected compared with 18 in the 2020 infections. Japan warned producers to be on high alert and an official was quoted by Reuters as saying outbreaks in wild birds have been greater than expected.

— Your food-delivery order may be re-routed. Startup Wonder Group is laying off staff and scrapping plans for a nationwide fleet of food trucks, shifting instead to a more conventional and less expensive restaurant delivery model. The Wall Street Journal reports (link) the shift marks a significant change for the four-year-old startup run by e-commerce entrepreneur Marc Lore. He has raised $900 million in venture capital for a business valued at around $3.5 billion last year. Wonder currently cooks food with a fleet of around 500 food trucks that deliver in the New York and New Jersey suburbs — essentially combining meal preparation and last-mile delivery. The WSJ article says the switch is a sign that even Lore, who has earned investors profits with past ventures such as Jet.com, is up against tight investor funding and rising interest rates. Startups face growing pressure to more quickly earn profits and use less capital.

— Summary:

• Global Covid-19 cases at 664,690,735 with 6,709,324 deaths.
• U.S. case count is at 101,285,347 with 1,096,751 deaths.
• Johns Hopkins University Coronavirus Resource Center says there have been 665,076,272 doses administered, 268,546,218 have received at least one vaccine, or 81.50% of the U.S. population.

— Moderna signals Covid-19 vaccines will cost at least $110 a dose. The vaccine maker said Monday that it plans to price its Covid-19 vaccine between $110 and $130 a dose, following in Pfizer’s footsteps as drug companies prepare for the government to wind down its pandemic spending. The Wall Street Journal first reported the move. In both cases, the commercial price is significantly more than what the U.S. government has paid for the vaccines. The cost per dose was $26.36 in a July deal, up from $15.25 and $17.50 in previous agreements.

— FDA is pressing pause on drug-company testing of experimental medicines more often, a WSJ review of FDA data on clinical holds found (link), a side effect of the industry’s move into promising but less proven technologies.

— President Joe Biden is preparing to launch his 2024 re-election campaign “in the coming weeks, likely in February, around the State of the Union,” The Hill reports (link) , citing “multiple sources.” While Biden “mulled his next steps together with first lady Jill Biden, he has been getting briefed by advisers on what a potential campaign would look like.” Additionally, his aides are “quietly building the infrastructure needed for a new campaign,” and expanding “their digital footprint on platforms such as TikTok and WhatsApp, where political advertising is prohibited.” The Hill profiles who he is “leaning on as he revs up for another run,” noting Biden’s “all-important brain trust” includes White House Chief of Staff Ron Klain; senior advisors Steve Ricchetti, Mike Donilon and Anita Dunn; and Deputy chief of Staff Jen O’Malley Dillon.

— Nebraska Gov. Jim Pillen (R) is “reviewing candidates” for the Senate vacancy left by Ben Sasse’s (R) resignation Sunday, “and an appointment will be made promptly,” Pillen spokesman John Gage said.

— House narrowly approves rules package. The package passed on Monday evening in a mostly party-line vote of 220-213, with just one Republican (Tony Gonzales of Texas) voting “no” — he objected to conservative threats to cut defense spending. The rules package includes the Holman rule, which allows lawmakers to use spending bills to defund specific programs and fire federal officials or reduce their pay; makes it harder for lawmakers to raise the debt limit; and paves the way for the creation of a new select subcommittee under the Judiciary Committee focused on the “weaponization” of the federal government. The package requires that lawmakers receive the text of bills 72 hours ahead of a vote. It ends proxy voting, a procedure instituted by Democrats during the coronavirus pandemic. It also stipulates legislation must address a “single subject,” to discourage sprawling legislation that mashes together numerous pieces of unrelated bills. Another rule, known as “cut-go,” would require any new spending to be offset by cuts elsewhere in the budget. Deficit-increasing tax cuts are exempt.

Not all of Speaker Kevin McCarthy’s (R-Calif.) promises to conservatives are enumerated in the rules. There is a separate, three-page document that Republicans have kept secret.

— House Republican Steering Committee tapped Rep. Jason Smith (R-Mo.) to chair the Ways and Means Committee, one of the most important chairmanships with its focus on the tax code, health care, trade and the IRS. In a statement (link), Smith said: “If confirmed, the new IRS Commissioner should plan to spend a lot of time before our committee answering questions about the leaking of sensitive taxpayer information and an agency with a history of targeting conservative Americans.” Smith, 42, stressed his youth and working-class roots, a contrast with his top competitor, Rep. Vern Buchanan (R-Fla.), a wealthy 71-year-old. Smith is a populist and pro-Trump Republican. Smith is also a close ally of McCarthy and helped negotiate with dissenting members during last week’s speaker vote. Green is a Freedom Caucus member, but he backed McCarthy through all 15 votes for speaker.

Smith also focused on China and energy policy, saying: “We will examine using both trade policy and our tax code to re-shore and strengthen our supply chains, where products and services vital to our national security are made here at home using American labor, as well as craft policies that help America achieve food and medical security rather than dependence on nations like China. We must also look at ways to encourage domestic energy production and achieve energy independence through the tax code instead of using it as a tool to punish energy producers as President Biden has suggested.”

— Freedom Caucus member Rep. Mark Green (R-Tenn.) was picked to lead the Homeland Security Committee, knocking off Rep. Dan Crenshaw (R-Texas), who also wanted the post.

— Texas GOP Rep. Jodey Arrington is the new Budget Committee chair. Arrington beat Reps. Buddy Carter (Ga.) and Lloyd Smucker (Pa.) to win the gavel in just his fourth term in the House. Arrington bested Reps. Lloyd Smucker (R-Pa.) and Buddy Carter (R-Ga.) on Monday. The Budget role was vacant after Jason Smith won Ways and Means.

— Rep. Virginia Foxx (R-N.C.) will again lead the House Education and Workforce Committee. She sought a waiver from the steering panel due to a GOP conference rule that bars members from serving more than three consecutive terms as a ranking member or chair of a committee.

— House will vote today to establish two committees: a select committee that will focus on competition with China on economic and security issues to be chaired by Rep. Mike Gallagher (R-Wis.) and the Select Subcommittee on the Weaponization of the Federal Government to be chaired by Rep. Jim Jordan (R-Ohio). This panel will have broad authority and could investigate the Justice Department’s investigation into the Jan. 6 attack on the Capitol.

— House votes to strip IRS Funds. The House voted to repeal billions of dollars of Internal Revenue Service (IRS) funding that Democrats approved last year, an issue that will not go anywhere in the Democrat-controlled Senate. In the first vote on legislation with Speaker Kevin McCarthy (R-Calif.) at the helm, the chamber passed a bill on Monday night that would rescind most of the $80 billion President Joe Biden’s Inflation Reduction Act approved to bolster the agency’s faltering audit program. The legislation passed 221-210 on a party-line vote. The IRS provisions in the crosshairs call for $80 billion to be spent over a decade to bolster auditing, customer service and computer systems. The repeal would actually cost the federal government, rather than saving it money.

— Dept. of Justice is investigating Biden’s handling of classified docs. The department is looking into around ten classified documents from President Biden’s tenure as VP that were found in a private office he used. An official appointed by former President Trump has been tasked with the review. Unlike the documents that were seized from Trump’s Mar-a-Lago club, it appears that Biden’s own attorneys found them and alerted the government, returning them the next day.

Incoming House Oversight Chair James Comer (R-Ky.) called the situation an example of a “two-tier” standard at the Justice Department and musing to reporters at the Capitol about why agents haven’t yet raided Biden’s homes. A letter to the National Archives and potentially a hearing will follow, he said.

Incoming House Judiciary Committee Chair Jim Jordan (R-Ohio) seized on the timing of the discovery, telling CNN: “They knew about this a week before the election. Maybe the American people should have known about it.”

— Supreme Court turns down case on rail, air unions’ court access. The U.S. Supreme Court declined to consider a case that had the potential to roll back union access to federal courts for labor disputes involving railroads and airlines.

— Biden administration unveiled details of its plan to help low-income student-loan holders wipe out debts more quickly. The plan would halve, to 5% from 10%, the amount of discretionary income borrowers must pay each month on their undergraduate loans if they are enrolled in an income-driven repayment plan. Borrowers with incomes below 225% of the federal poverty line wouldn’t have to make monthly payments.

— Mike Pence’s political action committee bought $91,000 worth of the former vice president’s memoir, which became a New York Times best-seller. Pence could legally use his PAC to funnel donor funds into his personal pocket because he isn’t a current candidate for federal office, one campaign finance attorney says, though a spokesperson for Pence insists steps were taken to avoid that from happening.

— Brazil riots. In a joint statement the leaders of the U.S., Canada and Mexico condemned violent riots in Brazil by supporters of Jair Bolsonaro, a former president. Meanwhile, some of President Biden’s fellow Democrats asked him to expel Bolsonaro from their country — he is currently in hospital in Florida, with abdominal pain. Police in Brazil have arrested around 1,500 people involved in the storming of government buildings in the capital, Brasília, on January 8.

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