Iowa Poll signals trouble for Grassley re-election
In Today’s Digital Newspaper
Market Focus:
• Dollar weaker, U.S. equities signal higher opening
• Biden to meet with top U.S. financial regulators today
• S.F. Fed: Recent run-up in inflation largely due to temporary price increases
• Natural-gas futures up 96% from year ago, highest price headed into summer since 2017
• Bitcoin prices fell over 10% after China statement
• WSJ: Amtrak facing challenges from freight trains over commuter rail expansion
• Almost every part of the Western U.S. is in a drought
• Ag demand update
• Rains weigh on grain and soy futures
• Eastern Corn Belt receives the best rains; more is in the forecast
• Indonesia lowers top tariff on palm oil exports
• Russia preparing its first wheat shipment to Algeria in 4.5-years
• Argentine deal on beef exports expected early this week
• Will the cash cattle market continue to strengthen?
• Cold Storage and Quarterly H&P Report both out this week
Policy Focus:
• Infrastructure: more of the same as hurdles continue; Biden statement today
• DOJ defends USDA socially disadvantaged farmer debt forgiveness in court filing
China Update:
• Chinese regime: Wuhan lab scientists ‘should be awarded the Nobel prize’
• Jake Sullivan: No immediate action on China until there is ‘international consensus’
• Chinese imports of Brazilian beans picked up last month
• Chinese corn auction met with strong demand
• More warnings to Chinese hog producers not to pani
Energy & Climate Change:
• Oil refiners warn of record biofuel costs
• North Dakota presses court on climate regulation
• Iran announces emergency shutdown of Bushehr nuclear power plant
Coronavirus Update:
• In the U.S., more than 44% of the eligible population has been fully vaccinated
• U.S./Canada border closed until July 21
Politics & Elections:
• Trump challenges
• Iowa Poll shows almost two-thirds want someone to replace Grassley
• Tennessee Republicans consider dividing Nashville to gain House seat
Congress:
• Voting rights legislation to Senate floor on Tuesday
• House highway bill consideration next week
Other Items of Note:
• CNH to buy Raven Industries in $2.1 billion deal
• Tokyo Olympics will allow some spectators at Summer Games
• North Korea talks
• Victor in Iran’s election likely to delay resolution of nuclear talks
MARKET FOCUS
Equities today: Global stock markets were mixed overnight. U.S. stock futures are signaling a rebound following a week that saw the Dow drop by the most in more than seven months. In Asia, Japan’s Nikkei 225 fell 3.3%, while Australia’s S&P/ASX 200 dropped 1.8% and Hong Kong’s Hang Seng decreased by 1.1%. China’s Shanghai Composite was little changed, ticking up 0.1%. In Europe the Stoxx 600 Index recovered from losses at the open to trade 0.4% higher in early trading.
U.S. equities Friday: The Dow dropped 533.37 points, 1.58%, at 33,290.08. The Nasdaq lost 130.97 points, 0.92%, at 14,030.38. The S&P 500 declined 55.41 points, 1.31%, at 4,166.45.
On tap today:
• Chicago Fed National Activity Index for May is due at 8:30 a.m. ET.
• Federal Reserve: Philadelphia Fed President Patrick Harker, St. Louis Fed President James Bullard and Dallas Fed President Robert Kaplan speak at 9:30 a.m. ET.
• USDA Grain Export Inspections report, 11 a.m. ET.
• New York Fed President John Williams speaks at 3 p.m. ET.
• CFTC Commitments of Traders report, 3:30 p.m. ET (delayed from Friday)
• USDA Crop Progress report, 4 p.m. ET.
• Roth Virtual London Conference, hosted by Roth Capital Partners, begins Monday. Participants will include Plug Power, eGain and SunRun.
• President Joe Biden plans to meet with top U.S. financial regulators today to discuss the health of the system they oversee and how his administration’s priorities, including on climate change and inclusion, can best be addressed.
Recent run-up in inflation is largely due to temporary price increases on products that were sensitive to changes brought about by the pandemic, writes San Francisco Fed economist Adam Hale Shapiro in a blog post (link). Prices of Covid-sensitive categories rose at more than twice the rate than Covid-insensitive categories in April, he found. In particular, inflation in health care services--which account for about 20% of the core personal consumption expenditures price index--has been strong because of temporary changes to Medicare rules. Used car prices have also risen due to a spike in demand and shortage of semiconductors. The economist estimates inflation in those Covid-sensitive categories will cool within the next 12 months.
Market perspectives:
• Outside markets: The U.S. dollar index is weaker on a corrective pullback after solid gains posted last week. The index is lower amid a mixed tone for foreign currencies against the greenback —t he Euro and British pound are both up versus the U.S. currency. The yield on the 10-year Treasury fell another 2 bps to 1.43%, marking its lowest point since early March. The five- to 30-year yield spread narrowed to the smallest gap since December as investors continue to react to last week’s hawkish Fed; Fed Chair Jerome Powell is due to testify to Congress tomorrow. Gold and silver futures are higher ahead of US market action, with gold above $1,783 per troy ounce and silver above $26.05 per troy ounce.
• Natural-gas futures ended Friday at $3.215 per million British thermal units, up 96% from a year ago and the highest price headed into summer since 2017.
• Crude oil prices have surrendered earlier advances and are nearly unchanged ahead of U.S. trading. U.S. crude is trading around $71.65 per barrel while Brent crude is trading around $73.50 per barrel. Prices were higher in Asian action as Iran nuclear talks ended without a deal. U.S. crude was up 45 cents at $72.09 per barrel while Brent was up 35 cents at $73.86 per barrel.
• Bitcoin prices fell over 10% after China authorities said banks and payment institutions cannot provide payment services for crypto-currency related transactions. Also, the city of Ya’an moved to curtail digital mining in the hydropower-rich region of China. Since Friday, Bitcoin has dropped about $3,000, to about $32,500. Bitcoin traded below that level on June 9, but it hasn’t closed below $33,000 since January. With today’s declines, Bitcoin is down about 50% from its April 52-week high of almost $65,000. Ethereum traded below $2,000 while DeFi coins remained under pressure.
• Amtrak is facing challenges from freight trains over its commuter rail expansion, the Wall Street Journal reports (link). Amtrak owns most of the tracks where it currently offers its flagship service—the Northeast Corridor between Washington and Boston—but it relies in most of the rest of the country on access to the tracks owned by freight railroads. By law, Amtrak trains can take precedence over freight when running over those networks. In practice, conflicts are frequent. As the Biden administration looks to secure funding to transform passenger train travel in its infrastructure plan, Amtrak is seeking legal changes to force the freight carriers to provide better access for passenger trains.
• Ag demand: Egypt’s state grain buyer is seeking at least 30,000 MT of soyoil and 10,000 MT of sunflower oil.
• Almost every part of the Western U.S. is in a drought. Montana, Idaho, Washington, Oregon, California, Nevada, Arizona and New Mexico are all experiencing extreme and exceptional droughts, the most severe types, according to the U.S. Drought Monitor, a weekly map produced by the U.S. government and the University of Nebraska-Lincoln.
• Weather outlook: There is a slight risk of excessive rainfall over parts of the Central Appalachians/Ohio Valley to the Lower Mississippi Valley and parts of the Western to Eastern Gulf Coast through Tuesday morning... ...There is a slight risk of severe thunderstorms over parts of the Northeast/northern Mid-Atlantic and parts of the Ohio Valley/Central Appalachians through Tuesday morning... ...Dangerous and record-breaking heat wanes across California and the Southwest, while expanding into the Pacific Northwest...
Items in Pro Farmer’s First Thing Today include:
• Rains weigh on grain and soy futures
• Eastern Corn Belt receives the best rains; more is in the forecast
• Indonesia lowers top tariff on palm oil exports
• Russia preparing its first wheat shipment to Algeria in 4.5-years
• Argentine deal on beef exports expected early this week
• Will the cash cattle market continue to strengthen?
• Cold Storage and Quarterly H&P Report both out this week
POLICY FOCUS
— Latest on infrastructure: more of the same as hurdles continue. The White House on Friday reiterated President Joe Biden’s opposition to indexing the gasoline tax to inflation to help pay for an infrastructure plan, raising new questions about the viability of a bipartisan compromise emerging in the Senate. “After the extraordinarily hard times that ordinary Americans endured in 2020 — job losses, shrinking incomes, squeezed budgets — he is simply not going to allow Congress to raise taxes on those who suffered the most,” White House spokesman Andrew Bates said in a statement.
Background: A bipartisan group of 21 senators has been working to finish a $579 billion infrastructure proposal to counter a $2.25 trillion plan that Biden initially proposed. A draft outline of the lawmakers’ plan lists several funding sources that have been opposed by the White House, including the gas tax proposal, a fee on electric vehicles and re-purposing unspent Covid-19 relief funds. Biden on Friday said that he’ll have a response to the plan after reviewing it this week. “I’ll tell you Monday when I get the copy of it,” the president said at the White House.
Sen. Lindsey Graham (R-S.C.) said yesterday a bipartisan accord on infrastructure is still on the table and challenged Biden to decide whether he wants to pursue it. “I would just say this: President Biden, if you want an infrastructure deal with a trillion dollars it’s there for the taking — you just need to get involved,” Graham, a member of the bipartisan group of 21 senators, said on Fox News Sunday.
Comments: Biden’s review today will be important. Meanwhile, far-left Democratic infighting on the topic is adding another hurdle to the topic. The most liberal members of the Democratic Party favor a $6 trillion infrastructure package that stands no chance of passing the close Senate. The plan for the Senate is to pass a bipartisan infrastructure deal next month as well as a budget blueprint that sets up a vote later on a far larger bill with trillions in social spending paid for in large part by tax hikes on the wealthy and corporations. The budget bill could be passed with only Democratic votes in the Senate. But as noted, far-left Democrats in the House and Senate say they may not back an infrastructure package that includes concessions to Republicans without a guarantee that their priorities — on climate, health care and social welfare — will be accommodated in follow-up budget legislation.
— DOJ defends USDA socially disadvantaged farmer debt forgiveness in court filing. The Department of Justice (DOJ) Friday filed court documents in response to the suit brought by white farmers against the debt forgiveness plan launched by USDA for socially disadvantaged farmers. The suit, brought by 12 farmers in nine states, was filed in U.S. District Court for the Eastern District of Wisconsin, and Judge William Griesbach granted a temporary restraining order on the effort. DOJ had until June 18 to respond. DOJ argued a preliminary injunction should be denied as “Plaintiffs are white farmers who object to the government’s effort to remedy the lingering effects of discrimination because the government used a race-conscious remedy to do so. They seek to further delay pandemic relief designated for minority farmers, despite failing to provide any basis to question Congress’s conclusion that minority farmers were largely left out of prior relief efforts.”
DOJ said the farmers bringing the suit “cannot show irreparable harm” and said that the farmers could “obtain any monetary relief they seek at the conclusion of this case if they are entitled to it.” DOJ argued that to delay the debt forgiveness for socially disadvantaged farmers would further harm minority farmers.
Griesbach is to decide on a preliminary injunction by July 23.
CHINA UPDATE
— Chinese regime: Wuhan lab scientists ‘should be awarded the Nobel prize.’x A Chinese foreign ministry spokesperson has claimed that researchers at the Wuhan lab deserve the Nobel Prize just as calls renew for a harder look into whether the virus that causes Covid-19 could have leaked from the facility. The Wuhan Institute of Virology, hosts China’s first P4 laboratory, the highest biosafety designation that allows it to handle the world’s most dangerous pathogens. The lab is located just a few miles from a major seafood market in the city that Beijing first identified as the source of the virus. Zhao Lijian, of China’s Ministry of Foreign Affairs, sought to deflect attention on the lab, claiming that the WIV scientists were being faulted because they were the first to identify the Covid-19 genome sequence. “That does not mean Wuhan is the source of the coronavirus, nor can it be inferred that the coronavirus was made by Chinese scientists,” he said at a June 18 press briefing. “If those that first publish high-quality viral genomes were to be accused of making the virus, then professor Luc Montagnier, who first discovered Human Immunodeficiency Virus (HIV) would be considered the culprit of AIDS rather than awarded the Nobel Prize, and Mr. Louis Pasteur, who discovered microbes, would be held accountable for the disease-causing bacteria all around the globe.”
— Jake Sullivan: Biden administration will take no immediate action on China until there is ‘international consensus.’ President Joe Biden’s national security adviser Jake Sullivan said the administration is seeking answers from China on the origins of Covid-19 with the international community. Sullivan said the U.S. is working on two tracks on finding out the origins of the coronavirus, including an assessment by the intelligence community that Biden gave a 90-day deadline for, and a second international investigation led by the World Health Organization. “We are not, at this point, going to issue threats or ultimatums,” Sullivan said Sunday on CNN’s State of the Union. “What we are going to do is continue to rally support in the international community, and if it turns out that China refuses to live up to its international obligations, we will have to consider our responses at that point, and we will do so in concert with allies and partners.”
Sullivan reaffirmed that the administration is “not going to simply accept China saying no” in refusing to answer questions as to how the virus came about but highlighted the importance of working with other nations to combat Beijing. “In order to build the kind of international consensus around this issue that will be required to put additional pressure on China, that takes diplomatic spadework,” he said. “It’s spadework the president carried forward in a major way at the G-7, getting for the first time something the last administration could not get, which was the democratic world speaking out with one voice on this issue.”
China will risk international isolation if it fails to allow a “real” investigation on its territory Sullivan said. His comments follow last week’s call by Group of Seven leaders including U.S. President Joe Biden for another probe into how the virus originated. Biden last month ordered the U.S. intelligence community to “redouble” efforts to determine where the coronavirus came from and to report back in 90 days. China has rejected the theory that the virus originated in a lab in Wuhan. Meanwhile Japan is enlisting the help of big corporations to help get vaccines into employees’ arms, Hong Kong is “carefully-examining” the possibility of easing its strict virus curbs, and Covid booster shots may not be necessary, a WHO scientist says.
— Chinese imports of Brazilian beans picked up last month. China imported 9.23 MMT of soybeans from Brazil during May, an 82% (4.15 MMT) surge from April and a 4% (370,000 MT) rise from year-ago levels, according to data from the country’s General Administration of Customs. The arrival of delayed cargoes helped push up the tally. China also imported 244,431 MT of soybeans from the U.S. last month, a 50% drop from year-ago and an 89% dive from the 2.15 MMT of the oilseed China imported from the U.S. during April. Five months into the year, China has imported 15.66 MMT of soybeans from Brazil, which lags year-ago by 28.9% (6.38 MMT). Beijing has imported 21.53 MMT of soybeans from the U.S. so far in 2021, a dramatic 240% surge from its imports of 8.97 MMT last year at this point.
— Chinese corn auction met with strong demand. China’s Sinograin sold all (37,126 MT) of the imported corn for Ukraine it put up for auction Friday. The small sale was part of the country’s multi-faceted effort to cool domestic prices.
— More warnings to Chinese hog producers not to panic. Chinese hog prices continue to slide, with live hog prices now down 65% since the start of the year. In response, China’s Animal Agriculture Association (CAAA) issued a notice saying, “In a period of declining prices, don’t panic, and further, don’t listen to rumors and plan production with a gambling mentality.” This comes soon after similar comments from China’s state planner last week. CAA also encouraged farmers to speed up elimination of less-efficient breeding sows and to focus on cost-cutting. Hog margins are at their lowest level since 2014, as farmers sell overweight pigs and China has remained an aggressive importer of pork. Some expect the situation to force out smaller producers, accelerating the country’s move toward factory hog farming. Pressure could linger. Cofco Futures recently noted, “Currently large companies are at 55% of their slaughter schedule and small farmers still have a lot of stock on their hands. We expect supply pressure to be quite large in late June.”
ENERGY & CLIMATE CHANGE
— Stop the presses… oil refiners warn of record biofuel costs. The nation’s top refining trade group warned that the cost of complying with a federal mandate to blend biofuels into gasoline and diesel is skyrocketing and could reach $30.5 billion in 2021, as industry advocates petition the Biden administration to lower annual quotas. The American Fuel and Petrochemical Manufacturers (AFPM) based its analysis largely on recent record-high prices for tradeable credits known as Renewable Identification Numbers (RINS) that track biodiesel and ethanol blending and are used by refiners to prove they have complied with annual biofuel quotas. On a per-gallon basis, RFS compliance could add as much as 23 cents to the cost of wholesale fuel production, AFPM says.
Comments: Much like when livestock, dairy and poultry farmers complain about the high price of feed, little mention is made that they could have covered some feed needs when prices were lower. But such observations are rarely made in Washington. RIN prices were indeed lower earlier.
— North Dakota presses court on climate regulation. North Dakota is pushing the U.S. Supreme Court to weigh in on federal climate regulation. The state filed a petition Friday asking the justices to review a January appellate court ruling and clarify the scope of the Environmental Protection Agency’s authority to regulate greenhouse gas emissions under a provision of the Clean Air Act. Similar petitions are pending from a coal company and a multistate coalition led by West Virginia.
— Iran announces emergency shutdown of Bushehr nuclear power plant for a “technical overhaul.” The Associated Press says Iran’s Bushehr nuclear power plant “has undergone an unexplained temporary emergency shutdown, state TV reported on Sunday.” Reuters says Iranian state TV attributed the temporary shutdown to a “technical overhaul” that “will continue for a few days,” according to an Iranian official. Axios highlights that it “marks the first time the plant...has reported a shutdown,” and “power outages could result from the shutdown, Gholamali Rakhshanimehr, an official from state electric company, Tavanir, told a local talk show Sunday.
CORONAVIRUS UPDATE
— Summary: Global cases of Covid-19 are at 178,513,818 with 3,866,737 deaths, according to data compiled by the Center for Systems Science and Engineering at Johns Hopkins University. The U.S. case count is at 33,541,997 with 601,825 deaths. The Johns Hopkins University Coronavirus Resource Center said that there have been 317,966,408 doses administered, 149,667,646 have been fully vaccinated, or 45.6% of the total U.S. population.
— Overall, in the U.S., more than 44% of the eligible population has been fully vaccinated, with nearly 53% having received at least one dose. The vaccinations have pushed the test-positivity rate to around 2%, compared with around 13% during this winter’s surge, an indication that far less Covid-19 is circulating.
— U.S./Canada border closed until July 21. Non-essential travel between the U.S. and Canada will be banned for another month despite mounting pressure from businesses to ease travel restrictions. Justin Trudeau’s border chief announced an extension of the current border rules until at least July 21 in a tweet last Friday. Public Safety Minister Bill Blair also said restrictions on travel to other countries would continue but added the Canadian government would begin to flesh out planned exemptions for fully vaccinated travelers on Monday.
POLITICS & ELECTIONS
— Trump challenges Murkowski. Former President Donald Trump continued challenging Republican incumbents by endorsing Kelly Tshibaka in her battle to unseat Alaska Sen. Lisa Murkowski, one of the GOP senators who voted to convict him in his impeachment trial. Trump called Murkowski “bad for Alaska” in a statement Friday endorsing Tshibaka, a former Alaska Department of Administration commissioner. He cited Murkowski’s vote to confirm Deb Haaland, Biden’s nominee for Interior secretary, which the former president said was “a vote to kill” drilling in the Arctic National Wildlife Refuge and jobs.
On Saturday, June 26, Trump makes his first major public appearance since losing last November’s presidential election at a rally in Ohio.
— Iowa Poll shows almost two-thirds want someone to replace Grassley. Almost two-thirds of likely Iowa voters polled say it is time for someone other than Chuck Grassley to serve in the U.S. Senate, casting doubt on the prospects of the longest-serving senator in the state’s history. In a poll published Saturday by the Des Moines Register (link) 64% of those surveyed said it’s time for someone else to occupy that seat, compared to 27% who said they’d vote to elect Grassley to an eighth term in 2022. Notably, Grassley’s job approval stood at 45%, which the Des Moines Register said is his worst since 1982.
— Tennessee Republicans consider dividing Nashville to gain House seat. The Hill reports (link), “Republicans plotting to maximize their advantages in state legislatures across the country during the decennial redistricting process are considering cracking apart Tennessee’s largest city, an ambitious move that could signal how aggressively the party will try to rig maps in its favor in the coming months.” In preliminary discussions, “top Republicans in the Volunteer State have contemplated dramatically redrawing the boundaries of a district anchored in Nashville, one of just two U.S. House seats in Tennessee held by a Democratic member of Congress.” Placing portions of Davidson County into neighboring conservative districts would “put the squeeze on Rep. Jim Cooper (D), the dean of Tennessee’s congressional delegation and a presence in Washington since he first won his district in 1982, save for an eight-year absence after he lost a race for a U.S. Senate seat in 1994.”
CONGRESS
— On Tuesday afternoon, Senate Majority Leader Chuck Schumer (D-N.Y.) will bring voting rights legislation to the Senate floor. It doesn’t have 60 votes to overcome a filibuster. Even if there were no filibuster, it does not have 50 votes to pass the Senate. Recall that Vice President Kamala Harris has been appointed by President Biden to lead the administration’s effort on voting rights reform.
— House highway bill consideration next week. Democrats’ $547 billion surface transportation reauthorization bill (HR 3684) was posted last Friday to officially be considered on the floor the week of June 28. The modified bill included provisions that would transfer money to pay for it from the general fund to the Highway Trust Fund. The bill advanced out of the House Transportation and Infrastructure Committee on a 38-26 vote on June 10. The Ways and Means Committee, which would write the financing title, hasn’t put forth a proposal.
OTHER ITEMS OF NOTE
— CNH to buy Raven Industries in $2.1 billion deal. CNH Industrial has agreed to buy Raven Industries for $58 per share in a deal that will build CNH’s stance in the agriculture equipment business. The deal, valued at $2.1 billion, marks a 33.6% premium based on a four-week volume-weighted average stock price. “Precision agriculture and autonomy are critical components of our strategy,” CNH Industrial Chief Executive Scott Wine said in a statement. CNH said it will spin off its Iveco truck and bus units along with its FPT engine division. The company is the second largest in the farm equipment business with the New Holland, Case IH and Steyr brands, putting it just behind Deere and Company. The deal is expected to close in the fourth quarter of this year. Raven’s stock soared 48% premarket.
— Tokyo Olympics will allow some spectators at Summer Games. Up to 10,000 Japanese spectators will be able to attend each event, organizers said, despite advice by leading doctors that the Games would be safer without crowds.
— North Korea talks. U.S. Special Representative for North Korea Sung Kim meets with his South Korean and Japanese counterparts in Seoul today. The meeting comes as U.S National Security Adviser Jake Sullivan noted the “interesting signal” sent by North Korean leader Kim Jong Un in his comments last week that he is ready for “dialogue and confrontation” with Washington. Sullivan added that the Biden administration would wait for a clearer message from Pyongyang before it would consider talks. “The clear signal they could send is to say ‘yes, let’s do it. Let’s sit down and begin negotiations,’” Sullivan told ABC News.
— Victory in Iran’s election of conservative cleric Ebrahim Raisi is likely to delay the resolution of nuclear talks, and therefore the return of the country’s oil to the international market. Raisi, who himself is subject to U.S. sanctions, is set to take over as president in August.