Biden Unveils Immigration Restrictions Amid Loopholes and Bipartisan Criticism

Reduced Roundup verdict against Bayer in Pa. | RGDS flooding | China warns Biden | Yen rally | India surprise | Russian crop losses | Possible Canada border strike

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June 05, 2024 08:48 AM

Today’s Digital Newspaper

MARKET FOCUS

Treasury yields fall
Texas Stock Exchange (TXSE) a new initiative backed by major financial players
Pimco predicts fixed income will outperform other asset classes
Middle class struggling despite strong economy
Goldman Sachs’ family office clients considering using look-back puts
Egypt expects to import more than 20 liquefied natural gas cargoes this summer
Ag markets today
Impacts of recent floods in state of Rio Grande do Sul, Brazil
Ag trade update
NWS weather outlook
Pro Farmer First Thing Today items

BALTIMORE BRIDGE COLLAPSE

Crews lift last large piece of bridge unlocking Patapsco River channel

CONGRESS

Congressional agenda
EPA Administrator Regan’s testimony postponed

ISRAEL/HAMAS CONFLICT

Hamas rejects U.S.-backed peace proposal

RUSSIA & UKRAINE

Ukrainian forces use HIMARS to strike Russian air defense systems
Russian crop losses due to severe frosts
In Ukraine, lack of rain resulting in falling crop condition ratings
Ukraine’s waterborne ag exports total 5.9 MMT in May

POLICY

Free June 24 webinar on tax strategies for Discrimination Financial Assistance
Senate Ag Subcommittee debates future farm bill
Farmers protest in Brussels ahead of EU elections, but movement loses momentum

PERSONNEL

Three FERC nominees cleared by panel

CHINA

Biden on China, Taiwan; China responds
Yellen concerned about increasing number of Chinese exports to
China’s export boom extends beyond high-tech industries targeted by West
Sinograin to increase wheat stockpiles

IMMIGRATION & BORDER POLICY

Biden announces executive order to limit asylum requests at U.S./Mexico border
Comparing Biden’s executive order with failed bipartisan border bill
Biden’s long-awaited southern border measure elicits fire from all sides

ENERGY & CLIMATE CHANGE

Grassley talks about challenges faced by renewable fuel industry
U.S. farmer interest in solar leasing doubles since winter

POLITICS & ELECTIONS

What’s the political verdict on the Trump verdict?
Modi claims victory in India’s election, but fails to secure an outright majority
Voting behavior of farmers in India’s election influenced by their ongoing protests
Highlights from Tuesday’s U.S. primaries

OTHER ITEMS OF NOTE

Reduced Roundup verdict against Bayer in Pennsylvania
EPA employees ratify new four-year contract
Over 9,000 Canada border workers could legally strike starting Thursday, June 6

MARKET FOCUS

— Equities today: Global stocks advanced. The U.S. Dow opened around 80 points higher on speculation that a cooling economy will give the Federal Reserve room to lower rates this year. The futures market this morning sees one Fed rate cut before Election Day, probably in September. Those odds could change if Friday’s jobs report brings any surprises. Thursday’s European Central Bank meeting is widely expected to cut rates from a record high. A rate cut by the ECB would most likely push the dollar higher against the euro. China’s May Composite PMI handily beat estimates at 54.1 vs. (E) 52.7. In Asia, Japan -0.9%. Hong Kong -0.1%. China -0.8%. India +3.2%. In Europe, at midday, London +0.3%. Paris +0.7%. Frankfurt +0.7%.

U.S. equities yesterday: The Dow ended up 140.26 points, 0.36%, at 38,711.29. The Nasdaq gained 28.38 points, 0.17%, at 16,857.05. The S&P 500 was up 7.94 points, 0.15%, at 5,291.34.

Treasury yields fell after data signaled an easing in labor market tightness that supported a Fed rate cut this year. Yields on the two-year and 10-year Treasury both down about two-tenths of a percentage point over the past week. The move in bond yields is almost equivalent to a quarter-point Fed cut being already delivered.

— Texas Stock Exchange (TXSE) is a new initiative backed by major financial players such as BlackRock and Citadel Securities, aiming to challenge the dominance of the New York Stock Exchange (NYSE) and Nasdaq. The TXSE has secured approximately $120 million in funding and plans to file registration documents with the U.S. Securities and Exchange Commission (SEC) later this year, with the goal of commencing trading in 2025 and hosting its first listing in 2026.

— Ag markets today: Corn, soybeans and wheat held in relatively tight trading ranges during a quiet overnight session. As of 7:30 a.m. ET, corn futures were trading 1 to 2 cents lower, soybeans were fractionally lower to 2 cents higher, winter wheat markets were unchanged to a penny lower in most contracts, while spring wheat was 2 to 4 cents higher. The U.S. dollar index was around 275 points higher, and front-month crude oil futures are modestly firmer.

Wholesale beef market remains strong. Wholesale beef prices extended recent gains with Choice firming $1.28 and Select up 77 cents on Tuesday. Despite strengthening prices, movement improved to 143 loads, signaling strong retailer demand. Given the wholesale beef strength, some packer margins have turned positive, which could limit expected pressure on cash cattle prices this week.

Hog premiums dwindle. The CME lean hog index is up 20 cents to $91.93 as of June 3. As of Tuesday’s close, the premium June lean hog futures held to today’s cash quote dwindled to 77 cents. July lean hog futures held only a $1.62 premium to the cash index.

— Agriculture markets yesterday:

Corn: July corn futures closed down 1 cent at $4.42 1/2 and near mid-range.
Soy complex: July soybeans fell 5 1/2 cents to $11.79, while July soymeal fell $4.40 to $355.10, each forging a more than one-month low close. July soyoil fell 52 points to 43.62 cents, closing near the session low.
Wheat: July SRW futures plunged 14 1/2 cents to $6.58 1/4 and settled on session lows. July HRW futures dropped 12 3/4 cents to $6.87 1/4. July HRS futures dipped 10 1/4 to $7.23 1/2.
Cotton: July cotton rose 33 points to 73.48 cents, marking a high-range close.
Cattle: August live cattle futures slipped 42.5 cents to $178.45, while nearby June futures closed 15 cents higher to $182.175. August feeder cattle futures fell 17.5 cents to $256.025.
Hogs: July lean hogs closed down $2.35 at $93.925 and nearer the session low.

— Quotes of note:

Pacific Investment Management (Pimco) predicts that fixed income will outperform other asset classes following a significant increase in bond yields. In an outlook released Tuesday, Pimco’s Richard Clarida, Andrew Balls, and Daniel Ivascyn stated that active fixed income is well-positioned to perform well in both recessionary and non-recessionary scenarios. As prices rise and inflation declines, they believe bonds will become more attractive than cash.
Middle class struggling despite strong economy. According to a poll commissioned by the National True Cost of Living Coalition, a significant portion of Americans considered middle class are facing economic hardship and pessimism about their financial future, despite positive economic indicators. The poll found that 65% of Americans whose incomes are 200% above the federal poverty line (around $30,000 for an individual in 2024) expressed pessimism that their financial struggles would improve over the course of their lives. This group includes those with high school diplomas, graduate degrees, blue-collar and white-collar workers in both rural and urban areas. Despite being able to cover essentials, many in this middle-income group face challenges in planning and saving for the future. 40% of all Americans polled admitted they could not envision their daily economic existence beyond their next paycheck. Nearly half (46%) confessed they lacked even a $500 emergency fund. Respondents expressed anxiety over housing costs, childcare expenses, education, and debt.
Goldman Sachs’ family office clients are considering using look-back puts, a type of exotic option, to manage volatility ahead of the U.S. elections, according to Sara Naison-Tarajano, global head of private wealth management capital markets. These options, also known as hindsight options, allow investors to exercise based on the most favorable price over the option’s lifetime, though they are costly and traded over the counter. Despite the economic volatility risk, Goldman is not altering its portfolio allocation strategy, maintaining confidence in the U.S. economy’s strength. Link for more via Bloomberg.

Market perspectives:

— Outside markets: The U.S. dollar index was higher, with the euro slightly weaker against the greenback. The yield on the 10-year U.S. Treasury note was little changed, around 4.33%, with a mostly lower tone in global government bond yields. Crude oil futures were firmer ahead of U.S. gov’t inventory data due later this morning, with U.S. crude around $73.60 per barrel and Brent around $77.90 per barrel. Gold and silver were higher ahead of U.S. market action, with gold around $2,354 per troy ounce and silver around $29.72 per troy ounce.

— Most notable move in the currency market yesterday and over the last week has been the strengthening yen. Yesterday, the yen gained 0.78% against the dollar, ending at a multi-week low and at its intraday peak was up 2% from last week’s low. The Bank of Japan has said they are monitoring the currency markets closely with an emphasis on its inflation impact after the yen fell to the lowest level since 1990 earlier this year.

— Egypt expects to import more than 20 liquefied natural gas cargoes this summer, a massive effort to ease energy shortages that are causing power outages and shutting industrial plants.

— Recent floods in the state of Rio Grande do Sul, Brazil, have had a devastating impact on agricultural production, especially on the soybean crop. Main effects of the floods:

Impact on soybean production

Estimated losses: The floods have caused significant losses in soybean production. It is estimated that losses could reach between 1 and 2 million metric tons (MMT) of soybeans due to the floods and landslides. The state crop agency Emater has adjusted its forecast for soybean production in Rio Grande do Sul to 19.53 MMT, down from the previous forecast of 22.24 MMT. Rio Grande do Sul was expected to be Brazil’s second-largest soybean producing state this year after Mato Grosso.
Quality and quantity: Approximately 30% to 40% of the remaining grains to be harvested are damaged, and in the most affected areas, up to 70% to 80% of the grains are damaged. This affects not only the quantity but also the quality of the harvest.
Market impact: The losses in Rio Grande do Sul could reduce the total production of Brazil, the world’s largest producer and exporter of soybeans.

Effects on other agricultural sectors

Rice and other crops: Rio Grande do Sul is also Brazil’s main rice producer. The floods have severely affected the rice harvest, with only 84% of the crops harvested before the rains. Additionally, wheat production is also expected to decrease due to waterlogged soils that hinder planting.
Livestock: The floods have caused the death of thousands of animals, including 12,600 pigs and more than 400,000 chickens. This has severely impacted pork and poultry producers, with disruptions in processing plants and significant economic losses.

Infrastructure and logistics

Infrastructure damage: The floods have destroyed roads, bridges, and other critical infrastructure, making it difficult to transport crops and livestock operations. The suspension of rail services and increased reliance on trucks have raised transportation costs and times.
Storage and processing: Storage and processing facilities have also been affected. For example, the soybean processing plant of Bianchini SA in Canoas was flooded, putting nearly 100,000 tons of stored oilseeds at risk.

Outlook

Recovery: Recovery will be a long and arduous process. Waterlogged soils will complicate planting for the next season, and farmers may be forced to switch to other crops while the soils recover. Additionally, government-backed guarantee funds will be needed to restore the agricultural sector.
Food inflation: The combination of crop losses, production disruptions, and increased logistical costs is likely to put pressure on food prices, contributing to inflation in Brazil.

— Ag trade update: Algeria purchased between 810,000 and 840,000 MT of optional origin milling wheat, with the majority expected to be sourced from Black Sea region countries. Egypt purchased 470,000 MT of wheat, including 180,000 MT Romanian, 120,000 MT French, 120,000 MT Ukrainian and 50,000 MT Bulgarian. Jordan tendered to buy 120,000 MT of optional origin milling wheat.

— NWS weather outlook: Excessive Heat Warnings in effect across parts of California’s Central Valley region as well as the Desert Southwest; Extreme Heat Risk continues across south Texas... ...Thunderstorms and heavy to Excessive Rainfall possible from Southern Plains to Northeast through Thursday.

Items in Pro Farmer’s First Thing Today include:

• Grains mixed in quiet overnight trade
• Argentina farmer soybean sales nearly double in May but still slow overall
• Global trade imbalances worsen as China’s surplus soars
• China to establish carbon footprint management system by 2027
• Asia, Mideast dominate port performance rankings
• Eurozone PMI hits one-year high, producer prices continue to ease

BALTIMORE BRIDGE COLLAPSE

— Crews lift last large piece of Francis Scott Key Bridge unlocking Patapsco River channel. On Tuesday morning, crews lifted the last large piece of the Francis Scott Key Bridge blocking the Patapsco River’s main shipping channel, according to the Army Corps of Engineers. This lift, following extensive operations to free the section of steel from the mudline, marked the end of efforts to cut and haul out a significant section of the Key Bridge that had fallen onto the Dali freighter and the riverbed in late March after the ship struck a bridge support column. The collapse on March 26, which killed six construction workers, significantly hampered maritime traffic into the Port of Baltimore.

Key Bridge Response Unified Command crews are now set to use dredging buckets and a large salvage grab to pull smaller chunks of debris out of the water before reopening the full 700-foot-wide channel in and out of the Port of Baltimore. The full marine route is expected to open sometime between Saturday and Monday after surveys to ensure no debris remains in the federal channel.

For the past several weeks, Unified Command crews have been cutting a 10-million-pound bridge segment into large pieces and lifting them out of the river using the Chesapeake 1000 crane. The large piece of steel truss, dubbed “Section 4,” is the same segment of the bridge that had pinned down the Dali for 55 days. The first segment, weighing 140 tons, was lifted on May 24 and taken to Sparrows Point for processing. A second, 470-ton segment was lifted over the weekend, and the third and final segment, estimated to weigh around 400 tons, was picked up and transported Tuesday morning. The final lift required approximately 200 tons of steel to be removed through smaller cuts, shaking, and hammering to remove the larger piece from the water.

A 400-foot-wide section of the main channel has allowed 24/7 cargo vessel access into the Baltimore harbor for about two weeks, opening after crews refloated the Dali. Opening the main channel will mark a return to normalcy for maritime traffic into the port.

CONGRESS

— Congressional agenda: The Senate will hold a procedural vote on the Right to Contraception Act before adjourning for the week, with several senators traveling to France for the D-Day anniversary. Meanwhile, the House will vote on the final passage of the MilCon-VA spending bill before leaving for the week, with many members also flying to France after the votes. (Lawmakers will need to pass a continuing resolution before the Sept. 30 deadline to avoid a gov’t shutdown. Most expect Congress to finish up everything post-election.)

— EPA Administrator Regan’s testimony postponed. The House Oversight and Accountability Committee hearing on EPA oversight with Administrator Michael Regan that was scheduled for today has been postponed due to an “unanticipated scheduling conflict.” The committee site said a new hearing date was to be determined but Politico is reporting it will be July 10.

ISRAEL/HAMAS CONFLICT

— Hamas rejected a U.S.-backed peace proposal, saying Israel must commit to a permanent cease-fire and full withdrawal.

RUSSIA/UKRAINE

— Ukrainian forces use HIMARS to strike Russian air defense systems. Ukrainian forces have reportedly used U.S.-provided High Mobility Artillery Rocket Systems (HIMARS) to strike military targets inside Russia, specifically targeting S-300/400 air defense systems in the Belgorod region. This follows recent authorizations from officials in Europe and Washington allowing Ukraine to use Western-supplied weapons against certain military targets on Russian soil.

The Institute for the Study of War (ISW) assessed that Ukrainian forces likely employed HIMARS to destroy parts of a Russian advanced air defense battery near Belgorod, approximately 40 miles from the frontlines near Kharkiv. Geospatial imagery confirmed the destruction of two launchers and damage to a command post of the Russian air defense system.

This development comes after President Joe Biden authorized Ukrainian strikes on Russian soil using some U.S.-donated weapons to help Kyiv counter Moscow’s ongoing offensive in the northeastern Kharkiv region. The decision marks a significant shift in U.S. policy, which had previously restricted the use of American weapons for strikes inside Russia to avoid escalating the conflict further.

The authorization is limited to counter-fire purposes, allowing Ukraine to defend itself against Russian forces attacking or preparing to attack from positions close to the border. However, the use of longer-range missiles like ATACMS remains prohibited.

The strikes have been part of Ukraine’s broader strategy to counter Russian advances and protect its cities from relentless missile and bomb attacks. The ability to target Russian military assets directly has been seen as crucial for Ukraine’s defense, especially given the ongoing bombardment of Kharkiv and other regions.

Regarding Biden’s authorization to strike inside Russia: “All of our efforts have been focused on defensive capability throughout,” Austin said. And that includes “the permissions that the president has provided in terms of the use of our weapons in firing across [the] border…And so if someone’s shooting at you, then certainly, this gives them the opportunity to counter-fire.”

— Russian crop losses due to severe frosts. According to recent reports, Russia is facing significant crop losses due to severe frosts that have impacted several key agricultural regions across the country. The extent of the damage has prompted discussions about declaring a nationwide emergency to facilitate crop insurance claims for affected farmers.

Widespread frost damage. Russian President Vladimir Putin stated on Tuesday that 21 regions in Russia have been affected by the frosts, which have destroyed more than 1% of the country’s crops. This statement aligns with earlier remarks from Russian Agriculture Minister Oksana Lut, who indicated that the country may declare a nationwide emergency by the end of this week due to the frost’s impact on crops. The frosts have affected a diverse range of crops, including grains, sugar beets, and apples, among others. Some regions have already declared local emergencies in response to the crop damage.

Potential nationwide emergency declaration. Minister Lut expressed optimism that a nationwide emergency declaration would facilitate insurance claims for farmers affected by the frosts, following a recent emergencies committee meeting. If declared, this measure would enable farmers to seek compensation for their crop losses through insurance claims.

Impact on wheat production. The frost damage has raised concerns about Russia’s wheat production for the 2024-25 crop year. Last week, the agricultural consultancy Sovecon predicted a significant decrease in Russia’s wheat crop, estimating it to reach 82.1 million metric tons, down from the earlier forecast of 85.7 million tons. Russia is a major wheat exporter, and its production levels have a substantial influence on global grain markets. In 2023 and early 2024, the large supplies of Russian wheat flooded the world market and depressed prices, highlighting the country’s sizable impact on global grain markets.

— In Ukraine, a lack of rain is resulting in falling crop condition ratings, but so far there are not expected to have been significant damage to production prospects. May this year was one of the driest Mays for some 30 years in some areas and in others the driest in more than 100 years. The moisture shortages have not been accompanied by high temperatures which potentially limited the impact to crops.

— Ukraine’s waterborne ag exports total 5.9 MMT in May. Ukraine’s overall waterborne ag exports totaled 5.9 MMT in May, including 5.1 MMT shipped through its Black Sea ports and 800,000 MT sent via the River Danube, according to Spike Brokers, which tracks and publishes export statistics. That would be down from maritime ag exports of 6.5 MMT in April, based on UGA traders union data. UGA noted in May Ukraine exports via seaports and land included 3.6 MMT of corn, 1.65 MMT of wheat, 624,000 MT of sunflower oil, 209,000 MT of barley and 107,000 MT of soybeans. Ukraine’s ag ministry said 2023-24 grain exports reached 47.4 MMT as of June 5, up from 45.6 MMT during the same period last year.

POLICY UPDATE

— USDA offers free June 24 webinar on tax strategies for the Discrimination Financial Assistance Program. Financial assistance provided by USDA’s Discrimination Financial Assistance Program (DFAP) is taxable, and producers will need to report the assistance as gross income during next year’s filing season. USDA asks participants to join experts Guido van der Hoeven and JC Hobbs as they discuss strategies for dealing with the tax liabilities that DFAP recipients may encounter. Link to register.

— Senate Ag Subcommittee debates future farm bill. During a Senate Agriculture subcommittee hearing, Republicans and Democrats discussed the future challenges for American farmers, particularly in the context of the upcoming farm bill.

There is a shared recognition of the need to support beginning farmers, with proposals to increase land access and provide more resources for young and minority farmers. Link to Senate Ag Committee release.

Sen. Chuck Grassley (R-Iowa) said the farm bill “needs to be updated to reflect the realities of farming today – not six years ago, when the 2018 Farm Bill was passed. Farmers today face the increased input costs of diesel, fertilizer, chemicals, seed and interest rates.”

Sen. Cindy Hyde-Smith (R-Miss.) criticized proposals in Sen. Debbie Stabenow’s (D-Mich. ) farm bill framework that would implement means testing for some farm subsidies. Hyde-Smith expressed concern that this could adversely affect farmers who lease land. Stabenow defended the measures as essential to prevent wealthy Wall Street interests from receiving federal aid.

Republicans emphasized the necessity of significantly increasing statutory reference prices, a provision included in the House farm bill but absent in the Senate Democrats’ version. Stabenow pointed out that the House bill’s increase in reference prices isn’t currently funded according to the Congressional Budget Office (CBO) scoring, highlighting the need for negotiators to address this funding issue.

Stabenow acknowledged substantial common ground between the Senate and House versions of the farm bill. She emphasized that her framework better supports new and beginning farmers by prioritizing crop insurance. In contrast, the House bill increases support for both crop insurance and statutory reference prices.

Of note: Congress can enact a new farm bill this year, despite being months behind schedule, if lawmakers respect “the needs and interests of the broad farm and food coalition,” Stabenow said. “I know we can build on bipartisan cooperation and finish a 2024 farm bill.” Stabenow told Politico that lawmakers “don’t have a timeline, per se” for the farm bill. “The House has reported a bill out, so we’ll be talking more to the House and looking for areas of common ground.” Meanwhile, Sen. Chuck Grassley (R-Iowa) told reporters Tuesday that he met with Stabenow to discuss details of her farm bill plans, beyond the framework she released last month. “I think she’s making a good faith effort to move ahead,” Grassley said.

— Farmers protest in Brussels ahead of EU elections, but movement loses momentum. For months, farmers across Europe have been protesting the European Union’s environmental regulations and trade policies, which they argue are detrimental to their livelihoods. The protests reached a crescendo in Brussels on June 4, just days before the European Parliament elections, as farmers from various countries gathered in the Belgian capital to voice their grievances.

Protest turnout lower than expected. While the protest in Brussels was intended to be a show of force, the turnout was significantly lower than anticipated. Hundreds of tractors rumbled through the streets, but the numbers paled in comparison to previous demonstrations held earlier this year, which saw tens of thousands of farmers converge on the city.

The relatively low turnout suggests that the protest movement is losing steam, as the political incentives to maintain momentum fade after the EU elections. This is likely due to several factors, including concessions made by Brussels to address the farmers’ demands and divisions within the agricultural community itself.

Concessions from Brussels. In response to the sustained protests, the EU has scaled back several environmental rules and regulations that were part of its Green Deal and Common Agricultural Policy (CAP). These include:

Weakening climate and environmental measures: The European Commission has proposed loosening rules imposed on agriculture, such as those related to crop rotation, soil cover protection, and tillage methods.
Shelving pesticide legislation: The EU has discarded a proposed bill on sustainable pesticide use, which was a key component of the “Farm to Fork” strategy.
Relaxing land fallow requirements: The EU has offered more flexibility on the requirement for farmers to let some land lie fallow.
Limiting Ukrainian imports: The EU has drawn up limits on the import of tariff-free Ukrainian grains, which had been undercutting competition in domestic markets.

These concessions have addressed some of the farmers’ key demands, potentially reducing the incentive for continued protests.

Divisions within the agricultural community. Another factor contributing to the waning momentum of the protest movement is the emergence of divisions within the agricultural community itself. While some farmers’ unions and groups have been at the forefront of the protests, others have distanced themselves from the movement, citing concerns about its direction and potential politicization by far-right, anti-establishment parties.

For instance, in Germany, the largest farmers’ union, Deutscher Bauernverband, which represents 90% of the country’s farmers, did not participate in the Brussels protest, stating that they did not know the organizers. Similarly, in France, the largest union, the Fédération Nationale des Syndicats d’Exploitants Agricoles (FNSEA), was unlikely to attend.

This division within the agricultural community has weakened the protest movement’s cohesion and potentially contributed to the lower turnout in Brussels.

Diminishing disruptions to transport, business, and supply chains. While the farmers’ protests earlier this year caused significant disruptions to transport, business, and supply chains across Europe, the relatively low turnout in Brussels suggests that the likelihood of future protests causing similar disruptions will dramatically diminish.

Previous protests had led to gridlocks on roads, blockades of ports, and nationwide shutdowns, impacting trade, manufacturing, and logistics infrastructure. However, with the protest movement losing momentum, the risk of such disruptions is expected to decrease substantially.

PERSONNEL

— Three FERC nominees cleared by panel. The Senate Energy and Natural Resources Committee Tuesday approved the nominations of David Rosner, Lindsay See, and Judy Chang to be members of the Federal Energy Regulatory Commission (FERC). Rosner, a Democrat, and See, a Republican, were approved on votes of 16-3 while Chang, a Democrat, won approval 15-4. If the trio are confirmed by the Senate, that would put FERC at a full five members. It has been operating with three since the start of the year. The term of current Democratic Commissioner Allison Clements expires at the end of June, but FERC rules allow her to serve through the end of the year until a replacement is confirmed.

CHINA UPDATE

— Treasury Secretary Janet Yellen expressed concerns about the increasing number of Chinese exports to Russia, particularly dual-use goods that could be critical to Russia’s war effort in Ukraine. During her testimony before the Senate Appropriations Subcommittee on Financial Services and General Government, Yellen highlighted the significant rise in these exports, which include items that can be used for both civilian and military purposes.

The dual-use goods in question encompass a range of products such as semiconductors, machine tools, telecommunications equipment, and microelectronics. These items are essential for manufacturing weaponry like missiles, drones, and tanks, which are crucial for sustaining Russia’s military operations. Despite international sanctions and export controls imposed by the G7 and other Western nations, China has continued to supply these critical components to Russia, thereby supporting its defense industrial base.

Yellen’s testimony aligns with broader concerns from U.S. officials and allies about China’s role in enabling Russia’s war efforts. The U.S. has warned that Chinese firms face a choice between doing business with Western economies or supporting Russia’s military-industrial complex. The increase in Chinese exports of dual-use goods to Russia underscores the complex geopolitical dynamics and the challenges in enforcing sanctions effectively.

Bottom line: Yellen’s remarks underscore the importance of addressing the flow of dual-use goods to Russia and the need for coordinated international efforts to prevent such exports from undermining global security and stability.

Of note: Chinese solar firms are halting production at Southeast Asian factories as increased U.S. trade barriers create uncertainty for exports from the region.

— China’s export boom extends beyond high-tech industries targeted by the West, creating potential backlash from countries previously neutral in trade conflicts. China’s manufacturing trade surplus is nearing record highs, reflecting a broader surge in exports. This includes green-energy goods, steel, animal feed, and more, as domestic demand weakens due to a real estate slump slowing the economy.

— Sinograin to increase wheat stockpiles. China’s state-owned agricultural stockpiler Sinograin said it will increase domestic wheat purchases in major production areas as it looks to secure supplies amid recent weather-related damage to global producers. Beijing expanded its budget to stockpile grains and edible oils by 8.1% and implemented its first food security law aimed at achieving “absolute self-sufficiency” in staple grains. Sinograin in January said it would raise its purchases of domestic corn.

IMMIGRATION & BORDER POLICY

— President Joe Biden announced an executive order that will limit asylum requests at the U.S./Mexico border. This order will be activated when the daily average of people attempting to enter the country between ports of entry exceeds 2,500 over a seven-day period. The border will reopen for asylum seekers when the daily average falls below 1,500.

Key components of the executive order:

Threshold for activation:

The order will restrict new asylum requests when the daily average of border crossings surpasses 2,500 over a week.
Asylum processing will resume when the daily average drops to 1,500.

Exceptions:

The order does not apply to unaccompanied minors.
Asylum claims will still be processed at ports of entry, and credible fear interviews will be conducted for migrants fearing persecution or torture.

Enforcement measures:

Migrants expelled under the order will face a minimum five-year bar on re-entry to the U.S. and potential criminal prosecution.
Enhanced enforcement measures will target smuggling networks and organizations profiting from migration.

Legal and political context:

The order is seen as a response to congressional inaction on immigration reform and aims to address high border crossings, which have been a political liability for Biden.
The policy is expected to face legal challenges and criticism from progressives and immigration advocates, who argue it mirrors former President Trump’s hard-line immigration policies.

Immediate implementation:

The order takes effect immediately due to the current seven-day average of daily encounters at the border exceeding 2,500.

Political implications

The executive order represents a shift from Biden’s earlier stance on immigration reform, aiming to project political strength and consensus on a contentious issue.
The administration hopes this move will resonate with voters concerned about border security, especially in an election year.

Criticism and challenges

Immigration policy experts warn that the policy change may not resolve the border crisis and could lead to more erratic surges at the border.
Legal challenges are anticipated, potentially stalling the policy and bringing it before the Supreme Court.

Of note: Biden is still calling on Congress to act on border and immigration issues, asking lawmakers to fund the hiring of 1,500 more border security agents, 100 more immigration judges, 4,300 more asylum officers, and more technology to detect and prevent fentanyl from being smuggled into the U.S.

— Comparing Biden’s executive order with the failed bipartisan border bill. Both aim to address the issue of asylum seekers at the U.S./Mexico border, but they differ significantly in their approaches and scope.

Biden’s Executive Order

Threshold-based restrictions:

The executive order will restrict asylum requests when the daily average of border crossings exceeds 2,500 over a seven-day period and will resume processing when the average falls below 1,500.
Migrants who cross the border illegally will be barred from making asylum claims and will face swift deportation.

Exceptions and enforcement:

Unaccompanied minors are exempt from these restrictions.
The order includes measures to enhance enforcement against smuggling networks.

Political and legal context:

The order is a response to congressional inaction and aims to address high border crossings, which have been a political liability for Biden.
It is expected to face legal challenges and criticism from progressives and immigration advocates.

Failed Bipartisan Border Bill

Comprehensive overhaul:

The bill aimed to overhaul U.S. immigration law for the first time in over 30 years, including tightening asylum standards and empowering federal officials to quickly remove those who did not qualify.
It would have provided the president with the authority to shut down the asylum system if unauthorized border crossings reached a certain monthly threshold.

Additional provisions:

The bill included measures to expand visas, increase detention capacity, and offer a pathway to citizenship for certain groups like Afghan evacuees.
It also aimed to address root causes of migration and support American communities welcoming new arrivals.

Political dynamics:

The bill failed due to lack of bipartisan support, with Republicans blocking it despite initial negotiations and concessions from Democrats.
It faced criticism from both sides: progressives for not including pathways to citizenship for undocumented immigrants and conservatives for not being stringent enough.

Comparison

Scope and approach:
- Biden’s executive order is a more immediate and targeted measure focusing on daily border crossings, while the bipartisan bill was a comprehensive legislative attempt to reform the entire immigration system.
Implementation and enforcement:
- The executive order relies on executive authority and immediate enforcement actions, whereas the bipartisan bill required legislative approval and included broader structural changes to immigration policy.
Political and Legal Challenges:
- Both measures face significant political and legal hurdles. The executive order is expected to be challenged in courts, while the bipartisan bill failed to pass due to political opposition and lack of consensus.

Of note: The Wall Street Journal says (link), “Biden’s executive actions might help reduce the flow somewhat if they are strictly enforced, and at least he’s admitting the problem. But the press release sounds better than the details. Migrants could still seek asylum at ports of entry using the CBP One mobile app, which would be excluded from the daily triggers.”

Bottom line: While both Biden’s executive order and the failed bipartisan border bill aim to manage asylum seekers and border security, they differ in their methods, scope, and political feasibility. The executive order is a more immediate, executive-driven response, whereas the bipartisan bill represented a broader, legislative approach that ultimately failed to gain sufficient support.

— Biden’s long-awaited southern border measure elicits fire from all sides.

Republicans dismissed the measure as “window dressing” intended to give the White House a talking point with voters. Trump, the presumptive GOP nominee, called the policy “weak” and “pathetic” and suggested it was “all about show, because he knows we have a debate coming up in three weeks.” Sen. John Cornyn (R-Texas) said in a statement that Biden’s decision-making was “based on the proximity of the next election and sinking poll numbers… This executive order is just political cover, and the American people aren’t going to be fooled,” said Cornyn, who is running to replace Sen. Mitch McConnell (Ky.) as GOP leader in the Senate.

Progressive Democrats complained that Biden was using tactics like the Trump administration that would threaten millions of migrants fleeing violence and persecution in their home countries. The American Civil Liberties Union (ACLU) said it would challenge the order in court. Rep. Delia Ramirez (D-Ill.) said Biden’s crackdown would fall flat with the Republicans who have turned the border into a prime political issue.

ENERGY & CLIMATE CHANGE

— Grassley talks about challenges faced by renewable fuel industry. The recent Treasury Department decision to allow U.S.-made ethanol and other biofuels to qualify for a sustainable aviation fuel tax credit under the Inflation Reduction Act (IRA/Climate Bill) has sparked a range of reactions from different stakeholders. The tax credit aims to incentivize the production of cleaner aviation fuels by offering up to $1.25 per gallon for fuels that reduce carbon emissions by 50% compared to conventional jet fuel, and up to $1.75 per gallon for fuels that cut emissions by more than 50%.

The Treasury Department chose to use a modified version of the GREET (Greenhouse gases, Regulated Emissions and Energy use in Technology) model to calculate emissions reductions, a decision favored by the agriculture industry. This model acknowledges the role of farmers in lowering greenhouse gas emissions and rewards them for their contributions to producing new fuels.

However, the decision has not been without controversy. Environmentalists are concerned that the tax credit will not sufficiently incentivize the development of newer, cleaner fuels. They argue that the GREET model underestimates the environmental impact of land-use changes associated with biofuel production, such as converting grasslands or forests to crop fields. They had advocated for the adoption of the CORSIA (Carbon Offsetting and Reduction Scheme for International Aviation) model, which they believe better tracks these long-term effects.

Sen. Chuck Grassley (R-Iowa) on Tuesday highlighted practical challenges in meeting the new requirements. He pointed out that it can be difficult to verify whether farmers have adopted specific climate-smart conservation practices, such as reduced tillage. Additionally, once corn from different farms is mixed at an ethanol plant, it becomes challenging to trace its origins and ensure compliance with the new standards.

Ethanol industry groups have expressed mixed feelings about the announcement. While they see it as a step forward, they are concerned that the stringent requirements may be overly prescriptive and difficult for producers to meet. The American Coalition for Ethanol described the announcement as a “tailwind” for biofuels but criticized the government for overestimating the impact of land-use changes.

— U.S. farmer interest in solar leasing doubles since winter. A Purdue University survey (link) revealed that one in five U.S. farmers has discussed leasing land for solar projects, doubling since February. High payments offered by developers have led 6% of landowners to sign solar energy leases, according to the Ag Economy Barometer. In mid-May, 20% of farmers reported discussing solar leases, up from 10% in February. Combining April and May data, 30% of those who discussed leasing signed a solar lease, equating to 6% of all farmers.

In 2020, solar and wind farms occupied 423,974 acres, just 0.05% of U.S. farmland. USDA notes 2,600 local restrictions on such projects, with opposition increasing with project size.

Lease offers: 55% of farmers investigating solar leases were offered at least $1,000 per acre annually; 27% were offered $1,250 or more.

Some farmers report energy production is driving up local land values.

2020 Data: Solar and wind provided 10.7% of U.S. electrical generation, with wind at 8.4% and solar at 2.3%.

Tax credits and loans: The 2022 Inflation Reduction Act (IRA/Climate Bill) law extended tax credits and included $40 billion in loan guarantees for clean energy, with USDA funding for rural renewable energy projects.

POLITICS & ELECTIONS

— What’s the political verdict on the Trump verdict? That’s the question Amy Walter of the Cook Political Report asks. Her comments: “At first blush, it’s hard to believe that Donald Trump’s conviction on 34 counts of falsifying business accounts will hurt him politically. If you already despise the man, this verdict was further proof of his lack of fitness for the job. If you support him, the trial was yet another example of ‘lawfare’ perpetuated by a biased and liberal prosecutor. The question going forward in this campaign isn’t whether this conviction will change opinions about Trump. The real question is the impact it has on two key groups of people: those who already dislike Trump but aren’t motivated to show up for President Joe Biden, and those so-called ‘double haters’ who dislike both men.”

— Modi claims victory in India’s election, but fails to secure an outright majority. In the recent Indian general election, Prime Minister Narendra Modi and his Bharatiya Janata Party (BJP) faced a significant setback, failing to secure a majority in Parliament for the first time since Modi came to power in 2014. Despite this, the BJP is still poised to form a government through a coalition with its allies, but ones that don’t share his Hindu nationalist agenda.

The BJP fell short of the 272 seats needed for a majority, winning around 240 seats, a stark contrast to the 303 seats it secured in 2019. It’s the first election since 2014, when Modi won his first term as prime minister, that his party hasn’t gotten an absolute majority on its own.

The party’s performance was particularly weak in Uttar Pradesh, a crucial state where it won only 35 out of 80 seats, compared to 71 and 62 seats in the 2014 and 2019 elections, respectively.

Next step: Coalition government. Modi’s National Democratic Alliance (NDA) is on track to win a combined 286 seats, allowing them to form a government despite the BJP’s individual shortfall. This coalition reliance is expected to act as a check on Modi’s power, potentially stymying his ambitious economic and political reforms.

The opposition alliance, INDIA, made significant gains, winning around 210 seats. This marks a stronger challenge to Modi’s leadership than in previous elections.

The Congress party, a key member of the I.N.D.I.A. alliance, celebrated the results as a “win for democracy” and a moral victory against Modi’s leadership.

Impacts: The election results have cast doubt on Modi’s ability to push through his economic reform agenda, which includes labor reforms and streamlining elections. The stock market initially reacted negatively to the unexpected results, with significant drops in major indices. Indian stocks rebounded after an alliance partner of Prime Minister Narendra Modi’s party affirmed support to form a coalition government. The Nifty 50 Index rose more than 2%, recouping some of Tuesday’s loss when the gauge fell the most in four years. Investors will watch carefully to see who becomes the new finance minister and what they say about the country’s reform agenda.

Modi struck a defiant tone, pledging to form a new government and continue his agenda despite the setbacks. He emphasized the need to hit back harder at the opposition, which he described as corrupt. The reliance on coalition partners will likely introduce more checks and balances, potentially altering the trajectory of Modi’s policies and governance style.

Of note: India’s election results show again that you can’t always trust the polls, which predicted a Modi landslide victory.

— Voting behavior of farmers in India’s election was significantly influenced by their ongoing protests and dissatisfaction with the government’s response to their demands, according to observers. Farmers have been demanding a legal guarantee for MSP (Minimum Support Price) to protect them from market fluctuations. This demand has been a central issue in their protests. The government’s refusal to acknowledge this demand has led to widespread discontent among the farming community. Many farmers have faced economic difficulties, including poor returns on investments and rising costs of agricultural inputs. This has made it challenging for them to sustain their livelihoods without guaranteed prices for their produce.

The promise to double farmers’ incomes by 2022, made by Prime Minister Modi in 2016, remains unfulfilled, further fueling their frustration. The farmers’ protests, which have seen significant participation from states like Punjab and Haryana, have been met with resistance from the government, including internet shutdowns and physical barriers to prevent protests from reaching Delhi. The lack of resolution in talks between the government and farmers’ unions has exacerbated the situation, leading to a call for larger nationwide strikes.

Opposition parties, including the Congress, have included farmers’ demands in their election manifestos, which may have swayed some farmers’ votes away from the ruling BJP. The BJP’s steadfast refusal to meet these demands likely cost them support among this significant demographic. Given these factors, it is likely that many farmers voted against the BJP in the recent election.

— Highlights from Tuesday’s U.S. primaries:

Menendez family: Rep. Robert Menendez (D-N.J.) survived a primary challenge from Hoboken Mayor Ravi Bhalla in the 8th District. Bhalla attempted to associate him with his indicted father, Sen. Bob Menendez (D-N.J.), but the younger Menendez argued successfully against this connection.
New Jersey races: Rep. Andy Kim (D-N.J.) easily won the Democratic Senate primary and will face Republican Curtis Bashaw in November. The elder Menendez is running as an independent for his seat. State assemblymember Herb Conaway won the Democratic primary for Kim’s 3rd District seat.
Iowa Republicans: Reps. Randy Feenstra (R-Iowa) and Mariannette Miller-Meeks (R-Iowa) both survived challenges from hardline conservatives, maintaining their positions within the governing wing of the GOP.
Montana: Montana State Auditor Troy Downing won the 2nd District Republican primary, defeating former Rep. Denny Rehberg (R-Mont.) and retired DEA agent Stacy Zinn. Downing will succeed retiring Rep. Matt Rosendale (R-Mont.).

OTHER ITEMS OF NOTE

— EPA employees, represented by the American Federation of Government Employees (AFGE), ratified a new four-year contract aimed at protecting scientific integrity and providing new telework benefits. This contract, the first full deal since the Trump administration’s imposed agreement in 2019, includes a provision for an appeals process handled by an independent arbitrator for employees disciplined for pursuing science-related work. This measure seeks to shield workers from political retaliation, especially in light of potential future changes in administration and policy. Additionally, the contract solidifies a telework policy allowing EPA employees to work remotely up to four days per week, though this benefit may be renegotiated after two years. The agreement also introduces pilot programs to enhance diversity, equity, and inclusion within the EPA, focusing on improving representation of people of color in STEM fields.

— Reduced Roundup verdict against Bayer in Pennsylvania. In January 2024, a Philadelphia jury awarded $2.25 billion to plaintiff John McKivison, who claimed his use of Roundup herbicide caused his non-Hodgkin’s lymphoma. This included $250 million in compensatory damages and $2 billion in punitive damages. On June 5, 2024, Judge Susan Schulman of the Philadelphia Court of Common Pleas reduced the total verdict to $400 million after granting post-trial motions filed by Bayer. Compensatory damages were cut from $250 million to $50 million. Punitive damages were reduced from $2 billion to $350 million

Bayer stated it still disagrees with the liability verdict and views the reduced $400 million award as “unconstitutionally excessive.” The company plans to appeal the decision to the Superior Court of Pennsylvania.

The plaintiff’s attorneys also indicated they will pursue appeals, likely seeking to reinstate the larger original verdict.

This case was one of thousands of lawsuits alleging that Roundup causes cancer. Despite the reduction, it remains one of the largest verdicts so far against Bayer over Roundup.

Reports estimate there are still around 50,000 Roundup lawsuits pending against Bayer at this stage after the company paid over $11 billion to settle around 100,000 earlier cases.

— Over 9,000 Canada Border Services Agency (CBSA) workers could legally strike starting Thursday, June 6. These workers, part of the Public Service Alliance of Canada, have been without a contract since June 2022. CBSA states the border will stay open if a strike occurs since 90% of frontline staff are deemed essential. However, travelers and businesses should prepare for delays and picketing, with essential workers likely to “work to rule,” increasing wait times.

The union warned that a strike could significantly disrupt the flow of goods, services, and individuals entering and leaving Canada.

Both sides began mediated negotiations on Monday, with no updates as of late Tuesday.

The union seeks wage parity with other law enforcement agencies, a “25-and-out” retirement policy, telework access, and protections against outsourcing services to automated systems, students, and other providers.

Of note: In 2021, a one-day CBSA staff strike caused significant delays at border crossings and airports, ending with a deal after 36 hours of negotiations.

Link for more details via realagriculture.com.

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