China watcher Bill Bishop on current situation | Vilsack comments on trade issue with Mexico
In Today’s Digital Newspaper |
This is an abbreviated dispatch as I am en route to Columbia, Mo., for a speech Wednesday at FCS Financial Connect’s Young, Beginning Ag Seminar.
Fed’s Williams: Inflation fight could last into 2024. The New York Fed president points to signs that price pressures are easing, but sees inflation remaining above 3% in a year, still above the Fed’s 2% target. “There is still more work to do,” said New York Fed President John Williams in a speech on Monday. Williams, who serves as a key lieutenant to Fed Chair Jerome Powell, did not push back against expectations that the central bank will lift rates by a half percentage point at its meeting Dec. 13-14. Inflation using the Fed’s preferred gauge, the personal-consumption-expenditures price index, rose 6.2% in the 12-months ended September. Williams said he expects the inflation rate to slow to between 5% and 5.5% by the end of this year, and to between 3% and 3.5% next year.
Perspective: The Fed’s projections in September were for Core PCE inflation to be at 2.3% yet in 2024; 3.1% for 2023.
WTI crude futures rebounded to above $77 per barrel on Monday, having hit an 11-month low of $73.50 earlier this session, as rumors of an OPEC+ production cut offset concerns about weak demand. Eurasia Group said major oil producers were considering a new production cut when they meet on Dec. 4, after in October agreeing to reduce its output target by 2 million barrels per day through 2023. Protests against strict Covid-19 restrictions in some major Chinese cities have increased concerns about weaker growth and subdued demand for oil. Meanwhile, investors continued to track developments surrounding a G7 plan to impose a price cap on Russian oil (see next item), but reports of a high price cap eased worries that Russia would retaliate by cutting supply.
EU countries again fail to agree on Russian oil price cap. EU ambassadors ended another round of negotiations Monday without a deal on a Russian oil price cap, as Poland continued to push for a lower price to hit the Kremlin’s sources of income. The European Commission proposed a cap of $62 per barrel (down from the original $65 to $70), but Poland, as well as Estonia, are holding out for a lower price, according to reports. The original plan was for a cap to enter into force on Dec. 5, when the EU’s partial embargo on Russian oil comes into effect. But the U.S. has told the EU it will require 90 days between agreement and enforcement.
Protests against China’s stringent Covid regime failed to take place Monday night, as authorities deployed a heavy police presence in major cities to deter a repeat of the weekend’s demonstrations. Stocks in Hong Kong closed at session highs as Chinese health authorities reported recent uptick in senior vaccination rates, which is regarded by experts as crucial to reopening the economy that has been facing sporadic lockdowns.
How China watcher Bill Bishop of Sinocism sizes up the situation: “The government has a playbook for dealing with these kinds of events and have been hardening the system for many years for just these kinds of threats. Today the police ‘flooded the zone’ with massive presences in areas where there were protests over the weekend. While there have been some breathless claims using terms like ‘uprising’ and ‘revolt’, I think that is an exaggeration of the protests at this stage, and that the security services will succeed in nipping them in the bud. Some of the more vocal protesters have been or will be detained and some colleges are sending students home early for the Lunar New Year holiday. Families of some participants will be warned by security service personnel, academic cadres or employers. Beijing will likely make more examples of some local officials who have been overzealous with dynamic zero-Covid and reiterate/rework the recent ‘optimizations’ to Covid controls, while pushing harder on propaganda work, censorship and political thought work. And ‘hostile foreign forces’ will be blamed. But no mistake, the fact that so many were willing to stand up publicly in spite of the likely personal costs is remarkable and meaningful… There is always the chance that the protests spiral out of control. For all the stability maintenance work Beijing has done they really would have a hard time dealing with tens or hundreds of thousands or more people on the streets in one or more cities. I am not expecting anything like that to happen, but you can’t rule it out, and I will bet the security services are not ruling it out. I was in Beijing in the spring of 1989, and no one knew how the protests would eventually spread, grow and evolve the goals. Still, in spite of how stirring these protests have been, I would be surprised if they continue in any meaningful way given how much work the system has put into to dealing with just these kinds of contingencies, and how it has repeatedly demonstrated that when it comes to ensuring political security there is no bottom line.”
Vilsack comments after Mexico trip to meet with López Obrador re: GMO corn issue. USDA Secretary Tom Vilsack traveled to Mexico on Monday to meet with Mexican President Andres Manuel López Obrador to discuss genetically modified corn, Lopez Obrador’s plans to ban biotech corn and other biotechnology products by January 2024.
Vilsack said the meetings provided “a venue to raise the United States government’s and our producers’ deep concerns around President López Obrador’s 2020 decree to phase out the use and importation of biotech corn and other biotechnology products by January 2024. The president’s phase-out decree has the potential to substantially disrupt trade, harm farmers on both sides of the border and significantly increase costs for Mexican consumers. We must find a way forward soon and I emphasized in no uncertain terms that — absent acceptable resolution of the issue — the U.S. government would be forced to consider all options, including taking formal steps to enforce our legal rights under the USMCA” [the U.S.-Mexico-Canada Agreement on trade.] Vilsack added, “We made it abundantly clear that Mexico’s import ban would cause both massive economic losses for Mexico’s agricultural industries and citizens, as well as place an unjustified burden on U.S. farmers.”
“This is a critically important issue for U.S. farmers, who are rightfully and deeply concerned about the decree,” Vilsack added. “The decree would also have significant impact on the U.S./trade relationship, which hit a record value of more than $63 billion in two-way trade in 2021 and is expected to be even higher in 2022. The phase-out of biotechnology products, as outlined in the decree, could also stifle the important innovations we need to help our farmers adapt to a changing climate. USDA and the wider U.S. government have consistently and proactively pursued cooperation and consultation with Mexico to resolve this issue and time is now running short.”
Vilsack said “some progress was made. For example, President López Obrador reaffirmed the importance of yellow corn imports for Mexico’s food security. He also discussed a potential process in which we can exchange information and engage in dialogue assuring the safety of biotechnology products. We expect to have a proposal from the president’s team soon and we will evaluate closely. While we do not have a solution in hand, we will continue to engage with Mexico on this important issue.”
Rice futures rose above $18 per hundredweight, touching their highest levels since June 2020, supported by a fall in supply and expectations of rising demand from China and European countries. USDA recently lowered its 2022 US rice production forecast to 164.3 million hundredweight, about a million less than October’s report following a downward revision in the yield estimate. Global supplies were also reduced by 2.5 million tons to 686.8 million, on lower beginning stocks for India and smaller production for Pakistan, Bangladesh, Nigeria, and Sri Lanka. Meanwhile, prices of rice shipped from India edged up in November, as limited supplies are available for exporters amid aggressive government buying of paddy to encourage higher domestic output. In Bangladesh, rice prices have also remained elevated despite the government’s latest efforts to stabilize the market, including allowing imports and duty cuts.
U.S. official: Discussions with Russia to Free Griner, Whelan continue. Reuters reports the U.S. is “still talking to Russia about a deal to free jailed Americans Brittney Griner and Paul Whelan but Moscow has not provided a ‘serious response’ to any of its proposals, a senior U.S. diplomat said in comments published on Monday.” U.S. chargée d’affaires Elizabeth Rood told “Russia’s state-owned RIA news agency that talks were continuing through the ‘designated channel.’” Rood said, “The United States, as we have said, has put a significant proposal on the table. We have followed up on that proposal and we have proposed alternatives. Unfortunately, so far the Russian Federation has not provided a serious response to those proposals.”
At Biden’s urging, House to consider bill to avoid rail strike this week. President Joe Biden late Monday called on Congress to pass legislation immediately to adopt the tentative agreement between railroad workers and operators that was approved by labor and management negotiators in September “without any modifications or delay — to avert a potentially crippling national rail shutdown.” House Speaker Nancy Pelosi (D-Calif.) said in a statement that the House this week would “take up a bill adopting the tentative agreement — with no poison pills or changes to the negotiated terms — and send it to the Senate.”
Biden noted the deal “provides a historic 24% pay raise for rail workers. It provides improved health care benefits. And it provides the ability of operating craft workers to take unscheduled leave for medical needs,” adding that “since that time, the majority of the unions in the industry have voted to approve the deal.
Biden said a rail shutdown “would devastate our economy. Without freight rail, many U.S. industries would shut down. My economic advisors report that as many as 765,000 Americans — many union workers themselves — could be put out of work in the first two weeks alone. Communities could lose access to chemicals necessary to ensure clean drinking water. Farms and ranches across the country could be unable to feed their livestock.”
“As a proud pro-labor president,” Biden said he is “reluctant to override the ratification procedures and the views of those who voted against the agreement. But in this case — where the economic impact of a shutdown would hurt millions of other working people and families — I believe Congress must use its powers to adopt this deal.”
DOT rejects farm groups’ request for longer trucker driving time. The Biden administration denied a request for truckers who transport livestock, insects, and aquatic animals to be exempt from some federal driving time regulations, according to a notice set to published today in the Federal Register (link). Several farm groups asked for an exemption to allow for additional time on the road on behalf of truckers moving the animals. The Federal Motor Carrier Safety Administration (FMCSA) rejected the request, saying it wouldn’t meet an acceptable safety level. “Research studies demonstrate that long work hours reduce sleep and harm driver health, and that crash risk increases with work hours,” FMCSA said in its decision.
Background. The hours-of-service regulations place limits on when and how long a trucker may drive. Animal and livestock haulers have long sought leniency from the rules, arguing they could put the well-being of livestock at risk during transport or burden drivers, particularly in rural areas.
The agency received more than 350 comments on the exemption request. The National Transportation Safety Board, Commercial Vehicle Safety Alliance, Truckload Carriers Association, Iowa Motor Truck Association, and Animal Welfare Institute urged the agency to deny the request.
House elections analysis. The New York Times reports (link) in an analysis that although “New York and its suburbs may remain among the safest large communities in the country,” amid “a torrent of doomsday-style advertising and constant media headlines about rising crime and deteriorating public safety, suburban swing voters...helped drive a Republican rout that played a decisive role in tipping control of the House.” While the “attempt to capitalize on upticks in crime may have fallen short for Republicans elsewhere across the nation,” from “Long Island to the Lower Hudson Valley, Republicans running predominantly on crime swept five of six suburban congressional seats, including three that President Biden won handily that encompass some of the nation’s most affluent, well-educated commuter towns.”
Note: Rep. A. Donald McEachin (D-Va.) died Monday after a battle with colorectal cancer, his office said. He was 61.
Senate elections analysis. The Associated Press reports (link) that the race between Sen. Raphael Warnock (D-Ga.) and Republican challenger Herschel Walker (R-Ga.) “has grown increasingly bitter as their Dec. 6 runoff nears.” Warnock recently told supporters, “Herschel Walker ain’t serious.” Walker, he said, “‘majors in lying’ and fumbles the basics of public policy.” Walker “casts Warnock, the senior pastor at Ebenezer Baptist Church, as a ‘hypocrite’ and servile to President Joe Biden.” ABC World News Tonight reported, “More than two dozen counties state-wide have opened the polls to early voting ahead of the Dec. 6 runoff. Some voters waited in long lines. Officials say nearly 80,000 people voted on Saturday.”
Looking ahead to 2024 Senate races, The Hill lists (link) the eight most vulnerable Democratic senators who face re-election in 2024: Sen. Joe Manchin (D-W.Va.); Sen. Kyrsten Sinema (D-Ariz.); Sen. Sherrod Brown (D-Ohio); Sen. Jon Tester (D-Mont.); Sen. Jacky Rosen (D-Nev.); Sen. Bob Casey (D-Pa.); Sen. Tammy Baldwin (D-Wis.); and Sen. Debbie Stabenow (D-Mich.).
Indiana GOP Rep. Jim Banks is mulling a run for Senate if Sen. Mike Braun (R-Ind.) runs for governor, as many expect. Braun is up for re-election in 2024 and said earlier this month he will make a decision about seeking the governorship before the end of the year. Banks recently lost a close race for House majority whip to Minnesota Rep. Tom Emmer. House Republican rules prevent members of the leadership from running for higher office. Because Banks lost, he is now free to consider the Senate bid. Banks earlier this month won the election for his fourth term in the House. He was the chair of the Republican Study Committee, where he built up favors with many prominent figures in the conservative world. Banks represents a district that runs from the Michigan border down through Fort Wayne.
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