Canadian Dockworkers, Employers Agree to Tentative 4-Year Labor Deal

WOTUS rule confusion | Sugar industry ruling | Protecting U.S. farmland | India rice trade

•

July 14, 2023 08:21 AM

WOTUS rule confusion | Sugar industry ruling | Protecting U.S. farmland | India rice trade

In Today’s Digital Newspaper

Abbreviated report today.

— Equities: Asian and European stock markets were mixed to higher in overnight trading. U.S. stock indexes are pointed toward narrowly mixed openings. Lots of corporate earnings being released today, including banks like Wells Fargo, JP Morgan, Citi, and asset managers BlackRock and State Street, as well as healthcare and insurance firm UnitedHealth. JPMorgan Chase said its second-quarter profit jumped 67%, including a lift from acquiring the failed First Republic in early May. Meanwhile, Citigroup shares rose in premarket on Friday after the bank reported second-quarter earnings and revenue that topped expectations. Wells Fargo bank’s stock rose nearly 4% premarket after it reported a 57% jump in profit on the year-earlier quarter. BlackRock, the world’s largest asset manager, reported net income of $1.4 billion, up 27% from the same period a year earlier. Its stock rose nearly 1% premarket. In Asia, Japan -0.1%. Hong Kong +0.3%. China flat. India +0.8%. In Europe, at midday, London +0.2%. Paris +0.4%. Frankfurt -0.2%.

— Outside markets: The U.S. dollar index was higher, with the euro and British pound weaker against the greenback. The yield on the 10-year U.S. Treasury note rose, trading around 3.78% with a mixed tone in global government bond yields. Crude oil futures were shifting between small gains and losses, with U.S. crude around $76.85 per barrel and Brent around $81.35 per barrel. Gold and silver are up, with gold at around $1,965 per troy ounce and silver around $25.07 per troy ounce.

— Grain markets firmer this morning. Corn, soybean and wheat futures traded on both sides of unchanged during the overnight session but have firmed and are near their highs this morning amid uncertainty with the Black Sea grain deal and forecasts calling for reduced rainfall chances in some areas of the Corn Belt over the next two weeks. As of 7:30 a.m. ET, corn futures were trading 10 to 11 cents higher, soybeans were 8 to 10 cents higher and wheat futures were 12 to 15 cents higher. Crude oil futures and the U.S. dollar index were both trading near unchanged.

— Ag trade: Thailand purchased 60,000 MT of feed wheat expected to be sourced from the European Union.

— Canadian dockworkers and their employers agreed to a tentative 4-year labor deal, effectively ending a disruptive 13-day strike organized by the British Columbia Maritime Employers Association (BCMEA) and the International Longshore and Warehouse Union (ILWU). The negotiations were mediated by federal mediators and the agreement is yet to be ratified by both parties involved. During the 13-day strike, major supply chains in Canada and the U.S. faced extensive snarls. The action is estimated to have caused nearly $5 billion in cargo disruption, as reported by the Canadian Manufacturers and Exporters industry group. The American Association of Railroads pointed out that Canadian freight rail traffic to the US fell by nearly 50% in one week due to the strike. Commodities most affected included non-metallic minerals, chemicals, crude oil, petroleum products, and forest products. The strike also stranded food ingredients and agricultural inputs. According to CNBC, it’s estimated that the resulting rail container delays could span between 39 and 66 days, although this does not account for additional delays due to waiting vessels.

— Fed hawk Christopher Waller expects the central bank to raise rates twice more this year, although two more soft CPI prints may lead to a September pause.

Meanwhile, Fed Bank of San Francisco President Mary Daly said it’s too soon for policymakers to say they have done enough to return U.S. inflation to their target. While data on consumer prices out Wednesday “is very positive,” she said she’s in a “wait-and-see mode on that, because I remain resolute to bring inflation down to 2%,” she said on CNBC Thursday.

— James Bullard, President of the Federal Reserve Bank of St. Louis, has resigned to become the inaugural dean of the Mitchell E. Daniels, Jr. School of Business at Purdue University. Bullard’s resignation is effective as of last Thursday, and he will fully leave his role on Aug. 14. Although Bullard doesn’t vote on rate decisions, his opinions have often presaged policy changes. He has withdrawn from his Federal Open Market Committee monetary policy role and public speaking. The St. Louis Fed’s No. 2 official, Kathleen O’Neill Paese, will step in as the interim president.

Of note: The St. Louis Fed is commonly more “hawkish,” favoring tighter control over monetary policy. Their board was one of only four that recently advocated for a quarter-point increase in the discount rate, supporting further tightening. Bullard, before leaving, projected that policymakers would need to increase rates twice more this year to lessen price pressures.

His departure creates a third vacancy on the Fed’s 19-member rate-setting committee, adding to the ongoing search for leaders for the Fed board and Kansas City Fed.

— Biden administration announced it will automatically forgive roughly $39 billion in student loan debt for 804,000 borrowers. This comes because of adjustments made to the student loan repayment plans, leading to corrected counts of borrower payments. Under these revised repayment schemes, borrowers are granted cancellation of any remaining debt by the government after making payments for 20 or 25 years, contingent on the timing of their loan and the specific type of repayment plan they’re under. In the past, certain payments that should have minimized borrowers’ debts were not recognized, leading to detrimental consequences for the borrowers. As Education Secretary Miguel Cardona stated, many borrowers previously fell victim to a system that did not properly account for their progress toward debt forgiveness. To qualify borrowers for debt forgiveness now, the administration factored in payments from those who had paused their payments during specific deferments, forbearances, and those who made partial or late payments.

Of note: The move comes after the Supreme Court rejected a comprehensive student loan forgiveness plan proposed by President Joe Biden, which could have helped approximately 37 million people. Eligible borrowers will be notified by the Education Department in the upcoming days about this new initiative.

— The Biden administration is set to announce a $20 billion investment to support the establishment of a national clean energy lending network. It aims to enhance private-sector development of environmental projects and eco-friendly technologies across the US. Vice President Kamala Harris and EPA Administrator Michael Regan are scheduled to officially announce the initiative in Baltimore, Maryland. The allocated funds will be competitively awarded to two or three national clean financing institutions. These organizations will collaborate with the private sector to back climate-friendly initiatives spearheaded by individuals, groups, and local authorities. The distribution of the $20 billion will feature $14 billion going to the National Clean Investment Fund competition and $6 billion to the Clean Communities Investment Accelerator competition.

— WOTUS rule confusion. The recent decision in the Sackett v. EPA case by the Supreme Court has sowed confusion among landowners in three states: Michigan, New Jersey, and Florida. These states, which handle federal permitting on their soil, are reportedly struggling to understand the breadth of wetlands regulations following the high court’s ruling. State officials and people closely observing the situation have noted that these states serve as early examples of the challenges other places may face in response to the Sackett ruling. Many states are in a holding pattern, waiting for the Environmental Protection Agency (EPA) to amend its definition of “Waters of the U.S.” (WOTUS) to take into account the court’s ruling.

Meanwhile, EPA announced that it will only seek public input after it has adjusted its rule about federal waters. This move has been criticized by House Republicans who, during a recent hearing, accused the EPA of potentially circumventing the ruling. They argue that the agency may try to maintain federal jurisdiction over as many wetlands as possible and could be keeping the public uninformed during the decision-making process.

— Chinese President Xi Jinping has recently made moves to mend ties with the private sector, which in past years has suffered greatly due to regulatory crackdowns and China’s stringent Covid-19 measures. These initiatives have included a string of prominent measures manifesting the government’s support for private businesses. The President has promised to provide more advantageous conditions for foreign investors and has promoted the idea of further expansion. This shift in attitude has been illustrated by events such as the warm welcome of Elon Musk and other high-ranking executives to China, an action indicating the conclusion of a tech clampdown that wreaked havoc on what could have been the world’s largest IPO. Chinese officials have also visited the Shanghai office of U.S.-based consultancy firm, Bain & Company, in a move seen as a cessation of concerns regarding an investigation into consultancies, a subject that had previously unsettled international investors.

— Protecting U.S. farmland. Members of the House Select Committee on the Chinese Communist Party proposed a bipartisan bill titled the Protecting U.S. Farmland and Sensitive Sites from Foreign Adversaries Act. This bill aims to expand the scope of the Committee on Foreign Investment in the U.S. (CFIUS), enabling them to consider U.S. food security during reviews specifically regarding any potential impact of foreign acquisition of agriculture-related biotechnology. The bill emphasizes that certain foreign transactions, particularly those related to real estate purchases near sensitive locations, would compel the respective foreign governments or residents to mandatorily file CFIUS reviews. Nations specifically mentioned in this context include the People’s Republic of China, the Republic of Cuba, the Islamic Republic of Iran, the Russian Federation, and Venezuela, but only under Nicolás Maduro’s rule.

Details: The bill would necessitate the Secretary of Agriculture to vote on any transactions involving farmland or agricultural tech, but refrains from making him or her a definitive member of the CFIUS. Another addition suggested by the bill is creating a “presumption of non-resolvability,” implying the inevitability of a review for transactions near military locations with unresolved national security concerns. The list of sensitive locations will be expanded to include all military bases, university-linked research centers funded by defense, critical telecommunication nodes, intelligence sites, and other sensitive locations.

— Biden: ‘No possibility’ of Putin winning the war. In his recent European trip that concluded in Finland, President Joe Biden underscored the strength of NATO in deterring Russian President Vladimir Putin’s advancements. Amid ongoing diplomatic accomplishments, uncertainties regarding the war’s future remain. During a press conference with Finnish President Sauli Niinistö in Helsinki, Biden confidently claimed that there was “no possibility” of Putin winning the war. He was asked if his guarantee that Ukraine could join NATO once the conflict with Russia concludes could potentially motivate Putin to prolong the war. Biden responded by stressing that no nation at war can join NATO, as it would risk pulling the entire alliance into the confrontation, an idea his administration has been emphasizing in recent times. This comes in the wake of criticism from Ukrainian President Volodymyr Zelenskyy over NATO’s hesitation to expedite Ukraine’s membership.

— Top rice shipper India is considering banning exports of most varieties as the disruptive El Niño weather pattern returns. Such a move could further push up prices that are already at a two-year high. Many importers would likely turn to Thailand and Vietnam, with the former already set to harvest only one crop this season instead of the usual two.

— International Agency for Research on Cancer (IARC) categorized aspartame, an artificial sweetener, as “possibly carcinogenic.” It said that the evidence of the potential to cause cancer is “limited,” and did not change its guidelines on the consumption of the product. The IARC also found no evidence of genotoxicity, meaning damage to DNA or chromosomes that could provoke cell mutation.

The Food and Drug Admin. (FDA) rejected the IARC’s conclusion. “Aspartame being labeled by IARC as ‘possibly carcinogenic to humans’ does not mean that aspartame is actually linked to cancer,” the FDA said in a statement. The food and beverage industry had been expecting the new designation from the WHO. Industry trade groups and experts from the science community criticized the limited evidence of the IARC study, and reiterated earlier studies that have deemed aspartame innocuous. “There is a broad consensus in the scientific and regulatory community that aspartame is safe,” Kevin Keane, interim president and chief executive officer of the American Beverage Association, said in a statement. “It’s a conclusion reached time and time again by food safety agencies around the world.”

Bottom line: Experts disagree on what constitutes an unsafe level of consumption, but Wall Street analysts say the warning could hurt the sale of diet sodas and other products.

— The global trade landscape continues to face difficulties with world goods trade falling by 1.4% in April and now standing 3.5% below its peak in September. Exports have generally suffered across the world, except in regions dominated by the Commonwealth of Independent States (CIS) led by Russia, and in China. A leading exports index indicates that the contraction has been ongoing for more than a year, hinting at prolonged economic struggles. Consistent high inflation and escalating interest rates are continuing to affect consumer demand negatively, particularly for goods that were in high demand during the pandemic, such as electronics and furniture, many of which were sourced from Asia. However, one positive aspect amid these difficulties is the reduction of freight rates, which in some instances, are reported to have dropped below pre-pandemic levels. But overall, the outlook for a swift recovery in global trade remains bleak, given the current economic factors, according to trade analysts.

— Sugar industry ruling. The U.S. Third Circuit Court of Appeals rejected an appeal by the Department of Justice (DOJ) aimed at blocking U.S. Sugar’s acquisition of Imperial Sugar Co., thereby upholding a lower court’s ruling from September 2022 that allowed the merger to proceed. The DOJ had contested the $315 million deal under the Clayton Act, a component of U.S. antitrust law, arguing that the merger would infringe upon the law and result in increased sugar prices for customers and businesses. However, a three-judge panel from the Third Circuit Court acknowledged that sugar distributors serve as a necessary counterbalance in the market, with the ability to regulate supplies and sell sugar to customers if sugar prices increase.

The court dismissed the DOJ’s argument that distributors, who only sell sugar and do not produce it, should not be regarded as market competitors under antitrust law. Despite this, the panel did concur with the DOJ that the lower court had erred in contending that USDA could potentially counteract any anticompetitive effects caused by the acquisition, such as by expanding the amount of low- or no-duty sugar imported into the U.S. under the current tariff-rate quota (TRQ). However, Judge David Porter confirmed that while this was a mistake, it doesn’t affect the lower court’s main ruling, stating, “The Court’s analysis of market definition stands unaffected by those portions of its opinion on USDA policy.”

Following the ruling, U.S. Sugar expressed satisfaction with the decision, emphasizing the benefits of bringing the Savannah Refinery and its brands back under American ownership. The company touted the merger’s advantage to its employees, local communities, customers, and the country at large, promising to deliver high-quality, affordable, and sustainably produced food items to American families.

— SNAP pullback. According to the Center on Budget and Policy Priorities, roughly 500,000 to 1 million people, accounting for 1% to 2.4% of the 42.3 million total food stamp recipients, are projected to lose Supplemental Nutrition Assistance Program (SNAP) benefits starting from October. This reduction is due to the reinstatement of a 90-day limit on benefits for some able-bodied adults without dependents (ABAWDs) aged 18 to 50, a limit that was suspended during the pandemic. Since welfare reform in 1996, ABAWDs have been allowed only three months of SNAP benefits in a three-year period, unless they are working at least 80 hours a month. This requirement is being reintroduced in 43 states in October. The Center on Budget and Policy Priorities contends that the work requirement fails to stimulate employment, while potentially disadvantaging low-income people experiencing job transitions, health issues, inconsistent work hours, or difficulties with form completion. Furthermore, the 90-day restriction will also affect another 750,000 ABAWDs aged 51 to 55, due to debt limit legislation adopted in June. The legislation does provide exemptions for veterans, homeless people, and young adults (up until the age of 24) who have transitioned out of the foster care system.

— Cotton AWP declines. The Adjusted World Price (AWP) for cotton is at 64.94 cents per pound, effective today (July 14), down from 65.81 cents per pound the prior week. Meanwhile, USDA announced that Special Import Quota #13 would be established July 20 for 39,606 bales of upland cotton, applying to supplies purchased not later than Oct. 17 and entered into the U.S. not later than Jan. 15, 2024.

— A New York appeals court has ruled that the state’s congressional map must be redrawn, a decision that could benefit Democrats by offering them more sway in defining the boundaries of New York’s heavily contested 26 House seats. The Appellate Division of the State Supreme Court in Albany determined that the temporary district boundaries were inadequate, and instructed the bipartisan Independent Redistricting Commission (IRC) to commence revisions.

What’s next: Democrats and Republicans expect the new map-making process to deadlock again, in such a scenario, final map-making authority would return to the Democrat-majority State Legislature. Republicans intend to appeal the ruling, fearing Democrats may use map redraws for partisan advantage. If the ruling stands, however, it may jeopardize re-election for several incumbent Republican representatives.

KEY LINKS

Policy Updates