ERP payouts update | DMC signup begins | Another SPR release | China & Taiwan
In Today’s Digital Newspaper |
A modified report this morning as I am in San Antonio to attend and participate at the CIPA meeting.
China’s economic secrecy. China has postponed the publication of key economic statistics and indicators such as its gross domestic product, officials announced Monday. The data was originally set to be released on Tuesday; authorities did not offer reasons for the change or provide a new release date. The abnormal move has fueled suspicions that the economic figures did not meet Beijing’s expectations. The postponement of third-quarter GDP data, an official told Reuters, was “due to adjustment to work arrangements” without providing further details. The figures were due to be published on Tuesday. Analysts expected the data to reveal weak growth because of the zero-covid policy and a property-sector slump. Speaking at the ongoing Chinese Communist Party congress, Li Keqiang, the prime minister, insisted that the economy is recovering.
Private-sector economists, the World Bank and other institutions expect China’s growth to rebound to around 4.5% next year after an estimated 3% or so in 2022, assuming Beijing eventually relaxes its zero-Covid policy. Many economists predict growth will remain weaker than before the pandemic, in part due to a shrinking workforce and rising debt levels.
The delay suggests third-quarter data could be even worse than economists’ forecasts. The full-year 2022 growth target of 5.5 percent would be the slowest expansion in three decades. “The fact that they don’t even release the numbers means that the numbers are so pessimistic that it’s hard for them to even massage it into a slightly positive number,” said Victor Shih, an expert in Chinese fiscal policy at the University of California, San Diego.
“We know that China is no longer the major growth engine of the world, and we do not expect China to return to anywhere near its old growth trend in the future,” said Holger Schmieding, chief economist at Berenberg Bank.
China is planning unification with Taiwan on a “much faster timeline” than previously thought, according to U.S. Secretary of State Antony Blinken, who suggested China may achieve unification by force, but said America would honor its commitment to help Taiwan defend itself. On Sunday Xi Jinping, China’s president, said “complete reunification of our country must and will be realized.”
Equities on Monday: The Dow closed up 550.99 points, 1.85%, at 30,185.82. The Nasdaq gained 354.41 points, 3.43%, at 10,675.80. The S&P 500 rose 94.88 points, 2.65%, at 3,677.95.
Equities today: Global stock markets were mostly firmer overnight. U.S. stock indexes are pointed to higher openings. Goldman Sachs posted third-quarter results Tuesday that topped analysts’ expectations for profit and revenue on better-than-expected trading results. In Asia, Japan +1.4%. Hong Kong +1.8%. China -0.1%. India +0.9%. In Europe, at midday, London +0.9%. Paris +0.6%. Frankfurt +1.1%.
The Bank of England is likely to delay “quantitative tightening,” the sale of billions of pounds worth of government bonds, according to the Financial Times. The delay, the second in as many months, is meant to keep the market for so-called gilts stable, after the central bank was forced to intervene to halt fire sales of government bonds by pension funds. (The Bank of England said it hadn’t decided whether to delay the bond sales.)
Prime Minister Liz Truss remains under pressure, despite the recent calm in the markets. Truss apologized for the chaos her proposed tax cuts spurred — she had gone “too far, too fast,” she told the BBC — but insisted she would continue to lead the ruling Conservative Party.
Ag markets: Price pressure overnight. Corn, soybean and wheat futures faced solid selling pressure overnight and are near their session lows this morning. As of 7:30 a.m. ET, corn futures were trading 4 to 5 cents lower, soybeans were 5 to 6 cents lower, winter wheat futures were 4 to 7 cents lower and spring wheat was 1 to 4 cents lower. Front-month crude oil futures were trading just below unchanged, while the U.S. dollar index was around 225 points higher.
Chinese hog producers looking at alternatives to soymeal amid shortages, high prices. Shipping delays from the U.S. due to low water levels on the Mississippi River will further tighten Chinese soybean supplies and push soymeal prices higher. As a result, Chinese hog producers are looking for alternative protein sources. Cash soymeal prices in Dongguan, Guangdong province climbed to an all-time high of 5,680 yuan ($789) per metric ton last week, compared with 3,500 yuan ($486) at this time last year. China’s soybean imports are likely to fall to their lowest in more than two years this month, having dropped in September and August.
India examining proposal to raise palm oil import tax. India is examining whether there is a need to raise palm oil import taxes, government and trade sources said, as part of efforts to help millions of its farmers reeling from lower oilseed prices. Earlier this year, India abolished the basic import tax on crude palm oil (CPO) to keep a lid on prices, though a special 5% duty remains. India also levies a 12.5% import tax on refined, bleached and deodorized (RBD) palm oil. “We are going through a proposal to bring back the duty on crude palm and raise the RBD duty,” said a government source told Reuters. “We are going to keep in mind the interests of both farmers and consumers.” The head of India’s Solvent Extractors’ Association says should raise the CPO and RBD import taxes by at least 10% to support falling oilseed prices, and the duty differential between CPO and RBD should at least be 12% to 13% to encourage local refining.
A release of another 10 million to 15 million barrels of oil from the nation’s emergency stockpile is seen in a bid to balance markets and keep gasoline prices from climbing further. The Strategic Petroleum Reserve release would be the latest tranche of a 180-million-barrel program that began in the spring. Heading into winter, the U.S. has the lowest seasonal inventories of diesel, according to data back to 1982.
Natural gas bills expected to spike this winter. Americans who use natural gas for heat will pay an average of $931 for the fuel from October to March, according to the U.S. Energy Information Administration. That’s a 28% hike over last winter, the agency forecast in data released Monday. Higher retail natural gas prices, colder temperatures expected this winter across the country, and slightly more natural gas consumption for households that primarily use natural gas for heat will drive the increases.
DHS grants ‘temporary and targeted’ Jones Act waiver to get LNG to Puerto Rico. The Dept. of Homeland Security (DHS) issued a “temporary and targeted” waiver of the Jones Act to allow liquefied natural gas (LNG) to be transported to Puerto Rico as the island struggles with the impacts of Hurricane Fiona. DHS previously approved a waiver of the Jones Act for a shipment of 300,000 gallons of diesel fuel.
Another impact of the Jones Act: Imports of LNG can make up more than a third of New England’s natural-gas supply during periods of peak demand because the region lacks pipeline capacity. Jones Act restrictions on vessel transports between U.S. ports makes maritime delivery of domestic supplies economically unviable, so the region relies on gas produced abroad.
- The Baltic Exchange showed spot rates for LNG carriers reaching as high as $450,000 a day.
- China has stopped reselling LNG overseas to ensure its own supply for the winter.
German Chancellor Olaf Scholz ordered an extension in the life of the country’s three remaining nuclear plants until mid-April 2023 — a reversal of an earlier decision by Economy Minister Robert Habeck — as the country contends with an unprecedented energy crisis. Scholz’s decision, which came late Monday after a day of speculation, is designed to end a standoff between his two coalition partners, the Greens and the Liberals.
Russian missiles targeted energy infrastructure in multiple Ukrainian cities. Ukrainian officials said a power-supply facility outside the capital, Kyiv, had been hit. A facility in the Zaporizhia region was hit by drones, according to the regional governor. Several EU foreign ministers called for fresh sanctions against Iran over its transfer of such “kamikaze” drones to Russia. Britain and France were joined by the U.S. in complaining that Iran and Russia violated terms of the U.N. Security Council resolution that endorsed the nuclear deal of 2015 (which the U.S. scotched in 2018).
Exxon Mobil says Russia forcefully took its biggest oil field there. The oil giant said it had fully exited the country — and accused Moscow of expropriating its stake in the Sakhalin-1 oil and gas project. The declaration may hint at Exxon seeking damages in international arbitration.
Specialty crop ERP payments near $1 billion; total payouts $7.06 billion. Payments under the Emergency Relief Program (ERP) totaled $7.06 billion as of Oct. 16, up from $7.03 billion the prior week. Specialty crop payments rose to $999.8 million ($991.3 million prior) with non-specialty crop payouts at $6.06 billion ($6.06 billion prior). A USDA official on Monday was murky on what she could say relative to Phase 2 of ERP payouts and paying additional Phase 1 payments, just saying they were nearing an announcement.
Signup opens for 2023 DMC. Enrollment for coverage under the Dairy Margin Coverage (DMC) program opened Monday (Oct. 17) and runs through Dec. 9, with USDA noting the program as triggering payments in August totaling $47.9 million and an additional payment is projected to be generated for September. Producers typically have to pay a $100 administrative fee to participate in the program along with premiums for the level of coverage above $4 per hundredweight. USDA’s Economic Research Service (ERS) forecast in September the program would take in more in premiums than it will payout in benefits in 2022 by about $10.4 million after the program generated payments $1.15 billion in 2021.
Levels of the Mississippi River in Memphis have just hit a new all-time low record of -10.77 feet. Meanwhile, companies are not loading as much cargo onto ships — so they can travel safely and not bottom out — while fewer barges are included in each tow. According to the American Commercial Barge Line, the industry has agreed to a 25-barge tow max size, which translates into around a 17-38% reduction in capacity. Dredging by the U.S. Army Corps of Engineers has been helpful to keep the traffic flowing, but new challenging spots can surface any day. “While the public and media generally understand that our economy depends upon viable international ocean shipping, trucking, and rail transportation, the essential role of our inland waterways is often overlooked,” said Peter Friedmann of the Agriculture Transportation Coalition. “Our members depend upon adequate water levels in the Mississippi River system, to reach domestic and international export markets. The low water disruption of the supply chain will be felt not only by our U.S. producers of food, farm, and fiber but also by U.S. and international consumers as well.”
The baby-formula shortage across the U.S. may be easing but it is hardly over. Many U.S. households are still struggling to find formula, the Wall Street Journal reports (link), almost a year since supplies thinned on store shelves and eight months after a nationwide recall. Adults in roughly one-third of households with infant children who typically use formula had trouble obtaining it last month, according to a U.S. Census Bureau survey. Nearly one in five of affected households has less than a week of formula on hand. The challenges are most acute for lower-income families, according to the survey. The shortage that began early this year triggered emergency responses that included the airlift of supplies from overseas. Out-of-stock levels that peaked at 30% in July have improved, but market-research firm IRI says about 18% of powdered baby formula was out of stock last month.
210,367: Loaded container imports into Georgia’s Port of Savannah in September, 9.8% less than September 2021 and 27.7% less than August volumes to the lowest level since February 2021, according to the Georgia Ports Authority.
Prosecutors dropped price-fixing charges against former employees of poultry producer Pilgrim’s Pride. The Justice Department’s last criminal case against former poultry-industry executives accused of price-fixing has collapsed, bringing an apparent end to a probe that alleged an effort by rival companies to coordinate prices of chickens sold to restaurants, grocery stores and others. A federal judge on Monday dismissed charges against former Pilgrim’s Pride Corp. employees Jason McGuire and Timothy Stiller after prosecutors moved to drop them. The Justice Department’s decision came after the judge criticized the case and barred most of the government’s evidence, including hundreds of emails and text messages and the anticipated testimony of the government’s main witness.
Biden: 8 million already applied for student debt relief: President Biden said 8 million Americans had already applied for “life-changing relief,” as he formally launched the application for loan borrowers to seek forgiveness on their student debt. The official launch follows a three-day beta test of the website.
People seeking to apply for student debt relief can fill out the form at StudentAid.gov. Borrowers have until December 31, 2023, to submit an application. In August, Biden announced his decision to cancel up to $10,000 in student loan debt for individuals making less than $125,000 a year or as much as $20,000 for eligible borrowers who were also Pell Grant recipients.
Ex-IRS officials urge swift appointment of next agency chief. A group of former top IRS officials is urging the White House to quickly announce a nominee for IRS commissioner, saying that doing so is important for implementation of the new funds the agency recently received. The new tax-and-climate law provides the IRS with roughly $80 billion that it can utilize through Sept. 30, 2031.
Paris’s sweeping protests. Tens of thousands of people demonstrated against inflation and surging costs of living in Paris on Sunday. The sweeping protest, which was coordinated by a group of French President Emmanuel Macron’s left-wing rivals, coincided with a mass oil refinery strike over wages.
KEY LINKS |
WASDE | Crop Production | USDA weekly reports | Crop Progress | Food prices | Farm income | Export Sales weekly | ERP dashboard | California phase-out of gas-powered vehicles | RFS | IRA: Biofuels | IRA: Ag | Student loan forgiveness | Russia/Ukraine war, lessons learned | Election predictions: Split-ticket | Congress to-do list | SCOTUS on WOTUS | SCOTUS on Prop 12 |