Debate: Biden Stumbles in Halting Debate as Dems ‘Panic’ Over Performance

Key Fed measure shows inflation rose 2.6% in May from a year ago, as expected

Modified report today as I am in Napa Valley at the Cotton Warehouse Association of America annual meeting.

— Equities today: In Asia, Japan +0.6%. Hong Kong flat. China +0.7%. India -0.3%. In Europe, at midday, London +0.6%. Paris -0.3%. Frankfurt +0.6%.

— U.S. equities yesterday: U.S. equities ended the day with gains ahead of a key inflation update due Friday morning. The Dow rose 36.26 points, 0.09%, at 39,164.06. The Nasdaq gained 53.53 points, 0.30%, at 17,858.68. The S&P 500 was up 4.97 points, 0.09%, at 5,482.87.

— In May 2024, the U.S. personal consumption expenditure (PCE) price index remained unchanged from April, marking the smallest change in six months and aligning with forecasts. Goods prices decreased by 0.4%, while service prices increased by 0.2%. The core PCE index, excluding food and energy, rose by 0.1%, the smallest increase since November, matching forecasts and down from a 0.3% rise in April. Food prices increased by 0.1%, and energy prices decreased by 2.1%. The annual PCE inflation rate fell to 2.6%, the lowest since March 2021, with the annual core PCE inflation also easing to 2.6%.

— Oil prices were higher Thursday as Middle East tensions continue to mount. Cross-border strains between Israel and Lebanon’s Hezbollah have been escalating, fanning fears that a widening war could draw in other countries including major oil producer Iran. WTI traded up $0.84 1.04% to close at $81.74. Brent traded up $1.14, 1.34%, to close $86.39.

— Outside markets: The U.S. dollar index was slightly weaker, with the euro, British pound and Swiss franc all firmer against the greenback. The yield on the 10-year U.S. Treasury note was slightly higher, trading around 4.30% ahead of the PCE data, with a mixed tone in global government bond yields. Crude oil futures were higher, with U.S. crude around $82.40 per barrel and Brent around $85.85 per barrel. Futures had been higher in Asian action. Gold and silver were higher ahead of inflation data, with gold around $2,346 per troy ounce and silver around $29.69 per troy ounce.

— Ag markets today: Corn, soybeans and wheat posted mild corrective gains overnight amid light short-covering ahead of USDA’s reports later this morning. As of 7:30 a.m. ET, corn futures were trading mostly a penny higher, soybeans were 5 to 6 cents higher and wheat futures were 3 to 6 cents higher. The U.S. dollar index and front-month crude oil futures were both modestly firmer this morning.

Bullish cash cattle momentum building. Cash cattle trade remained limited Thursday, though packer interest built, suggesting higher cash prices could be seen again this week. So far, limited cash trade has occurred at steady/firmer levels within a wide price range.

Cash hog fundamentals weaken. The uptick in the CME lean hog index and pork cutout proved to be temporary, as both resumed their recent downturns after one day of gains. The CME lean hog is down 17 cents to $89.75 as of June 26, the lowest level since April 9. The pork cutout fell 62 cents on Thursday to $94.90, the lowest since March 29.

— Key acreage, grain stocks data out today. USDA will release its Acreage and Grains Stocks Reports at noon ET. The Acreage Report will feature planted and harvested acreage estimates for principal crops, with markets primarily focused on corn, soybeans, wheat and cotton. Because of the timing of NASS’ survey work, the data won’t account for recent flooding in areas of the northwestern Corn Belt. While the acreage estimates will draw a lot of attention, quarterly stocks data has a history of producing major surprises, especially for corn, leading to big post-report price moves.

— Agriculture markets yesterday:

• Corn: December corn fell 2 3/4 cents to $4.33 3/4, closing near the session low.
• Soy complex: November soybean futures sunk 2 1/4 cents to $11.04 3/4 and settled nearer session lows. August meal futures firmed $1.10 to $348.10, settling near mid-range. August soyoil firmed a point to 43.73 cents.
• Wheat: December SRW wheat rose 18 1/2 cents to $6.01 1/2. December HRW wheat gained 12 1/2 cents to $6.11 1/2. Both markets closed nearer their session highs. September spring wheat futures firmed 14 cents to $6.18.
• Cotton: December cotton futures sunk 76 points to 74.58 cents and settled near mid-range.
• Cattle: August live cattle fell 30 cents to $186.45 after hitting an eight-month high early on. August feeder cattle closed down $1.125 at $260.65. Both markets closed nearer their session lows. June live cattle futures expire at noon Friday.
• Hogs: Hog futures gave back a sizeable portion of Wednesday’s big advance. Nearby July dropped 45 cents to $89.45, with most-active August falling 87.5 cents to $88.10.
  

— H&P Report: Hog herd expands more than expected. USDA’s Hogs & Pigs Report estimated the June 1 U.S. hog herd at 74.486 million head, up 935,000 head (1.3%) from year-ago and 347,000 head than the average pre-report estimate implied. The breeding herd declined 198,000 head (3.2%) to 6.008 million head, but the market hog inventory increased 1.134 million head (1.7%) to 68.479 million head. The data implies slaughter will run around 2% above year-ago through summer and then slightly more than 1% higher through the fourth quarter and early 2025.

Pro Farmer analysis: ”The report data was negative compared to pre-report expectations, especially the market hog inventories. That will likely pressure lean hog futures, though futures have been beaten down, so some (most) of that could already be factored into the market.”

— Top Democrats are growing increasingly worried about the 2024 race following President Joe Biden’s debate performance, which led some to question whether he should continue as the party’s nominee. During the debate, Biden had difficulty articulating his thoughts, while former President Donald Trump aggressively pushed multiple points on subjects including the economy, immigration, and foreign policy. Biden missed several chances to fact-check Trump.

The Trump campaign claimed victory after the debate, while Biden’s team dismissed concerns. Vice President Kamala Harris acknowledged that Biden had a “slow start” but urged Americans to focus on his achievements. A CNN flash poll indicated that 67% of debate watchers believed Trump performed better, compared to 33% who favored Biden’s performance.

Biden “did get stronger as the debate went on but by that time, I think the panic had set in,” said David Axelrod, a former campaign strategist to President Barack Obama, on CNN. “And I think you’re going to hear discussions — that I don’t know will lead to anything — but there are going to be discussions about whether he should continue.”

Election analyst David Wasserman of the Cook Political Report with Amy Walter wrote: “This debate [is] making abundantly clear that Biden’s insistence on running for another term — when 66% of voters in our swing state poll believe it’s likely he won’t be able to finish a second term — has gravely jeopardized Dems’ prospects to defeat Trump.”

Amy Walter writes: ”Trailing in the polls, President Joe Biden needed Thursday night’s debate to help change the trajectory of the race. His campaign’s hope was that this debate would move the focus away from Biden’s shortcomings and onto former President Donald Trump’s many liabilities. Instead of a reset, however, Thursday night’s debate only served to remind voters of Biden’s weaknesses — especially his health and stamina. The problem for Biden is that he has more than just swing voters to worry about; he has a base enthusiasm problem. Last night’s performance did nothing to persuade those apathetic voters.”

Biden told reporters he intends to stay on the ticket.

Bottom line: President Biden’s halting performance at last night’s debate raised further concerns about his mental and physical stamina and hurt his re-election chances. The net result is markets are rallying on Trump’s improved chances to win, as markets generally prefer Republican candidates due to pro-business policies (although actual results are mixed). Democratic and Republican strategists await the first round of post-debate polls to see what movement there might be. Historically, debates can prompt some change in the balance between the candidates, but the changes are generally not long lasting.

— If Biden were to step down, the Democrats would be cast into a brokered convention at the Aug. 19 convention in Chicago, where the individual candidates who threw their hat in the ring would have to campaign to try to win a majority of the 700 superdelegates. Historically, brokered conventions aren’t unprecedented, but it’s been 72 years since the last one.

— If President Joe Biden is unable to fulfill his presidential duties or run for a second term due to health issues, Vice President Kamala Harris would assume the presidency. However, this doesn’t guarantee she would be the Democratic nominee for the general election. Harris, despite being the obvious choice, faces low approval ratings below 40%, raising concerns about her ability to defeat Trump in a general election.

California Gov. Gavin Newsom, despite speculation of a “shadow campaign” for the presidency, has pledged his support for Biden’s 2024 campaign. Other Democratic governors like J.B. Pritzker, Gretchen Whitmer, Jared Polis, and Josh Shapiro, who have gained national attention and won their 2022 gubernatorial races by significant margins, are also supporting Biden and have ruled out running against him.

Corporate backers have talked up Gina Raimondo, the Commerce secretary, and Pete Buttigieg, the transportation secretary.

Sen. Bernie Sanders, though a year older than Biden and a previous presidential contender, has endorsed Biden and opted out of the 2024 race.

Third-party candidates like Robert F. Kennedy Jr. and Cornel West are not seen as viable challengers but might gain traction if Biden drops out.

Rep. Dean Phillips, who challenged Biden in the 2024 primary focusing on Biden’s age, received minimal support and has since dropped out of the race.

— USDA officially announced additional aid for dairy herds affected by highly pathogenic avian influenza (HPAI). The information echoes what we reported on Thursday. Dairy producers who have experienced a loss in milk production due to HPAI can now apply for payments under the updated Emergency Assistance for Livestock, Honeybees, and Farm-raised Fish Program (ELAP). The aid is available to those with dairy herds confirmed to have HPAI through positive test results from USDA’s Animal and Plant Health Inspection Service (APHIS) National Veterinary Services Laboratories (NVSL).

The aid covers a 21-day period of no milk production when a cow is removed from the milking herd and an additional seven days when the cow returns to milking but produces only 50% of the normal amount. Payments are based on the monthly all-milk price, national milk production statistics, and a standard number of days with reduced or no production. The deadline to file a notice of loss and application for payment is Jan. 30, 30 days after the end of the prior calendar year.

— USDA’s Agricultural Marketing Service (AMS) published a proposed rule on Fair and Competitive Livestock and Poultry Markets in the Federal Register (link), initiating a 60-day comment period ending on August 27. The rule has garnered both criticism and praise within the US agriculture industry. During the Office of Management and Budget (OMB) review, there were four meetings held—two with groups opposing the rule and two with groups supporting it. The forthcoming comments are expected to reflect the issues raised during these meetings.

— Beijing miscalculated the impact of supporting Russia’s war on Ukraine on its relationship with Europe, according to America’s top diplomat in China, Ambassador Nicholas Burns. Burns told Bloomberg Television that China failed to grasp the importance of peace and unity in Europe. As a result, the European Union is now in “outright opposition” to China’s support for Moscow. The EU and NATO have labeled China a systemic rival, partly due to this misjudgment. Burns, who assumed his post shortly after Russia’s invasion, highlighted the significant shift in European stance against China.

— Boozman writes farm bill Op-Ed in the Arkansas Democrat Gazette. Sen. John Boozman (R-Ark.), ranking member on the Senate Ag Committee, wrote an opinion piece published in the Arkansas Democrat-Gazette (link) that outlines how the Senate Republicans efforts to put more farm in the farm bill will help farmers in Arkansas and across the country.

Key takeaways:

• The input of farmers and ranchers must be the foundation for laws that impact their operations, particularly when Congress renews our five-year contract with them known as the Farm Bill. It’s the ideas of those on the front lines in the state and around the country that serve as the backbone for the framework Senate Republicans recently announced.
• Net farm income is expected to decline in Arkansas this year, down nearly 30 percent from two years ago, deterring some operations from even trying to continue. We must reverse this trend by providing the next generation of producers with increased certainty and predictability so farm families can continue to feed and clothe the world.
• Bolstering the farm safety net by increasing reference prices, and through updates to risk-management tools, including first-time access for poultry farmers, relief for catfish growers suffering losses due to predation, and enhanced crop insurance coverage for all farmers, are meaningful improvements that reflect the diverse challenges facing agriculture producers.
• Research discoveries at our state’s colleges and universities are critical to innovation on the farm. Our proposal doubles agricultural research funding and guarantees continuation of the 1890 Scholars Program that would directly impact research institutions like the University of Arkansas at Pine Bluff.
• Finally, our framework creates rural communities that the next generation choose to call home. In the last census, more than half of our 75 counties lost population. This Farm Bill proposal grows job opportunities and invests in economic development, broadband expansion, water infrastructure projects, and rural child care and health care to retain and attract families who call these areas home.
  

— Key Supreme Court decisions announced June 27, 2024:

• Emergency Abortion Care Case (Moyle v. United States): The Supreme Court rejected an appeal regarding Idaho’s strict abortion ban, effectively allowing emergency room doctors in Idaho to perform abortions in specific circumstances. This decision upholds a lower court ruling favoring the Biden administration’s stance that federal regulations for hospital emergency care take precedence over state abortion bans that don’t provide exceptions for situations where a woman’s health is at risk.
• SEC In-House Judges Case: In a 6-3 decision, the Supreme Court ruled against the Securities and Exchange Commission’s (SEC) use of in-house administrative law judges for civil fraud cases. The court deemed this practice unconstitutional, stating that individuals accused of fraud by the SEC are entitled to a jury trial in federal court.
• Purdue Pharma Opioid Settlement: The Supreme Court blocked Purdue Pharma’s multi-billion-dollar bankruptcy settlement in a 5-4 decision. This ruling removes the legal protections previously granted to the Sackler family, allowing them to potentially face lawsuits related to the opioid crisis.
• EPA Air Pollution Rule: The court halted the Environmental Protection Agency’s (EPA) enforcement of an air pollution rule, allowing states to pause the application of the “good neighbor” rule while the case proceeds in lower courts.
  

Of note: Some highly anticipated rulings, such as the case regarding Donald Trump’s immunity from prosecution, have not yet been announced.

— Cotton AWP moves higher. The Adjusted World Price (AWP) for cotton moved up to 58.23 cents per pound, effective today (June 28), after having fallen to the lowest mark since 2020 the prior week at 56.65 cents per pound. Meanwhile, USDA announced Special Import Quota #11 would be established July 4 for the import of 39,784 bales of upland cotton, applying to supplies purchased no later than October 1 and entered into the U.S. no later than Dec. 30.

— Argentina’s Congress approved President Javier Milei’s signature pro-business reforms in a final vote. An even more significant win was the approval of a return of income taxes, giving the government room to reach fiscal targets.

— NWS weather: Severe thunderstorms and flash flooding possible across portions of the central Plains and Midwest today... ...Unsettled weather with the potential for heavy rain and strong storms enter the Lower Great Lakes and Upper Ohio Valley on Saturday... ...Dangerously hot conditions will continue from parts of the southern Plains to the Southeast this weekend.

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 | | Russia/Ukraine war, lessons learned | | SCOTUS on WOTUS | SCOTUS on Prop 12 pork | New farm bill primer | | Gov’t payments to farmers by program | Farmer working capital | USDA Ag Outlook Forum |