Deere Reports Disappointing Results, Another Indication of Downturn in U.S. Ag Sector

Gaza hostage deal | Altman returns to OpenAI | Ag bankers report lower incomes and cautious outlook

Farm Journal
Farm Journal
(Farm Journal)

Gaza hostage deal | Altman returns to OpenAI | Ag bankers report lower incomes and cautious outlook



Today’s Digital Newspaper

MARKET FOCUS

  • Rest of week trading expected to see light activity
  • Nikkei touches 33-year high
  • OpenAI reaches tentative agreement for Sam Altman to return
  • Nvidia exceeds expectations but issues a warning re: China
  • Strategists at Bank of America: S&P 500 to close at record high of 5,000 next year
  • Highlights of FOMC minutes
  • Agricultural Bankers in Midwest report lower incomes and cautious outlook
  • ECB’s Lagarde urges patience on inflation control
  • Germany decided to freeze public spending for the remainder of the year
  • Canada’s inflation rate continues to decrease
  • Gas prices have seen a nine-week consecutive decline
  • Panama Canal squeeze takes toll on U.S. energy exports
  • Ships heading to European ports to face carbon emissions cost of $3.6 billion
  • Ag markets today
  • USDA daily export sales:

— 110,000 MT SRW wheat to China during 2023-2024 marketing year

— 128,000 MT corn to unknown destinations during 2023-2024 marketing year

  • Ag markets comments from grain trader and analyst Richard Crow
  • Global sugar prices soar to 12-year high due to supply squeeze
  • NWS weather outlook

ISRAEL/HAMAS CONFLICT

  • Israel and Hamas reach agreement

RUSSIA & UKRAINE

  • UN warns of Ukrainian wheat production challenges
  • Romanian port of Constanta sets record for grain shipments

POLICY

  • Link to RealAgriculture.com interview with Sean Haney on several policy issues
  • In 2024, estate and gift tax breaks in U.S. will see significant increases due to inflation

PERSONNEL

  • American Soybean Association expanding staff in D.C. policy office and St. Louis

CHINA

  • In October, China resumed export of two critical minerals for high-tech manufacturing
  • Tesla and Apple to attend China supply chain expo
  • Reuters: China to name finance veteran Zhu as new forex chief

TRADE POLICY

  • WTO’s Committee on Agriculture divided on food security stockholding

ENERGY & CLIMATE CHANGE

  • EU calls on member states to cease energy cost subsidies amid budget concerns
  • Ford downsizes Michigan battery plant due to weaker EV demand outlook
  • G20 fails to reduce fossil fuel subsidies: BloombergNEF
  • Argentina’s President-elect, Javier Milei, has ambitious plans for energy sector
  • New Jersey to ban gas-powered vehicle sales by 2035 to combat emissions
  • The Guardian: ‘Breakthrough battery’ from Sweden may cut dependency on China

LIVESTOCK, NUTRITION & FOOD INDUSTRY

  • USDA confirms more cases of HPAI in South Dakota and California

HEALTH UPDATE

  • WSJ: Senators call for probe into health insurers over high generic drug prices
  • Biden urging lawmakers to help combat fentanyl trafficking

POLITICS & ELECTIONS

  • GOP Celeste Maloy secures seat previously held by former Rep. Chris Stewart
  • Rep. Bill Johnson (R-Ohio) announced retirement from Congress
  • Democratic Rep. Anna Eshoo of California will not run in 2024
  • Andrew Cuomo mulls NYC mayoral
  • GOP candidate Tim Sheehy leads Montana Senate primary poll over Matt Rosendale

OTHER ITEMS OF NOTE

  • North Korea claims successful launch of its first spy satellite into orbit

MARKET FOCUS

— Equities today: Asian and European markets were mixed to firmer in overnight trading. U.S. Dow opened around 145 points higher. In Asia, Japan +0.3%. Hong Kong flat. China -0.8%. India +0.1%. In Europe, at midday, London -0.1%. Paris +0.4%. Frankfurt +0.4%.

U.S. equities yesterday: All three major indices registered losses Tuesday, unable to trade in positive territory during the session. Markets will trade normal hours today and will be closed Thursday, with abbreviated trading hours Friday. The Dow was down 62.75 points, 0.18%, at 35,088.29. The Nasdaq declined 84.55 points, 0.59%, at 14,199.98. The S&P 500 fell 9.19 points, 0.20%, at 4,538.19. The down day came as Federal Reserve officials released minutes Tuesday from their most recent meeting (see related item below) indicating that Fed policy will need to remain “restrictive” amid concerns that inflation could be stubborn or tick higher.

The Nikkei touched a 33-year high as a move by Warren Buffett stirred speculation that he might increase his bet on Japanese equities

— Rest of week trading expected to see light activity. The rest of this week is expected to be relatively calm in terms of trading activity due to the U.S. Thanksgiving holiday on Thursday. Traditionally, the Friday following Thanksgiving is one of the least active trading days in the United States. Thus, U.S. traders are likely to leave their positions early today to take advantage of an extended holiday break. Deere & Co. reports disappointing results

Details: Financial and commodity markets will trade normal hours today. U.S. gov’t offices and markets will be closed on Thursday and will observe an abbreviated session on Friday —equity markets will halt trading at noon CT, commodity futures mostly halt trading at 12:05 pm CT and bond markets will close at 1 pm CT. U.S. gov’t offices will be open on Friday.

— OpenAI has reached a tentative agreement for Sam Altman to return as the company’s CEO and establish a new board of directors. This decision comes after a week of turmoil triggered by Altman’s unexpected removal by the company’s previous board. In a statement, Altman expressed his love for OpenAI and his dedication to the team and its mission. He had briefly joined Microsoft but decided to return to OpenAI with the support of the new board and Microsoft CEO Satya Nadella. OpenAI co-founder Greg Brockman, who had stepped down as president in response to Altman’s firing, also announced his return to the company. This series of events follows Altman’s unexpected removal from OpenAI, citing issues related to communication with the board. It led to strong reactions from OpenAI’s top investors and employees, with many advocating for Altman’s reinstatement.

— Nvidia exceeded Wall Street’s expectations for its third-quarter earnings, but the company has also issued a warning about export restrictions potentially impacting its sales in China and other countries in the next quarter. Despite this concern, Nvidia’s performance remains strong. The company reported a 206% year-over-year growth in revenue for the quarter ending on October 29. Nvidia provided guidance forecasting $20 billion in revenue for the fiscal fourth quarter, indicating an impressive almost 231% growth in revenue. The high demand for Nvidia’s graphics processing units, driven by the increasing adoption of generative artificial intelligence, has resulted in supply constraints.

— Agriculture markets yesterday:

  • Corn: March corn futures rose 1 1/2 cents to $4.89 and near mid-range.
  • Soy complex: January soybeans rallied a dime to $13.77 1/4, a mid-range close after trading as high as $13.89 1/4. December meal fell $1.00 to $459.20. December soyoil rose 108 points to 54.19 cents and closed above the 40-day moving average for the first time since Sept. 15.
  • Wheat: December wheat futures surged 11 1/2 cents, settling at $5.55. December HRW futures rallied 5 1/4 cents to $6.15 3/4, while December spring wheat futures rose 10 1/4 cents to $7.17 1/2.
  • Cotton: March cotton fell 56 points to 80.69 cents, a near mid-range close.
  • Cattle: December live cattle futures fell 47.5 cents to $175.00 and settled near mid-range. January feeder cattle futures dropped $1.525 to $228.325, closing nearer the session low.
  • Hogs: February lean hogs dropped $2.725 to $72.325, nearer the session low and hit a three-week low.

— Ag markets today: Soybeans turned lower after rallying 60 cents in two sessions to start the week, wheat futures continue to bounce from near-contract lows and corn saw light trading on both sides of unchanged overnight. As of 7:30 a.m. ET, corn futures were fractionally to a penny higher, soybeans were 8 to 10 cents lower and wheat futures were 6 to 8 cents higher. Front-month crude oil futures were facing steady losses, while the U.S. dollar index was around 100 points higher.

Cash cattle trade quiet. There have been no reported trades yet this week in the cash cattle market. The wholesale market continues to base sideways, with Choice rising 6 cents to $295.81 and Select falling $2.18 to $268.77 on Tuesday.

Wholesale pork posts fresh low. Pork cutout posted a new for-the-move low on Tuesday as prices slipped 88 cents to $85.21, marking the lowest close since early June. The CME lean hog index fell another 34 cents to $74.18, as of Nov. 20, a fresh seasonal low.

— Quotes of note:

  • Fedspeak. “All participants agreed that the committee was in a position to proceed carefully and that policy decisions at every meeting would continue to be based on the totality of incoming information and its implications for the economic outlook ...” — Minutes from the Fed’s Oct. 31-Nov. 1 meeting
  • “Gov. DeSantis hasn’t exactly wowed people on the stump and he has made a number of rookie mistakes that have hurt his ability to gain more supporters.” — Republican pollster Whit Ayres.
  • Strategists at Bank of America said in a note they expect the S&P 500 to close at a record high of 5,000 next year, a sign of confidence in the economy even as others aren’t quite as bullish. The strategists explained that companies have already adapted to higher interest rates imposed by the Federal Reserve, and predict 2024 will be “a stock picker’s paradise.” Link for more.
  • Ag markets comments from grain trader and analyst Richard Crow: “Even with the rumors of good soybean sales to China, the U.S. bean basis continues to weaken. Again, there have yet to be any announcements. The market will be looking for some. Yesterday, the oil market showed signs of regaining some crush share. Even with oil gaining, meal values continue strong with a discussion of meal trading over delivery value. The spread should encourage users to try and wait it out. The hog industry has rumors of some producers having financial trouble and liquidating herds.”

— Federal Open Market Committee (FOMC) minutes released Tuesday reveal several key points:

  • No Recession Predicted: The Fed’s staff did not predict a recession in the near future.
  • Monitoring Treasury Yields: Both staff and Fed officials are closely monitoring the rise in Treasury yields, with a focus on term premiums and increased uncertainty regarding the duration of high policy rates.
  • Inflation Concerns Persist: Despite acknowledging some moderation, officials still view current inflation as unacceptably high and above the 2% target. They require further evidence that inflation is on a clear path toward their objective.
  • Impact of High Interest Rates: Rising interest rates are affecting businesses, leading to delays in investment plans and tighter lending conditions. Small businesses and the agricultural sector are particularly affected.
  • Rising Bond Yields: The rise in longer-term bond yields may be driven by expectations of a higher federal funds rate or increased economic resilience, and officials agree that persistent changes in financial conditions should be closely monitored.
  • Monetary Policy Remains Restrictive: Officials believe that monetary policy should remain restrictive until inflation clearly moves down sustainably toward the 2% target. The balance sheet runoff should proceed as planned, and there may be a need to continue it even after rate cuts.
  • Inflation as a Key Concern: Inflation remains the primary focus for Fed officials, and they want to ensure that it is moving toward their target without any “head fake” on prices becoming lower. Consumer perceptions of high prices are also noted.

Bottom line: The minutes provide insight into the Fed’s cautious approach to monetary policy, with continued attention on inflation and potential impacts on various sectors of the economy due to rising interest rates and bond yields.

— Agricultural Bankers in Midwest report lower incomes and cautious outlook. Agricultural bankers in the U.S. Midwest have reported lower incomes for farmers heading into this year’s fall harvest due to falling output prices and high production costs, according to a third-quarter survey by the Federal Reserve Bank of Minneapolis (link). The survey, conducted in October, found that commodity prices were trending down, and interest rates were high. Despite this, farm finances remained in good condition overall, with the rate of loan repayment holding steady. However, the outlook for the fourth quarter is modestly pessimistic, with most lenders expecting farm incomes to decrease.

  • Farm Incomes and Spending. The decline in farm incomes was not uniform, with 46% of respondents indicating that incomes decreased in the third quarter from a year earlier. More than a third of respondents reported increased spending by farm households, while capital spending on equipment and buildings dropped.
  • Loan Repayments and Renewals. Loan repayments and renewals remained stable, with 83% of respondents reporting that repayment rates were unchanged from a year earlier. Collateral requirements on loans were also mostly unchanged, although some lenders reported increases. Interest rates continued to rise, climbing at least 20 basis points for all loan categories.
  • Demand for Loans and Collateral. Demand for loans showed little change from previous years, with 52% of lenders reporting no change in loan demand relative to a year ago. Collateral requirements on loans were mostly unchanged, with 85% of lenders reporting no increase.
  • Land Values and Rents. Land values and cash rents continued to increase, with nonirrigated cropland values up 7.2% on average from the third quarter of the previous year. Cash rents for nonirrigated land increased by 4.2%, while irrigated land rents grew by 8%.
  • Outlook: Bankers’ outlooks for agriculture in the remainder of 2023 are generally pessimistic, with 60% expecting farm incomes to decrease in the fourth quarter. However, more than a third of lenders anticipate an increase in loan demand despite higher interest rates.

Bottom line: The survey paints a cautious picture for the agricultural sector in the Midwest, with farmers facing challenges from falling prices, high costs, and a mixed outlook for the future.

— ECB’s Lagarde urges patience on inflation control. Christine Lagarde, President of the European Central Bank (ECB), has cautioned against premature celebration regarding inflation control, emphasizing the need for patience to gauge the effectiveness of disinflationary measures. Despite raising interest rates by an unprecedented 4.5 percentage points over the past year, the ECB kept borrowing costs unchanged at its October policy meeting, with a similar stance expected for December. While market expectations have grown for potential rate cuts in the future, Lagarde noted that the ECB is currently in an “attentive and focused” phase of its policy cycle.

Lagarde stressed that the ECB is not finished addressing inflation concerns, as Eurozone inflation is projected to increase slightly in the coming months after dropping from a record high of 10.6% to 2.9% in October. The ECB’s inflation target is 2%, and Lagarde cited two primary forces influencing inflation: the waning impact of energy and supply shocks and the effects of higher borrowing costs.

Despite strong labor markets and rising wages, Lagarde expressed confidence that recent wage growth is a “catch-up” effect related to past inflation rather than a self-fulfilling dynamic. However, she emphasized the need to remain attentive until solid evidence emerges that conditions support a sustainable return to the inflation target.

In response to Lagarde’s remarks, Christian Lindner, Germany’s finance minister, stressed the importance of fiscal policy discipline to combat inflation and reduce the burden of debt on heavily indebted countries.

— Germany decided to freeze public spending for the remainder of the year following a court ruling that declared the government’s plans unconstitutional. This development is a setback for Europe’s economic recovery. Germany, being Europe’s largest economy, is currently facing contraction due to rising energy prices and trade tensions. Chancellor Olaf Scholz’s government had been relying on significant spending on green-energy initiatives and technology, including chips and batteries, to rejuvenate the country’s export-focused economic model. The court’s decision is expected to exacerbate the economic gap between Europe, which has experienced stagnation for over a year, and the United States.

— Canada’s inflation rate has continued to decrease, particularly in October, which has implications for central-bank interest rates. In October, consumer prices increased by only 0.1%, marking a year-over-year rise of 3.1%. This is notably slower than previous months and well below the peak of 8.1% recorded in the middle of the previous year. This trend in easing inflation suggests that central bank interest rates are likely to remain steady in the near term, especially as the Canadian economy exhibits signs of struggle.

Market perspectives:

— Outside markets: The U.S. dollar index rose, with the euro and British pound slightly weaker against the greenback. The yield on the 10-year U.S. Treasury note was weaker, trading around 4.37%, with a mostly higher tone in global government bond yields. Crude oil futures were lower, with U.S. crude at around $76.10 per barrel and Brent at around $80.60 per barrel. Gold and silver futures were narrowly mixed ahead of US economic data, with gold higher around $2,003 per troy ounce, and silver weaker around $23.85 per troy ounce.

— Gas prices have seen a nine-week consecutive decline due to a decrease in crude oil prices and the typical seasonal drop in demand. The national average for a gallon of regular gas is currently at $3.28, as reported by AAA. These lower prices are contributing to a resurgence in travel, both on highways and in the air. Over 55.4 million Americans are expected to travel at least 50 miles from home between the day before Thanksgiving and the Sunday after the holiday. The Transportation Security Administration (TSA) is also anticipating the busiest holiday travel season on record, with expectations to screen 30 million passengers during the Thanksgiving travel period, which spans from November 17th to November 27th. This marks a 9% increase compared to the previous year and an additional 1.7 million passengers over pre-Covid record levels.

— Panama Canal squeeze takes a toll on U.S. energy exports. If weather conditions persist, the ongoing drought could reduce Panama Canal transit capacity from the current 60% to 45% by early 2024, resulting in heightened shipping costs, extended voyages and diminished tanker availability, according to Energy Intelligence Group (link). The Panama Canal Authority has reduced the number of vessels allowed to traverse the canal due to low water levels at Gatun Lake, resulting in traffic congestion and increased premiums for timely passage. Some ships are taking longer alternative routes, increasing shipping costs and delaying shipments.

This situation is particularly affecting U.S.-sourced liquefied petroleum gases (LPGs) and natural gas liquids (NGLs) headed to the Asia-Pacific region, as the canal is a crucial shipping route for these products. Asia accounts for a significant portion of U.S. gas liquids shipments abroad. With U.S. gas liquids production on the rise and domestic demand remaining relatively flat, the canal’s capacity constraints pose challenges for U.S. exports.

While LPGs and NGLs are most impacted by the drought, other products, such as renewable diesel moving from the US Gulf Coast to West Coast markets, are also feeling the effects. Ships can bid for priority passage through the canal, but the associated costs are substantial.

Unfortunately, the drought is expected to persist due to the El Niño effect. Additionally, the shipping fleet is not anticipated to grow significantly in the near term, which could further exacerbate the challenges related to shipping through the Panama Canal.

Of note: An oil tanker carrying fuel to New York is adding thousands of miles to its journey to avoid disruption at the Panama Canal. The High Loyalty, chartered by a Glencore subsidiary, is sailing around South America, according to data (link) compiled by Bloomberg News.

— Ships heading to European ports are expected to face a combined carbon emissions cost of $3.6 billion in the coming year, with the likelihood of this levy increasing as Europe intensifies its efforts to address climate change. The figure is an estimate of the total price of complying with the European Union’s Emissions Trading System from Drewry Shipping Consultants Ltd. Link for details.

— USDA daily export sales:

• 110,000 MT SRW wheat to China during 2023-2024 marketing year

• 128,000 MT corn to unknown destinations during 2023-2024 marketing year

— Global sugar prices soar to 12-year high due to supply squeeze. A combination of factors, including the El Niño weather pattern, congested Brazilian ports, export limits in India and Thailand, and increased use of biofuels, has driven global sugar prices to their highest level since 2011, according to analysts (link) from the International Food Policy Research Institute (IFPRI). Dry El Niño weather has reduced sugar harvests in South and Southeast Asia, impacting exports from major suppliers like India and Thailand. Brazil, the world’s top sugar exporter, has also faced difficulties with sugar shipments due to congested ports.

The rising demand for alternative energy sources, such as ethanol, has led to reduced sugar output in some countries, further exacerbating the supply shortage. In India, there are plans to increase the ethanol blend rate in gasoline from 11.5% to 20% by 2025, while over half of Brazilian sugarcane is being used for ethanol production this year.

Impact. While higher sugar prices may not significantly affect wealthier nations, they pose a burden on less developed countries, especially in sub-Saharan Africa, which heavily rely on sugar imports. In some low-income countries, sugar is a dietary staple, and one-third of sugar consumed worldwide is imported.

The IFPRI analysts noted that global sugar market dynamics have mirrored those in other agricultural markets over the past two years, with supply shortfalls driving prices to multi-year highs. They attributed the price increases to domestic policies, including biofuel policies diverting production away from food use and export policies designed to protect domestic markets but resulting in price volatility worldwide.

— NWS weather outlook: Widespread rainfall and locally heavy rain along the East Coast are expected to taper off by this evening... ...Accumulating snow today across northern New England and especially over northern Maine... ...A white Thanksgiving is on tap for northern and central Rockies as arctic air intrudes the northern tier of the country on Thanksgiving Day into Friday.

ISRAEL/HAMAS CONFLICT

— Israel and Hamas have reached an agreement brokered by the U.S., Qatar, and Egypt, aimed at temporarily halting the conflict. Key points of the agreement:

  • Four-Day Pause: The agreement includes a four-day pause in the fighting, providing a temporary cessation of hostilities.
  • Release of Hostages: Hamas has agreed to release 50 women and children who were being held in Gaza, including three Americans.
  • Prisoner Exchange: Israel has agreed to release 150 Palestinian women and teenagers who were held in Israeli prisons.
  • Humanitarian Aid: The agreement also allows for safe passage of humanitarian aid from Egypt to Gaza.

Approximately 200 hostages will remain in Hamas’ custody, and both sides have expressed their intentions to continue pursuing their objectives. President Joe Biden has emphasized the importance of full implementation of the deal and the release of all American hostages. Hamas refers to it as a “truce,” while Israel sees it as a “pause” and remains committed to addressing the situation in Gaza.

RUSSIA/UKRAINE

— UN warns of Ukrainian wheat production challenges. The UN World Food Program (WFP) issued a warning about the potential consequences for Ukrainian wheat production due to ongoing issues. The WFP states that if Black Sea shipping routes remain blocked and attacks on food infrastructure continue, Ukraine may struggle to meet both domestic and export demands for wheat in the coming years. According to EFP Ukraine director Matthew Hollingsworth, a forthcoming UN Human Rights Office report will reveal 31 documented attacks on Ukrainian grain production and export facilities since mid-July, with 28 of these attacks occurring in the Odesa oblast, where critical Black Sea and Danube River terminals are located.

Hollingsworth emphasizes that if these attacks and blockades persist, it could significantly impact Ukraine’s agricultural production for years to come. In a worst-case scenario, it might even lead to a situation where wheat production cannot meet both domestic and export requirements.

In response, Russian UN Ambassador Vassily Nebenzia has stated that Russia is not targeting civilian infrastructure but rather military targets.

— Romanian port of Constanta has set a record for grain shipments, with 29.4 million metric tons (MMT) shipped during the first 10 months of 2023. This data, reported by Reuters and attributed to the Romanian port authority, reveals that 40% of this total, equivalent to 11.7 MMT, consisted of Ukrainian shipments. In comparison, in 2022, the port handled 8.6 MMT of Ukrainian grain. This marks a significant increase, surpassing the previous record of just over 25 MMT at the Constanta port.

POLICY UPDATE

Link to RealAgriculture.com interview with Sean Haney on several policy issues.

— In 2024, estate and gift tax breaks in the U.S. will see significant increases due to inflation. Key points:

  • Lifetime Estate and Gift Tax Exemption: The lifetime estate and gift tax exemption for 2024 will rise to $13,610,000. This means that individuals can pass on or gift up to this amount without incurring federal estate or gift taxes.
  • Future Exemption Levels: After 2025, the exemption is set to revert to $5 million, adjusted for inflation, unless Congress decides to extend the higher exemption amount. The likelihood of an extension will depend on the political party in control of the White House and Congress after the 2024 election.
  • Special Valuation for Real Estate: In 2024, there will be a special estate tax valuation for real estate. Up to $1,390,000 of farm or business real estate can receive a discount valuation, allowing estates to value the property at its current use rather than its fair market value. Certain conditions must be met to qualify for this benefit.
  • Installment Payment Tax Break: Estates with more significant estate tax liabilities and a substantial portion (greater than 35%) attributed to closely held businesses can defer up to $740,000 in taxes and pay only 2% interest.
  • Annual Gift Tax Exclusion: The annual gift tax exclusion will increase to $18,000 per donee in 2024. This means that you can give up to $18,000 to each person without triggering gift tax implications or using your lifetime estate and gift tax exemption. Gifts exceeding this annual exclusion amount will require the filing of a gift tax return in 2024, but no gift tax will be due unless your total lifetime gifts exceed $13,610,000.
  • Post-2025 Estate Tax Calculation: Most tax-free gifts made between 2018 and 2025 will not result in post-2025 estate tax obligations. Estates can utilize the higher lifetime exemption for gifts when calculating post-2025 estate taxes. This ensures that individuals who made significant gifts during this period will not lose the benefits of the larger exemption amount, even if it reverts to a lower level in 2026.

PERSONNEL

— American Soybean Association (ASA) is expanding its staff in both its D.C. policy office and St. Louis headquarters to meet the growing needs of the soybean industry. Carson Fort and Joe Prosser have joined the advocacy team for ASA in newly created policy manager roles. In St. Louis, Maria Brockamp has joined the Industry Relations department. ASA is also in the process of hiring a manager for its “SoyPAC” political action committee in D.C. and a state and industry relations manager in St. Louis. Additionally, ASA’s World Initiative for Soy in Human Health (WISHH) program will soon add a new manager. The policy managers will contribute to policy development, advocacy execution, and building relationships with stakeholders. Carson Fort, one of the new hires, brings valuable experience in policy research and legislative analysis. Maria Brockamp, joining the Industry Relations department, has a background in sustainability and conservation. ASA advocates on various policy issues affecting soybean farmers across the United States.

CHINA UPDATE

— In October, China resumed the export of two critical minerals for high-tech manufacturing after a months-long hiatus due to Beijing’s restrictions. The controls on germanium, gallium and their chemical compounds, used to make parts for chips, telecommunications equipment and electric vehicles, were imposed on Aug. 1 on national security grounds, as China escalated its tit-for-tat trade war with the U.S. and Europe. Another set of export controls on graphite, a key material for EV batteries, is due to come into force on Dec. 1. Link to more via Bloomberg.

— Tesla and Apple to attend China supply chain expo. Beijing stresses U.S. participation in push to prevent decoupling. Link for details.

Reuters: China to name finance veteran Zhu as new forex chief. China is set to appoint Zhu Hexin, a veteran banker and chief of state-run financial conglomerate CITIC Group, as the new head of its foreign exchange regulator, four people familiar with the matter said, amid growing headwinds for the economy and markets. Link for details.

TRADE POLICY

— WTO’s Committee on Agriculture divided on food security stockholding. The World Trade Organization’s (WTO) Committee on Agriculture (CoA) remains divided on the issue of public stockholding (PSH) for food security. PSH has been a contentious point in WTO agriculture negotiations leading up to the 13th Ministerial Conference (MC13) in February. The Bali decision in 2015 introduced an interim policy known as the “peace clause” for PSH policies, but talks have stalled since then.

Developing nations, led by India, are seeking a permanent arrangement allowing countries to maintain public food stocks for food security purposes without triggering scrutiny under domestic subsidies rules. Pro-trade liberalizing members, including the Cairns Group, the U.S., and the EU, oppose negotiations around a solution based on the post-2015 status quo and argue that PSH should be addressed alongside related issues like domestic support.

During the recent CoA session, India refused to engage in discussions after Canada and Turkey presented a new submission on behalf of the Cairns Group outlining a negotiating framework for domestic support. India suggested that this was an attempt to derail the PSH discussion and preferred to address the submission separately. Over 80 developing members, including Nigeria, insisted that the PSH mandate is standalone and not subject to negotiations in other areas like domestic support, a view shared by China. They argued that the Cairns proposal would undermine PSH goals, particularly during a food crisis.

Bottom line: With negotiations at a stalemate and MC13 approaching, WTO Director-General Ngozi Okonjo-Iweala has called for a mini-ministerial meeting on Nov28 to build momentum and guidance ahead of MC13. The agenda for this session is still being drafted, but it will be closely watched for any progress on key issues like PSH.

ENERGY & CLIMATE CHANGE

— EU calls on member states to cease energy cost subsidies amid budget concerns. The European Commission has called on several EU member states, including Germany, Portugal, Malta, France, and Croatia, to cease subsidies aimed at reducing energy costs for companies and households, as these measures risk breaching EU budget guidelines. These subsidies were introduced in response to the energy crisis triggered by Russia’s invasion of Ukraine. The EU suspended its rule limiting budget deficits to 3% of GDP during the pandemic but plans to reintroduce this rule in 2024. The European Commission has urged these countries to remove these measures “as soon as possible” to ensure fiscal sustainability and avoid inflationary pressures. The cost of gas in European markets reached a record high in August 2022 but has since declined. Germany is revising its fiscal plans, with concerns that some measures could be declared unconstitutional. Italy also faces pressure to cut spending after exceeding its expected budget increase in 2023.

— Ford downsizes Michigan battery plant due to weaker EV demand outlook. Ford Motor is proceeding with the construction of a battery plant in Michigan, but the project will be downsized due to a more cautious outlook on future electric vehicle (EV) demand. The scaled-down facility will manufacture approximately 40% fewer batteries than initially envisioned and will employ around 1,700 workers when it opens in 2026, down from the previous estimate of approximately 2,500.


— G20 fails to reduce fossil fuel subsidies: BloombergNEF. The Group of 20 governments and state-owned institutions have made limited progress in reducing subsidies for coal, natural gas, oil, and fossil fuel-fired power, according to BloombergNEF. Subsidies for these sectors reached a record high of $1.3 trillion in 2022, which was more than double the amount from the previous year. A significant portion of this growth, approximately $830 billion, was allocated to support consumers during the energy crisis. The remaining $446 billion went to fossil fuel producers, many of whom reported substantial profits.

— Argentina’s President-elect, Javier Milei, is a proponent of free-market policies and has ambitious plans for the country’s energy sector. His agenda includes eliminating export taxes, reforming the central bank, and transitioning from the peso to the U.S. dollar. Argentina possesses substantial untapped energy resources, including the world’s second-largest shale gas basin. These policies could potentially lead to significant developments in the country’s energy industry.

— New Jersey to ban gas-powered vehicle sales by 2035 to combat emissions. New Jersey’s Department of Environmental Protection announced that the state will ban the sale of new gasoline-powered vehicles by 2035 as part of an initiative to enhance air quality and decrease emissions causing climate change. A new rule, effective Jan. 1, commits the state to a transition toward zero-emission vehicles. Beginning in 2027, New Jersey will gradually limit the number of new gasoline-powered cars that can be sold in the state, ultimately reaching zero by 2035.

The Guardian: ‘Breakthrough battery’ from Sweden may cut dependency on China. Northvolt, Europe’s only large homegrown electric battery maker, has said it has made a lower cost, more sustainable battery designed to store electricity which does not use lithium, nickel, graphite and cobalt. Link for details.

LIVESTOCK, NUTRITION & FOOD INDUSTRY

— USDA confirms more cases of HPAI in South Dakota and California. USDA’s Animal and Plant Health Inspection Service (APHIS) confirmed three additional cases of highly pathogenic avian influenza (HPAI) in commercial poultry operations in Edmunds County, South Dakota. The affected flocks include 30,100 commercial turkey breeder replacements, 19,200 commercial turkey breeder hens, and 33,400 commercial meat birds. This brings the total number of affected commercial flocks in South Dakota to 13, with a combined total of 451,500 birds.

Besides the South Dakota cases, USDA also confirmed HPAI at a commercial duck breeder operation in Fresno County, California, involving 23,400 birds.

The continued spread of HPAI in poultry operations is a concern for the poultry industry, as the virus can lead to significant economic losses. Efforts are being made to contain and mitigate the spread of the virus, including depopulation of affected flocks and increased biosecurity measures in poultry operations.

HEALTH UPDATE

WSJ: Senators call for probe into health insurers over high generic drug prices. Sens. Elizabeth Warren (D-Mass.) and Michael Braun (R-Ind.) called for an investigation into health insurers that pay high prices for generic drugs used in the treatment of serious diseases such as cancer and multiple sclerosis, the Wall Street Journal reports (link). The senators sent a letter to the Department of Health and Human Services’ Office of Inspector General, citing a recent Wall Street Journal article that highlighted how major health insurers, including Cigna, CVS Health, and UnitedHealth Group, are paying significantly more for drugs like Gleevec (used in cancer therapy) and Tecfidera (used in multiple sclerosis treatment) than what manufacturers charge for generic versions.

— President Biden is urging lawmakers to approve additional funding and enact stricter laws to combat fentanyl trafficking following an agreement with Chinese President Xi Jinping to crack down on the illicit drug trade. Biden highlighted the commitment from China to enforce laws against fentanyl precursor chemicals and emphasized the need for verification to ensure these actions are taken. The goal is to save lives by addressing the flow of deadly drugs, with cooperation between the U.S. and China in targeting fentanyl components.

POLITICS & ELECTIONS

— Republican Celeste Maloy secured the seat previously held by former Utah GOP Rep. Chris Stewart. This win restores the House of Representatives to its full complement of 435 members and re-establishes the Republican majority with a 222-213 margin over Democrats. Maloy, a former congressional aide to Chris Stewart, won the election, defeating Democratic state Rep. Kathleen Riebe. Her campaign prioritized issues such as curbing inflation and government overreach. Maloy plans to travel to Washington next week for her swearing-in, despite the results not being officially certified until the first week of December. Maloy’s election makes her the first woman to join the Utah congressional delegation since 2019 and the fifth woman in the state’s history to serve in Congress.

— Rep. Bill Johnson (R-Ohio) announced his retirement from Congress. He will be leaving his position to take on the role of president at Youngstown State University, which is expected to occur at some point in the next year. While the specific timing is not confirmed, a spokesperson stated that Johnson will resign from Congress before March 31. This means that he will likely remain in office during the government funding battle early next year.

Long-time Democratic Rep. Anna Eshoo of California also announced she will not run in 2024, bringing an end to her 30-year career in the House.

— Andrew Cuomo mulls NYC mayoral run. Former New York Governor Andrew Cuomo is reportedly considering the possibility of running for the position of New York City mayor. This potential bid is contingent on current Mayor Eric Adams facing removal from office due to a federal investigation into corruption allegations related to his campaign. There is a new poll in circulation aimed at gauging public sentiment regarding Cuomo, his past accomplishments as governor, and the controversies that led to his resignation.

— GOP candidate Tim Sheehy leads Montana Senate primary poll over Matt Rosendale. Sheehy launched an extensive advertising campaign aimed at boosting his chances in a potential Republican primary, and early poll results suggest it may be paying off, Politico reports (link). According to a recent poll conducted by co/efficient, a Republican firm, Sheehy is leading Montana Rep. Matt Rosendale in the race for the Republican nomination to challenge incumbent Democratic Senator Jon Tester. The poll shows Sheehy with 40% support, Rosendale with 24%, two other candidates with a combined 5%, and 31% of voters undecided. Rosendale, who was the Republican nominee in 2018 and lost to Senator Tester, is expected to join the race. However, his potential entry has caused tension among GOP leaders who had recruited and endorsed Sheehy, believing he has a better chance of unseating the Democratic incumbent.

OTHER ITEMS OF NOTE

— North Korea claimed the successful launch of its first spy satellite into orbit, although this claim has not been independently confirmed by South Korea, the United States, or Japan. If the satellite is functional, it could potentially enhance North Korea’s military capabilities, particularly in terms of targeting opponents’ forces more accurately. The rocket carrying the satellite was launched in a southerly direction, passing over Japan’s Okinawa prefecture. South Korea has labeled this launch as a “clear violation” of a UN Security Council resolution that prohibits North Korea from using ballistic missile technology and has pledged to conduct further investigations into the matter.


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