Dockworkers Union Faces Technology Standoff Amid Contract Talks

News/Markets/Policy Updates: Dec. 3, 2024

— Equities today: Asian and European stock markets were mostly higher overnight. In Asia, Japan +1.9%. Hong Kong +1%. China +0.4%. India +0.7%. In Europe, at midday, London +0.7%. Paris +0.2%. Frankfurt +0.3%. U.S. Dow opened around 100 points higher, but then turned lower. There are two Fed speakers to watch: Kugler (12:35 p.m. ET) and Goolsbee (1:30 p.m. ET and 3:45 p.m. ET).

U.S. equities yesterday: The Dow opened December with a loss while the Nasdaq and S&P 500 both managed to score new record finishes on gains in tech shares. The Dow was down 128.65 points, 0.29%, at 44,782.00. The Nasdaq rose 185.78 points, 0.97%, at 19,403.95. The S&P 500 rose 14.77 points, 0.24%, at 6,047.15.

— Donald Trump pledged to prevent Nippon Steel, a Japanese company, from acquiring U.S. Steel, promising to bolster the American firm with “Tax Incentives and Tariffs” to make it “Strong and Great Again.” President Joe Biden echoed concerns, emphasizing the importance of keeping U.S. Steel domestically owned, despite significant worker support for Nippon’s bid. The Committee on Foreign Investment in the United States (CFIUS) is assessing the acquisition on national-security grounds, with a report expected by Dec. 23.

— Cargill announced a significant workforce reduction as part of its 2030 strategy. The company plans to cut approximately 5% of its global staff, which translates to around 8,000 jobs. The decision comes in response to several factors:
• Declining profits: Cargill’s profits fell to $2.48 billion in the fiscal year ending May 2024, the lowest since 2015-16. This is less than half of the record $6.7 billion profit achieved in the 2021-22 fiscal year.
• Market pressures: Agricultural merchants like Cargill are facing challenges due to falling commodity prices. Wheat, corn, and soybean prices have dropped to near four-year lows, leading to shrinking crop processing margins.
• Cattle herd reduction: The U.S. cattle herd is at its smallest in seven decades, impacting Cargill’s beef processing operations.

According to CEO Brian Sikes, the majority of these reductions will take place this year. Cargill is consolidating its business units from five to three as part of its 2030 strategy. Cargill plans to hold a meeting on Dec. 9 to share more information about the restructuring.

— Tyson Foods announced the closure of its beef and pork non-harvest processing facility in Emporia, Kansas, as part of a strategic move to streamline operations and improve efficiency. The closure is scheduled for Feb. 14, 2025, and will impact 809 employees. The shutdown will occur in two stages: The company’s laboratory on Funston Street will close around Dec. 20, with five team members’ positions eliminated by the end of January 2025. The main plant at 2101 West Sixth will cease operations on or about Feb. 14, 2025. Tyson plans to consolidate operations by transferring all activities from Emporia to its facility in Holcomb, near Garden City.

This closure represents a significant blow to Emporia, a city of about 24,000 residents, and its local economy. This closure marks the end of Tyson’s operations in Emporia, following previous reductions in 2008 and 2020.

The company has closed several plants in the U.S. over the last few years. Recent closures include facilities in Perry, Iowa; Van Buren, Arkansas; Glen Allen, Virginia; and others. Despite these closures, Tyson continues to employ over 5,000 workers across its other Kansas facilities.

— Ag markets today: Corn, soybeans and wheat firmed amid corrective buying during the overnight session. As of 7:30 a.m. ET, corn futures were trading 1 to 2 cents higher, soybeans were 6 to 8 cents higher and wheat futures were mostly 5 to 7 cents higher. The U.S. dollar index was around 100 points lower, and front-month crude oil futures were about 85 cents higher.

Wholesale beef prices rose $2.49 for Choice to $313.01 and $2.70 for Select to $277.00 on Monday. Despite the beef strength, packer margins remain solidly in the red. Given negative margins, the availability of December-contracted cattle, strong packer purchases the past two weeks and holiday-shortened slaughter schedules around the upcoming holidays, traders sense the recent cash market strength may end.

The CME lean hog index is down another 85 cents to $84.36 as of Nov. 29, extending the recent price slide. After strong gains on Monday, December lean hog futures finished $1.135 below today’s cash quote, while February hog futures hold a $3.59 premium.

— Agriculture markets yesterday:
• Corn: March corn fell 1/2 cent to $4.32 1/2, nearer the session high.
• Soy complex: January soybean futures fell 4 1/4 cents to $9.85 1/4 though settled well off session lows. January meal futures dropped $4.0 to $287.90, a contract low close. January bean oil futures sunk 32 points to 41.42 cents.
• Wheat: March SRW wheat fell 3/4 cent to $5.47 1/4 and near mid-range. March HRW wheat dipped 1/4 cent to $5.40 1/2 and near mid-range after hitting a contract low early on. March HRS futures sunk 4 cents to $5.87 3/4.
• Cotton: March cotton fell 44 points to 71.49 cents, nearer the session high.
• Cattle: February live cattle fell 70 cents to $187.925, nearer the daily low. January feeder cattle fell $2.625 to $256.85, nearer the session low after hitting a five-month high early on.
• Hogs: February lean hog futures surged $1.625 to $87.95 and closed on session highs. Nearby December futures climbed $1.15 to $83.225.

— Federal Reserve Governor Christopher Waller expressed a cautious stance on the central bank’s efforts to control inflation, indicating that progress might be slowing down. While he is leaning towards supporting an interest rate cut at the Fed’s Dec. 17-18 meeting, he raised concerns about recent inflation trends that could influence his decision. Waller cited recent data suggesting that advancements in controlling inflation might be “stagnating.” The October figures for the Fed’s preferred inflation measure, the personal consumption expenditures (PCE) price index, showed:

• Overall inflation rose to an annual rate of 2.3%
• Core inflation, excluding food and energy costs, increased to 2.8%

Of note: These numbers, while aligning with Wall Street predictions, represent an uptick from the previous month, demonstrating the ongoing challenge of reaching the Fed’s 2% inflation target.

Despite inflation concerns, Waller is currently inclined to support a rate cut at the December meeting. He stated, “Based on the economic data in hand today and forecasts that show inflation will continue on its downward path to 2% over the medium term, at present I lean toward supporting a cut to the policy rate at our December meeting.” However, Waller emphasized that the final decision will depend on upcoming economic data. He will be closely monitoring employment and inflation figures, particularly those to be released by the Bureau of Labor Statistics this week.

Waller believes that the overall economic landscape suggests it may be prudent to maintain a course of easing monetary policy. He noted that even after recent rate reductions, monetary policy remains restrictive. The Fed has already cut rates by 75 basis points since September, and Waller expects rate reductions to continue over the next year until reaching a more neutral policy stance.

— Challenges shake the Christmas tree industry. The Christmas tree supply chain faces mounting challenges this holiday season, the Wall Street Journal reports (link). Growers are grappling with root rot, labor shortages, inflation, and foreign competition. Hurricane Helene has compounded these woes, severely damaging North Carolina’s Christmas tree farms — a key supply source. While there are enough trees for this year, the hurricane’s impact on immature trees will tighten supply in 5-6 years. Additionally, shifting consumer habits toward artificial trees, primarily imported from China, continue to pressure the industry. U.S. tree harvests have fallen 30% since 2002, despite a 16% growth in population.

Market perspectives:

— Outside markets: The U.S. dollar index was lower, with the euro and yen stronger against the greenback. The yield on the 10-year U.S. Treasury note was higher, trading around 4.22%, with a mixed tone in global government bond yields. Crude oil futures were higher, with U.S. crude around $69.30 per barrel and Brent around $73.00 per barrel. Gold and silver futures were up ahead of US trading, with gold around $2,661 per troy ounce and silver around $31.24 per troy ounce.

— Dockworkers union faces technology standoff amid contract talks. The U.S. dockworkers’ union remains deadlocked with employers over the use of semi-automated rail-mounted gantry cranes in contract negotiations. With just six weeks left to finalize a deal before another potential strike, the International Longshoremen’s Association (ILA) is resisting technological advances they argue could eliminate jobs, jeopardize national security, and threaten the workforce’s future. Despite a tentative 61.5% pay increase agreement over six years under a temporary extension, the union halted discussions last month over automation concerns. Employers insist the technology aims to improve safety and efficiency, not replace workers. Adding to the complexity, President-elect Donald Trump’s labor secretary nominee, Lori Chavez-DeRemer, has received a rare endorsement from the union, as the ILA seeks government backing during this pivotal moment. The deadline for a resolution is Jan. 15, just days before Trump’s Jan. 20 inauguration.

— Argentina raises biofuel prices for December. The Argentine government has increased domestic biofuel prices for December, raising the biodiesel price to 1,065,595 pesos ($1,051.97) per metric ton, up from 1,023,649 pesos. The bioethanol price is set to rise to 703.804 pesos per liter from 683,305 pesos. These adjustments, effective immediately, reflect a common strategy by the government to support domestic market prices.

— Ag trade update: Japan is seeking 111,405 MT of milling wheat via its weekly tender. Jordan passed on a tender to buy 120,000 MT of optional origin milling wheat.

— NWS outlook: Heavy snow for the Upper Peninsula of Michigan and the northern Lower Peninsula on Tuesday and Wednesday... ...Lake-effect and lake-enhanced snow downwind from Lakes Erie and Ontario on Tuesday and Wednesday; Moderate to heavy snow over parts of Northern New England; light to moderate snow over parts of the Central Appalachians on Wednesday... ...Temperatures will be 10 to 15 degrees below average over parts of the Ohio Valley, the Mid-Atlantic, and the Southeast.

(NWS)

Items in Pro Farmer’s First Thing Today include:
• Corrective buying in grains overnight
• Wholesale beef prices strengthen
• Traders sense cash hog weakness will end soon
• Cordonnier again raises Brazilian soybean crop forecast

— Senate GOP plots policy priorities at strategic retreat. Senate Republicans are convening for a five-hour retreat at the Library of Congress, led by incoming Republican Policy Chair Shelley Moore Capito (R-W.Va.). The session aims to align on key goals, including approving regular spending bills and utilizing budget reconciliation to advance priorities like tax cuts without Democratic support. Achieving this would require passing budget resolutions and navigating procedural challenges in both chambers.

— Senate Majority Leader Chuck Schumer (D-N.Y.) will tap Sen. Cory Booker (D-N.J.) for a new No. 4 Democratic leadership position that will allow the party to avoid a fight between Booker and Sen. Amy Klobuchar (D-Minn.) for the No. 3 spot, Axios reported (link). Klobuchar will move into the role of the Senate Democrats’ Policy and Communications Committee, taking over that role from retiring Sen. Debbie Stabenow (D-Mich.). Senate Democrats will meet this morning to finalize the leadership roles for the next Congress.

— The Biden administration plans to send Ukraine $725 million in military aid consisting of counter-drone systems and munitions for HIMARS systems. The package is part of a late push to surge arms to Ukraine before Donald Trump takes office.

— Boozman stresses farmers’ market losses in Senate floor speech. Sen. John Boozman (R-Ark.), ranking member of the Senate Ag Committee, addressed Congress on Monday, urging immediate economic assistance for agricultural producers grappling with severe market losses. “It’s clear the pain our farm families are living through,” Boozman stated on the Senate floor. He highlighted the dire situation many farmers face, noting that consecutive years of negative cash flow have left families unable to repay operating loans, secure financing for 2025, or sustain their farms amid extreme market conditions.

Boozman emphasized the need for Congress to act swiftly, providing farmers with the predictability needed to secure financial stability. The uncertainty around whether disaster aid will include relief for “market losses” persists, with President Biden proposing a $100 billion aid package, $24 billion of which is earmarked for USDA to address natural disasters.

Rep. Trent Kelly (R-Miss.) has introduced the bipartisan Farmer Assistance and Revenue Mitigation Act of 2024 (FARM Act), which seeks to safeguard farmers when revenue falls below production costs due to factors beyond their control. “Farmers have been hit with circumstances outside of their control... The FARM Act will bridge the gap, providing relief so that our farmers can continue to do their best — feed the nation,” Kelly said.

Terrain, a Farm Credit consulting service, published a report saying that crop margins are likely to remain tight in 2025.

(Terrain)

(Terrain)

— China escalates trade tensions with U.S. via critical mineral export ban. China announced a ban on the export of key rare minerals to the U.S., marking a significant escalation in trade tensions. The ban targets materials vital to military and advanced technology applications, including gallium, germanium, antimony, and graphite (now under stricter export scrutiny). China cited national security concerns. These materials are critical for semiconductors, solar tech, fiber optics, and military equipment. China supplies 94% of the world’s gallium and 83% of germanium. This move underscores the intensifying strategic rivalry between the two nations, potentially reshaping global high-tech supply chains.

— China’s shortfall on Phase One trade deal highlights persistent U.S./China imbalance. Citigroup economists, analyzing the Phase One trade deal from Donald Trump’s first term, report that China significantly underperformed on its import commitments. Despite Covid-related disruptions, China fulfilled less than 60% of the agreed $200 billion increase in purchases for 2020-21 compared to 2017 levels. Economists argue this underscores the difficulty in addressing the U.S./China trade imbalance, likely to remain a focal point in Trump’s potential second term.

— China’s sow herd, hog slaughter contract. China’s sow herd totaled 40.73 million head at the end of October, according to the ag ministry, down 3.2% from year-ago. Through the first 10 months of the year, China’s hog slaughter fell 2.6% from the same period last year to 264.21 million head.

— China lifts final trade restrictions on Australian meat processors. China has lifted trade restrictions on two Australian meat processing facilities, allowing the full resumption of red meat exports to the country, the Australian government said. Beijing has now removed restrictions from all 10 Australian meat processors it banned between 2020 and 2022. China is the second largest market for Australian beef and veal after the United States.

— Starbucks and Nestlé face scrutiny over labor practices in China. ‘Ghost’ coffee farms in Starbucks’ and Nestle’s supply chains in China are overworking farmers and allowing underaged labor, China Labor Watch has found. Link to article in the Washington Post.

— U.S. importers scramble ahead of Trump’s tariffs. An article from The South China Morning Post (link) highlights the scramble among U.S. importers to mitigate the effects of Donald Trump’s threatened tariffs on Chinese imports. With the president-elect pledging a 10% tariff on all Chinese goods effective Jan. 20, businesses are front-loading shipments and stockpiling inventory in anticipation of higher costs. Jimmy Zollo, founder of the adaptive clothing company Joe & Bella, shared his urgency, explaining that his largest order to date aimed to preempt the economic strain. “It was the largest order to date on our men’s button-down shirts, so we could get ahead of what was coming,” Zollo noted. He described the impending tariffs as “a big deal” and expressed concern over navigating supply chain disruptions.

The Port of Los Angeles, the busiest in the Western Hemisphere, is witnessing an unprecedented surge in activity as importers race against the tariff deadline. Executive Director Gene Seroka described the surge: “The port processed 905,206 shipping containers in October, a 25% increase from 2023, surpassing 900,000 units for four consecutive months — a first.” Seroka underscored the broader implications, emphasizing that “more than a million people go to work every day because of what emanates from this port complex.”

However, the consequences extend beyond logistics. The tariffs, part of Trump’s broader reshoring policy, aim to reduce dependency on foreign manufacturing but could destabilize supply chains and increase costs for U.S. consumers. Mary Lovely, senior fellow at the Peterson Institute for International Economics, warned, “These policies really do handicap our exporters. So of course, that has implications for jobs at the Port of LA, but it has implications for jobs across the United States.”

As businesses scramble to adapt, the uncertainty looms large. “Once the tariffs have hit, I don’t know yet what our strategy will be,” Zollo admitted. “It feels like a whack-a-mole.”

— Study details challenges in Sustainable Aviation Fuel (SAF) adoption. A study by Brussels-based Transport and Environment (T&E) reveals major hurdles in the transition to Sustainable Aviation Fuel (SAF) by airlines globally. Key findings include:
• Limited adoption: Only 13% of airlines are actively pursuing SAF, while 87% show little progress, threatening efforts to reduce aviation’s carbon emissions.
• Investment gaps: Oil producers lack sufficient investment in SAF production, creating a bottleneck in availability.
• High costs: SAF costs 2–5 times more than conventional jet fuel, posing a challenge for airlines with narrow profit margins.
• Low market share: SAF comprises just 1% of global aviation fuel but needs significant growth to meet climate targets.
• Production growth: SAF production is expected to triple in 2024 but remains far below the levels required for meaningful impact.

Solutions for accelerating SAF adoption include:
• Policy support: Governments need to incentivize SAF production and usage.
• Increased investment: Particularly from oil companies to scale production facilities.
• Cost reduction: Strategies to make SAF economically viable.
• Collaborative efforts: Partnerships between stakeholders to address adoption barriers.

— OMB hosts stakeholder meetings on EPA’s 2024 ethanol mandate waiver. The Office of Management and Budget (OMB) has scheduled five meetings to review a proposed partial waiver of cellulosic ethanol mandates under the Renewable Fuel Standard (RFS) for 2024. Upcoming sessions include discussions with the Renewable Gas Coalition on Dec. 10 and Amp Americas on Dec. 11. One meeting with the American Fuel and Petrochemical Manufacturers has already taken place, where the group estimated that the waiver could save $310.5 million in compliance costs, citing Renewable Identification Numbers (RINs) pricing analysis.

— FTC report confirms competitive landscape in U.S. ethanol industry. The Federal Trade Commission’s 2024 Report on Ethanol Market Concentration (link) reaffirms that the U.S. ethanol industry remains competitive, with no significant risks of anticompetitive behavior. Using the Herfindahl-Hirschman Index (HHI), the FTC found low concentration levels across both production capacity and actual production, indicating a dispersed market structure.

Market concentration:
• Producer-based HHI: 509 (capacity) and 531 (production)
• Marketer-based HHI: 862 (capacity) and 942 (production)

These values classify the market as unconcentrated.

Industry structure:
• Around 100 firms operate in the industry.
• The largest producer controls only 16% of domestic capacity.
• Domestic production capacity slightly increased since last year.

Factors supporting competition
• A diverse market with roughly 100 participants.
• Dispersed market share, limiting the dominance of any single firm.
• Potential for new entrants into the market.
• Ethanol imports further enhance competition.

Bottom line: The report, mandated by the Energy Policy Act of 2005, supports ongoing monitoring under the Renewable Fuel Standard (RFS). It indicates that the policy has not resulted in market concentration. This competitiveness benefits policymakers, stakeholders, and consumers by maintaining fair pricing and discouraging monopolistic practices in the ethanol market.

— GOP-led House committee concludes Covid-19 likely leaked from Wuhan lab. The special Republican-led House committee investigating the origins of the Covid-19 pandemic sided with the theory that the virus likely leaked from a lab in Wuhan, China. The House Select Subcommittee on the Coronavirus Pandemic released its final 520-page report after a two-year investigation. This conclusion is based on several factors:
• The virus possesses biological characteristics not found in nature.
• All Covid-19 cases appear to stem from a single introduction to humans, contrary to previous pandemics with multiple spillover events.
• Wuhan is home to China’s foremost SARS research lab, which has a history of conducting gain-of-function research at inadequate biosafety levels.
• Researchers at the Wuhan Institute of Virology were reportedly sick with Covid-like symptoms in fall 2019, months before the outbreak was officially recognized.

The committee found that the National Institutes of Health (NIH) funded controversial gain-of-function research at the Wuhan Institute of Virology. The report criticizes the NIH’s procedures for funding and overseeing potentially dangerous research, describing them as “deficient, unreliable, and a serious threat to public health and national security.”

The report also scrutinizes various aspects of the pandemic response:
• Social distancing measures were deemed “not based on science.”
• No conclusive evidence was found that wearing masks protected Americans from Covid-19.
• Lockdowns were determined to have “done more harm than good.”
• School closures were found to have a lasting impact on American children.

The investigation included interviews with key figures such as Dr. Anthony Fauci, who denied allegations of covering up the virus’s origins. The report also mentions that the U.S. Department of Justice had convened criminal grand juries to investigate the origins of Covid-19, particularly focusing on EcoHealth Alliance’s role.

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