East and Gulf Coast Port Strike Looms as Labor Talks Stall, Impacting U.S. Meat Exports

News/Markets/Policy Updates: Sept. 20, 2024

— East and Gulf Coast port strike looms as labor talks stall, impacting U.S. meat exports. Contract negotiations between the International Longshoremen’s Association and U.S. Maritime Alliance on a new labor agreement for port workers along the East and Gulf Coasts have stalled, increasing the potential for an Oct. 1 strike. Even though the majority of U.S. red meat exports flow out of the West Coast ports, a strike in the east and south would still have a significant impact on the industry, according to U.S. Meat Export Federation (USMEF) President and CEO Dan Halstrom. Facts and figures. Through July, 45% of waterborne U.S. pork exports were shipped through the East and Gulf Coast ports, while the share of waterborne beef exports was 30%, based on USMEF’s calculations from PIERS data. Some of that traffic is already being re-routed through the West Coast ports, but there is not enough capacity to absorb all of the trade that would be impacted. USMEF and other organizations are urging the White House and Congress to do all in their power to bring the two sides back to the bargaining table to avoid a port shutdown. (PIERS, USMEF) (PIERS, USMEF) — GOP lawmakers urge Biden to prevent looming port strike amid stalled negotiations. Nearly 70 Republican House members have called on President Biden to intervene in stalled negotiations between the United States Maritime Alliance (USMX) and the International Longshoremen’s Association (ILA) to prevent a potential port strike. The letter, led by Rep. Sam Graves (R-Mo.), urges the administration to provide support to both parties and use all available authority to keep goods flowing and avoid harm to the U.S. economy. It’s unclear if Biden will send top officials to mediate, as was done in 2023 for West Coast ports. Of note: The American Soybean Assn. notes that while effects on bulk soybean exports will be limited, disruptions could ripple throughout the agricultural supply chain. It adds that container shipping is vital for transporting food-grade soy, soybean meal and perishables, including frozen meats and essential farming equipment. Last year, East and Gulf Coast ports exported over 2.5 million metric tons of soybeans via container. — N.C. governor GOP candidate Mark Robinson faces backlash over past controversial comments; denies allegations and stays in race. A CNN investigation revealed inflammatory comments made by Republican gubernatorial candidate Mark Robinson over a decade ago, including referring to himself as a “black NAZI!” and supporting slavery. Robinson denies the allegations, but the controversy could impact North Carolina’s role in the 2024 presidential race, with Democrats aiming to flip the state. — Postmaster General DeJoy vows “heroic efforts” to ensure timely delivery of mail-in ballots amid concerns. Postmaster General Louis DeJoy promised the USPS will implement extraordinary measures to deliver all mail-in ballots on time, urging voters to send ballots at least a week before Election Day. The pledge comes as concerns rise from election officials, and Trump renews contested claims about mail-in voting fraud, despite studies showing voter fraud is extremely rare. Trump’s attacks have led to declining support for mail-in voting among Republicans. Of note: Pennsylvania and Wisconsin still prohibit the counting of mail-in ballots until Election Day. — Early in-person voting begins in South Dakota, Minnesota and Virginia today. Other states will join them in the coming weeks. Michigan will be the last swing state to open voting booths, on Oct. 26. Mail-in voting has already begun in some states. Election day is Nov. 5. Early voting has become increasingly popular in recent years: • In the 2020 presidential election, over 69% of votes were cast through either mail-in ballots or early in-person voting. • Experts predict a large number of early voters in the 2024 election season as this voting method continues to rise in popularity. • Early voting can be convenient for people who are busy on Election Day and can help reduce waiting times at polling places. Of note: The specific rules and timeframes for early voting vary by state. — Billionaire John Paulson backs Trump’s tariffs, advocates U.S./China decoupling, and predicts economic boost under a Trump presidency. John Paulson, a billionaire hedge fund manager and Trump supporter, expressed his views on trade policies, the U.S./China relationship, and potential economic impacts of a Trump presidency in a recent Financial Times interview (link). Key points: Trade policy and tariffs. Paulson now supports Trump’s proposed tariffs, viewing them as a valuable negotiating tool to level the playing field in international trade. This marks a shift from his earlier criticism of Trump’s trade policies. Paulson believes current trade practices are “one-sided” and not implemented fairly. He cites personal experience with his investment in Steinway Musical Instruments, which faces higher tariffs in China compared to U.S. tariffs on similar products. Economic impact. Paulson dismisses concerns that increased tariffs would harm the economy, despite warnings from some economists about potential negative effects on consumers, growth, and inflation. U.S./China relations. Paulson advocates for “decoupling” from China, citing Beijing’s increasingly adversarial stance towards the US and its impact on foreign investment. This view contrasts with his earlier stance in April, where he opposed decoupling from China. He now believes there’s already been an economic decoupling and sees a need to continue this trend. Potential Trump presidency. Paulson discussed several aspects of a potential Trump presidency: • Immigration: Supports Trump’s deportation plans, particularly for criminals, while advocating for “fair immigration.” Economic policies: • Argues a Trump presidency would boost natural gas production, manufacturing, and government efficiency. • Criticizes Democratic nominee Kamala Harris’s proposed tax increases, warning they could lead to a market crash and recession. Government role. While mentioned as a possible Treasury secretary, Paulson acknowledges potential conflicts of interest due to his holdings, particularly in Fannie Mae and Freddie Mac. Paulson believes these state-backed mortgage giants should be privatized, noting they now have sufficient capital to operate independently. Of note: Paulson wrote a commentary piece in today’s Wall Street Journal (link) in which he presents the case for Trump’s tariffs. Tariff math. Even if the former president returns to office and rolls out a 10-20% tariff on all imports and higher levies still on Chinese imports, it won’t be enough to pay for his plans, economists say. A new Bloomberg Economics study finds that a 20% universal tariff and a 60% tax on Chinese imports would bring in $300-$400 billion in revenues annually, up from the $83 billion duties collected in 2023. The Peterson Institute for International Economics separately puts likely revenues from a 10% tariff and higher China duties at around $225 billion. Neither estimate would be sufficient to match the as-much-as $6.9 trillion cost over a decade that the Penn Wharton Budget Model says Trump’s fiscal promises would add to the U.S. federal budget deficit. — Trump allies push to change Nebraska’s electoral vote allocation to winner-take-all. Donald Trump and his allies are advocating for Nebraska to switch its split Electoral College allocation to a winner-take-all system. Nebraska GOP Governor Jim Pillen has reignited efforts to pass this change, meeting with state senators to gather support. The move could significantly impact the 2024 election. Maine, the only other state with split electoral votes, may consider a similar adjustment in response, but logistical and timing hurdles complicate the process. The outcome of Nebraska’s push could have national implications as the election approaches. Sen. Lindsey Graham (R-S.C.) traveled to Nebraska to urge state senators to back the change. Donald Trump has publicly supported the move to a winner-take-all system. Under the current system: Nebraska awards two electoral votes to the statewide popular vote winner One electoral vote is awarded to the winner of each of the state’s three congressional districts The proposed change would switch Nebraska to a winner-take-all system, awarding all five of the state’s electoral votes to the candidate who wins the statewide popular vote. Switching to winner-take-all would likely ensure all of Nebraska’s electoral votes go to the Republican candidate. In a close election, even a single electoral vote could be crucial. Pillen needs 33 senators to firmly commit to backing the change before calling a special session. Currently, it appears Pillen does not yet have the required number of supporters. The proposal would need to overcome a potential Democratic-led filibuster. Maine Democrats have indicated they would consider a similar change if Nebraska altered its system: Maine House Majority Leader Maureen Terry stated the legislature would be “compelled to act” if Nebraska changes its system. However, Maine faces logistical and timing challenges in implementing such a change before the 2024 election.

— Equities today: Asian and European stock indexes were mixed overnight. U.S. Dow is currently down slightly. In Asia, Japan +1.5%. Hong Kong +1.4%. China flat. India +1.6%. In Europe, at midday, London -0.4%. Paris -0.7%. Frankfurt -0.7%. The Dow on Thursday hit 42,000 for the first time in its history, the S&P 500 scored its 39th record close of the year, and the YTD gains for the Nasdaq Composite also returned to 20%, fueled by a rally in tech.

U.S. equities yesterday: All three major indices scored major gains the day after the Fed’s action to lower rates by 0.5% with the Dow and S&P 500 ending in record territory. The Dow gained 522.09 points, 1.26%, at 42,025.19. The Nasdaq rose 440.68 points, 2.51%, at 18,013.98. The S&P 500 was up 95.38 points, 1.70%, at 5,713.64.

— Ag markets today: Soybeans and wheat posted mild gains during the overnight session, while corn held near unchanged. As of 7:30 a.m. ET, corn futures were trading unchanged in most contracts, soybeans were 2 cents higher and wheat futures were 3 to 6 cents higher. The U.S. dollar index was almost 250 points higher, and front-month crude oil futures were around 30 cents lower.

Choice beef falls below $300. Wholesale beef prices continued their seasonal descent on Thursday as Choice fell $1.82 to $299.56 and Select dropped $1.49 to $286.26. That’s the first time Choice beef has been below the $300.00 mark since May 13.

Cash hog index rises. The CME lean hog index is up 16 cents to $84.38 as of Sept. 18, the first increase in two weeks. The discount October lean hog futures hold to the index shrunk to $2.13 on Thursday.

— Agriculture markets yesterday:

• Corn: December corn plunged 7 cents to $4.05 3/4, marking the largest daily loss since July 30.
• Soy complex: November soybeans fell 3/4 cent to $10.13 1/4 and closed near mid-range. December meal futures climbed 20 cents to $321.60, near mid-range. December bean oil futures climbed 62 points to 40.93 cents.
• Wheat: December SRW wheat fell 10 1/4 cents to $5.65 1/2. December HRW wheat fell 14 cents to $5.64 1/2. Both markets closed nearer their session lows and closed at two-week-low closes. Spring wheat futures sunk 8 3/4 cents to $6.07 3/4.
• Cotton: December cotton futures surged 176 points to 73.03 cents, though settled well off session highs.
• Cattle: October live cattle rose $1.675 to $179.975 and nearer the session high. Prices hit a four-week high today. October feeder cattle rallied $3.825 to $243.775 and nearer the session high. Prices hit a six-week high.
• Hogs: Hog futures traded mixed Thursday, with nearby October edging up 20 cents to $82.25.

— Fed officials’ comments gain focus after 50-basis-point rate cut amid economic uncertainty. With the FOMC blackout period lifted, attention turns to Fed officials’ comments following the recent 50-basis-point rate cut, which passed with only one dissenting vote. Despite some division within the Fed, officials are likely to emphasize a “soft landing” for the U.S. economy. Fed Chair Jerome Powell downplayed recession risks, and more insights will be revealed with the release of September meeting minutes on Oct. 9.

— The Bank of Japan (BOJ) decided to keep rates unchanged, with Governor Kazuo Ueda citing global economic uncertainty and market instability as reasons for caution. While Japan’s economy shows signs of recovery, Ueda emphasized the need to closely monitor international developments, particularly the U.S. economic outlook, before considering rate hikes. The BOJ remains prepared to raise rates if economic and inflation forecasts are met, but no specific timeline was given.

Market perspectives:

— Outside markets: The U.S. dollar index was firmer with no major economic updates on tap as the euro was slightly weaker against the greenback. The yield on the 10-year U.S. Treasury note was firmer, trading around 3.73%, with a mostly higher tone in global government bond yields. Crude oil futures were weaker, with U.S. crude around $71.75 per barrel and Brent around $74.70 per barrel, near levels seen in Asian trading. Gold and silver futures were putting up sizable gains ahead of US market action, with gold around $2,638 per troy ounce and silver around $31.65 per troy ounce.

— Smaller cattle placements expected in Cattle on Feed Report. Analysts expect USDA’s Cattle on Feed Report this afternoon to show the large feedlot (1,000-plus head) inventory up 0.9% from year-ago at 11.194 million head. After a 5.8% jump in placements during July, the report is expected to show a 1.0% decline in the number of cattle moved into feedlots last month. Marketings are expected to decline 3.4% from August 2023.

— U.S. and Russian wheat suppliers to benefit from Brazil’s additional tariff-free quota. Brazil has introduced a tariff-free quota of 250,000 metric tons of wheat, benefiting U.S. and Russian suppliers, Reuters reports (link). This comes after Brazil nearly filled its annual 750,000-ton wheat quota exempt from Mercosur tariffs. The additional quota, valid until the end of 2024, was created due to delayed harvests in Argentina and Brazil. Brazil’s wheat imports surged 65% this year, with most wheat sourced from Mercosur countries, but significant volumes from Russia and the U.S. also took advantage of tariff exemptions.

— Thai rice exports to top target this year, fall in 2025. Thailand’s rice exports could reach 8.5 MMT target this year, before falling to 6.5 MMT in 2025, the country’s rice exporters association said. The association had targeted 8.2 MMT of rice exports this year, but nearly 70% of that total was already shipped during the first seven months.

— USDA daily export sale:
• 121,000 MT soybeans to China, 2024-2025 marketing year.

— Ag trade update: Taiwan tendered to buy up to 65,000 MT of corn to be sourced from the U.S., Brazil or South Africa.

— NWS outlook: Severe thunderstorm threat will shift from the upper Midwest this morning to the southern High Plains by Saturday night/early Sunday... ...Rainy weather lingers over southeastern New England... ...A moderate to heavy rain event developing this weekend from the central High Plains eastward toward the Mid-Mississippi Valley... ...Much above average temperatures through the mid-section of the country and into Ohio Valley and Great Lakes.

(NWS)

Items in Pro Farmer’s First Thing Today include:

• Grains mostly firmer overnight
• Coceral slashes EU wheat production forecast
• Dry weather lowers outlook for Western Australia’s wheat crop
• China unexpectedly leaves lending rates unchanged

— House Speaker Johnson in talks with Trump amid gov’t shutdown threat. House Speaker Mike Johnson (R-La.) is consulting with former President Trump about the potential gov’t shutdown and options for GOP lawmakers as the Sept. 30 funding deadline nears. Trump has urged a shutdown if Republicans can’t get the SAVE Act included in a short-term spending bill, a measure opposed by Democrats and the White House. Johnson’s proposal tying the SAVE Act to a six-month CR failed, with several Republicans voting against it. While Johnson aims to avoid a shutdown, he must balance GOP demands and Trump’s influence while negotiating with Democrats for a short-term funding solution that most say eventually will go into December. “Time is short, our staffs are in communication with each other,” House Minority Leader Hakeem Jeffries (D-N.Y.) said. “What occurs over the next few days will be determinative as to whether we can find the common ground necessary to fund the government.”

In the Senate, Majority Leader Chuck Schumer (D-N.Y.) said he’s teeing up votes for next week on a legislative vehicle for a continuing resolution. He plans to file cloture on the vehicle, with an initial procedural vote slated for Monday. Speaking on the Senate floor, Schumer said his move “will enable us to prevent a Trump shutdown in the event that Speaker Johnson does not work with us in a bipartisan, bicameral manner.”

Bottom line: CQ Roll Call reports the House may now go first and vote on a CR that would run through Dec. 13 and would not contain the controversial voting provisions. The plan would be ready to go over the weekend to allow time for the package to be examined and voted on early next week. Both the House and Senate are scheduled to be in session through Sept. 27, just ahead of the end of FY 2024 on September 30. House Appropriations Committee member Mike Simpson (R-Idaho) said he expects the CR on the House floor “around the first of the week.” Even with a House vote early next week, indications are that could take some procedural actions in the Senate to bring the measure to conclusion in time to avert a shutdown.

— Hezbollah leader vows revenge after deadly explosions, blames Israel. Hezbollah’s leader, Hassan Nasrallah, vowed retribution against Israel following two days of explosions that killed at least 37 people and injured thousands in Lebanon. Nasrallah accused Israel of breaking international laws by targeting Hezbollah operatives through the detonation of pagers and walkie-talkies. As Nasrallah delivered his speech, Israeli fighter jets flew over Beirut, further escalating tensions. While Nasrallah did not specify how Hezbollah would retaliate, the attacks have raised fears of a broader conflict involving Iran and the United States. Israel and Hezbollah have since exchanged cross-border strikes.

— Ceasefire in Israel-Hamas conflict unlikely before end of Biden administration, say U.S. officials. U.S. officials privately admit that a ceasefire deal in the Israel-Hamas conflict is unlikely before the Biden administration ends, according to the Wall Street Journal (link). Despite claims that 90% of the framework deal has been agreed upon, disputes over prisoner exchanges and recent escalations involving Hezbollah have hindered progress. Rising prospects of an all-out war and frustrations with Hamas’ shifting demands further complicate negotiations. Some also point to Israeli Prime Minister Benjamin Netanyahu as contributing to the deadlock.

— Ukraine cuts wheat plantings. Ukraine’s ag ministry lowered its winter wheat seedings forecast by 210,000 hectares to 4.48 million hectares. Record high temperatures and a lack of rain almost throughout the country in recent months have created unfavorable conditions for sowing winter crops. As of Sept. 19, farmers had seeded 360,300 hectares to winter grains, including 340,300 hectares of winter wheat.

— Lingering issues on new farm bill. Despite lawmaker chatter this week about various high-level meetings about a new farm bill, the same issues remain: (1) Major policy differences between Republicans and Democrats and (2) House GOP funding issues for its farm bill. There is agreement that a financial/ag disaster aid package is needed. Both issues are being punted until after Nov. 5 elections.

Of note: The only way veteran farm bill watchers will up the odds of a new farm bill is if and when Senate Ag Chair Debbie Stabenow (D-Mich.) releases actual text of her farm bill. Only then can key policy differences between the two chambers be worked out. Also, it will be interesting to see how much additional funding Stabenow received for farm bill spending, and where it came from — if we will ever know that before she retires after this Congress.

Meanwhile, USDA Secretary Tom Vilsack said the main issue in farm bill negotiations is determining the size of reference price increases that trigger crop subsidy payments. Once settled, lawmakers could finalize the legislation, which has been stalled for months. Farm groups insist on higher reference prices due to rising production costs, while disagreements over SNAP funding and climate measures persist. Republicans propose a 15%-plus increase, while Stabenow suggests 5%. Vilsack urged practicality, as the House bill currently exceeds the budget by $33 billion. “I think we can get there if people are practical,” said Vilsack. Either the adjustment in reference prices must be tempered in size or additional funding must be found, he said.

— Brazil continues to dominate soybean exports to China. Of the record 12.14 MMT of soybeans China imported in August, 10.24 MMT (84.3%) originated from Brazil. U.S. soybeans accounted for 202,383 MT (1.7%) of China’s August imports. Through the first eight months of this year, China imported 53.8 MMT of soybeans from Brazil (up 217% from the same period last year) and 12.8 MMT from the U.S. (down 73%).

— China state banks buying dollars as yuan hits 16-month high. China’s major state-owned banks purchased dollars in the onshore spot foreign exchange market on Friday to prevent the yuan from appreciating too fast after it hit a 16-month high, two people with knowledge of the matter told Reuters. Rapid yuan gains could hurt China’s export competitiveness at a time when signs of slowdown weigh on the world’s second-largest economy, market watchers said.

— China says it will ‘gradually’ resume imports of Japanese seafood. China imposed a ban last year after Japan began releasing treated water from the Fukushima nuclear plant into the sea. They have agreed to expand monitoring of the water. Link to details via the New York Times.

— Delay in 45Z Clean Fuel Credit rules stalls renewable fuel investments, raising industry concerns. The delayed finalization of the 45Z Clean Fuel Production Credit is hindering renewable fuel investments, leading to concerns over plant shutdowns, delayed climate-friendly projects, and hesitation in customer purchases. Industry leaders are seeking clarity as companies hold back on major investments. Treasury spokesperson Michael Martinez indicated that the Treasury and IRS are working to implement all tax credits from the 2022 tax-and-climate law, but did not provide a specific timeline for the release of the rules. USDA Secretary Tom Vilsack recently predicted would be finalized by the time the Biden administration leaves office in January 2025. The credit is to take effect Jan. 1.In the meantime, biofuel producers are exploring alternative credits and considering reduced operations for 2025 if guidance remains unclear. Lawmakers are pushing for quicker resolution to prevent further disruption.

— USDA awards $35 million to boost meat and poultry processing capacity across 12 states. USDA Secretary Tom Vilsack announced $35 million in grants to 15 independent meat processors in 12 states as part of the Meat and Poultry Processing Expansion Program (MPPEP). The funding aims to increase processing capacity, spur competition, and create rural jobs. This marks the final investment from the American Rescue Plan’s MPPEP, bringing total awards to over $325 million since 2022. The initiative seeks to strengthen the food supply chain and offer farmers more market opportunities.

— USDA aims to finalize livestock rules by year-end, eyes cattle price rule in 2025. USDA Secretary Tom Vilsack announced plans to finalize two livestock-related rules by the end of 2024, aligning with the Biden administration’s regulatory goals. The rules address fair livestock markets and poultry grower payment systems. Meanwhile, a pre-rule on cattle price discovery is expected to move forward in early 2025. However, these efforts may face uncertainty if Donald Trump wins the 2024 election, potentially altering or halting rulemakings initiated by the Biden administration.

— Analyst predicts food prices will not decrease despite political focus on inflation. Aaron Smith, a professor in the Department of Agricultural and Resource Economics at UC Berkeley, predicts (link) food prices will not decline, stating they tend to follow the general upward trend of prices in the economy. He explains that processing, distribution, and marketing costs drive price increases, especially for more processed foods. Smith suggests wages will eventually rise to restore purchasing power.

— New analysis links raccoon dogs to early Covid-19 spread at Wuhan market. Scientists have identified several animal species, including raccoon dogs, at Wuhan’s Huanan Seafood Market, where the most positive Covid-19 samples were found. Raccoon dogs, which are known to be susceptible to and capable of transmitting the virus, are considered a likely candidate for initially passing Covid-19 to humans.

— AI-powered farming tools aim to reduce herbicide use and boost efficiency. AI technology is being introduced in agriculture to reduce herbicide use, with John Deere’s “See & Spray” system cutting herbicide application by nearly 59% in 2024 trials. While adoption remains limited, analysts note that AI tools like these could help address farming challenges linked to climate change, cost, and environmental impact. The economic and environmental benefits of AI-driven precision farming may lead to wider adoption, though the long-term effectiveness at scale is yet to be proven.

— Cotton AWP climbs. The Adjusted World Price (AWP) for cotton moved up to 58.83 cents per pound, effective today (Sept. 20), a sizable rise from the prior week’s level of 56 cents per pound. Meanwhile, USDA announced Special Import Quota #23 will be established Sept. 26 for the importation of 38,901 bales of upland cotton, applying to supplies purchased not later than Dec. 24 and imported into the U.S. not later than March 24.

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 |