EU’s Russian-Oil Embargo Dubbed ‘More Bark Than Bite’

Can China’s economic stats be trusted? WSJ blasts Biden on not helping Ukraine enough

The European Union is partially banning Russian oil imports to the EU. The ban “immediately covers more than 2/3 of oil imports from Russia, cutting a huge source of financing for its war machine,” European Council chief Charles Michel said in a tweet yesterday. The agreement will ban 90% of Russian crude by the end of the year as part of a sixth sanctions package the bloc is putting together against Moscow. Seaborne deliveries of Russian oil would be forbidden under the new arrangement, though it would include a temporary exemption for pipeline transfers until a solution is found that would meet the energy needs of Hungary and other landlocked countries like Slovakia and the Czech Republic. A sixth package of sanctions was discussed by EU leaders, and could contain other hard-hitting measures, including cutting off the largest Russian bank from the SWIFT network, banning more Russian state-owned broadcasters, and sanctioning individuals responsible for war crimes in Ukraine.

Saturday will mark 100 days since Russia first invaded Ukraine. After being repelled by Ukrainian forces in central Ukraine, Russia is now focused on taking territory in the eastern Donbas region. Russia is targeting Ukrainian rail lines as its military depends on trains to move troops and munitions. Meanwhile, the Ukrainian band that won Eurovision sold its trophy to a cryptocurrency exchange for $900,000 and used the proceeds to buy drones for the country’s army.

Less than half of Ukraine’s grain harvest is likely to be exported this year, threatening to stoke food inflation and exacerbate shortages.

Biden’s ambivalence in aiding Ukraine encourages Vladimir Putin to believe he can still achieve a strategic victory, the WSJ editorial board writes. By ruling out sending rocket systems that strike into Russia, the U.S. is offering a pre-emptive concession that lets Russia get away with putting more economic pressure on Ukraine and the West without fear of a response. Biden said that America will not supply Ukraine with rocket systems that could reach Russia, as his country prepares to send a new military equipment package. Ukrainian officials are pushing for long-range weapons as Russian forces continue their onslaught of the Donbas region.

Oil prices rose to a two-month high over the weekend, while the average cost of a gallon of gas in the U.S. hit a record of $4.62. Recognizing that American voters may not be too pleased about that, President Biden has invited Fed Chair Jerome Powell for a rare Oval Office meeting this afternoon to discuss the economy. U.S. Treasury Secretary Janet Yellen will join Biden and Powell. Meanwhile, Fed Governor Christopher Waller said he wants to keep raising interest rates in half-percentage-point steps until inflation is easing back toward the U.S. central bank’s goal. Waller is a voting member of the rate-setting Federal Open Market Committee this year.

Oil markets are also on edge after the Iranian Navy seized two Greek tankers in retaliation over the confiscation of Iranian crude by the U.S. from a tanker held off the Greek coast.

In an opinion piece in the WSJ, President Biden writes about his plan for fighting inflation. Details below.

Lumber buyers have slowed orders and wood is piling up at mills, which are slashing prices, according to pricing service Random Lengths.

Eurozone inflation rose to yet another record high in May, challenging the European Central Bank view that gradual interest rate increases from July will be enough to tame stubbornly high price growth.

Shanghai is expected to ease Covid restrictions. Two months after China’s biggest city fell under a lockdown that rippled across the national economy, Shanghai is poised to return to something closer to normal starting tomorrow. The city released plans to reopen shops and malls and revive buses and ferries.

China and the U.S. are working to finalize what would be the first face-to-face meeting between their top defense officials on the sidelines of a conference in Singapore in June amid rising tensions over Taiwan, the WSJ reports, citing people familiar with the situation.

On the policy front, Democrats note progress with Manchin in talks on Biden economic and energy agenda.

USDA Secretary Tom Vilsack on Wednesday will announce details of the USDA framework “to transform the nation’s food system.” On Thursday, Vilsack will travel to Ohio to highlight efforts to transform the food system.

Senate negotiators say they hope to have an outline of a gun-violence prevention package by next week, when they return from recess, but questions loom over whether a deal can happen.

Hurricane Agatha lashed Mexico’s western coastline as the strongest May storm to hit the eastern Pacific on record. It has been downgraded to a tropical storm.

Equities today: Global stock markets were mixed overnight. U.S. stock indexes are pointed toward lower openings. Major Asian stock indexes closed mixed and Europe was mostly lower at midday.

U.S. equities Friday: Stocks were boosted by strong consumer discretionary-spending trends and a slight deceleration in inflation. The Dow added 575.77 points, 1.8%, to 33,212.96. The S&P 500 gained 100.40 points, 2.5%, to close Friday at 4,158.24. The Nasdaq added 390.48 points, 3.3%, to 12,131.13.

The Dow surged 6.2% for the week to snap an eight-week decline, its longest losing streak since 1932, while the S&P climbed 6.5% and the Nasdaq jumped 6.8%, both ending seven-week slides. It’s the first time since November 2020 that all three indexes have gained more than 6% on the week. Discussion is whether the market has found a bottom, with the Nasdaq now 25% below its peak, the S&P off 13% and the Dow down 10%.

Agriculture markets Friday:

• Corn: July corn futures rose 12 1/4 cents to $7.77 1/4, down 1 1/2 cents for the week and the fourth straight weekly decline. December corn rose 11 1/4 cents to $7.30, down 2 cents for the week.
• Soy complex: July soybeans rose 5 3/4 cents to $17.32 1/4, up 27 cents for the week and a lifetime-high close for the contract. November soybeans fell 3/4 cent to $15.44, up 22 1/4 cents for the week. July soymeal rose $4.10 to $432.30, while July soyoil fell 95 points to 79.57 cents.
• Wheat: July SRW wheat rose 14 1/4 cents to $11.57 1/2, down 11 1/4 cents for the week. July HRW futures rose 6 3/4 cents to $12.35 1/4, down 17 1/4 cents for the week. July spring wheat rose 12 1/2 cents to $13.04 3/4, up 25 3/4 cents for the week.
• Cotton: July cotton fell 119 points to 139.42 cents per pound, down 285 points for the week.
• Cattle: August live cattle fell 20 cents to $132.40, up 85 cents for the week. August feeder futures dropped 35 cents to $166.325, a weekly gain of $2.40.
• Hogs: July lean hogs fell 10 cents to $111.725, a four-week high and a gain of $2.725 for the week. Cash market fundamentals continued to improve, with the CME lean hog index reaching the highest level since late August.
  

Ag markets today: Wheat futures faced heavy pressure coming out of the extended weekend, which pulled corn lower. Soybeans favored the upside for much of overnight trade. As of 7:30 a.m. ET, winter wheat futures were trading 28 to 32 cents lower, spring wheat was 18 to 23 cents lower, corn was 4 to 5 cents lower and soybeans were 7 to 8 cents higher. Front-month U.S. crude oil futures were nearly $4 higher, topping $119 overnight, and the U.S. dollar index was around 300 points higher this morning.

Technical viewpoints from Jim Wyckoff:

On tap today:

• S&P CoreLogic Case-Shiller 20-city home price index for March is expected to increase 20% from one year earlier. (9 a.m. ET)
• Chicago purchasing managers index is expected to fall to 55.9 in May from 56.4 one month earlier. (9:45 a.m. ET)
• Conference Board’s consumer confidence index is expected to fall to 103.9 in May from 107.3 one month earlier. (10 a.m. ET)
• Dallas Fed’s manufacturing survey is expected to tick up to 1.3 in May from 1.1 one month earlier. (10:30 a.m. ET)
• USDA Grain Export Inspections report, 11 a.m. ET.
• President Biden meets with Fed Chairman Jerome Powell and Treasury Sec. Janet Yellen, 1:15 p.m. ET.
• President Biden hosts New Zealand Prime Minister Jacinda Ardern at the White House today at 11 a.m. ET in a continuation of his Pacific-focused diplomacy of recent weeks.
• USDA Crop Progress report, 4 p.m. ET.
• China’s Caixin manufacturing index for May is out at 9:45 p.m. ET.

Latest government report on personal consumption expenditures, or PCE, grew 0.9% in April. That’s still elevated, but it’s off March’s 1.4% rate, spreading hope that inflation could be peaking. The Federal Reserve looks to PCE as its key inflation gauge when making monetary policy decisions.

Friday will bring the jobs report for May from the Bureau of Labor Statistics. Economists’ average forecast is for a gain of 317,500 nonfarm payrolls and for an unemployment rate of 3.5%.

President Biden in WSJ commentary boasts his “administration’s economic and vaccination plans helped achieve the most robust recovery in modern history.” Link to op-ed. Biden wrote:

• “The U.S. is in a better economic position than almost any other country.
• “With the right policies, the U.S. can transition from recovery to stable, steady growth and bring down inflation without giving up all these historic gains. During this transition, growth will look different. We will likely see fewer record job-creation numbers, but this won’t be cause for concern.
• “The Federal Reserve has a primary responsibility to control inflation. My predecessor demeaned the Fed, and past presidents have sought to influence its decisions inappropriately during periods of elevated inflation. I won’t do this. I have appointed highly qualified people from both parties to lead that institution. I agree with their assessment that fighting inflation is our top economic challenge right now.
• “We need to take every practical step to make things more affordable for families during this moment of economic uncertainty — and to boost the productive capacity of our economy over time. The price at the pump is elevated in large part because Russian oil, gas and refining capacity are off the market.
• “We can also reduce the cost of everyday goods by fixing broken supply chains, improving infrastructure, and cracking down on the exorbitant fees that foreign ocean freight companies charge to move products.
• “We need to keep reducing the federal deficit, which will help ease price pressures.”

Well-stocked warehouses may help if port congestion worsens again. But Bloomberg notes that with consumers adjusting their tastes and taking inflation into account, extra supply may also put retailers at risk of being left with a glut of merchandise people just don’t want.

Record Eurozone inflation. Eurozone inflation rose to a new record high in May, cementing expectations the European Central Bank will raise its key interest rate for the first time since 2011 at its July policy meeting. Consumer prices increased 8.1% from a year earlier, according to Eurostat, the European Union’s statistics agency. Core prices — which exclude food, energy, alcohol and tobacco — were also up the most since the inception of the euro.

Market perspectives:

• Outside markets: The U.S. dollar index is solidly up in early trading. U.S. Treasury yields climbed today, with the yield on the benchmark 10-year note rising as high as 10 basis points to reach 2.855%. As of 7:20 a.m. ET, the 10-year Treasury note yield stood around 2.812%. Bond yields move inversely to prices. Fresh supply concerns in world energy markets sent WTI crude futures up 3.5% overnight to $119 per barrel for the first time since March, when sanctions began to target Russia for its invasion of Ukraine. Brent crude already touched the new symbolic $120 level on Monday, while U.S. gasoline prices surged to another record. Gold and silver futures are under pressure ahead of US market action, with gold under $1,852 per troy ounce and silver under $21.73 per troy ounce.

• As of Memorial Day, gas prices have surged to a national average of $4.619 a gallon. Not only is that a new record, it’s close to half a buck higher than one month ago. Motorists in California were feeling the strongest pinch Monday, with some gas stations in parts of Los Angeles, the San Francisco Bay area and the Yosemite region charging in excess of $7.25 per gallon — more than the federal minimum wage. On average, gas in the Golden State costs $6.15 a gallon, more than in any other in the nation, according to AAA. Californians are saddled with higher prices due to taxes and surcharges that are added onto the baseline cost of fuel. The nationwide average, meanwhile, represents a 40% increase from the start of the year. It is also well above last year’s $3.04 per gallon level. Analysts predict that more states will cross the $5 per gallon average by the Fourth of July holiday as demand is expected to increase while supply remains tight.

• You think you’re feeling pain at the pump? “Try living in Brazil, where the average cost of a liter of gasoline is 7.28 reais, equal to about $6 a gallon,” Bloomberg notes. “Brazilians are now spending about a third of a minimum wage to fill up an average capacity 55-liter tank. In the U.S., that stop at the gas station would roughly be 6% of the monthly income of a worker who makes the minimum hourly wage.

• The price of shipping’s very-low sulfur fuel oil in Singapore has jumped more than 20% since mid-April to more than $1,000 per metric ton.

• Lumber futures for July delivery ended Friday at $695.10 per thousand board feet, down 52% from a high in early March. On-the-spot wood prices have plunged, too. Pricing service Random Lengths said Friday that its framing composite index, which tracks cash sales, fell about 12% last week to end at $794. That is down from $1,334 in March, just before the Federal Reserve raised interest rates for the first time since 2018.

• Supply strains in the U.S. appear to be easing. The line of ships headed to Southern California’s top ports is less than a quarter of January’s record backup, spot container rates are down and delays at some rail depots are said to be shortening.

• CFTC Commitments of Traders report (Source: Barron’s):

• Ag trade: Pakistan purchased around 500,000 MT of optional origin milling wheat. Algeria tendered to buy an unspecified amount of optional origin milling wheat.

• First hurricane of season Agatha expected to dissipate after making landfall in Mexico. Agatha is expected to dissipate over southeastern Mexico by late today after touching down in the country’s southern coast as the strongest hurricane on record to make landfall in May in the eastern Pacific. Agatha touched down as a Category 2 hurricane Monday about 5 miles west of Puerto Angel in Mexico’s southern state of Oaxaca, with maximum sustained winds of 105 mph. Late Monday, it was downgraded to a tropical storm, with maximum sustained winds of 70 mph.

• NWS weather: A threat of severe weather exists today from the Great Lakes down through the southern High Plains... ...Areas of heavy rainfall will impact portions of the central and southern Plains, and the middle Mississippi Valley which may result in localized areas of flash flooding... ...Much cooler temperatures to arrive across the Plains and Midwest through the middle of the week... ...Heat and humidity across many areas of the East today will give way to cooler temperatures and a threat of showers and thunderstorms by later this week.

Items in Pro Farmer’s First Thing Today include:

• Wheat and corn weaker, soybeans firmer
• Russia will work w/Turkey on Ukrainian grain exports (details in Russia/Ukraine section)
• Countries seeking wheat from India
• China allocates more grain subsidies to ensure food security
• Firm hikes EU sunflower seed crop forecast
• Weekend beef clearance a focal point
• Hogs firming seasonally

— Summary: Ukraine President Volodymyr Zelenskyy visited front-line troops in the Kharkiv region in his first trip away from Kyiv since Russia’s invasion. Meanwhile, European Union nations on Sunday failed to come to an agreement on a revised package of sanctions over Moscow’s invasion of Ukraine, and Russian President Vladimir Putin promised Serbian President Aleksandar Vucic an uninterrupted natural gas supply. Leaders of European Union members are met Monday and will meet Tuesday, after diplomats over the weekend failed to strike a deal on sanctions that would limit imports of Russian oil.

• A top Kremlin official disputed reports that Russian President Vladimir Putin’s health is getting progressively worse amid rumors that he may have cancer. Russian Foreign Minister Sergei Lavrov issued a response to the reports, saying that Putin “makes public appearances on a daily basis… You can see him on TV screens, read, and listen to his speeches. I don’t think that a sane person can suspect any signs of an illness or ailment in this man,” he added. “I’ll leave it on the conscience of those who disseminate such rumors despite daily opportunities for everyone to see how he and others look like.” Lavrov, who was speaking to a French TV station, did not address claims that Putin is suffering from an undisclosed form of cancer.
• EU agrees to ban most Russian oil by year-end. European Union leaders agreed on a compromise to ban imports of most Russian oil by the end of the year, after the country invaded Ukraine Feb. 24. Details:
  • The fresh round of sanctions will only affect Russian crude imports that arrive by sea, equivalent to about two-thirds of shipments to the bloc. Pipeline oil will still be allowed, in a key concession to Eastern European countries, mainly Hungary, concerned about cutting off supply.
  • Poland and Germany have pledged to end pipeline imports by the end of 2022, which would stop about 90% of Russian imports.
  • European Council President Charles Michel said the agreement would cut off a huge source of funding for the Russian war machine. No sanctions have yet been placed on natural-gas imports.
  • This was the sixth round of sanctions against Russia by the EU. The bloc also agreed to cut off Sberbank, the largest Russian bank, from the Swift payment system and banned three more state-owned broadcasters.
  • Outlook: The announcement of the ban pushed international oil prices to the highest since March. EU leaders said they would revisit the exemption on pipeline oil as soon as possible. They may also consider ways to reduce the bloc’s reliance on Russia for natural-gas supplies.

— Market impacts:

• Critical transportation infrastructure is proving to be the major hurdle to getting Ukrainian agricultural goods to world markets. Farmers are navigating mines, traversing bombed bridges and risking dangerous maneuvers at overworked ports to circumvent a Russian blockade and ship their grains. But the Wall Street Journal reports (link) that Ukraine’s strained infrastructure has little hope of being able to handle the 30 million metric tons of corn, wheat and sunflower oil that is expected after harvesting starts in June. Russia’s Black Sea blockade has pushed crops across roads and rail to Ukraine’s western borders or down the Danube to be loaded onto ships in Romania. That has sparked a race to increase the capacity of those routes and high-stakes diplomacy as Ukraine’s Western allies seek alternatives. For now, a one-day truck journey on one route takes three days and river transports are backed up for days.
• Russia will work with Turkey on Ukrainian grain exports. Russian President Vladimir Putin said his country was ready to facilitate the unhindered export of grain from Ukrainian ports in coordination with Turkey, according to a Kremlin readout of talks with Turkish President Tayyip Erdogan. “During the discussion of the situation in Ukraine, emphasis was placed on ensuring safe navigation in the Black and Azov seas and eliminating the mine threat in their waters,” the Kremlin said of Putin’s call with Erdogan. “Vladimir Putin noted the readiness of the Russian side to facilitate the unhindered sea transit of goods in coordination with Turkish partners. This also applies to the export of grain from Ukrainian ports.” Putin, according to the Kremlin, added that if sanctions were lifted, then Russia could “export significant volumes of fertilizers and agricultural products.” Erdogan told Ukrainian President Volodymyr Zelenskyy he “especially valued the project to create a secure sea route for exporting Ukrainian agricultural products,” his office said, adding he welcomed, in principle, the idea of making Istanbul a headquarters for the “observation mechanism.”

— Democrats note progress with Manchin in talks on Biden economic and energy agenda. Centrist Sen. Joe Manchin (D-W.Va.) and Senate Majority Leader Chuck Schumer (D-N.Y.) have held several meetings in recent weeks on a package focused on lowering prescription drug costs, raising taxes and bolstering energy production in the U.S. Reports note that package could raise around $1 trillion in revenue and spend about $500 billion over a decade. With roughly half the new revenue dedicated toward reducing the deficit, the spending would focus on tax incentives for reducing carbon emissions and some support for fossil fuels, as well as an extension of subsidies for purchasing health insurance under the Affordable Care Act.

Democrats may drop some of the tax increases they included in the House-passed package, including a surtax on very high-income Americans. Observers say revenue measures would likely include a new minimum tax on the profits of large companies and expanded funding for enforcement by the Internal Revenue Service, which would help net more taxes owed to the government.

Timing of any package is key as Democrats believe they will need an agreement in the coming weeks to have enough time translate into bill language that can pass both the House and Senate before August, when Congress leaves town for the month and lawmakers begin to focus more heavily on their re-election efforts.

— China rolls out more economic relief policies. Shanghai offered some tax rebates for companies and allowed all manufacturers to resume operations from June as authorities rolled out policies to revitalize an economy impacted by Covid lockdowns. Shanghai’s Vice Mayor Wu Qing said over the weekend that the authorities will loosen the conditions under which companies are able to resume work this week, and the city’s government laid out a 50-point plan for accelerating the economic recovery. The measures include tax cuts for businesses and subsidies for purchases of electric vehicles, the official Xinhua News Agency said. The financial hub will accelerate approvals for property projects and supply new residential developments, according to a plan issued by the Shanghai municipal government.

Details: Beginning on Wednesday, Shanghai’s businesses will no longer need to obtain government approval, or get on the government’s priority resumption list, to re-open. Shanghai authorities also announced that they will move to start lifting the city’s lockdown on Wednesday, as well: All exit and entrance restrictions imposed on residential compounds will be lifted; All forms of public transportation will be restored; Private vehicles will be allowed back on roads. The 50 measures aim to relieve financial pain as businesses reopen. They include (Shanghai.gov):

• Postponing social security payments by businesses
• Extending tax payment and loan repayment deadlines
• Reducing rent for small and medium-sized companies
• Subsidizing companies that retain all their employees
• Offering consumption coupons for big-ticket items, including electric vehicles.

Bottom line: So far this year, the central government has already transferred RMB 1.2 trillion to local governments to support tax cuts and other cost-cutting initiatives for businesses. It is clear policymakers want to turn around the economy in time for the Party congress this Fall. Of note: Container line Cosco Shipping is predicting a strong rebound in freight volume and rates after the Shanghai lockdown is lifted.

— China got some upbeat economic news early this week as its official purchasing managers index for May rose to 49.6 from 47.4 in April. Still, a reading below 50.0 suggests contraction in the sectors.

— China’s downturn shows signs of easing but economists are skeptical about a big revival. The slowdown is testing the credibility of official economic data. Link to more via the WSJ.

— Chinese Foreign Minister Wang Yi mocked Biden’s wide-ranging economic framework for failing to lower tariffs, in some of the strongest criticism yet of the US’s plan to counter Beijing’s influence in Asia. “The so-called Indo-Pacific Economic Framework recently rolled out by the U.S. claims to build a free, open, and inclusive new order, but how can any economic frame call itself free if it doesn’t lower tariffs?” Wang said during a visit to Fiji, according to a statement.

— U.S. Defense Secretary Lloyd Austin and Chinese Defense Minister Wei Fenghe are expected to meet in person for the first time on the sidelines of a Singapore conference in June, a conversation that would take on extra significance because of increased tension over Taiwan, the Wall Street Journal reports. The meeting hasn’t been fixed, though, and plans could change. In a check on Chinese ambitions, Pacific Island nations deferred action on a proposal that would have extended Beijing’s influence to areas including law enforcement and cybersecurity.

— China sent 30 warplanes into Taiwan’s Air Defense Identification Zone, a buffer region where intrusions trigger military alerts. Taiwan is used to saber-rattling from its covetous neighbor, but this is the largest incursion since January.

— Biden’s new trade pact with Asia is only a small step, some observers note. The Indo/Pacific pact will not give the nations what they really want: a way to reduce their growing economic dependence on China.

— Availability of charging stations has lagged behind electric-vehicle sales in the U.S. More than four years after states received $424 million that could be used for EV chargers as part of Volkswagen’s $2.8 billion dieselgate settlement, they have spent about 48% of those funds to kick-start a new service industry. Now, the Biden administration is preparing to give states $7.5 billion for new charging stations. The WSJ reports (link) that so far, the U.S. has around 93,000 public chargers. The Biden administration wants 500,000 by 2030; McKinsey & Co. estimates that as many as 1.2 million are needed. Sales of EV and plug-in hybrids doubled to more than 600,000 last year, and EVs accounted for 6.6% of car sales in recent weeks.

— More funding for HPAI. USDA’s Animal and Plant Health Inspection Service (APHIS) continues its efforts to respond to an outbreak of highly pathogenic avian influenza (HPAI) in the United States. To date, the virus has been confirmed in 35 states, affecting more than 37.9 million domestic birds. APHIS’ response efforts include working closely with animal health officials in affected states to quickly identify and address new cases of HPAI. To help ensure APHIS can continue to provide critical rapid response activities, USDA Secretary Tom Vilsack approved the transfer of $400 million from the Commodity Credit Corporation (CCC) to APHIS to directly support the response efforts. Link

— USDA Secretary Tom Vilsack on Wednesday will announce details of the USDA framework “to transform the nation’s food system,” 11:30 a.m. ET, Georgetown University. Vilsack is expected to provide new details on a $4 billion commitment made in June 2021 to strengthen supply chains and address structural challenges revealed by the pandemic. “The address will underscore USDA’s commitment under the Biden-Harris administration to increase competition, bolster access to healthy, affordable food, ensure growers and workers receive a greater share of the food dollar, and advance equity as well as climate resilience and mitigation,” said USDA.

— FDA is investigating two brands of organic strawberries that could be linked to an outbreak of hepatitis A. The strawberries have been sold at chains including Trader Joe’s, Walmart, and Aldi.

— Infant formula shortage took a turn for the worse, according to data on 130,000 stores across the U.S. Out-of-stock rates spiked to 70% nationally for the week ending May 21, up from 45% the prior week, Datasembly found. In many cities and states, the situation was far more dire. More than two-thirds of states had shortage rates over 70%, with California, Missouri, Minnesota, Nevada, Montana, Louisiana, Arizona and Utah over 80%, and Utah hit hardest at 89%, up from 49% the week prior. Federal and local regulators have been taking steps to try to boost supply. HHS Secretary Xavier Becerra invoked the Defense Production Act to ensure that Cargill can deliver the raw materials needed to maximize infant formula production, the department said on Friday. To deal with marketplace shortages, DPA authorities will allow Cargill to place certain orders for infant formula manufacturers before unrated orders, according to the Health and Human Services Department.

Meanwhile, Danone will send the equivalent of about five million bottles of nondairy infant formula to the U.S. The shipment is part of a push to ensure that babies with allergies to cow’s milk and other proteins have enough to eat amid a nationwide shortage of formula. Nestlé’s CEO said yesterday that no big shortages were expected outside the U.S.

— Burgers and steaks are set to stay pricey as U.S. cattle ranchers shrink their herds, further constraining beef production in the months ahead. Rising costs for feed and other expenses are leading ranchers to sell their calves into feedlots at a faster pace, according to federal data, leaving fewer cattle available for slaughter later this year and in 2023. Link to details via the WSJ.

— Amy Walter on Nov. 8 elections: ‘It’s not that complicated.’ Democrats’ biggest opponent in 2022: economic headwinds says Amy Walter of the Cook Political Report. She writes: “To win, it’s important to have a strong candidate and a well-funded and well-organized campaign. But, the political environment has a disproportionate impact on a campaign’s success. In a year where the environment is relatively neutral, the specific candidates matter more. But, in a year like this one, where more than 70 percent of Americans think the country in on the wrong track, where inflation is at a 30-40 year high, and where a stubbornly strong virus continues to wreak havoc on our health and the global economy, the environment is anything but neutral. Democrats, who are the party in power at this moment, are going to get the blame. It’s not that complicated.”

— Paul Pelosi, the husband of the House speaker, was arrested Saturday night in Napa County, California, for drunken driving. The 82-year-old was released the next morning. Nancy Pelosi wasn’t with him at the time, and a spokesperson said she won’t comment.

— Australia’s new Labor government appears to have secured a majority in parliament. Anthony Albanese, the party’s leader, became prime minister when he defeated Scott Morrison, the conservative incumbent, in an election on May 21. But counting ballots in tightly contested seats took days and it is only now that Labor is projected to secure the 76 out of 151 seats needed in the lower house.

— House Judiciary Committee will hold an emergency hearing on Thursday to mark up a package of gun-control bills as Congress wrestles with the twin massacres in Uvalde and Buffalo. The panel will consider a package of eight gun-related bills which Democrats are calling the “Protecting Our Kids Act.” House Democratic leaders plan to bring the bills to the floor early next week and say they have the votes to pass them. But it will face hurdles getting the needed 60 votes in the Senate. But Senate Majority Leader Chuck Schumer (D-N.Y.) is attempting to negotiate a compromise on new gun laws. President Biden on Sunday promised the families of the victims in the Texas shooting government action on gun violence, increasing pressure on the Senate. Schumer has raised expectations that a bipartisan deal on gun safety, mental health and school security is possible.

Meanwhile, Canada’s government proposed a new law that would freeze purchases and sales of handguns. The legislation would also limit magazine capacities and ban toys that look like guns. Justin Trudeau, the prime minister, said, “As we see gun violence continue to rise, it is our duty to keep taking action.”

— Transportation labor groups are lobbying against a bipartisan push to enable more foreign-flagged vessels to carry U.S. food aid exports. House and Senate lawmakers are working to waive requirements that 50% of U.S. food aid exports ship on U.S.-flagged ships amid disruption from Russia’s war in Ukraine. The effort is under attack from unions and industry groups that say it’s unnecessary and would hurt U.S. companies and mariners.

— Taiwan President Tsai Ing-wen meets with a U.S. delegation led by Sen. Tammy Duckworth (D-Ill.).

— Nuclear Iran. The United Nations atomic agency said Iran has roughly enough highly enriched uranium to produce a nuclear bomb.