FTC Launches Investigation into Deere & Co.; Firm Announces More Layoffs

News/Markets/Policy Updates: Oct. 18, 2024

— Equities today: Asian and European stock indexes were mixed overnight. U.S. Dow opened slightly lower. In Asia, Japan +0.2%. Hong Kong +3.6%. China +2.9%. India +0.3%. In Europe, at midday, London -0.2%. Paris +0.5%. Frankfurt +0.1%.

U.S. equities yesterday: The Dow scored another record finish following a batch of economic data that was viewed mostly positive. The Blue Chip index ended up 161.35 points, 0.37%, at 43,239.35. The Nasdaq edged up 6.53 points, 0.04%, at 18,373.61. The S&P 500 was down 1.00 point, 0.02%, at 5,841.47.

— Netflix picked up 5.1 million streaming subscribers in the third quarter, topping Wall Street estimates by more than 1 million, and said it expected higher customer growth around the holidays when Korean drama Squid Game returns. However, the new subscriber level was down from 8.76 million during the same period a year earlier. Netflix would like the market to stop focusing on subscriptions and start focusing on its profitability instead, so starting in 2025 it intends to stop reporting its subscriber count.

— CVS replaces CEO Karen Lynch with David Joyner amid investor pressure and profit struggles. CVS has replaced CEO Karen Lynch with pharmacy executive David Joyner, effective Thursday. The leadership shakeup comes as the company grapples with declining profits, a falling share price, and pressure from an activist investor. On Friday, CVS also revised its estimated third-quarter results, advising investors to disregard prior guidance issued in August. The moves come as CVS weighs strategic options including a breakup as it faces pressure from investors such as the hedge fund Glenview Capital.

— Ag markets today: Corn and soybean futures mildly extended Thursday’s corrective gains during overnight trade, while wheat pivoted around unchanged. As of 7:30 a.m. ET, corn futures were trading around a penny higher, soybeans were 4 to 5 cents higher, SRW wheat was narrowly mixed, while HRW and HRS wheat were mostly a penny higher. The U.S. dollar index was nearly 200 points lower, and front-month crude oil futures were around 25 cents lower.

Cash cattle trade steady/higher. Cash cattle started trading at steady to $1.00 higher prices on Thursday, with the strongest bids in the Southern Plains. While some feedlots opted to hold out for even better prices, sales were relatively active.

Cash hog index slips, pork cutout firms. The CME lean hog index is down a penny to $83.84 as of Oct. 16. The pork cutout firmed $1.56 on Thursday to $96.41 as all cuts except ribs strengthened.

— Agriculture markets yesterday:
• Corn: December corn rose 2 cents to $4.06 3/4 after trading at the lowest intraday level since Sept. 12.
• Soy complex: November soybean futures rose 8 3/4 cents to $9.88 3/4, closing near session highs. December meal futures climbed $4.40 to $318.10. December bean oil futures closed 91 points higher, closing near session high.
• Wheat: December SRW wheat rose 4 1/2 cents to $5.89 1/2 and nearer the daily high. December HRW wheat gained 7 1/4 cents to $5.96 and nearer the session high. December spring wheat futures closed 8 cents higher at $6.28 3/4.
• Cotton: December cotton futures fell 49 points to 72.85 cents.
• Cattle: December live cattle fell 42 1/2 cents to $186.175, settling near mid-range after hitting a two-week low. November feeder cattle rose 25 cents to $245.75 and nearer the session low.
• Hogs: December lean hog futures moved to fresh highs Thursday but settled 2.5 cents lower at $77.675.

— Of note:

• U.S. shoppers are showing no signs of fatigue ahead of the holidays. Even though inflation continues to crimp people’s spending power, retail sales for September came in unexpectedly strong, picking up steam following a strong gain for August. A broad range of categories overcame weak gas and auto spending. Retail sales rose 0.4% last month, versus expectations for a gain of 0.3%. Excluding autos, retail sales rose 0.5%, also ahead of expectations. Futures traders see a 90% probability of a quarter-point cut at the Fed’s November meeting, just after the election.

• “One of my key customers said the demand right now is insane. It is just the beginning.” — Taiwan Semiconductor Manufacturing CEO C.C. Wei, on the drive for more artificial intelligence chips.

• Traders raised their bets on quick-fire European Central Bank rate cuts, taking the bank’s first consecutive rate cut in 13 years as a green light from policymakers that a speedier easing cycle has begun.

— Sevens Report: Soft landing likely as economic data strengthens, market rally justified. The Hard Landing/Soft Landing Scoreboard indicates that a soft landing remains the most probable outcome for the economy, driven by stronger economic data across multiple sectors, says the Sevens Report. It says this positive outlook has supported recent highs in the S&P 500, with solid data and aggressive Fed rate cuts keeping markets stable. While the risk of a hard landing still exists, current signals suggest no immediate threat. As economic conditions improve, markets may reduce expectations of further Fed easing, shifting toward a “no landing” scenario. However, barring a significant downturn in data, the market’s rally is expected to remain intact, the report concludes.

Market perspectives:

— Outside markets: The U.S. dollar index was weaker, with the euro and the British pound stronger against the dollar. The yield on the 10-year U.S. Treasury note was higher, trading around 4.11%, with a mixed tone in global government bond yields. Crude oil futures were slightly weaker, with U.S. crude around $70.60 per barrel and Brent around $74.30 per barrel. Gold and silver futures were sharply higher, with gold around $2,725 per troy ounce and silver around $32.28 per troy ounce.

— Gold hits $2,700 as geopolitical tensions and U.S. election drive safe-haven demand. Gold surged past $2,700 an ounce for the first time, propelled by investor concerns over escalating conflict in the Middle East and uncertainty ahead of the U.S. election. Bullion reached $2,714.10, extending its record-breaking run, while a weaker dollar further boosted gold’s appeal. Traders anticipate continued volatility as geopolitical developments unfold and market participants hedge portfolios in preparation for the Nov. 5 election.

— Canada pushes mediation to resolve Port of Montreal labor deadlock. Canada’s Labor Minister Steven MacKinnon is urging dockworkers and employers at the Port of Montreal to agree to mediation to end disruptions that have slowed shipments. MacKinnon set a Friday deadline for both sides to accept the offer, with a commitment to no strikes or lockouts during negotiations. Recent labor actions, including a three-day strike and overtime refusals, have prompted shippers to reroute cargo through Vancouver and Halifax. A spokeswoman for the Canadian Union of Public Employees local 375, which represents about 1,150 dockworkers at the Canadian port, said officials were still deliberating whether to accept the mediation offer. Dockworkers since last Thursday have been refusing to work overtime in the meantime, she said.

— USDA daily export sales:
• 21,000 MT soybean oil to Mexico during 2024-2025 marketing year
• 125,000 MT corn to unknown destinations during 2024-2025 marketing year
• 292,800 MT soybeans received in the reporting period for delivery to unknown destinations during 2024/2025 marketing year

— Ag trade update: Taiwan purchased 65,000 MT of corn expected to be sourced from Brazil.

— NWS outlook: Heavy snow expected for the central and southern Rockies through Saturday... ...Heavy rain expected for the western High Plains on Saturday ahead of an
upper low over the Four Corners region... ...Sunny and pleasant conditions for much of the Eastern U.S. through the upcoming weekend.

(NWS)

Items in Pro Farmer’s First Thing Today include:

• Corn and beans firmer, wheat mixed this morning
• Dry conditions trim Aussie wheat production in southern areas
• China’s industrial production, retail sales improve but housing slump continues
• PBOC head signals more monetary policy easing

— Hezbollah declares ‘new phase’ after Israel kills Hamas leader Yahya Sinwar. The Israel Defense Forces (IDF) confirmed the killing of Hamas leader Yahya Sinwar in Gaza’s Rafah area, labeling him the mastermind of the Oct. 7 attacks on Israel. Prime Minister Benjamin Netanyahu celebrated the event as “the beginning of the day after Hamas” in Gaza. In response, Lebanon’s Hezbollah announced that its confrontation with Israel is entering a “new and escalating phase,” with further developments expected soon. Meanwhile, Hamas has not officially commented on Sinwar’s death. Amid efforts to de-escalate the conflict, President Joe Biden is dispatching Secretary of State Antony Blinken to Israel. The conflict has already resulted in over 42,000 Palestinian deaths, with experts cautioning that Sinwar’s death, though a setback, may not dismantle Hamas entirely.

Of note: Sinwar was tracked by an Israeli mini drone as he lay dying in the ruins of a building in southern Gaza, which filmed him slumped in a chair covered in dust. Link to Reuters item.

— Zelenskyy: NATO invitation ‘essential’ for Ukraine’s survival and war’s end. Ukrainian President Volodymyr Zelenskyy stated that a formal NATO invitation is “the only way” Ukraine can survive Russia’s invasion. In an interview with the Financial Times, he urged Western allies to back his five-step “victory plan,” emphasizing that NATO membership is critical to compelling Russia to negotiate and bringing the conflict to an end.

— Soybeans main U.S. export sales to China in most recent week. Soybeans continued as the major U.S. export sales activity for China in the most recent week, with activity for 2024-25 the week ended Oct. 10 including net sales of 5,345 metric tons of sorghum, 999,723 metric tons of soybeans, and 9,301 running bales of upland cotton. Sales activity for 2024 included net sales of 2,289 metric tons of beef and 474 metric tons of pork.

— U.S. conducts second deportation flight to China as immigration issues dominate election debate. The U.S. Dept. of Homeland Security (DHS) carried out a second flight this year to deport Chinese nationals, underscoring cooperation with Beijing on migration control. Although DHS did not disclose the number of deportees or flight details, the move comes three weeks before the presidential election, where immigration has become a pivotal issue. The first flight since 2018 occurred in July, with 116 Chinese nationals onboard, coordinated closely with China’s National Immigration Administration. Secretary Alejandro Mayorkas emphasized that unauthorized migrants would face swift removal, as the Biden administration continues to enforce stricter border controls amid rising migrant flows from China. Since China eased Covid-19 border restrictions, over 21,000 Chinese nationals have been apprehended at the U.S./Mexico border this year, highlighting increased migration through Central America. Beijing expressed openness to continued cooperation, focusing on curbing smuggling and other cross-border crimes.

— China’s economy grew by 4.6% year-on-year in the third quarter of 2024, the slowest pace since early 2023, and a slowdown from the 4.7% expansion seen in the second quarter, indicating a continued loss of momentum in the world’s second-largest economy. The third-quarter GDP growth of 4.6% fell short of the official target of “about 5%" for 2024, highlighting the challenges facing the Chinese economy. For the first nine months of 2024, China’s overall economic growth stood at 4.8%.

Key economic indicators for the first three quarters of 2024 include:
• Factory output rose by 5.8%
• Retail sales expanded by 3.3%
• Property investment declined by 10.1%
• New home sales value plunged by 22.7%4

These figures underscore the persistent weakness in consumer demand and the ongoing struggles in the property sector, which continue to drag on the broader economic recovery.

Several factors have contributed to the slowing growth:
• Property sector weakness: The real estate market remains a significant drag on the economy, with property investment and new home sales experiencing sharp declines.
• Consumer confidence: Despite the lifting of Covid-19 restrictions at the end of 2022, consumer confidence remains low.
• External environment: The National Bureau of Statistics noted that the economy faced a “complicated and severe external environment.”
• Export slowdown: China’s September exports grew by just 2.4% year-on-year, down from 8.7% in August, indicating weakening external demand.

In response to the economic slowdown, Chinese policymakers have implemented several measures to stimulate growth (see next item for more):
• Monetary policy: The People’s Bank of China (PBOC) has pledged to maintain a supportive monetary policy stance.
• Stock market support: The central bank has introduced two funding schemes totaling 800 billion yuan (approximately $112 billion) to bolster the stock market.
• Property market measures: Authorities have announced measures to reduce mortgage rates for existing homes and increase financing for approved housing projects.
• Bank deposit rate cuts: Large state-run banks have cut deposit rates to encourage spending and investment.

Of note: Despite these efforts, analysts believe that more aggressive measures may be needed to achieve the targeted 5% GDP growth for 2024. The government has so far refrained from unveiling major new stimulus plans, opting instead for targeted interventions.

— China injects $112 billion to stabilize stock market with new funding schemes. The People’s Bank of China (PBOC) launched two funding schemes worth up to 800 billion yuan ($112.38 billion) to boost the stock market. A 500-billion-yuan swap scheme allows brokerages, asset managers, and insurers to access liquidity using asset collateral, preventing forced share sales during market downturns. Additionally, a 300 billion yuan relending program offers low-interest loans to financial institutions to support share purchases by listed companies or major shareholders. So far, 20 companies have joined the swap scheme, with initial applications exceeding 200 billion yuan.

Of note: Analysts are hoping for more details about fiscal spending plans at the next meeting of the National People’s Congress, China’s rubber-stamp parliament, in the coming weeks.

— China’s pork imports plunge in September amid falling consumer demand. China imported 100,000 MT of pork during September, half of the volume from August and 1.4% less than last year. Through the first nine months of this year, China imported 800,000 MT of pork, 37.3% less than the same period last year. Meanwhile, China’s pork production slipped 0.8% in the third quarter to 12.59 MMT, falling on an annual basis for a third consecutive quarter as poor meat consumption hampered slaughter rates. For the first nine months of the year, pork production fell 1.4% to 42.4 MMT. Meat demand has slowed in China, with shoppers tightening their belts to cope with a sluggish economy. Farmers slaughtered 520.3 million hogs during the first nine months of the year, down 3.2% from a year earlier. China’s pig herd at the end of September was down 3.5% from the previous year to 426.94 million head.

— China weighs higher tariffs on car imports amid EU trade tensions. China is considering raising tariffs on imported large-engine, fuel-powered vehicles following the European Union’s decision to impose new tariffs of up to 45% on China-made electric vehicles (EVs). The Chinese Ministry of Commerce confirmed it is evaluating the measures and has invited EU officials for further negotiations. Analysts suggest that if implemented, the higher tariffs would primarily affect German automakers due to their export volumes to China. While the move is seen as partly political, a drop in Chinese car imports has already reduced its potential impact. The ongoing trade tensions come as the U.S. and Canada also maintain 100% tariffs on Chinese EVs.

— Report: Trump’s tariff plan would hit Midwest and South the hardest. A new analysis by the Tax Policy Center (link) reveals that Donald Trump’s proposed tariffs would disproportionately impact states in the Midwest and South, including Kentucky, Indiana, Tennessee, Mississippi, and Michigan. These states, where Trump either leads or aims to regain ground lost in 2020, would feel the most economic pressure from a potential 60% tariff on Chinese goods and a 10% across-the-board tariff. Trump has defended his tariff policy, calling tariffs “the most beautiful word in the dictionary,” though his exact plans remain unclear. Treasury Secretary Janet Yellen criticized the approach, warning that broad tariffs would raise consumer prices and hurt U.S. businesses’ competitiveness.

— IMF projects soft landing but warns of sluggish growth amid trade barriers. The International Monetary Fund (IMF) anticipates a soft landing for the global economy, but warns of sluggish growth prospects as trade barriers increase. IMF Managing Director Kristalina Georgieva delivered a speech ahead of the fund’s annual meetings in Washington, D.C., highlighting both positive developments and challenges facing the world economy.

Inflation and economic outlook. Georgieva noted that inflation rates are declining globally, with central banks’ efforts to raise interest rates successfully taming inflation without triggering a recession or widespread job losses. She stated, “The big global inflation wave is in retreat”. Recent data from the European Union, the United Kingdom, and the United States support this trend, with inflation rates falling to or near central bank targets.

Despite this positive development, the IMF warns of a “lackluster” outlook for global economic growth. The fund projects an expansion of 3.2% this year and 3.3% the next, with new forecasts to be released in the coming week.

Rising government debt. Georgieva expressed concern about the increasing government debts accumulated during the pandemic, describing the interest payments as “frightening.” She noted: “Even the traditionally fiscally conservative political parties are developing a taste for borrow-to-spend.” IMF economists predict that government debts could match the annual output of the global economy by the end of this decade.

Trade barriers. A significant headwind to global economic growth is the rise in trade barriers. Georgieva likened this trend to “pouring cold water on an already lukewarm world economy.” Recent examples include the European Union’s decision to impose tariffs on Chinese-made electrical vehicles and U.S. presidential candidate Donald Trump’s proposal for increased tariffs on imports from China and other countries.

Georgieva urged governments to take swift action to address these challenges:
• Halt the sharp rise in government debts
• Work together to resolve growing trade tensions
• Keep migration channels open
• Boost productivity of existing workforces

She emphasized the importance of international cooperation, stating: “Let us not take the global tensions as given, but rather resolve to work to lower the geopolitical temperature and attend to the tasks that can only be tackled together.”

— USDA: Tainted meat recall affects schools but not lunch program. USDA released a preliminary list of around 200 schools (link) impacted by BrucePac’s recall of nearly 12 million pounds of ready-to-eat meat and poultry products due to potential Listeria contamination. However, USDA’s Food Safety and Inspection Service (FSIS) clarified that the affected products were not distributed through the National School Lunch or Breakfast Programs. FSIS will continue updating the list of involved schools and retail products as more information becomes available.

— Cotton AWP eases slightly. The Adjusted World Price (AWP) for cotton is at 59.24 cents per pound, effective today (Oct. 18), down from 61.75 cents per pound the prior week. Meanwhile, USDA announced that Special Import Quota #26 will be established Oct. 24 allowing the import of 34,508 bales of upland cotton, applying to supplies purchased no later than Jan. 21 and entered into the U.S. no later than April 21.

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