GOP Underperforms Again as Dems Use Abortion, Turnout to Win Marquee 2023 Elections

House censures Rep. Tlaib | U.S. ag trade deficit | More HPAI in Iowa | CR, Ukraine aid differences

Jim Wiesemeyer

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November 08, 2023 08:51 AM

House censures Rep. Tlaib | U.S. ag trade deficit | More HPAI in Iowa | CR, Ukraine aid differences

Today’s Digital Newspaper

MARKET FOCUS

Oil prices plummeted by over 4% Tuesday to their lowest point in three months
Fed’s Cook again raises concerns on global geopolitical developments
U.S. trade deficit widens in September
Record trade gap concludes FY 2023 for U.S. ag despite exceeding export forecasts
Americans’ credit card debt swelled $154 billion Y/Y to a record $1.08 trillion in Q3
U.S. finds no major trade partners manipulated currencies
Ag markets today
USDA daily export sales:
— 433,000 MT soybeans to China during 2023-2024 marketing year
— 270,000 MT corn to Mexico during 2023-2024 marketing year
— 132,000 MT soybeans to unknown destinations during 2023-2024 marketing year
— 344,500 MT soybeans received in the reporting period to unknown destinations during 2023-2024 marketing year
Florida Everglades ag area drainage woes
Ag trade update
This year is “virtually certain” to be the hottest on record
NWS weather outlook

POLITICS & ELECTIONS

GOP underperforms as Dems use abortion, turnout to win marquee 2023 elections
Five Republican presidential candidates tonight in Miami

CONGRESS

Rep. Rashida Tlaib censured over controversial Israel comments
House GOP leaders pulled the Transportation-HUD spending bill Tuesday night.
Republicans reportedly did not back laddered approach in a continuing resolution (CR)
McConnell links Ukraine funding to border policy fix

ISRAEL/HAMAS CONFLICT

G7 foreign ministers support ‘humanitarian pauses and corridors’ in Gaza

RUSSIA & UKRAINE

Russia to maintain elevated seasonal grain export quota following big wheat harvest

POLICY

ERP Phase 2 payments reach $783.89 million, total ERP program now at $8.23 billion

CHINA

Reuters: China makes large U.S. soybean purchases
Reuters: China asks insurance group to aid embattled property developer

TRADE POLICY

Brown opposes Biden’s Indo-Pacific Economic Framework over trade pillar concerns

ENERGY & CLIMATE CHANGE

U.S. seeks to buy up to 3 million barrels for oil reserve for January delivery

LIVESTOCK, NUTRITION & FOOD INDUSTRY

Vilsack to unveil new final rule on poultry contracting
Another HPAI confirmation in Iowa

OTHER ITEMS OF NOTE

California’s glyphosate warning rejected

MARKET FOCUS

— Equities today: Asian and European markets were mixed in overnight trading. The S&P 500 rose slightly. The broader market index gained 0.2%. The Nasdaq climbed 0.1% along with the Dow. Asia, Japan -0.3%. Hong Kong -0.6%. China -0.2%. India +0.1%. In Europe, at midday, London +0.1%. Paris +0.2%. Frankfurt -0.1%.

U.S. equities yesterday: All three major indices finished with modest gains, with the Dow up 56.74 points, 0.17%, at 34,152.60. The Nasdaq rose 121.08 points, 0.90%, at 13,639.86. The S&P 500 rose 12.40 points, 0.28%, at 4,378.38.

Oil prices plummeted by over 4% Tuesday to their lowest point in three months. Brent crude, the global benchmark, settled at around $81 per barrel; U.S. crude futures fell to $77 a barrel. The decline was driven by a big increase in American crude supplies and new data suggesting that China’s demand for oil may slow. U.S. crude prices have now plunged more than 15% in less than three weeks. And that is dragging U.S. pump prices down to levels not seen since March.

— Agriculture markets yesterday:

Corn: December corn futures dropped 8 3/4 cents to $4.68 1/2 and near the session low.
Soy complex: January soybeans fell 2 cents to $13.62, near the session low, after trading at the highest intraday level since Sept. 15. December meal rose $9.90, a mid-range close after marking a fresh contract high early on. December soyoil fell 131 points to 49.49 cents, closing near the session low.
Wheat: December SRW wheat fell 5 1/2 cents to $5.70 1/4. December HRW wheat dropped 13 1/4 cents to $6.32 1/2. December spring wheat fell 4 1/2 cents to $7.24 1/4.
Cotton: December cotton fell 152 points to 76.48 cents, the lowest close since November 28, 2022.
Cattle: December live cattle futures fell $2.55 to $178.775, settling near the session low. January feeder cattle futures fell $5.60 to $230.825, settling near session lows. Expiring November feeder futures fell $4.95 to $232.225.
Hogs: Hog futures rose modestly on the day, with nearby December gaining 50 cents to $72.90 after surging to six-week highs, then reversing.

— Ag markets today: Soybean futures posted strong gains overnight on talk of big Chinese purchases, while corn and wheat followed to the upside. As of 7:30 a.m. ET, corn futures were trading 2 to 3 cents higher, soybeans were 8 to 17 cents higher and wheat futures were 5 to 8 cents higher. Front-month crude oil futures were down around $1.00, and the U.S. dollar index was about 200 points higher this morning.

Macros, technicals hammer cattle. Live cattle and feeders faced heavy pressure from macroeconomic concerns and technical-based selling on Tuesday. That sets the market up for followthrough selling, though a lack of early seller interest could see fresh buying surface as both are short-term oversold.

Cash hog index firms, pork cutout falls. The CME lean hog index firmed 4 cents to $76.27 (as of Nov. 6). That’s the first uptick in the cash index since Oct. 11. After Tuesday’s gains in December hog futures, the discount in the lead contract is down to $3.37. Wholesale pork prices were unable to sustain Monday’s strong gains, falling $3.84 amid a $14.64 plunge in bellies along with smaller declines in all other cuts except ribs.

— Quotes of note:

Fed’s Cook again raises concerns on global geopolitical developments. Federal Reserve Governor Lisa Cook delivered remarks in Dublin, Ireland, echoing points she made on Monday regarding potential geopolitical risks that could impact various sectors, including commodity markets, credit markets, and the U.S. economy. Cook emphasized the resilience of the financial system, contrasting it with the vulnerabilities observed in the mid-2000s when other risks emerged. She highlighted risks outside the U.S., such as unexpected policy rate hikes by foreign central banks, the potential deterioration of China’s economic slowdown, and increased tensions in regions like Russia/Ukraine, the Middle East, or China. Cook expressed concern that escalating geopolitical tensions could lead to reduced economic activity, heightened fragmentation in global trade and financial systems, increased financing and production costs, and prolonged supply chain challenges, potentially contributing to inflationary pressures. However, she did not provide specific insights into how these external events might affect the U.S. economy and the direction of monetary policy. It is evident that the Federal Reserve is closely monitoring these external factors as it navigates its monetary policy decisions. Other Fed officials have also indicated uncertainty regarding the Fed’s success in addressing inflation concerns. Market participants are eagerly awaiting comments from Fed Chairman Jerome Powell, with particular attention likely focused on a Thursday event where he may delve deeper into economic and monetary policy matters beyond his opening remarks at a Fed conference.
“Pragmatism is surfacing,” Khalid Al-Falih, Saudi Arabia’s minister of investment, said of the increasing exchanges between the U.S. and China. Al-Falih, meantime, said talks toward the normalization of ties with Israel remain on the table but have always been “contingent on a pathway to a peaceful resolution of the Palestinian question.”
Bank of England Governor Andrew Bailey pushed back against the market bets on interest rates, saying that officials need to carry on fighting inflation for now.
Oh Canada. Even if Canada sees a similar 3Q dip in GDP as it did in 2Q, it won’t officially be in recession, particularly given both quarters were disrupted by forest fires, CIBC’s Avery Shenfeld says.
EVs. “I think there was a miscalculation about demand and how much EVs would be coveted.” — Joseph Yoon, an Edmunds analyst.
“Abortion is an issue that motivates and turns out Democrats, and that advantage for them is not going to fade.” — Tucker Martin, a Republican political strategist in Virginia.

— U.S. trade deficit widens in September. The U.S. trade deficit widened to $61.5 billion in September from an upwardly revised $58.7 billion gap in August. Still, it is the third lowest trade deficit since 2021. Imports were up 2.7% to $322.7 billion, the highest level in seven months. Exports rose at a slower 2.2% to $261.1 billion, the highest level since August 2022.

— Record trade gap concludes FY 2023 for U.S. ag despite exceeding export forecasts. The U.S. ag sector concluded fiscal year (FY) 2023 with a record trade deficit, as agricultural exports reached $178.75 billion, while imports soared to a record $195.37 billion, resulting in a trade gap of $16.62 billion. Despite this deficit, it was a better outcome than initially anticipated by USDA, as exports exceeded their forecast of $177.5 billion, while imports fell short of the projected $196.5 billion level that would have resulted in a $19 billion deficit.

However, the agricultural sector experienced a series of monthly trade deficits, with four consecutive months from May to August surpassing $3 billion. USDA has already forecasted a challenging year for U.S. agriculture in FY 2024, with expected exports of $172 billion against imports of $199.5 billion, leading to another record deficit of $27.5 billion. USDA’s updated FY 2024 trade forecast is scheduled for release on Nov. 30.

— Americans’ credit card debt swelled $154 billion Y/Y to a record $1.08 trillion in Q3, according to the Federal Reserve Bank of New York, notching the largest increase since it began tracking household debt in 1999. Interestingly, millennials saw the most credit card delinquencies. “Credit card balances experienced a large jump, consistent with strong consumer spending and real GDP growth,” said Donghoon Lee, economic research advisor at the NY Fed. Bankrate analyst Ted Rossman also noted that credit card balances have been increasing faster than any other type of debt amid high inflation and record-high credit card rates, adding that “more people are using credit cards just to get by.”

Market perspectives:

— Outside markets: The U.S. dollar index was firmer, with the euro, British pound and Swiss franc all weaker against the greenback. The yield on the 10-year U.S. Treasury note was weaker, trading around 4.55%, with a lower tone in global government bond yields. Crude oil futures were under pressure, with U.S. crude around $76.15 per barrel and Brent around $80.50 per barrel. Gold and silver were narrowly mixed, with gold weaker around $1,971 per troy ounce and silver firmer around $22.61 per troy ounce.

— U.S. finds no major trade partners manipulated currencies. The U.S. Treasury Department on Tuesday said no major trading partners appeared to be manipulating their currencies, but it put Vietnam back onto a foreign exchange “monitoring list,” while removing Switzerland and South Korea from that category. Treasury’s semi-annual currency report for the four quarters ended June 2023 showed China, Vietnam, Germany, Malaysia, Singapore and Taiwan were included on its monitoring list. These countries exceeded two of three thresholds: a trade surplus with the U.S. above $15 billion, a high global current account surplus above 3% of gross domestic product and persistent net foreign currency purchases exceeding 2% of GDP over a year.

— Florida Everglades ag area is essential to sugar cane, vegetable and rice crops, but a century of drainage projects has turned it into a significant source of greenhouse gas emissions, Inside Climate News reports (link).

USDA daily export sales:

433,000 MT soybeans to China during 2023-2024 marketing year
270,000 MT corn to Mexico during 2023-2024 marketing year
132,000 MT soybeans to unknown destinations during 2023-2024 marketing year
344,500 MT soybeans received in the reporting period to unknown destinations during 2023-2024 marketing year

— Ag trade update: South Korea purchased 65,000 MT of corn expected to be sourced from South America or South Africa. Algeria purchased at least 550,000 MT of milling wheat expected to be sourced from the Black Sea region and France. Japan tendered to buy 60,000 MT of feed wheat and 20,000 MT of feed barley.

— This year is “virtually certain” to be the hottest on record, according to the EU’s climate change service and the World Meteorological Organization. Global average air temperatures in October were 0.4°C warmer than the previous record for that month, set in 2019. Separately, the WMO said that there is a 90% chance that El Niño, a warming weather pattern, will last until at least April 2024.

— NWS weather outlook: Warm to record breaking temperatures from Southern High Plains to Southeast today will give way to cooler conditions late this week... ...Post-frontal rain develops across Southern Plains and Lower Mississippi Valley on Thursday... ...Storm system brings rain and snow to the Pacific Northwest beginning Thursday night.

POLITICS & ELECTIONS

— Democrats experienced several notable victories in Tuesday elections:

Incumbent Democratic Governor Andy Beshear secured his re-election in Kentucky (in a state that backed Trump by 26 percentage points in 2020). He defeated Republican Daniel Cameron, who is known to be closely aligned with Senate Minority Leader Mitch McConnell (R-Ky.). Beshear will now be seen as a rising star among Democrats.
Ohio voters took a significant step by incorporating the right to an abortion into the state’s constitution, which implies a strong commitment to protecting reproductive rights.
Democrats successfully gained control of the state legislature in Virginia, marking a significant political shift in that state, and deflating rising GOP star Glenn Youngkin.
Gabe Amo, a former aide to President Joe Biden, emerged victorious in a special election held in Rhode Island, further bolstering Democratic representation in that region. The victory will, for a few weeks, give Speaker Mike Johnson (R-La.) even less room to maneuver. It cuts the GOP majority to 221-213, with a Utah special election pending on Nov. 21 to fill the seat opened by the retirement of former Rep. Chris Stewart (R). Republicans are heavily favored to keep that seat and bump their majority back up by one.
Daniel McCaffery, a Pennsylvania Supreme Court candidate who ran on abortion rights, also won.

Tuesday’s elections included GOP victories, most prominently in Republican-dominated Mississippi, where voters reelected Gov. Tate Reeves over Democratic challenger Brandon Presley.

Bottom line: These outcomes reflect a positive Election Night for Democrats, with wins in gubernatorial, legislative, and special elections, as well as advancements in issues related to abortion rights and progressive policies. Abortion-rights supporters spent millions of dollars to tell voters that GOP lawmakers couldn’t be trusted to set state abortion policy after the Supreme Court last year eliminated a right to the procedure under the U.S. Constitution. Their success gives Democrats hope that they can leverage the issue again in 2024 to offset voter disenchantment with the economy and President Biden.

— Five Republican presidential candidates who made the cut will take the stage tonight in Miami for the third, and less crowded, GOP debate. Former President Trump will skip the event for the third straight time, instead holding a rally about 15 miles away. Former New Jersey Gov. Chris Christie, Florida Gov. Ron DeSantis, former United Nations Ambassador Nikki Haley, businessman Vivek Ramaswamy and Sen. Tim Scott of South Carolina qualified for the event, hosted live by NBC News.

CONGRESS

— Rep. Rashida Tlaib censured over controversial Israel comments, with the help of Democrats. The House of Representatives voted late on Tuesday to censure Rep. Rashida Tlaib (D-Mich.) due to a series of controversial comments she made regarding Israel. This decision came after bipartisan backlash and involved nearly two dozen Democrats who voted to reprimand Tlaib. A similar measure had failed the previous week.

The censure resolution passed with a vote of 234-188-4, with 22 Democrats breaking ranks to vote in favor of censure, while four Republicans voted against it. The resolution moved forward after a motion to table it failed in a 208-213-1 vote earlier on Tuesday.

The Democrats who voted yes include: Reps. Steve Cohen (Tenn.), Jim Costa (Calif.), Angie Craig (Minn.), Don Davis (N.C.), Lois Frankel (Fla.), Jared Golden (Maine), Dan Goldman (N.Y.), Josh Gottheimer (N.J.), Greg Landsman (Ohio), Susie Lee (Nev.), Kathy Manning (N.C.), Jared Moskowitz (Fla.), Wiley Nickel (N.C.), Chris Pappas (N.H.), Marie Gluesenkamp Perez (Wash.), Pat Ryan (N.Y.), Brad Schneider (Ill.), Kim Schrier (Wash.), Darren Soto (Fla.), Ritchie Torres (N.Y.), Debbie Wasserman Schultz (Fla.) and Frederica Wilson (Fla.).

Not all Republicans were on board, with Reps. Ken Buck (Colo.), Thomas Massie (Ky.), John Duarte (Calif.) and Tom McClintock (Calif.) voting against the resolution.

The censure resolution was introduced by Rep. Rich McCormick (R-Ga.) and cited Tlaib’s statements after the Oct. 7 attack on Israel by Hamas, where she called Israel an “apartheid government” and attributed the violence to U.S. financial support of Israel. The resolution also condemned her refusal to retract a tweet blaming Israel for a hospital bombing in Gaza. Tlaib shared a video featuring protesters chanting “from the river to the sea,” which some view as a call for violence to destroy the state of Israel. In contrast, Tlaib defended her use of the video as an “aspirational call for freedom, human rights, and peaceful coexistence.”

— House GOP leaders pulled the Transportation-HUD spending bill Tuesday night because both moderate and conservative Republicans rebelled. A dispute over spending for Amtrak prompted House Republicans leaders to not take up the Transportation-HUD spending plan for fiscal year (FY) 2024. The situation is raising talk that a government shutdown could emerge as lawmakers face a Nov. 17 deadline to keep the government operating.

— Republicans reportedly did not back the concept of a laddered approach in a continuing resolution (CR) to keep the government funded past Nov. 17. But they also failed in their weekly caucus meeting to back any other approach to keeping the government funded. Under a laddered approach, some agencies would face different spending deadlines in the CR. But that approach was also unlikely to move forward with opposition to the plan in the Senate.

— McConnell links Ukraine funding to border policy fix. Senate Minority Leader Mitch McConnell (R-Ky.) has firmly stated that Republicans will not support a substantial foreign-aid package, which includes Ukraine funding, unless there is a GOP-approved resolution for the U.S./Mexico border, encompassing policy changes and increased funding. This decision carries significant political risks, as it ties Ukraine, a pressing international issue, to the contentious immigration policy, potentially jeopardizing the larger aid package and McConnell’s aspiration for robust Ukraine funding that could last until the 2024 elections.

Despite Democrats’ criticism of the Republican border proposal, they are willing to engage in negotiations, recognizing the seriousness of McConnell’s demands. Senate Majority Leader Chuck Schumer (D-N.Y.) said he aims for a “true bipartisan deal” on immigration rather than a partisan wish list, indicating a sense of urgency among top Democrats in light of GOP requirements. Democrats are emphasizing the dire consequences for Ukraine if new aid is not approved, and President Biden has stressed the importance of maintaining U.S. credibility and European security by supporting Ukraine.

Key Democrat comments. Sen. Chris Murphy (D-Conn.), who chairs the Appropriations subcommittee overseeing border operations, suggests that any border package should be “targeted” and “lean,” potentially increasing the chances of a deal as it would not involve a comprehensive overhaul of immigration laws, a more formidable obstacle.

ISRAEL/HAMAS CONFLICT

— G7 foreign ministers support ‘humanitarian pauses and corridors’ in Gaza, urging Iran to avoid destabilization. During their meeting in Japan, G7 foreign ministers expressed their support for “humanitarian pauses and corridors” in Gaza but stopped short of calling for a ceasefire. In a joint statement, they also called on Iran to “refrain” from actions that could destabilize the Middle East. Antony Blinken, the U.S. Secretary of State, emphasized key elements for peace, including preventing the forcible displacement of Palestinians and avoiding the reoccupation of Gaza by Israel. In a separate development, Israel reported targeting a prominent Hamas weapons maker while focusing on the militant group’s tunnel network beneath the Gaza Strip.

RUSSIA/UKRAINE

— Russia to maintain elevated seasonal grain export quota following bumper wheat harvest. Russia intends to retain a high seasonal grain export quota, expected to be set at 24 million tons for the second half of the season from Feb. 15 to the end of June. While the specific allocation for wheat was not mentioned, experts suggest that this generous quota is unlikely to restrict grain exports. Russia has historically utilized quotas to secure domestic grain supplies, but this move echoes the substantial cap introduced in 2022, which had minimal impact on global markets. The country, now the world’s top wheat exporter, has achieved another significant harvest, further solidifying its position.

Meanwhile, challenges stemming from Moscow’s invasion of Ukraine have hindered Ukrainian food exports, while Russian traders have managed to overcome financial and logistical obstacles to deliver record shipments. The Russian export quota also encompasses shipments from regions of Ukraine under Moscow’s control, according to Interfax.

POLICY UPDATE

— ERP Phase 2 payments reach $783.89 million, total ERP program now at $8.23 billion. As of Nov. 5, the total Emergency Relief Program (ERP) has continued to increase, reaching $8.23 billion. This figure represents a slight uptick from the previous week. Specifically, Phase 2 ERP payments have seen notable growth, increasing to $783.89 million from $767.99 million in the prior week. These Phase 2 payments have been disbursed to a total of 10,024 recipients, signifying ongoing efforts to provide essential relief and support in various sectors.

CHINA UPDATE

— Reuters: China makes large U.S. soybean purchases. Chinese importers bought around 10 cargoes of U.S. soybeans (about 600,000 MT) for shipment from Gulf and Pacific Northwest export terminals between December and March, trade sources told Reuters. If confirmed, Tuesday’s sales would be the largest single-day soybean purchases by China since late July. Cash premiums for U.S. soybeans at Gulf Coast terminals jumped as much as 10 cents a bushel on Tuesday as exporters scrambled to source supplies, traders said.

— Reuters: China asks insurance group to aid embattled property developer. Chinese authorities have asked Ping An Insurance Group to take a controlling stake in embattled Country Garden, the country’s biggest private property developer, four people familiar with the plan told s. A spokesperson for Ping An said the company had not been approached by the government and denied the information reported by Reuters.

TRADE POLICY

— Sen. Brown opposes Biden’s Indo-Pacific Economic Framework over trade pillar concerns. Sen. Sherrod Brown (D-Ohio), Chairman of the Senate Banking Committee, conveyed his opposition to the Biden administration’s Indo-Pacific Economic Framework for Prosperity (IPEF) during a Democratic caucus lunch. According to Politico, Brown expressed his stance that he will oppose the IPEF unless the administration removes the trade pillar from the agreement. His primary concerns revolve around labor standards within the deal. It’s noteworthy that Sen. Brown’s opposition could have an impact, even though Congress does not have the opportunity to vote on the IPEF, as it is not being negotiated as a free trade agreement.

ENERGY & CLIMATE CHANGE

— U.S. seeks to buy up to 3 million barrels for oil reserve for January delivery. The Biden administration is making efforts to acquire up to three million barrels of oil, scheduled for delivery in January 2024, to replenish the nation’s strategic petroleum reserve (SPR), as announced by the Department of Energy. This procurement initiative is the second solicitation for January 2024 delivery, aligning with the Department’s goal to make oil purchases at advantageous terms for taxpayers. In the previous month, the administration expressed its intent to acquire six million barrels of crude oil, slated for delivery in December and January.

Of note: Data show a static level in the SPR for October and November. Total in it is 351.3 million barrels.

LIVESTOCK, NUTRITION & FOOD INDUSTRY

— Vilsack to unveil new final rule on poultry contracting. Ag Secretary Tom Vilsack today will emphasize USDA’s commitment to enhancing agricultural markets, establishing new revenue avenues, and boosting competition within the industry. This development follows the Office of Management and Budget’s recent completion of its review of the USDA’s final rule titled “Transparency in Poultry Grower Contracting and Tournaments.” The Biden administration has been swiftly announcing new regulations once OMB concludes its mandatory review of a rule. In July, USDA forwarded the final rule to OMB, and the review process was finalized on Monday, Nov. 6. This impending announcement signals USDA’s dedication to addressing issues related to transparency and competition in the poultry contracting sector, with potential implications for growers, producers, and the broader agricultural community.

— Another HPAI confirmation in Iowa. The Iowa Department of Agriculture confirmed highly pathogenic avian influenza (HPAI) in Kossuth County, Iowa, involving a site with 8,400 game bird pheasants, 16 peafowl, and 160 commercial layer chickens. USDA on November 6 confirmed HPAI was also found at a commercial broiler hatcher in Hamilton County, Iowa, with 15,000 birds. Over 1 million birds have been affected by HPAI in November (backyard and commercial operations combined), with a confirmation Nov. 3 of 940,000 birds in a commercial table egg layer flock in Wright County, Minnesota, accounting for most of the total. USDA info reveals a total of 1.37 million birds in backyard and commercial operations combined were affected during October.

OTHER ITEMS OF NOTE

— California’s glyphosate warning rejected. The U.S. appeals court in San Francisco, in a 2-1 decision, ruled that a California state law unconstitutionally required a warning label on the weedkiller Roundup, saying its main ingredient was known to cause cancer. (9th Circuit U.S. Court of Appeals). Link to ruling.

KEY LINKS

Policy Updates