Harris, Trump Meet for First Time at Tonight’s Debate

News/Markets/Policy Updates: Sept. 10, 2024

— Equities today: Asian and European stock indexes were mostly higher overnight. U.S. Dow opened around 70 points higher but is now trading just over 200 points lower. In Asia, Japan -0.2%. Hong Kong +0.2%. China +0.3%. India +0.4%. In Europe, at midday, London -0.6%. Paris +0.2%. Frankfurt -0.2%. Traders will be watching inflation data as they anticipate an interest rate cut at the Federal Reserve’s policy meeting next week. The August consumer price index is due Wednesday, while the producer price index is set for Thursday.

U.S. equities yesterday: U.S. equities put last week’s losses in the rearview mirror and scored solid gains to open the week. The Dow was up 414.18 points, 1.20%, at 40,829.59. The Nasdaq gained 193.77 points, 1.16%, at 16,884.60. The S&P 500 was up 62.63 points, 1.16%, at 5,471.05.

— Bad news for Apple. The EU’s top court upheld a 2016 decision that Ireland had to collect €13 billion, about $14 billion at today’s exchange rates, for giving Apple a low-tax deal. Tim Cook, Apple’s CEO, has called the tax accusations “political crap,” and the U.S. Treasury Department has accused Brussels of acting as a “supranational tax authority” in ways that could threaten global reforms. The EU’s antitrust chief also fined Apple almost $2 billion in March for using its App Store to limit competition. (Apple is appealing.)

— The EU’s top court also upheld a fine of €2.42 billion ($2.7 billion) that antitrust officials imposed on Google over how its comparison-shopping service fares in search results. The commission levied the fine in 2017, saying Google had abused its market dominance as a search engine by promoting its own comparison-shopping service in search results and demoting those of competitors.

— Ag markets today: Soybean futures erased Monday’s strong gains during the overnight session, while corn mildly followed to the downside and wheat was choppy. As of 7:30 a.m. ET, corn futures were trading a penny lower, soybeans were 12 cents lower and wheat futures were a penny lower to 2 cents higher.

Cash cattle slide continues. Cash cattle averaged $181.18 last week, down $2.63 from the previous week. That was the sixth straight weekly decline and the lowest average price since mid-February. Despite the cash weakness, cattle futures posted strong gains, finishing high-range and more than $3.00 off their intra-day lows as traders narrowed up discounts to the cash market. But traders likely need some indications of a short-term low in the cash market before they are active buyers.

Cash hog fundamentals weaken. The CME lean hog index is down 50 cents to $85.74 as of Sept. 6, the lowest since April 2. The pork cutout dropped 38 cents on Monday to $95.72. Estimated packer cutting margins stood at $25.70 per head in the black on Monday, according to HedgersEdge.com.

— Agriculture markets yesterday:

• Corn: December corn rose a penny to $4.07 1/4, ending near the session high.
• Soy complex: November soybeans rallied 13 cents to $10.18, closing back above the 40-day moving average and near the session high, while December soymeal rose 60 cents to $325, forging a low-range close. December soyoil closed 85 points higher at 40.48 cents, closing near the session high.
• Wheat: December SRW wheat rose 1 1/2 cents to $5.68 1/2 and near the daily high. December HRW wheat fell 1 3/4 cents to $5.75 3/4 and near mid-range. December spring wheat futures fell 7 cents to $6.06 3/4.
• Cotton: December cotton fell 19 points to 67.69 cents, nearer the daily low and hit a three-week low.
• Cattle: October live cattle futures settled $1.75 higher at $176.925, nearer session highs. October feeder cattle futures climbed $3.775 to $234.725.
• Hogs: October lean hog futures sunk 70 cents to $78.80 and settled nearer session lows.

— Quotes of note:

• No shrimpy appetite. “We called them campers. This one couple, they came in every Sunday, and I’d say they ate about 100 shrimp apiece, maybe 120.” — Zachary Spain, a manager at the Red Lobster location in Times Square, recalling the doomed Ultimate Endless Shrimp promotion that helped drive the restaurant chain into bankruptcy.

• “Apple Intelligence draws on the immense power of our silicon to run multiple generative models on the iPhone in your pocket.” — Apple software chief Craig Federighi. The new iPhone line has a chip that Apple executives say will help power the new AI features, and Apple says it is faster than competing devices and even some high-end desktop PCs.

Market perspectives:

— Outside markets: The U.S. dollar index was higher, with the euro pivoting around unchanged with the British pound firmer against the greenback. The yield on the 10-year U.S. Treasury note rose, trading around 3.72%, with a mixed-to-positive tone in global government bond yields. Crude oil futures were lower, with U.S. crude trading at around $67.80 per barrel and Brent trading at around $71 per barrel. Gold and silver futures were up, with gold around $2,534 per troy ounce and silver around $28.78 per troy ounce.

— Tether: the unregulated digital dollar fueling a shadow economy. Tether, a cryptocurrency, has become a key player in global finance, moving as much as $190 billion daily, the Wall Street Journal reports (link). Despite its stablecoin status and 1:1 peg to the U.S. dollar, it is privately controlled in the British Virgin Islands. Its unregulated nature undermines U.S. efforts to combat arms dealers, sanctions evaders, and scammers. Tether has become highly profitable, even outpacing financial giants like BlackRock with minimal staff. It facilitates a parallel economy that evades U.S. law enforcement.

— Alan Shaw, CEO of Norfolk Southern since May 2022, is reportedly set to leave the company amid an investigation into an alleged relationship with an employee, the Wall Street Journal reports (link). Shaw’s departure would cap a turbulent tenure marked by criticism over safety practices, particularly following a toxic train derailment in Ohio in 2023, which resulted in a $600 million settlement. Norfolk Southern also faced pressure earlier this year from activist investor Ancora Holdings, which criticized its handling of the derailment and financial performance. Shaw’s exit follows a trend of high-profile executives losing their jobs due to policy violations.

— Tropical Storm Francine to hit Louisiana, threatens oil production. Tropical Storm Francine has formed in the southwestern Gulf of Mexico and is projected to make landfall near Louisiana late Wednesday, according to the U.S. National Hurricane Center.

The storm may disrupt offshore oil and natural gas production, with some crews already evacuated. The U.S. Coast Guard has ordered the closure of all operations at the Port of Brownsville and other small Texas ports while Corpus Christi remained open. Some companies have also started to alter their operations in the region. Exxon Mobil said it would close its Hoover offshore production platform while Shell reported suspending drilling operations at two platforms, Reuters reported, while Chevron was also halting gas and oil output at two offshore platforms.

Francine is expected to bring 4 to 8 inches of rainfall, with localized areas receiving up to 12 inches. This would be the third named storm to hit the U.S. mainland in 2024, following a brief lull in what has been an active hurricane season.

— NWS outlook: Life-threatening storm surge and hurricane-force winds, as well as the risk of considerable flash flooding are forecast across southern Louisiana on Wednesday as Francine approaches... ...Heavy rain expected to impact parts of the northern Rockies by midweek... ...Elevated to critical fire weather concerns across much of the Intermountain West.

(NWS)

Items in Pro Farmer’s First Thing Today include:

• Soybeans post sharp losses overnight
• Cordonnier leaves U.S. yield estimates unchanged
• S&P Global forecasts bigger U.S. corn, soybean crops than USDA’s August estimates
• Corn, soybean CCI ratings increase

— House passes bill to blacklist Chinese biotech firms amid security concerns. The House of Representatives passed the Biosecure Act, a bill that blacklists five Chinese biotech companies and their U.S. subsidiaries due to national security concerns. The legislation, approved by a vote of 306 to 81, targets firms like BGI Group and WuXi Biologics, citing fears that China could use biological data for bioweapons. Despite lobbying efforts and pushback from some lawmakers, the bill now moves to the Senate. The legislation has implications for the global pharmaceutical supply chain, as Chinese companies play a significant role in drug manufacturing. China has opposed the bill, calling it discriminatory.

— Johnson CR plan headed for defeat. House Speaker Mike Johnson’s (R-La.) plan to fund the government through March 28, 2025, is facing significant challenges and appears likely to fail. At least six House Republicans have publicly stated their opposition to Johnson’s continuing resolution (CR) plan. This level of opposition is crucial, as Johnson can only afford to lose four Republican votes given the slim GOP majority in the House.

The opposing Republicans include:
• Greg Steube (Florida)
• Cory Mills (Florida)
• Jim Banks (Indiana)
• Tim Burchett (Tennessee)
• Thomas Massie (Kentucky)
• Matt Rosendale (Montana)

These lawmakers have various reasons for their opposition, with some stating they have never supported CRs and others criticizing the plan for not doing enough to address border security.

Johnson’s CR proposal includes two main elements
• A six-month funding extension at current levels through March 28, 2025.
• The SAVE Act, which would require proof of citizenship for voter registration in federal elections.

The inclusion of the SAVE Act has drawn strong opposition from Democrats. Senate Majority Leader Chuck Schumer (D-N.Y.) declared the plan “dead on arrival” in the Senate. President Biden has promised to veto the proposal if it reaches his desk. Democrats are advocating for a “clean CR” without additional provisions. Johnson may be forced to consider a clean CR, which would require Democratic support to pass. The House might need to explore other funding options that can garner broader support.

Of note: Punchbowl News reported this morning that “Speaker Mike Johnson called us this morning ahead of the closed GOP meeting where he plans to pitch his six-month stopgap funding bill. Johnson told us that he does not think it ‘behooves the country’ to shut down the federal government ahead of the election. ‘I don’t think anybody desires that, and we have an obligation to try to prevent that from happening,’ Johnson told us. ‘So that’s what I’m working on.’ Johnson said he has not ‘drawn out contingencies’ if this plan cannot pass.

— China urged to spend up to $1.4 trillion to battle deflation. Estimates underline the scale of challenge facing Beijing as it seeks to reboot economy. Link to more via the Financial Times.

— China’s copper imports fall 12.3% as weak economy restrains demand. August data from the world’s top consumer highlights headwind for global prices. Link for details via Nikkei Asia.

— China’s exports surge amid weak domestic economy, raising global concerns. In August, China’s exports surged by nearly 9%, reaching $309 billion, the highest since September 2022, while imports remained stagnant at 0.5%. The strong export growth provided a rare boost to China’s economy, which has been struggling with deflation and a housing slump. The trade surplus for the month was $91 billion. Despite the positive export figures, the influx of cheaper Chinese goods has sparked concerns in the U.S., South America, and Europe, leading to tariffs on certain products like electric cars and steel. With exports to almost every market growing — particularly to the EU, India, and Brazil — questions remain about the sustainability of China’s growth strategy as global trade tensions rise. Analysts warn that China’s weak domestic demand, coupled with global economic uncertainty, poses risks to its overall economic recovery.

(China’s General Admin. of Customs, Bloomberg)

— Taiwan’s exports reached a record $43.6 billion in August, driven by surging demand for semiconductor equipment fueled by the artificial intelligence boom. Exports to the U.S. rose 79% to a record $11.9 billion, surpassing shipments to China and highlighting a significant shift in Asian supply chains. Taiwan’s finance ministry expects exports to continue growing in the second half of the year, supported by the peak export season and ongoing AI-related demand.

— China’s soybean imports reached a record high in August 2024, reflecting significant growth in the country’s demand for the oilseed. China imported a record 12.14 million metric tons (MMT) of soybeans in August 2024. This represents a substantial increase of 29% compared to August 2023, when imports totaled 9.43 MMT.

Several factors contributed to this record-breaking import volume:
• Lower prices: Traders took advantage of lower soybean prices in the global market to stock up on supplies.
• Potential tariffs: Concerns about possible tariffs that could be implemented if former President Donald Trump wins the November election may have prompted increased imports.
• Customs clearance: Ships that had been held up were cleared by customs, contributing to the higher import figures.

Year-to-date imports: For the period of January to August 2024, China’s soybean imports reached 70.48 MMT, marking a 2.8% increase compared to the same period in the previous year.

USDA forecasts China’s soybean imports for the 2024-25 marketing year to reach 103 million metric tons. Increased soybean meal inclusion rates in animal feed, stable demand in the poultry sector, and growing demand in aquaculture are expected to support imports. But weaker demand in the swine sector due to declining production may partially offset the growth in other areas.

— Chinese meat imports have declined significantly compared to previous years. Through the first eight months of 2024, China imported 4.40 million metric tons (MMT) of meat products, down 13.9% from the same period in 2023. In August 2024, China imported 565,000 MT of meat, which was 9.9% lower than August 2023. Beef imports have been particularly affected, with volumes down 27% year-over-year in July 2024.

Several factors are contributing to lower Chinese meat imports in 2024:
• Economic headwinds are impacting consumption of both pork and beef.
• China has ample domestic meat supplies after building up stocks in 2023.
• Pork production in China remains high, reducing import needs.
• Chinese consumers are seeking cheaper protein options due to economic slowdown.
• Import bans on some U.S. meat facilities have restricted supply.

Pork
• Pork imports may grow marginally to offset a forecasted 3% decline in domestic production.
• China’s pork output fell 0.4% year-over-year in Q1 2024, the first quarterly decline in nearly 4 years.

Beef
• Beef imports are expected to decline in 2024 due to high year-end inventory and flat demand.
• China’s share of global beef imports is forecast to be 5% below 2023 levels.

Poultry
• Poultry meat imports accounted for $282 million in July 2024, resulting in a negative trade balance.

Impact on global trade
• The U.S. has seen a fall in meat exports as China scales back imports.
• Brazil has increased beef exports to China, up 10.2% in the first half of 2024.
• Australia has shifted more beef exports to the U.S. and Japan as Chinese demand weakens.

Bottom line: While there have been some month-to-month fluctuations, overall Chinese meat imports remain well below 2023 levels as domestic production remains high and economic factors dampen demand. This has led to shifts in global meat trade flows, with exporters like the U.S., Brazil and Australia adjusting to changing Chinese import patterns.

— EU set to slightly lower tariffs on Chinese EV imports, including Tesla. The European Union is preparing to make slight reductions to proposed tariffs on electric vehicles imported from China. Mlex first reported the changes on Monday, saying Tesla’s rate will drop to 7.8%. The new highest rate for Chinese producers that failed to cooperate with the EU’s probe will be set at 35.3%, down from 36.3%, according to the news organization. These additional tariffs, on top of the existing 10% duty, are set to be voted on by EU member states before taking effect in November.

— WTO warns protectionism will widen global wealth gap, undermine decades of progress. The World Trade Organization (WTO) in a report (link) warned that rising protectionism threatens to reverse 30 years of progress in reducing income disparities between rich and poor countries. Since 1995, per capita income in low- and middle-income nations has nearly tripled, while global income has risen by 65%. WTO Director-General Ngozi Okonjo-Iweala countered claims that trade harms poorer nations, but acknowledged that globalization has left some workers in wealthier countries feeling left behind. Protectionism, she argued, raises production costs and risks retaliation, worsening economic inequalities.

While defending trade’s overall benefits, the WTO acknowledged some negative impacts:
• Some workers in wealthier countries have felt left behind by globalization.
• The benefits of trade have not been evenly distributed, contributing to political backlash in some nations.

Between 1995 and 2022, the WTO estimated that the share of poor and middle-income economies in global trade grew to 38% from 21%, while the share of trade between those economies in world trade almost quadrupled, increasing to 19% in 2021 from 5% in 1995. During that period, income per person in poor and middle-income countries tripled, the WTO said. “These are difficult times for globalization,” said Ralph Ossa, the WTO’s chief economist. “What is really important to do is change the narrative.”

The WTO urged governments to:
• Resist implementing tariffs and other barriers to international commerce.
• Pursue policies that harness trade’s benefits while addressing its downsides through targeted support for affected workers and communities.

Instead of raising barriers, the WTO said governments should help workers acquire new skills that are in high demand, and make it easier for them to move to locations where new jobs are being created. “If you want to help, the more promising approach is to help workers move towards opportunity,” Ossa said.

Bottom line: WTO’s report (link) presents a strong defense of open trade policies while recognizing the need for complementary measures to ensure more inclusive economic growth. It warns that a turn towards protectionism could reverse decades of progress in reducing global economic inequality.

— Highlights of NPPC virtual briefing on key challenges.

• Bottom line issues: Brian Humphreys, CEO of the National Pork Producers Council, said: We’re here to find solutions, not just discuss challenges. We need a 2024 Farm Bill — not an extension. We need a legislative fix to California’s Prop 12, resolutions to the labor shortage, and an active trade agenda. NPPC says moving a new farm bill this year with language restricting state animal welfare rules is the group’s top priority.

• Need for new farm bill: “With all the stress on farmers now, it’s important that we get this moved now while we’ve got the opportunity,” Duane Stateler, president-elect of NPPC, said in the virtual briefing. “If the farm bill goes into next year, it starts all over. We have many good things in this farm bill which makes it imperative we get it done in 2024,” Lori Stevermer, NPPC president, said in the briefing.

• Proposition 12: The 2024 Farm Bill is a golden opportunity to address a top issue for pork producers across the country – California Prop 12,” Stevermer said. Proposition 12, a 2018 California ballot initiative, prohibits the sale of uncooked whole pork meat not produced according to the state’s arbitrary housing dimensions. The initiative places the cost and compliance burden on pork producers, who are nearly all located outside of California, and puts the industry at risk of significant consolidation, NPPC argues. The Supreme Court of the United States said this is an issue for Congress to solve, and NPPC has been urging passage of the farm bill which includes a federal solution to Prop 12. “We cannot continue down a path of unscientific rules and regulations,” Humphreys said on the call. “It’s not a question about what has happened, but it’s a question of how do we move forward and protect the U.S. from this patchwork of regulations? We appreciate the bipartisan solution in the farm bill to make that happen.”

Stevermer said Prop 12 impacts extend beyond producers as it has also resulted in higher prices for consumers. “Pork prices are up on average 20% since Prop 12 went into place, and the supply is down about 20% so that’s not good for consumers, and it’s not good for farmers either,” she said.

• Labor issues remain a concern, with the group presses for improvements to the TN skilled guestworker visa program. NPPC said policy concerns include addressing the persistent ag labor shortage and contending with inflationary impacts on production costs. While ag labor discussions often focus on the H-2A ag guestworker program for low-skilled farm laborers, pork industry officials said they also face difficulty using the TN visa program, which allows businesses to procure skilled workers from Mexico and Canada. The State Department recently made changes to the program aimed at streamlining it, but NPPC officials said they have effectively closed off the ability to use TN visas by the pork sector. “It just seems like every day there’s less and less TNs approved,” said NPPC Vice President Rob Brenneman. He explained that the program has become more important in helping producers secure the workers skilled in utilizing new production technologies that are difficult to find in the domestic labor market. “I think it’s absolutely absurd that we just keep getting TNs denied … we’ve been to the State Department, and we’ve been to the White House and had conversations, and it just seems like they’re doing everything in their power to do the opposite of what we’re asking because nothing’s changed,” Brenneman said.

• Cost of production. NPPC officials said that besides labor shortages, producers also continue to grapple with higher production costs, though the growth in costs has slowed in areas like feed. Other fixed costs like transport, labor and utility bills mean overall production costs remain roughly 25% higher than they were three years ago, officials stressed. “While we’re getting a little relief on the feed side, we’re still seeing elevated costs of production,” said NPPC board member Scott Hays.

• CAFOs: Officials were asked to weigh in on a lawsuit from environmental groups seeking to compel EPA to act on their petition seeking an overhaul of how the agency regulates concentrated animal feeding operations (CAFOs). NPPC and other livestock and poultry interests are backing EPA’s decision to deny the petition, as the question heads to federal court later this week. Calling the CAFO lawsuit “an attack on ag by activist groups,” NPPC’s Statler said, noting EPA was right to deny the petition. “What they’ve asked EPA to do was illegal.” Stateler praised EPA for engaging with stakeholders including NPPC on the issue to gather information before considering any additional action. “They decided to take a look and look at the facts, and they turned it over to explore the issues that are really involving all CAFOs and the ag groups, including NPPC, are participating in that process,” he added, saying the group looks forward to finding a solution that works for all involved.

• Trade policy: NPPC continues to urge new trade agreements, but acknowledges new FTAs are unlikely. “We know that’s not how things are being done — in the manner that maybe they were, you know, 10 or 15 years ago,” Stevermer said regarding new FTAs, but she added that such agreements are not an end all be all for trade. Trade programs like the Generalized System of Preferences (GSP) and African Growth and Opportunity Act (AGOA), both pending renewal, are also important for the sector, she said.

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