House Farm Bill Strategy: Compromise to Get Additional Democratic Votes

Trade policy initiatives evident around the world as U.S., China, EU mull big changes

Jim Wiesemeyer

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May 28, 2024 08:43 AM

Trade policy initiatives evident around the world as U.S., China, EU mull big changes

Today’s Digital Newspaper

MARKET FOCUS

Stocks on track to close out month on strong note
T+1 settlement for U.S. securities transactions goes into effect today
Apple’s China iPhone shipments up 52% as rebound gains steam
Hess shareholders due to vote on company’s $53 billion sale to Chevron
T-Mobile to acquire most of U.S. Cellular in $4.4 billion deal
Fed’s Mester: Central bank should consider ways to better communicate to public
Goldman economists alter forecasts to start cutting rates to September from July
ECB poised to cut interest rates amid falling inflation
Japan cemented its position as world’s largest creditor
Cost of international shipping surges
Ag markets today
USDA daily export sale: 215,000 metric tons of corn for delivery to Mexico
Grain trader and analyst Richard Crow on the wheat market
Ag trade update
NWS weather outlook
Pro Farmer First Thing Today items

BALTIMORE BRIDGE COLLAPSE

Francis Scott Key bridge debris cleanup delayed to June 10, affecting shipping traffic

CONGRESS

Big impacts if 2017 Trump cuts expire… or are extended

ISRAEL/HAMAS CONFLICT

Israel and Egypt aim to contain Gaza conflict after Rafah airstrike
Israeli tanks reach center of Rafah: AFP

RUSSIA & UKRAINE

Russia increasing control over its grain industry
IKAR further cuts Russian wheat production, export forecasts
Traders union cuts Ukraine grain/oilseed crop forecast

POLICY

How Democrats voted on House Ag Committee markup of farm bill
May be more “give” to new farm bill negotiations than naysayers believe

CHINA

China hails ‘new beginning’ at summit with Japan and South Korea
While U.S. importers decry levies on Chinese goods, U.S. manufacturers are happy
China’s sow herd shrinks
EU, Australia agree to boost cooperation on critical minerals, reduce reliance on China

TRADE POLICY

Why Mexico wants to ban U.S. genetically modified (GMO) corn for food
Commentary: No, trade surpluses aren’t caused by comparative advantage
Macron renews ‘buy European’ call, advocates doubling EU public investment

ENERGY & CLIMATE CHANGE

Biden administration introducing framework to use carbon offsets for climate progress
Automakers electrify Brazil’s unique sugarcane cars
NYT: Biden admin aims to make Chinese electric vehicles prohibitively expensive

LIVESTOCK, NUTRITION & FOOD INDUSTRY

FSIS recently detected viral particles in beef samples for first time
U.S., other countries consider vaccinating workers exposed to H5N1
Soda startup Olipop Inc. projected to achieve $500 million in sales this year
Study warns of H5N1 risks in raw milk, highlights need for pasteurization

POLITICS & ELECTIONS

Trump leading President Joe Biden, especially in crucial swing states
Canadian PM Justin Trudeau faces critical juncture as he trails significantly in polls
Sen. John Cornyn (R-Texas) intends to seek re-election in 2026

OTHER ITEMS OF NOTE

America is getting ready for space warfare
Argentina President Javier Milei accepts resignation of cabinet chief, Nicolás Posse

MARKET FOCUS

— Equities today: Asian and European stock indexes were mixed overnight. In Asia, Japan -0.1%. Hong Kong flat. China -0.5%. India -0.3%. In Europe, at midday, London -0.3%. Paris -0.6%. Frankfurt +0.1%. Chinese property stocks experienced a decline after initially rising. This shift occurred because skepticism about potential sales improvements overshadowed the temporary positive sentiment generated by Shanghai’s policy to ease housing restrictions. U.S. Dow is currently down around 100 points. No big data reports in the U.S. come until Friday when we get PCE inflation numbers, the Federal Reserve’s preferred gauge of inflation. Economists expect the personal consumption expenditures (PCE) price index minus food and energy to rise 0.2% in April. That would mark the smallest advance so far this year for the measure.

U.S. equities Friday: All three major indices managed gains on Friday, but the Dow lost ground for the week, ending down 2.3%, snapping a string of what had been five weekly advances. The Nasdaq and S&P 500 still managed to end higher for the week, the first week in a row they finished higher, with the Nasdaq up 1.4% and the S&P 500 was up less than 0.1%. On Friday, the Dow was up 4.33 points, 0.01%, at 39,069.59. The Nasdaq was up 184.76 points, 1.10%, at 16,920.79. The S&P 500 added 36.88 points, 0.70%, at 5,304.72.

Stocks are on track to close out the month on a strong note. The S&P 500 has added 5.3% so far in May, while the Nasdaq Composite has rallied about 8%, after ending last week at a fresh record high. The Dow is up 3.3% for the month and topped 40,000 for the first time ever in May.

— T+1 settlement for U.S. securities transactions goes into effect today when markets reopen. “For everyday investors who sell their stock on a Monday, shortening the settlement cycle will allow them to get their money on Tuesday,” Gary Gensler, chair of the Securities and Exchange Commission, said in a press release. “It will make our market plumbing more resilient, timely and orderly.” These new rules will apply to stocks, bonds, municipal securities, exchange-traded funds, some mutual funds and limited partnerships that trade on an exchange. Broker-dealers and registered investment advisors will also have to follow new recordkeeping rules. Bloomberg cautions that international investors may struggle to source dollars on time and the new system will face two big immediate tests — a double settlement day tomorrow and the MSCI’s rebalancing at the end of the week. Even the SEC said last week the transition may lead to a “short-term uptick in settlement fails and challenges to a small segment of market participants.”

— Earnings reports: This coming week, Salesforce.com, Cava, Dell Technologies Abercrombie & Fitch, Costco Wholesale and Pure Storage are among the notable earnings reports.

— Apple’s China iPhone shipments up 52% as rebound gains steam. Official data for April showed Chinese mobile demand returning as the iPhone’s bad start to the year prompted retail price cuts. Apple rose 2.2% in pre-market trading, the equivalent of about $60 billion.

— Hess shareholders are due to vote on the company’s $53 billion sale to Chevron, a deal complicated by an arbitration claim filed by Exxon Mobil.

— T-Mobile to acquire most of U.S. Cellular in $4.4 billion deal. The deal includes cash and up to $2 billion of debt. T-Mobile said it will use U.S. Cellular wireless spectrum to improve coverage in rural areas, while also offering improved connectivity to U.S. Cellular customers around the United States. The company said it will allow U.S. Cellular customers to keep their current plans or switch to a T-Mobile plan.

— Ag markets today: Wheat futures posted strong gains overnight coming off the extended holiday weekend amid ongoing Russian crop concerns. Corn followed to the upside, while soybeans slumped after a firmer start. As of 7:30 a.m. ET, corn futures were trading 1 to 2 cents higher, soybeans were 3 to 4 cents lower, SRW wheat was 9 to 10 cents higher, HRW wheat was 13 to 16 cents higher and HRS wheat was 10 to 12 cents higher. Front-month crude oil futures were more than $1.00 higher, and the U.S. dollar index was more than 200 points lower this morning.

Neutral Cattle on Feed Report. USDA estimated there were 11.554 million head of cattle in large feedlots (1,000-plus head) as of May 1, down 100,000 head (0.9%) from year-ago. That was the first year-over-year decline in feedlot inventories in eight months. April placements dropped 5.8%, while marketings jumped 10.1% from year-ago levels. The data is virtually right in line with pre-report expectations and there should have no market impact.

Beef stocks declined less than average, pork inventories built more than normal in April. USDA’s Cold Storage Report showed beef stocks totaled 430.7 million lbs. at the end of April, down 3.8 million lbs. from March, whereas the five-year average was a 21.6-million-lb. decline. Still, beef stocks stood 21.4 million lbs. (4.7%) below year-ago and 37.9 million lbs. (8.1%) under the five-year average. Pork inventories rose to 501.3 million lbs., up 38.2 million lbs. from March versus the five-year average increase of 18.8 million lbs. during the month. But pork stocks were still down 66.2 million lbs. (11.7%) from April 2023 and 56.8 million lbs. (10.2%) below the five-year average.

— Agriculture markets Friday and for the week:

Corn: July corn futures closed 3/4 cents higher to $4.64 3/4, gaining 12 1/4 cents on the week.
Soy complex: July soybeans rose 8 3/4 cents to $12.48 and notched a 16 1/4-cent weekly gain. July soymeal surged $9.80 to $386.50 and rose $17.70 on the week. July soyoil slid 24 points to 44.95 cents and gave up 32 cents week-over-week.
Wheat: July SRW wheat futures fell 3/4 cent to $6.97 1/4 and near mid-range. On the week, July SRW rose 46 cents. July HRW wheat gained 10 1/2 cents to $7.21 1/4, nearer the session high and hit an eight-month high. For the week, July HRW rose 59 1/2 cents. July HRS rose 8 3/4 cents to $7.52 3/4 and gained 41 1/4 cents on the week.
Cotton: July cotton fell 120 points to 80.52 cents but rallied 463 points on the week.
Cattle: June live cattle futures rose 17 1/2 cents to $183.70 and near mid-range. For the week, June cattle rose $2.65. August feeder cattle futures lost $1.225 at $260.225 and nearer the session low. On the week, August feeders rose 37 1/2 cents.
Hogs: Hog futures were mixed Friday, with nearby contracts slipping and the deferred futures posting slight gains. June lean hogs slid 25 cents to $94.275 at the close, which marked a weekly drop of $2.225.

— Quotes of note:

Fedspeak. Federal Reserve Bank of Cleveland President Loretta Mester said the U.S. central bank should consider ways to better communicate to the public how economic conditions will affect future policy decisions. Speaking in Tokyo on Tuesday, Mester recommended two key changes: adding more words to the Fed’s post-meeting policy statement — to describe how officials assess economic developments and potential risks to the outlook — and more detail to its quarterly summary of policymakers’ economic forecasts.
Goldman economists pushed back forecasts for the Fed to start cutting rates to September from July.
Textile tariffs. “Cost is constantly, constantly, constantly either our enemy or our friend. Tariffs help move it to the friend scope instead of the enemy scope.” — Joseph Ferrara, head of New York City apparel maker Ferrara Manufacturing. The Biden administration’s decision to maintain tariffs on Chinese apparel imports has exposed a divide in the textile sector, the WSJ reports (link). American manufacturers argue these tariffs are essential for their survival against low-price competition from China. Companies like Ferrara Manufacturing and Greenwood Mills have restructured operations but face continued price undercutting by Chinese suppliers. Although the share of U.S. textile and apparel imports from China has decreased, U.S. employment in the sector has declined even more as retailers shift to offshore suppliers. Jay Self of Greenwood Mills advocates for doubling tariffs and raising barriers against goods made with forced labor.

— ECB poised to cut interest rates amid falling inflation. The European Central Bank (ECB) has indicated it will likely reduce interest rates from their historic highs at its upcoming June 6 meeting. Chief economist Philip Lane during an interview with the Financial Times (link/paywall) signaled that the ECB is ready to cut its benchmark deposit rate by a quarter percentage point from the current record high of 4%, citing a significant decrease in Eurozone inflation nearing the bank’s 2% target.

Interest rate cut: The ECB is set to be one of the first major central banks to cut rates, a move criticized as being overdue given the past inflation surge.
Inflation control: Lane emphasized that the region’s rapid fall in inflation, partly due to the energy shock from Russia’s invasion of Ukraine, justifies the rate cut. He stressed the need to maintain restrictive rates this year to ensure inflation continues to decrease.
Economic impact: Investors anticipate a rate cut will follow recent reductions by central banks in Switzerland, Sweden, the Czech Republic, and Hungary. However, the Fed and the Bank of England are not expected to cut rates before summer, and the Bank of Japan may continue raising them.
Policy adjustments: Lane mentioned that the pace of future rate cuts would depend on ongoing inflation data, with potential adjustments based on economic conditions and exchange rate movements.
Long-term strategy: Despite a near-record pace in Eurozone wage growth, Lane predicted a deceleration in wages, which is crucial for continued inflation control. The ECB’s restrictive policy stance is expected to persist until at least 2025.

Market data:

Eurozone inflation: Inflation has fallen from a peak of over 10% in 2022 to 2.4% in April 2024 but is anticipated to rise slightly to 2.5% in May.
Exchange rates and bond yields: The euro has strengthened against the U.S. dollar, and delays in expected Fed rate cuts have increased U.S. and European bond yields, influencing ECB policy considerations.

Bottom line: The ECB’s upcoming decision will mark a significant shift in its monetary policy approach, aiming to balance economic growth and inflation control effectively.

— Japan cemented its position as the world’s largest creditor. The country’s net external assets hit ¥471.3 trillion ($3 trillion) in 2023, according to the Finance Ministry, up 12% on the year before. The value of Japan’s overseas assets has been bolstered by the weak yen.

Market perspectives:

— Outside markets: The U.S. dollar index was weaker, with the euro and British pound both firmer. The yield on the 10-year U.S. Treasury note was weaker, trading around 4.46%, with a mostly lower tone in global government bond yields. Crude oil futures remained higher ahead of U.S. trading, with U.S. crude around $79.10 per barrel and Brent around $83.20 per barrel. Gold and silver were registering gains ahead of U.S. economic data, with gold around $2,352 per troy ounce and silver around $31.79 per troy ounce.

— Grain trader and analyst Richard Crow on the wheat market: The reduction of Russia’s wheat crop continues to dominate market news, Crow says. Despite weekend rains, significant improvement was not seen, and warm temperatures are expected ahead. Ikar, a Russian consulting firm, has lowered its wheat crop estimate to 81.5 million tons. This reduction has increased market fears about a smaller crop, potential export reductions, or other restrictions from Russia, which is responsible for approximately 25% of the global wheat export trade. Consequently, Matif wheat prices rose by 7 euros, translating to about 20 cents in the U.S. market.

With Russia’s wheat crop nearing 80 million tons and a reduction in Ukraine’s crop, global wheat trade will need to adjust, Crow adds. Major importers like Egypt and Turkey, along with several smaller countries, will be affected. The European Union (EU), a primary wheat feeder, might reduce wheat usage, potentially shifting multiple million tons to imported corn as the price spread widens. Additionally, there is uncertainty surrounding the EU crop.

In the U.S., the wheat harvest is underway, with producers expected to sell their crops. The U.S. market will carry forward its crop while observing global developments.

Of note: Crow says the shrinking Russian wheat crop is anticipated to boost demand in the corn market. This situation exacerbates uncertainties regarding Brazil’s crop. Currently, Brazilian and U.S. corn prices are comparable, with Brazil serving the Asian market and the U.S. catering to African and European markets. The restriction of GMOs in certain countries will further complicate trade dynamics.

— Cost of international shipping has surged as businesses expedite their shipments for the festive season in response to disruptions from attacks in the Red Sea, the Financial Times reports (link). The average cost of shipping a 40-foot container between the Far East and northern Europe at short notice reached $4,343 last week, nearly three times higher than the same period last year, according to freight market tracker Xeneta. These price hikes, while not surpassing the peak seen after Yemen’s Houthi group began targeting vessels in November, are notable for occurring during the typically quieter spring months. Traditionally, shipping costs peak between late summer and autumn, as retailers import goods for the Black Friday sales and Christmas season.

Michael Aldwell, head of sea logistics at Kuehne + Nagel, noted that the peak season has effectively been brought forward. The attacks in the Red Sea, purportedly in support of Gaza’s Palestinians amid Israel’s war with Hamas, have forced shipowners to take longer routes around Africa, constraining the supply of shipping space and containers.

With global supply chains already disrupted, some businesses have pre-booked shipments for the festive season as early as April, while others are stocking up on summer goods like outdoor furniture. This demand is also driven by businesses that had cut inventories expecting weak consumer demand, which has proven to be stronger than anticipated.

Peter Sand, chief analyst at Xeneta, pointed out that the pandemic taught importers to build resilience by stocking up quickly, leading some to import Christmas goods earlier than usual to avoid capacity shortages during the traditional peak season. Marco Forgione, director-general of the Institute of Export & International Trade, added that the ongoing disruption is expected to continue into the year, altering future supply chain management and highlighting the impact of geopolitical instability on global trade.

— USDA daily export sale: 215,000 metric tons of corn for delivery to Mexico . Of the total, 165,000 metric tons is for delivery during the 2023-2024 marketing year and 50,000 metric tons is for delivery during the 2024-2025 marketing year.

— Ag trade update: South Korea passed on a tender to buy up to 138,000 MT of corn from South America or South Africa. Egypt purchased 250,000 MT of raw sugar from unspecified origins.

— NWS weather outlook: Numerous strong to severe thunderstorms and areas of flash flooding likely across portions of northern and central Texas today... ...Unsettled weather with thunderstorms and heavy rain possible over the northern Great Basin/Rockies today before shifting into the northern High Plains on Wednesday... ...Sweltering heat continues across parts of South Texas and southern Florida.

Items in Pro Farmer’s First Thing Today include:

• Wheat and corn firmer, soybeans weaker overnight
• Corn Belt, Mid-South stay wet
• Cordonnier keeps South American crop estimates unchanged
• EU crop monitor trims wheat, rapeseed yield forecasts
• Cold temps slow leafhoppers in Argentina

BALTIMORE BRIDGE COLLAPSE

— Francis Scott Key bridge debris cleanup delayed to June 10, affecting shipping traffic. Crews working to clear debris from the collapse of the Francis Scott Key Bridge in Baltimore need more time to restore full shipping traffic. Initially, state and federal officials aimed to complete the work by the end of May, but it is now projected to finish by June 10. Col. Estee S. Pinchasin, Baltimore District commander of the Army Corps of Engineers, emphasized the commitment to completing the task quickly and safely. The goal is to restore the federal channel to its original dimensions of 700 feet in width and 50 feet in depth.

The remaining work involves removing the bottom cord of the collapsed truss, which is partially buried in the Patapsco River mud. This truss must be cut into three sections before it can be lifted out of the water. Latest dive surveys and engineer analyses, conducted after refloating the vessel Dali, support the new completion timeline of June 8-10.

The revised schedule considers the complexity of the cutting and rigging operations required to remove the large span, as well as safety measures and potential weather disruptions. Thunderstorms were forecasted through Monday, which could affect progress.

On a positive note, a 400-foot-wide, 50-foot-deep channel into Baltimore harbor opened last Tuesday, marking the largest and deepest marine route into the port since the Key Bridge collapse in March. This collapse, which killed six construction workers, had immediately halted maritime traffic into the port. Since then, about 500 commercial vessels have navigated temporary channels managed by the Key Bridge Response Unified Command. The Coast Guard has now commenced 24-hour commercial vessel traffic through the Fort McHenry Limited Access Channel, prioritizing deep-draft vessels that require Maryland pilots and escort tugboats, though shallower ships can use alternate channels.

CONGRESS

— Big impacts if the 2017 Trump cuts are left to expire… or are extended. A $3 trillion tax hike; many would pay $2,600 to $3,600 more in taxes. Biden said if he is re-elected, he will let them expire. He wants big increases/changes in corporate tax rates, capital gains, estate taxes. Trump wants to extend some and further cut other taxes. According to new estimates released by the Congressional Budget Office (CBO), permanently extending the expiring provisions of the Trump tax cuts would cost $4 trillion over the next 10 years, $400 billion per year. That would come atop $20 trillion in new deficits projected under current laws.

The tax debate will likely consume lawmakers’ attention next year. If Congress doesn’t act by Dec. 31, 2025, marginal income-tax rates would climb, and the standard deduction and child tax credit would shrink. More than 60% of households would see tax increases, though 9% would get a tax cut.

Of note: The budget reconciliation process allows the party in control of the Senate to pass certain legislation with a simple majority. Think of the Trump-era tax bill as well as the Inflation Reduction Act from President Joe Biden’s first term. Budget reconciliation is only applicable when one party controls the House, Senate and White House.

ISRAEL/HAMAS CONFLICT

— Israeli tanks have reached the center of Rafah: AFP. Israeli tanks have reached the center of Rafah in southern Gaza, AFP reported, citing witnesses. Residents said there were clashes between Israel and Hamas’s forces in the middle of the city, AFP said. The move comes around three weeks after Israel started urging Palestinian civilians to leave Rafah and began pushing troops to its outskirts. The United Nations says roughly one million civilians have fled Rafah, with Israeli forces urging them to move to tented camps elsewhere in the Gaza Strip. The city’s population had swelled to about 1.4 million by last month as it was one of the few safe zones in Gaza.

RUSSIA/UKRAINE

— Russia is increasing its control over its grain industry, potentially gaining more power over exports amid global supply concerns, Bloomberg reports (link). Western companies like Cargill Inc. and Viterra withdrew from Russia last year due to government pressure, paving the way for local firms to dominate. This consolidation intensified after President Vladimir Putin’s invasion of Ukraine, with just four companies now handling three-quarters of grain exports from Russia’s Black Sea terminals. This shift grants Moscow more influence over wheat supplies, crucial for global food inflation control, and complicates the ability of overseas traders to monitor Russian grain flows, especially as adverse weather affects the wheat crop.

Major Western traders, such as Cargill, Viterra, and Louis Dreyfus Co., ceased sourcing grain from Russia last year. Meanwhile, private Russian exporters, like TD Rif (now Rodnie Polya LLC), are also under gov’t pressure, with their exports being blocked on safety grounds, leading to accusations of forced company sales.

Since the Ukraine war started, Moscow has increasingly targeted assets owned by local tycoons and foreign companies, sometimes nationalizing them or pushing them towards Kremlin-favored buyers. This hardline approach and conservative ideology bolster state intervention in the economy, making the government the main economic player.

Lack of info. Despite Western traders still buying Russian cargoes, the lack of on-ground insight into crop volumes, conditions, and exports raises concerns as Russia faces reduced wheat output due to poor weather. Analysts have significantly cut production estimates, leading to the highest wheat futures since July and fears of rising food prices. The International Grains Council predicts a 6% fall in Russia’s wheat output this year.

USDA, which no longer has staff in Russia, relies more on satellite images for its forecasts, adding uncertainty. Independent local consultants like IKAR provide closely watched production estimates, though less transparency remains a challenge.

Russia’s tighter control over grain exports, with no signs of significant supply disruptions, differs from its approach to gas supplies. Most of Russia’s grain exports go to politically aligned countries, suggesting stable export patterns. The consolidation has dramatically increased, with the top four traders now controlling 75% of exports from Black Sea terminals, compared to 45% six years ago. This was highlighted at the GrainCom conference in Geneva by Dmitry Rylko, director of Moscow-based consultant IKAR.

— IKAR further cuts Russian wheat production, export forecasts. Russia’s IKAR agricultural consultancy cut its forecast for the country’s wheat crop another 2 MMT to 81.5 MMT. Its forecast for 2024-25 Russian wheat exports was lowered to 44 MMT. IKAR expects all grain production at 129.5 MMT, with grain exports at 55.5 MMT. Some 1.5 million hectares of crops in Russia have been damaged by bitter frosts this spring and the total figure may rise to 2 million hectares, the head of the Russia’s Grain Union said on Monday. It said Russia’s total grain production will be lower than 130 MMT, without providing a specific estimate. Russia’s ag ministry does not plan to revise its forecasts for the Russian grain harvest or exports, RIA state news agency cited Minister Oksana Lut as saying on Monday.

— Traders union cuts Ukraine grain/oilseed crop forecast. Ukrainian grain traders union UGA cut its forecast for Ukraine’s combined grain and oilseed production by 1.5 MMT to 74.6 MMT. Production is expected to include 25.5 MMT of corn, 19.1 MMT of wheat, 4.6 MMT of barley, 13.7 MMT of sunseed, 5.5 MMT of soybeans and 4.3 MMT of rapeseed.

POLICY UPDATE

— The 21 Democrats on the House Ag Committee who voted AGAINST the 2024 Farm Bill markup and their district’s 2020 vote for president:

David Scott (Ga.-13), Ranking, 2020 presidential vote: Biden 75%, Trump 23%
Jim Costa (Calif.-16/CA-21) 2020: Biden 58.8%, Trump 38.9% (16^th District)
Jim McGovern (Mass.-02) 2020: Biden 61.8%, Trump 36.0%
Alma Adams (N.C.-12) 2020: Biden 64.4%, Trump 34.2%
Abigail Spanberger (Va.-07) 2020: Biden 49.8%, Trump 48.7%
Jahana Hayes (Ct.-05) 2020: Biden 54.6%, Trump 43.9%
Shontel Brown (Ohio-11) 2020: Biden 79.8%, Trump 19.2%
Sharice Davids (Kan.-03) 2020: Biden 51.2%, Trump 46.4%
Elissa Slotkin (Mich.-07) 2020: Biden 49.7%, Trump 48.6%
Andrea Salinas (Ore.-06) 2020: Biden 55.0%, Trump 42.0%
Marie Gluesenkamp Perez (Wash.-03) 2020: Biden 50.1%, Trump 47.7%
Jill Tokuda (Hawaii-02) 2020: Biden 63.7%, Trump 34.3%
Nikki Budzinski (Ill.-13) 2020: Biden 54.4%, Trump 43.4%
Gabe Vasquez (N.M.-02) 2020: Biden 50.1%, Trump 49.0%
Jasmine Crockett (Tex.-30) 2020: Biden 75.0%, Trump 24.0%
Jonathan Jackson (Ill.-01) 2020: Biden 74.0%, Trump 25.0%
Greg Casar (Tex.-35) 2020: Biden 72.0%, Trump 27.0%
Chellie Pingree (Maine-01) 2020: Biden 60.0%, Trump 37.0%
Salud Carbajal (Calif.-24) 2020: Biden 57.0%, Trump 40.0%
Angie Craig (Minn.-02) 2020: Biden 52.0%, Trump 45.0%
Darren Soto (Fla.-09) 2020: Biden 56.0%, Trump 43.0%

The four Democrats who voted FOR the bill and their district’s 2020 vote for president:

Don Davis (N.C.-1) 2020: 2020: Biden 53.2%, Trump 45.9%
Yadira Caraveo (Colo.-8) 2020: Biden 50.8%, Trump 46.3%
Eric Sorensen (Ill.-17) 2020: Biden 48.1%, Trump 50%
Sanford Bishop (Ga.-2) 2020: Biden 55.7%, Trump 43.4%

— There may be more “give” to new farm bill negotiations ahead than naysayers currently believe will occur. House Ag Chair GT Thompson (R-Pa.) said after his panel approved the farm bill markup last week that he could modify some language to garner more votes from Democrats, but he said changes would come from the Title I safety net programs.

With House leadership focusing on the 12 appropriations bills, it is not surprising that Thompson said it would likely be sometime in September when the House considers a farm bill. That assumes (1) House Speaker Mike Johnson (R-Pa.) agrees and (2) if the feisty Rules Committee clears a rule for farm bill consideration, including the number and type of amendments. The time lag gives House farm bill leaders time to discuss various issues and in the case of Thompson, time to deal with the Congressional Budget Office to get a different reading of some farm bill issues including the Commodity Credit Corporation (CCC).

While another 2018 Farm Bill extension is likely, House GOP leaders will not want to take such action too soon, thereby tempering the push to get a new farm bill voted on.

Results of the Nov. 5 elections will also help determine if a likely lame duck session of Congress following elections will include a vote on the farm bill by the time this Congress adjourns.

CHINA UPDATE

— China’s sow herd shrinks. China’s sow herd totaled 39.86 million head at the end of April, down 0.1% from March and 6.9% below year-ago, the ag ministry reported.

— EU, Australia sign pact to boost cooperation on critical minerals, reduce reliance on China. The memorandum of understanding aims to reduce reliance on China for materials vital to high-tech and green manufacturing. The agreement will lead to concrete actions over the next six months to foster collaboration on critical minerals projects.

EU Commissioner for Trade Valdis Dombrovskis highlighted Australia’s leadership in critical raw materials, emphasizing the partnership’s role in securing sustainable supplies for the EU while boosting investment in Australia. This initiative is part of a broader effort by Western nations to diversify sources of critical minerals like lithium, cobalt, and nickel, which are essential for manufacturing computer chips, solar panels, and military hardware. The EU is concerned about the potential for China to leverage its dominance in this sector as a geopolitical tool.

Australia, with its significant untapped mineral deposits, has been promoting its domestic industry through financial incentives and tax measures. The MoU will encourage joint ventures and cooperation in research and innovation between the EU and Australia.

TRADE POLICY

— Why Mexico wants to ban U.S. genetically modified (GMO) corn for food. While most think Mexico’s threatened ban on imports of GMO corn for food will go away sometime after June’s presidential elections next week in the country, others cite reasons why Mexico wants the ban to be implemented. They include:

Health concerns over GMOs and glyphosate residues. Mexico cites studies linking consumption of GMO corn and exposure to the herbicide glyphosate (used on GMO crops) to potential health issues like liver inflammation, cancer risk, and other impacts. Mexico wants to take a precautionary approach to protect public health from these perceived risks.
Preserving native corn biodiversity and cultural heritage. Mexico is the center of origin for corn, with over 59 native landraces. There are concerns that cross-pollination from imported GMO corn could contaminate and erode this invaluable genetic diversity that is vital for food security and Mexico’s cultural heritage.
Food sovereignty and reducing import dependence. Mexico aims to increase domestic corn production and reduce dependence on U.S. corn imports, which have negatively impacted many Mexican farmers since NAFTA. Banning GMO corn for food is part of a broader push for greater food self-sufficiency.
Invoking USMCA allowances for health/environmental protection. Mexico argues the ban is permissible under USMCA provisions that allow countries to determine their own appropriate levels of protection for human/environmental health. It claims the U.S. has not provided sufficient scientific proof that GMO corn is safe, a charge U.S. officials disputes that, accusing it of protectionism.
Of note: Link to an article in the Financial Times about how Mexico’s current president, Andrés Manuel López Obrador, won over the working class. Also, link to another article about the topic. Still another: Criminal cartels are expanding their operations to include extorting the storefront shops that make tortillas, says a trade group (link).

— Commentary: No, trade surpluses aren’t caused by comparative advantage. Michael Pettis, a Beijing-based associate of the Carnegie Endowment for International Peace, argues in a Financial Times commentary (link/paywall) that trade surpluses are not caused by comparative advantage, as suggested by David Ricardo’s theory. Instead, they result from domestic income distribution. Pettis critiques the notion that comparative advantage leads to trade surpluses, using Germany as an example. If German workers receive a smaller share of production in wages, Germany can produce and export more cheaply than Spain, not due to comparative advantage but due to weak domestic demand. This misalignment leads to trade surpluses that negatively impact both German and Spanish workers and businesses.

Pettis explains that for comparative advantage to work as Ricardo envisioned, there must be a balanced exchange of goods.

He also addresses the issue of recent U.S. tariffs on Chinese goods, noting that China’s low export prices are due to weak domestic demand rather than comparative advantage. He argues that raising wages in line with productivity in countries like China would lead to a more balanced global trade system, aligning with Ricardo’s principles and reducing trade conflicts.

— Macron in Germany renews ‘buy European’ call, advocates doubling EU public investment. French President Emmanuel Macron, during his visit to Germany, renewed his calls for the European Union to adopt a “buy European” strategy to counter growing competition from the U.S. and China. Speaking in Dresden, Macron emphasized the need for the EU to stop being naive and called for doubling public investment in key sectors such as defense, space, climate transition, and AI.

Macron argued that Europe should adopt trade rules that include reciprocal clauses and fair competition, like those in the U.S. and China. He also advocated for increasing the EU budget through joint borrowing strategies or existing instruments to enhance public investment.

This three-day visit aims to strengthen Franco-German relations and find common ground on issues like military aid to Ukraine, trade with China, and deepening capital markets. Macron and German Chancellor Olaf Scholz plan to unveil closer cooperation on European air defenses in response to the security challenges posed by Russia’s invasion of Ukraine.

In a joint op-ed published in the Financial Times (link), Macron and Scholz called for progress on a capital markets union to encourage investment within the EU and proposed measures to improve regulatory frameworks and cross-border investment products. They stressed the importance of accelerating existing EU instruments and adopting a strategic approach in relevant sectors.

ENERGY & CLIMATE CHANGE

— The Biden administration is introducing a framework to use carbon offsets for climate progress, aiming to ensure these offsets result in actual emissions reductions. Treasury Secretary Janet Yellen announced that companies may use carbon credits to offset Scope 3 emissions, which are those produced by their suppliers and customers.

This framework aligns with industry-led guidelines and supports voluntary carbon markets to create economic opportunities for farmers and ranchers while reducing pollution. Yellen emphasized the need to address current challenges to unlock the potential of private markets in reducing emissions.

The guidelines, detailed in a 12-page policy statement (link), propose trading credits representing a ton of carbon dioxide reduced or removed from the atmosphere. These credits finance initiatives like tree planting, but have faced criticism for not always meeting carbon-cutting claims. Ensuring the integrity of these credits is crucial for companies to meet their sustainability goals.

The U.S. gov’t envisions financial tools, such as insurance mechanisms, to address the longevity of offsets, suggesting credits should meet their longevity claims without specifying a time frame. This approach diverges from the Integrity Council for the Voluntary Carbon Market’s minimum threshold of 40 years.

The framework encourages prioritizing measurable emission reductions within companies’ value chains and using offsets as a complement. This aligns with the United Nations-backed Science Based Targets initiative and the Voluntary Carbon Markets Integrity Initiative, which also propose allowing more flexibility for companies to use carbon credits for Scope 3 emissions.

— Automakers electrify Brazil’s unique sugarcane cars. As the global automotive industry moves gingerly towards battery-powered vehicles, Brazilian manufacturers are focusing on a unique alternative: flex-fuel hybrid cars that run on ethanol derived from sugarcane. Companies like Stellantis, Volkswagen, Mitsubishi, and Great Wall Motor are investing billions in this technology, which combines an internal combustion engine with an electric motor, according to an article in the Financial Times (link/paywall). Key points:

Flex-fuel hybrids: These vehicles can run on a mix of petrol and ethanol, providing a lower-emission alternative without needing a significant change in consumer habits or infrastructure.
Ethanol’s role: Ethanol, readily available at Brazilian filling stations, is a low-carbon option that can reduce CO₂ emissions by 73% compared to gasoline.
Market impact: With Brazil’s vast size and varied terrain, establishing a widespread electric vehicle (EV) charging network is challenging, making flex-fuel hybrids a practical interim solution.
Investment: Automakers have pledged R$77 billion ($14 billion) to the Brazilian market in 2024 to upgrade and expand the production of flex-fuel hybrids.
Challenges: Environmentalists argue that relying on biofuels might delay the adoption of fully battery-powered EVs, which are considered the cleanest option.

Outlook:

Hybrid advancements: Companies like BYD and Toyota are developing plug-in flex-fuel hybrids, which offer more electric-only driving range.
Battery production: Brazil is beginning large-scale lithium mining, aiming for domestic battery production to support future EV manufacturing.

Upshot: The diverse technological approaches are expected to revitalize Brazil’s automotive sector, which has struggled in recent years.

— New York Times reports (link) that the Biden administration aims to make Chinese electric vehicles (EVs) prohibitively expensive as part of a broader strategy to promote American-made EVs. While some environmentalists and liberal economists argue that importing affordable, low-emission technologies would better combat climate change, the administration counters that this approach addresses China’s harmful trade practices and will ultimately benefit American jobs, national security, and the environment. President Biden’s aides believe that fostering a domestic EV industry aligns with both climate goals and economic interests.

While former President Donald Trump is “crystal clear about his disdain for electric vehicles” and has “promised to shred... Biden’s policies that encourage EV manufacturing and sales,” the NYT says (link) analysts “say that even if Mr. Trump is elected and ends federal policies that support electric vehicles, by the time that happens, the market may have reached a level where it would keep growing without government help.” However, the NYT adds while “a Trump presidency couldn’t slam the brakes on the EV transition, it could throw enough sand in the gears to slow it down,” which “might have significant consequences for the fight to stop global warming.”

LIVESTOCK, NUTRITION & FOOD INDUSTRY

— USDA’s Food Safety and Inspection Service (FSIS) recently detected viral particles in beef samples for the first time. Earlier tests on retail ground beef were negative. The latest tests found the virus in meat from one of 96 culled dairy cows, but none of this meat entered the food supply. USDA officials assert that the risk of the virus spreading among humans is low. However, public health experts are concerned after a second dairy farmworker tested positive for avian influenza last week.

USDA also confirmed infections in five additional herds — three in South Dakota and two in Colorado — raising the U.S. total to 63 herds in nine states.

— U.S., other countries consider vaccinating workers exposed to H5N1. The U.S. and Europe are taking steps to acquire or manufacture H5N1 vaccines that could be used to protect at-risk poultry and dairy workers, veterinarians and lab technicians, government officials said. U.S officials said they were moving bulk vaccine from CSL Seqirus that closely matches the current virus into finished shots that could provide 4.8 million doses of vaccine. European health officials told Reuters they were in talks to acquire CSL’s prepandemic vaccine. Canadian health officials said they have met with GSK, maker of Canada’s seasonal flu shots, to discuss acquiring and manufacturing a prepandemic H5N1 vaccine once its seasonal flu production capacity is freed up. Other countries, including the UK, are discussing how to proceed on prepandemic vaccines, scientists said.

— Soda startup Olipop Inc. is projected to achieve $500 million in sales this year, more than doubling its $200 million revenue from 2023, according to Bloomberg (link). Founded in 2019, the company has grown rapidly, becoming profitable every month this year, according to co-founder David Lester.

Olipop’s strategy focuses on maintaining profitability while growing, though it remains open to raising more funds. The company has attracted over $55 million in investments from notable figures like Gwyneth Paltrow, the Jonas brothers, Mindy Kaling, and former PepsiCo CEO Indra Nooyi.

Olipop differentiates itself by offering soda with less sugar, plus added prebiotics and fiber for gut health. Starting in independent stores in Northern California in 2018, Olipop gained significant traction after being sold at Erewhon in Los Angeles. Now available in over 30,000 locations, including Whole Foods and Sprouts, Olipop continues to focus on brand growth rather than acquisitions.

— Study warns of H5N1 risks in raw milk, highlights need for pasteurization. A recent study, published in the New England Journal of Medicine, highlights the potential risks of consuming unpasteurized (raw) milk that may contain H5N1 avian flu viruses. The research, conducted on mice, showed that those fed milk from H5N1-infected cows became seriously ill. While the study cannot conclusively prove that the same would happen in humans, it underscores a probable risk. Ethical constraints prevent such studies from being conducted on people.

Caution recommended. Experts like Michael Osterholm, director of the Center for Infectious Disease Research and Policy at the University of Minnesota, and Thijs Kuiken, a pathologist at the Erasmus Medical Center in Rotterdam, emphasize caution. Kuiken pointed out that based on existing knowledge of H5N1, drinking raw milk from infected cows is likely to cause systemic disease in humans.

The FDA has long advised against consuming raw milk due to potential pathogens like E. coli, Salmonella, and Listeria. This advice is reiterated in light of the current H5N1 outbreak among dairy cattle. As of the latest update, the USDA confirmed infections in 63 herds across nine states, with testing pending in two additional herds in Michigan. Two human infections among farm workers have also been reported since the outbreak began in late March.

The research team, led by Yoshihiro Kawaoka from the University of Wisconsin–Madison, conducted several experiments. These included feeding raw milk to mice, testing different pasteurization methods, and examining virus longevity in refrigerated raw milk. Their findings suggest that while one pasteurization method killed all the virus, another only reduced it to low levels. Additionally, raw milk stored at fridge temperature for weeks showed only a minor reduction in active virus, indicating that the virus could remain infectious for an extended period in such conditions.

Interestingly, the study also found H5N1 virus in the mammary glands of two mice, indicating that dairy cattle’s mammary tissues are highly susceptible to the virus. Infected lactating cows were found to shed extraordinarily high levels of the virus in their milk. This underscores the importance of adhering to pasteurization processes to mitigate health risks associated with consuming raw milk.

POLITICS & ELECTIONS

— Most polls show former President Donald Trump leading President Joe Biden, especially in crucial swing states. Despite Biden’s positive public stance, his actions suggest underlying anxiety.

Last week, Biden announced measures that reveal his concerns. His administration decided to release 1 million barrels of gasoline from the Northeast Gasoline Supply Reserve, established for emergencies, to lower summer driving costs just before the election. Energy Secretary Jennifer Granholm emphasized the administration’s focus on reducing fuel prices for American families, but this move appears driven by Biden’s poor poll numbers rather than an actual emergency.

Additionally, Biden targeted young voters by announcing another round of student loan cancellations, wiping out $7.7 billion in loans for about 160,000 borrowers. This brings the total student debt relief under his administration to $167 billion for nearly 5 million people. While this might appeal to those with outstanding loans, it frustrates Americans who have repaid their debts or never took out loans. Biden’s fixation on debt cancellation persists despite the Supreme Court’s rejection of his previous attempt, and critics argue that such measures contribute to inflation, a major voter concern.

Polls reflect Biden’s struggles, with a recent ABC News/Ipsos poll showing that inflation remains a top issue for Americans, who trust Trump more than Biden on economic matters by 14 percentage points. According to the Cook Political Report with Amy Walter, voters are more worried about Biden’s economic and immigration policies than Trump’s stance on abortion, a supposed strong point for Democrats in 2024.

Biden’s approval rating has dropped to 36%, its lowest in two years, according to a Reuters/Ipsos poll. Initially, Biden banked on voters rejecting Trump again after the 2020 election controversies. However, the current election is shaping up to be a referendum on Biden’s presidency, and many voters are dissatisfied with his performance. Biden’s strategy of offering election-year incentives seems to underestimate the American electorate’s ability to see through such tactics, election analysts note.

— Canadian Prime Minister Justin Trudeau faces a critical juncture as he trails significantly in polls and struggles to regain support for his Liberal Party. Despite efforts to reverse his fortunes, including high-profile visits from U.S. President Joe Biden and Ukrainian President Volodymyr Zelenskyy, Trudeau has not succeeded in narrowing the gap against the Conservative Party led by Pierre Poilievre. Speculation about Trudeau’s potential resignation has emerged among some Liberal insiders, although he maintains that he will continue to lead, according to Politico (link).

Trudeau’s challenges mirror those of other Western leaders grappling with populist movements, economic concerns, and post-pandemic frustrations. Unique to Trudeau, however, are the fatigue from his three terms in office and various scandals that have tainted his image. The upcoming election, which must be held within the next 17 months, is crucial, with some suggesting that Trudeau might need to step down soon to allow a successor adequate time to prepare.

Potential successors within the Liberal Party, such as Finance Minister Chrystia Freeland and Public Safety Minister Dominic LeBlanc, have been mentioned, but no clear frontrunner has emerged. Trudeau’s immediate strategy involves engaging with younger demographics and attempting to reset his cabinet and policies. However, if his approval ratings do not improve, internal and external pressures could force a change in leadership.

— Sen. John Cornyn (R-Texas) reportedly announced he intends to seek re-election in 2026, regardless of the outcome of his bid to become the Republican Senate leader later this year. Cornyn, who is currently serving his fourth term, disclosed his intentions to the Dallas Morning News. Despite the prospective challenge from Texas Attorney General Ken Paxton (R), Cornyn’s plans are set to proceed.

OTHER ITEMS OF NOTE

— WSJ: Pentagon preparing for the potential of space warfare. Calling the space domain the “next frontier,” the Wall Street Journal reports (link) the U.S. military’s efforts to safeguard its assets in space have been accelerated by recent intelligence disclosures about Russian and Chinese antisatellite weapons capabilities. U.S. officials have also adopted the strategy of publicly highlighting Russia’s actions in space. Although the U.S. opposes the deployment of nuclear weapons in space, the Pentagon is looking into expanding its array of space-based arms and capabilities. Additionally, military and industry officials are investigating the development of more mobile, distributed assets, alongside collaborating with private firms to bolster the military’s capabilities during crises.

— In his first cabinet reshuffle, Argentina’s libertarian president, Javier Milei, accepted the resignation of his cabinet chief, Nicolás Posse. Posse will be replaced by Guillermo Francos, the current interior minister. This change occurs as Milei faces significant challenges in Congress regarding his key economic reform bill.

KEY LINKS

Policy Updates