Key Takeaways from Fed Chair’s Powell Testimony Before Senate Banking Panel

News/markets/policy updates: July 10, 2024

(Farm Journal )

MARKET FOCUS

· Powell’s testimony before Senate Banking Committee provided several key insights

· Fed’s Powell says more good data needed for rate cuts

· Powell gives ammo to both sides of rate outlook

· Powell informed Congress that commercial property industry may face stress for years

· Powell testimony takeaways from Tom Essaye of The Sevens Report

· Key takeaways from yesterday’s Powell hearing via NYT’s DealBook

· Boeing delivered 44 commercial aircraft in June

· Boom in AI driving surge in Taiwanese exports

· CBO: U.S. federal budget deficit $1.3 trillion in first nine months of FY 2024

· CBO director: Increased immigration to boost U.S. economy, workforce, and revenues

· U.S. housing market experiencing an unusual situation

· American Statistical Assn. study warns reliability of U.S. economic data at risk

· Panama Canal Authority (ACP) holding talks about building new reservoir

· Ag markets today

· Italian coffee company Lavazza warns prices will continue to rise

· India to sell wheat from state reserves to flour millers and biscuit makers in August

· India’s monsoon favorable for crops

· USDA daily export sale: 132,000 MT soybeans to China, 2024-2025 marketing year

· Ag trade update

· NWS weather outlook

CONGRESS

· Dem senators urge special counsel to investigate Justice Clarence Thomas

· Democrats meet with tax scorekeeper official ahead of 2025 cliff

· Lawmakers targeting December for spending deal re: FY 2025 spending plans

ISRAEL/HAMAS CONFLICT

· U.S. opposition to Israel’s military campaign in Gaza decreasing

RUSSIA & UKRAINE

· House Speaker Johnson will meet with Ukrainian President Zelenskyy today

CHINA

· Focus on forced labor in China .

· China to investigate whether EU trade investigations constitute ‘trade barriers’

· China’s deflation risks persist amid weak domestic demand

· Cooking oil scandal in China reignites food safety concerns

ENERGY & CLIMATE CHANGE

· Study: Adequate supply of biofuel feedstocks

· Honeywell acquires Air Products’ LNG technology for $1.81 billion

LIVESTOCK, NUTRITION & FOOD INDUSTRY

· Tyson Foods sells poultry complex in Vienna, Georgia, to House of Raeford Farms

· Singapore approves 16 insect species as safe for human consumption

HEALTH UPDATE

· Ozempic, similar drugs in short supply for Type 2 diabetes patients

· Rare case of plague confirmed in Pueblo County, Colorado

· FTC criticizes pharmaceutical benefit managers

POLITICS & ELECTIONS

· Post-debate swing state polling update

· Cook Political Report shifts six states toward GOP in electoral college ratings

· Biden slows Dem defections, refocuses on Trump

· Haley releases 97 delegates to Trump

· Stephanopoulos doesn’t think President Biden can serve another four years

· 8 states will decide whether to amend constitutions to ban noncitizens from voting

OTHER ITEMS OF NOTE

· Chesapeake Bay achieves highest score in 20 years on annual report card

· U.S. paper industry urges EU to delay anti-deforestation law, citing inflation concerns

· Tech firms develop AI weapons for U.S. and allies, raising accountability concerns

— Equities today: Asian and European stock indexes were mostly firmer overnight. U.S. Dow is currently down slightly. Fed Chair Jerome Powell will testify again today, this time before the House Financial Services Committee. Expect more questions about the proposed banking rules, the economy and the Fed’s timing on rate cuts. In Asia, Japan +0.6%. Hong Kong -0.3%. China -0.7%. India -0.5%. In Europe, at midday, London +0.6%. Paris +0.8%. Frankfurt +0.7%.

U.S. equities yesterday: The Dow ended lower after having worked their way into positive territory in late morning trade. The Dow ended down 52.82 points, 0.13%, at 39,291.97. The Nasdaq was up 25.55 points, 0.14%, at 18,429.29. The S&P 500 edged up 4.13 points, 0.07%, at 5,576.98. This marks the index’s 36th record close in 2024.

Of note: Financial services stocks led the way yesterday. That was after Powell said that regulators were “very close” to agreeing on a revamped proposal on how much capital big banks would be required to hold — a potentially big victory for Wall Street.

— Fed Chair Jerome Powell informed Congress that the commercial property industry may face stress for years. He emphasized that banks must assess their risks honestly and ensure they have the capital, liquidity, and systems to manage these risks. This year’s Fed stress tests showed that large and most small U.S. banks can handle commercial real estate (CRE) risk. However, regulators are closely monitoring banks with higher CRE exposure, as prolonged higher interest rates are expected to prompt more banks to increase loan loss reserves through 2024.

— Boeing delivered 44 commercial aircraft in June, the highest monthly total since the company curbed work in its factories in the wake of a harrowing near-miss in early January involving a 737 Max jetliner.

— Ag markets today: Soybeans faced light followthrough selling overnight, while corn and wheat erased Tuesday’s modest corrective gains. As of 7:30 a.m. ET, corn futures were trading 1 to 2 cents lower, soybeans were fractionally to 2 cents lower, winter wheat markets were 3 to 5 cents lower and spring wheat was mostly a penny lower. The U.S. dollar index and front-month crude oil futures were both modestly weaker this morning.

Concerning pattern in cattle futures. Cattle futures repeated Monday’s price action yesterday in which gains early in the session gave way to a late selloff that produced a sharply lower close. The futures price pattern this week is not only concerning but could impact cash cattle trade, with cash sources expecting “steady at best” cash cattle trade and some calling for a downturn after four weeks of record prices.

Traders erase premium in August hogs. August lean hog futures finished Tuesday’s session at $88.40, three cents below today’s CME lean hog index quote for July 8. Fall- and winter-month contracts sharply extended their big discounts to the cash index, signaling traders expect heavy pressure on the cash hog market as slaughter supplies build seasonally during the second half of the year.

— Agriculture markets yesterday:

· Corn: December corn futures closed up 3/4 cent at $4.08 1/2 and near mid-range.

· Soy complex: November soybeans fell 19 1/2 cents to $10.80, a three-year low close, while August soymeal fell $4.70 to $345.30, closing nearer the session low. August soyoil plunged 214 points to 46.95 cents.

· Wheat: December SRW futures closed a penny higher to $5.95 1/2 though settled nearer session lows. December HRW futures rose 1/2 cent to $5.96 1/4, also nearer session lows. December spring wheat fell 1/4 cent to $6.36 1/4.

· Cotton: December cotton fell 50 points to 70.55 cents, the lowest close since October 2021.

· Cattle: August live cattle futures fell $2.00 to $182.35 and settled near the midpoint of today’s range. August feeder cattle futures fell $3.45 to $255.725 and settled nearer session lows.

· Hogs: August lean hogs closed down $1.125 at $88.40 and near the session low.

— Quotes of note:

· Powell testimony takeaways from Tom Essaye of The Sevens Report:

“Fed Chair Powell testified before the Senate Banking Committee on Tuesday as part of his semi-annual testimony and there were two notable takeaways from his comments. First, Powell continued to say that all the Fed needs is some more ‘good’ inflation data to be in a position to cut rates. That is dovish on its face, but it’s also the same thing he’s been saying for the past month-plus and since a September rate cut currently has an 80% expectation from the market, that comment merely reinforced what is now widely expected, and as such it didn’t really move markets.

“Second, if you read between the lines of Powell’s comments, it’s clear the Fed is focusing on slowing growth, while the market still is not. Powell made several small comments to reflect this reality, including some comments on cooling in the labor market and again referencing that risks to the outlook are balanced between inflation and growth. Yet perhaps the most notable comment was that inflation, is not the only risk we face.’

“I view Powell’s commentary as reinforcing my concern that the market is complacent to growth risks. That doesn’t mean I’m predicting a recession. I am not. But I do think the chances of a growth scare continue to rise, and at this point there is a growing disconnect between what the Fed is worried about (growth) and what the market is worried about (nothing, other than AI earnings).”

· Key takeaways from yesterday’s Powell hearing via the NYT’s DealBook:

The good: The jobs picture points to a soft-landing scenario. A recent drop-off in hiring and wage gains indicates that the labor market is “not a source of broad inflationary pressures for the economy now,” Powell said.
The better: The first-quarter uptick in inflation hasn’t persisted. “The most recent monthly readings have shown modest further progress,” he said, adding that just two months ago he wouldn’t have reached that conclusion.
The best (for Wall Street): Powell’s update on new capital requirements for lenders sent shares of Goldman Sachs to a new high, and lifted other bank stocks, on hopes that the hotly contested measures would be tamer than first feared. In March, he signaled that the Fed could scale back or rework the rules. Yesterday, Powell laid out a timeline that could see a final proposal bogged down in review for months.

· Boom in AI is driving a surge in Taiwanese exports, with the island’s companies shipping more than $42 billion worth of graphic processing units and related equipment over the past year, up from almost nothing in recent years. Link to more via Bloomberg.

· “The coffee supply chain is dramatically under pressure.” — Lavazza Chairman Giuseppe Lavazza, projecting further increases in coffee prices.

· “There are huge parts of the city that have been left in the dark.” — Kevin de León, a Los Angeles City Council member, on a rise in the theft of copper and other metals from city infrastructure like streetlights for profit. Increasing commodity prices, economic problems and social malaise have driven such crimes to new levels.

— Federal Reserve Chair Jerome Powell’s testimony before the Senate Banking Committee provided several key insights into the current economic landscape and potential future monetary policy actions. Here are the main highlights:

Cooling job market and economic slowdown. Powell noted a noticeable cooling in the job market, with the unemployment rate rising to 4.1% for the third consecutive month. Despite this, hiring remains solid, indicating a slowdown rather than a halt in economic activity. He also mentioned a general deceleration in economic growth following a period of robust expansion last year.

Inflation and interest rates. Powell emphasized that while significant progress has been made in controlling inflation, it remains above the Federal Reserve’s 2% target. This persistent inflation, coupled with the slowing job market, has led to discussions about the potential for interest rate cuts soon. Powell’s testimony suggested a shift from the Fed’s previous focus on combating inflation to a more balanced approach that also considers economic growth and employment.

Potential rate cuts. Market participants and economists are anticipating a possible interest rate cut at the Federal Reserve’s Sept. 17-18 meeting. Powell’s remarks have bolstered these expectations, with many interpreting his statements as a signal that the Fed is open to adjusting rates to support the economy. Democratic senators, including Elizabeth Warren (Mass.), have been vocal in urging for rate cuts, aligning with market sentiments.

Political implications. The testimony comes at a politically sensitive time, with the presidential campaign season underway. Voters’ dissatisfaction with high prices has put additional pressure on the Federal Reserve’s decisions. Powell’s cautious approach aims to balance economic needs without appearing to influence political outcomes. His emphasis on avoiding delayed policy adjustments that could harm economic activity and employment was well-received by the markets.

Outlook. Powell highlighted the importance of monitoring economic indicators closely to avoid past mistakes of delayed responses to inflation. Thursday’s release of the Consumer Price Index for June is expected to show a slight decrease, further indicating a gradual moderation in inflation.

Direct quotes from Powell:

• “The Committee has stated that we do not expect it will be appropriate to reduce the target range for the federal funds rate until we have gained greater confidence that inflation is moving sustainably toward 2 percent. Incoming data for the first quarter of this year did not support such greater confidence. The most recent inflation readings, however, have shown some modest further progress, and more good data would strengthen our confidence that inflation is moving sustainably toward 2%.”

• “We continue to make decisions meeting by meeting. We know that reducing policy restraint too soon or too much could stall or even reverse the progress we have seen on inflation. At the same time, in light of the progress made both in lowering inflation and in cooling the labor market over the past two years, elevated inflation is not the only risk we face. Reducing policy restraint too late or too little could unduly weaken economic activity and employment.”

• Asked when the Fed would cut, Powell replied: “I’m not going to be sending any signals about the timing of any further actions.”

Market impact: Markets want to believe the Fed will cut rates in September, so they are taking the basic remarks and now taking them as suddenly backing a rate cut in September. But the Dow is flat and CME Fed funds futures for September have a 70% probability of a rate cut. Yesterday that was 71%.

Bottom line: Powell’s testimony underscored a cautious optimism regarding inflation control, a recognition of a cooling job market, and a potential shift towards interest rate cuts to support the economy amid evolving conditions.

— U.S. federal budget deficit was $1.3 trillion in the first nine months of fiscal year (FY) 2024, CB0 estimates — $118 billion less than the deficit recorded during the same period last fiscal year. The full fiscal year deficit is likely to be significantly higher once the remaining three months are accounted for. Despite the slight year-over-year improvement, the deficit remains at concerning levels that contribute to the growing national debt.

Several factors contributed to the decrease in the federal budget deficit compared to last year:

Increased revenues:

• Total revenues increased by $140 billion in the first six months of FY2024 compared to the previous year.

• There was a $72 billion (6%) increase in individual income and payroll tax revenue.

• Corporate income taxes increased by $44 billion (35%), largely due to delayed business tax receipts from areas affected by natural disasters.

Reduced discretionary spending:

• The Fiscal Responsibility Act and the Further Continuing Appropriations and Other Extensions Act, 2024 led to a reduction in projected discretionary outlays.

Timing shifts in outlays:

• Certain payments were shifted into March 2023 due to April 1, 2023, falling on a weekend, which affected year-over-year comparisons.

• Adjusting for timing effects, outlays in March 2024 were down $49 billion compared to March 2023.

Decreased spending in specific areas:

• The Federal Deposit Insurance Corporation spent $27 billion less in March 2024 compared to March 2023.

• Department of Education spending decreased by $29 billion due to changes in student loan repayment costs.

• Spending related to the Covid-19 pandemic decreased by $26 billion.

• Emergency funding for the Supplemental Nutrition Assistance Program ended, reducing spending by $24 billion.

Changes in tax refunds:

• There was a $19 billion (28%) decrease in individual income tax refunds, which increased net receipts.

• This decline reflects slowing Employee Retention Tax Credit refunds, which have been subject to an IRS moratorium since September.

— CBO director: Increased immigration to boost U.S. economy, workforce, and revenues. Congressional Budget Office (CBO) Director Swagel told Congress that increased immigration is expected to have a significant positive impact on the U.S. economy, workforce, and federal revenues over the next decade, despite some potential short-term effects on wages.

• Workforce and economic growth: Swagel emphasized that increased immigration is expected to expand the labor force, leading to higher economic output and additional tax revenue. CBO projects that this surge in immigration will boost the U.S. economy by approximately $7 trillion over the next decade.

• GDP growth: CBO estimates that the rise in immigration will increase the growth of inflation-adjusted gross domestic product by an average of 0.2 percentage points annually from 2024 to 2034.

• Federal revenue: Swagel stated that the immigration surge is projected to generate about $1 trillion in additional federal revenue over a ten-year period. This increase in revenue is attributed to the larger workforce and subsequent economic growth.

• Labor force expansion: CBO revised its estimate of the labor force in 2033 upwards by 5.2 million people, largely due to increased net immigration.

• Long-term Economic Benefits: Swagel highlighted that immigrants, who are typically younger and more inclined to work, will help offset the anticipated retirement of the native-born population, leading to enhanced economic growth.

• Wage effects: While noting the overall positive economic impact, Swagel mentioned that the influx of immigrants might exert some downward pressure on average wages, particularly in the initial years. This is partly due to migrants often occupying lower-paying positions.

• Uncertainty in projections: Swagel acknowledged the substantial uncertainty surrounding population projections, especially in later years, and stated that CBO assumes the current surge in immigration will persist until 2026 before tapering off.

— U.S. housing market is experiencing an unusual situation where both new and existing home inventories are rising, yet home prices are also increasing. Currently, there is a nine-month supply of newly built homes, nearly three times that of existing homes. New construction now makes up 30% of total inventory, double its historical share. This supply divide is driven by fluctuating mortgage rates and the effects of the subprime mortgage boom. It remains uncertain whether rates and prices will stabilize in the year’s second half, as analysts expect.

— New study by the American Statistical Association warns that the reliability of U.S. economic data is at risk due to shrinking budgets, declining survey response rates, and potential political interference. Currently, government statistics remain dependable, but the study, authored by statisticians from various institutions including George Mason University and the Urban Institute, likens the statistical system to infrastructure that is often neglected until a crisis occurs. Link to report. Link to New York Times article.

Nancy Potok, a former chief statistician, emphasized the importance of addressing these issues to prevent a “downward spiral.” The report highlights significant threats to data on education, health, crime, and demographics, with economic data being particularly vulnerable because of its crucial role for policymakers and investors.

Survey response rates have plummeted, with the Current Population Survey, which informs unemployment rates and other labor statistics, dropping from nearly 90% to about 70% over the past decade. Erica Groshen, a former head of the Bureau of Labor Statistics (BLS), described this as a “slow-moving train wreck.” The BLS has already announced plans to cut the survey size due to rising costs and budget constraints, potentially leading to less reliable data reporting for smaller demographic groups and less populous states.

Despite these challenges, there is no current evidence of declining quality in U.S. economic data, according to statistical agencies and the American Statistical Association report. However, William Beach, a former BLS leader, warned that continued budget issues could soon impact the reliability of monthly employment and unemployment data.

Statistical agencies recognize the challenge posed by falling response rates, driven by privacy concerns, the prevalence of cellphone-only households, and respondent availability. Efforts are underway to stabilize these rates, and agencies are increasingly incorporating private sector and administrative data to supplement traditional surveys. However, this approach requires significant resources and innovation.

Funding for the BLS has decreased by 18% in real terms since 2009, and other agencies have faced similar budget declines despite rising operational costs. This underfunding limits opportunities for necessary research and modernization.

The report urges Congress to increase funding for statistical agencies, enhance data sharing, and ensure protections against political interference. The independence of these agencies became a prominent issue during the Trump administration’s attempt to add a citizenship question to the 2020 census, highlighting the need for statutory protections for the professional autonomy of statistical agencies.

Market perspectives:

— Outside markets: The U.S. dollar index was weaker, with most foreign currencies higher against the greenback. The yield on the 10-year U.S. Treasury note was weaker, trading around 4.27%, with a mixed tone in global government bond yields. Crude oil futures were slightly weaker, with U.S. crude around $81.35 per barrel and Brent around $84.50 per barrel. Gold and silver futures were higher, with gold around $2,379 per troy ounce and silver around $31.20 per troy ounce.

— Italian coffee company Lavazza warned that prices would continue to rise because of supply chain issues and increased regulation. Link to more via the Financial Times.

— India plans to sell wheat from state reserves to flour millers and biscuit makers in August, offering it at 23,250 rupees ($279) per metric ton, about 12% lower than market prices. The exact quantity is yet to be determined, with state warehouses holding 29.9 million metric tons as of June 1. This follows reports of India potentially importing wheat after a six-year break to boost reserves and reduce prices. In June 2023, the Food Corporation of India sold just over 10 million metric tons of wheat to private parties, a record for the fiscal year ending in March.

— India’s monsoon favorable for crops. India’s monsoon continues to perform relatively well and most locations of the country have ample moisture to support generally good crop establishment and growth, according to World Weather Inc. Rainfall as a percent of normal ranged from 101% to 249% from June 1 to July 9. World Weather notes, “Soil moisture is rated adequate to excessive in a large section of India. However, many areas in western Rajasthan and western Gujarat still have a shortage of moisture. Portions of Tamil Nadu also have moisture shortages in the topsoil due to a lack of rain this month. Long-term production potentials are generally favorable across the country outside areas impacted by severe flooding.”

— Panama Canal Authority (ACP) is holding talks with community leaders of Rio Indio about building a new reservoir to increase the canal’s water supply, head of the canal authority Ricaurte Vasquez said in a press conference. The ACP is planning to construct a $1.6 billion reservoir along the Indio River to increase the canal’s water supply. This project aims to provide water security for the Panama Canal’s operations in the coming years. The ACP has set a six-year deadline to complete the construction of this new reservoir. Once operational, it is expected to maintain a minimum of 36 daily transits through the canal, which is close to the pre-drought capacity of 38 transits per day. The need for this new water source has become critical due to recent drought conditions and the impacts of climate change. In 2023, the canal faced severe water shortages, forcing restrictions on ship transits and drafts. The new reservoir is seen as a long-term solution to these water supply challenges.

— USDA daily export sale: 132,000 MT soybeans to China, 2024-2025 marketing year

— Ag trade update: Japan purchased 18,030 MT of feed wheat and 220 MT of feed barley. Jordan tendered to buy 120,000 MT each of optional origin milling wheat and feed barley.

— NWS weather outlook: Post-Tropical Cyclone Beryl to bring Severe Thunderstorms, heavy rain and flooding to parts of the Midwest, eastern Great Lakes, and Northeast
today... ...Dangerous heat and record high temperatures to continue for much of the West through the end of the work week... ...Major to Extreme HeatRisk over portions of the East Coast today.

(NWS)

— Democratic senators urge special counsel to investigate Justice Clarence Thomas for ethics, false statement, and tax violations. Sens. Sheldon Whitehouse (D-R.H.) and Ron Wyden (D-Ore.) urged Attorney General Merrick Garland to appoint a Special Counsel to investigate potential violations of ethics, false statement, and tax laws by Supreme Court Justice Clarence Thomas, according to a letter sent last week. Senators also asked for a Special Counsel to review the undisclosed gifts given to Justice Thomas by billionaire benefactors.

— Democrats meet with tax scorekeeper official ahead of 2025 cliff. House Ways and Means Committee Democrats on Tuesday met with Thomas Barthold, the chief of staff for the Joint Committee on Taxation (JCT), to discuss the impacts of the 2017 tax law as its individual provisions are set to expire in 2025. The meeting aimed to explore potential scenarios if the 2017 tax law provisions expire or continue.

$400,000 threshold. Rep. Judy Chu (D-Calif.) noted that data showed it might be possible to let the provisions expire without harming those earning less than $400,000.

Ways and Means ranking member Richard Neal (D-Mass.) emphasized understanding the economic impacts and technical aspects of individual tax rates and related provisions. Neal highlighted the historical top marginal rates of 39.6% during the Clinton and Obama administrations compared to the current 37% set by the 2017 law.

President Biden’s budget proposes restoring the top rate to 39.6% for high-income earners while pledging not to raise taxes for households making under $400,000.

— Lawmakers are targeting December for a spending deal as they work on FY 2025 spending plans. Despite efforts by the House and Senate before the August recess, they acknowledge the inability to finalize the measures before the Oct. 1 start of FY 2025. Rep. Steny Hoyer (D-Md.) stated that the plans would not be adopted until at least December. House Appropriations Committee Chair Tom Cole (R-Okla.) noted that the November election winners would likely decide whether to finalize the FY 2025 deal in the lame duck session or wait for the new Congress in January. Cole hopes to advance the plans as much as possible before deferring to the lame duck session.

— U.S. opposition to Israel’s military campaign in Gaza is decreasing. A Gallup poll shows 48% of Americans disapprove of Israel’s actions, down seven points from March, while 42% approve. The shift is mainly due to a 12-point increase in approval among Republicans, with support also rising by five points among Democrats and independents. The survey, conducted from June 3-23, followed Israeli troops’ movement into Rafah and the decline in coverage of pro-Palestinian protests on U.S. college campuses.

— President Joe Biden is hosting global leaders in Washington, DC, for the annual NATO summit, aiming to show unity on key issues. Biden announced plans to supply new air defenses to Ukraine, providing crucial support against Russia’s invasion. Meanwhile, Ukrainian President Volodymyr Zelenskyy urged international leaders for prompt aid, emphasizing that “everyone is waiting for November,” including Russian President Vladimir Putin, as a potential second Donald Trump presidency concerns both allies and adversaries.

Of note: House Speaker Mike Johnson (R-La.) will meet with Ukrainian President Zelenskyy today.

— EU’s top diplomat, Josep Borrell, emphasized that Europe’s security will be determined in Ukraine and criticized the U.S. for delaying aid to Ukraine earlier this year. At the EU Defense Night, Borrell warned that allowing Russia to install a puppet government in Kyiv would result in higher future costs. Ukrainian Minister of Strategic Industries Oleksandr Kamyshin vowed that Ukraine would increase defense production and become an “arsenal of democracy” regardless of the outcome of the U.S. presidential election in November. The event, co-hosted by Semafor, was attended by diplomats and industry leaders, including the EU’s Ambassador to the U.S. Jovita Neliupšienė, Belgian Prime Minister Alexander De Croo, French Ambassador to the U.S. Laurent Bili, and Oracle CEO Safra Catz.

— Focus on forced labor in China. The U.S. Dept. of Homeland Security announced it is ramping up its enforcement focus on industries including aluminum, PVC and seafood, as part of the agency’s increased attention on forced labor in China. This initiative is part of the broader enforcement of the Uyghur Forced Labor Prevention Act (UFLPA), which aims to prevent the importation of goods produced with forced labor, especially from the Xinjiang Uyghur Autonomous Region (XUAR).

Of note: Other high-priority sectors include apparel, cotton, polysilicon, and tomatoes.

— China’s Commerce Ministry will investigate whether EU trade investigations constitute “trade barriers.” The China Chamber of Commerce for Import and Export of Machinery and Electronic Products claims that EU probes have hindered Chinese products’ entry into the European market and harmed Chinese businesses’ competitiveness. The investigation will run from July 10, 2024, to Jan. 10, 2025, and may extend to April 10 under special conditions. The review will cover rail locomotives, photovoltaics, wind power, and security equipment goods.

— China’s deflation risks persist amid weak domestic demand. China’s consumer price index eased to 0.2% above last year in June, the fifth straight month of inflation but the lowest figure since March. Food prices declined from year-ago for the 12th consecutive month despite an 18.1% jump in pork prices. China’s producer prices fell 0.8% from year-ago. While that was the softest decline in factory-gate prices since January 2023, it marked 21st straight month of producer deflation, reflecting fluctuations in global commodity prices and insufficient domestic demand for some industrial goods.

— A cooking oil scandal in China has reignited food safety concerns, with allegations that tankers used for fuel and chemicals were also used to transport cooking oil without cleaning. The state-owned grain company Sinograin was named in the report, leading the State Council’s food safety commission to launch an investigation. The scandal caused shares of leading cooking oil supplier Yihai Kerry to plummet and sparked outrage on social media. Sinograin has blacklisted the tanker operator and begun an internal inspection. Previous incidents of mixed-use tankers have occurred in China, highlighting ongoing regulatory challenges. Experts suggest that high costs and low profits in the transportation sector contribute to such misconduct.

— Adequate supply of biofuel feedstocks. A study commissioned by the National Oilseed Processors Association (link) reveals that $6 billion in investments have enabled U.S. oilseed processors to produce sufficient feedstocks to support a 1.4 billion-gallon increase in the Renewable Fuel Standard for biofuels.

— Honeywell acquires Air Products’ LNG technology for $1.81 billion. Honeywell International Inc. agreed to acquire Air Products’ liquefied natural gas (LNG) process technology and equipment business for $1.81 billion in an all-cash transaction. This strategic acquisition marks Honeywell’s fourth acquisition of the year and aligns with the company’s focus on energy transition solutions. The LNG market has quadrupled over the past 20 years and is expected to double over the next two decades, driven by demand in key end markets including power and data centers. Air Products’ LNG Business has approximately 475 employees, with headquarters in Allentown, Pennsylvania, and a 390,000-square-foot manufacturing facility in Port Manatee, Florida. The deal is expected to close before the end of the calendar year, subject to customary closing conditions and regulatory approvals.

— Tyson Foods announced the sale of its poultry complex in Vienna, Georgia, to House of Raeford Farms, a family-owned chicken products manufacturer. This move is part of Tyson’s ongoing efforts to streamline operations and improve profitability in its meat and poultry business. House of Raeford Farms stated that poultry processing will continue at the facility, utilizing the existing workforce. This decision should help maintain employment in the area. House of Raeford Farms is one of the 10 largest chicken producers in the United States. The company operates poultry grow-out operations and processing facilities in four southeastern states. It is known for its commitment to ethical and environmentally responsible practices.

— Singapore has approved 16 insect species, including crickets, silkworms, and the western honey bee, as safe for human consumption to promote an alternative, eco-friendly protein source. Insects are already commonly eaten in parts of Asia, Africa, and Mexico. While the European Commission and Australia have approved a few insect species, the U.S. has not officially recognized insects as food. Singapore, a pioneer in alternative proteins, was the first country to approve lab-grown meat in 2020.

— Over the past 18 months, Ozempic and similar drugs have been in short supply for Type 2 diabetes patients due to their off-label use for weight loss. Missing doses can lead to uncontrolled blood sugar and complications like kidney and eye issues. To address this, telehealth company Ro created a free online tool for reporting drug shortages. The map shows frequent prescription issues, and within two weeks of launch, it received 35,000 reports. Ozempic is a weekly shot that helps the body produce insulin.

— A rare case of plague has been confirmed in Pueblo County, Colorado. The plague, caused by the bacterium Yersinia pestis and transmitted by fleas, is best known for the “Black Death” in the Middle Ages. Today, it circulates among wild rodents and rarely infects humans. The source of the infection in Colorado is under investigation. Officials urge anyone with symptoms to seek immediate medical attention. The CDC notes that plague vaccines are in development but not expected to be available soon.

— The FTC criticized pharmaceutical benefit managers (PBMs), such as CVS’s Caremark and Cigna’s Express Scripts, for potentially inflating drug costs and harming local pharmacies. This criticism raises concerns within the industry that it may prompt a formal investigation or increased regulatory limits on PBM practices.

— Post-debate swing state polling update.

National Overview

• Former President Trump has gained about two points in the RCP (RealClearPolitics) Average since the first presidential debate on June 27.

Emerson College Poll (June 30 - July 2)
• Conducted with 1,000 registered voters.
• Trump leads in all swing states surveyed: Arizona, Nevada, Wisconsin, Michigan, Pennsylvania, and Georgia.

• Arizona: Trump leads by 4 points (46% to 42%).
• Michigan: Trump leads by 1 point (45% to 44%).
• Wisconsin: Trump leads by 3 points (47% to 44%).
• Nevada: Trump’s lead increased to 6 points (47% to 41%).
• Pennsylvania: Trump’s lead grew to 5 points (48% to 43%).
• Georgia: Trump’s lead expanded to 5 points (47% to 42%).

Remington Research Group Poll
Trump leads in every swing state.

• Nevada and Arizona: Trump leads by 7 points.
• Michigan: Trump leads by 3 points.
• Pennsylvania: Trump leads by 5 points.
• Wisconsin: Trump leads by 6 points (49% to 43%), the largest lead this cycle.

Bloomberg/Morning Consult Poll (July 1 - July 5)

Conducted with around 700 registered voters in each state.

• Wisconsin and Michigan: Biden leads by 3 and 5 points, respectively.
• Pennsylvania: Trump leads by 7 points, his biggest lead in a Pennsylvania poll this year.
• Arizona and North Carolina: Trump leads by 3 points.
• Georgia: Trump leads by 1 point.
• Nevada: Trump leads by 5 points.

Five-Way Race Poll (Bloomberg/Morning Consult)

• Includes independent candidates Robert F. Kennedy Jr., Cornel West, and Green Party candidate Jill Stein.

• Kennedy: Polled between 6% and 10%.
• West and Stein: Polled between 0% and 2%.
• Trump and Biden’s leads: Remain within one point of their head-to-head race leads in five of the seven states.
• Pennsylvania: Trump’s lead fell from 7 points to 3 points in the five-way race.

— Cook Political Report with Amy Walter makes six changes to its Electoral College ratings — all of them in the GOP’s direction. Key changes:

Significance of small shifts:

• A two-point shift in a closely divided electorate is significant. If Trump wins the national popular vote by three points, the election experts note it would mark a seven-point improvement from his 2020 performance, making any state or district Biden carried by eight points or less competitive.

State reclassifications:

• Minnesota, New Hampshire, and Nebraska’s 2nd District: Moved from Likely Democrat to Lean Democrat as they were carried by Biden by less than eight points.

• Arizona, Georgia, and Nevada: Moved from Toss Up to Lean Republican due to Trump’s current leads.

Toss up states:

• Michigan, Pennsylvania, and Wisconsin: Remain in the Toss Up category.

• Pennsylvania: Most vulnerable to flipping toward Trump, with Biden trailing in polls since spring by 2-3 points and Trump’s lead widening post-debate. MAGA Inc. has spent over $10 million on advertising in Pennsylvania from January to May.

Amy Walter said the firm is “awaiting more post-debate polling in these battleground states before making further adjustments.”

— Whoops. ABC News’ George Stephanopoulos was caught on camera Tuesday saying to a passerby that he didn’t think President Biden can serve another four years. Through a spokesperson, Stephanopoulos told Puck News he shouldn’t have responded to the question.

— Voters in eight states will soon decide whether to amend their constitutions to ban noncitizens from voting. This initiative, led by Trump-aligned Republicans, aims to address the unlikely scenario of undocumented immigrants voting in elections. Voting in federal contests is already illegal for noncitizens, and violations are rare due to severe penalties.

Meanwhile, Massachusetts implemented a policy banning migrants from sleeping at Boston’s Logan International Airport, addressing the issue of migrant families overwhelming the airport by staying overnight in terminals.

— Chesapeake Bay achieved its highest score in 20 years on the annual report card from the University of Maryland Center for Environmental Science, receiving a C-plus for its ecological health. This score, derived from factors like aquatic grasses, dissolved oxygen, and nutrient content, climbed to 55% in 2023, marking a four-point increase from the previous year. While the Bay has traditionally received moderate scores, this improvement reflects positive trends in underwater grasses, oxygen content, and nutrient levels, despite ongoing challenges with water clarity and algae measurements.

Only the Upper Eastern Shore region showed a declining trend, while the remaining 14 regions either improved or remained steady. The Lower Bay scored highest with 70%, whereas Baltimore’s Back and Patapsco River area had the lowest score at 22%. The report card’s release, notably attended by Pennsylvania Governor Josh Shapiro, highlights ongoing efforts to meet pollution reduction goals by 2025, though progress has been slow. Pennsylvania, often criticized for its contribution to pollution, has made some strides, meeting portions of its nitrogen, phosphorus, and sediment reduction targets.

— U.S. paper industry urges EU to delay anti-deforestation law, citing inflation concerns. The American Forest and Paper Association is urging the European Union to delay a forthcoming law designed to ensure supply chains for key consumer goods, like diapers and sanitary pads made from timber-derived pulp, do not contribute to deforestation. Mark Pitts, the association’s executive director, warns that implementing this law will lead to higher prices for these goods, resulting in inflationary pressures within the EU.

U.S. gov’t officials have also requested a postponement, according to a Bloomberg News report (link). The EU Deforestation Regulation aims to reduce the 10% of global deforestation and the associated biodiversity loss linked to EU consumption of commodities such as timber, beef, coffee, and cocoa.

— Tech firms develop AI weapons for U.S. and allies, raising accountability concerns. A growing number of tech companies, including Palmer Luckey’s Anduril, are developing AI weapons they claim will transform warfare for the U.S. and its allies. Luckey, who became a billionaire after selling his Oculus VR headset to Facebook, now sells AI weapons to the Pentagon and other countries. Anduril’s drones, used in Ukraine, can be pre-programmed to target Russian forces while avoiding jamming signals. However, the technology raises concerns about accountability if errors occur.

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