Normal Operations Resume at Ports of Los Angeles and Long Beach

EPA vehicle emissions standards rule coming Wed. | Russia comments on Ukraine grain exports

Today should be a mostly quiet day of trading as European markets are closed for the Easter holiday and there are no notable economic reports and just one Fed speaker.

The U.S. and Canada have turned to North Sea crude for the first time since 2015 in a bid to replace Russian crude. Reuters reports that the two countries have imported North Sea “Forties” crude for the first time since 2015 as the countries seek to replace Russian crude, with Refinitiv Eikon data indicating a tanker discharged 770,000 barrels of Forties blend crudes in February in Maine, and another 585,000 barrels of Forties crude unloaded in March at a Maine port. A third tanker unloaded 618,000 barrels of Forties crude in Delaware last week, the report said. Some of the crude was to be sent to Canada via pipeline.

A Texas federal judge’s unusual decision to halt abortion pill mifepristone’s Food and Drug Administration approval could affect other FDA-approved drugs or vaccines, said Health and Human Services Secretary Xavier Becerra, promising “every option is on the table” to keep the drug available.

Tesla plans to open a new “Megafactory” to manufacture massive batteries in Shanghai, China, the car company announced in a tweet on Sunday, deepening Tesla’s ties to the Chinese market despite previous criticism of its connections to the country.

Shareholders at publicly traded companies have filed roughly 540 proposals this year asking companies to address environmental, social and corporate governance issues, as resolutions about climate change have increased by 12% compared with last year and make up a quarter of resolutions filed since mid-February, according to Proxy Preview.

Equities today: Global stock markets were mixed overnight. U.S. stock indexes are pointed toward mixed openings. Futures barely moved after last Friday’s U.S. jobs report, which showed that the labor market was still tight, but cooling. Investors now turn their focus to the start of earnings season this week as well as the all-important U.S. inflation data on Wednesday. Markets across Europe, Hong Kong and Australia closed for Easter holidays and trading volumes were expected to be light. In Asia, Japan +0.4%. Hong Kong closed. China -0.4%. India flat. In Europe, London closed. Paris closed. Frankfurt closed.

Only one in three actively managed large-cap mutual funds beat their benchmarks in the first three months of the year, the worst performance since the three-month period ended December 2020, according to data from Bank of America Global Research.

Ag markets today: Wheat futures traded solidly higher coming out of the extended holiday weekend, while corn favored the downside and soybeans traded mixed. As of 7:30 a.m. ET, corn futures were trading steady to 2 cents lower, soybeans were fractionally lower to 2 cents higher, SRW wheat was 3 to 4 cents higher, HRW wheat was 8 to 9 cents higher and spring wheat was 6 to 8 cents higher. Front-month crude oil futures were near unchanged, while the U.S. dollar index was around 150 points higher.

Market quotes of note:

• Private-equity funds went on a buying binge for food companies before markets crashed in 2022. Now they have indigestion that is contributing to rising prices at the grocery checkout. While energy prices are falling back more than a year on from Russia’s invasion of Ukraine. But the other big cost of the war for households around the world continues to rise: food.

• JPMorgan’s Dimon sees bank crisis near end even if more fail. The bank crisis that rattled global markets last month is probably nearing the end, even if more unforeseen failures occur, JPMorgan CEO Jamie Dimon said. Only a handful of lenders have the problems that toppled Silicon Valley Bank, and when the industry starts reporting quarterly earnings next week, the numbers will probably be good, Dimon told CNN last week. Asked if more bank failures might come, he said he didn’t know.
  
• Yellen still sees U.S. economy growth, strong labor market. “I continue to anticipate that the US economy will grow and the labor market will remain strong, and inflation will come down,” Treasury Secretary Janet Yellen said in an AFP interview. Yellen added the U.S. is committed to ensuring that all deposits are safe and monitoring banking system conditions. “Our banking system is sound and it’s resilient” and has strong capital and liquidity, Yellen said.
  
• Wages increased by 0.3% in Mach and 4.2% from a year ago. The three-month wage growth average has dropped to 3.8%. That’s moving closer to what Fed policymakers “believe to be in line with stable wage and inflation expectations,” wrote Joseph Brusuelas, chief economist at RSM in a note. “That wage data tends to suggest that the risk of a wage price spiral is easing and that will create space in the near term for the Federal Reserve to engage in a strategic pause in its efforts to restore price stability,” he added. Friday’s was the last employment report Fed officials will have in hand before their May 2-3 gathering.
  

On tap today:

• U.S. wholesale inventories for February are expected to rise 0.2% from the prior month. (10 a.m. ET)
• USDA Grain Export Inspections report, 11 a.m. ET.
• USA Crop Progress report, 4 p.m. ET.
• Federal Reserve Bank of New York President John Williams speaks about economic policy at 4:15 p.m. ET.
• China’s producer and consumer price indexes for March are due out at 9:30 p.m. ET.
• International Monetary Fund and World Bank spring meetings are in Washington, D.C., this week.

Summers: Recession probabilities rising, Fed nearing the end. Former Treasury Secretary Lawrence Summers said the likelihood of a U.S. recession is rising after a series of weak economic indicators and that the Federal Reserve is approaching the end of its series of interest-rate hikes.

Market perspectives:

• Outside markets: The U.S. dollar index was slightly higher. The yield on the 10-year US Treasury note was weaker, trading around 3.36%, after an abbreviated session on Friday. Global government bond yields were virtually unchanged. Crude oil was higher, with U.S. crude around $80.80 per barrel and Brent around $85.15 per barrel. Gold and silver futures were under pressure after the holiday weekend, with gold around $2,013 per troy ounce and silver around $25.09 per troy ounce.

• U.S. production of renewable diesel hit 5 million gallons a day for the first time in January, the Wall Street Journal reports (link), extending a two-year biofuel business boom and offering a potential cleaner alternative to the petroleum product that fuels industrial operations. Annual production tripled between 2019 and 2022, and the Energy Information Administration forecasts it will reach 3.34 billion gallons next year. That pales next to the more than 46 billion gallons of diesel the U.S. transportation sector consumed in 2021. But for the trucking industry, the fuel may offer help in reducing carbon emissions while electrification of long-haul, heavy-duty vehicles remains a long way off. Renewable diesel is made in a way similar to that for conventional fuel powering trucks and trains. Experts say it is similar enough to its petroleum-based cousin to serve as a drop-in replacement.

• India will likely see below-normal monsoon rain this year, according to a private forecaster, a prospect that could hurt its vast agriculture sector and stoke food inflation in Asia’s third-biggest economy. The coming season may bring only 94% of the rain India usually gets from June to September, Skymet Weather Services Pvt said Monday. A lack of rain spells trouble for the economy as it might cut yields of summer-sown crops like rice and sugar cane, driving up food prices. The India Meteorological Department, the nation’s official forecaster, is likely to provide its monsoon prediction later this month.

• NWS weather outlook: Unsettled weather to linger over the Northwest; return to the Gulf Coast by midweek... ...Widespread warm up across much of the Lower 48 ahead of the next cold front Tuesday... ...Thunderstorm chances continue over the Central and Southern Plains.

Items in Pro Farmer’s First Thing Today include:

• Varied grain price tone to open the week
• Warm, dry forecast for central United States
• Russia threatens to bypass Black Sea grain deal
• Russia considering raising calculation price for wheat export dut
• Russia raises wheat export tax
• Demand for China’s wheat auctions slowing
• Attitudes remain bullish toward cash cattle trade
• Cash hog index continues to fall

— Search for source of leaked documents points to domestic. Classified military and intelligence documents that appeared online, with details ranging from Ukraine’s air defenses to Israel’s Mossad spy agency, have U.S. officials scrambling to identify the leak’s source, with some U.S. officials saying they suspected it could be someone from the United States. Officials say the topics addressed in the documents, which touch on the war in Ukraine, China, the Middle East and Africa, suggest they were likely leaked by an American, as the search for the source continues.

— Russia hints at not allowing Ukraine grain exports via ports. Russian Foreign Minister Sergei Lavrov said Friday that Russia may opt to work outside the Black Sea Grain Initiative unless the West removes restrictions that are limiting Russia grain and fertilizer exports, hinting that the country may also not allow Ukrainian agricultural exports to continue via Black Sea ports. “If they do not have the desire to honestly approach what [UN Secretary General] Mr. [António] Guterres proposed and so persistently promoted, well, let them continue to ship the relevant products from Ukraine by land, by rail and by rivers,” Lavrov said at a news conference in Ankara. “And we will work, if necessary, outside the framework of this initiative. We have the opportunity to do this with Turkey, with Qatar — the presidents discussed relevant plans,” Lavrov said.

— Poland to temporarily halt Ukraine grain imports. Imports of Ukrainian grain to Poland will be temporarily halted to mitigate impact on prices, but transit will still be allowed, Polish Agriculture Minister Robert Telus said on Friday. Telus said, “Transit will be allowed but will be closely monitored in both countries, so that Ukraine grain doesn’t stay in Poland.”

— Tesla, an electric-vehicle maker, announced that it will build a new battery factory in Shanghai — its second in the city. Construction of the site, which will produce Tesla’s large-scale lithium-ion battery, is set to begin towards the end of 2023. The American company’s new investment in China comes at a time when tensions between the two countries are running high.

— Toyota unveiled a new goal to sell 1.5 million battery-electric vehicles, or BEVs, annually by 2026, coming from 10 new models. “As one of our efforts, we will do our utmost to develop next-generation BEVs for the era of BEV popularization and create new business models,” President Koji Sato said during a presentation to investors Friday. Toyota’s previous plan called for about 3.5 million all-electric sales annually by 2030, coming from 30 models. Toyota sells roughly 10 million cars a year. Toyota shipped 2.6 million hybrid electric cars in 2022, while it only sold 22,689 BEVs.

Ford Motor wants to produce BEVs at a “run-rate” of two million units annually by 2026. That translates to between one million and two million sold in 2026, then the full two million — plus any growth — coming in 2027. Ford sold about 4.2 million vehicles overall in 2022.

General Motors wants to sell one million EVs in North America by 2025. GM sold about 2.9 million vehicles in North America in 2022.

Wall Street expects Tesla to sell 2.9 million vehicles in 2025 and 3.5 million in 2026.

— EPA is expected to propose much stricter auto emissions limits on Wednesday to spur electric vehicle adoption. One of the biggest changes in the White House’s proposal to update Circular A-4 — the federal government’s core guidance document on rule-writing — would more heavily weight regulatory benefits that won’t be fully realized until the distant future, said Rachel Rothschild, an environmental law professor at the University of Michigan Law School. That shift means ambitious proposals whose benefits lie mostly in the future, potentially including greenhouse gas rules or standards governing chemicals that won’t cause cancer for many years, are likelier to survive the mandatory cost-benefit analysis agencies must undertake, Rothschild said.

— World Bank to prioritize climate. Treasury Secretary Janet Yellen said she expects an update to the World Bank’s mission to include building resilience against climate change and pandemics in its core goals as the bank holds its 2023 Spring Meetings this week. Ajay Banga, the U.S. nominee for World Bank president, said he’ll take a stronger stance on climate change. Environmental groups are protesting the event, calling on the bank and its shareholders to stop funding fossil fuels and instead fund clean energy and justice investments.

— Texas grid backup plan. A fleet of new natural gas-fired power plants in Texas may cost $18 billion, much more than an earlier estimate, as lawmakers attempt to improve the state’s electric grid after its deadly failure in 2021.

— White House weighs in on abortion pill ban. The White House is in discussions with abortion pill manufacturers and U.S. pharmacy chains on ways to push back against efforts to ban mifepristone, as it gears up to appeal a Texas court ruling suspending the approval of the drug. U.S. District Judge Matthew Kacsmaryk suspended approval of mifepristone, which essentially makes sales of the pill illegal in the U.S., while legal challenges proceed. A Washington state ruling on Friday blocks changes to pill sales in 17 states.

— Sen. Bob Casey (D-Pa.)) announced Monday he will seek a fourth term in 2024. His decision gives Democrats a boost ahead of a difficult political map. Next year they must defend Senate incumbents in red states such as Montana, Ohio and West Virginia, and in multiple swing states.

— Republicans in Montana are trying to change the rules for next year’s Senate primary to make it easier to defeat Sen. Jon Tester (D-Mont.) and win back the Senate majority, The Hill reports (link). But state Democrats believe the bill, which passed the state Senate earlier in the week and is expected to be approved by the Montana House, is nothing more than a desperate and last-gasp attempt of Sen. Steve Daines (R-Mont.), chairman of the National Republican Senatorial Committee. The new legislation would change the structure of the election from the usual primary system to a jungle primary to exclude libertarians from being on the November ballot and give Republicans a leg up against the three-term Senate Democrat.

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