News/Markets/Policy Updates: Oct. 1, 2024
— East and Gulf Coast dockworkers begin first strike in 47 years, halting major U.S. trade. Dockworkers across 36 major ports on the U.S. East and Gulf coasts have gone on strike for the first time in nearly five decades, disrupting half of the nation’s trade volumes. While negotiations between the dockworkers’ union and the U.S. Maritime Alliance continue, President Biden has not invoked national security laws to force workers back to the docks. Key issues include wage increases and opposition to automation at the ports. Link to our special report on the topic. — The East and Gulf Coast port strike will have a significant impact on U.S. poultry exports: Export volume at risk. The strike will severely disrupt a large portion of U.S. poultry exports: Key ports affected. The Port of Savannah plays a crucial role in poultry exports: Economic impact. The strike would have significant economic consequences for the poultry industry: Broader industry effects. The impact extends beyond just poultry producers: Limited alternatives. While some alternatives exist, they are not ideal solutions: Market access. The strike will affect access to important international markets: — Fresh fruits and vegetables will be some of the initial products most affected by the strike. The U.S. imports perishable items like bananas and the ports where the strike has affected take in around 3.8 million metric tons (MMT) of bananas each year, about 75% of the U.S. imports. — USDA Secretary Tom Vilsack said that last week that most of the effect for agriculture would be on imports, especially higher-value items from Europe. While grain and other bulk exports would not be affected, containerized shipments of agricultural products would be impacted. — Traffic is already heavy at ports. There are nearly 100,000 containers in New York City-area ports alone waiting to be unloaded, according to a Reuters report quoting the executive director of the Port Authority of New York and New Jersey, with 35 container ships headed to New York over the coming week. — BNSF to resume grain shipments to Mexico amid ongoing rail delays. BNSF Railway will begin issuing permits for grain shipments to Mexico starting Oct. 1, marking a step towards easing trade bottlenecks. While other railroads have not yet followed suit, the National Grain and Feed Association praised the move but warned that delays could persist until the backlog is fully resolved. U.S. rail companies had halted shipments due to congestion in Mexico, prompting calls for intervention from the Biden administration. — President Joe Biden suggested Monday that members might have to return from their campaign-season break to deal with funding for Helene’s fallout, but odds are against that occurring. The recent stopgap spending bill Congress cleared extends $20.3 billion in current funding for FEMA’s Disaster Relief Fund. The legislation did include a provision that allows FEMA to use resources faster for disaster response over the next three months. Biden said it’s his “expectation” to ask for a supplemental funding bill, but that he didn’t have a price tag for it yet, adding “this is a historic storm, it’s devastating.” Congress left Thursday for recess, and the House and Senate aren’t expected to return until Nov. 12, after Election Day. Biden says he going to take an aerial tour of Asheville, North Carolina on Wednesday to observe damage from Hurricane Helene. He plans to travel to Georgia and Florida soon afterward. — Hurricane Helene devastates Southeastern U.S. agriculture, emergency aid sought. Hurricane Helene hit the U.S. Southeast just as crops were ready for harvest, causing significant damage to poultry barns, processing plants, and field crops from Florida to North Carolina and Tennessee. Senate Ag Chairwoman Debbie Stabenow (D-Mich.) called for emergency assistance for affected farmers and ranchers, while President Biden indicated he may request a disaster-relief package. Georgia Gov. Brian Kemp reported widespread damage to poultry facilities and dairy farms (107 poultry facilities were damaged or destroyed and 15 dairies were affected), and Florida Ag Commissioner Wilton Simpson described catastrophic losses in the “big bend” region. Federal workers are deployed to support recovery, and USDA is ready to provide disaster aid and technical assistance. Of note: In a fact sheet (link), the White House said 3,500 federal workers “are deployed and supporting Hurricane Helene response efforts across the impacted states.” — Sen. JD Vance (R-Ohio) and Minnesota Gov. Tim Walz (D) will face off in the vice-presidential debate at 9 p.m. ET. Airing live from New York City, CBS anchors Norah O’Donnell and Margaret Brennan will moderate. This is the only debate scheduled between Walz and Vance. — Trump and Harris in tight race for North Carolina, despite controversy around GOP governor candidate. A Washington Post poll (link) shows a close race between Donald Trump (50%) and Kamala Harris (48%) in North Carolina, within the margin of error. Controversy surrounding Republican governor candidate Lt. Gov. Mark Robinson has not dampened GOP enthusiasm for Trump. Robinson faces backlash over alleged lewd remarks, and Democratic candidate Josh Stein currently leads in the governor’s race. Key issues for voters include the economy, immigration, and protecting democracy, with Trump leading on the economy and Harris favored on handling democracy and health care. — Tony Vargas leads Don Bacon in key Omaha House race. State Sen. Tony Vargas, a Democrat, is leading Republican Rep. Don Bacon in a rematch for a House seat in the Omaha area, according to nonpartisan polls. The race, now rated as “Leans Democratic” by Sabato’s Crystal Ball (link), has Vargas ahead of Bacon, a member of the House Ag Committee. — Jimmy Carter, America’s oldest-living president, celebrated his 100th birthday. Carter, who was in office from 1977 to 1981, is the first American president to reach triple digits. He won the Nobel Peace prize in 2002 for his humanitarian work. He has spent the past 19 months in end-of-life care at his home in Georgia. |
| MARKET FOCUS |
— Equities today: Asian and European stock indexes were mixed overnight. China markets are closed for a holiday this week. U.S. stock indexes are pointed to slightly higher openings. In Asia, Japan +1.9%. Hong Kong closed. China closed. India flat. In Europe, at midday, London +0.5%. Paris flat. Frankfurt +0.4%.
U.S. equities: All three major indices registered gains to open the week, with the Dow posting the smallest percentage rise of the three on a late push higher after being in negative territory most of the session. The Dow and S&P 500 both notched new record finishes and capped off strong quarterly gains. The Dow was up 8.2% for the quarter, the Nasdaq was up 2.57%, and the S&P 500 gained 5.53%.
For September, the Dow was up 1.9%, the Nasdaq rose 2.7%, and the S&P 500 gained 2%.
On Monday, the Dow ended up 17.15 points, 0.04%, at 42,330.15. The Nasdaq rose 69.58 points, 0.38%, at 18,189.17. The S&P 500 was up 24.31 points, 0.42%, at 5,762.48.
— CVS is exploring a breakup. The health care giant is discussing moves that could include separating its retail pharmacy business from its insurance arm. The review of strategic options comes as CVS said it saw pressure on its business, and investors including the hedge fund Glenview Capital push for changes. The news was first reported by Reuters (link).
— X’s value drops nearly 79% since Elon Musk’s acquisition. Fidelity has written down its stake in X (formerly Twitter) to about $4.19 million, indicating the social network’s value is now less than a quarter of what Elon Musk paid in 2022. This 79% decline reflects the pressures on X, as it struggles with lost advertising revenue and major business and policy changes under Musk’s leadership.
— Oil prices were largely unchanged on Monday but saw a significant 17% drop for the third quarter due to concerns over weak global demand. Brent crude futures for November delivery fell 21 cents to $71.77 per barrel, while the December contract gained 27 cents to $71.81. West Texas Intermediate (WTI) settled at $68.17, down 16% for the quarter.
— Ag markets today: Wheat futures are mildly firmer and trading near session highs after facing pressure earlier in the overnight session. Corn is chopping around unchanged, while soybeans are weaker. As of 7:30 a.m. ET, corn futures were trading fractionally to a penny lower, soybeans were 7 to 8 cents lower and wheat futures were 1 to 3 cents higher. The U.S. dollar index was more than 300 points higher, and front-month crude oil futures were around 50 cents lower.
Packers improve short-term cattle inventories. Packers purchased a large amount of cattle again last week and have fresh contracted supplies available with the flip of the calendar. Cash sources note packers are better positioned on near-term slaughter needs, which could lead to less aggressive bidding in the cash market, though feedlots have little incentive to move cattle at lower prices. A lengthy standoff in cash cattle negotiations seems likely this week.
Cash hog index slips. The CME lean hog index is down 2 cents to $84.01 as of Sept. 27. October lean hog futures finished Monday at a $1.76 discount to today’s cash quote, signaling traders anticipate the cash index will continue to slide into mid-October.
— Agriculture markets yesterday:
• Corn: December corn rallied 6 3/4 cents to $4.24 3/4, marking a monthly and quarterly high close.
• Soy complex: November soybeans fell 8 3/4 cents to $10.57, while December meal closed down $2.50 at $341.60, each closing near the session low. December soyoil rallied 95 points to 43.31 cents, closing near the session high and above the 100-day moving average.
• Wheat: December SRW wheat rose 4 cents to $5.84 and near mid-range. December HRW wheat gained 7 cents to $5.83 3/4 and nearer the session high. December spring wheat futures rallied 11 cents to $6.19 1/4.
• Cotton: December cotton rose 89 points to 73.61 cents, marking a high-range close.
• Cattle: December live cattle rose 32 1/2 cents to $184.80 and nearer the session high. November feeder cattle fell 80 cents to $244.90 and nearer the session low. Both markets last Friday hit two-month highs.
• Hogs: December lean hogs fell 10 cents to $73.275 and nearer the session high.
— Quotes of note:
• “Shoppers can rest assured holiday merchandise will be on shelves.” — Brian Dodge, president of the Retail Industry Leaders Association.
• Fed Chair Powell highlights strong economy, inflation progress, and data-driven rate decisions. Federal Reserve Chair Jerome Powell delivered remarks Monday at the National Association for Business Economics Annual Meeting in Nashville, Tennessee. Some highlights from his speech:
Economic outlook
• Powell described the U.S. economy as “strong overall,” noting significant progress over the past two years towards the Fed’s dual mandate of maximum employment and price stability.
• He emphasized that labor market conditions remain solid, though they have cooled from their previously overheated state. Powell pointed to recently published annual revisions to previous gross domestic product data, which boosted growth in both 2022 and 2023. The upward revision was driven by higher consumer income and spending, plus a modest increase in productivity. “When there’s strength in the economy like that, it does that give you… more of a sense of security when you’re seeing a cooling labor market,” Powell said.
Inflation progress
• The Fed Chair expressed greater confidence that inflation is on a sustainable path to the 2% target. He cited recent data showing further progress, with headline and core inflation at 2.2% and 2.7% respectively over the most recent 12 months. “We do not believe that we need to see further cooling in labor market conditions to achieve 2% inflation,” Powell said. If the past three months’ rate of inflation continued for a year, the core PCE index would come in below the Fed’s 2% annual target.
Interest rate policy
• Powell explained the recent decision to reduce policy restraint by lowering the target range for the federal funds rate by a half percentage point. This move reflects growing confidence that with an appropriate recalibration of policy stance, labor market strength can be maintained alongside moderate growth and declining inflation.
Future rate cuts
• Powell suggested that another half-point rate cut is unlikely this year. “This is not a committee that feels like it’s in a hurry to cut rates quickly,” he said. Powell indicated that if the economy evolves as expected, policy will move towards a more neutral stance over time. He sees two more interest rate cuts totaling 50 basis points this year as a baseline “if the economy performs as expected.” However, he stressed that the Fed is not on any preset course, stating, “The risks are two-sided, and we will continue to make our decisions meeting by meeting.”
• After Powell’s comments, odds for a half-point rate cut at the November policy meeting fell to 36%, from more than 53% before the speech, according to CME FedWatch. Futures pricing also implied significantly more easing in 2025 than most Fed officials predicted in their latest economic projections offered in September, which had the fed-funds rate ending next year at a target range of 3.25% to 3.5%.
Data-dependent approach
• The Fed Chair emphasized that future decisions will be made on a meeting-by-meeting basis, carefully assessing incoming data, the evolving outlook, and the balance of risks. He noted, “If the economy slows more than we expect, then we can cut faster. If it slows less than we expect, we can cut slower.”
Bottom line: Powell reaffirmed the Fed’s commitment to its dual mandate, stating, “We remain resolute in our commitment to our maximum-employment and price-stability mandates. Everything we do is in service to our public mission.”
• Fed Gov. Michelle Bowman on Monday said that while inflation is cooling, “core inflation is still uncomfortably above” the Fed’s 2% target. Bowman, who was the lone dissenting vote on the Fed’s half-point rate cut Sept. 18, explained that a “more measured approach would have avoided the risk of unintentionally signaling concerns about underlying economic conditions.” She also worried that bringing rates down too fast could raise expectations for a similar cut at a later meeting and that it could risk unleashing pent-up demand.
• BlackRock CEO Larry Fink says markets are overestimating potential Federal Reserve interest-rate cuts, given the continued growth of the US economy. Speaking at the Berlin Global Dialogue, Fink said that while some easing is possible, the market’s pricing of significant rate cuts is unrealistic. He noted that current government policies are more inflationary than deflationary, making it difficult for the Fed to cut rates as aggressively as the market anticipates. Traders are betting on further cuts despite Fed Chair Jerome Powell’s emphasis on gradual rate reductions and a stable economic outlook.
— Eurozone inflation fell to 1.8% in September, marking the first time it’s dropped below the European Central Bank’s 2% target since 2021. This news caused two-year German bond yields to reach their lowest point in over a year and heightened expectations of an ECB rate cut in October.
Market perspectives:
— Outside markets: The U.S. dollar index was firmer, with the euro and British pound both weaker against the greenback. The yield on the 10-year U.S. Treasury note was lower, trading around 3.74%, with a mostly lower tone in global government bond yields. Crude oil futures were lower, with U.S. crude around $67.70 per barrel and Brent around $71.30 per barrel. Gold and silver futures were higher, with gold around $2,669 per troy ounce and silver around $31.59 per troy ounce.
— Russian Finance Ministry plans to buy 52 billion rubles in precious metals, including platinum and palladium. Broker SP Angel said this morning in an email dispatch that media reports have suggested the Russian Finance Ministry intends to buy 52 billion rubles worth of precious metals and stones. The INTERFAX news agency via Bloomberg said this will also include platinum and palladium. “The Ministry is aiming to boost the ‘liquid assets in the State Fund of Russia,’” said the broker.
— Sharp slowdown in soy crush expected. Analysts expect USDA to show soybean crush slowed to 167.3 million bu. in August, down 26.1 million bu. (13.5%) from July and 1.7 million bu. (1.0%) from last year. Corn-for-ethanol use is expected to total 469.0 million bu., down 4.5 million bu. (1.0%) from July but up 27.3 million bu. (6.2%) from last year.
— USDA daily export sales:
• 195,000 MT corn to unknown destinations, 2024-2025 marketing year
• 120,000 MT soybeans to unknown destinations, 2024-2025 marketing year
— Ag trade update: Thailand tendered to buy 180,000 MT of optional origin feed wheat. Jordan passed on a tender to buy up to 120,000 MT of optional origin milling wheat.
— NWS outlook: There is a Marginal Risk of excessive rainfall over parts of the Mid-Atlantic and Florida on Tuesday... ...There is a Critical Risk of fire weather over parts of the Northern High Plains on Tuesday... ...There are Excessive Heat Warnings and Heat Advisories over parts of Southern California and the Southwest.
Items in Pro Farmer’s First Thing Today include:
• Wheat firmer, corn choppy and beans weaker early this morning
• Cordonnier again trims U.S. soybean yield, production forecasts
• Corn, soybean CCI ratings show mild late-season improvements
| ISRAEL/HAMAS CONFLICT |
— Israel confirmed its troops crossed into southern Lebanon for “limited, localized, and targeted raids” against Hezbollah, an Iran-backed militant group. The raids targeted threats near the Lebanon-Israel border. Shortly after, air-raid sirens sounded in central Israel, including Tel Aviv, as about ten projectiles were fired from Lebanon, according to the Israel Defense Forces.
| CHINA UPDATE |
— U.S., China to hold trade, economic talks. Chinese Commerce Minister Wang Wentao and his U.S. counterpart will hold a call soon on trade and economic ties, China’s state-run Xinhua news agency reported, citing people familiar with the matter. They will exchange views on bilateral economic and trade relations and key issues of mutual concern, including restrictions on electric vehicles, Xinhua reported.
| TRADE POLICY |
— USTR and USDA: Biden/Harris administration has expanded market access and increased U.S. agricultural exports by 28.5%. The U.S. Trade Representative’s (USTR) office and USDA on Monday said (link) the Biden-Harris administration has made significant strides in expanding market access and boosting agricultural exports for U.S. producers.
Details from the joint announcement (link):
Export growth
• The four-year average of U.S. agricultural exports under the Biden/Harris administration is 28.5% higher compared to the previous four years.
Market access achievements
• The administration has secured over $26.7 billion in agricultural market access globally for U.S. farmers, ranchers, fishers, and food manufacturers since taking office1 This expanded access has opened up new opportunities for American agricultural producers in international markets.
Record-breaking export values
• Between 2021 and 2024, the U.S. achieved its four largest annual export values for agricultural products. The peak was reached in 2022 with a record-high of $196 billion in agricultural exports.
Key initiatives. The administration has launched several programs to promote U.S. agricultural exports:
• Regional Agricultural Promotion Program (RAPP): A $1.2 billion initiative aimed at opening new markets and strengthening existing ones for U.S. agricultural and food producers and exporters.
• Assisting Specialty Crop Exports (ASCE) initiative: Funded with $65 million from RAPP, this program supports projects that advance U.S. specialty crop exports by improving understanding of foreign food safety systems and promoting U.S. food safety standards abroad.
Trade relationship improvements. The administration has worked on strengthening trade relationships and removing barriers (link for fact sheet):
• Lowered tariffs in India for 10 agricultural commodities, including apples, frozen duck, and frozen chicken.
• Secured approvals and renewals for agricultural biotechnology products in the European Union.
• Reopened the Colombian market for U.S. poultry and egg products.
• Gained access for U.S. fresh potatoes to Mexico beyond the border zone, resulting in over $82 million in exports in 20222.
Economic impact. U.S. food and agricultural exports play a crucial role in the nation’s economy:
• Support more than one million jobs.
• Generate nearly $200 billion in additional economic activity each year.
• Account for about 20% of all U.S. agricultural production.
Upshot: Some of the increase in export value may be attributed to higher prices rather than solely increased volumes. This joint release tries to address bipartisan complaints in Congress and in the U.S. ag sector about the current trade policy and shows the sensitivity of the issue within the Biden administration. Through July, U.S. ag exports totaled $148.29 billion so far in fiscal year (FY) 2024 against imports of $171.63 billion for a deficit of $23.3 billion, already ahead of FY 2023 when the deficit was $17.15 billion via exports of $178.18 billion against imports of $195.33 billion. USDA’s trade numbers signal a $42.5 billion deficit for FY 2025 (exports $169.5 billion against $212 billion imports). This projected record trade deficit is raising concerns about the U.S. farm economy and has led to calls for new free trade agreements to expand export markets. While the overall agricultural trade balance is negative, the U.S. continues to be a net exporter of bulk commodities, with imports largely consisting of high-value agricultural and food products.
| ENERGY & CLIMATE CHANGE |
— Stellantis extends production halt of EV. Stellantis said that it would continue the suspension of production of its Fiat 500 electric vehicle (EV) until Nov. 1, citing poor demand. The company told unions that the EV market in Europe is “in deep trouble.”
| POLITICS & ELECTIONS |
— Ishiba Shigeru was sworn in as Japan’s new prime minister after winning the ruling Liberal Democratic Party’s leadership race, fulfilling a long-held ambition after four previous failed bids. Known as a gadfly within his party, he is highly popular among the public and is seen as a champion of Japan’s rural regions. A former defense minister, Ishiba aims to improve the LDP’s image after a financial scandal, with his first challenge being a snap general election scheduled for Oct. 27.
— Claudia Sheinbaum takes office as Mexico’s first female president amid judicial shake-up and economic uncertainty. Claudia Sheinbaum has become Mexico’s first female president, inheriting a country divided by her predecessor Andrés Manuel López Obrador’s judicial overhaul, which forces federal judges to face elections. While Sheinbaum supports the reform, critics say it undermines democracy and could harm trade with the U.S., as well as foreign investment. She faces challenges from organized crime, economic slowdown, and geopolitical tensions, especially with the potential return of Donald Trump to the U.S. presidency.
Of note: Sheinbaum plans to name a former top finance official from the nation’s capital for a key role negotiating trade ahead of the scheduled review of the country’s agreement with the U.S. and Canada, Bloomberg reports. Sheinbaum and incoming Economy Minister Marcelo Ebrard plan to name Luis Rosendo Gutierrez Romano as deputy secretary for international trade In that role, Gutierrez Romano is poised to lead an area responsible for the U.S.-Mexico-Canada Agreement, the four-year-old pact that’s up for evaluation and potential changes in 2026.
| KEY LINKS |
WASDE | Crop Production | USDA weekly reports | Crop Progress | Food prices | Farm income | Export Sales weekly | ERP dashboard | California phase-out of gas-powered vehicles | RFS | IRA: Biofuels | IRA: Ag | | Russia/Ukraine war, lessons learned | | SCOTUS on WOTUS | SCOTUS on Prop 12 pork | New farm bill primer | | Gov’t payments to farmers by program | Farmer working capital | USDA Ag Outlook Forum |