News/Markets/Policy Updates: Nov. 11, 2024
— The CBOE Volatility Index, or VIX, finished Friday at 14.94 down 32% on the week. It was the biggest weekly drop for the Fear Index since December 2021. — Trump will follow through on plans to hit imports with tariffs, but is likely to carve out exemptions for sectors such as Canadian oil and gas, former US Commerce Secretary Wilbur Ross said. Canada is the nation’s largest external supplier of energy. More on Trump’s plans below. — Trump says Tom Homan to join administration as border Czar. President-elect Donald Trump says former ICE Director Tom Homan will be joining his administration as the Border Czar, according to post on Truth Social. He will be in charge of the nation’s borders. “Tom Homan will be in charge of all deportation of illegal aliens back to their Country of Origin,” Trump adds. — Rep. Elise Stefanik (R-N.Y.) tapped as Trump’s UN Ambassador, sparking House GOP leadership shuffle. President-elect Trump has chosen Stefanik to serve as U.S. ambassador to the U.N., CNN first reported. Stefanik’s House departure could create a minor disruption for the slim GOP majority but her safe, deep-red district mitigates major risk. A seasoned national security and intelligence veteran, Stefanik’s Senate confirmation is expected to be swift. Her exit triggers a scramble for GOP leadership roles, with potential contenders including Reps. Ashley Hinson (Iowa), Byron Donalds (Fla.), Stephanie Bice (Okla.), and Blake Moore (Utah). GOP leaders are likely to seek female candidates for diversity among top ranks. — Gregg Doud is a notable addition to the list of potential USDA Secretary candidates. He served as the Chief Agricultural Negotiator with the rank of Ambassador in the Office of the United States Trade Representative, confirmed by the U.S. Senate on March 1, 2018. In this role, Ambassador Doud was responsible for conducting and overseeing international negotiations related to trade in agricultural products. Doud’s background is deeply rooted in agriculture: He grew up on a dry-land wheat, grain sorghum, soybean, swine, and cow-calf operation near Mankato, Kansas, which he remains involved with today. Prior to his role as Chief Agricultural Negotiator, he served as the President of the Commodity Markets Council from 2013. He has experience as a Professional Staff member of the Senate Ag Committee, working for Senators Pat Roberts and Thad Cochran. Doud has held various roles in the agriculture industry, including positions with the National Cattlemen’s Beef Association, U.S. Wheat Associates, and the agricultural commodity consulting firm World Perspectives. Doud’s current employment is as the President and Chief Executive Officer of the National Milk Producers Federation (NMPF). Prior to joining NMPF, Doud worked at Aimpoint Research, a global intelligence firm specializing in agriculture and food (Aimpoint Research joined with Directions Research and SEEK Company to form a new entity called The Directions Group). Besides Doud, the list of potential USDA Secretary candidates includes (but not limited to): — An estimated 1 million votes are left to be counted in House races, mostly in California. Republicans are now two seats away from holding on to the majority. Freshman Rep. Yadira Caraveo (D-Colo.) conceded Sunday night she’d lost her bid for a second term, another blow to Democratic chances for victory. Rep. David Schweikert (R-Ariz.), a vulnerable GOP incumbent, also won re-election. Republicans have secured 216 as of Saturday night, according to Decision Desk HQ, and the Democrats trail with 209 seats. A total of 10 races have not yet been called. Of those 10, Democrats are leading in two while Republican candidates are ahead in the other eight, according to The Hill. If the current margins hold once all votes are counted, Republicans could net a total of 224. Democrats could total of 211 as the new Congress is sworn in next year. The current House of Representatives has 220 Republican seats, 212 Democratic, and three vacancies. — Prominent investor Scott Bessent met with Donald Trump on Friday, as he and fellow investor John Paulson emerge as leading candidates for the key role of Treasury Secretary. |
MARKET FOCUS |
— Equities today: Asian and European stock indexes were mixed overnight. U.S. Dow opened up around 220 points higher and is currently up by around 400 points. Today is Veteran’s Day so trading should be quiet as there are no economic reports or Fed speakers, while the bond market is closed. However, there are important updates this week on inflation (CPI on Wednesday) and growth (numerous reports on Thursday/Friday).
U.S. equities Friday and for the week: All three major indices ended Friday higher, registering record finishes in the wake of the Fed decision and U.S. elections. On Friday, the Dow was up 259.65 points, 0.59%, at 43,989.99. The Nasdaq rose 17.32 points, 0.09%, at 19,268.78. The S&P 500 gained 22.44 points, 0.38%, at 5,995.54. It was the best week of the year for the Dow and S&P 500. Of note: The S&P 500 now trades at 22.2 times earnings estimates for the next 12 months, according to FactSet. That compares with a five-year average of 19.6 times.
For the week, the Dow climbed 4.63%, the S&P 500 gained 4.66% and the Nasdaq rallied 5.74%.
— CNH industrial shares drop 10% after profit miss, forecast cut. CNH Industrial’s shares fell over 10% following a third-quarter profit miss and a lowered 2024 profit forecast due to weak demand and reduced dealer inventory needs. The adjusted profit forecast was cut to $1.05-$1.15 per share from a previous $1.30-$1.40 estimate. Agricultural sales are expected to decline by 22%-23% amid high crop inventories and pressured prices, leading farmers to delay equipment purchases. CNH’s revenue dropped 22.3% year-over-year to $4.65 billion but exceeded market estimates. Declining tractor and combine sales hit global markets, reflecting broader challenges in farm incomes and equipment demand. CNH, known for its New Holland brand of farm equipment, posted an adjusted third-quarter profit of 24 cents per share that fell short of the estimates of 27 cents.
— Oil prices fell over 2% on Friday, as supply fears from Hurricane Rafael eased and China’s economic stimulus measures underwhelmed traders. U.S. WTI crude futures dropped by $1.98 (2.7%) to $70.35 per barrel, and Brent crude fell by $1.76 (2.3%) to $73.87 per barrel.
— Ag markets today: Soybean futures built on last week’s gains during overnight trade while wheat weakened and corn mildly favored the downside. As of 7:30 a.m. ET, corn futures were trading 1 to 2 cents lower, soybeans were 3 to 4 cents higher, winter wheat markets were 9 to 12 cents lower and spring wheat was 4 to 8 cents lower. The U.S. dollar index was around 500 points higher and front-month crude oil futures were around $1.20 lower.
Cattle futures posted a downside breakout from the bear flag formation on the daily chart last Friday, suggesting followthrough selling is likely. Wholesale beef prices continued to fall, dropping $1.53 for Choice to $307.93 and 53 cents for Select to $279.29, while cash cattle prices declined for a second straight week.
The CME lean hog index dropped 18 cents to $90.43 as of Nov. 7, ending a 15-day string of gains. After a sharp drop on Thursday, the pork cutout firmed $4.42 on Friday to $102.38. December lean hog futures finished last Friday $10.005 below today’s cash index quote.
— Agriculture markets Friday and for the week:
• Corn: December corn futures climbed 3 1/2 cents to $4.31, ending the day near mid-range. Prices gained 16 1/2 cents on the week.
• Soy complex: November soybeans rose 4 cents to $10.30 1/4 and gained 36 1/2 cents on the week. December soymeal fell $2.30 to $296.20 but rose 90 cents week-over-week. December soyoil rose 45 points to 48.77 cents and for the week, rose 247 points.
• Wheat: December SRW wheat futures rose 1 cent to $5.72 1/2, near mid-range and on the week up 4 1/2 cents. December HRW wheat futures lost 4 3/4 cents to $5.64 1/4, for a technically bearish weekly low close today. For the week, December HRW lost 2 1/2 cents. December spring wheat fell 4 3/4 cents to $5.97 3/4, marking a 2-cent loss on the week.
• Cotton: December cotton fell 7 points to 70.98 cents but rose 81 points on the week.
• Cattle: December live cattle futures closed down $2.125, hit a six-week low and closed near the daily low. On the week, December live cattle lost $2.225. November feeder cattle futures fell $2.225 to $245.425, near mid-range and closed at a five-week-low close. For the week November feeders were down $1.45.
• Hogs: Futures followed the cattle market lower Friday, with nearby December futures leading the way lower. December lost 77.5 cents on the day to close at $80.425. That represented a weekly drop of $3.65.
— Trump signals shift to tariffs over sanctions for economic diplomacy in second term. President-elect Donald Trump has signaled a shift in his approach to economic diplomacy for his upcoming second term, emphasizing a preference for tariffs over sanctions as a tool to advance U.S. interests on the global stage. During his speech at the Economic Club of New York on Sept. 5, Trump made several key points regarding his economic policy plans:
• Limited use of sanctions: Trump expressed his intention to use sanctions “as little as possible” during his second term. This marks a potential departure from the widespread use of sanctions as a foreign policy tool in recent years.
• Preference for tariffs: Trump emphasized his belief in the power of tariffs as an alternative to sanctions. He claimed, “I stopped wars with the threat of tariffs,” although he did not provide specific examples.
• Trade as a powerful tool: The president-elect highlighted trade as a more potent instrument than sanctions in international relations.
• Preserving the dollar standard: Trump stressed the importance of maintaining the U.S. dollar’s status as the global reserve currency, stating, “We cannot lose our dollar standard.”
This stance aligns with Trump’s broader economic strategy, which includes:
• Proposing a universal tariff: Trump has suggested implementing a 10% to 20% tariff on all imports, with higher rates for products from China.
• Focusing on domestic manufacturing: The tariff strategy is partly aimed at incentivizing companies to relocate production to the U.S., although economists remain skeptical about its effectiveness.
• Tax cuts: Trump plans to extend aspects of the 2017 tax cuts and has proposed further reductions in corporate taxes.
Of note: While Trump’s preference for tariffs over sanctions might signal a shift in U.S. economic diplomacy, the implementation and impact of such policies would depend on various factors, including congressional support and international reactions. Economists have cautioned that widespread tariffs could increase costs for American businesses and consumers and potentially provoke retaliatory measures from trading partners.
Market perspectives:
— U.S. dollar hits four-month high amid market focus on Trump policies and Fed outlook. The dollar index rose to 105.5, marking a six-week winning streak and the highest level since early July, driven by market optimism over Donald Trump’s pro-business tax and deregulation policies, which could boost inflation and limit Fed rate cuts. Traders are eyeing key economic data releases this week and potential Fed official statements for policy direction. The probability of a December rate cut has dropped to 69% from 80% following Trump’s election.
The U.S. bond market is closed for the Veterans Day holiday.
Crude oil futures were under pressure, with U.S. crude around $69.10 per barrel and Brent around $72.70 per barrel.
Gold and silver futures were seeing sizable losses, with gold around $2,670 per troy ounce and silver around $31.43 per troy ounce.
— Euro drops to 4.5-month low amid rate cut speculation. The Euro slid below $1.07, marking its lowest point since late June, as traders track economic and political developments, particularly in Germany. Pressure on the currency stems from expectations that the European Central Bank may adopt more aggressive interest rate cuts compared to the Federal Reserve.
— Bitcoin surges past $80,000 amid Trump’s pro-crypto stance. Bitcoin hit a record above $80,000, up 80% this year and outpacing the S&P 500’s 25.7% gain in 2024. The crypto industry views Donald Trump’s presidential victory as a bullish sign, given his recent embrace of cryptocurrencies. Once a skeptic, Trump now sees crypto as a strategic asset, proposing a national Bitcoin stockpile and advocating for U.S.-based mining and minting, in contrast to Biden’s regulatory approach.
— Gulf oil, gas production recovery begins after Hurricane Rafael. Recovery of Gulf oil and gas production is underway following Hurricane Rafael, which at its peak impacted 28.01% of oil and 16.83% of natural gas output. As of Nov. 10, 27.6% of oil and 16.7% of natural gas production remained shut in, according to the Bureau of Safety and Environmental Enforcement. Chevron has begun returning personnel and restoring production at affected platforms. Rafael, now a post-tropical remnant, entered the Gulf as a major hurricane last week.
— European natural gas futures surge on cold weather and reduced wind output. European natural gas futures climbed above €43 per megawatt-hour, nearing an 11-month high due to colder weather forecasts and reduced wind power output. Expectations of frosty eastern conditions are increasing gas demand for power generation, with storage levels at 94.58%. Markets are also weighing the impact of Donald Trump’s U.S. presidential win, given his stance on Ukraine and LNG exports, while Russian gas flows through Ukraine remain stable.
— Kashkari warns of economic uncertainty from immigration crackdown, tariffs under Trump. Minneapolis Fed President Neel Kashkari noted potential business disruptions if Trump follows through on mass deportations of undocumented workers but said the broader economic impact remains unclear. Appearing on Face the Nation, Kashkari highlighted how policies like tariffs and tax cuts under Trump’s second term could influence inflation, now near the Fed’s 2% target, with details and international responses shaping long-term effects. Tariff escalations could lead to price hikes and trade tensions, he warned, while the Fed assesses further rate adjustments.
— Montreal dockworkers’ union rejects offer, lockout begins. The Montreal Longshoremen’s Union rejected a final offer made for a new labor contract, leading to a lockout being declared, the Maritime Employers Association (MEA) and the union said on Sunday. The lockout at Canada’s second largest port will further slow Canadian imports and exports at a time the Port of Montreal was already operating at partial capacity and as West Coast ports are stopped due to a separate dispute.
— Indonesia may limit or avoid rice imports in 2025 amid push for self-sufficiency. Indonesia may not import rice in 2025, or only in limited amounts, according to senior food minister Zulkifli Hasan. Recent annual imports have surpassed 3 million metric tons (MMT). The country plans 3.6 MMT of imports this year while preparing to open 750,000 to 1 million hectares of new rice fields in 2025 to achieve food self-sufficiency. Rice production for 2024 is estimated at 30.34 MMT, reflecting a 2.43% decrease due to delayed planting and dry conditions in 2023.
— Ag trade update: South Korea purchased 65,000 MT of feed wheat that can be sourced from the U.S., Australia, Canada, EU or Black Sea region. Bangladesh tendered to buy 50,000 MT of optional origin milling wheat.
— NWS outlook: An Atmospheric River will bring a couple rounds of heavy, lower elevation rain and high elevation mountain snow to the Pacific Northwest and northern California... ...Lingering precipitation chances for the Northeast and Carolinas Monday with some locally heavier rainfall along the central Gulf Coast... ...Above average temperatures continue for much of the country, more seasonable temperatures for the Northeast and the West on Tuesday.
Items in Pro Farmer’s First Thing Today include:
• Beans firmer, wheat and corn weaker to open the week
• Cattle market correcting
• Cash hog index rally halted
• Brazil’s soybean planting two-thirds complete
• APK-Inform keeps Ukraine’s grain production, export forecasts unchanged
CONGRESS |
— Republicans aim to delay budget talks into Trump term with continuing resolution. With the White House, Senate, and a likely Republican-controlled House, GOP lawmakers plan to pass a continuing resolution (CR) to defer budget negotiations until March, enabling time for Trump’s Cabinet confirmations and tax legislation moves. While Democrats are expected to accept the proposal to avert a shutdown, their influence may hinge on the House’s final composition. Senate Majority Leader Schumer (D-N.Y.) emphasizes bipartisan cooperation in any future legislative efforts.
CHINA UPDATE |
— China’s deflationary concerns persist. China’s consumer prices rose at the slowest pace in four months in October while producer price deflation deepened, despite stimulus efforts by Beijing. China’s consumer price index rose 0.3% from year-ago, the ninth straight month of consumer inflation but the lowest reading since June. Food prices increased 2.9%, driven by a 21.6% jump in fresh vegetables and a 14.2% rise on pork, though both moderated from the previous month. China’s producer prices fell 2.9% in October, the 25th consecutive month of producer deflation and the sharpest contraction since November 2023.
— Chinese new yuan loans hit 15-year low in October. Chinese banks extended CNY 500 billion in new loans in October 2024, down from CNY 738 billion a year earlier and below expectations of CNY 700 billion. This marks the lowest October loan issuance since 2009, highlighting weak investment demand despite the People’s Bank of China’s stimulus measures. Total social financing also fell short at CNY 1,400 billion, contributing to a record-low loan growth rate of 7.8%, below the anticipated 8%.
— China urges US lawmakers to halt efforts to change trade status. China’s Foreign Ministry spokesman Lin Jian warned U.S. lawmakers against proposed legislation to revoke China’s Permanent Normal Trade Relations status, urging them to avoid actions that would harm bilateral ties. Lin accused some U.S. politicians of seeking to reverse economic relations to a Cold War footing.
TRADE POLICY |
— Mexico’s GM corn restrictions likely to stay despite U.S. trade dispute win. Mexico’s new president, Claudia Sheinbaum, is expected to maintain restrictions on genetically modified (GM) corn planting and its use in tortillas, despite reports of a U.S. victory in a trade case, reports note. Tufts researcher Timothy Wise, according to Politico, noted that Mexico’s restrictions have minimal impact on U.S. exports and are popular domestically. Economy Minister Marcelo Ebard confirmed that Mexico and the U.S. received a preliminary ruling under the USMCA, with a final decision expected Dec. 14. U.S. officials continue to express concern over Mexico’s biotechnology policies affecting American corn exports.
LIVESTOCK, NUTRITION & FOOD INDUSTRY |
— Nestlé, P&G probe palm oil supply chains following deforestation report. Nestlé and Procter & Gamble are investigating a report by the Rainforest Action Network (RAN) claiming palm oil linked to illegal deforestation in Indonesia’s Rawa Singkil Wildlife Reserve may have entered their supply chains. The report, based on satellite imagery from February 2024, alleges that 2,609 hectares of forest were cleared since 2016, with palm trees now covering 645 hectares. Fresh fruit bunches from the illegal plantations were reportedly sold to mills supplying major brands. Procter & Gamble has stopped sourcing from the implicated mills, while both companies vowed to take further action if necessary.
— Canada detects first presumptive human H5 bird flu case. Canada has detected its first presumptive case of H5 bird flu in a person, a teenager in the western province of British Columbia, health officials said on Saturday. The teenager likely caught the virus from a bird or animal and was receiving care at a children’s hospital, the province said.
OTHER ITEMS OF NOTE |
— The World Meteorological Organization will release the “State of the Climate” update at the UN’s climate-change summit in Azerbaijan. A new report is flashing a warning signal about natural disasters. The total cost of damage from climate-related extreme weather events globally was approximately $2 trillion between 2014 and 2023, according to the International Chamber of Commerce (ICC). That’s roughly in line with the economic toll of the 2008 global financial crisis. There has also been an 83% increase in recorded climate disasters between 1980-1999 and 2000-2019, the ICC says.
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 |