Russia Cuts Off Gas Supplies to Poland and Bulgaria, Taking Aim at Europe’s Economy

Details of first day of Surface Transportation Board hearings | NCBA statement on cattle bill

Gazprom, Russia’s state-controlled energy giant, said it had cut off deliveries of gas to its Bulgarian and Polish counterparts. Locked out of most dollar trades, Russia has demanded that “unfriendly” buyers pay for their gas in rubles. Poland has refused to do so. Almost half of Poland’s gas, and 90% of Bulgaria’s, is from Russia. Polish officials reassured citizens that it can access gas from other sources. The head of the European Commission, Ursula von der Leyen, said Russia’s action was “unjustified and unacceptable”, that it was using gas as “an instrument of blackmail.”

Russia is suffering more fires at supply depots. Meanwhile, a Russian attack on bridge may impact Ukraine’s grain export plans.

China’s president is pushing to beat U.S. growth despite lockdowns, an accomplishment he says is critical to showing the superiority of China’s one-party system. Chinese government agencies are discussing plans to accelerate big construction projects, especially in the manufacturing, technology, energy and food sectors, as well as to issue coupons to individuals to spur consumer spending.

Russia and the U.S. carried out a prisoner exchange, trading a Marine veteran jailed in Moscow for a convicted Russian drug trafficker serving a long prison sentence in America, a senior U.S. official and the Russian foreign ministry said.

DJI, a major drone manufacturer, said it would suspend its business in Russia, a rare example of a Chinese company halting operations in response to the war.

The S&P 500 is on track for its worst month since March 2020 because of several factors: Fear that the Fed may raise rates faster than expected, that lockdowns in China could slow economic activity and that rising prices would erode corporate profits.

Global prices of fuel and food are forecast to rise sharply this year due to shocks caused by Russia’s invasion of Ukraine, the World Bank said, a sign higher commodity costs will continue to put upward pressure on inflation.

Lael Brainard, one of President Biden’s Fed nominees, was confirmed as the central bank’s vice chair.

A trio of Covid-19 cases among Democrats is expected to delay Senate plans to confirm Federal Reserve nominee Lisa Cook and Federal Trade Commission nominee Alvaro Bedoya this week.

Democrats are using dealing with inflation as tool to pass controversial legislation, including cattle pricing bills.

The largest group representing producers, the National Cattlemen’s Beef Association (NCBA), announced its opposition to mandatory cash purchases as an infringement of the right to pursue profits. “What is being proposed right now concentrates on what works for one region,” said NCBA vice president Ethan Lane in a statement. “It simply doesn’t work for the rest of the country.”

Longstanding supply chain problems, combined with China’s severe Covid restrictions and the war in Ukraine, are adding to costs for consumers and businesses alike. “This amounts to the largest commodity shock we’ve experienced since the 1970s,” declared Indermit Gill, Vice President for Equitable Growth, Finance and Institutions at the World Bank.

Bank of America sounding the alarm on collapsing freight demand; trucking demand is “near freight recession levels.” Today’s dispatch contains an extended look at the first day of Surface Transportation Board hearings on railroad issues.

U.S. orders for long-lasting goods such as appliances, computers and cars rose in March, resuming gains after a sharp drop in demand at the end of the winter.

A major recession is coming, Deutsche Bank economists warned in a report yesterday.

President Biden is seriously considering taking action to forgive student-loan debt on a large scale.

Walmart said it will offer deeper discounts on fuel to get more customers to join and renew its subscription service Walmart+.

Equities today: Global stock markets were mixed overnight. U.S. stock indexes are pointed toward higher openings. Asian equities were mixed after a down day on Wall Street Tuesday. The Nikkei was down 313.48 points, 1.17%, at 26,386.63. The Hang Seng Index edged up 11.65 points, 0.06%, at 19,946.36. European equities are seeing gains in early dealings, with the Stoxx 600 up 0.7% and regional markets showing advances of 0.3% to 0.8%.

U.S. equities yesterday: The Dow dropped 809.28 points, 2.38%, at 33,240.18. The Nasdaq was down 514.11 points, 3.95%, at 12,490.74. The S&P 500 lost 120.92 points, 2.81%, at 4,175.20.

Agriculture markets yesterday:

• Corn: July corn futures rose 3 1/2 cents to $8.01 1/2. December futures rose 9 1/2 cents to $7.43 1/2.
• Soy complex: July soybeans fell 3 1/2 cents to $16.71 3/4, while November futures gained 8 1/2 cents to $15.02 3/4. July soymeal dropped $8.60 to $437.00, the lowest close since Feb. 15. July soyoil gained 236 points to 82.44.
• Wheat: July SRW wheat rose 22 1/2 cents to $10.95, while July HRW wheat gained 11 1/2 cents to $11.64 1/2. July spring wheat rose 10 1/2 cents to $11.88 after posting a contract high at $11.99 3/4.
• Cotton: July cotton futures rose 27 points to 135.68 cents per pound, while new-crop December gained 43 points to 118.71 cents.
• Cattle: June live cattle rose 82.5 cents to $136.25. May feeder futures fell 57.5 cents to $160.725.
• Hogs: June lean hogs fell $2.85 to $111.175, the contract’s lowest close since March 7. Wholesale pork continued slipping, with cutout values down 21 cents early to $105.58, the lowest since early April.
  

Ag markets today: Soybeans and soyoil extended gains overnight, while corn and wheat are trading lower this morning after two-sided overnight trade. As of 7:30 a.m. ET, corn was trading fractionally to a penny lower, soybeans were 12 to 16 cents higher, winter wheat was 7 to 10 cents lower and spring wheat was 3 to 8 cents lower. Front-month U.S. crude oil futures were modestly firmer, and the U.S. dollar index was up nearly 400 points to another two-year high.

Technical and other viewpoints from Jim Wyckoff: “A feature in the marketplace this week is the soaring value of the U.S. dollar, which today hit another two-year high. Meantime, the Euro currency today hit a five-year low. The greenback is seeing safe-haven demand amid the geopolitical crisis. The Eurozone is getting hammered by soaring energy costs, as much of Europe gets its energy from Russia. Russia on Tuesday cut off natural gas supplies to Poland and Bulgaria.”

On tap today:

• U.S. advance economic indicators report for March is out at 8:30 a.m. ET.
• U.S. pending-home sales for March are expected to fall 1.8% from the prior month. (10 a.m. ET)
• Japan’s preliminary industrial production report for March is expected to show output rose 0.5% from the prior month. (7:50 p.m. ET)

Bank of America sounding the alarm on collapsing freight demand; trucking demand is “near freight recession levels.” Trucking demand is “near freight recession levels,” according to Bank of America. Shippers’ outlook on rates, capacity and inventory levels are matching attitudes not seen since May and June 2020, when pandemic lockdowns sent freight volumes into a historic decline. In a Friday note to investors, Ken Hoexter, the managing director of Bank of America’s trucking research, wrote that shippers’ view of demand is down 23% year-over-year. The proprietary Truckload Demand Indicator hit 58 — the lowest since June 2020. Hoexter said the shippers’ view of rates have “melt(ed) down,” hitting a low not seen since May 2020. Bank of America’s survey represented views from 44 shippers in industries including retail, consumer goods and manufacturing. Meanwhile, these shippers are finding it easy to find capacity to move their loads; outlook on capacity hit its highest level since June 2020. They also noted their view on inventory levels had climbed to its highest point since May 2020.

Global prices of fuel and food are forecast to rise sharply this year due to shocks caused by Russia’s invasion of Ukraine, the World Bank said Tuesday, a sign higher commodity costs will continue to put upward pressure on inflation. The World Bank expects commodity prices to remain elevated for years to come, as the war in Ukraine alters how commodities are traded, produced and consumed around the world. In its latest Commodity Markets Outlook report, the multilateral bank said that energy prices will soar 50.5% this year from last, after nearly doubling in 2021. Food prices are projected to rise 22.9% this year after rising 31% last year. Increases in energy prices over the past two years have been the most significant since the early 1970s. The price increases for food commodities such as wheat and cooking oil — of which Ukraine and Russia are large producers — have been the largest since 2008.

U.N. warns that almost 2 million children in Horn of Africa are at risk of starving. U.N. aid chief Martin Griffiths said on Tuesday that close to 2 million children risk starving to death as the Horn of Africa faces one of its worst droughts in decades.” According to Reuters, “Parts of Kenya, Ethiopia and Somalia are facing the driest conditions in more than 40 years and aid agencies are seeking to avoid the repeat of a famine a decade ago that killed hundreds of thousands of people.” Reuters adds that Griffiths “said the organization had only a fraction of the $1.4 billion it needs to respond to the drought.”

Slumping demand. The supply chain focus on home goods is dimming as the impact of the pandemic fades, the Wall Street Journal reports (link). Makers of household items like mattresses and appliances are reporting falling demand, signaling a reversal in the manufacture and delivery of goods that has been heavily focused on homebound consumers. Makers of mattresses are cutting costs and delaying product launches amid waning appetite for big-ticket items, the WSJ notes, saying that may signal a more sustained drop in spending on durable discretionary items. Along with the surge in e-commerce, greater spending on household goods has been a hallmark of the pandemic and has sent transportation companies scrambling to meet the demand. U.S. consumers spent about $298.5 billion on furniture and furnishings in 2021, up 22% from 2020 and 31% from 2019. But appliance maker Whirlpool said this week that sales of dishwashers and refrigerators are also slowing while costs are rising. “As we sit here today, we are operating in a very different world than we were just 10 years ago. It is a less global world,” said Whirlpool CEO Marc Bitzer.

A major recession is coming, Deutsche Bank economists warned in a report yesterday. This comes after Deutsche Bank earlier this month became the first major bank to forecast a U.S. recession, albeit a “mild” one. The problem, according to the bank, is that while inflation may be peaking, it will take a “long time” before it gets back down to the Federal Reserve’s goal of 2%. That suggests the central bank will raise interest rates so aggressively that it hurts the economy. The good news is that Deutsche Bank predicts the economy will eventually rebound by mid-2024 as the Fed reverses course in its inflation fight.

Market perspectives:

• Outside markets: The U.S. dollar index is showing initial advances with a mixed tone in foreign currencies against the greenback. The 10-year U.S. Treasure note yield has firmed to trade around 2.75% with a mixed tone in global government bond yields. Gold and silver futures are mixed, with gold weaker around $1,901 per troy ounce and silver firmer around $23.69 per troy ounce.

• Fort Worth is running a six-month pilot program for mining Bitcoin, the first U.S. city government to experiment with mining cryptocurrency.

• Crude oil futures are showing a firmer tone in action ahead of U.S. inventory data due later this morning. U.S. crude is around $102 per barrel and Brent around $104.90 per barrel. Asian action saw U.S. crude rise to around $102.50 per barrel and Brent around $105.80 per barrel.

• Ag trade: Algeria purchased between 230,000 and 250,000 MT of durum – likely to be sourced from Mexico. Jordan made no purchases in its tender to buy 120,000 MT of optional origin milling wheat. Thailand passed on a tender to purchase optional origin feed wheat.

• NWS weather: Coastal storm to produce rain and snow across northern New England through the end of the week... ...Isolated chances for severe thunderstorms and flash flooding over the next few days throughout the southern/central Plains and Mid-Mississippi Valley, with critical fire weather expected across the southern High Plains and southern Rockies... ...Developing storm system over the central U.S. on Friday to generate areas heavy snow across the northern Rockies, heavy rain over the northern Plains, and potentially severe thunderstorms in the central/southern Plains on Friday.

Items in Pro Farmer’s First Thing Today include:

• Soybeans and soyoil higher, corn and wheat lower this morning
• Russian attack on bridge may impact Ukraine’s grain export plans (details below)
• China to buy more pork for state reserves
• Early week cash cattle trade again
• Cash hog index continues to firm

— Summary: Amid escalating tensions with Western powers, Russia has cut off gas supplies to Poland and Bulgaria after they refused to pay in rubles, rather than dollars or euros. The European Commission described the decision to halt gas supplies as attempted “blackmail” and said it was coordinating a response among EU member states. Russian state energy giant Gazprom told Bulgaria that it would shut off gas supplies starting today, Bulgaria’s energy ministry said in a statement. The announcement sent U.S. natural gas futures up about 3%. European gas prices also jumped nearly 20% this morning.

• U.S. seeks more authority to seize Russian assets to aid Ukraine. The Justice Dept. will ask Congress for expanded authority to confiscate and sell assets such as superyachts, jets and mansions held by wealthy Russians as part of a U.S. crackdown on Russia for invading Ukraine, Attorney General Merrick Garland said. The department will back new legislation that would make it easier to seize targeted Russian assets, Garland said during a Senate budget hearing Tuesday.
• A Chinese drone manufacturer — the world’s largest —s aid that it would temporarily suspend business in Russia and Ukraine, becoming the first major Chinese firm to halt sales in Russia because of the conflict. DJI Technology Co, which research firm Drone Analyst estimates had hardware revenues of $2.9 billion in 2020, said it “abhors any use of our drones to cause harm.” It denied Ukrainian allegations that it leaked military data to Russia.
• An ammunition depot caught fire near Russia’s border with Ukraine, a local official said, the latest incident at a Russian military facility that could pressure supply lines. Authorities also reported blasts in Russia’s Kursk and Voronezh regions, which are adjacent to Ukraine.
  

— Market impacts:

• Russia halts gas, struggles to sell oil. Russia said it would halt gas flows to Poland and Bulgaria starting Wednesday, the first time it has followed through on a threat to cut off countries that don’t pay for their gas on new, wartime terms outlined in March by President Vladimir Putin. The move marks a major escalation by Russia, which has tried to bolster its currency by insisting customers pay for gas in rubles, and introduces the possibility that more economies in Europe, deeply dependent on Russian gas, could be targeted. Gas prices in Europe rose by more than 10% late Tuesday as traders weighed risks to already tight supplies.
  

• Russia failed to sell a huge batch of oil, a sign that soon-to-be imposed sanctions against its state oil giant are playing havoc with the energy industry that undergirds its bruised economy, the Wall Street Journal reports (link). Moscow maintained a brisk pace of energy exports in the two months after the invasion, bringing in revenue that Kyiv says funds the Kremlin war machine. But exports hit a snag in recent days when Rosneft Oil Co. struggled to find buyers for enough oil to fill a fleet of tankers, traders familiar with the sale said. The problems with the sale give an early indication that European sanctions targeting Rosneft, and due to kick in on May 15, are starting to disrupt Russia’s ability to move crude from oil fields to overseas buyers.

  Russia’s largest state-run oil producer, Rosneft, failed to sell 37 million barrels of its flagship Urals crude, traders told Reuters Tuesday. The ratio of outgoing Urals seaborne exports to Europe has cratered from 90% to 50%.

• As Russian oil slows down, the U.S. is ramping up. To help replace missing Russian energy supplies, the U.S. has super-sized its crude deliveries to Europe, using tankers double the normal size. This month, a 2-million-barrel supertanker delivered oil from the U.S. to Spain for the first time since 2015, Bloomberg reported, before making stops in Germany and the Netherlands. American exports are plugging the gap as the EU attempts to wean itself off Russian oil and as some buyers self-sanction from doing business with Moscow.
• Russian attack on bridge may impact Ukraine’s grain export plans. Russia launched two missile strikes and damaged strategic bridge in Ukraine’s Odesa region, state railways and local officials said on Wednesday, which could affect Ukraine’s plans to expand grain exports through Danube ports. The bridge across the Dniester Estuary is a part of the only fully Ukrainian-controlled railway route to Ukraine’s ports on Danube. Ukrainian officials have said the country is seeking to boost export capacity of Danube River ports, which allow grain to be shipped through the river to Romanian Black Sea ports.

— STB hearings focus on several railroad issues, including rail fertilizer shipments. On Tuesday, the first day of two hearings by the Surface Transportation Board (STB), USDA Deputy Secretary Jewel Bronaugh said, “Union Pacific (UP) recently announced a cutback in the number of cars it has online, and we’ve heard reports that the railroad has asked fertilizer shippers to reduce their volume by 20%.” But some companies have reportedly reached agreement with UP to deal with the alleged reductions. The hearing comes as shippers and labor unions complain that U.S. railroad business decisions have led to rail delays, worker shortages and strained supply chains, while rail executives blame the pandemic.

Congestion and service issues have become a “real problem” for industries across the country that need rail to move their goods, and the situation is now a priority for the administration, Transportation Secretary Pete Buttigieg told the board. “The supply chain crisis has left us moving more goods with a smaller workforce, leading to higher costs and longer delays,” Buttigieg said. STB Chairman Martin Oberman said this was the first time in more than 20 years that a transportation secretary came to address the board. “The fact that the secretary is here this morning indicates the seriousness of the problems that have instigated this hearing,” Oberman said.

Buttigieg called for more investment on the rail workforce since “turnover is still far above normal levels” and for the board to expand its data collection, as well as require improvement plans from railroads. He suggested the railroads consider the need for more employees and the impact of increasing service without expanding the workforce.

Traffic trouble on the rails have contributed to supply chain problems for different businesses and shippers, particularly in the agriculture sector.

STB chairman comments. “During my time on the Board, I have raised concerns about the primacy Class I railroads have placed on lowering their operating ratios and satisfying their shareholders even at the cost of their customers,” said Oberman. “Part of that strategy has involved cutting their work force to the bare bones in order to reduce costs. Over the last six years, the Class Is collectively have reduced their work force by 29% — that is about 45,000 employees cut from the payrolls. In my view, all of this has directly contributed to where we are today — rail users experiencing serious deteriorations in rail service because, on too many parts of their networks, the railroads simply do not have a sufficient number of employees.”

“USDA understands that with limited capacity, some traffic must be prioritized and reductions in the number of cars online may help the system move, [but] fertilizer and ag commodities are not the commodities to de-prioritize, especially as we now enter the growing season,” Bronaugh said in testimony before the board. Farmers, she said, can’t move their crops, and livestock producers are struggling to feed their animals. “Elevators are full and cannot purchase grain from farmers, and livestock operators are unable to get the grain they need for feed,” she said. “We’ve even heard that some producers have been so close to being unable to feed their livestock and poultry that they’re preparing to depopulate their animals. That’s something a farmer should never have to do.” But even if rail cars are available, Bronaugh said the ag industry is facing explosive freight rates. “Ag shippers are paying thousands of dollars extra per car just to get service, easily representing a 50-100% increase in costs,” she said. “In recent months, rail service complaints have grown in number and urgency,” Bronaugh said, urging the board to use all the authority it has. “We cannot continue a system where the railroads face no consequences for providing unpredictable service.”

The National Grain and Feed Association (NGFA) testified, listing several examples of rail service failures experienced by grain shippers across the country and outlining recommended actions for the STB. “NGFA’s preference is to seek commercial solutions between individual rail customers and their rail carriers,” said NGFA President and CEO Mike Seyfert during his oral testimony at STB headquarters. “However, the recent rail service challenges impacting entire regions of the country have led us to the board to seek help.” NGFA urged the board to address inadequate rail service in a March 24 letter to Chairman Oberman and led another letter signed by members of the Agricultural Transportation Working Group on April 21 outlining several proposals to improve rail service. “Many NGFA members have a daily risk of slowing or shutting down operations due to reduced and inconsistent rail service,” Seyfert said. “Some individual NGFA member companies report losses and increased costs in the tens of millions of dollars and lost or reduced operating days totaling weeks.” NGFA estimates the combined costs to the grain industry due to lost revenues and additional freight expenses in the first quarter of 2022 to be over $100 million. “Depending on the market position of the grain industry participant, these extra transportation costs are either borne by the participant, reflected in the grain basis paid to the farmer, or passed onto the consumer,” Seyfert noted. One of NGFA’s recommendations for STB is to implement financial incentives for railroads to perform more efficiently using the same concepts they use to incentivize their customers.

While NGFA member companies understand the pandemic caused labor shortages for employers in many industries, the Class I railroads’ inadequate crews are having an undue impact on grain shippers and receivers, NGFA noted. “When NGFA members cannot load a train because a crew is out with Covid, they will be charged demurrage by the rail line and if they cannot unload a train due to Covid, they will pay demurrage and face the risk of penalties or loss of contracts with their own customer,” Seyfert said. “However, if the railroad cannot deliver or move a train due to Covid– or any other reason —NGFA members cannot charge and are not entitled to any demurrage from the railroad.”

Besides demurrage solutions for rail customers, NGFA recommended several potential actions to the STB, including:

• Finalizing a rulemaking on reciprocal switching rules, which would allow shippers served by a single railroad to request bids from a nearby competing railroad.
• Requiring additional data reporting, such as first-mile, last-mile rail service reporting.
• Developing guidance on expectations for rail carriers in meeting their statutory obligation to provide service upon reasonable request.
• Requiring all the Class I railroads to develop annual rail service assurance plans.

American Chemistry Council’s (ACC) President and Chief Executive Officer, Chris Jahn, told board members that serious freight rail service failures are harming chemical manufacturing and magnifying supply chain problems. Jahn noted that while railroads are heralding the growth in demand for chemical shipments, they are failing to provide adequate service. “This growth is good news for our industry, America’s manufacturing base, and the economy as a whole,” Jahn explained. “And it should be good news for the freight railroads that carry this traffic. However, ongoing rail service problems are putting the brakes on both our current production and future growth… The problems we are experiencing today are not solely the result of the COVID-19 pandemic,” he continued. “Years of railroad decisions to cut staff, eliminate switch yards, and slash customer service resources have gutted network resilience, making service crises like this one entirely predictable, if not inevitable.” He urged the STB to require railroads to report meaningful data on “first mile/last mile service,” impose greater accountability on railroads for service failures and promote greater rail-to-rail competition through reciprocal switching.

The Renewable Fuels Association (RFA) commented on how poor rail service is having a negative impact on the entire ethanol industry. In written testimony, RFA President and CEO Geoff Cooper wrote, “The majority of the ethanol produced in the U.S. (over 70%) is transported via railway to its final destination across the lower 48 states as well as Canada and Mexico. In fact, U.S. railroads typically transport more than 370,000 carloads of ethanol per year, accounting for almost 3% of total U.S. rail ton-miles. Thus, our industry is heavily reliant on efficient and timely rail service.” Cooper added: “The rail traffic congestion issue and subsequent decision to meter traffic is leading to major disruptions for our members and is impacting their ability to maintain production and deliver vitally important fuel ethanol to the market. In many instances, both manifest and unit train traffic has been significantly delayed and this is leading to fuel terminals running short on ethanol needed to blend for retail consumption. In some cases, where on-site storage is reaching capacity, some producers are having to reduce ethanol production rates until cars are made available. Recent data from the Energy Information Administration (EIA) shows that weekly ethanol production rates have fallen in four successive weeks, with many producers citing rail logistics issues as the primary culprit for reduced output.” RFA is urging STB to “take all actions necessary to prioritize the rail transportation of fuel ethanol from its point of origin to its final destination. This action is needed to ensure that the lowest cost liquid fuel alternative is available to U.S. consumers across this country at a time when it is needed most.”

Now what? The STB’s attention to the issue comes as the House Transportation and Infrastructure Committee weighs further authority for the regulator as part of reauthorization legislation. The board can take certain actions — it recently proposed a rule change that aims to bring immediate relief for shippers facing poor rail service. The rule would allow the board to direct emergency rail service on its own. NGFA at the hearing applauded the STB’s recent decision to accept public comments on a petition that asks the board to adopt rules allowing rail customers to levy financial penalties on railroads for their inefficient use of private railcars, which make up many of the cars that haul agricultural commodities.

— Little change in CFAP totals. Totals for payments issued under the Coronavirus Food Assistance Program (CFAP) efforts were reported as holding steady as of April 25. CFAP 2 payments were at $19.16 billion with original CFAP 2 payments at $14.33 billion and top-up payments at $4.83 billion. Total CFAP 1 payouts were at $11.81 billion, with original CFAP 1 payments at $10.62 billion and top-up payments at $1.19 billion.

— IRS eyes limits on exclusion of large gifts from estate tax. The IRS proposed limits on a special rule that protects taxpayers from having to pay future estate taxes on large gifts made from 2018 through 2025. The proposed rules would place limitations on a special rule adopted in 2019 that ensures that the estate of a donor is not taxed on completed gifts that were free of gift tax when made. The rule stems from the 2017 tax-law overhaul, which allowed taxpayers to exclude larger gifts from estate and gift taxes. When the 2019 rules were issued, the IRS said “further consideration” would be given as to whether certain gifts should be exempted from the special rule.

— Brainard wins confirmation for Fed vice chair. Lael Brainard was confirmed as vice chair of the Federal Reserve Board of Governors Tuesday in a 52-43 Senate vote, but a combination of Covid-related absences and a political spat may delay three other Fed nominees. Brainard, 60, had been considered by President Joe Biden for the Fed’s top job before he chose to keep Jay Powell in that post. She won over four Republicans on the Banking Committee after a relatively friendly confirmation hearing, though most GOP senators still opposed her because of her views on regulation. Brainard had dissented from several moves to reduce the regulatory burden on banks in recent years.

Senate Majority Leader Chuck Schumer (D-N.Y.) wanted to move next on the nomination of Lisa Cook to the board of governors. However, she is opposed by Republicans, and Democrats were unable to muster the 50 votes needed to move ahead on Cook after two senators and Vice President Kamala Harris — who would provide a tie-breaking vote — were absent after testing positive for the coronavirus. Schumer entered a motion to reconsider the failed cloture vote on Cook at a later time.

— U.S. investments in China topic of legislative proposal. Sens. Jeanne Shaheen (D-N.H.) and Rick Scott (R-Fla.) unveiled a bill that would require the Treasury to annually report to Congress on the U.S.’ financial exposure to China. The bill responds to a bipartisan and unanimous recommendation by the U.S./China Economic and Security Review Commission, according to the press release from the lawmakers.

— China pushes to beat U.S. GDP growth. Chinese President Xi Jinping has told officials to ensure that the country’s economic growth outpaces the U.S.’ this year, according to the WSJ, citing people familiar with the discussions, even as its economy sags under its worst Covid-19 outbreak since the pandemic began. In meetings over the past few weeks, Xi told senior economic and financial officials that ensuring that the economy is stable and growing is important because it is critical to show that China’s one-party system is a superior alternative to Western liberal democracy, and that the U.S. is declining both politically and economically. “The desire to have a stronger GDP compared to the U.S. doesn’t help a healthy economy but certainly helps the party to maintain its rule,” Alfred Wu, a political scientist at the National University of Singapore, told the WSJ.

— China reported its lowest number of new Covid-19 cases in three weeks, as authorities in Beijing rolled out citywide testing in the race to stamp out the virus before it forces the kind of stringent lockdowns that have closed manufacturers in Shanghai.

— China authorities report human case of H3N8 avian influenza. China’s National Health Commission (NHC) has reported a case of a human infection with the H3N8 avian influenza virus was found in Henan Province in a four-year-old boy from a home where there were chickens were raised and wild ducks were around the home. Once confirmed with the H3N8 virus, the NHC tested close contacts with the boy and found no abnormality. “Experts’ preliminary assessment believes that the H3N8 avian influenza virus is of avian origin and has not yet had the ability to effectively infect humans,” NHC said. They characterized the situation as an “occasional bird-to-human cross-species transmission, and the risk of large-scale transmission is low.” Some reports have stated the NHC view was that the situation is a “one-off” development. The strain is not the same as the H5N1 virus currently affecting US poultry operations. Reuters reported the H3N8 virus is “common” in horses and dogs. While a troubling development, indications are there is minimal risk of humans contracting the virus.

— China to buy more pork for state reserves. China will buy another 40,000 MT of frozen pork for state reserves on Friday to support domestic prices for hog producers saddled with poor margins. This will be the sixth round of pork buys for state reserves.

— Walmart said it will offer deeper discounts on fuel to get more customers to join and renew its subscription service Walmart+. With inflation at a four-decade high and gas prices soaring, Walmart is flexing its low prices as a competitive advantage.

— Democrats are using dealing with inflation as tool to pass controversial legislation. Cattle pricing proposals are trying to get out of the Senate Ag Committee and were the topic of a Senate Ag Committee hearing yesterday and the meat industry structure will be discussed today at a House Ag panel hearing which will hear from CEOs of several meat packing companies. In a clear political swipe at Republicans, Senate Ag Chairwoman Debbie Stabenow (D-Mich.) said the Grassley/Fischer proposal (both Republicans) would impose cash trade mandates on meatpackers and would “help our ranchers get a fair price” and not be “gouged at the supermarket.” Speaking at the weekly Democratic leadership news conference on Tuesday, Stabenow added this political zinger: “I would just say that Republicans talk and talk and talk, and we act and act and act. We’re going to continue to lead these efforts that are related to price gouging that is causing incredible prices that people are having to pay.”

Meanwhile, Senate Commerce Chairwoman Maria Cantwell (D-Wash.) said the Ocean Shipping Reform Act also would help address inflation. “Shipping costs have accelerated greatly and raised costs on average Americans,” she said.

— NCBA opposes mandatory cash purchases. The largest group representing producers, the National Cattlemen’s Beef Association (NCBA), announced its opposition to mandatory cash purchases as an infringement of the right to pursue profits. The biggest U.S. farm group said weeks ago that it opposed mandatory cash purchases, as did the meat industry. “What is being proposed right now concentrates on what works for one region,” said NCBA vice president Ethan Lane in a statement (link). “It simply doesn’t work for the rest of the country.”

Andy Green, USDA market adviser, said cow-calf operators and cattle feeders “are left with fewer options for selling their cattle and greater risks of an unfair playing field.”

“Market reform is needed right now,” Sen. Chuck Grassley (R-Iowa), a long-time advocate of mandatory cash purchases as the method to assure fair prices. “Independent cattle producers in the Midwest are being hurt.”

Link to a Senate Ag Committee hearing yesterday.

— Two additional HPAI finds in commercial operations as USDA seeks comments on report covering first seven states where virus found. USDA’s Animal and Plant Health Inspection Service (APHIS) now puts the count of commercial operations that have been confirmed with highly pathogenic avian influenza (HPAI) at 157 with the addition of cases in Utah (1.4 million table egg layer flock in Cache County) and Minnesota (14,600 turkey meat birds in Stearns County).

Meanwhile, APHIS is requesting comments on its draft environmental assessment (EA), “Emergency Response for Highly Pathogenic Avian Influenza Outbreaks in Seven States,” and a draft Decision and Finding of No Significant Impact (FONSI) for the EA. The report covers outbreaks within Delaware, Indiana, Kentucky, Maine, Michigan, New York, and Virginia where actions have been completed. The draft emergency EA looks at potential environmental impacts from proposed actions where USDA would work with state and local authorities and affected operations with response activities in the seven states, potentially including “monitoring wild birds and poultry, depopulating and disposing of HPAI-infected domestic poultry flocks, disinfecting premises, and conducting follow up monitoring and quarantine release.” Similar actions will take place in any additional states where HPAI is detected. Link to access the EA and FONSI documents. Comments are due by May 31. Link for details.

— Canada reports additional HPAI cases. The Canadian Food Inspection Agency (CFIA) reported that there are 35 cases of highly pathogenic avian influenza (HPAI) in the country with 717,100 birds affected in seven provinces as of April 21. CFIA also said that six previously infected premises had been released. The agency updates their HPAI situation weekly with the next one due April 28.

— Justice Department said it would try chicken-processing executives from Claxton Poultry and Pilgrim’s Pride for the third time on charges of conspiring to fix prices; two previous trials ended in hung juries. Link for details.

— Summary: Global cases of Covid-19 are at 511,079,180 with 6,225,687 deaths, according to data compiled by the Center for Systems Science and Engineering at Johns Hopkins University. The U.S. case count is at 81,101,161 with 991,959 deaths. The Johns Hopkins University Coronavirus Resource Center said that there have been 543,582,745 doses administered, 219,423,356 have been fully vaccinated, or 66.59% of the U.S. population.

— Vice President Kamala Harris on Tuesday became the highest-ranking official in the Biden administration to test positive for the coronavirus but was not experiencing symptoms, her office said. The vice president was in California last week and has not had any recent contact with President Biden and most of the White House staff, her office said. She returned to Washington on Monday. Harris “will isolate and continue to work from the Vice President’s residence,” Kirsten Allen, her spokesperson, said in a statement. “The Vice President will return to the White House when she tests negative.” Harris, 57, has been vaccinated and boosted twice. Allen tweeted Tuesday night that Harris had taken Paxlovid, a drug developed by Pfizer to treat people at high risk of becoming severely ill from the virus, including those over age 65 or with chronic conditions.

— Pfizer and BioNTech have requested FDA authorization of a booster dose of Covid-19 vaccine for children 5 through 11. The companies have said that a third vaccine dose raised Omicron-fighting antibodies by 36 times in this age group. Recent studies found that the effectiveness of Pfizer’s vaccine for children ages 5 to 12 dropped substantially during the Omicron surge, falling from 68% to about 12% against Covid-19 infection. However, two doses continued to provide protection against more severe illness resulting in urgent care or hospitalizations. Currently, boosters are available for kids 12 and older with certain kinds of immunocompromised conditions, as well as adults. Second boosters are authorized for anyone 50 and older.

— Hispanic lawmakers press Biden on pledge to cancel student debt. Hispanic lawmakers are urging President Biden to follow through on a campaign promise to cancel student loan debt that they say falls especially hard on Hispanic and Latino Americans. Rep. Raul Ruiz, a California Democrat and chairman of the Congressional Hispanic Caucus, asked the Biden administration to honor a pledge to cancel up to $10,000 in student loan debt for each current borrower.

President Biden signaled to House Democrats this week that he is seriously considering taking action to forgive student-loan debt on a large scale, according to congressional aides and others familiar with the discussions. This month, President Biden extended the pandemic pause on federal student loan payments until Aug. 31. Senate Democrats lack the votes to forgive student loan debt by legislation, so Biden would have to carry out the measure by executive order, which some of the president’s aides say he doesn’t have the legal authority to do. Proponents of forgiveness say the Higher Education Act of 1965 gives the education secretary broad powers to modify or cancel debt, but any move is likely to face legal challenges.

— Federal judges would have to disclose securities transactions valued at more than $1,000 within 45 days of making them under S 3059, which is set to be considered by House lawmakers under expedited procedure. The measure would effectively subject federal judges to the same disclosure requirements as members of the executive branch and Congress under the 2012 STOCK Act (PL 112-105). The Senate passed the bill by voice vote on Feb. 17.

— Key appropriators to meet Thursday. Senate Appropriations Committee Chairman Pat Leahy (D-Vt.), Ranking Member Richard Shelby (R-Ala.), House Appropriations Committee Chair Rosa DeLauro (D-Ct.) and Ranking Member Kay Granger (R-Texas) are scheduled to meet Thursday on fiscal year (FY) 2023 funding. Shelby said that Republicans will be pushing for more military spending, noting ““with inflation and everything else. Maybe we can make some progress.” Senate Minority Leader Mitch McConnell (R-Ky.) expressed hope Tuesday that the meeting will see progress toward getting agreement on topline budget numbers. “We hope to be able to reach an agreement so we can have at least some semblance of a normal appropriations process, which hasn’t happened around here very often,” McConnell said. It remains to be seen whether appropriators can come to terms on spending targets as recent history has not been positive on such an agreement, evidenced by FY 2022 spending decisions finalized in a measure signed into law March 15.

— Talk about a big dairy industry. $174 billion is the value of India’s dairy industry — 75 million dairy farmers, 200 million cows and 100 million buffaloes produce a fifth of the world’s milk. Link for details via the Economist.