Seven-Day Truce Between Hamas and Israel Comes to Abrupt End

Sandra Day O’Connor dies at 93 | Vote to expel Rep. Santos | Record U.S. ag trade deficit

Jim Wiesemeyer

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December 01, 2023 09:31 AM

Sandra Day O’Connor dies at 93 | Vote to expel Rep. Santos | Record U.S. ag trade deficit

Today’s Digital Newspaper

MARKET FOCUS

Nasdaq outperformed the other major averages for November
S&P 500 posted strongest monthly performance since July 2022
Rally in debt markets continues; U.S. bonds had best monthly performance since 1985
IRS secures victory over hedge-fund and asset-management sectors
Federal Reserve Chair Jerome Powell speaks today
Nominee Mersinger calls for increased CFTC authority on cryptocurrencies
N.Y. Fed’s John Williams says rates are at or near peak level
San Francisco Fed’s Mary Daly says she’s not thinking about cuts
Canada’s economy shifts from recession to ‘bumpy landing': Capital Economics
Mortgage rates drop for fifth consecutive week, lowest point in over two months
Eurozone factory downturn eased a touch in November
Ag, other markets today
USDA daily export sales:
— 132,000 MT soybeans to China during 2023-2024 marketing year
— 198,000 MT soybeans to unknown destinations during 2023-2024 marketing year
USDA projects decrease in U.S. farm sector profits in 2023 vs record-high 2022
Updated U.S. agricultural trade in FY 2024 signals trade policy concerns
Perspective on OPEC+ oil production cuts
Airlines want to replace jet fuel with ethanol to fight global warming
Copper futures surge, marking highest level since early August
‘It is make-or-break time for Brazil,’ says grain trader and analyst Richard Crow
NWS weather outlook
Pro Farmer First Thing Today items

CONGRESS

Sen. Paul saves choking Sen. Ernst at GOP lunch
Around 90 House Republicans expected to vote to expel Santos, but not Speaker

ISRAEL/HAMAS CONFLICT

Israel resumed combat operations in Gaza following a breakdown in talks

RUSSIA & UKRAINE

‘New phase’ for Russia/Ukraine conflict
Ag Ministry: Ukrainian harvest of grains and oilseeds totaled nearly 77 MMT

POLICY

Southern Ag Today assesses recent GAO sugar program report
1,300 farmers to receive $208 million in USDA aid

CHINA

China’s manufacturing sector unexpectedly experienced growth in November
Yuan’s role in settling cross-border payments with China is on the rise
Mainland China’s stock market experiences significant exodus of foreign investments
Meta shuts down thousands of fake Chinese accounts targeting 2024 election
Federal judge halts implementation of Montana law to ban downloads of TikTok
How Chinese marijuana operations cropped up in small-town America
U.S. to limit China’s ability to benefit from electric vehicle industry

TRADE POLICY

EU leans toward concession to Biden in steel trade dispute over Trump concerns
USITC keeps duties on Canadian softwood lumber
USTR reallocates unused FY 2024 sugar import quotas

ENERGY & CLIMATE CHANGE

Economist: China building nuclear reactors faster than any other country

LIVESTOCK, NUTRITION & FOOD INDUSTRY

Kroger trims sales view on lower prices, choppy grocery demand
Cases of highly pathogenic avian influenza (HPAI) on the rise
NAMI promotes meat industry’s sustainability at COP28

POLITICS & ELECTIONS

Elections in Montana and Ohio will likely determine control of Senate
DeSantis takes on Newsom in Red vs. Blue state debate
Fourth Republican presidential primary debate set for next Wednesday
Reuters: Democrats have no Plan B if Biden decides to halt his campaign

OTHER ITEMS OF NOTE

Cotton AWP resumes downward move
Argentina, under incoming President Milei, will not join China-led BRICS bloc
Sandra Day O’Connor, first woman on Supreme Court, dies at 93

MARKET FOCUS

— Equities today: Asian stock markets were mixed to weaker and European shares mostly firmer in overnight trading. U.S. Dow opened slightly lower. In Asia, Japan -0.1%. Hong Kong -1.1%. China +0.1%. India +0.7%. In Europe, at midday, London +0.6%. Paris +0.4%. Frankfurt +0.7%. Today’s focus will be on Fed speak and economic data. Fed Chair Powell speaks twice today at 11:00 a.m. and 2:00 p.m. ET and markets will want to see if Powell repeats the “policy is appropriate” message received from Fed Governor Waller earlier this week. Beyond Powell, we also get two other Fed speakers, Goolsbee (10:00 a.m. ET) and Cook (2:00 p.m. ET), but they shouldn’t move markets.

U.S. equities yesterday: The Dow registered solid gains in the wake of inflation data released before the open while the tech-heavy Nasdaq fell and the S&P 500 could only put up modest gains. The Dow was up 520.47 points, 1.47%, at 35,950.89. The Nasdaq declined 32.27 points, 0.23%, at 14,226.89. The S&P 500 was up 17.22 points, 0.38%, at 4,567.80.

The Nasdaq outperformed the other major averages for November, advancing more than 10% in November. The Dow and S&P 500 each gained nearly 9% for the month. Heading into December, the Dow is up 8.5% year to date, the S&P 500 is up nearly 19% and the Nasdaq is up more than 35%.

A rally in debt markets is continuing after U.S. bonds capped off their best monthly performance since 1985, according to Deutsche Bank, in a sign that investors are growing more hopeful that interest rates have peaked.

— In November, the S&P 500 posted its strongest monthly performance since July 2022, with an increase of 8.9%. This impressive gain brings the large-cap index’s year-to-date performance to a total increase of 19%. December has historically been one of the S&P 500’s better-performing months, with an average increase of 1.3% dating back to 1928, as reported by Yardeni Research.

— The IRS secured a significant victory over the hedge-fund and asset-management sectors in a recent case. This outcome has the potential to result in higher taxes for many fund managers.

— Federal Reserve Chair Jerome Powell is expected to participate in a fireside chat at Spelman College in Atlanta, Georgia. Separately, Powell and Federal Reserve Board Governor Lisa Cook are expected to participate in a roundtable to hear from local leaders in the tech innovation and entrepreneurship community at Spelman College.

— Nominee Mersinger calls for increased CFTC authority on cryptocurrencies. Summer Mersinger, who has been nominated as a commissioner on the Commodity Futures Trading Commission (CFTC), emphasized the need for the agency to have more authority concerning cryptocurrencies during her nomination hearing before the Senate Ag Committee. She pointed to the case involving Binance.com as an example illustrating the necessity for expanded powers in this domain. Mersinger highlighted that relying solely on enforcement authority means intervening after the fact, once money has been lost and consumers harmed. She expressed the need for proactive measures to protect customers and suggested that the agency may require legislative authority to enhance its role in this area. Senate Ag Committee Chair Debbie Stabenow (D-Mich.) aims to move Mersinger’s nomination, as well as that of Basil Gooden, who is nominated to be USDA undersecretary for rural development, out of the committee next week. At this stage, neither nominee is expected to encounter significant opposition.

— Agriculture markets yesterday:

Corn: March corn rose 7 cents to $4.82 3/4, closing near the session high.
Soy complex: January soybeans fell 4 1/4 cents to $13.42 3/4. March soybean meal dropped $2.70 at $414.20. March bean oil closed down 43 points at 52.05 cents. All three markets closed nearer their session lows.
Wheat: March SRW futures rallied 12 1/4 cents before closing at $5.98, near session highs. March HRW futures firmed 8 3/4 cents and settled at $6.43. March spring wheat rose 4 1/4 cents to $7.29 1/2.
Cotton: March cotton rose 47 points to 80.06 cents and near mid-range.
Cattle: Cattle futures turned lower Thursday, with the expiring December live cattle contract dropping $1.025 to $170.8750 and most-active February tumbling $1.65 to $171.825. Nearby January feeder futures dove $2.25 to $219.95.
Hogs: February lean hog futures rallied $1.375 to $71.475, settling near session highs, though nearby December futures fell 20 cents to $68.775.

— Ag markets today: Selling pressure built through the overnight session, with corn, soybeans and wheat trading near session lows earlier this morning. As of 7:30 a.m. ET, corn futures were trading mostly 2 cents lower, soybeans were 15 to 16 cents lower and wheat futures were mostly 7 to 10 cents lower. Front-month crude oil futures were near unchanged, while the U.S. dollar index was more than 100 points lower.

Futures drop triggers additional lower cash cattle trade. More cash cattle traded at lower prices on Thursday given the sharp drop in futures. So far this week, cash trade has been mostly $1.00 to $3.00 lower on a live basis and as much as $4.00 lower for the dressed market. With funds remaining in liquidation mode, both futures and the cash market are struggling to find a bottom.

Cash hog prices continue to weaken. The CME lean hog index is down another 18 cents to $71.35 (as of Nov. 29). December lean hog futures finished Thursday at a $2.575 discount to today’s cash quote. After strong gains yesterday, February futures are back to a small premium to the cash index.

— Quotes of note:

The N.Y. Fed’s John Williams says rates are at or near peak level and monetary policy is “quite restrictive.” Rates are “estimated to be the most restrictive in 25 years,” Williams said on Thursday at the Bretton Woods Committee conference at the New York Fed. “I expect it will be appropriate to maintain a restrictive stance for quite some time to fully restore balance and to bring inflation back to our 2% longer-run goal on a sustained basis.”
Williams said he’s “not losing too much sleep over” market forecasts, adding that rate cuts will depend on how inflation and the economy evolve. Williams said he expects inflation to continue to move down to the central bank’s 2% goal, forecasting that the Fed’s preferred price gauge will fall to just above 2% next year and close in on that target in 2025. Government figures out Thursday showed that gauge — the personal consumption expenditures price index — slipped to 3% in October. “We’ve gotten to a restrictive stance and things are moving in the right direction,” Williams told reporters. “Now we can assess whether we need to do more.”
San Francisco Fed’s Mary Daly says she’s not thinking about cuts and it’s too soon to say whether hikes are finished. Daly said interest rates are in a “very good place” to control inflation though she’s not thinking about cuts and that it was too soon to say if hikes are finished. In an interview with Germany’s Börsen-Zeitung newspaper conducted earlier this month and published Thursday, her remarks echoed other policymakers who have made the case for keeping rates on hold.
Canada’s economy shifts from recession to ‘bumpy landing': Capital Economics. Canada’s economic situation has shifted from a recession to what forecasting firm Capital Economics describes as a “bumpy landing,” at least for the time being. In the third quarter, the economy contracted significantly by 1.1% on an annualized basis. However, this decline was offset by a surprising and substantial upward revision in the second quarter, which shifted from a 0.2% decline to a 1.4% increase. This revision suggests that consumer spending did not decrease as much as previously thought. In the third quarter, household spending remained relatively stable. Capital Economics believes that the sharp drop in the third quarter will likely be a one-time occurrence, with early indicators pointing toward a return to growth in the fourth quarter.
“We have sworn, I have sworn, to eliminate Hamas. Nothing will stop us.” — Israeli Prime Minister Benjamin Netanyahu.

— USDA’s Economic Research Service (ERS) projects a decrease in U.S. farm sector profits in 2023 compared to the record-high levels of 2022. Inflation-adjusted net cash farm income (NCFI) is forecasted to decline by $49.2 billion (23.8%) from 2022, reaching $157.9 billion in 2023. Similarly, net farm income (NFI) is expected to drop by $37.9 billion (20.0%) to $151.1 billion in 2023. NCFI represents gross cash income minus cash expenses, while NFI provides a broader measure of farm sector profitability, incorporating noncash elements such as changes in inventories and depreciation.

These projected decreases come after both NCFI and NFI reached all-time highs in 2022, totaling $207.1 billion and $188.9 billion, respectively.

Cash receipts for farm commodities are anticipated to decline by $43.0 billion (7.8%) in 2023 compared to 2022, with decreases expected in milk, corn, and broiler receipts.

Total production expenses are expected to remain relatively stable, with a slight increase of $0.6 billion (0.1%) to $443.4 billion in 2023. However, individual expense items may vary, including an increase in interest expenses and reductions in spending on fertilizer, lime, soil conditioner, and feed.

USDA detailed that interest expenses in 2023 “are forecast to have the most significant increase in nominal terms at $10.3 billion (42.9% above the 2022 value) to $34.4 billion in 2023. This reflects expectations that both total debt levels and interest rates will rise in 2023.” USDA noted that this is the highest level to-date in nominal terms, but is still well below then early 1980s when interest expenses were at least 50% higher in inflation-adjusted dollars.

Direct government payments to farmers are forecasted to decrease by $4.0 billion (24.8%) in 2023 to $12.1 billion, primarily due to lower supplemental and ad hoc disaster assistance.

The Dairy Margin Coverage Program (DMC) is forecast to make $1.3 billion in payments in 2023, which is up by $1.1 billion compared with 2022, due to lower milk prices in 2023 compared to 2022.

Minimal payments under the Agriculture Risk Coverage (ARC) and Price Loss Coverage (PLC) are in the outlook. Combined the programs are forecast to pay out $343.7 million, down $28.8 million from 2022.

Financial indicators still solid. Farm sector equity is expected to increase to $3.57 trillion in 2023, up 6.9% from 2022 with assets rising to $4.09 trillion, up $254 billion or 6.6%. Farm sector debt is to rise to $520.7 billion in 2023, up $24.6 billion from 2022. But despite the increases, the financial ratios covering debt to assets and debt to equity are still in very solid condition. Debt-to-asset levels for the sector are forecast to improve from 12.93 percent in 2022 to 12.73% in 2023. Working capital is forecast to fall 5.0 percent in 2023 relative to 2022. The debt-to-equity ratio is also seen improving to 12.58% in 2023, down from 12.85% in 2022.

Working capital is now seen at $122.59 billion, down from $129.05 billion in 2022, but just above the level forecast in August of $121.92 billion.

Perspective: Danny Munch, an economist with the American Farm Bureau, says the picture is a little brighter than the August predictions, but not much. In the August reports, USDA forecasted that farm income from 2022 would drop 23%, a $41 billion drop from 2022. In this new November report, they adjusted that number — $41 billion — to $31.8 billion, which is a 17% drop from 2022. In total, that would give you a total net farm income of $151 billion for 2023 compared to the $141 billion estimated previously in August.\

Some of the main factors behind the revisions: Munch says the most significant revisions are attributable to lower production expenses compared to what they estimated in August. “There’s still a $14.9 billion expected increase in what farmers are paying for production expenses, which is about 4%. But that’s 7% lower than what they forecasted in the August release.”

Munch says there is some good news about the forecast, though overall it is a mixed bag. Munch: “For all categories except fuels and oils, electricity and interest expenses, they adjusted their numbers downward. Things like fertilizer, pesticides, seeds, those all saw decreases from what they estimated that farmers will be paying. Electricity, fuels, oils, interest expenses all saw increases. So those are things farmers saw upward adjustments and are going to pay more for in 2023 than they estimated previously.”

Bottom line: Look for farm bill proponents to note the declining income picture as a key reason lawmakers should finish work on the next farm bill.

— Updated U.S. agricultural trade in fiscal year (FY) 2024 indicates several key points (link):

Decline in Agricultural Exports: U.S. agricultural exports for FY 2024 are expected to reach $169.5 billion, a decrease from the previous projection of $172 billion. This figure would be the lowest since FY 2020 due in part to pandemic-related impacts.
Record Imports: Agricultural imports are forecasted to reach a record high of $200 billion in FY 2024. Factors contributing to this increase include a strong U.S. dollar and strong domestic demand for agricultural imports, particularly for products like beef, veal, vegetable oils, and grain.
Trade Deficit: The result of these export and import figures is a trade deficit projected at $30.5 billion for FY 2024, up from the August forecast of $27.5 billion. In FY 2023, the trade deficit was $16.7 billion.
Economic Factors: Economic factors, such as a strong U.S. dollar, resilient consumer spending, and a robust labor market, play a role in these trade projections. U.S. GDP for 2023 is expected to be 2.1%, with a forecast of 1.5% for 2024.
Impact on Imports: Domestic demand for agricultural products remains strong, although consumer expectations of a slowing U.S. economy could affect demand. Global inflation moderation has also affected import values.
Product Categories: Horticultural products make up a significant portion of U.S. agricultural imports, accounting for about half of the total import value. In FY 2024, U.S. horticultural products are forecasted at $98.4 billion.
Exports by Product: Grain and feed exports are projected to decrease by $1.3 billion to $37.5 billion, while livestock, poultry, and dairy exports are expected to decrease by $1.3 billion to $36.3 billion. Soybean exports are forecasted to decrease by $500 million to $26.0 billion.
Biggest Export Destinations: The top three destinations for U.S. agricultural exports in FY 2024 are expected to be China ($29.5 billion), Mexico ($27.9 billion), and Canada ($27.7 billion).
Importance of Diversification: USDA Secretary Tom Vilsack has highlighted the importance of diversifying markets beyond a few major destinations. Initiatives like the Regional Agricultural Promotion Program (RAPP) aim to expand exports to markets beyond China, Mexico, Canada, and the European Union (EU).
Growth Potential: Africa and Asia present growth opportunities for U.S. agricultural exports. Africa, in particular, is a target for expansion, with $25 million allocated for promotional efforts. However, challenges and trade barriers in these markets may need to be addressed.

Bottom line:

The trade outlook for U.S. agriculture in FY 2024 reflects a complex interplay of economic factors, global demand, and trade dynamics, with potential growth opportunities in diverse markets.
U.S. ag exports would be the smallest in four years due to lower prices for wheat, corn, and cotton.
China would remain the No. 1 customer for food and ag products, with Mexico a close second.
U.S. ag sector and farm-state lawmaker concerns are accelerating regarding Biden’s trade policy. They note that unless trade barriers are reduced or eliminated in targeted countries, all the promotion funding in the world won’t help. Of note: Japan accounts for the same percentage of U.S. agricultural exports as the EU. USDA did not block Japan from RAPP, but they did block the EU.
Developments indicating a change in trade policy direction is needed include (1) Record U.S. ag trade deficit; (2) Brazil largest world corn exporter for second consecutive year; (3) Brazil looks to take over being the world’s largest cotton exporter; (4) USMCA decision on U.S. complaint that Canada isn’t following through on promise to give more market access certain U.S. dairy products and (5) growing carryover and lower prices for some U.S. crops, especially corn.

— Mortgage rates have dropped for the fifth consecutive week, reaching their lowest point in over two months. According to Freddie Mac, the average rate for a 30-year fixed mortgage now stands at 7.22%. Over the past month, mortgage rates have fallen by more than half a percentage point, marking the most significant four-week decline since late 2022.

— Eurozone factory downturn eased a touch in November. HCOB’s final euro zone manufacturing PMI, compiled by S&P Global, rose to 44.2 in November from October’s 43.1 and was above a preliminary estimate of 43.8. Still, the reading was far below the 50.0 level, signaling ongoing contraction within Europe’s manufacturing sector.

Market perspectives:

— Outside markets: The U.S. dollar index was slightly higher, with the euro weaker and yen steady against the greenback. The yield on the 10-year U.S. Treasury note was weaker, trading around 4.32%, with a mostly higher tone in global government bond yields. Crude oil futures were under pressure despite the OPEC+ output cut decision. U.S. crude was around $75.75 per barrel and Brent around $80.35 per barrel. Gold and silver futures were weaker ahead of US economic data, with gold around $2,055 per troy ounce and silver around $25.55 per troy ounce.

— OPEC+ countries said it would reduce output by about 1% of global production, per day to prop up sinking oil prices, drawing a rebuke from the White House. Still, the price of Brent crude is down this morning as investors remain worried about slowing global demand.

— Airlines want to replace jet fuel with ethanol to fight global warming, and that would require massive amounts of corn and water. The New York Times takes a look at the implications (link).

— Copper futures surged to $3.85 per pound at the start of December, marking their highest level since early August. This comes after a nearly 5% gain in November. The rise is driven by concerns over supply and optimism about increasing demand. Panama is planning to shut down First Quantum Minerals Ltd.'s Cobre operation following a national court ruling that declared the law approving a new long-term operating contract for the mine as unconstitutional. This decision is expected to reduce copper supply and pose a threat to the global surplus projected for 2024 since the company contributes approximately 1.5% of the world’s copper supply. In addition, there is hope for the manufacturing sector in China as the Caixin Manufacturing PMI unexpectedly increased in November, indicating a potential turnaround. Beijing has pledged to invest CNY 1 trillion in manufacturing and infrastructure development, and the prospect of major central banks, particularly the Federal Reserve, potentially lowering interest rates next year has also boosted the outlook for copper.

— USDA daily export sales:

• 132,000 MT soybeans to China during 2023-2024 marketing year
• 198,000 MT soybeans to unknown destinations during 2023-2024 marketing year

— “It is make-or-break time for Brazil,” says grain trader and analyst Richard Crow. “The major growing areas of Northern Brazil are 40% of crop area, as forecasts of rain increase. The moisture to this period has been less than 25% of normal. Can Dec save the crop? The estimates for the crop range are in the 155- to 158-million-ton area.”

— NWS weather outlook: Multi-day winter storm will impact travel in the Northwest with significant mountain snow and heavy rain... ...Unsettled weather forecast across the eastern third of the country with heavy rain potential along the Gulf Coast and Southeast, while wintry weather is expected from parts of the Midwest and Great Lakes to northern New England.

Items in Pro Farmer’s First Thing Today include:

• Grain price pressure overnight
• Record soy crush, big rise in corn-for-ethanol use expected
• Russia again cuts wheat export tax
• China’s Evergrande creditors seek controlling stakes in new proposal.

CONGRESS

— Sen. Paul saves choking Sen. Ernst at GOP lunch. Sen. Rand Paul (R-Ky.), an ophthalmologist, came to the rescue on Thursday when he used his Heimlich maneuver skills to help Sen. Joni Ernst (R-Iowa), who was choking, during a Senate Republicans’ lunch. Ernst recovered swiftly and humorously pledged to vote for whatever Rand recommends. She also expressed her gratitude to Paul on social media.

— Approximately 90 House Republicans are expected to vote for the expulsion of GOP Rep. George Santos (R-N.Y.,) marking a critical moment in the removal of one of the most widely recognized House members in the social media era, according to Politico’s latest whip count. However, reports this morning signal Speaker Mike Johnson (R-La.) will vote to oppose the expulsion of Santos, signaling that the House GOP’s leaders will swing against the bipartisan push to boot the indicted New York Republican. Politico reports that while Johnson and his leadership team are not formally whipping against the latest expulsion push, describing it as a vote of conscience, other House Republicans on the fence are certain to take cues from the GOP leader.

Under New York law, if the expulsion occurs, Democratic Governor Kathy Hochul will have to declare the seat vacant within ten days and arrange a special election to be held between 70 and 80 days from that point. This would likely result in a stand-alone special election taking place in late February.

ISRAEL/HAMAS CONFLICT

— Israel resumed combat operations in Gaza following a breakdown in the seven-day truce with Hamas. This resumption of hostilities was triggered by accusations of Hamas firing towards Israel and violating the truce agreement, which had allowed for the release of hostages. Israel said Hamas didn’t free all the kidnapped women it promised to in the latest group to be released. It added that Hamas violated the truce by firing missiles. Hamas accused the Israeli government of refusing to accept any of its hostage-exchange offers last night. Sirens warning of incoming rockets were heard in communities around the Gaza Strip and the city of Ashkelon. UN Secretary-General Antonio Guterres expressed regret about the resumption of strikes, while U.S. Secretary of State Antony Blinken called for Israel to make further efforts to protect civilians in Gaza as the military campaign resumes.

— Gaza military operation to extend beyond a few weeks. Israeli officials told Secretary of State Tony Blinken that the Israeli military operation in Gaza is expected to take “more than a few additional weeks,” Axios reports (link). Blinken met with Israeli leaders on Thursday and urged them to take concrete steps to reduce civilian deaths before Israel resumes an offensive against Hamas in Gaza.

RUSSIA/UKRAINE

— ‘New phase’ for Russia/Ukraine conflict. Ukrainian President Volodymyr Zelenskyy, in an interview with the Associated Press, acknowledged that the conflict with Russia has entered a “new phase.” Despite some recent actions not yielding the desired outcomes, he emphasized that Ukraine is determined and will not give up. Zelenskyy expressed satisfaction with Ukraine’s resilience in facing the Russian military, which he referred to as the “second (best) army in the world.” However, he also expressed concern about the loss of Ukrainian lives and the challenges in obtaining all the needed weapons. Additionally, he voiced apprehension that the situation in the Middle East could divert global attention and resources away from Ukraine, emphasizing the importance of maintaining international focus on their ongoing conflict. Zelenskyy stressed the need to fight for attention regarding Ukraine’s full-scale war and prevent it from being forgotten.

— Ag Ministry: Ukrainian harvest of grains and oilseeds totaled nearly 77 million metric tons (MMT), including 56.3 MMT of grains and 20.7 MMT of oilseeds. The grains total included 22.5 MMT of wheat, 26.8 MMT of corn, 5.9 MMT of barley, and 399,500 metric tons of peas. Rapeseed harvest was put at 4.5 MMT with 11.9 MMT of sunflower seed.

POLICY UPDATE

— Southern Ag Today assesses recent GAO sugar program report. The recent report (link) by the U.S. Government Accountability Office (GAO) evaluating the effects of the U.S. sugar program has come under scrutiny. The report, which focused on the impact of the sugar program on food companies and consumers, has faced criticism for not presenting a balanced view of the program’s effects. Some key points of contention include, according to the report (link) from Southern Ag Today:

Emphasis on Harm to Food Companies: The report primarily highlighted complaints from sugar-using groups regarding the prices paid for sugar, without quantifying the benefits these companies receive from the sugar program. It failed to acknowledge consumer preferences for domestically sourced sugar and the reliability of domestic sugar supply chains facilitated by the program.
Omission of Recent Studies: The GAO report neglected to include recent studies that indicate the success of sugar-using firms operating within the program’s framework. These studies demonstrated the financial outperformance of large sugar-purchasing food companies.
Lack of Updated Consumer Impact Analysis: The report referenced a GAO report from 2000 regarding the effects of the sugar program on consumers, rather than using more recent studies. Recent research suggests that savings from changes in sugar prices are not passed on to consumers by food manufacturers.
Failure to Address Loan Rate and Production Costs: The report missed an opportunity to compare sugar loan levels in the farm bill to the actual costs of producing sugar. Current production costs for sugarbeet and sugarcane are significantly higher than in 2018, when the last farm bill was enacted.
Overemphasis on Welfare Economic Studies: The report relied heavily on welfare economic studies that provide a one-sided view of the sugar market. These studies do not capture the real-world benefits of a strong domestic supply chain and the threats posed by foreign governments in response to changes in U.S. sugar policy.
Neglect of Economic Contributions: The report did not acknowledge the economic contributions of the sugar industry to rural and urban communities in the United States, including supporting jobs and contributing billions to the economy.
Recycled Recommendations: GAO’s recommendation to analyze alternative mechanisms for administering preferential-quota access to trade partners was like one made nearly 25 years ago, lacking new insights.

Bottom line: Critics argue that the report missed an opportunity to provide a balanced assessment of the U.S. sugar program, including its benefits, and did not contribute substantially to the ongoing discussion surrounding the new farm bill.

— 1,300 farmers to receive $208 million in USDA aid. Approximately 1,300 farmers are set to receive financial assistance totaling $208 million through guaranteed and emergency loans. This aid is being provided as part of an ongoing program aimed at supporting distressed borrowers under a USDA program funded by taxpayers (link).

CHINA UPDATE

— China’s manufacturing sector unexpectedly experienced growth in November. The Caixin China General Manufacturing PMI increased to 50.7, reaching a three-month high compared to October’s 49.5, surpassing expectations of 49.8. This growth was attributed to improvements in both output and buying levels, supported by Beijing’s efforts to stimulate the economy. Additionally, cost pressures were under control, and confidence among manufacturers reached a four-month high.

— The yuan’s role in settling cross-border payments with China is on the rise, with a 24% increase in transactions in the first three quarters of this year. The yuan now represents over 50% of China’s global transactions, surpassing the U.S. dollar. However, its dominance is mainly limited to countries aligned with China politically, such as Argentina, Nigeria, Russia, and Pakistan. The war in Ukraine and sanctions on Russia have encouraged these countries to reduce their reliance on the dollar. Nevertheless, the yuan faces challenges as China conducts most of its trade with U.S.-aligned countries. The yuan accounts for only 3.7% of global payments by value, compared to the dollar’s 46.6% share, and foreign investment in Chinese assets has declined due to geopolitical tensions and economic concerns.

— Mainland China’s stock market has experienced a significant exodus of foreign investments. Starting from August, investors have withdrawn over $24 billion, marking the largest net outflow through a Hong Kong trading link since its establishment in 2014.

— Meta shuts down thousands of fake Chinese accounts targeting 2024 election. Meta, the company behind Facebook and Instagram, announced the closure of nearly 4,800 fake Chinese accounts aimed at influencing American voters in the lead-up to the 2024 election. These accounts impersonated ordinary Americans and shared strongly partisan content from politicians and news sources. Additionally, a smaller Russian network was also dismantled as part of these actions.

— A federal judge has temporarily halted the implementation of a Montana law that aimed to ban downloads of TikTok, the Chinese-owned video-sharing app. The law, which was scheduled to take effect in January, has been paused because the judge believes it “likely violates the First Amendment.” This law was introduced by lawmakers in February, who expressed concerns that TikTok could potentially be utilized by the Chinese government for spying on American citizens.

— How Chinese marijuana operations cropped up in small-town America. From New Mexico to Maine, Chinese networks are cashing in on cannabis legalization. Link to WSJ article.

— U.S. to limit China’s ability to benefit from electric vehicle industry. The Biden administration issued new rules to prevent Chinese firms from supplying parts for electric cars set to receive billions of dollars in tax credits. Link to NYT article for details.

TRADE POLICY

— EU leans toward concession to Biden in steel trade dispute over Trump concerns. The European Union is so worried about another Trump term that the bloc is leaning toward conceding a key issue to President Joe Biden in an ongoing trade dispute over steel imports due to concerns about the prospect of another Trump term in the 2024 U.S. election. Most EU countries are hesitant to provoke a trade fight with the U.S., fearing it could boost Trump’s campaign, Bloomberg reports (link).

The trade dispute arose during the Trump era when tariffs on European steel and aluminum were imposed, citing national security concerns, leading to retaliatory measures from the EU.

The EU seeks to reach a comprehensive agreement on the Global Arrangement on Sustainable Steel and Aluminum (GSA) with the US. Still, the U.S. refuses to lift all tariff-rate quotas, leading to discussions on improving the existing truce’s terms to correct the imbalance.

EU Trade Commissioner Valdis Dombrovskis expressed the need to avoid unnecessary escalation, indicating that the EU and the US are negotiating the administration of tariff-rate quotas for steel and aluminum exports. Negotiators are considering extending the truce while seeking improvements in tariff-rate quotas, including transitioning to annual quotas to better reflect historical flows. The priority for the EU and member states is to prevent the reimposition of full tariffs and retaliatory measures, especially as they work together to address global challenges like Russia’s invasion of Ukraine and align their response to China.

— USITC keeps duties on Canadian softwood lumber. The U.S. International Trade Commission (USITC) Decided to maintain its antidumping and countervailing duty orders on specific softwood lumber products from Canada. This decision was made as part of a five-year review process, with the USITC concluding that lifting these orders would probably result in significant harm within a foreseeable future. The vote in favor of keeping the duties in place was supported by Chairman David S. Johanson and commissioners Rhonda K. Schmidtlein, Jason E. Kearns, and Amy A. Karpel, as stated by the USITC.

— USTR reallocates unused FY 2024 sugar import quotas. The Office of the U.S. Trade Representative (USTR) announced the reallocation (link) of unused country-specific quota allocations for imported raw cane sugar in fiscal year (FY) 2024. The total in-quota quantity for raw cane sugar for FY 2024 is 1,117,195 metric tons raw value (MTRV), which represents the minimum WTO commitment by the US. Initially, USTR published the country-specific allocations in July. However, this recent announcement involves reallocating 223,740 MTRV of the original TRQ quantity from countries that have indicated they will not fill their FY 2024 allocated raw cane sugar quantities.

ENERGY & CLIMATE CHANGE

— Economist: China is building nuclear reactors faster than any other country. Over the past decade China has added 37 nuclear reactors, for a total of 55, according to the International Atomic Energy Agency, a UN body. During that same period America, which leads the world with 93 reactors, added two. Link for details.

LIVESTOCK, NUTRITION & FOOD INDUSTRY

— Kroger trims sales view on lower prices, choppy grocery demand. Kroger cut its annual sales forecast, pinched by moderating food and grocery prices at a time when demand has come under pressure from consumers keeping a tight lid on spending.

— Cases of highly pathogenic avian influenza (HPAI) are on the rise, with new confirmations reported by the USDA’s Animal and Plant Health Inspection Service (APHIS) in several commercial operations. One significant case is in Sioux County, Iowa, involving 1,616,300 table egg layer birds. Additionally, new HPAI confirmations were reported in commercial turkey meat bird operations in Yankton County (49,000) and McPherson County (61,800), South Dakota, as well as in Dickey County, North Dakota (60,300), Otter Tail County (19,000), Minnesota, and Becker County, Minnesota, involving 25,500 turkey breeder hens. In Carroll County, Arkansas, a commercial broiler production operation was also confirmed with HPAI, although specific bird numbers affected have not been provided yet. This marks the third case of HPAI in Arkansas.

— NAMI promotes meat industry’s sustainability at COP28. The North American Meat Institute (NAMI) is using the UN Climate Change Conference (COP28) in Dubai to highlight the sustainability efforts of the meat industry through its associated livestock sustainability strategy, Protein PACT for the People, Animals, and Climate of Tomorrow. This move comes in response to increasing attention on greenhouse gas emissions linked to livestock farming and meat and dairy consumption. NAMI is participating in COP28 as an observer, and Protein PACT is the principal sponsor of the Inter-American Institute for Cooperation on Agriculture’s (IICA) Sustainable Agriculture of the Americas Pavilion at the event. They plan to organize six expert panel discussions and host a reception to emphasize the role of meat and dairy in sustainable agriculture.

NAMI’s Chief Strategy Officer, Eric Mittenthal, mentioned their intention to engage in the summit to assess progress in sustaining nutrient-dense foods like meat and dairy for future generations, including sharing their greenhouse gas inventory tool and sector-wide data reporting. Dr. Manuel Otero, the Director General of IICA, highlighted the centrality of livestock production in various sustainability solutions — environmental, economic, and social — and expressed their commitment to advocating for sustainable agriculture, including livestock production, at COP28 and beyond.

POLITICS & ELECTIONS

— Elections in Montana and Ohio will likely determine control of Senate. Sens. Jon Tester (D-Mont.) and Sherrod Brown (D-Ohio) are seeking fourth terms amid challenging races in states that have increasingly leaned towards the Republican party. Donald Trump carried both states twice during his presidential campaigns — Trump won by 16 points in Montana and eight points in Ohio. With West Virginia very likely going Republican now that Sen. Joe Manchin (D-W.Va.) is not seeking re-election, Republicans will need to win at least one of the Montana/Ohio races.

But both Tester and Brown are battle-tested incumbents well liked in their states… and among farmers. We recently made a visit to Montana, and it is clear the state’s Senate race is going to be very close, with a lot of money being spent by both candidates (Tester’s likely opponent will be former U.S. Navy SEAL Tim Sheehy).

David Wasserman, election analyst for the Cook Political Report with Amy Walter, told us: “Tester’s approval rating is remarkable...he’s at ~60%. But I think it will eventually come back down to earth, and it looks like Sheehy is the favorite over Rosendale in the R primary (Rosendale would be a disaster). Tester’s approval won’t be at 60% after Sheehy spends $50 million or more. Pure Toss Up.”

Wasserman’s early predictions on House and Senate outcomes: “Best guess right now is little change in the House (still slim R majority) and slim GOP majority in Senate (WV + either MT/OH/AZ).”

In Ohio, Brown faced weak challengers in both his 2012 and 2018 races, something Republicans plan to rectify this year, according to Jessica Taylor of the Cook Political Report. She writes, “National Republicans say they feel okay with any of the three top candidates becoming their nominee, but acknowledge that a bruising primary is on the horizon ahead of the March 19 election.”

If Dems retain both states, and W.Va. goes Republican as expected, it will likely be a 50/50 Senate, with control of the chamber determined by who wins the White House.

— DeSantis shows strong debate performance against Newsom. During a debate with Gavin Newsom, California’s Democratic governor, Ron DeSantis, Florida’s Republican governor, displayed a strong and combative performance. This contrasted with his previous interactions with fellow Republican presidential candidates, where he appeared less assertive. Much of the debate devolved into a shouting match with the pair yelling over one another or quibbling over facts, leading moderator Sean to gently chastise the Florida and California governors.

DeSantis and Newsom engaged in debates covering topics such as abortion, guns, immigration, and their respective pandemic policies.

“We have one thing in common: Neither of us will be the nominee for our party in 2024,” Newsom said. He suggested that DeSantis would inevitably drop out of the race for the Republican presidential nomination because he was so far behind Donald Trump in the polls.

“You’re trying to ... play political games to get some news attention so you can out-Trump Trump,” Newsom said. “And by the way: How’s that going for you, Ron?”

“I will take Joe Biden at 100 rather than Ron DeSantis any day of the week at any age,” Newsom added.

DeSantis criticized Newsom, a key surrogate for Biden’s re-election campaign, over California’s response to COVID and his handling of crime and homelessness. DeSantis said: “This is a slick, slippery politician whose state is failing.”

Bottom line: Despite his spirited performance, DeSantis’s campaign for the Republican presidential nomination is facing challenges. Gavin Newsom, on the other hand, is not currently running for the 2024 presidential election but may consider a presidential run in the future.

— Fourth Republican presidential primary debate is set for next Wednesday in Tuscaloosa, Alabama. Donald Trump will skip the Republican presidential debate to instead attend a fundraiser for his campaign in Hallandale Beach, Fla., a person familiar with the planning said.

— Reuters: Democrats have no Plan B if Biden decides to halt his campaign. In a story (link) headlined, “Democrats have no Biden backup plan for 2024, despite age concerns,” Reuters says the Democratic Party “has no Plan B if President Joe Biden decided for any reason to halt his 2024 re-election campaign, and a sudden need to replace him as its standard-bearer would spark a messy intraparty battle.” Reuters says Vice President Harris “has her own popularity problems,” and “would not automatically replace him as the top candidate if he stepped aside.” A “senior Democrat” told Reuters, “There is no Plan B. If he were ... suddenly not to run, everyone you know would run. The VP scares no one.”

OTHER ITEMS OF NOTE

— Cotton AWP resumes downward move. The Adjusted World Price (AWP) for cotton moved down to 64.18 cents per pound, effective today (Dec. 1), after having ticked higher the prior week to 65.23 cents per pound. The AWP has moved lower seven of the past eight weeks. Meanwhile, USDA announced Special Import Quota #17 will be established Dec. 7 for the import of 35,998 bales of upland cotton, applying to supplies purchased not later than March 5 and entered into the U.S. not later than June 3.

— Argentina, under the leadership of incoming President Javier Milei, has decided not to join the China-led BRICS bloc. This decision reflects a notable shift in the country’s foreign policy that is anticipated to take place during his presidency.

— Sandra Day O’Connor, first woman on Supreme Court, dies at 93. She died at the age of 93 Friday morning at her home in Phoenix, the court announced.

KEY LINKS

Policy Updates