News/Markets/Policy Updates: Nov. 14, 2024
— Republicans secure control of House, narrow majority expected. The GOP not only regained control of the White House and the Senate but also managed to hold onto a narrow majority in the House, the Associated Press called late Wednesday, more than a week after voters headed to the polls. A win by GOP Rep. Juan Ciscomani in Arizona gave Republicans the 218 seats needed for a majority of the House’s 435 lawmakers, the AP projected late Wednesday. Democrats have so far won 208 seats, while some contests are still uncalled. Minority Leader Hakeem Jeffries (D-N.Y.) acknowledged the outcome, noting Democrats’ efforts and emphasizing the razor-thin GOP majority. Key Republican wins included flipping districts in Pennsylvania, Michigan, and Colorado, while Democrats made gains in New York and redistricted Alabama and Louisiana. With a narrow majority, the GOP faces challenges enacting President-elect Donald Trump’s agenda, though House leadership vows readiness to pursue aggressive tax, immigration, and energy reforms starting in January. The final House tally is clear unclear, but it looks like the GOP will control 220 to 222 seats; it takes 218 to lead the chamber (nine races still need to be called). David Wasserman of the Cook Political Report says, “I’m at 220-222 Republican seats (depending on CA-13 and CA-45), with most likely outcome being 220R-215D, a loss of one seat for Republicans (pretty much a status quo result).” The House GOP’s is losing members from Trump’s choices for his administration. Trump tapped Rep. Elise Stefanik (R-N.Y.) to be ambassador to the United Nations and Rep. Michael Waltz (R-Fla.) to be his national security adviser. Having Trump nominate Gaetz — and Gaetz’s sudden resignation — reduces Johnson’s current margin to just four votes (220 Republicans, 213 Democrats.) It could be even tighter at the start of the next Congress. Florida Gov. Ron DeSantis and Speaker Mike Johnson (R-La.) are scheduled to have a phone call this morning to discuss timing for special elections to replace Gaetz and Waltz. Florida has around eight weeks to announce a replacement. New York has around 80 days. Both districts are solid Republican. — Sen. John Thune (R-S.D.), an institutionalist, wins Majority Leader race. Sen. Rick Scott (R-Fla.) was eliminated on the first ballot. And Thune beat Sen. John Cornyn (R-Tex.) 29-24 on the second ballot. The Thune selection is good for the U.S. ag sector. He has one of the best staff in Congress. The leadership race unfolded in two rounds of voting: Donald Trump stayed out of the contest but did make public demands that the incoming majority leader allow him to make recess appointments to his Cabinet. All three men quickly agreed. Thune’s election as Majority Leader is considered beneficial for the U.S. ag sector for several reasons: Of note: This leadership change marks the end of Mitch McConnell’s (R-Ky.) 18-year tenure as the Senate’s Republican leader. Thune will assume the role of Majority Leader for the next two years, coinciding with President-elect Donald Trump’s second term. While Thune has had differences with Trump in the past, he has recently worked to improve their relationship and has pledged to advance Trump’s legislative agenda. In his first post-election news conference, he promised that Senate Republicans would preserve the legislative filibuster on his watch — the 60-vote threshold that Trump repeatedly, and unsuccessfully, pressured GOP senators to eliminate during his first term. Republican senators agree with Thune about that. — Speaker Mike Johnson, House Majority Leader Steve Scalise and House Majority Whip Tom Emmer were all picked for leadership slots by voice vote. Rep. Lisa McClain (R-Mich.) resoundingly beat Rep. Kat Cammack (R-Fla.) to become the next House Republican Conference chair. The vote was 146-67-1. Someone voted for Rep. Marjorie Taylor Greene (R-Ga.). Of note: The full House of Representatives will vote to elect the Speaker on the opening day of the new Congress, which is Jan. 3, 2025. While Johnson has won the Republican nomination for Speaker, he still needs to secure 218 votes — a simple majority of the 435 House seats — during this public vote in January to officially retain his position for a full term. This vote is separate from the internal Republican leadership elections that have just taken place. The January vote involves the entire House, including both Republicans and Democrats. Democrats are expected to back Rep. Hakeem Jeffries (D-N.Y.) for Speaker, which means Johnson can only afford a few defections from his own party, depending on the final number of House Republicans. — House Republicans reach tentative deal on speaker removal rules. House Republicans, including members of the Freedom Caucus and Main Street Caucus, have tentatively agreed to raise the threshold for filing a motion to oust the speaker from one member to nine. In return, moderate Republicans will withdraw amendments targeting lawmakers opposing GOP priorities. This agreement facilitated the unanimous nomination of Mike Johnson for speaker, reports note. The proposal, which will be voted on by the full House Republican Conference, aims to make speaker removal slightly more difficult while retaining the possibility. Next step: The House Republican Conference today will vote on the party’s rules. Rebel Rep. Chip Roy (R-Texas), a frequent Johnson critic, said he and an unspecified number of other Republican lawmakers “are not able — yet —to unite” behind Johnson or any other candidate. He blasted a proposal that some colleagues have floated to punish Republican lawmakers who vote down procedural measures, which he said was unfair retaliation. Meanwhile, Rep. Anna Paulina Luna (R-Fla.) said some members will raise concerns about Johnson’s leadership and make demands before the Jan. 3 vote. — Several news services have called the Pennsylvania Senate race, but there is still some uncertainty surrounding the final outcome. The Associated Press (AP) called the race for Republican Dave McCormick on Thursday, Nov. 7. Following this projection, McCormick declared victory and has been appearing in interviews as Pennsylvania’s senator-elect. However, other major news outlets, including NBC News, CNN, and the New York Times, have not yet called the race. This discrepancy has led to a contested situation. McCormick is leading by approximately just over 29,000 votes with 99% reporting. The margin between the candidates is around half a percentage point, which makes the contest eligible for an automatic recount. Casey’s campaign believes there is still a path to victory, particularly given the nature of the remaining ballots and past voting patterns. — Rubio officially nominated as Secretary of State by Trump. Sen. Marco Rubio (R-Fla.) was officially nominated by President Trump to serve as secretary of State, following leaked reports earlier in the week. In his statement, Rubio described the nomination as a “tremendous responsibility” and pledged to uphold Trump’s “peace through strength” foreign policy. His confirmation is expected to be smooth, with bipartisan support. The move is seen as a significant shift in U.S./Cuba relations, raising concerns in Havana. Rubio would be the first sitting secretary of state under Chinese sanctions. Florida’s replacement for Rubio in the Senate remains undecided, with potential candidates, including Ashley Moody and Lara Trump, expressing various degrees of interest. Governor DeSantis has tasked the Florida Secretary of State with preparing for a special election. — Shocker: Trump announced his intention to nominate Rep. Matt Gaetz of Florida as the next Attorney General of the United States. This surprising choice was revealed by Trump on his social media platform, Truth Social, on Wednesday. Background on Gaetz. Gaetz, 42, has been serving as a member of Congress since 2017, representing Florida’s 1st District. He is known for being one of Trump’s most loyal and vocal supporters in Washington. Gaetz holds a law degree from the William & Mary College of Law and has an active law license, though he does not appear to have significant prosecutorial experience. Gaetz’s nomination comes with a backdrop of controversy In announcing the nomination, Trump praised Gaetz as a “deeply gifted and tenacious attorney” who has focused on “achieving desperately needed reform at the Department of Justice.” Trump emphasized the importance of ending what he calls the “partisan Weaponization of our Justice System.” If confirmed, Gaetz would lead the very department that previously investigated him. Some analysts say this appointment signals Trump’s intention to potentially exert more control over the Justice Department’s autonomy. It also aligns with Trump’s stated goal of holding accountable the Justice Department officials who pursued legal action against him. Next steps. The nomination has been met with surprise from both sides of the political aisle. Sen. Susan Collins (R-Maine) remarked that this nomination “underscores the importance of the Senate’s advise and consent role.” The confirmation process is expected to be contentious, with numerous questions likely to arise during Gaetz’s hearing. Sen. Kevin Cramer (R-N.D.) said Gaetz’s prospects of getting confirmed were “a long shot,” adding that it’s “very possible” Trump is testing the limits of how far he can push the Senate. Gaetz’s lack of significant prosecutorial experience is likely to be a major point of contention during his confirmation process. Historically, many Attorney General nominees have had extensive experience as prosecutors or in senior roles within the Justice Department. Gaetz’s background diverges significantly from this norm, which could lead to unfavorable comparisons during the confirmation process. The ultimate outcome will depend on how effectively Gaetz can address these concerns and whether he can garner sufficient political support despite his unconventional background for an Attorney General nominee. Of note: Punchbowl News reports that Gatez’s nomination “could already be dead.” The news service reports: “A top Senate Republican who has a good read on the mood of the GOP Conference said the Gaetz nomination is dead in the water: ‘Many of President Trump’s selections so far have been just what the American people asked for. But nominating Matt Gaetz to be Attorney General would be a significant mistake because he will not have the votes to be confirmed. It’s clear a lot of us hope the President-elect reconsiders.’” Sen. Thom Tillis (R-N.C.), a member of the Senate Judiciary Committee, noted that Gaetz has offended GOP senators frequently in the past. “I’m all about counting votes, and I would probably think he’s got some work cut out for him,” Tillis said. Although they will never say it publicly, some GOP House leaders will be happy if Gaetz departs the House as he has been a thorn in the side of leadership. Gaetz has submitted his letter of resignation, House Speaker Mike Johnson (R-La.) said during a press conference. The resignation is effective immediately, Johnson said. The move would also allow Florida GOP Gov. Ron DeSantis to set up a special election to replace Gaetz. One contact said: “Sounds like Gaetz quit to cause the House ethics committee to halt its investigation. Once he is no longer a Member, the panel no longer pursues.” Gaetz and House Speaker Johnson insisted Gaetz’s resignation was to help fill the vacancy as quickly as possible. It’s possible the report could still be published or leaked. The New York Times wrote: “The potential collapse of his (Gatez’s) nomination may ease the path to confirmation for other polarizing picks by Trump, including former Representative Tulsi Gabbard of Hawaii as director of national intelligence.” — Trump chose former Hawaii Democrat congresswoman Tulsi Gabbard to be the director of national intelligence. The new Republican will face some opposition within the Senate GOP, so her acceptance is murky. — Lutnick makes late push for Treasury Secretary role. Howard Lutnick, CEO of Cantor Fitzgerald and co-chair of Trump’s transition team, has launched a late bid to become Treasury secretary, competing with frontrunner Scott Bessent. While Lutnick has been working closely with Trump at Mar-a-Lago, Bessent, an investment firm founder and former Soros Fund Management executive, faces conservative pushback due to his past Soros ties. The Treasury secretary role is critical for implementing Trump’s economic agenda, with both candidates courting Trump’s favor. Speculation remains on whether a third candidate, such as Robert Lighthizer or Jay Clayton, may ultimately emerge. — RFK Jr. pushes for major food policy overhaul in Trump 2.0. Robert F. Kennedy Jr. aims to eliminate processed food from school lunches and restrict food dyes, signaling a significant shift in Trump’s food regulation plans. While some praise his efforts to promote healthier food, his controversial background as a vaccine critic raises concerns among public health officials. Kennedy’s potential role could influence upcoming dietary guidelines, but industry and nutrition experts are wary of his push to “clean house” at the FDA and alter regulations affecting ultra-processed foods. His agenda faces challenges from existing regulatory frameworks and political dynamics. Marion Nestle, a retired professor of nutrition, food studies and public health at New York University, said she supports Kennedy’s proposal to get ultra-processed foods out of schools. But she criticized the hypocrisy of an administration that had previously pushed back on efforts to make school lunches healthier. “Now we have Republicans saying essentially what the Obama administration was trying to do but that Republicans blocked at every turn,” she said. Link to more via the Washington Post. — Where to find a lot of savings: Empty federal buildings. Federal agencies are using on average 12% of space in their headquarters, according to a March report from the Public Buildings Reform Board. The General Services Administration is spending $2 billion annually to maintain government-owned offices and $5 billion to lease space. Government workers have been slower to get back into the office. Of the 2.3 million civilian workers, more than a million are eligible for “telework,” with another 228,000 or so in fully remote arrangements. |
MARKET FOCUS |
— Equities today: Asian and European stock indexes were mixed overnight. U.S. Dow opened up around 60 points. Chinese indexes drop about 2%, while Europe rebounds. In Asia, Japan -0.5%. Hong Kong -2%. China -1.7%. India -0.1%. In Europe, at midday, London +0.4%. Paris +1%. Frankfurt +1.4%.U.S. stock futures and Treasuries are little changed. Fed Chair Jerome Powell at 3 p.m. ET will deliver his first public remarks since his post-meeting press conference on Nov. 7. Investors and economists will be listening closely. Other Fed speakers: New York Fed President Williams (4:45 p.m. ET). Prior to those two Fed leaders speaking, we will hear from Fed members Kugler (7:00 a.m. ET), Barkin (9:00 a.m. ET).
European stocks are looking like a big loser before Trump’s presidency has even started, according to Bloomberg analysis. The Stoxx 600 Index has risen just 5.4% this year, compared with 25% for the S&P 500. If that trend holds through December, it would be the biggest underperformance since 1995.
U.S. equities yesterday: The Dow and S&P managed to finish higher with the Dow staying in positive territory most of the day while the S&P 500 moved back slightly higher by the close, but the Nasdaq ended lower. The Dow gained 47.21 points, 0.11%, at 43,958.19. The Nasdaq was down 50.66 points, 0.26%, at 19,230.74. The S&P 500 edged up 1.39 points, 0.02%, at 5,985.38.
— Disney forecasts double-digit earnings growth for 2026-2027. Disney projects double-digit earnings growth in 2026 and 2027, fueled by strong performance in its cruise ship and theme park businesses. The entertainment giant, which typically avoids offering future guidance, also reported positive strides in movies and streaming, easing investor concerns in these key areas.
— The FBI searched the home of Polymarket’s CEO as part of an apparent investigation into whether the political prediction market was being run as an unlicensed commodities exchange. Polymarket claims to be the world’s biggest prediction market and that its odds are often more accurate than experts or polling. Shayne Coplan, the 26-year old founder of Polymarket, has raised tens of millions in funding from various investors, including billionaire Peter Thiel’s Founders Fund.
— Ben & Jerry’s sued Unilever, saying its parent company silenced its ability to express support for Palestinian refugees. Link to details via Reuters.
— U.S. export sales data pushed to Friday. Due to Monday’s government holiday, export sales data for the week ended Nov. 7 will be published Friday morning.
— Ag markets today: Corn, soybeans and wheat traded on both sides of unchanged in light trade overnight. As of 7:30 a.m. ET, corn futures were trading fractionally lower, soybeans were around a penny higher, winter wheat markets were 2 to 4 cents lower and spring wheat was narrowly mixed. The U.S. dollar index was more than 300 points higher (see related item below) and front-month crude oil was 35 cents higher.
After modest gains the two previous days, Choice beef dropped $1.33 to $306.94 on Wednesday. Select beef fell $1.26 to $278.66. Despite negative margins, packer inquiry into cash cattle picked up Wednesday, giving some hopes of steady cash cattle trade.
Lean hog futures have paused after the recent pullback from their highs as traders wait to see if cash fundamentals will face seasonal pressure. The CME lean hog index is up 6 cents to $89.94 as of Nov. 12, ending a three-day slide. The pork cutout declined 42 cents on Wednesday to $97.62 and fell $4.89 over the past week.
— Agriculture markets yesterday:
• Corn: December corn fell 2 cents to $4.26 1/2, closing nearer the session low.
• Soy complex: January soybeans fell 2 3/4 cents to $10.07 3/4, near mid-range. December soybean meal fell $1.30 to $291.60, near mid-range and hit a contract low. December soybean oil fell 105 points to 45.18 cents and nearer the session low.
• Wheat: December SRW wheat fell 11 1/4 cents to $5.41 while December HRW wheat fell 5 3/4 cents to $5.40 3/4, both closing at the lowest levels since late August. December HRS futures fell 6 ¾ cents to $5.71.
• Cotton: December cotton rose 13 points to 68.90 cents, nearer the daily high and hit a two-month low early on.
• Cattle: December live cattle futures slid 37.5 cents to $184.025 Wednesday. Expiring November feeder futures slipped 35 cents to $246.475, while most-active January edged up 7.5 cents $243.65.
• Hogs: December lean hog futures fell 47.5 cents to $81.875, settling nearer session highs.
— Quotes of note:
• Fed remains data driven as market expectations for rate cuts temper. Federal Reserve officials emphasized that future monetary policy decisions will remain data-dependent, with Fed Governor Adriana Kugler noting progress on price stability and employment while cautioning against premature rate cuts. Fed Chair Jerome Powell reiterated the need for flexibility, stating that persistent inflation would justify pausing cuts, while a sudden labor market slowdown could prompt gradual reductions. Market expectations for a December rate cut rose to over 80% following recent CPI data, which showed a slight inflation uptick. Looking ahead, CME futures suggest limited rate cuts in 2025, as markets also weigh potential inflationary policies from the incoming Trump administration.
Of note: Barron’s says the possibility of inflationary Trump policies is perhaps being priced in. “The Fed can’t pre-empt Trump’s policies and can only look at the data. Stock markets aren’t missing the future risk – it’s there for all to see as long-term Treasury yields creep higher. Investors are just choosing to seize the day as Trump trades continue to lift sentiment. At some point that will change, possibly when the president-elect takes office and starts setting out his policy agenda. For the time being, though, the Trump trade seems to be all that matters.”
• “When the dollar is strong, financial conditions tighten and financing trade and exports become more complicated and more expensive.” — Valentina Bruno, a finance professor at American University, on the potential impact of Trump administration policies on trade.
• Just 36% of U.S. households earned enough to afford a new home in the third quarter this year, compared to 59% in the same period in 2019.
— U.S. factory gate prices rise 0.2% in October, matching expectations. Factory gate prices in the U.S. rose 0.2% month-over-month in October 2024, matching market expectations and following a 0.1% rise in September. Service prices increased 0.3%, driven largely by a 3.6% rise in portfolio management costs, while goods prices edged up 0.1%, led by an 8.4% increase in carbon steel scrap. Year-over-year, the Producer Price Index (PPI) grew 2.4%, exceeding forecasts of 2.3%. Core PPI rose 0.3% for the month, with an annual rate of 3.1%, both surpassing expectations.
Upshot: President-elect Donald Trump will enter office as the Fed is continuing its efforts to lower interest rates without triggering inflation or risking a recession. The next report on personal consumption expenditures, the Fed’s preferred measure of inflation, will be released on Nov. 27.
— U.S. budget deficit widens sharply in October. The U.S. budget deficit expanded to $121 billion in October, up 89% from last year, mainly due to increased spending on health, defense, and rising debt-interest costs, according to the Treasury Department. Adjusted for deferred tax revenue distortions in 2023, the deficit was 22% higher. Key drivers included a 12% rise in Health and Human Services outlays and a 13% increase in defense spending. President-elect Donald Trump has enlisted Elon Musk and Vivek Ramaswamy to explore spending cuts, though politically challenging areas dominate outlays. Treasury debt-servicing costs rose slightly, but inflation-linked debt costs fell due to easing inflation.
— Traders bet on December rate cut as inflation data matches forecasts. Following in-line October CPI data, traders increased bets on a Federal Reserve interest rate cut in December, pushing yields on two-year Treasury notes down by 10 basis points to 4.24%. Swaps traders boosted the odds of a quarter-point cut to 80%. The market response reflects relief over cooling inflation concerns. The Fed, which cut rates by a quarter-point on Nov. 7, has emphasized further reductions hinge on inflation trends. Meanwhile, bond yields remain volatile amid anticipation of fiscal changes under President-elect Trump and expected higher Treasury debt issuance to fund potential tax cuts.
However, the market expectations for rate reductions moving forward have declined dramatically. The highest probabilities in CME Fed fund futures for each of the Federal Open Market Committee (FOMC) meetings now would see only two rate reductions of 25 basis points in 2025 after a cut of that size in December.
— The Illinois Farm Bureau (IFB) is no longer a member of the American Farm Bureau Federation (AFBF). The American Farm Bureau Federation has decided to terminate the Illinois Farm Bureau’s membership, effective Dec. 20, 2024. AFBF President Zippy Duvall announced the termination, which is expected to have a significant impact on farmers in Illinois.
The IFB has filed a lawsuit against the American Farm Bureau Federation (AFBF). The lawsuit was filed in McLean County, Illinois. It claims this termination violates a 1990 settlement agreement between the two organizations, which allegedly allowed IFB to continue using the name “Illinois Farm Bureau.” Duvall stated that the decision to vote out the Illinois Farm Bureau is related to maintaining “farmer control” of organizational decisions. The IFB argues that AFBF’s action threatens to deprive them of important membership rights and benefits, including a voice in national farm policy issues. IFB President Brian Duncan expressed that they have “no desire to leave AFBF” and believes that AFBF is choosing to abandon more than 70,000 Illinois-based farmer members. The lawsuit seeks to halt AFBF’s decision to expel the Illinois Farm Bureau.
A letter from AFBF President Zippy Duvall to state farm bureau presidents said the action comes after a failed mediation session on Monday. The move is in retaliation for a decision by the Illinois Farm Bureau’s affiliate, Country Financial, to drop a Farm Bureau membership eligibility requirement for non-farm insurance policy holders in Illinois. “The membership decision is expected to cause the loss of hundreds of thousands of farm bureau members, to the detriment of Illinois Farmers, Illinois County Farm Bureau organizations, IFB [Illinois Farm Bureau] and the entire Farm Bureau organization,” wrote Duvall, a third-generation dairy farmer from Georgia who has headed the AFBF since 2016. Country Financial told customers in September it would no longer require Farm Bureau membership for nonfarm policies. Membership costs about $20 per year. AFBF receives $5 of those dues. Country Financial operates in 19 states. It is the largest farm insurer in Illinois.
The expulsion of the Illinois Farm Bureau from the national federation marks a significant change in the relationship between these agricultural organizations. The IFB has about 400,000 members. More than 70,000 are farmers, farmland owners, and agriculture industry professionals, according to the IFB website. Its farm membership comprises about 75% of all Illinois farmers. The IFB has been operating for over 100 years. It will no longer be part of the larger national network. This separation could potentially affect various aspects of support and representation for Illinois farmers, including:
• Legislative advocacy at the federal level
• Access to national resources and programs
• Participation in national policymaking for agriculture
Of note: While the Illinois Farm Bureau will no longer be part of the American Farm Bureau Federation, it will continue to operate as a state-level organization.
Market perspectives:
— Outside markets: The U.S. dollar index was higher, with the euro and British pound weaker against the greenback. The yield on the 10-year U.S. Treasury note fell, trading around 4.45%, with a mixed-to-negative tone in global government bond yields. Crude oil futures were up ahead of U.S. gov’t inventory data delayed a day by the Monday holiday, with U.S. crude around $68.90 per barrel and Brent around $72.75 per barrel. Gold and silver futures were down ahead of inflation data, with gold around $2,558 per troy ounce and silver around $29.98 per troy ounce.
— Rising dollar could challenge Trump’s economic agenda. The dollar continues to climb, reaching a one-year high amid a post-election rally driven by market bets on “Trumponomics” — a mix of tariffs, tax cuts, and immigration crackdowns. This surge could complicate global trade, U.S. competitiveness, and Trump’s economic plans, while impacting Fed policy. Analysts warn that the strong dollar may force Trump to scale back key policies. The rising dollar poses a challenge for U.S. businesses with overseas operations, reducing profits and creating uncertainty in global markets.
— IEA predicts global oil surplus amid weak Chinese demand. The International Energy Agency (IEA) forecasts a global oil surplus of over 1 million barrels per day next year, driven by a sustained decline in Chinese demand, which contracted for six consecutive months through September. Despite Middle Eastern tensions, crude prices have softened due to growing output from the Americas. The IEA projects global demand growth will slow to under 1 million barrels per day in both 2024 and 2025, as clean energy transitions accelerate. Supply growth from the U.S., Brazil, Canada, and Guyana will further contribute to the anticipated glut. OPEC+ plans to gradually revive production remain uncertain.
— U.S. port labor talks resume, but face breakdown over automation dispute. Negotiations between unionized dockworkers and U.S. port employers have stalled due to disagreements over the expansion of automation, with a contract deadline looming on Jan. 15. A repeat of last month’s three-day strike, which disrupted East and Gulf Coast ports, remains possible. The union opposes automation, citing job loss concerns, while employers argue it boosts port efficiency. Talks are under added pressure with a new Trump administration taking office in January, which may favor maritime employers. The National Retail Federation has raised import forecasts amid fears of another strike.
— 294,393: Intermodal loads moved by U.S. railroads in the week ending Nov. 9, up 11.7% from the same week last year and the strongest week for intermodal traffic since April 2021, including a record 284,708 containers, according to the Association of American Railroads.
— U.S. daily export sale:
• 176,000 MT soybeans to unknown destinations, 2024-2025 marketing year.
— Ag trade update: Japan purchased 114,403 MT of wheat via its weekly tender, including 58,046 MT U.S., 31,937 MT Canadian and 24,420 MT Australian. South Korea purchased 65,000 MT of feed wheat expected to be sourced from the U.S.
— Tropical Storm Sara forming; heavy rainfall threatens Central America. A developing tropical system in the Caribbean, expected to become Tropical Storm Sara, could pose a threat next week. While upper-level winds shielded the Gulf Coast from Hurricane Rafael, conditions may allow this storm to impact the U.S. Potential life-threatening flash flooding and mudslides are forecast for Central America, including Honduras, Belize, El Salvador, and western Nicaragua. The National Hurricane Center advises close monitoring for potential impacts on Florida, the Keys, Cuba, and the eastern Gulf of Mexico.
— NWS outlook: A rapidly developing coastal storm is expected to bring a period of gusty winds, enhanced rainfall and thunderstorms from the Carolinas to the Mid-Atlantic states Thursday night into Friday... ...Lower elevation/coastal rain and mountain snow continue for the Pacific Northwest Thursday; a rain/snow mix will spread inland across the Great Basin and Rockies Thursday and Friday... ...Most of the country will see seasonable to above average temperatures to end the week.
Items in Pro Farmer’s First Thing Today include:
• Light grain trade overnight
• Wholesale beef resumes price slide
• Hog prices pause
• Conab slightly raises Brazilian soybean, corn crop forecasts
• EU wheat plantings expected to rise
• Euro zone economic growth builds in Q3
ISRAEL/HAMAS CONFLICT |
— Israel expands ground operations in Lebanon amid ongoing conflict. Israel’s defense minister announced an expansion of military ground operations in Lebanon, stating there will be no agreement to “any ceasefires.” The move comes as Hezbollah continues daily rocket attacks on northern Israel and drone launches targeting Israeli cities.
POLICY UPDATE |
— Addressing economic losses in 2024: farmdoc analyzes farmer risk share. U.S. farmers are set to face significant economic losses in 2024 due to systemic market risks, with declining revenues and high costs. As farmdoc notes (link), “What share of the systemic risk downturn should farmers bear?” FARM proposes a 39% share, similar to the 38% farmers already pay for crop insurance premiums. Farmdoc says this raises the question of whether farmers, who have benefitted from recent high returns and government assistance, should shoulder more risk. Further, farmdoc explores whether economic loss coverage should vary by crop, pointing out potential disparities that favor some crops and regions. They suggest using current yield estimates instead of a 10-year average for a more uniform coverage approach.
Another key issue is whether existing safety net payments should count toward economic assistance. Farmdoc emphasizes timely adjustments to crop safety net payments by using futures prices, allowing for payments at harvest rather than a year later. As they propose, ad hoc assistance should prioritize closing this timing gap before offering additional aid.
— How one congressional source sizes up fate of disaster aid, farm bill and ag economic aid. Says the farm policy source: “Disaster is low hanging fruit. Everyone knows there needs to be disaster aid. On economic aid. there is a growing awareness of the trouble brewing in farm country. We will see what kind of students of history people are. They may preside over a full-blown farm financial crisis. We will see. Sen. Debbie Stabenow (D-Mich.) does not seem interested in closing a deal on a farm bill. If she did it would get done. If she opts not to act, Congress could patch the farm safety net like it did before the 2018 farm bill and then facilitate Boozman (R-Ark.) and Klobuchar (D-Minn.) striking an agreement and moving a bill by a supermajority.”
CHINA UPDATE |
— Moolenaar pushes for major tariffs on China with new trade bill. Rep. John Moolenaar (R-Mich.) introduced legislation to revoke normal trade relations with China, imposing steep tariffs of 35% on non-strategic goods and 100% on strategic imports, gradually phasing in over five years. His proposal, which also ends de minimis treatment for low-value Chinese imports, is likely to trigger a trade war, with anticipated Chinese retaliation potentially affecting U.S. industries such as agriculture. Revenue from tariffs would support impacted American farmers and manufacturers. Moolenaar’s bill aligns with past calls for similar measures by Trump-aligned figures and faces mixed reception due to potential cost impacts. Link to text of bill.
“Having permanent normal trade relations with China has failed our country, eroded our manufacturing base, and sent jobs to our foremost adversary,” Moolenaar said in a statement. “At the same time, the CCP has taken advantage of our markets and betrayed the hopes of freedom and fair competition that were expected when its authoritarian regime was granted permanent normal trade relations more than 20 years ago.” Moolenaar added that his proposal ”levels the playing field and helps the American people win this strategic competition with the CCP.”
— China is taking proactive measures to prepare for a potential trade war with the United States, particularly considering Donald Trump’s return to the presidency and his threats of imposing higher tariffs.
Legislative preparations. China has enacted comprehensive laws over the past eight years that provide it with more tools to retaliate against U.S. actions, according to the Financial Times. These include:
• An ‘anti-foreign sanctions law’ to counteract foreign measures
• An ‘unreliable entity list’ for companies that threaten China’s national interests
• An enhanced export control law that allows Beijing to leverage its dominance in crucial resources like rare earths and lithium
China is actively working to reduce its vulnerability to U.S. trade actions:
• Accelerating efforts to fortify its technology and resource supply chains against potential U.S. sanctions
• Boosting trade with nations less aligned with Washington
• Redirecting purchases of agricultural commodities, such as soybeans, from American farmers to suppliers in Brazil and Argentina, according to the New York Times
If threatened, China has several options for retaliation, according to the FT and NYT:
• Imposing its own sanctions on U.S. companies
• Restricting American access to essential supply chains
• Potentially reducing imports of American products, particularly agricultural goods
• Further limiting exports of critical minerals to the U.S.
Despite these preparations, China has been cautious in using its strategic options due to:
• Concerns about further damaging weak international investment sentiment
• Internal economic challenges, including meeting the modest growth target of around 5%
Some experts believe China now has more leverage than during Trump’s first term, according to the NYT:
• China accounts for 17% of global exports, up from 12% during Trump’s first term
• Beijing has various tools at its disposal to counteract and exert pressure on the U.S. economy
China has already shown its willingness to use its new tools, according to the FT:
• Sanctions on Skydio, a major U.S. drone manufacturer and supplier to Ukraine’s military
• Warnings against including PVH (parent company of Calvin Klein and Tommy Hilfiger) on its ‘unreliable entity list’
— Xi Jinping to inaugurate key port in Peru, highlighting China’s influence in Latin America. Chinese leader Xi Jinping’s visit to Latin America this week, including the inauguration of the Chancay deep-water port near Lima, Peru, underscores China’s expanding influence in the region. As Latin America’s largest trading partner, China has increasingly surpassed the U.S. in economic partnerships with major regional economies. The Chancay port, a significant addition to China’s Belt and Road Initiative, is led by Chinese contractors and China Ocean Shipping. Beijing’s $286.1 billion in regional projects, such as metro lines and hydroelectric dams, signals a strategic pivot with a refined lending model and broader acceptance compared to its initiatives in Africa. Link to an in-depth article via the WSJ.
Bottom line: Xi’s arrival in Latin America to take part in leadership summits are likely to illustrate what some have called China’s economic marginalization of the U.S. in the region.
— President Biden will meet Xi Jinping, China’s leader, during the APEC summit this weekend, with Beijing expecting a tougher relationship with Washington under Donald Trump.
— China’s stimulus priorities are plain to see. Recent economic planning meetings talked up the need to reorganize local government debt and to reflate asset prices. This lays out Beijing’s stimulus priorities and implies measures involving heavy spending may only follow if other efforts to re-invigorate the economy fail, according to Reuters Breakingviews columnist Chan Ka Sing. Planners want to make it easier for local governments to meet their basic spending commitments including on pensions and healthcare. They also want to tackle the deflationary mindset: Chinese people are more likely to spend their savings if they believe the value of their properties or equity market holdings are rising.
ENERGY & CLIMATE CHANGE |
— EPA proposes waiver for 2024 cellulosic biofuel requirements. EPA has submitted a proposal to the Office of Management and Budget (OMB) for a partial waiver of the 2024 cellulosic biofuel volume requirement under the Renewable Fuel Standard (RFS). Relabeled as “Renewable Fuel Standard (RFS) Program: Partial Waiver of 2024 Cellulosic Biofuel Volume Requirement and Extension of 2024 Compliance Deadline,” the rule is expected to adjust volumes by a few hundred million gallons. No other significant changes to the RFS program are anticipated.
OTHER ITEMS OF NOTE |
— Commerce finds 2-4D herbicide dumping from China, India; final decision delayed. The Department of Commerce’s International Trade Administration (ITA) issued a preliminary determination that 2-4D herbicide imports from China (link) and India (link) were sold in the U.S. at below fair value during 2023. Dumping margins for India ranged from 3.91% to 13.23%, while China saw rates from 17.07% to a China-wide rate of 127.21%. Final determinations are delayed up to 135 days, affecting the timeline for the International Trade Commission’s ruling on potential injury to U.S. industry. Concerns have been raised over the potential duties’ impact on farm producers reliant on 2-4D.
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 |