News/Markets/Policy Updates: Nov. 8, 2024
Note: Modified report today as I am in Arizona for a speech for the USMEF. — China announced a 10 trillion-yuan ($1.4 trillion) stimulus program to refinance local government debt, as Beijing rolls out more measures to support a slowing economy facing new risks from the reelection of Donald Trump. Investors had expected more due to the threat of tariffs from the U.S. under Trump’s presidency. In a news conference, NPCSC budget committee director Xu Hongcai said the measure, which will be implemented across three years, will increase the limit of local government special bonds from 29.52 trillion yuan to 35.52 trillion yuan by the end of 2024. A Nikkei Asia assessment notes, “The latest package suggests Beijing remains reluctant to shore up domestic demand by giving direct support to households, a shift that some economists say is urgently needed to put the country’s growth on a healthier path for the long run… China may also be keeping some powder dry for dealing with Trump.” Of note: “The lack of direct fiscal stimulus implies that the policymakers would leave policy room for the impact of Trump 2.0 later,” economists from ANZ said after Friday’s announcement, adding that China’s central bank could cut policy rates again by the end of the year to help offset the potential impact of new tariffs. — Global food commodity prices surged to an 18-month high in October, with the UN FAO Food Price Index rising 2% from September to 127.4, marking a 5.5% increase from a year earlier but still 20.5% below the March 2022 peak. Key drivers included a 7.3% rise in vegetable oil prices, attributed to production concerns for palm, soybean, sunflower, and rapeseed oils. Cereal prices rose 0.9% due to higher wheat and corn costs, while sugar prices jumped 2.6% amid a challenging 2024/25 production outlook. Dairy prices also climbed 1.9%, contributing to the index’s three-month upward trend since its February low. — Donald Trump wins Nevada, now giving him 303 electoral votes. Trump made Las Vegas a frequent stop on the campaign trail, repeatedly promoting his “no tax on tips” pledge, in a state where a significant number of residents work for tipped wages in the entertainment and hospitality industries. Trump announced the proposal at a Las Vegas campaign rally in June. Arizona has still not called its election. — Republican David McCormick defeated Democratic Sen. Bob Casey in the Pennsylvania Senate race, according to the Associated Press, a major victory for Republicans against a longtime incumbent. McCormick’s win means Senate Republicans are set to control at least 53 seats in the next Congress. That margin could climb as high as 55 seats if Republicans win close races in Arizona and Nevada, which remain uncalled. Of note: Casey has not yet conceded. Casey’s campaign on Thursday said it’s not conceding yet. Spokesperson Maddy McDaniel wrote in a statement: “As the Pennsylvania Secretary of State said this afternoon, there are tens of thousands of ballots across the Commonwealth still to count, which includes provisional ballots, military and overseas ballots, and mail ballots. This race is within half a point and cannot be called while the votes of thousands of Pennsylvanians are still being counted.’” Meanwhile, The Hill reports that Sen. John Fetterman (D-Pa.) “criticized” the AP for calling the race, posting in X, “We still have tens of thousands of votes to be counted across the Commonwealth. @AP_Politics shouldn’t make a call in this race until every Pennsylvanian has their vote counted.” — Donald Trump is well ahead of Kamala Harris in the national popular vote, 50.5% to 48.5%. If he wins Arizona, he will have a substantial Electoral College victory: 312 votes to her 226. What that means: Trump and other Republicans say a MAGA mandate. But the Washington Post says, “While Trump’s win was larger than many expected and every swing state swung in his favor, his level of support is relatively par for the course for a victor. And Republicans on the whole didn’t do as well as he did.” Trump had received more than 73.4 million votes, against around 69.1 million for Harris, a gap of around 4.3 million votes. Of note: This is the first time since 1896 that voters have ousted the incumbent party in three straight presidential elections. — Trump names Susie Wiles as first female White House chief of staff. President-elect Donald Trump has appointed senior campaign adviser Susie Wiles, 67, as his White House chief of staff, marking the first woman to hold the position. Wiles, a key figure in Trump’s 2016, 2020, and 2024 campaigns, is credited with professionalizing his latest campaign. Despite her limited experience in Washington, Wiles, a veteran of Florida politics, will oversee White House operations and serve as a liaison with Congress and federal agencies. Trump praised Wiles for her strategic acumen and dedication, as she steps into a role historically marked by turbulence during Trump’s first term. Upshot: Trump is taking action to get his top team, including his Cabinet choices, announced far sooner than he did in his first term. A GOP-led Senate will most likely accelerate approval of Trump’s Cabinet choices. — Donald Trump is conducting his own transition. As the president-elect, Trump now has a 75-day transition period to prepare for taking office on Jan. 20, 2025. The transition process is a crucial part of the transfer of power in the United States government. Here are some key aspects of Trump’s transition: Staffing the administration. Trump’s team is tasked with filling approximately 4,000 government positions with political appointees. This includes: About 1,200 of these appointments will require Senate confirmation, which is expected to be easier now that Republicans control the Senate. Trump’s transition is being managed by a group of close allies and family members, including: • Robert Kennedy Jr., who has been tasked with “making America healthy again” Differences from 2016. Trump’s team is emphasizing that this transition will be “as different as possible” from his 2016 effort. Key differences include: New transition guidelines. Due to issues that arose during the 2020 transition, new rules have been implemented: The Presidential Transition Improvement Act of 2022 mandates that the transition process begin five days after the election, even if the winner is disputed. This ensures that the General Services Administration’s (GSA) “affirmative ascertainment” is no longer needed for transition support services to begin. Bottom line: As Trump prepares to return to the White House, his transition team is working to establish a new administration that will differ significantly from both his first term and the outgoing Biden administration. — It will take 218 seats to rule the House, and although neither party had reached the threshold early Friday, the numbers appeared to favor the GOP. The GOP is holding a 211 to 199 edge on the races called so far in the 435-seat House, according to the Associated Press (AP) count. Election analysts predict the GOP will end up with between 218 and 221 House seats. Absences, illnesses or unexpected resignations could tip the balance of power. A slim margin will make Trump’s team cautious about tapping House members for administration positions. That lowers already low odds that Rep. Thomas Massey (R-Ky.) could be USDA Secretary. NRCC Chair Richard Hudson complained that AP was “dragging their feet” to call 10 incumbent races where the Republicans are poised to win. He mentioned: Reps. David Schweikert (R-Ariz.), Juan Ciscomani (R-Ariz.), David Valadao (R-Calif.), Young Kim (R-Calif.), Ken Calvert (R-Calif.), Michelle Steel (R-Calif.), Mariannette Miller-Meeks (R-Iowa), Don Bacon (R-Neb.) and Scott Perry (R-Pa.). Republicans currently hold a slim majority in the House with 220 seats compared to Democrats’ 212 seats (3 seats vacant). To take control, Democrats would need to hold onto their current seats and pick up at least 4 additional seats. However, this appears unlikely based on current projections and trends. House Speaker Mike Johnson (R-La.) and other Republican leaders have expressed confidence they will retain their majority once all votes are counted. Rep. Richard Hudson, chair of the House GOP campaign arm, echoed this sentiment in a recent interview. For Democrats to capture a majority, they would need to win nearly all of the remaining toss-up races. This is considered a very difficult task given the current electoral landscape. While Democrats are holding out hope that late-breaking ballots in states like California might turn in their favor, Republicans believe that at worst they will only lose one seat, and potentially could even pick up a seat or two. Of note: The last time control of the House flipped in a presidential election year was in 1952. This historical precedent adds to the expectation that Republicans will maintain their control. Key pickups in Pa. and Michigan have party leaders hopeful a full sweep is in sight and senior Republicans feel confident they will hold onto their already slim majority. Even with Republicans looking likely to retain control, their majority will remain razor thin. The most likely scenarios are where Republicans win between 218 and 220 seats… translating into a majority of one to three seats. — Equities today: Asian and European stock indexes were mixed overnight. U.S. stock indexes are pointed to slightly lower openings. Equities on Thursday: Tech-oriented indices registered gains while the Dow essentially ended little changed after the Fed meeting conclusion after moving between losses and gains into the closing bell. The Nasdaq and S&P 500 managed record finishes. The Dow was down 0.59 point, 0.00%, at 43,279.34. The Nasdaq rose 285.99 points, 1.51%, at 19,269.46. The S&P 500 was up 44.06 points, 0.74%, at 5,973.10. — Oil prices rose nearly 1% on Thursday, with Brent crude up 71 cents (0.95%) to $75.63 a barrel and U.S. WTI crude increasing 67 cents (0.93%) to $72.36. The market reacted to potential supply impacts from President-elect Donald Trump’s policies, including the possibility of renewed sanctions on Iran and Venezuela, which could reduce oil availability. — Ag markets today: Corn futures have firmed after light, two-sided trade overnight, while the soybean and wheat markets faced pressure for most of the session. As of 7:30 a.m. ET, corn futures were trading fractionally higher, soybeans were 5 to 7 cents lower and wheat futures were mostly 2 to 5 cents lower. The U.S. dollar index was modestly firmer and front-month crude oil futures were around $1.00 lower. Slow developing cash cattle trade. Cash cattle activity remained limited Thursday. With wholesale beef prices plunging $6.13 for Choice to $309.46 and $3.48 for Select to $279.72 on Thursday, and packers owning a lot of inventory after recent hefty purchases, it’s likely cash cattle will trade lower, as they work to protect eroding margins. However, feedlots will likely be reluctant sellers at lower prices. Cash hog index continues to climb, wholesale pork plunges. The CME lean hog index is up another 37 cents to $90.61 as of Nov. 6, the 15th straight daily increase in the contra-seasonal rally. Pork cutout fell $4.19 to $97.96 on Thursday, pressured by a $17.05 plunge in primal bellies, though sharp losses were also recorded in hams, ribs and picnics. — Ag markets yesterday: — India’s rice stockpiles hit record levels. India’s state-owned rice inventories surged to a record 29.7 MMT at the start of this month, sources told Reuters, nearly three times the government’s target, as export curbs imposed over the past two years bumped up local supplies. State stockpiler Food Corporation of India is expected to purchase 48.5 MMT of summer-grown rice in the 2024-25 marketing year that began Oct. 1, adding to the bulging inventories. Huge stockpiles will allow India to boost export without worrying about domestic supplies. — France joins UK with ‘high’ risk designation for bird flu. France has stepped up its bird flu risk assessment to “high” from “moderate,” it said on Friday in a decree that will trigger reinforced security measures around poultry farms. The heightened risk status follows confirmation of infection in migratory wild birds in neighboring countries and aims to strengthen surveillance and prevention measures, France’s agriculture ministry said. The upgrade to risk status in the seasonal assessment is kicking in earlier than last year, taking effect in early November rather than December. Earlier this week, Britain increased the risk level of bird flu to “high” after two different strains of the virus, H5N5 and H5N1, were detected in wild birds in the country. — FOMC cuts rates 25 BP; chairman asked about election. The Federal Reserve on Thursday implemented a widely anticipated 25 basis point rate cut, reducing the target range for the federal funds rate to 4.5% to 4.75%. This decision was made unanimously by the Federal Open Market Committee (FOMC) members, with no dissenting votes. Economic outlook. The Fed’s post-meeting statement described economic expansion as “solid” and noted that labor market conditions have “generally eased” while unemployment remains low. This suggests that Fed officials believe the job market has slowed further since September. Regarding inflation, the statement indicated that it “has made progress” toward the 2% goal but “remains somewhat elevated.” Changes in statement language. Notably, the Fed removed mentions of “further” progress toward their inflation goal and no longer stated they have “gained greater confidence that inflation is moving sustainably toward 2%.” This change in language might reflect recent mixed signals in inflation data, potentially indicating a slowdown in reaching the Fed’s target. Future policy guidance. The Fed maintained its previous guidance on future monetary policy actions, consistent with the September meeting. Chairman Jerome Powell emphasized that the Fed does not have a preset plan for rate adjustments and decisions are made on a meeting-by-meeting basis. Economic data and neutral rate. Powell acknowledged mixed signals in recent economic data, including labor market conditions and inflation readings. He noted that while significant progress has been made on inflation, there may be “bumps” along the way. The Fed is moving policy towards a more neutral level, but Powell stressed that it’s not yet clear where the neutral rate is. Political independence. Throughout the press conference, Powell firmly rejected any attempts to link monetary policy decisions to elections or potential future administration policies. He emphasized that the Fed’s focus remains on its dual mandate of maximum employment and price stability. Consumer sentiment. Addressing why consumers may not feel the economic strength shown in data, Powell acknowledged that people are still feeling the effects of high prices from the global inflation shock. He noted that while the Fed is working to restore confidence, it would not be appropriate to deliberately undershoot on inflation to help consumers. Powell stated he would not resign if asked by Trump, asserting that such a request would be illegal. Powell, whose term extends to 2026, emphasized that the White House lacks authority to demote Federal Reserve board members, reinforcing the Fed’s independence. Asked again, Powell said it was “not permitted under the law.” — Trump likely to let Fed head Powell serve out term until May 2026, CNN reports, citing a Trump senior adviser. Kevin Warsh and Trump’s former chief economist Kevin Hassett are being mentioned as possible replacements for Powell. — Union Pacific to open new intermodal terminal in Kansas City. Union Pacific (UP) Railroad is set to open a new intermodal terminal near downtown Kansas City, Mo., next year, aimed at serving domestic and international shipments of grains, consumer goods, refrigerated products, and pet foods. The terminal will connect via UP’s extensive 32,000-mile network, reaching markets in Mexico, Canada, and beyond. In 2022, U.S. railroads moved 4.7 million tons of containerized grain, with 300,000 tons originating from Kansas City, primarily for export through Los Angeles. — Trump team discusses peace plan for Russia-Ukraine war, proposes NATO freeze. President-elect Donald Trump’s transition team is exploring a potential peace plan for the Russia/Ukraine conflict that diverges from outgoing President Biden’s approach. The proposal includes Ukraine delaying NATO membership for 20 years in exchange for U.S. military support and an 800-mile demilitarized zone patrolled by European peacekeepers. The plan reflects ideas from Vice President-elect J.D. Vance and contrasts with past U.S. positions, raising skepticism among European allies and facing expected resistance from Moscow. No finalized strategy will emerge until Trump assumes office, highlighting ongoing uncertainty around efforts to end the conflict. — RFK Jr. poised for key health role in Trump 2.0, aims to overhaul public health policies. Kennedy, a longtime Democrat and vaccine skeptic, is expected to take on a significant health role in the incoming Trump administration. His proposed agenda aims to combat chronic diseases by targeting various factors, including fluoride in drinking water and sugary drinks purchased with food stamps. Kennedy’s potential appointment will face opposition from the food and drug industries, their congressional allies, and many health experts. His plans include overhauling public health agencies to reduce what he perceives as corrupt influence from food and pharmaceutical industries. Key points of Kennedy’s proposed health agenda include: Kennedy’s views have alarmed many doctors and scientists, particularly regarding vaccine use. Critics worry that limiting vaccines could have severe consequences for public health. The Trump campaign refers to Kennedy’s plans as an “Operation Warp Speed for chronic disease.” If implemented, these ideas could potentially reverse decades of established public health policies. While President-elect Trump has expressed support for Kennedy’s involvement, the exact role he will play in the administration remains uncertain. Trump may opt to place Kennedy in a newly created White House position, such as chronic disease czar, rather than a Senate-confirmed role like Health and Human Services Secretary or FDA Commissioner, which would not likely approve any such nomination. Reports note that Kennedy has already begun compiling lists of personnel recommendations for the Trump administration to fulfill their “Make America Healthy Again” agenda. However, the final slate of health officials is likely to be a mixture of traditionalists and Kennedy allies. — Biden stresses unity and peaceful transition after Trump’s election victory. President Joe Biden addressed the nation on Thursday, following Donald Trump’s victory in the recent presidential election. In his speech, Biden emphasized the importance of national unity and a smooth transition of power. Biden unequivocally stated his commitment to a peaceful transfer of power, declaring, “On Jan 20, we will have a peaceful transfer of power.” He emphasized his dedication to upholding the Constitution and ensuring a smooth transition process. The President highlighted the importance of respecting the electoral process and maintaining faith in American democracy. Biden expressed hope that Trump’s win would strengthen public confidence in the electoral system, although he notably refrained from mentioning Trump’s previous refusal to accept the 2020 election results. In his address, Biden called for healing the nation’s divides. He stressed the importance of coming together as a nation despite political differences. Biden has invited Trump to the White House for a meeting to discuss the transition process. Trump’s campaign spokesperson, Steven Cheung, confirmed that the President-elect looks forward to the meeting. Looking ahead, Biden emphasized that there are 74 days remaining in his administration, encouraging Americans to make every day count. He acknowledged the inevitability of setbacks but stressed the importance of perseverance, stating, “Setbacks are unavoidable. But giving up is unforgivable.” — Republicans expand state-level control, retain supermajorities across country. Republicans broke Democratic Party dominance in Michigan and Minnesota while successfully defending their majorities in other states. Republicans retained supermajorities in key states like Kansas and made gains in states such as South Carolina and Idaho. Despite Democratic efforts to break GOP dominance, Kansas Gov. Laura Kelly and other Democrats saw limited success. The results reflect the GOP’s influence on budget, tax policy, and social issues, including abortion. Meanwhile, Democrats made modest gains in North Carolina and Wisconsin, breaking some GOP supermajorities and gaining potential influence over state policy. The shifts underscore ongoing battles over legislative control in several states. — Impact of Trump’s trade policy plan. Trump’s plan to impose a universal 10% to 20% tariff on imports and a 60% tariff on goods from China will raise prices on foreign-made products for American consumers. Pantheon Macroeconomics’ Samuel Tombs estimates that a 10% tariff would lift personal consumption expenditures by 0.8 percentage point, mostly in the first year. Meanwhile, Bloomberg released an assessment of Trump’s likely trade policy, saying it has raised concerns about agricultural trade disruptions and their impact on food prices. Key topics: Proposed tariffs. Trump’s threatened tariffs on China and his across-the-board tariffs on all on all imported goods to the U.S. from other countries trigger retaliatory measures from China, the world’s largest soybean buyer. Potential Chinese response. Bloomberg Economics suggests that Beijing’s retaliation might mirror its previous actions, targeting agricultural and energy exports from Republican-leaning states. Soybeans and other commodities are likely to be primary targets if China decides to restrict U.S. imports again. Shifting trade dynamics. Since Trump’s first term, Brazil has strengthened its position as China’s top soybean supplier and has become the largest source of corn imports. This shift has reduced U.S. market share in China, with U.S. soybean imports to China falling from over 40% in 2016 to less than 18% in the first nine months of this year. U.S. farmer support. Despite the initial negative impact of Trump’s trade policies on U.S. agricultural exports, many farmers continue to support him. This support is partly due to the $28 billion in aid provided to farmers during previous trade disputes and a desire for change in the face of a weakening farm economy. Potential beneficiaries. In the event of a major U.S./China trade dispute, South American suppliers, particularly in the beef sector, could benefit according to executives at Brazil’s Minerva. Short-term outlook. Despite concerns about future trade relations, Bloomberg says China will likely need to secure soybean supplies from the U.S. before Brazil’s harvest begins early next year. Food prices and inflation. Trump’s approach to food prices focuses on using import tariffs to lower costs. However, his proposed mass deportation of undocumented immigrants could have significant implications for the US food system, according to the Bloomberg assessment. The potential deportation of 1.7 million undocumented workers who contribute to the U.S. food system could lead to increased grocery prices due to labor shortages in the agricultural sector. — President-elect Donald Trump says one of his first priorities in January would be to make the border “strong,” NBC News reports, citing an interview with Trump. Asked about the cost for a possible deportation proposal, Trump tells NBC it is not a question of price and “we have no choice.” — Cotton AWP moves lower. The Adjusted World Price is at 57.96 cents per pound, effective today (Nov. 8), down from 58.54 cents per pound the prior week and the lowest since the week of Sept. 14. However, the rate is still nearly 6 cents below the level that would trigger a loan deficiency payment (LDP). Meanwhile, USDA announced Special Import Quota #4 will be established Nov. 14, allowing the import of 31,716 bales of upland cotton, applying to supplies purchased no later than Feb. 11, 2025, and entered into the U.S. not later than May 12. — NWS outlook: Winter storm brings significant heavy snowfall and blizzard conditions to portions of Colorado and New Mexico Friday... ...Showers and thunderstorms will bring the threat of flash flooding to the central/southern Plains Friday and Lower Mississippi Valley Saturday... ...Above average temperatures continue for much of the country heading into the weekend. |
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 |