U.S. Job Growth: 175,000 in April, Much Less than Expected; Unemployment Rises to 3.9%

Two very different farm bills from House and Senate signal getting bipartisan bill tough task

MARKET FOCUS

• Latest jobs report shows U.S. economy could be cooling
• Apple rose 6% postmarket after saying sales will return to growth this quarter
• U.S. ag sector is facing a growing trade deficit
• Japanese yen strengthens vs dollar amid signs of Japan currency market action
• Ag markets today
• USDA daily export sale: 122,000 MT soybeans to unknown destinations, 2023-2024
• Ag trade update
• NWS weather outlook
• Pro Farmer First Thing Today items

BALTIMORE BRIDGE COLLAPSE

• Estimated cost to rebuild bridge: nearly $2 billion, with completion by fall 2028

ISRAEL/HAMAS CONFLICT

• Turkey halts trade with Israel because ‘worsening humanitarian tragedy’ in Gaza Strip
  

POLICY

• Stabenow’s limiting PLC to 20% of Effective Reference Price impacts all program crops
• Big missing part to Stabenow’s new farm bill proposal: CBO budget scoring
  

TRADE POLICY

• In first quarter 2024, Mexico maintains position as top exporter to U.S.
  

LIVESTOCK, NUTRITION & FOOD INDUSTRY

• Florida bans lab-grown meat
• UN FAO Food Price Index rises for second month
• FDA updates reg framework for intentional genomic alterations (IGAs) in animals
  

POLITICS & ELECTIONS

• Federal court ruling throws new Black-majority Louisiana seat in limbo
  

OTHER ITEMS OF NOTE

• FDA rule on safety of water used in produce cultivation

— Equities today: Asian and European stock indexes were mixed overnight. In Asia, Japan closed. Hong Kong +1.5%. China closed. India -1%. In Europe, at midday, London +0.4%. Paris +0.6%. Frankfurt +0.4%. The Dow opened up around 515 points after the Labor Department’s weaker-than-expected April jobs report (details below). Traders pulled forward bets on a Fed rate cut to November, from December, ahead of today’s U.S. non-farm payrolls report. Fed Chair Jerome Powell’s tone at the FOMC presser this week was much less hawkish than feared, signaling a rate hike was unlikely and that cuts can be expected once economic data provides clear evidence that inflation is moving downward.

U.S. equities yesterday: All three major indices registered gains Thursday ahead of the key jobs update due Friday. The Dow gained 322.37 points, 0.85%, at 38,225.66. The Nasdaq was up 235.48 points, 1.51%, at 15,840.96. The S&P 500 rose 45.81 points, 0.91%, at 5,064.20.

— Apple rose 6% postmarket after saying sales will return to growth this quarter. Revenues and profit beat as China demand was better than expected. And it announced an additional $110 billion buyback — the largest in U.S. history — and increased its dividend. Apple is responsible for the top six of the 10 largest share-repurchase announcements ever made in the country.

— Ag markets today: Corn, soybeans and wheat extended Thursday’s gains during the overnight session. As of 7:30 a.m. ET, corn futures were trading 2 to 3 cents higher, soybeans were 6 to 8 cents higher, winter wheat markets were 12 to 15 cents higher and spring wheat was mostly 7 cents higher. Front-month crude oil futures were modestly higher, and the U.S. dollar index was about 140 points lower.

Futures rally gives cash cattle a boost. The sharp price rebound in cattle futures Thursday triggered stronger cash cattle bids from packers, with some prices $1.00 to $2.00 higher than the previous week. With futures at big discounts to the cash market, the late-week strength in the cash market could trigger followthrough buying today.

Cash hog market strengthening again, pork cutout stalls. The CME lean hog index is up 32 cents to $90.92 as of May 1, the second consecutive day of gains after a four-day slump. The pork cutout value slipped 11 cents on Thursday as a $13.03 rise in primal bellies was more than offset by sharp declines in loins, butts, ribs and hams.

— Agriculture markets yesterday:

• Corn: July corn futures rose 9 cents at $4.59 3/4, near the session high and hit a three-month high.
• Soy complex: July soybeans rallied 28 3/4 cents to $11.99, one-month-high close, while July soymeal surged $15.90 to $364.90, marking the highest close since Jan. 31. July soyoil closed 2 points lower at 43.24.
• Wheat: July SRW wheat rose 5 cents at $6.04 1/4 and near mid-range. July HRW wheat closed up 11 1/2 cents at $6.36 1/2 and nearer the session high. July spring wheat futures rose 7 cents to $7.09 1/4.
• Cotton: July cotton tumbled 89 points to 75.62 cents, the lowest close since Nov. 2022.
• Cattle: The cattle complex rebounded strongly after USDA announced that tests of the nation’s beef supply had come up negative for bird flu. June live cattle futures leapt $2.95 to $176.80, while May feeders jumped $2.175 to $243.60. The cash cattle market continued exhibiting remarkable strength Wednesday, with cattle in the Nebraska and Iowa/southern Minnesota regions trading at $186.56.
• Hogs: Most nearby hog futures continued their recent slide Thursday, while the deferred posted modest gains. Expiring May hog futures inched up 5 cents to $93.075, whereas most-active June futures fell 50 cents to $99.925.
  

— Quotes of note:

• “The labor market right now is in a very sweet spot,” said Joe Brusuelas, chief economist at RSM. “Employers are unwilling to let go of workers due to persistently strong aggregate demand.”
  
• A sturdy economy will sustain the bull-market run in U.S. stocks even without Federal Reserve interest-rate cuts, said Bank of America’s Savita Subramanian. Although optimistic that the economy will avoid a severe downturn, Subramanian said the biggest challenge will be if growth slows while inflation remains elevated. She also sees the Fed trimming interest rates as early as December, or possibly not at all this year.
  

— Nonfarm payrolls in the United States increased by 175,000 in April of 2024, lower than the expected increase of 240,000 The unemployment rate rose slightly to 3.9%, from 3.8%, the 27th consecutive month that the unemployment rate was below 4%. The March jobs number was revised up to 315,000 (rom 303,000), the Bureau of Labor Statistics said on Friday. Job gains were recorded in industries such as health care, which added 56,000 new jobs, and social assistance with 31,000 new jobs. The leisure and hospitality sector, which has helped lead the way on job growth in recent months, added only 5,000 jobs in April.

Immigration swelled the labor supply by about 80,000 a month last year and should provide a boost of about 50,000 a month in 2024, Goldman Sachs wrote in a research note.

Diane Swonk, chief economist at KPMG, called the stretch of low unemployment “phenomenal” and the “good side of the economy” now. Bringing labor supply and demand into balance through higher interest rates, she added, remains “a long slog.” Ideally, that process will not trigger unemployment to rise beyond the Fed’s target rate of 4.1%, Swonk said.

The Black unemployment rate, which recently jumped up to 6.4%, shifted back downward to 5.6%.

Average hourly earnings, a measure of wage growth, rose 0.2%. That was both cooler than the previous reading and slightly cooler than what economists had forecast. Over the past 12 months, average hourly earnings increased 3.9%.

There was no change in the labor force participation rate.

Market impact: Stock futures jumped sharply Friday after the softer-than-expected April jobs report boosted hopes that the Federal Reserve could start cutting interest rates soon. Treasury yields, which largely reflect investors’ expectations for short-term rates set by the Federal Reserve, fell after the report. The yield on the benchmark 10-year U.S. Treasury note was 4.471% in recent trading, according to Tradeweb, down from 4.569% Thursday.

— U.S. ag sector is facing a growing trade deficit, as highlighted by record imports and a decreasing trend in exports. In March 2024, ag imports surged to a historic high of $18.34 billion, exceeding the previous record set in March 2022. This increase in imports, combined with a drop in exports to $15.54 billion, resulted in a monthly trade deficit of $2.85 billion. The trend has contributed to a cumulative deficit of $6.87 billion in the first half of fiscal year (FY) 2024.

USDA projects that by the end of FY 2024, ag exports will total $170.5 billion against imports of $201 billion, potentially leading to a record annual deficit of $30.5 billion. This forecasted deficit is part of a continuing pattern observed over recent fiscal years, where the U.S. agriculture sector frequently posted trade deficits, particularly in the latter months of each year.

Impact: This situation is becoming a significant concern for lawmakers, who are pressing the Biden administration to pursue free trade agreements more aggressively. These agreements are seen as enhancing U.S. agricultural trade by reducing tariffs and addressing other market barriers, thus potentially reversing the trend of growing trade deficits.

Market perspectives:

— Outside markets: The U.S. dollar index was weaker ahead of the Employment report, with the euro and British pound both firmer against the U.S. currency. The yield on the 10-year U.S. Treasury note was weaker, trading around 4.55%, with a mostly lower tone in global government bond yields. Crude oil futures firmed, with U.S. crude around $79.40 per barrel and Brent around $84.20 per barrel. Gold and silver futures were under pressure ahead of the jobs data, with gold around $2,306 per troy ounce and silver around $26.66 per troy ounce.

— Japanese yen strengthened against the U.S. dollar on Friday amid signs that Japan has intervened in the currency markets. Reports, including one from the Nihon Keizai Shimbun, suggest that the Japanese gov’t has spent approximately 8 trillion yen ($50 billion) this week to bolster the yen, which had dropped to its lowest level in 34 years against the dollar. With Japanese markets and government offices closed for a holiday, detailed data on this week’s currency activities is pending and expected to be significant when released next week.

— USDA daily export sale: 122,000 MT soybeans to unknown destinations during the 2023-2024 marketing year.

— Ag trade update: Algeria purchased between 210,000 and 300,000 MT of milling wheat, with most of it expected to be sourced from Russia and Ukraine.

— NWS weather outlook: There is a Slight Risk of excessive rainfall over parts of the Western/Central Gulf Coast on Friday and the Southern Plains on Saturday... ...Heavy snow over the Sierra Nevada Mountains on Saturday... ...There is a Slight Risk of severe thunderstorms over parts of the Central/Southern Plains.

NWS

Items in Pro Farmer’s First Thing Today include:

• Followthrough buying overnight
• Brazilian crops facing both flooding and moisture stress
• IKAR cuts wheat crop, export forecasts
• French wheat crop ratings unchanged

— Maryland transportation officials have estimated the cost to rebuild the Francis Scott Key Bridge at nearly $2 billion, with completion expected by fall 2028. The project to replace the span of Interstate 695 by fall of 2028 is estimated to cost between $1.7 and $1.9 billion, Maryland Transportation Secretary Paul Wiedefeld said Thursday. This follows the catastrophic collapse of the bridge, a crucial conduit for $21.5 billion in freight and about 30,000 vehicles daily, including hazardous material transports. The rebuilding efforts are set to be underpinned by federal funds from the Federal Highway Administration’s Emergency Relief Program, which has already allocated significant resources for disaster-impacted infrastructures across the states.

Of note: Chubb, the insurer of the collapsed Francis Scott Key Bridge in Baltimore, is preparing to make a $350 million payout to Maryland, paying the full amount of the coverage quickly. Chubb will likely sue the shipowner and others to recoup losses from the crash, according to the Wall Street Journal (link). WTW North America, the state’s broker for insurance on the Key Bridge, said that it’s unclear when the payment will ultimately be made.

The Maryland Transportation Authority, which oversees the bridge, will be holding a virtual forum May 7 with the construction industry as the agency develops a formal request for proposals.

— Turkey stopped all trade with Israel because of the “worsening humanitarian tragedy” in the Gaza Strip. The Turkish trade ministry said the ban would be lifted if Israel allowed “uninterrupted and sufficient flow” of aid into the territory. Trade between the two countries was worth $6.8 billion in 2023. Israel’s foreign minister said Recep Tayyip Erdogan, Turkey’s president, was acting like a “dictator.”

— Stabenow’s farm bill proposal limits PLC to 20% of the Effective Reference Price. That would hit program crops when they need help the most. And this is not just a rice or peanuts issue. PLC is designed to work when prices get low. That’s what it’s there for. And Stabenow’s proposal just cuts it’s legs off at the knees. Take wheat, for example. During the recession, wheat got to $3.89/bu. in 2016. With a Reference price of $5.50/bu., that resulted in a payment rate of $1.61/bu. (or $5.50/bu. minus $3.89/bu.). Stabenow’s proposal would have limited PLC to $1.1/bu. (or $5.50/bu. x 20%). Wheat growers would have seen their support cut by $0.51/bu. at a time when it was needed most.

— Big missing part to understanding Stabenow’s new farm bill proposal: CBO budget scoring. Reason: Whenever the scores are released, they could show another hefty increase for food and nutrition spending, paid in part by the way her bill alters the Title I safety net programs. Also, questions are being raised about the alleged $5 billion Stabenow says she received via a commitment from Majority Leader Chuck Schumer (D-N.Y.), Finance Committee sources say they have no information about this funding being given to the farm bill.

Says one farm bill veteran: “There’s no shortage of Senate money for climate and nutrition but the cupboard’s bare for farmers. Underserved farmers get an extra share of the crumbs in the bill for farmers. An extension is better than this.”

Of note: Stabenow is spinning that she has some Senate GOP support. That could be challenged when as expected ranking member John Boozman (R-Ark.) releases his counter proposal which is expected to, like the House, show reinvestments for safety net programs, crop insurance and trade market development.

— In the first quarter of 2024, Mexico maintained its position as the top exporter to the United States, with nearly $120 billion in goods sent northward, marking a record high for this period. This performance, a 3.8% increase from the previous year, was reported by the U.S. Census Bureau and the U.S. Bureau of Economic Analysis. Notably, most of Mexico’s exports consisted of manufactured items such as cars, computers, and machinery, predominantly produced by foreign companies.

Mexico’s exports surpassed those of Canada, the second-largest exporter to the U.S., by nearly $19 billion. China, once the top exporter to the U.S., now ranks third, having shipped products worth $97.62 billion during the same period. In 2023, Mexico had overtaken China as the top goods exporter to the U.S.

Despite a robust export performance, Mexican imports from the U.S. declined by 1.2% to $80.16 billion, leading to a record trade surplus of $39.68 billion with the U.S. for the quarter. However, March saw a downturn, with Mexican exports to the U.S. falling by 2.9% and imports from the U.S. decreasing by 8.1%, resulting in a reduced two-way trade value of $68.46 billion, a 5% decline from March of the previous year. This downturn marked the first year-over-year decline in Mexican exports to the U.S. since April 2023.

— Florida bans lab-grown meat. The emerging conflict between traditional meat producers and the cultivated meat industry in the United States, particularly exemplified by Florida’s recent legislation banning lab-grown meat, highlights a significant shift in the agricultural landscape. This move by Florida, driven by GOP Governor Ron DeSantis citing the potential threat to the state’s beef cattle industry — a sector generating over $900 million annually — underscores the economic stakes involved. Florida’s position as the ninth-largest beef cattle producer in the U.S. further amplifies these concerns. “Florida is fighting back against the global elite’s plan to force the world to eat meat grown in a petri dish or bugs to achieve their authoritarian goals,” DeSantis said. “We will save our beef.” At the bill’s signing, Florida Agriculture Commissioner Wilton Simpson said the ban was meant to protect “the integrity of American agriculture.” The legislation joins similar efforts from three other states — Alabama, Arizona and Tennessee — that have also looked to stop the sale of lab-grown meat.

The reaction to this legislation is mixed within the meat industry, reflecting broader sectoral divisions. While traditional meat producers, represented by entities like the National Cattlemen’s Beef Association, have actively lobbied for measures that restrict the labeling and sale of lab-grown meats, larger meat companies and suppliers under the North American Meat Institute have opposed such bans. These larger corporations, including industry giants like Tyson, Perdue, Unilever, Nestlé, and Cargill, cite the potential of alternative proteins and have either invested in related startups or developed their own research divisions, signaling a strategic pivot towards embracing innovation and consumer choice in the face of shifting market demands and sustainability pressures.

The conflict not only poses challenges for regulatory frameworks but also for the cultivated meat industry, which, despite receiving USDA approval for products like cultivated chicken from companies like Upside and Good Meat, still faces significant market entry barriers in the U.S.

— UN FAO Food Price Index rises second month. The Food Price Index (FPI) tracked by the UN Food and Agriculture Organization (FAO) increased to 119.1 in April, up 0.3 points (0.3%) from March which had increased from the February mark after having declined for seven consecutive months. The FAO cited increased meat prices along with higher values for vegoils and cereal grains as factors, with those increases offsetting declines for sugar and dairy products. The FPI still remains 9.6 points (7.5%) under where it was one year ago despite the back-to-back monthly rises.

The increase in cereal grain prices is attributed to concerns about unfavorable crop conditions in key regions including parts of the European Union, Russia, and the United States, which are balanced by strong competition among major exporters. The rise in corn prices was influenced by increased demand and logistical disruptions in Ukraine, along with reduced production forecasts in Brazil.

For meats, higher international prices for poultry, beef, and sheep were only slightly mitigated by lower pork prices, driven by factors such as highly pathogenic avian influenza (HPAI) and increased demand impacting poultry prices. No specific mention was made of HPAI affecting U.S. dairy prices.

— FDA has updated its regulatory framework for intentional genomic alterations (IGAs) in animals, aiming to modernize and enhance the efficiency, predictability, and flexibility of its evaluations and approvals for innovative animal and veterinary products. This development is accompanied by a new memorandum of understanding (MOU) with USDA, which clarifies the roles and responsibilities of each agency in regulating IGAs.

This new approach marks an expansion from previous FDA efforts, which did not fully include food-producing animals in their more flexible regulatory strategies. Under the terms of the MOU, FDA and USDA will share various types of information such as records, data, and reports which are essential for the FDA’s review and premarket approval processes for IGAs in animals that fall under USDA regulation.

Furthermore, USDA is tasked with evaluating potential impacts on livestock health and is required to provide food safety feedback to the FDA within 120 days. It will also inform the FDA about any livestock disease concerns. Additionally, the USDA continues to oversee labeling for certain foods under the National Bioengineered Food Disclosure Standard, integrating these responsibilities into the broader regulatory framework for genetically altered food products.

— Federal court ruling throws new Black-majority Louisiana seat in limbo. A recent federal court ruling has cast doubt on the future of a newly created Black-majority congressional seat in Louisiana. In January, the Louisiana legislature had passed a new congressional map to align with Section 2 of the Voting Rights Act, which was intended to increase representation for Black voters. However, a three-judge federal panel struck down this map, creating significant uncertainty about the district lines that Louisiana will use in the upcoming elections, which are only six months away. Dave Wasserman, election analyst for the Cook Political Report with Amy Walter, says: “This is a setback for Democrats. But it’s also a fluid situation, and we’re holding off on re-evaluating our rating until the federal three-judge panel charts a path forward at its status hearing on May 6 and the Supreme Court either grants or denies a stay.

— FDA published a final rule on agricultural water, marking what it says is a significant advancement in the safety of water used in produce cultivation. This rule updates the 2015 produce safety regulations, shifting from specific pre-harvest water quality criteria to more comprehensive systems-based agricultural water assessments for covered produce (excluding sprouts).

Key aspects of the new rule include:

• Implementation of agricultural water assessments evaluating factors like the water system, use practices, crop characteristics, environmental conditions, and potential nearby impacts, which are crucial for identifying contamination risks.
• Conditional requirements for testing pre-harvest agricultural water based on assessment findings.
• Obligations for farms to implement effective mitigation measures within designated timeframes, particularly if hazards are identified related to adjacent land uses.
• Introduction of new options for mitigation measures, enhancing flexibility for farms.

Farms must conduct these water assessments annually or when significant changes occur. This approach aligns with the latest science and learnings from past produce-related outbreaks, aiming to prevent microbial contamination.

Compliance timelines are set as follows:

• Very small farms: 2 years and 9 months post-rule effectivity.
• Small farms: 1 year and 9 months post-rule effectivity.
• All other farms: 9 months post-rule effectivity.

This rule does not modify existing requirements for sprouts or for harvest and post-harvest water uses.

To aid compliance, FDA plans to educate stakeholders before and during the regulation phase. It has released fact sheets and updated tools like the Agriculture Water Assessment Builder, and is organizing a webinar for further guidance. Collaboration with state partners and other educational entities will be pivotal in implementing these updates effectively.

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 |