U.S. Retail Sales Rise Less Than Expected

Bird flu | CBO | Immigration program change | Intense heat wave | U.S./Mexico and GMO corn

MARKET FOCUS

• U.S. retail sales report shows signs of consumer strain
• Electric-vehicle startup Fisker files for bankruptcy
• Global investors bullish on U.S. equities, Bank of America survey finds
• Philadelphia Fed President Patrick Harker anticipates one interest-rate cut this year
• U.S. dollar nears 2024 high amid European turmoil
• Ag markets today
• U.S. cotton futures fall below 70 cents per pound, lowest level since November 2020
• Ag trade update
• Intense heat wave to affect 270 million in U.S.
• NWS weather outlook
• Pro Farmer First Thing Today items

CONGRESS

• Warren warns Democrats against compromising on tax increases
  

RUSSIA & UKRAINE

• Ukrainian grain and oilseed exports drop in June
• Putin visits North Korea for first time since 2000
  

POLICY

• CBO to unveil updated 10-Year farm program estimates

PERSONNEL

• National Chicken Council President Mike Brown announces retirement
  

CHINA

• Chinese investors, traders flock to gov’t bonds
• China’s pork imports continue to decline
• Biden’s tough-on-China stance threatens green America push
• China to see record exodus of 15,200 high-net-worth individuals in 2024
  

TRADE POLICY

• Biotech corn dispute hearing set for next week in Mexico City
  

ENERGY & CLIMATE CHANGE

• Lawmakers push for higher biofuel levels in 2026 RFS
• Oil and agriculture groups sue Biden administration over truck emission rules
  

LIVESTOCK, NUTRITION & FOOD INDUSTRY

• Bird flu infects seventh Iowa dairy farm
• CDC finds low immunity to H5N1 avian flu in U.S. population
• CFIA (Canada) updates guidance on HPAI in dairy cattle
• McDonald’s ends AI drive-through experiment with IBM
  

HEALTH UPDATE

• Surgeon general calls for warning labels on social media due to youth mental health
  

POLITICS & ELECTIONS

• Trump holds 18-point lead over Biden in Iowa, according to Iowa Poll
• Major primaries today in Virginia and Oklahoma
• Virginia’s 7th District up for grabs after Rep. Spanberger’s gubernatorial run
• North Dakota’s age limit law for Congress could face legal battle
  

OTHER ITEMS OF NOTE

• Immigration program for undocumented spouses of citizens

— Equities today: Asian and European stock indexes were mostly higher overnight. U.S. Dow opened around 20 points higher. In Asia, Japan +1%. Hong Kong -0.1%. China +0.5%. India +0.4%. In Europe, at midday, London +0.4%. Paris +0.5%. Frankfurt +0.3%.

U.S. equities yesterday: The Dow rose 188.94 points, 0.49%, at 38,778.10. The S&P 500 added 41.63 points, 0.77%, at 5,473.23 . The Nasdaq closed 164.14 points higher, 0.95%, at 17,857.02. Both the S&P 500 and the Nasdaq closed in record territory. Of note: The percentage of S&P 500 companies trading above their 200-day moving average fell to the lowest level of the year Monday, according to Dow Jones Market Data.

Treasury yields rose, with the benchmark 10-year yield hitting 4.277%.

— Global investors bullish on U.S. equities, Bank of America survey finds. A Bank of America survey indicates global investors are likely to continue investing in U.S. equities as the market hits new highs. The poll of 206 participants, managing $640 billion in assets, revealed the highest investor optimism since November 2021. The survey also highlighted that 69% of investors have long positions in the “Magnificent Seven” technology giants, making it one of the most crowded trades in history.

— After months of struggling to keep its business running, Fisker filed for Chapter 11 bankruptcy. The EV maker is in advanced talks for debtor-in-possession financing and the sale of assets due to “market and macroeconomic headwinds that impacted our ability to operate efficiently.” A production pause will also remain in place.

— Ag markets today: Corn and soybean futures were supported by light corrective buying overnight, while wheat futures posted mixed trade. As of 7:30 a.m. ET, corn futures were trading 1 to 2 cents higher, soybeans were 2 to 3 cents higher and wheat futures were 4 cents lower to a penny higher. The U.S. dollar index was around 200 points higher, and front-month crude oil futures were trading near unchanged.

Delayed cash cattle trade likely. Last week’s average cash cattle price jumped $3.63 to a record $192.55, eclipsing the previous high set just three weeks prior by $2.46. As would be expected, packers purchased a strong 96,000 head of cattle, including 22,000 head “with time.” That could reduce packers’ willingness to actively bid for cash cattle again this week, especially given record carcass weights for this time of year. But feedlots also won’t likely be in any hurry to move cattle at lower prices. Combined with USDA’s Cattle on Feed Report Friday afternoon, that sets the stage for lengthy cash cattle negotiations.

Cash hog fundamentals weaken. The CME lean hog index is down 71 cents to $90.73 as of June 14, the biggest daily decline since April 9. The pork cutout dropped $2.41 on Monday to $98.94, due mostly to an $11.83 plunge in primal bellies.

— Agriculture markets yesterday:

• Corn: July corn fell 6 1/4 cents to $4.43 3/4, nearer the session low.
• Soy complex: July soybean futures sunk 22 cents to $11.57 3/4 and settled nearer session lows. July meal futures closed $8.10 lower to $360.30. July bean oil futures firmed 5 points to 43.73 cents and continue to trade in a tight range.
• Wheat: July SRW wheat fell 21 1/4 cents to $5.91 1/2. July HRW wheat closed down 22 cents at $6.05 1/2. Markets closed nearer their session lows and hit seven-week lows. July spring wheat futures sunk 17 cents to $6.38 1/2 and settled nearer session lows
• Cotton: July cotton fell 103 points to 69.94 cents to an 11-month-low close after forging a new contract low early on.
• Cattle: August live cattle fell 37 1/2 cents to $182.80 and hit a three-month high early on. August feeder cattle closed down 65 cents at $261.325. Prices closed and nearer their session lows.
• Hogs: August lean hog futures rallied $1.425 to $91.875 despite weakening cash fundamentals.
  

— Quotes of note:

• Fedspeak. Federal Reserve Chair Jay Powell will testify before Congress in the second week of July, part of regularly scheduled Capitol Hill oversight of monetary policy. Powell will address the Senate Banking Committee on July 9 and the House Financial Services Committee on July 1.

  There is also a long list of Fed speakers today. In chronological order, we will hear from: Barkin (10:00 a.m. ET), Collins (11:40 a.m. ET), Musalem (1:00 p.m. ET), Logan (1:00 p.m. ET) and Goolsbee (2:00 p.m. ET).
  

• Philadelphia Fed President Patrick Harker stated he anticipates one interest-rate cut this year, contingent on continued improvement in inflation. Although a recent report showed consumer prices cooling, Harker emphasized the need for more evidence before confidently aiming for the Fed’s 2% inflation goal. He advocates a cautious approach, considering further action only after seeing several months of favorable data. Last week, Fed officials left their benchmark rate unchanged at a two-decade high and reduced their 2024 rate cut projections from three to one. Harker’s outlook aligns with this median projection. He foresees moderate economic growth, a slight rise in unemployment, and a gradual return to the inflation target.
  
• “We used to sell a lot of fleece jackets in extra, extra large. Now everything has gone down by at least one size.” — Edmond Moss of apparel retailer AllStar Logo, on the demand for smaller sizes on the growing popularity of weight-loss drugs.
  

— U.S. retail sales rise less than expected. U.S. retail sales rose by a modest 0.1% month-over-month in May 2024, following a downwardly revised 0.2% decline in April and falling short of the 0.2% forecast. Sales saw significant increases in sporting goods, hobby, musical instruments, and books (2.8%), as well as clothing (0.9%) and motor vehicle and part dealers (0.8%). However, gasoline station sales dropped 2.2%, and furniture store sales decreased by 1.1%, indicating cooling consumer sentiment.

Market impacts: The yield on 10-year Treasuries declined four basis points to 4.24%, approaching the over-two-month-low of 4.22% touched on June 14. S&P 500 futures were little changed.

Market perspectives:

— Outside markets: The U.S. dollar index was firmer, with the euro and British pound both registering losses against the U.S. currency. The yield on the 10-year U.S. Treasury note was firmer, trading around 4.29%, with a mostly higher tone in global government bond yields. Crude oil futures were nearly unchanged, with U.S. crude around $80.30 per barrel and Brent around $84.20 per barrel. Gold and silver futures were weaker ahead of U.S. economic data, with gold around $2,327 per troy ounce and silver around $29.27 per troy ounce.

— U.S. dollar nears 2024 high amid European turmoil. The U.S. dollar is approaching a new 2024 high as investors seek a safe haven amid political uncertainty in Europe and elevated U.S. Treasury yields. Despite efforts by France’s left-wing parties and the European Central Bank to calm markets, investors remain cautious. The dollar has strengthened for four consecutive weeks, supported by high U.S. interest rates and recent political disruptions. While the dollar remains strong against most Group-of-10 peers, traders are wary of potential volatility from the upcoming U.S. election, which could limit the dollar’s weakness in the near term.

— U.S. cotton futures fall below 70 cents per pound, the lowest level since November 2020, due to a strong dollar and expected increased supplies. Favorable weather with beneficial rainfall in Texas, Oklahoma, and Kansas is adding to the price pressure. The latest USDA WASDE report for the 2024-25 season showed a production increase of 90,000 bales, primarily from higher yields in Burma. Additionally, revisions to the 2023-24 global balance sheet indicated higher beginning stocks and production, alongside reduced trade and consumption.

— Ag trade update: Japan is seeking 84,667 MT of milling wheat via its weekly tender.

— NWS weather outlook: Significant heavy rain/flash flooding threat with gusty winds well ahead of Potential T.C. One expected to impact southern Texas on Wednesday... ...More rounds of heavy rain and severe thunderstorms expected for the northern Plains and upper Midwest today before shifting south into the central Plains on Wednesday... ...A heat wave will persist over the Great Lakes, Ohio Valley and the Northeast through midweek... ...Late-season wet snow continues across the high-elevations of the northern Rockies today before tapering off early on Wednesday.

Items in Pro Farmer’s First Thing Today include:

• Corn and beans modestly higher, wheat mixed overnight
• Corn and soybean CCI ratings decline, HRS wheat improves
• Crop Progress Report highlights
• Farm groups, Big Oil sue Biden administration to halt truck emissions rules
• Eurozone consumer inflation accelerates

— Warren warns Democrats against compromising on tax increases. Sen. Elizabeth Warren (D-Mass.) urged fellow Democrats to resist compromising with Republicans in the upcoming 2025 tax negotiations, advocating for higher taxes on the wealthy. Speaking at an event by The Washington Center for Equitable Growth, Warren suggested it would be preferable to let the 2017 tax cuts expire rather than endorsing further tax cuts for the wealthy.

Warren highlighted the current “doom loop” in the tax code, where loopholes allow the rich to retain more money. Her stance indicates potential discord among Democrats regarding their approach to 2025 tax discussions. She criticized a stalled bipartisan tax package in the Senate that aims to renew business tax breaks, warning against using it as a model for broader tax legislation.

Next up: Senate Finance Committee Democrats, including Warren, are scheduled to discuss next year’s tax strategy on Thursday.

— Ukrainian grain and oilseed exports drop in June. Ukrainian grain and oilseed exports from June 1-15 totaled 1.97 million metric tons (MMT), down from 2.69 MMT from May 1-15, according to the Ukrainian grain traders’ union UGA. Wheat exports decreased to 514,000 metric tons from 762,000 metric tons in the same May period, while corn exports fell to 1.3 MMT from 1.71 MMT. The slowdown in June is typical as exporters shift focus to new-crop shipments for the upcoming July/June marketing year.

— CBO to unveil updated 10-Year farm program estimates. The Congressional Budget Office (CBO) today is slated to release its latest 10-year estimates for farm programs. These new estimates will not impact current farm bill discussions, but they will impact farm bill deliberations if lawmakers again must extend the 2018 Farm Bill. This is why House Ag Chairman GT Thompson (R-Pa.) wanted to get his farm bill out of the Ag panel by the end of May to make sure it was scored on the budget baseline released last spring.

— National Chicken Council President Mike Brown announced his retirement Monday after 13 years leading the trade group. Gary Jay Kushner will be the group’s interim president. Link.

— Chinese investors, traders flock to gov’t bonds. China’s sovereign bond futures saw a record closing high Tuesday as the buying frenzy for government debt extended despite scrutiny from authorities. Futures on 10-year notes closed at the highest level on record back to 2015. The benchmark 10-year sovereign bond yield lingered near the lowest level in more than two decades. China’s 30-year government bond yield fell below 2.5% to the lowest in seven weeks. Investors and speculators are flocking to Chinese bonds, pushing down yields, amid safe haven buying given the uncertain economy and volatile stock market.

— China’s pork imports continue to decline. China imported 80,000 MT of pork in May, down 11.1% from the previous month and 41.1% less than year-ago. Through the first five months of this year, China imported 430,000 MT of pork, down 47.1% from the same period last year.

— Biden’s tough-on-China stance threatens green America push. President Biden tries to balance building clean-energy industries and curbing Chinese imports such as batteries and solar-panel parts. Link to more via the Wall Street Journal.

— China is expected to see a record exodus of 15,200 high-net-worth individuals (HNWIs) in 2024, exacerbating economic strains, according to a report by Henley & Partners. This follows the departure of 13,800 HNWIs last year, primarily to the U.S., Canada, and Singapore. The emigration is driven by economic uncertainty and geopolitical tensions.

HNWIs, defined as those with at least $1 million in assets, often hold between $30 million and $1 billion. Their departure, along with a prolonged property crisis and downgraded credit outlooks, could further weaken China’s fragile economy.

The U.S. is the top destination for these wealthy emigrants. Other favored locations include Japan, due to its appealing lifestyle, and Singapore, despite its increased scrutiny of Chinese wealth. The United Arab Emirates remains attractive for its zero-income tax and luxury lifestyle.

Hong Kong lost around 500 HNWIs last year, while the U.K. is projected to see the second-largest net loss after China in 2024, with 9,500 HNWIs expected to leave. South Korea and Taiwan are also expected to see significant outflows, partly due to geopolitical uncertainties.

Globally, 128,000 millionaires are expected to relocate in 2024, marking a record for wealth migration. This trend signals a significant shift in the global landscape, with implications for both the countries they leave and their new homes.

— Biotech corn dispute hearing set for next week in Mexico City. Attorneys from the United States and Mexico will meet next week in Mexico City over Mexico’s ban on genetically modified white corn in tortillas and its directive to phase out genetically modified yellow corn in livestock feed and human food. The U.S. argues that Mexico’s measures violate the U.S.-Mexico-Canada Agreement, which mandates science-based food safety measures. The USTR claims Mexico has not proven any harm from genetically modified corn. Mexico, however, argues there are health risks from consuming large amounts of genetically modified white corn, not accounted for in U.S. studies. The hearing is expected to be livestreamed.

— Lawmakers push for higher biofuel levels in 2026 Renewable Fuel Standard (RFS). A bipartisan group of 18 senators is urging the EPA to set higher biodiesel and advanced biofuel mandates for 2026 under the RFS. Despite record-high levels for 2023-2025, new evidence suggests the need for significantly higher volumes to match increased production capacity. The senators, led by Amy Klobuchar (D-Minn.) and Chuck Grassley (R-Iowa), cited Energy Information Administration (EIA) data indicating current levels are “significantly below production trends.” They highlighted a 66% drop in Renewable Identification Number (RIN) values since last year’s levels were set, leading to facility closures, job losses, and disrupted local economies. Link. The lawmakers warned that this negative signal threatens investments in renewable fuel production, including Sustainable Aviation Fuel (SAF). The EPA is expected to finalize the 2026 RFS levels later this year.

— Oil and agriculture groups sue Biden administration over truck emission rules. The American Petroleum Institute (API), National Corn Growers Association (NCGA), American Farm Bureau Federation (AFBF), and other groups have filed a lawsuit against the Biden administration’s EPA plan to cut emissions from heavy-duty vehicles for the 2027-2032 model years. The suit aims to halt the rule, arguing that the required technology does not currently exist for these vehicles and could have significant impacts on Americans.

API’s Ryan Meyers criticized the EPA for pushing unfeasible technology, while NCGA President Harold Wolle highlighted concerns about the EPA’s focus on electric vehicles over alternatives like corn ethanol.

This lawsuit follows API’s previous legal action against new standards for cars and light trucks, demonstrating that such rulemakings are susceptible to legal challenges that can delay their implementation.

— Bird flu infects seventh Iowa dairy farm. The Iowa Department of Agriculture reported another outbreak of highly pathogenic avian influenza (H5N1) in a Sioux County dairy herd of 10,000 cows, marking the seventh outbreak in Iowa since June. The virus, which is deadly to poultry, has shown limited effects on dairy cows, causing reduced appetite and milk production, but cows recover with supportive care. This is the fifth outbreak in Sioux County, with previous cases in O’Brien and Plymouth counties, affecting herds ranging from 250 to 4,500 cows.

— CDC finds low immunity to H5N1 avian flu in U.S. population. Preliminary findings from the CDC indicate that the American population has little to no pre-existing immunity to the H5N1 avian flu virus currently circulating on dairy and poultry farms. The CDC’s serology study, based on blood samples from the 2021-22 and 2022-23 flu seasons, showed low antibody levels against H5N1, suggesting most people would be susceptible if the virus became more easily transmissible among humans. The risk to the general public remains low, with only three human infections reported, all in people who worked closely with cows.

Outbreaks continue steadily in dairy herds and sporadically in poultry flocks. In response, federal health officials have contracted with CSL Seqirus to produce 4.8 million doses of an H5N1 vaccine, which the CDC says matches the circulating strain well. Meanwhile, Finland will offer avian flu vaccines to high-risk workers, such as those in poultry and fur farms, as part of a joint procurement with 15 EU countries.

— CFIA updates guidance on HPAI in dairy cattle. The Canadian Food Inspection Agency (CFIA) has updated its guidance for veterinarians regarding highly pathogenic avian influenza (HPAI) in dairy cattle (link). The CFIA will cover laboratory testing fees at any Canadian Animal Health Surveillance Network (CAHSN) lab but will not cover veterinary fees for sample collection or shipment. Non-clinical dairy cattle are now eligible for testing, requiring a milk sample for lactating animals and a nasal swab for non-lactating animals. Veterinarians must report negative test results to the district office if HPAI is suspected. While CFIA leads on HPAI in domestic birds, its role in cattle remains focused on providing scientific advice, diagnostic support, and international reporting. The CFIA collaborates with provinces, territories, and industry to ensure consistent disease management. As of June 14, no HPAI cases have been confirmed in Canadian dairy cattle.

— McDonald’s ends AI drive-through experiment with IBM, which began in 2021, in over 100 restaurants. According to a memo sent to franchisees, the Automated Order Taker technology will be shut down by July 26. Challenges with interpreting different accents and dialects impacted order accuracy. This decision comes as other restaurants, like Del Taco and Panera, are testing AI to streamline operations.

— Surgeon general calls for warning labels on social media due to youth mental health crisis. U.S. Surgeon General Vivek Murthy is advocating for warning labels on social media platforms, akin to those on cigarettes, to address a youth mental health crisis. In a New York Times op-ed (link), Murthy cited that adolescents spending over three hours daily on social media are at double the risk of anxiety and depression, with the average usage being 4.8 hours per day as of summer 2023. Popular social apps among teens include TikTok, YouTube, Snapchat, and Instagram.

— Major primaries today in Virginia and Oklahoma will determine the political careers of House Appropriations Committee Chair Tom Cole (R-Okla.) and House Freedom Caucus Chair Bob Good (R-Va.).

Initially endorsing Florida Gov. Ron DeSantis for president, Good angered former President Donald Trump, who then backed Good’s primary rival, state Sen. John McGuire. Good, one of eight Republicans who voted to oust former Speaker Kevin McCarthy, faces attack ads funded by McCarthy and support for McGuire from mainstream House Republicans. Top House Republicans in national security, including House Armed Services Committee Chair Mike Rogers, are also backing McGuire, who has significantly outraised Good, putting Good at risk of losing.

Cole, the new House Appropriations Committee chair, is in a costly battle against businessman Paul Bondar, who criticizes Cole for compromising with Democrats. Bondar, a recent Texas transplant, is painted by Cole as an outsider. Despite Trump’s endorsement of Cole, Bondar runs a more MAGA-focused campaign and criticizes Cole’s vote against censuring Rep. Adam Schiff. Bondar has invested millions in ads, raising GOP concerns about a possible upset.

— Virginia’s 7th District up for grabs after Rep. Spanberger’s gubernatorial run. Rep. Abigail Spanberger’s (D-Va.) decision to run for governor leaves her competitive 7th District seat open for November. On the GOP side, Derrick Anderson has the backing of Speaker Mike Johnson (R-La.), while Cameron Hamilton runs a more insurgent campaign with support from the Freedom Caucus. For Democrats, former national security official Eugene Vindman leads in fundraising, outpacing local officials like state Del. Briana Sewell and former state Del. Elizabeth Guzman. Vindman, notable for his testimony in Trump’s first impeachment, is a key figure in the race.

— Trump leads Biden 50% to 32% among likely Iowa voters. A new Des Moines Register/Mediacom Iowa Poll shows Trump leads Biden 50% to 32% among likely voters. Biden’s approval rating among all Iowans has remained low at 28%. Meanwhile, Iowans overwhelmingly believe the country is headed in the wrong direction. Link for details.

Of note: While other polls have found independents and swing voters are less likely to support Trump following the verdict, the Iowa Poll found that Trump remains at a higher favorability with likely voters than Biden. The GOP presidential candidate is viewed favorably by 51% of poll respondents and unfavorably by 47%, while Biden is seen favorably by 33% and unfavorably by 66%.

— North Dakota’s age limit law for Congress could face legal battle. North Dakota passed a law banning anyone from running for Congress if they would turn 81 before the end of their term, with 61% voter approval. This law may conflict with a 1995 Supreme Court ruling (U.S. Term Limits v. Thornton) that states cannot impose their own restrictions on federal office candidates. This ruling was recently reaffirmed when the court ruled that states cannot disqualify former President Trump from ballots. A potential lawsuit against North Dakota’s new measure could prompt the Supreme Court to reconsider the 1995 precedent. If the Supreme Court overturns the ruling, states could gain more authority to set eligibility requirements for federal candidates. Currently, North Dakota’s oldest congressional member is 67, so no immediate candidates are affected by the new law.

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