U.S. Weekly Export Sales to China Notable in Wheat, Meats

Japan intervenes to support yen | $2.9 bil. in U.S. global food aid | Protests in Russia, Iran

U.S. export sales to China notable in wheat, meats. USDA export sales figures for the week ended Sept. 15 included activity for 2022-23 of net sales of 134,345 tonnes of wheat, 6,238 tonnes of corn, 152,496 tonnes of soybeans, and net reductions of 11,427 running bales of upland cotton. No sorghum sales activity was reported for China during the week. For 2022, USDA reported net sales of 61,19 tonnes of beef and 2,170 tonnes of pork.

USDA daily export sales: 105,000 metric tons of corn to Mexico during the 2022-2023 marketing year; 101,600 metric tons of corn to unknown destinations during the 2022-2023 marketing year.

Japan intervenes in currency market to support yen. Japan said Thursday it intervened in currency markets to sell dollars and buy yen, the first such intervention in 24 years, in a bid to stem the recent sharp fall of the currency. The yen rallied against the dollar.

Central banks in Norway, Switzerland and Britain have joined the parade of interest rate increases, a day after the Fed’s big move.

The Bank of England voted to raise its base rate to 2.25% from 1.75% Thursday, as it seeks to combat inflation that remains five times higher than its target. This is its seventh consecutive rise and takes U.K. interest rates to a level last seen in 2008.

The Swiss National Bank delivered a 75 basis-point hike, which brought with it the end of negative interest rates in Europe. It’s the first time Switzerland’s rates have been in positive territory since 2015.

Fed Chair Jerome Powell comments on Wednesday signaled to some there will be a “hard landing” because of the Fed’s current approach to interest rates. Details and perspective below.

Higher interest rates raise the cost of car loans, mortgages, credit cards and other debt, but consumers may not immediately feel the effects. Even outsize increases like the central bank’s recent hikes reach wallets and the broader economy somewhat gradually over weeks and months, economists say.

U.S. home sales declined for a seventh straight month in August, the longest stretch since 2007. The number of previously owned homes sold in August was down 19.9% from a year earlier and 0.4% from July to a seasonally adjusted annual rate of 4.8 million, the lowest since May 2020, the National Association of Realtors said Wednesday. Economists expect further declines in the coming months, given mortgage rates’ recent climb above 6% for the first time since 2008.

U.S. banks including JPMorgan Chase, Morgan Stanley and Bank of America are threatening to walk out of the Glasgow Financial Alliance for Net Zero (GFANZ) for fear of being sued over the failure to hit decarbonization requirements, the Financial Times reported Sept. 20.

President Biden offered $2.9 billion in global food aid during his Wednesday speech to the United Nations.

Vladimir Putin’s military mobilization and escalating threats sparked protests in Russia and roiled the United Nations. Military and political analysts say Putin’s recent moves show how badly the war has gone for Russia and are unlikely to stop the Ukrainian advance or reverse the battlefield situation in the immediate future. Russia is attempting to “extinguish” Ukrainians’ “right to exist,” President Joe Biden said in a speech at the United Nations General Assembly as he urged “unwavering” support for Ukraine. Meanwhile, Russia and Ukraine released 270 prisoners, including Britons and Americans, in deals brokered by Turkey and Saudi Arabia. Details in Russia/Ukraine section.

USDA Secretary Tom Vilsack announced millions more for improving rural broadband. Details in Policy section.

Starting next year, Amazon looks to cut its CO2 emissions in Southern California by about 95% by using a new, renewable “electrofuel” diesel to power tens of thousands of delivery vehicles.

California regulators could soon ban the sale of diesel big rigs by 2040, ending a long reliance on the vehicles that are the backbone of the American economy. The proposal by staff of the California Air Resources Board would further require that, by 2035, medium- and heavy-duty trucks entering ports and railyards must be zero emission and that state and local government fleets be so by 2027.

California farms pump water to feed crops amid extreme heat and drought, but residents’ wells are running dry. More, below.

The Senate ratified its first climate treaty in 30 years, agreeing to phase out some greenhouse gases.

Sometimes-centrist Sen. Joe Manchin (D-W.Va.) released full details of his bill meant to speed up the approval process for energy projects. But more than a few Dems don’t support it and GOP senators favor an alternative approach by one its members.

A package of policing and public safety bills is headed for House votes today. Details in Congress section.

Women-led protests have erupted across Iran, including the capital Tehran, after a 22-year-old Kurdish woman named Mahsa Amini died at the hands of Iran’s “morality police,” who deemed she violated the country’s strict dress code for women that requires they cover their heads with hijabs and loose-fitting clothes to hide their arms and legs.

Election Day 2022 is 47 days away. Election Day 2024 is 775 days away.

Equities today: Global stock markets were mostly lower overnight. U.S. stock indexes are pointed to narrowly mixed openings. FedEx will report earnings after Thursday’s market close. FedEx shares tumbled last week after it issued a sales warning and said it was seeing declining volumes of packages moving around the world, fanning broader economic concerns. Hong Kong’s Hang Seng Index closed at its lowest level in more than a decade. Rising rates, high inflation, Russia’s invasion of Ukraine and various fears around China — including a regulatory crackdown, a property downturn and the country’s strict Covid-19 policies — have all caused jitters in the market this year. In Asia, Japan -0.6%. Hong Kong -1.6%. China -0.3%. India -0.6%. In Europe, at midday, London -0.2%. Paris -0.7%. Frankfurt -0.5%.

U.S. equities yesterday: All three major indices finished with losses after a volatile late session run following the Fed meeting conclusion. The Dow ended down 522.45 points, 1.70%, at 30,183.78. The Nasdaq fell 204.86 points, 1.79%, at 11,220.19. The S&P 500 declined 66.00 points, 1.71%, at 3,789.93.

Agriculture markets yesterday:

• Corn: December corn fell 6 1/2 cents to $6.85 1/2.
• Soy complex: November soybeans fell 17 1/2 cents to $14.61 1/4. December soymeal fell 60 cents to $438.80. December soyoil fell 91 points to 65.00 cents.
• Wheat: December SRW wheat rose 10 cents to $9.03 3/4, the contract’s lowest close since July 8. December HRW wheat gained 4 cents to $9.67. December spring wheat rose 5 cents to $9.64 1/4.
• Cotton: December cotton rose 359 points to 96.92 cents.
• Cattle: October live cattle fell 42.5 cents to $145.875. October feeder futures fell 80 cents to $179.225. Choice cutout values fell $1.57 early Wednesday to $250.07, the lowest daily average since April 2021.
• Hogs: October lean hogs fell $1.55 to $94.425, while December hogs fell $1.725 to $86.45.
  

Ag markets today: Winter wheat markets and corn futures are mildly favoring the downside after two-sided trade overnight, while soybeans and spring wheat are mixed. As of 7:30 a.m. ET, corn futures were fractionally lower, soybeans were fractionally lower to a penny higher, SRW wheat was 6 to 8 cents lower, HRW wheat was 1 to 4 cents lower and HRS wheat was 3 cents lower to 4 cents higher. Front-month crude oil futures were around 75 cents higher and the U.S. dollar index was nearly 500 points higher this morning, reaching a new 20-year high.

Technical viewpoints from Jim Wyckoff:

On tap today:

• Bank of England is expected to raise its benchmark interest rate to 2.25% from 1.75%. (7 a.m. ET) UPDATE: Bank of England raised rates by 50 basis points, its seventh consecutive hike, in line with expectations.
• U.S. jobless claims are expected to rise to 215,000 in the week ended Sept. 17 from 213,000 one week earlier. (8:30 a.m. ET)
• U.S. current account deficit is expected to narrow to $260.8 billion in the second quarter from $291.42 billion in the first quarter. (8:30 a.m. ET)
• USDA Weekly Export Sales report, 8:30 a.m. ET
• Conference Board’s leading economic index for August is expected to fall 0.2% from the prior month. (10 a.m. ET)
• Kansas City Fed’s manufacturing survey is expected to rise to 5 in September from 3 one month earlier. (11 a.m. ET)

As expected, the Federal Open Market Committee (FOMC) raised its target fed-funds rate another 75 basis points to between 3% and 3.25%, the third consecutive 75-point hike. The vote was unanimous. The forward guidance in its median economic projections show rates could rise another 125 basis points this year and higher than that in 2023. This signals a so-called terminal rate during this tightening cycle that is higher than 4.5% and could be 5% next year.

Slower U.S. economic forecasts were also released. The median forecast of board members and bank presidents for economic growth this year is now just 0.2%, down from 1.7% in June, 2.8% in March and 4% last December. The GDP growth forecast for next year is a tepid 1.2%. That suggests stagflation.

The Fed has inflation falling rapidly in 2023 and unemployment rising only modestly to a high of 4.4% from 3.7% today.

Key quote from Fed Chair Jerome Powell: “We have got to get inflation behind us. I wish there were a painless way to do that. There isn’t. Reducing inflation is likely to require a sustained period of below-trend growth and there will very likely be some softening of labor market conditions. Restoring price stability is essential to set the stage for achieving maximum employment and stable prices over the longer run. We will keep at it until we’re confident the job is done.”

President Biden warned world leaders Wednesday that a nuclear war “cannot be won and must never be fought,” as he accused Russia of violating the United Nations international charter in its “brutal, needless war” against Ukraine, and stressed that the U.S. “does not seek conflict” or a “Cold War” with China.

Biden announced $2.9 billion in fresh U.S. gov’t assistance to address global food insecurity during his speech Wednesday to the United Nations General Assembly. The new funds are a response to growing concerns about hunger worldwide due to rising food, fertilizer and energy prices caused in part by Russia’s war in Ukraine, according to the White House. The U.S. will spend $2 billion in humanitarian assistance from the Agency for International Development, including money for food aid, health care and safe drinking water in vulnerable countries, the White House said in a statement. More than $780 million will go toward development funding to help farmers develop sustainable growing methods and improve food delivery systems, among other projects. The U.S. is also contributing $150 million to the Global Agriculture and Food Security Program. The new money comes on top of $6.9 billion to address food security the U.S. already committed this year.

“We’re calling on all countries to refrain from banning food exports or hoarding grain while so many people are suffering,” Biden said.

International Monetary Fund Managing Director Kristalina Georgieva said she expects slowing growth from higher borrowing costs will make next year feel like a recession for millions of people, even if the global economy avoids a technical downturn.

Existing home sales have dropped seven straight months to a seasonally adjusted 4.8 million in August, about 20% lower than last August, as rising mortgage rates dissuaded home buyers and cooled prices. Home builders reported slower orders in the third quarter.

Daily mortgage interest rates have continued climbing this week, to 6.36% for a 30-year-fixed loan on Wednesday, according to Mortgage News Daily. The rate hit 6.25% last week, the highest since October 2008, according to the Mortgage Bankers Association.

What Fed Chair Jerome Powell said Wednesday re: housing prices: “"The deceleration in housing prices that we’re seeing should help bring sort of prices more closely in line with rents and other housing market fundamentals. And, you know, that’s a good thing. For the longer term, what we need is supply and demand to get better aligned, so that housing prices go up at a reasonable level, at a reasonable pace, and that people can afford houses again… so we probably in the housing market have to go through a correction to get back to that place.”

Average credit card interest rates have reached 18.1%, the highest in more than 26 years, and are set to climb even higher after the Federal Reserve’s 0.75 percentage point interest rate increase Wednesday. Credit card balances rose $46 billion from the first to the second quarter of 2022.

Companies are mentioning freight costs much less frequently during this season of conference calls than they did a year ago, and when they have discussed them, the conversation has revolved around a sense of relief.

Market perspectives:

• Outside markets: The U.S. dollar index is higher (with only the yen weaker against the greenback) and pushed to another 20-year high in early U.S. trading. The yield on the 10-year U.S. Treasury note is fetching 3.54%. The 2-year Treasury note yield is 4.103%. Differences in the yields between 2-year and 10-year Treasury notes is also known as the yield curve. Some analysts and market players see a higher yield on shorter-term debt as a sign a recession is coming. Crude prices are higher, U.S. crude was near $85 per barrel with Brent around $91.50 per barrel. Gold and silver futures are higher, with gold just under $1,680 per troy ounce and silver just under $19.64 per troy ounce.

• Japan intervened to strengthen the yen for the first time since 1998 on Thursday, after the currency tumbled to a 24 year low. The intervention, conducted shortly after 5 pm local time in Tokyo, caused the yen to surge from ¥145.83 to ¥142.39 to the dollar in just a few minutes. The yen had previously tumbled after Haruhiko Kuroda, the Bank of Japan governor, signaled it would leave its forward guidance unchanged for the next two to three years. We noted last week that Bank of Japan officials last week phoned currency traders to inquire about market conditions in a so-called rate check on concerns about the yen’s rapid decline vs the dollar. Earlier Thursday, the yen fell as low as 145.87 to the dollar, its lowest level since 1998. Traders have been buying dollars and selling yen this year in part because of Japan’s widening interest-rate differential with the U.S., where the Federal Reserve has been steadily raising rates.

History lesson: On this day in 1985, finance ministers and central bankers from the U.S., Japan, Germany, France and the U.K. met at the Plaza Hotel in New York with a big goal: reversing an overvalued dollar.

• Abu Dhabi’s national oil company is in talks to buy commodity trading house Gunvor. The deal would create one of the world’s largest traders of oil-and-gas products. Link for details via the WSJ.

• Signs of softening from Asia’s export heavyweights. South Korea’s early trade data showed exports barely grew in September, led by a 14% decline in shipments to China. Taiwan’s exporters are feeling the sting of China’s economic weakness, too. Some possible upside: “Easing supply chain constraints could provide a silver lining to the global picture,” Deutsche Bank researchers wrote in a note this week. “But this would only be partial given the normalization has been mostly demand-driven. High energy commodity prices and gas shortages could also worsen supply conditions going forward.’’

• Reuters: India considering rice export requests. The government of India is mulling requests from exporters to allow shipment of some rice cargoes that have been stuck at ports since the country barred exports of broken rice earlier this month, Reuters reported, citing a gov’t official that spoke on the condition of anonymity. India banned broken rice exports and applied a 25% duty on various other types. The requests are for shipments of 100% broken rice and the export of other white rice stocks at ports without paying the export tax, the report said, citing at least 20 ships waiting to load some 600,000 tonnes of rice with another 400,000 tonnes said to be stuck at port warehouses and container freight stations. “We are examining it,” the official told the news service.

• California farms pump water to feed crops amid extreme heat and drought, but residents’ wells are running dry. Many of the residents impacted are farmworkers themselves. Upward of 1,100 wells dried up this year already—a more than 60% increase from 2021. That means nearly one million Californians struggle to access clean, usable water. In the Central Valley, the drought also threatens the nearly $20 billion worth of grain, fruit and vegetable crops grown in the region.

• NWS weather: There is a Moderate Risk of excessive rainfall over parts of the Central Rockies through Friday morning... ...There is a Slight Risk of excessive rainfall over parts of the Northern Rockies and the Southwest through Friday morning... ...Temperatures will be 10 to 15 degrees above average over parts of the Southern Plains/Lower Mississippi Valley to the Southeast.

Items in Pro Farmer’s First Thing Today include:

• Two-sided price action overnight
• Exchange cuts Argentine corn, wheat crop forecasts amid drought
• China: U.S. EV subsidy regs likely violate WTO rules (details in China section)
• Cold Storage Report out this afternoon
• Choice beef under $250
• Pork cutout down sharply

— Summary: Olaf Scholz, the German chancellor, said in an interview with the New York Times that the situation was “dangerous,” but that Russia’s status as a nuclear power would not “change what we are doing.” In Russia, news of the partial mobilization of up to 300,000 reservists spurred protests across the country; more than 1,200 from 38 cities were detained, according to OVD-Info, a human rights watchdog that monitors police activity. In Moscow, hundreds of protesters gathered. Military analysts noted the draft would not have immediate consequences because it would take weeks, if not months, for Russia to mobilize, train and equip additional combat-ready troops. Meanwhile In a virtual address to the U.N., Ukraine President Volodymyr Zelenskyy called for a special tribunal that would punish Putin’s government. “Russia should pay for this war,” Zelenskyy said.

• Surprise prisoner exchange. Overnight, Ukraine announced that 215 Ukrainian and foreign citizens have been released by Russia in a prisoner exchange for 55 prisoners — among them, Putin pal Viktor Medvedchuk. Russia also released ten third-country prisoners of war, including five British nationals, after negotiations mediated by Saudi Arabia’s crown prince, Muhammad bin Salman.

— USDA distributes millions in funds to speed up rural broadband service. USDA will distribute $502 million to communities in 20 states in the latest round of funding designed to upgrade broadband access in rural areas struggling with upload and download speeds so slow they risk being left behind other Americans. USDA Secretary Tom Vilsack said in a press call the $360 million grant money and $142 million in loans through the department’s ReConnect continues department efforts to close the broadband gap between rural America and other parts of the country connected to high-speed broadband and economic opportunities.

Vilsack said his department meets regularly with the other agencies to avoid duplication of efforts. “Coordination has been good. We’re attempting to make sure we have a good accurate read on where the gaps are in terms of coverage,” Vilsack said.

— JBS hires sustainability chief. Jason Weller, who headed the USDA’s Natural Resources Conservation Service before leading a carbon credit initiative at Land O’Lakes, will be global chief sustainability officer at JBS, the world’s largest meat processor. Link for more.

— U.S. bank pledges. If China attacks Taiwan, the chief executives of three major U.S. banks — JPMorgan Chase, Citigroup, and Bank of America — have pledged to withdraw from China if the U.S. government orders it, the Financial Times reported.

— China: U.S. EV subsidy regs likely violate WTO rules. China said the U.S. Inflation Reduction Act is suspected of violating World Trade Organization (WTO) rules and will adopt measures to safeguard its rights, the commerce ministry said on Thursday. But China will follow and evaluate the implementation of the law before acting. The new law eliminates federal tax credits for electric vehicles (EVs) made outside North America.

— Britain lifted a moratorium on fracking for shale gas. The controversial practice, banned in 2019 for fear of causing earth tremors in the process, was allowed to resume in an attempt to expand domestic energy production. Jacob Rees-Mogg, Britain’s business and energy secretary, said that the country needed to “explore all avenues available to us” amid spiraling energy prices.

— Starting next year, Amazon looks to cut its CO2 emissions in Southern California by about 95% by using a new, renewable “electrofuel” diesel to power tens of thousands of delivery vehicles. The retail giant says the fuel, sourced from Sacramento, California-based startup Infinium, causes significantly less carbon pollution than petroleum-based diesel due to how it’s produced: clean hydrogen sourced from renewable energy is mixed with waste carbon dioxide captured from industrial sources. Link to details via Forbes.

— California focuses on diesel trucks. Not long after it voted to end the sale of gasoline-fueled cars and trucks by 2035, the California Air Resources Board (CARB) is expected to vote Oct. 27 on whether to ban the sale of diesel big rigs by 2040 (link for proposal). Link for more info via the Los Angeles Times.

— House Republicans: Hunger conference is partisan confab. The White House lost its opportunity for a bipartisan outcome of its hunger conference next week, so it should expect open skepticism about its recommendations, said five senior House Republicans on Wednesday. Link for details.

— Summary:

• Global Covid-19 cases at 613,538,190 with 6,531,788 deaths.
• U.S. case count is at 95,874,605 with 1,055,196 deaths.
• Johns Hopkins University Coronavirus Resource Center says there have been 612,781,120 doses administered, 267,325,642 have been fully vaccinated, or 81.13% of the U.S. population.

— FDA has authorized the release of “numerous batches” of Moderna’s updated Covid-19 booster amid reports of supply problems in some areas. Updated boosters from Pfizer/BioNTech and Moderna were made available early this month, but some pharmacy chains have reported trouble keeping Moderna’s shots in stock. Still, Moderna said it’s on track to deliver 70 million doses of its updated vaccine by the end of 2022. To date, less than half of people in the U.S. who received their initial series and are eligible for a booster have gotten one.

— Virginia Thomas, the wife of Justice Clarence Thomas of the U.S. Supreme Court, agreed to testify before a committee investigation the Jan. 6 riots.

— Sen. Manchin released his proposal to overhaul the federal energy and infrastructure permitting system. It would set a two-year target for reviews of major projects and shorten the statute of limitations for legal challenges. The draft legislation is intended to streamline the permitting process outlined under the National Environmental Policy Act (NEPA). Manchin (D-W.Va.) said the reforms are necessary to ensure that renewable infrastructure projects can be constructed on a reasonable timeline. The provisions would set a two-year target NEPA reviews for major energy and natural resource projects that require environmental impact statements, which typically take at least twice as long, and set a one-year target for projects that require a less detailed environmental assessment. To reduce the volume of litigation, it would set a statute of limitations of 150 days for legal challenges and require the random assignment of judges. If a court remands a permit back to an agency for reconsideration, the legislation would require it to set a schedule of no more than 180 days for the agency to act.

Background: To secure Manchin’s vote for the climate, health care and tax law (Inflation Reduction Act) signed by President Joe Biden last month, Senate Majority Leader Chuck Schumer (D-N.Y.) pledged to include the legislation in a continuing resolution (CR) needed to fund the federal government before the beginning of the fiscal year 2023 on Oct. 1.

Votes for Manchin language may not be there. Manchin faces strong opposition from members of his own party, and Republicans prefer an alternative approach written by Sen. Shelley Moore Capito (R-W.Va.) that would codify many of the changes the Trump administration made to the NEPA permitting process. The Biden administration finalized the reversal of those changes in April. The bill is co-sponsored by 46 of her Republican colleagues.

— U.S. ratifies Kigali climate treaty. By a vote of 69 to 27, the Senate ratified the 2016 Kigali amendment to the Montreal Protocol, in pledging to phase out the use of super-polluting greenhouse gases found in refrigerators and air conditioners. The Montreal treaty was adopted in the 1980s to protect the ozone layer. The Kigali amendment expands on it by winding down the production and consumption of hydrofluorocarbons, or HFCs, by 85% over 15 years. The Kigali amendment went into effect in many nations in 2019 — but not in the U.S. The Trump administration declined to submit it to the Senate for approval, despite unusually broad-based support from politicians in both parties, industry and environmental advocates.

— House passed its version of legislation to overhaul the Electoral Count Act, which was drafted by Reps. Liz Cheney (R-Wyo.) and Zoe Lofgren (D-Calif.). Nine Republicans voted for bill that seeks to prevent efforts to overturn an election like those undertaken by Donald Trump following his loss in 2020. Eight of them were among the 10 who voted to impeach Trump over the Jan. 6 riot; the ninth, Rep. Chris Jacobs (R-N.Y.), isn’t running for re-election. The Senate has its own version of the bill and whether Congress can come to a deal on the legislation will have to wait for the lame duck session.

— A package of policing and public safety bills is headed for House votes today following closed-door negotiations. The four bills in the package:

• Grants for police training and recruitment, especially for local departments with fewer than 125 officers, sponsored by Gottheimer.
• Promoting the deployment of mental health professionals instead of law enforcement for cases involving mental health crises, sponsored by Rep. Katie Porter (D-Calif.).
• Funding to enhance community violence intervention, sponsored by Rep. Steven Horsford (D-Nev.).
• Funding for technology investments to help local investigators close unsolved cases, especially gun crimes, sponsored by Rep. Val Demings (D-Fla.).

Outlook: The package doesn’t have the backing of Republicans and has no chance in the Senate. Translation: It’s an optics measure.

— Protests are growing in Iran over the death in police custody of a 22-year-old woman who was arrested and accused of violating a head scarf law. Though fiercest in Iran’s Kurdish region, the protests have also spread to Tehran, the capital, and to some 50 cities and towns across the country. At least seven deaths have been reported.

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