Shipping Containers Piling Up Again at Major Freight Hubs

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Key USDA reports Thursday: Grain Stocks, Acreage


                                                In Today’s Digital Newspaper


An abbreviated dispatch today as I am heading back to DC from St. Louis. Today’s report will be a combined news update plus a quick look ahead at key reports and Congress.



Equities rose for Japan, Australia and Hong Kong after a near-5% jump in global shares last week, the best such performance in a month, as investors snapped up beaten-down shares in defensive sectors like healthcare and technology. U.S. stock futures are higher. World Bank president David Malpass believes the Fed’s balance-sheet runoff can help avoid a recession, while Fed Governor Jerome Powell said last week that a soft landing will be “very challenging.” Meanwhile, ECB policymakers meet in Sintra, Portugal this week for their version of Jackson Hole.

Markets: The dollar pared an earlier drop, trading little changed. The yield on the 10-year U.S. Treasury note is fetching 3.162%. Meanwhile, West Texas Intermediate oil fell slightly, having found some support at around $107 a barrel. Spot gold maintained gains, adding about $13 to trade near $1,840/oz.

Ag markets: Key USDA reports this week come Thursday with the Grain Stocks and Acreage reports. Corn futures traded lower throughout the overnight session, while soybeans and wheat rebounded from initial losses. As of 7:30 a.m. ET, corn futures were trading 8 to 15 cents lower, soybeans were 3 to 9 cents higher, SRW wheat futures were 5 to 6 cents higher, while HRW and HRS wheat were mostly 1 to 2 cents higher. Front-month U.S. crude oil futures were around 25 cents higher and the U.S. dollar index was around 150 points lower this morning.

Ag trade: Saudi Arabia purchased 495,000 MT of wheat, with the seller having the option of sourcing from the EU, Black Sea region, North America, South America or Australia. Bangladesh tendered to buy 50,000 MT of optional origin milling wheat. Jordan tendered to buy 120,000 MT of optional origin milling wheat. Taiwan tendered to buy 40,000 MT of U.S. milling wheat and up to 65,000 MT of corn that can be sourced from the U.S., Brazil, Argentina or South Africa. Egypt contracted to buy 180,000 MT of wheat from India.

Shipping containers are piling up again at major freight hubs including Chicago, the WSJ reports (link), and delays in getting inbound boxes onto trains at the ports of Los Angeles and Long Beach are stretching to days and even weeks. BNSF Railway is limiting the boxes it will carry out of the region as it copes with the backups and some importers are turning to trucks to keep their supply chains moving. That is raising shipping costs and adding complications for many shippers and providing a reminder that the pandemic-driven disruptions of the past two years are far from resolved. The rail backups come as the backlog of container ships off the Southern California ports has drifted to a nearly two-year low. But getting goods through inland distribution networks remains a challenge.

Russian strike on Kyiv looms over G7 summit. Leaders of the Group of Seven (G7) nations said Sunday they would stop buying gold from Moscow and discussed a new U.S. proposal to undercut its oil revenues, even as Russian forces rained missiles on Kyiv for the first time in weeks. Gold is Russia’s second-most valuable export after energy products. Most of those exports go to G7 countries, particularly Britain, through the gold trading hub of London. Russia did nearly $19 billion in gold exports in 2020, almost all of it going to Britain.

Russia defaulted on its foreign-currency sovereign debt for the first time in a century, following significant Western sanctions that shut down payment routes to overseas creditors. For months, the country found paths around the penalties imposed after the Kremlin’s invasion of Ukraine. But on Sunday, the grace period on about $100 million of interest payments due May 27 expired, a deadline considered an event of default if missed. Focus shifts to what investors do next.

G7 leaders are expected to agree to start work on a mechanism to cap the purchase price of Russian oil, with the U.S. also announcing a new round of military aid for Ukraine and sanctions against Moscow, Biden administration officials said today. The issue was discussed by G7 leaders on Sunday, the first day of their gathering in the Bavarian Alps. “The goal here is to starve Russia, starve [Russian President Vladimir] Putin of his main source of cash and force down the price of Russian oil to help blunt the impact of Putin’s war at the pump,” the official said. Ukrainian President Volodymyr Zelenskyy addressed the leaders today via video.

U.S. will implement a higher tariff rate on more than 570 groups of Russian products worth approximately $2.3 billion to Russia in line with Congress revoking Russia’s trade status, according to a government fact sheet distributed Monday. On Sunday, G7 leaders unveiled a ban on Russian gold imports and addressed competition with China in detailing a plan to invest hundreds of billions of dollars in infrastructure projects for developing countries.

G7 leaders will commit to providing indefinite support to Ukraine for its defense against Russia’s invasion, according to the text of a draft statement from their summit in Bavaria. “We will continue to provide financial, humanitarian, military and diplomatic support and stand with Ukraine for as long as it takes,” the text of a draft statement said. Members of the alliance are concerned about the war dragging on and some, including Germany and France, have hinted that they may be more open to the idea of a negotiated cease-fire. The G7 leaders are also weighing the possibility of using revenues from tariffs on imports from Russia to support Ukraine.

Russia/Ukraine war impacting climate change efforts. The war has hampered the fight against climate change as countries focus on finding fossil fuels — even coal — to make up for lost Russian oil.

Inflation watch: United Airlines’ pilots get a 14.5% wage increase over 18 months, as airfares spike. Meanwhile, business sales are off and costs are soaring. For some small-business owners, the recession has already arrived.

Food prices forecast by USDA to rise by most in more than 40 years. Food price inflation is now forecast by USDA at 7.5% to 8.5% in 2022, the highest since food prices rose 8.6% in 1980. The latest rise marks a fifth straight monthly increase in the forecast, according to USDA’s Economic Research Service (ERS). Food at home (grocery) prices are expected to rise 8.5% to 9.5% for the highest level of grocery price inflation since an increase of 10.8% in 1979. Food away from home (restaurant) prices are looked to increase 6% to 7%, unchanged from last month, but still the biggest rise since an increase of 9% in 1981.

U.S. consumer sentiment fell to its lowest point on record, reflecting elevated inflation that is weighing on Americans’ moods and adding to indicators that point to a slowing in the world’s largest economy. The University of Michigan’s gauge of consumer sentiment reached a final reading of 50 in June. That was the lowest reading on record going back to 1952. A souring mood for consumers is a concerning sign because household spending accounts for about 70% of U.S. economic output.

California families would get as much as $1,050 to offset rising gas prices and inflation under a tentative agreement between Dem Gov. Gavin Newsom and Democrats in the Legislature. Lawmakers and the Democratic governor face a July 1 deadline to finalize details on the cash relief plan and enact the bulk of the state budget package in time for the new fiscal year. Senate and Assembly floor votes on the package are likely to take place on Wednesday or Thursday

White House clarifies Biden’s stance on adding justices to Supreme Court. President Joe Biden doesn’t support Democrats’ bid to expand the Supreme Court, the White House confirmed over the weekend. White House press secretary Karine Jean-Pierre confirmed Biden’s position while speaking to reporters on Air Force One, coming as Democrats repeated their calls to expand, or pack, the Supreme Court with more justices after the court ruled to overturn Roe v. Wade on Friday. “I’ve been asked it before—and I think the president himself … about expanding the court,” Jean-Pierre told reporters Saturday. “That is something that the president does not agree with. That is not something that he wants to do.”

Congress: House has Committee work days this week and is out next week. Senate is on its state work period through July 8, returning July 11. After the July Fourth recess, key will be whether or not Democrats can find enough votes on getting a modified stimulus/tax increase/green energy bill via a reconciliation approach.

Several members of the Biden administration Cabinet will be appearing or delivering remarks to the SelectUSA Summit in Washington. The Department of Commerce’s International Trade Administration holds the SelectUSA meeting to promote foreign direct investment to the United States. USDA Secretary Tom Vilsack addresses the meeting this morning (June 27), U.S. Trade Representative Katherine Tai on Tuesday, and Energy Secretary Jennifer Granholm will appear on Wednesday, the final day of the meeting. Several subcabinet officials will also deliver remarks during the three-day meeting which will be opened with video remarks from President Joe Biden.

Appropriations update. The House Appropriations Committee approved six fiscal year (FY) 2023 spending bills last week, setting them up for possible floor action in July. The remaining measures — Energy and Water, Commerce-Justice-Science, State and Foreign Operations, Interior-Environment, Transportation-HUD, and Labor-HHS-Education — advanced in subcommittee and are scheduled for full committee markup this week.

Economic reports. Key report comes Thursday via the Personal Income and Outlays data which will contain the Fed’s preferred inflation gauge — Personal Consumption Expenditures (PCE). Focus will be on the core PCE price index and the annual rate of inflation signaled by that reading. Data on International Trade in Goods is also due with expectations for an expanded goods deficit for May; the full trade data for May will arrive July 7. And even though July opens Friday, the key Employment report will not arrive until July 8.

Reports today:

Economic reports. Durable Goods Orders | Pending Home Sales Index | Dallas Fed Mfg. Survey

USDA reports.  Export Inspections | Peanut Stocks and Processing | Crop Progress

 Federal Reserve Chair Jerome Powell will speak via livestream at the European Central Bank Forum on Central Banking on Wednesday. Powell will be joined on the panel by Andrew Bailey, governor at the Bank of England, Christine Lagarde, president of the European Central Bank, and Agustín Carstens, general manager at the Bank for International Settlements. Powell is coming fresh off a week on Capitol Hill, where he fielded inflation questions from Senate Banking and House Financial Services committee members.

Supreme Court is expected to announce its ruling this week in West Virginia v. Environmental Protection Agency. The case, which includes 27 Republican attorneys general, argues that the executive branch of government does not have the authority to establish rules and regulations for greenhouse gas emissions, and that the task should instead be handled by Congress. A ruling in favor of West Virginia could severely weaken the Biden administration's efforts to curb emissions and combat climate change.

Organization of the Petroleum Exporting Countries and its allies are holding their next ministerial meeting on Thursday. OPEC+ is expected to talk about August output policies during the meeting, with Reuters reporting that the group will likely stick to its agreed-upon output increase of 648,000 barrels per day in August, according to an OPEC+ source and four other sources. The meeting comes as Biden plans to travel to the Middle East next month, though it appears the president's visit isn't impacting OPEC+'s decision making on production currently.

U.S. House Friday approved a school meals waiver plan after the Senate slightly modified the version the House previously cleared. The plan would give schools flexibility to operate summer feeding programs and to continue the pandemic waivers on reimbursement rates. The Senate removed language in the bill that would have provided free meals for the 2022-2023 school year for low-income children who qualified. Under the revised provision, those students would have to pay a share of their meal costs. The House approved the measure via a voice vote, sending it to President Joe Biden for his signature. The current waiver authority expires June 30.

Pfizer and BioNTech say their updated Covid-19 boosters show increased immune response against the Covid-19 Omicron variant. According to a new study, a fourth booster with the companies' modified vaccine resulted in an increase in Omicron-fighting antibodies. Preliminary results from studies also suggest the vaccines could neutralize the Omicron BA.4 and BA.5 subvariants, which are increasingly circulating in the U.S., the companies said Saturday.

Roe v. Wade. At least 10 states have effectively banned abortion since the Supreme Court's historic reversal of Roe v. Wade on Friday that eliminated the federal constitutional right to an abortion.

Iran deal talks back on. International talks to revive the 2015 Iran deal are expected to resume this week, with negotiators likely to swap Austria for Qatar as a new venue. The news comes after EU foreign policy chief Josep Borrell visited Tehran over the weekend.

North Korea has vowed to take revenge over the United States' "aggression moves" as it marked the 72nd anniversary of the outbreak of the Korean War this weekend, according to Reuters. Amid concerns North Korea could be preparing to conduct its first nuclear test in five years, South Korean President Yoon Suk Yeol and President Biden agreed in May to deploy more U.S. weapons if necessary.

More than 1 million U.S. voters have switched to the Republican Party. According to the Associated Press (link), many suburban swing voters are making the switch.

NWS weather: Heavy rain may lead to additional instances of flash flooding over parts of the Southwest and southern Rockies through at least Tuesday... ...Isolated chances for excessive rainfall forecast across the East Coast today and Southeast/Gulf Coast States through midweek, with isolated chances for severe weather located across the northern Plains and Upper Midwest on Tuesday... ...Above average temperatures and summer heat to impact much of the West today before shifting into the northern/central Plains by Wednesday.


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