90 seconds at 9 am: Record grain harvests after good weather conditions

American payrolls rise less than expected; US factory orders up strongly; Ireland to contest EU tax ruling; bumper Aussie wheat crop; UST 10yr yield at 1.60%; oil and gold up; NZ$1 = 72.9 US¢, TWI-5 = 76.5

5th Sep 16, 7:07am by David Chaston

Here's my summary of the key events from over the weekend, with news of some likely record grain harvests worldwide.

But first, the American jobs data came up short on Saturday. US payrolls grew at a slower but solid pace in August, a sign their job market is cooling as the American economy approaches full employment. Still, there are +2.4 mln more jobs in the American economy than at the same time a year ago. That is a lot of new jobs in anyone's language.

The updated durable goods report showed that new orders July grew a very respectable +4.4%. In June the increase was +4.3%. These are significant increases. (Orders for non-durables were weaker.)

Remember, it will be the American Labor Day holiday tomorrow, so markets will be quiet at the start of this week. But that marks the end of their summer holiday season, so the Wall Street heavy hitters will be returning on Wednesday.

And the general news has images of an Atlantic hurricane hitting the south-east of the country. This is real news; it is the first major event they have had in about ten years. The weather has been unusually tame for a long time in that area.

In Ireland, Apple has found a friend in the Irish Government. They have decided to join with the tech company in its legal appeal over the EU ruling. The Irish say its all about their sovereign right to set a corporate tax by their elected government, rather than it being imposed from Brussels.

In Australia, their wheat crop could be in for a big upgrade, probably to an all-time record. Satellite imagery shows record vegetation density across nearly all growing regions following good rains and excellent growing conditions. Good crop results aren't only coming from Australia; similar high output data is coming for other major ag commodities in other countries. India for example is expecting big crops this year. Big production means low prices, keeping a lid of food prices.

In New York, the UST 10yr yield ended the week at 1.60%.

The oil price is up by about US$1 with the US benchmark price now just over US$44 a barrel, while the Brent benchmark just over US$46.50 a barrel.

The gold price is also up, by US$13, now at US$1,325/oz.

The New Zealand dollar rose as well following the US payrolls report. It’s now at 72.9 US¢, 96.4 AU¢ and 65.4 euro cents. The TWI index is still at 76.5.

If you want to catch up with all the local changes from Friday, we have an update here.

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26 Comments

by KH | 5th Sep 16, 8:15am 1473020113

Collusion between the Irish Government and Apple corp. And New Zealand is being screwed by their cosy little arrangement. You, the NZ taxpayer, are paying more tax than you need because of the actions of these people. Depending on foreign co-operation in international tax is just plain wishful. Naive. We need to go unilateral.

by David George | 5th Sep 16, 8:28am 1473020897

The Irish getting all "sovereign rights" with the EU? What a joke! They don't do sovereign rights, that's why the Brits and, increasingly the rest of the EU people have had a gutsful.
As for that Apple outfit, how the hell can they get away with this and there's them sitting on hundreds of billions ( about $300,000,000,000) of cash they don't even know what to do with. Crazy!
https://www.theautomaticearth.com/2016/09/debt-rattle-september-4-2016/ • 6 Steps To Avoiding All EU (Incl. Irish) And US Taxes Via Ireland (PP)
http://www.thepropertypin.com/viewtopic.php?f=4&t=66347

by Noncents | 5th Sep 16, 9:02am 1473022929

Thing is the average Irish person is fine with this, and want to remain in the EU.

Ireland gets hundreds of millions (if not billions) of euros in EU subsidies. Significantly more than what they are required to contribute, it is also significantly more than if they were to fund everything themselves via taxes.

If you are getting giant multinationals basing themselves in Ireland (Job creation) and EU subsidies worth more than taxes - what would you do?

by scarfie | 5th Sep 16, 9:21am 1473024107

So do you really think even the above average Irishman really knows what is going on, let along the average one?

The jobs myth has been blown out of the water, it hasn't happened.

by Noncents | 5th Sep 16, 10:04am 1473026657

The average Irishman - Do they understand the wider tax implications and the intricacies of being in the EU? probably not. But they do see all the benefits - Roading and other infrastructure paid by EU, farming subsidies, etc...

As for the jobs - its not a myth, Google, Microsoft, IBM, Dell, Apple, Pfizer, and many more all set up their European Headquarters in Dublin. Remove them and Dublin would be about the size of Wellington rather than Auckland.

Apple have been in Ireland since the 80s, believe me, there will be some benefit to Ireland (or at least their corrupt pollies) otherwise they would have been turfed out decades ago.

by Cowpat | 5th Sep 16, 8:17am 1473020256

Who in Auckland is interested in grain, apples and payrolls,at the start of a month all that matters are Barfoots numbers.

by David George | 5th Sep 16, 8:37am 1473021461

It's all connected, though few Jaffas probably think about it (busy having to count all those tax free gains no doubt). All that food and oil and surplus supply everywhere you look can only mean lower for longer interest rates and another boost to already ridiculous asset prices everywhere. The central bank's inflation efforts are simply not working and mostly having the opposite effect of encouraging deflation.

by murray86 | 5th Sep 16, 8:48am 1473022123

They're not real gains until they either sell, or borrow against them. This is when they should be taxed.

by notaneconomist | 5th Sep 16, 10:47am 1473029255

Those Aucklander's might get a sudden urge to be interested in grain, apples and payrolls when there is no inflation......which causes the tax take to be down forcing the introduction of new taxes like for example a land tax.......there is always an area of the economy allowed to grow for future tax harvesting when other areas have dried off.

by Stephen Hulme | 5th Sep 16, 9:40am 1473025222

In Australia, their wheat crop could be in for a big upgrade, probably to an all-time record. Satellite imagery shows record vegetation density across nearly all growing regions following good rains and excellent growing conditions.

Another symptom of easy, cheap bank credit to add to the list of global malinvestment endeavours in need of any income to fund inappropriate debt.

CHICAGO—U.S. farm incomes will hit their lowest point this year since 2009, the U.S. Department of Agriculture said Tuesday, deepening pain in the Farm Belt amid a multiyear downdraft in commodity prices.

The forecast reflects a painful slump in the U.S. agricultural economy driven by bumper corn and soybean harvests, swelling grain inventories and tougher export competition. Farmers are expecting record corn and soybean harvests again this fall, potentially pushing prices for the nation’s two most common crops down even further.

As a result, the USDA said, net farm income will drop 11.5% to $71.5 billion this year, from $80.7 billion in 2015. That would be the third straight annual pay cut for farmers since incomes soared to record levels in 2013.

Futures prices for corn have fallen about 15% so far this year, and prices for the grain are trading at seven-year lows. Wheat prices have tumbled nearly 23% in 2016 to trade at 10-year lows thanks to excess supplies.

Domestic growers also are battling a strong U.S. dollar that has encouraged some of their foreign customers to find grain elsewhere. Read more

It's hard not to find fault with central bank stupidity.

by notaneconomist | 5th Sep 16, 10:41am 1473028881

It doesn't look like food prices will be providing the inflation for our RBNZ.

by Stephen Hulme | 5th Sep 16, 11:02am 1473030145

LOL - certainly, while it persists underwriting farmers' debts with lower interest rates today, which in turn deflate agricultural prices tomorrow.

by jh | 5th Sep 16, 11:13am 1473030814

Corin Dann
“With all the pressure put on housing put on infrastructure put on schools
can you point to any evidence that long term migration lifts our productivity rate or lifts our exports or makes us more competitive as a country”

Woodhouse
“Yes, absolutely. And there was a recent Berl report that came out last month that showed that there was a very strong and positive contribution being made by migrants (temproary and permanent) and
and that includes taking into account health education and social services. So it’s pretty unequivocal, it’s important to keep in mind that we do have a New Zealanders first policy and when it comes to things like housing supply, it’s important that we get that right. But the contribution to our economy by migration is overwhelmingly positive.”
http://tvnz.co.nz/q-and-a-news/ta-tvnz-index-group-2556429

presumably
http://www.berl.co.nz/economic-insights/jobs/migration/migration-and-to…

by David George | 5th Sep 16, 11:48am 1473032910

Woodhouse parroting the party line re immigration. There is plenty of evidence, including from Treasury, that the gains are marginal at best and mostly net negative.
What is really driving the economy is our propensity to borrow. We are pumping in around 10% of GDP in new money from debt/credit creation - that's equal to two entire dairy industries.
GDP per capita growth is less than 1%, that's it! With that much credit growth, tourism, a building boom and immigration at record levels and that's all we can manage! If that's as good as it gets then something is seriously wrong.

by tim12 | 5th Sep 16, 11:45am 1473032748

migration is a short term solution. We have an economy based on finding a "greater fool" i.e someone who will work twice as hard for less money or foreign investors who buy property here that is so far ahead of the rest of the market you wonder if they will ever get their money back when they sell.

by David Chaston | 5th Sep 16, 11:57am 1473033472

Completely disagree. Almost all the benefits from migration are long-term. Especially from second and third generations. All the stresses come in the short-term. But you can't get those long-term benefits without starting.

by jh | 5th Sep 16, 12:35pm 1473035757

What long-term benefits are you referring to jack?

by Camel's back | 5th Sep 16, 12:55pm 1473036903

I can't see benefits from a larger population i only see more people.

by steven | 5th Sep 16, 1:01pm 1473037261

Consuming more of finite resources. This is where I think many are failing, they cannot comprehend the simple math of exponential expansion on a finite planet, DC is clearly one of these.

by David George | 5th Sep 16, 1:39pm 1473039576

We are well past the tipping point now; 7.5 thousand million of us and climbing but there are these fools calling for more.

Each year in America - America alone - we throw away the equivalent of one football field, a 100 miles deep. That is the first thing.
The second thing, we’ve entered the age of climate instability. That means from burning subsidized climate altering fossil fuels our food security is in jeopardy.
The third thing that is striking is we’re losing species a thousand times faster than in the last 65 million years. At this rate within 33 years, by midcentury – that means 800,000 forms of life or half of everything we know will be gone.
http://www.zerohedge.com/news/2016-09-03/half-forms-life-earth-will-be-…
Makes you wonder if folk even bother to think about it. Take Auckland, that cess pit of greed and debt fueled consumption is being described as the power house of the NZ economy. Retail there is up 8.3% thanks to their dangerous addiction to debt and booming population. http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=117…
Has anyone else done the maths on their population growth? The current rate (2.5%) gives a doubling time of 28 years - about (or slightly less than a generation). That's about 14 million Aucklanders in only three generations. Who decided that would be a good idea?

by steven | 5th Sep 16, 12:58pm 1473037137

So the grow for ever on a finite planet strategy, bound to end well.

by KH | 5th Sep 16, 3:36pm 1473046587

Please list the benefits David. And no uttering 'growth' or 'GDP'. Just benefits to individual citizens are relevant.

by David Chaston | 6th Sep 16, 8:18am 1473106697

Sorry for missing your challenge yesterday. It is a fair one.

This is a list of first generation immigrants who added to their communities. The list for second and third generation offspring would be endless.
Albert Einstein
George Frederic Handel
Karl Marx ;)
Sigmund Freud
TS Eliot
Robert Maxwell
Zaha Hadid
Kazuo Ishiguro
Mo Farah
John Hemmes
Richard Pratt
Harry Triguboff
Frank Lowy
Sian Elias
Steve Jobs
Mahé Drysdale
(probably most of the commenters on interest.co.nz)
Just a few I could think of off-hand. I have probably missed some even more famous ones. More famous local ones.

The point is, all societies are enhanced by new arrivals. They bring energy, different ways of thinking, new ideas on food, art, business, sport, academia, etc. They tend to challenge the locals, help us raise our game. Lazy locals feel threatened. First generation migrants tend to want to provide a better future for their children. So they have an outsized focus on education and personal development. There are many benefits for the migrant's families. But the main benefits are for the locals who are challenged out of their comfort zone. Civic, business, workplace and social idea pools are larger because of their involvement. They tend to be more optimistic, have confidence about the future, are prepared to invest in areas overlooked by locals, are less class-structured in their thinking. True, some may challenge boundaries we locals want preserved. And that helps us understand why we have those boundaries. We should, and do, welcome them. The ones we each know personally are fantastic people. It is only when we don't know them and pidgeon-hole them as a 'class' that we feel threatened. They are different, and that confronts some people.

Look at monocultural countries, of which there are many. They tend to be insular, usually very insular. They may be 'safe' but they are stagnant.

A lot of this comes down to your world view and persoanl outlook. If you view the future with fear, you will fear change and fear new arrivals. If you view the future with optimism, you will welcome new ideas, new thinking, new challenges and be prepared top put up with a few rough edges.

Importing optimism and energy is a very good thing, in my view. I think NZers are good at welcoming them, inherently understand the benefits. We are an even better country because of migrants and our children will have a better society to live in.

by jh | 5th Sep 16, 12:45pm 1473036322

3.8 Large positive effects: conclusion
Overall, the evidence points to modest, rather than large positive effects from factor price
equalisation, different migrant characteristics, changes to capital utilisation, scale and
agglomeration, improved international connectedness, population ageing and fiscal
balance. However, it is possible that scale or international connection effects could
operate with very long lags: a new paper by Brunow et. al. (2014) provides tentative
empirical evidence suggesting that while net migration does not impact on growth
positively or negatively in the decade in which it occurs, it may boost growth in the longer
run. Some of the possible channels the authors identify include education and training
decisions, skill and diversity spillovers, trade, entrepreneurship, and clustering. It is also
possible that scale and agglomeration could create larger positive impacts if future
migration flows increase significantly. Existing evidence on these possibilities is too
uncertain to enable estimates precise enough to guide policy.
4 The case for large negative effects
http://www.treasury.govt.nz/publications/research-policy/wp/2014/14-10
Migration and Macroeconomic
Performance in New Zealand:
Theory and Evidence
Julie Fry
New Zealand Treasury Working Paper 14/10
Doesn't sound unequivocal to me?

by steven | 5th Sep 16, 1:02pm 1473037365

Yep more grow for ever strategy, they obviously still believe in a flat earth as well.

by KH | 5th Sep 16, 3:32pm 1473046357

"May boost Growth". Well whoopdee. "It" whever that is will be bigger. Meanwhile we, the locals, won't be better off. But as we have learned, thats not the important thing.