Good morning. Here’s your the Daily Situational Awareness for Thursday, 24 June 2021. As a reminder, you can get this brief in your inbox each morning by signing up here: https://forwardobserver.com/daily-sa You can also watch today’s Daily SA brief at 11am Central on our YouTube channel: https://youtube.com/forwardobserver
TRUCKING: After rising from $1.40 per mile in 2020 to $3.19 per mile this month, trucking rates seem to be peaking, but that doesn’t mean that shipping prices will come down. UPS announced that it’s adding a holiday season surcharge that could range from $1.15 to $6.15 per package for its largest customers. The surcharge is set to start on 31 October and run through 15 January 2022 for any customer who’s shipped more than 25,000 packages in any week since February 2020 (primarily big box stores). Meanwhile, oversized packages will incur a $3.50 surcharge starting on 04 July, which increases to $6 per package after 03 October. These costs will be passed onto consumers throughout the holiday season. – M.S.
INFRASTRUCTURE: The bipartisan group of lawmakers appears to have made a deal on $1 trillion in infrastructure spending. The group of 21 politicians are briefing the White House today, and then the measures are expected to be introduced into the legislature. Passage through Congress isn’t guaranteed but the presence of prominent Republicans like Sen. Lindsay Graham (R-SC) indicates some bipartisan support. (AC: This bill will raise transportation costs. Expect either a fuel-tax increase, potentially a per-mile tax and/or a new surcharge on electric vehicles. – D.M.)
HARASSED: Supply chain auditors working on behalf of commercial entities and the State Department are being harassed in China. Homeland Security Secretary Alejandro Mayorkas will hold a news conference tomorrow on efforts to remove slave labor from supply chains. The moves follow statements by the G7 members against China’s forced labor in Xinjiang. (AC: We covered recently the anticipated harassment of US and Western businesses operating in China as a consequence of the mere acknowledgement of the communists’ human rights abuses. As shipping and supply constraints continue, expect those to be artificially leveraged against companies speaking out against China. Going into 2022, the pressure by corporate PACs to elect pro-Chinese candidates will be substantial. – D.M.)
DROUGHT: Due to substantial drought conditions in California, almond farmers are beginning to take out trees to preserve quality crops. The current year crop is down 25% as farmers planted less but increased their crop density in an attempt to preserve moisture in the soil. California accounts for more than 80% of global almond production and the significant reduction in water is likely to impact other crops. Cattle are being sent to slaughter earlier and cauliflower, strawberries and lettuce aren’t being planted as widely due to their irrigation requirements. (AC: While the crop requires substantial amounts of water, the generalized water shortages in California stem from decades of bad public policy and prolonged drought conditions. – D.M.)
DECEPTION: On Wednesday, the UK-flagged HMS Defender conducted a patrol in the Black Sea near Crimea. Russian state media then said two border patrol boats and a SU-24 bomber engaged the British vessel with crew-served warning shots and 4 x 250kg bombs dropped nearby. Social media and traditional outlets immediately propagated the story, fomenting fears of a major conflict. The problem is that Russia didn’t actually respond with warning shots or bombs. Earlier this week, we discussed the incident with two NATO vessels appearing to be within two miles of the Sevastopol naval base. Falsified automatic identification system (AIS) data showed the two vessels travelling from Odessa to Crimea and back, but video showed the ships never left. (AC: This is a result of ideologically vulnerable target audiences being exploited in retaliation against perceived Western aggression. These operant conditioning campaigns are waged by state-actors against media personalities as the unwitting victims fight to be first with a story or scoop the impact. The unfortunate result is a lot of bad information goes out and fake stories have a much longer tail than they otherwise would. – D.M.)
In today’s Economic Early Warning report, we discuss concerns over an “accident” at the Federal Reserve, a new early warning indicator of a market correction or crash, and an updated outlook on inflation. You can get our full Early Warning briefing by becoming a subscriber here: https://forwardobserver.com/early-warning