Daily SA: “Global NATO” exercise, USDA warning on food disruption, Chinese space modernization

Good morning. Here’s your Daily Situational Awareness briefing for Thursday, 15 July 2021. You can receive this daily intel brief by signing up at https://forwardobserver.com/daily-sa

TODAY’S BRIEFING:

• Capitol Hill eyes China’s space modernization
• “Global NATO” conducts exercises in the Pacific
• USDA warning on potential limited food disruption
• U.S. lawmakers eyeing diplomatic boycott of 2022 Olympics
• Early Warning briefing:
• InFocus: Smart Money Inflation Outlook
• Fed to continue bond purchases
• Food prices continue rising

SITUATIONAL AWARENESS

SPACE: Chinese space modernization is causing concern on Capitol Hill. The communist nation is developing reusable heavy-lift rockets, similar to those of Space-X, and recently inked a deal with Russia to build a research facility on the moon. Decades of intellectual property and technological theft by Chinese and Russian spies are credited with dramatically closing the gap with U.S. space capability. China is executing its “Silk Road” data program to complement the terrestrial “Belt and Road” projects, and views militarization of space as a key component of the plan.

GLOBAL NATO: U.S. military units are leading Exercise Talisman Sabre with the Australians, South Koreans, Japanese and Canadians. Around 17,000 troops are participating in table-top exercises and field maneuvers focused on capturing and holding islands. During the formal start to the event, multinational defense speakers reiterated their shared commitment to freedom of navigation in the Pacific and resisting Chinese aggression. (AC: The broader West is actively testing its capabilities and interoperability in a fairly provocative manner. Unfortunately, the pace at which the allies have oriented themselves might be too slow to mitigate Chinese intent. – D.M.)

FOOD DISRUPTION: The US Department of Agriculture released its monthly truck rate report with a dim outlook. Out of 23 specialty agriculture regions, 18 are experiencing a shortage in haulers. Nearly all domestically grown produce is impacted by these movement constraints which could lead to availability issues in some markets. We’ve previously covered the relatively short window for ag products to enter the food supply and meet USDA standards, so further disruptions could prove problematic. (Recommendation: Find a local farmers market and consider sourcing only seasonal items to better understand what sustained food disruption will look like. – D.M.)

OLYMPICS: The European Union last week passed a non-binding resolution for a diplomatic boycott of the February 2022 Olympics to be held in Beijing, China. The resolution cited human rights abuses in Hong Kong and Xinjiang, and called for further sanctions against China. More recently, some U.S. lawmakers, such as House Speaker Nancy Pelosi (D-CA) and Sen. Mitt Romney (R-UT), have called for a U.S. diplomatic boycott. An Olympics boycott wouldn’t be unprecedented: Western governments protested the 1979 Soviet invasion of Afghanistan by pulling out of the 1980 Summer Olympics held in Moscow. While a total boycott appears unlikely, a diplomatic boycott of the Beijing Olympics is likely to result in economic and diplomatic escalation that could be disruptive for the United States. We’ll continue monitoring this development. – M.S.

  HAZARDS WARNING

HURRICANE SEASON: Nothing Significant to Report

In today’s Early Warning, I take a look at where Smart Money stands on inflation and add my baseline expectations. Plus, we cover the Fed’s future of bond purchases and some developments in food prices. Upgrade your Situational Awareness to Early Warning here: https://forwardobserver.com/subscribe