First Tranche’ of Sanctions Against Russia Seen as Less Severe Than Expected

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Surge in commodity prices from crude to metals to wheat is pausing today

 

                                                In Today’s Digital Newspaper

 

Market Focus:
• USDA daily export sale:
  — 132,000 MT soybeans to China during MY 2022-2023
• Equities stabilize following Tuesday rout
• S&P 500 into correction territory for first time since Mar. 2020's Covid-related selloff
• Bets on aggressive rate hikes are moving up again
• Record home-price growth in 2021
• Pandemic reordered personal priorities, tightening labor market and feeding inflation
• Eurozone consumer price inflation rose 0.3% from Dec., up record 5.1% from year-ago
• Transportation Dept. awards $450 million in grants for port-related projects
• Robust Russia/Ukraine-fueled wheat futures rally leading some U.S. producers to sell
• Several storms forecast to bring frigid temps, strong winds and heavy snow & rain

• Soy complex finds followthrough buying, wheat and corn pull back
• HRW crop continues to erode
• Another call for more Chinese soybean, oilseed plantings — see details in China section.
• French finance minister notes rising wheat prices 
• Pork stocks data adds to bullish tone
• Higher cash cattle prices expected
• Hog traders remain extremely bullish  

Russia/Ukraine Update

• Traders sees sanctions as modest and not as aggressive as feared
• Putin has insulated Russia’s economy from sanctions; prior punishments didn’t deter
• Putin: Russia open to ‘direct and honest dialogue’ and ‘diplomatic solutions’
• Ukraine gov’t urges Ukrainian citizens to leave Russia ’immediately’
• Trade policy impacts
• Putin’s frame of mind

Policy Focus:
• CFAP payments little changed in most recent week  
• Black farmers legislation in Illinois

Personnel:
• Biden interviewed three Supreme Court candidates
• Senate Ag Committee sets hearing for CFTC nominees  

China Update:
• Taiwanese President Tsai Ing-wen comments on Ukraine situation
• Chinese banks in two key cities cut mortgage rates to boost housing sector
• Another call for more Chinese soybean, oilseed plantings  

Trade Policy:
• Vilsack avoids discussion of Ukraine situation may have on grain markets, U.S. exports
• Several meetings with German representatives on tap for USTR Tai today

Energy & Climate Change:
• Energy independence could weigh on  efforts to decrease usage of fossil fuels
• Proposed consent decree would set June 3, 2022, as EPA deadline to finalize RFS levels
• EPA plans to release proposed RFS plan for 2023 and beyond in late-spring, early summer
• U.S. Geological Survey announces updated critical minerals list
• Biden wants California to help secure permanent pipeline of critical materials
• Progressive Dems, activists lobbying White House to declare ‘climate emergency’
• U.S. launching biggest-ever lease sale of territory to build offshore wind-power farms  
• Supreme Court rejects Dakota Access Pipeline operator's appeal  

Livestock, Food & Beverage Industry Update:
• Handful of additional trade restrictions imposed relative to U.S. HPAI cases  

Coronavirus Update:
• More infectious type of Omicron accounts for more than third of global Covid-19 cases
• Hong Kong to require all of its more than seven million residents to take coronavirus tests  

Politics & Elections:
• Inflation and politics  
• Reynolds to reply after Biden SOTU address

Other Items of Note:
• MacKenzie Scott makes major donation to 4-H Council
• Update on fire on cargo ship carrying thousands of Porsches, Lamborghinis
• Canada instructs banks to unfreeze freedom-convoy accounts  

 

MARKET FOCUS

 

Equities today: European and U.S. stocks rose with Asian shares, unfazed by geopolitics, after pressure seen on Tuesday, and suggesting investors also see the initial sanctions as limited. The U.S. Dow opened up just over 200 points higher. Asian equities finished mostly higher despite losses in US markets after Russia actions in Ukraine. The Hang Seng Index rose 140.28 points, 0.60%, at 23,660.28. China’s Shanghai Composite gained 32.00 points, 0.93%, at 3,489.15. Markets in Japan were closed for a holiday. European equities are showing gains in early trade action, with the Stoxx 600 up 0.8% and regional markets seeing gains of 0.6% to 1.2%.

     U.S. equities yesterday: Major US stock indices ended with sharp losses and the S&P 500 fell into correction territory. The Dow ended down 482.57 points, 1.42%, at 33,596.61. The Nasdaq was down 166.55 points, 1.23%, at 13,381.52. The S&P 500 fell 44.11 points, 1.01%, at 4,304.76.

     Stocks_022222
     S&P correction

On tap today:

     • Federal Reserve Bank of San Francisco President Mary Daly speaks at a Los Angeles World Affairs Council and Town Hall event at 3:30 p.m. ET.
     • Bank of Korea issues a policy statement at 8 p.m. ET.

Omicron is ripping through cargo ships, raising concerns that a surge in cases, coupled with China’s tightened quarantine requirements for vessels, could delay supply chain stabilization for the shipping industry, Bloomberg reports (link).  

Bets on aggressive rate hikes are moving up again in response, with swaps traders now pricing in a better than 35% chance of a half-point move in March, up from under 15% earlier this week. Fed Governor Michelle Bowman has also suggested a 50 bps increase could be in the cards if the next inflation readings come in too high.

Record home-price growth in 2021. U.S. home-price growth surged to a record in 2021, as low mortgage-interest rates prompted buyers to compete fiercely for a limited number of homes for sale. The S&P CoreLogic Case-Shiller National Home Price Index, which measures average home prices in major metropolitan areas across the nation, rose 18.8% in the 12 months that ended in December, unchanged from the prior month. The calendar-year increase was the highest since the index began in 1987. The Covid-19 pandemic kicked off a nationwide housing boom. Households took advantage of record-low rates and sought more space to work from home. Home sales climbed to a 15-year high in 2021. A shortage of homes for sale led to bidding wars.

     Home prices

Pandemic reordered personal priorities, tightening the labor market and feeding inflation. "Given the importance of wage growth for the inflation outlook, we examined detailed data on posted wages and workers’ reservation wages. Our findings suggest that strong wage growth is likely not a one-time adjustment for increased health risk but rather reflects a work-leisure reoptimization. ... Given our analysis of different factors, we expect strong wage growth to moderate only sluggishly, continuing to put upward pressure on inflation," the New York Fed's Richard Crump, University of Texas at Austin's Stefano Eusepi, Dallas Fed's Marc Giannoni and UT Austin's Ayşegül Şahin write in a working paper (link).

Eurozone consumer price inflation rose 0.3% from December and was up a record 5.1% from year-ago. The numbers were in line with market expectations, but they continue to reflect price pressures on Europeans. Consumer inflation minus volatile energy, food, alcohol and tobacco prices declined 0.9% from the previous month but was up 2.3% from last year.

U.S. Transportation Department is awarding $450 million in grants for port-related projects to bolster capacity and improve the movement of goods as the U.S. economy continues to be affected by congested supply chains, senior Biden administration officials say. “We’re proud to announce this funding to help ports improve their infrastructure — to get goods moving more efficiently and help keep costs under control for American families,” U.S. Transportation Secretary Pete Buttigieg said in a statement. This is the largest ever investment in the Port Infrastructure Development Program, nearly double last year’s investment, the officials said.

Market perspectives:

     • Outside markets: The U.S. dollar index is slightly weaker with a firmer tone in the euro, yen and British pound against the greenback. The yield on the 10-year U.S. Treasury note was slightly higher around 1.97% while there is a narrowly mixed tone in global government bond yields. Gold and silver futures are under pressure ahead of U.S. trading, with gold under $1,898 per troy ounce and silver under $24.18 per troy ounce.

     • Crude oil futures are weaker ahead of U.S. trading, with U.S. crude around $91.85 per barrel and Brent around $93.85 per barrel. This follows a mixed tone in Asian action with U.S. crude lower to trade around $91.95 per barrel and Brent up slightly to trade around $93.90 per barrel.

     • A robust Russia/Ukraine-fueled wheat futures rally is leading some U.S. producers to sell some of their old- and new crop. Says one industry analyst: “It was hard exporting U.S. wheat before the rally and even harder after.” Traders tend to factor into market prices a worst-case scenario, only to see that scenario typically not occur… unless another shoe drops. Wheat futures at multi-month highs is a sign that food supplies are also under threat since Russia and Ukraine together account for nearly a third of global wheat exports. A deeper impact may come as sanctions hit financial institutions, undercutting the ability of Western buyers to finance commodity purchases and for companies to ship parts to their Russian operations. Meanwhile, executives say regional freight transport costs, including prices for shipment from Black Sea ports and insurers are adding charges for voyages.

        Wheat surge  

     • USDA daily export sale: 132,000 MT soybeans to China during MY 2022-2023

     • NWS weather: Significant winter storm impacting the Southern Plains to the Ohio Valley on Wednesday into Thursday night then the Northeast/Mid-Atlantic Thursday night into Friday... ...Risk of Excessive rainfall from the Lower Mississippi to Tennessee Valleys through Thursday morning and over the Tennessee and Ohio Valley on Thursday into Friday morning... ...A Critical Risk of fire weather over parts of the Southern Rockies through Thursday morning.

        NWS 022322
        Wx 022322

Items in Pro Farmer's First Thing Today include:

     • Soy complex finds followthrough buying, wheat and corn pull back
     • HRW crop continues to erode
     • Another call for more Chinese soybean, oilseed plantings — see details in China section.
     • French finance minister notes rising wheat prices 
     • Pork stocks data adds to bullish tone
     • Higher cash cattle prices expected
     • Hog traders remain extremely bullish  

 

RUSSIA/UKRAINE


— Russia/Ukraine update: Today in a video statement, Russian President Vladimir Putin reacted to Tuesday developments, saying Russia is open to “direct and honest dialogue” and “diplomatic solutions.” Meanwhile, the Ukraine security council approved plans for a state of national emergency and the government urged Ukrainian citizens to leave Russia “immediately,” reported AFP. The rally in commodities from crude to metals to wheat is pausing today as investors stay on alert for fresh Ukraine developments. Gold held below $1,900 an ounce, nickel slipped after hitting $25,000 a ton yesterday and wheat futures retreated. Aluminum remained close to a record high. Things are more complex in the oil market, where traders are noting the possibility of a large supply boost which would accompany a successful conclusion of Iran nuclear talks.

  • U.S. and Europe placed economic sanctions on Russia for what President Joe Biden denounced as the beginning of an “invasion of Ukraine,” unveiling a set of coordinated punishments.
  • Initial sanctions: The suspension of a key natural gas pipeline (Nord Stream 2) and cutting off global financing to two Russian banks and a handful of the country’s elites — “Russian elites” and their family members, including the head of Russia’s Federal Security Service, known as the FSB, the main domestic security agency that succeeded the Soviet-era KGB. (If the Russian military ends up seizing all of Ukraine, or the central part at least, then Russia would gain ownership and control over the network of existing pipelines that run from Russia through Ukraine to Europe that Nord Stream 2 was supposed to render obsolete.)
  • U.S. financial sanctions are on a Russian military bank and VEB, the state development corporation, the first time the U.S. has frozen the assets of a major state-owned Russian bank.  The banks will be prohibited from making transactions in the U.S. or Europe, and their assets in the U.S. will be frozen. Combined, the two banks hold $80 billion in assets and finance the Russian defense sector and economic development, according to a fact sheet (link) from the White House. The U.S. is also cutting off Moscow from Western financing via sanctions on Russian sovereign debt. But the Treasury announcement Tuesday said the ban applies only to debt issued by Russia after March 1 — previously issued debt apparently can still trade in secondary markets. Biden said, “We’ve cut off Russia’s government from Western finance. It can no longer raise money from the West and cannot trade in its new debt on our markets or European markets, either.” One of the banks targeted by the U.S. had been under restrictions since 2014, and the U.S. already had limited prohibitions on Russian sovereign debt in place since 2019. The measures begin “dismantling the Kremlin’s financial network and its ability to fund destabilizing activity,” Treasury Secretary Janet Yellen said.
  • British Prime Minister Boris Johnson announced sanctions on five Russian banks and three wealthy Russians, but the oligarchs and four of the five institutions were previously targeted by the U.S. Treasury. Johnson described British sanctions as just “the first tranche.”
  • The European Union enacted sanctions against 381 Russian legislators (out of 450 of Russia’s State Duma) who voted in favor of recognizing separatist regions in Ukraine. It also imposed sanctions against 27 other Russian officials and institutions in the defense and banking sectors. They also sought to limit Moscow’s access to EU capital and financial markets.
  • Biden promised more sanctions if Putin did not withdraw his forces and engage in diplomatic efforts to resolve the crisis. “No Russian financial institution is safe if this invasion proceeds,” said deputy national security advisor Daleep Singh, who briefed reporters on the measures. He added that stronger measures remained on the table, including barring Russia from the SWIFT global banking network, a high-security communications platform used by more than 11,000 financial institutions worldwide to send secure messages and payment orders; other measures could include export controls and additional sanctions on other banks and oligarchs, including Putin.
  • The governments of Japan, Taiwan and Singapore issued a joint statement saying they would limit technology exports to Russia to pressure Putin with damaging restrictions on his ambitions to compete in high-tech industries.
  • President Biden said his administration is taking steps to limit the impact of sanctions on the U.S. economy, although he acknowledged some effects were likely. Some observers expect Biden will again tap the Strategic Petroleum Reserve, to “limit the pain” from higher gas prices. Deputy national security adviser Daleep Singh warned of severe consequences if Putin “weaponizes” global energy supplies. The White House knows well the political nature of rising energy prices. In January, U.S. consumer energy prices — a broad category — were up 27% from the prior year. Gasoline was up 40%. Fuel oil was up 46.5%. Utility gas prices were up 23.9%. "Geopolitics is back into energy, and energy is back into geopolitics, in a way that hasn't been the case since the 1970s," Daniel Yergin, Pulitzer Prize-winning author and historian focused on global energy markets, told Axios.
  • Secretary of State Antony Blinken canceled plans to meet with the Russian foreign minister on Thursday, saying that it does not “make sense” to hold talks while Russian forces are on the move.
  • Regarding the U.S. military, Biden said the U.S. would be repositioning troops already in Europe to shore up forces along NATO’s eastern flank, including moving an infantry battalion task force of approximately 800 personnel from Italy to the Baltic region. He emphasized that the movements were “totally defensive… We have no intention of fighting Russia,” Biden said. “We want to send an unmistakable message, though, that the United States, together with our allies, will defend every inch of NATO territory and abide by the commitments we made to NATO.”
  • Ukrainian Foreign Minister Dmytro Kuleba tweeted this this morning: “To stop Putin from further aggression, we call on partners to impose more sanctions on Russia now. First decisive steps were taken yesterday, and we are grateful for them. Now the pressure needs to step up to stop Putin. Hit his economy and cronies. Hit more. Hit hard. Hit now.”
  • As for Russia, Putin said that he recognized the Donetsk and Luhansk republics’ sovereignty over not only the land they control, but also the much larger portion of Ukraine that they lay claim to, home to 2.5 million people. At a news conference Tuesday, Putin demanded that Ukraine vow never to join NATO, give up the advanced weapons the West has delivered to it, recognize Russia’s annexation of Crimea and negotiate directly with the Luhansk and Donetsk separatists, who are seen in Kyiv and Western capitals as illegitimate Kremlin proxies.
  • Trade policy impacts: Russia isn’t a big player in the global economy; it’s not even in the top 10 of the world’s largest economies. U.S./Russia trade in 2020 amounted to about $24 billion — less than 5% of America’s exchange of goods with China. But Russia has an outsized role in global energy markets as the third-largest producer of oil, after the U.S. and Saudi Arabia, supplying about 10% of what’s consumed worldwide. Much of that goes to Europe, which is especially dependent on Russia for gas. Of note: Roughly one in 12 barrels of oil that the U.S. imports comes from Russia.
    Russia natural gas exports
    Russia trade
    Russia trade 2
  • Russia and prior sanctions: Sanctions are an imprecise tool in international politics, and they can take a long time to do damage to the targeted country. The U.S. and European sanctions since 2014 have inflicted only moderate pain on the Russian economy. Russia managed to find new markets and investment in China and the Middle East to replace what it lost under U.S. and European sanctions. In 2021, the Russian economy grew at a reported 4.3. And thanks to import substitution, Russian agriculture has enjoyed a renaissance over the last decade. The prices of oil and natural gas, which make up close to 40% of Russian export revenue, are soaring on global markets.
    Russia debt
    Russia reserves
  • Putin’s frame of mind: President Emmanuel Macron of France, during a visit with the Russian leader, reportedly “found that Putin was more rigid, more isolated, and had basically gone into a sort of ideological and security-minded drift.”
  • Bottom line: The moves against Russia were limited in scope and fell short of the more sweeping economic warfare that some — including members of Congress and other supporters of Ukraine — have repeatedly demanded in recent weeks. White House officials spent Tuesday afternoon trying to defend the measured approach, as questions swirled over whether their response would be enough to deter the Kremlin from mounting a bigger assault. Putin previously worked to inoculate Russia’s economy against the likely sanctions that will result from a prolonged invasion by building its currency reserves and establishing deeper economic ties with Beijing. Many analysts wonder whether even the most serious of financial sanctions will be enough to dissuade Putin from reconquering most of the former Soviet republic.

 

POLICY FOCUS


— CFAP payments little changed in most recent week. Payments under the Coronavirus Food Assistance Program 1 (CFAP 1) changed little as of Feb. 21, with total CFAP 1 payments at $11.77 billion, original CFAP 1 payments at $10.58 billion, and top-up payments at $1.18 billion. CFAP 2 payments changed very little, with total payments at $19.08 billion, original CFAP 2 payments $14.25 billion ($14.25 billion prior) and top-up payments at $4.83 billion.  

— Black farmers legislation. A bill in the Illinois legislature would respond to the declining number of Black farmers by creating a system of land grants of up to 100 acres apiece to eligible individuals, with priority going to socially disadvantaged farmers. Link for details.

 

PERSONNEL


— Biden interviewed three Supreme Court candidates. The White House said the president is on track to decide on a nominee to fill the seat vacated by Justice Stephen G. Breyer by the end of Feb..

— Senate Ag Committee sets hearing for CFTC nominees. The Senate Agriculture Committee will hold a hearing March 2 to hear from nominees for posts on the Commodity Futures Trading Commission (CFTC). They include the Christy Goldsmith Romero, Kristin Johnson, Summer Kristine Mersinger, and Caroline Pham.

 

CHINA UPDATE


— Taiwanese President Tsai Ing-wen has said Taiwan could "empathize" with Ukraine's situation given its experience with "military threats and intimidation from China." British Prime Minister Boris Johnson on Saturday said "echoes" of what happens in Ukraine "will be heard in Taiwan," while U.S. Secretary of State Antony Blinken on a trip to Australia earlier this month said "others are watching" the Western response to Russia, "even if it's half a world away in Europe."

     "I don't believe the Chinese would use force against Taiwan this year ... (Xi) doesn't really want to take any risk," said Steve Tsang, director of SOAS China Institute at the University of London, pointing to the Communist Party National Congress, due to be held in October, in which Xi is widely expected to secure a historic third term in power. "A military adventure that is not successful will not do his third term of office much good, and a failure could potentially derail it," Tsang added.

— Chinese banks in two key cities cut mortgage rates to boost the housing sector. Two of China’s largest and most prosperous cities have cut interest rates for prospective home buyers, joining an effort to prop up a housing sector whose weakness could threaten the broader economy.

— Another call for more Chinese soybean, oilseed plantings. China will plant soybeans everywhere possible this year, the country’s ag minister said, as it seeks to reduce its dependence on imports. "We will make great efforts... to expand the production of soybeans and oilseeds, Ag Minister Tang Renjian, said. “Each extra mu planted counts, and every jin harvested counts,” he noted, using Chinese measures for land area and weight. “A bottle of oil should contain as much Chinese oil as possible,” he said. Tang’s comments are the latest in a string from Chinese officials saying the country needs to ramp up domestic production of soybeans and other oilseeds.

 

TRADE POLICY


— Vilsack avoids discussion of what impact Russian invasion of Ukraine may have on grain markets, U.S. exports. “The reality is: We are dealing with hypotheticals right now,” Vilsack said in a call from Dubai, where he was leading a trade mission and attending the first Agriculture Innovation Mission for Climate (AIM for Climate) ministerial meeting. Vilsack said that diplomacy should be given a chance to work.

     Asked about criticism from farm leaders and some Republicans that the Biden administration is not taking enough action on trade, Vilsack said he was “puzzled by the skepticism” because U.S. agricultural sales last year were the highest on record, and even bigger sales are expected this year. He said there is more trade activity with India and Vietnam and pointed out the U.S. victory against Canada on a dairy issue via a USMCA challenge. “We understand and appreciate the importance of trade,” Vilsack said, but it is also important to rebuild the trust of Americans in trade.

— Several meetings with German representatives on tap for USTR Tai today. U.S. Trade Representative Katherine Tai will hold a series of meetings today with officials and representatives from Germany, according to her office. Tai will meet separately with Germany’s State Secretary of the Federal Foreign Office Susanne Baumann; State Secretary for Financial Market Policy and European Policy Dr. Jörg Kukies; and Federal Minister for Economic Affairs and Climate Action Dr. Robert Habeck. She will participate in a meeting hosted by the Federation of German Industries and a roundtable with stakeholders and students hosted by the Aspen Institute Germany. All of the sessions are closed to the press.

 

ENERGY & CLIMATE CHANGE


— Renewed importance on energy independence could weigh on policymakers' efforts to decrease the usage of fossil fuels, with coal imports to the EU in January climbing 56% from the prior year. The U.K. Coal Authority also recently allowed a mine in Wales to increase output by 40M tons over the next two decades, while Australia is planning to open or expand more coking coal mines. Meanwhile, U.S. Energy Secretary Jennifer Granholm is urging American producers to raise their oil and gas output, even telling the National Petroleum Council in December to "get your rig count up."

— Proposed consent decree would set June 3, 2022, as EPA deadline to finalize RFS levels. EPA would be required to set the final Renewable Fuel Standard (RFS) levels for 2021 and 2022 by June 3, 2022, under a proposed consent decree the agency has published (link) in today’s Federal Register.

     The proposed consent decree is in response to a complaint filed Feb. 8 by Growth Energy against EPA, contending the agency failed finalize the 2021 RFS levels by Nov. 30, 2020, and the 2022 levels by Nov. 30, 2021, as required by law — EPA proposed the 2021 and 2022 levels on Dec. 7, 2021. EPA would have to sign the final rule for the 2021 and 2022 RFS levels by June 3, 2022. EPA also said in the proposed decree it would finalize the revised 2020 RFS levels in that same rule.

     Comments are due March 25.

     Comments: This would appear to set the stage for EPA to send its finalized RFS levels for 2020, 2021 and 2022 to the Office of Management and Budget (OMB) soon for their review if they are to meet a June 3 deadline to sign the proposed rule.

— EPA plans to release proposed RFS plan for 2023 and beyond in late-spring, early summer. Renewable Fuels Association (RFA) President and CEO Geoff Cooper said EPA has advised the group they plan to release their proposal for setting Renewable Fuel Standard (RFS) levels for 2023 and beyond sometime in late spring or early summer of this year. After the 2022 compliance year, EPA is tasked with setting the RFS levels without legislated targets that were part of the 2007 energy law that expanded the RFS. “The only logical path forward for the RFS is to increase the volume requirements and maximize the program’s ability to drive carbon reduction in the transportation fuels sector,” Cooper remarked at the RFA National Ethanol Conference in New Orleans. He also continued to push back on EPA’s decision to retroactively reduce the already finalized 2020 RFS marks.

     As for the RFS plans, EPA Office of Transportation and Air Quality Director Sarah Dunham said at the conference the administration was going to put the RFS “back on track” toward a sustainable expansion path.

     A low-carbon fuel standard (LCFS) will be a “big topic of conversation and comment” in the future relative to the RFS, but Dunham stressed statutory language on the RFS is “conditioned around volume targets” and not on carbon intensity. Under the coming set rule for the RFS, Dunham said EPA must take into account several factors, including climate change, air and water quality, job creation and commodity supply. “We must look both backward and forward as we consider what volumes may be appropriate,” she said.

     EPA’s plan to include bio-intermediates (feedstocks partially processed at one site and moved to separate site for final refining) in the RFS shows the administration’s “commitment to making changes to the program where those changes can help improve the program.”

     Cooper welcomed the effort on bio-intermediates but said “more can be done to facilitate innovation and open the door to new pathways and processes.”

     Separately, Cooper told reporters that the group was hopeful EPA could propose more than 2023 levels when they unveil their plan for 2023 and beyond, a move he said would add certainty to the RFS.

     The global goal to achieve net-zero carbon emissions by 2050 “may very well be the greatest opportunity for growth and value creation in the industry’s history,” Cooper said in a keynote speech at the National Ethanol Conference in New Orleans. “Just as the ethanol industry seized on opportunities to stimulate the rural economy, reduce smog-forming air pollution, and bolster energy security, we now have — right in front of us — another great opportunity to provide a solution to one of the world’s most daunting challenges: reducing carbon emissions and combatting climate change,” Cooper said. “And we cannot afford to miss this opportunity — not just because it will help our industry grow and thrive, but because the very health of the planet is at stake. “With the right chemistry and technology, ethanol can serve not only as a future low-carbon fuel for jets, ocean liners, trucks, and farm equipment, but also as the fundamental building block for sustainable chemicals and plastics,” Cooper said. “In reality, anything you can do with a barrel of crude oil, we can do with a barrel of renewable ethanol.”

     Cooper released a study (link), “Pathways to Net-Zero Ethanol: Scenarios for Ethanol Producers to Achieve Carbon Neutrality by 2050,” and a state of the industry report (link). 

     Comments: It is still not clear what direction EPA will go with its plan for setting RFS levels in 2023 and beyond, but a clearer timeline is starting to emerge. EPA has also signaled it wants to finalize the plan before the end of 2022 which would put the agency back on the required regulatory schedule for the RFS.

— The U.S. Geological Survey announced an updated critical minerals list yesterday, adding nickel and zinc to the group, while leaving off two others — uranium and helium — that Senate Energy and Natural Resources ranking member John Barrasso (R-Wyo.) yesterday described as a surrender to Russia. “The president should make producing them in America a top priority,” he said.

— President Biden wants California to help secure a permanent pipeline of critical materials essential to the tech industry that can boost the nation’s green energy production and its competitiveness. Speaking Tuesday at a virtual roundtable with Gov. Gavin Newsom, the president touted investments around the country, highlighting several in California, including a new $35-million contract that the Department of Defense has awarded a Las Vegas company to separate and process heavy rare earth elements at its facility in Mountain Pass, Calif. The goal of the contract with MP Materials will be to establish a permanent end-to-end domestic supply chain for the magnets used in electric vehicle motors, electronics and wind turbines.

     Background. Nearly 100% of the nation’s critical minerals are imported from foreign sources, including materials such as lithium and graphite, “which are badly needed for so many American products,” Biden told the group of industry and community leaders. “China controls most of the global market of these minerals, and the fact is that we can’t build a future that’s made in America if we ourselves are dependent on China for the materials, the power, the products,” he said. Minerals such as lithium, which is abundant in the Imperial Valley, are the building blocks for many technologies found in everyday products such as computers and household appliances, as well as green technology. Global demand for critical minerals is set to skyrocket by up to 600% over the next several decades, White House officials said. For minerals such as lithium and graphite, which are used in electric vehicle batteries, the administration said, demand is expected to increase by as much as 4,000%.

— Progressive Democrats and activists are lobbying the White House to declare a “climate emergency” to unlock executive powers, with Biden’s signature environmental legislation indefinitely stalled. The tactic could allow Biden to shut down crude oil exports, suspend offshore drilling, and redirect funding for clean energy projects. Former President Donald Trump used a similar step to divert billions of dollars to build a wall along the southern border after Congress refused to appropriate the funds.

     Invoking a climate emergency also could allow Biden to use the Defense Production Act and the federal procurement budget of $500 billion per year to produce renewable energy and clean transportation technologies, according to a report being released today by the Center for Biological Diversity.

— U.S. is launching its biggest-ever lease sale of territory to build offshore wind-power farms. Today’s auction of half a million acres off New York and New Jersey represents a milestone for President Biden’s climate and renewable-energy agenda. But challenges to the development of a U.S. offshore wind industry include opposition from the commercial fishing industry, pandemic-related supply challenges for turbine makers and a looming construction crunch.

— The Supreme Court rejected the Dakota Access Pipeline operator's appeal of a federal appeals court ruling, leaving in place the lower court's decision that the Army Corps of Engineers should have conducted a more thorough environmental analysis before allowing the pipeline to cross under a lake in North Dakota. The pipeline, which has been operational since March 2017, is now vulnerable to being shut down.

 

LIVESTOCK, FOOD & BEVERAGE INDUSTRY


— Handful of additional trade restrictions imposed relative to U.S. HPAI cases. The European Union has put restrictions in place on U.S. poultry/product imports due to the highly pathogenic avian influenza (HPAI) cases and a handful of other countries have also placed restrictions on such shipments, including ones linked to backyard non-poultry cases of HPAI in New York and Maine, an action which runs counter to recommendations of the World Animal Health Organization (OIE). Meanwhile, detections in wild birds have increased to 247 with finds in Delaware and additional cases in North Carolina and New Hampshire.

     o   Poultry/products from Fulton County on or after Feb. 12 unless otherwise noted: Chile (includes Hickman County), Costa Rica, Curacao, Ecuador, Hong Kong, India, Jamaica (includes Hickman County), El Salvador (Jan. 22), French Polynesia (Tahiti – Jan. 23), Guatemala, Honduras, Jordan, Kazakhstan, New Zealand, Nicaragua, North Macedonia, Qatar, Solomon Islands, Turks & Caicos Islands, United Arab Emirates, Vietnam (Feb. 8).
     o   Poultry/products from a 10-kilometer radius from location in Fulton County as Feb. 12 unless otherwise noted: Canada, Egypt, Hong Kong, Mauritius (Jan. 22, 25), Morocco (Jan. 22), New Caledonia, Vietnam, Western Samoa (Samoa – 50 kilometers).
     o   Poultry/products from Webster County on or after Feb. 15 unless otherwise noted: Barbados, Chile (includes Hopkins and McLean Counties), Costa Rica, Curacao, Ecuador, El Salvador (Jan. 22), French Polynesia (Tahiti – Jan. 25), Guatemala, Hong Kong, Honduras, India, Jamaica (includes Hopkins and McLean Counties), Jordan, Kazakhstan, Nicaragua, New Zealand, North Macedonia, Solomon Islands, Turks & Caicos Islands, Qatar, United Arab Emirates, Vietnam (Feb. 8).
     o   Poultry/products from a 10-kilometer radius from location in Webster County as of Feb. 15 unless otherwise noted: Canada, Egypt, Mauritius (Jan. 22), Morocco (Jan. 22), New Caledonia, Singapore, Vietnam, Western Samoa (Samoa – 50 kilometers).
     o   Poultry/products from the state of Kentucky on or after Feb. 12 unless otherwise noted: Benin (Jan. 22), Belarus, China, Cuba, Dominica, Dominican Republic, European Union (including a portion of Tennessee), French Polynesia (Tahiti), Japan (Jan. 21), Jamaica, Korea, Mexico (Jan. 17), Namibia (Jan. 22), Norway, Myanmar, South Africa (Jan. 22), Singapore, St. Lucia, Taiwan (Feb. 13), Tunisia, Ukraine, UK (including a portion of Tennessee), Uruguay.
     o   Poultry/products from the state of Virginia on or after Jan. 17 unless otherwise noted: Cuba (Feb. 16), Hong Kong (Feb. 17), Mexico, Taiwan (Feb. 17).
     o   Poultry/products from Fauquier County, Virginia on or after Jan. 21 unless otherwise noted: Hong Kong (Feb. 17), Japan.
     o   Poultry/products from Indiana on or after Feb. 8 unless otherwise noted (restrictions added since Feb. 20): European Union, Norway.
     o   Poultry/products from Maine on or after Jan.27 unless otherwise noted: Japan (Knox County only), Taiwan (Feb. 20).
     o   Poultry/products from New York on or after Jan. 26 unless otherwise noted: Japan (Suffolk County only), Taiwan (Feb. 19).

 

CORONAVIRUS UPDATE


Summary: Global cases of Covid-19 are at 428,140,978 with 5,907,714 deaths, according to data compiled by the Center for Systems Science and Engineering at Johns Hopkins University. The U.S. case count is at 78,649,877 with 939,202 deaths. The Johns Hopkins University Coronavirus Resource Center said that there have been 550,924,900 doses administered, 215,006,201 have been fully vaccinated, or 65.50% of the U.S. population.

— A more infectious type of the Omicron variant accounts for more than a third of global Covid-19 cases sequenced recently, complicating debates over full reopening.

— Hong Kong will require all of its more than seven million residents to take coronavirus tests next month, as the territory tries to contain its worst outbreak.

 

POLITICS & ELECTIONS


— “Inflation is not only an economic phenomenon, it’s also a psychological one in politics, because it is a psychological proxy for things being out of control” — William Galston, a political scientist at the Brookings Institution, on why public discontent is widespread despite job growth and wage gains. Link for details.

— Reynolds to reply after Biden SOTU address. Iowa GOP Gov. Kim Reynolds, who opposed mask and vaccine mandates as Covid-19 cases rose in her state, will deliver the Republican response following President Biden's State of the Union address next Tuesday, said GOP leaders in Congress.

 

OTHER ITEMS OF NOTE

 

— MacKenzie Scott makes major donation to 4-H Council. Billionaire MacKenzie Scott has pledged a gift of $50 million to the National 4-H Council, the largest donation the group has received in its 120-year history. Scott, the ex-wife of Amazon founder Jeff Bezos, also recently donated $15 million to the Center for Science in the Public Interest (CSPI). The group reaches nearly 6 million young people across the U.S. and is present in every county and parish in the U.S., providing experiences in a host of areas that target both urban and rural locations.

— A fire that broke out on a cargo ship carrying thousands of Porsches, Lamborghinis and Volkswagens destined for the U.S. market continues to rage, a week after the unexplained blaze began. The fire on the ship, currently adrift near the Azores after it was abandoned by its crew, is expected to lead to a loss of cargo worth more than $300 million. Additional firefighting vessels are expected to arrive today, while a Portuguese team will inspect the vessel via helicopter on Thursday to assess how best to tow it to port.

— Canada instructed banks to unfreeze freedom-convoy accounts. Canada told banks to unlock financial accounts belonging to individuals involved in a weekslong Covid-19 protest in Ottawa that police shut down this past weekend, according to a finance ministry official. The Canadian government instructed banks to lock the private and/or business accounts of individuals involved in the weeks-long demonstration, saying it was crucial during the declared emergency period. "We were very clear that we would be following the money, that we would be using financial tools to disrupt illegal blockades and occupations," Finance Minister Chrystia Freeland declared. "These measures were put in place to disrupt illegal activity in Canada." While the accounts are now in the process of being unfrozen, organizers of the Freedom Convoy dubbed the move financial warfare, saying it would "sow mistrust in both the banking system and the government and the repercussions will be felt for years to come."

     The disruption was said to cost the Canadian capital over $800,000 per day in policing expenses, and that does not include the collateral damage felt by businesses in the surrounding areas. It also upended U.S. cross-border trade worth $350 million a day, with the auto industry alone facing losses as high as $1 billion, including manufacturers like Ford, General Motors and Chrysler-maker Stellantis. While the Ambassador Bridge has been cleared, it's going to take several weeks for things to return to normal, said Peter Nagle, auto research analyst at IHS Markit.


 

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