Report: Pruitt backs E15 waiver, curbing trading of credits
— $1.5 billion settlement in suit over Syngenta modified corn seed. A $1.5 billion settlement was reached in a class-action lawsuit against Syngenta over its introduction of a genetically engineered corn seed. Payments will be made to U.S. corn farmers, grain handling facilities and ethanol plants. The settlement covers corn priced after September 15, 2013. Lawsuits in state and federal courts challenged Syngenta's decision to introduce its modified Viptera and Duracade corn seed strains to the U.S. market for the 2011 growing season before having approval for import by China in 2014. The plaintiffs said Syngenta's decision cut off access to the large Chinese corn market and caused price drops for several years.
The settlement, reached Monday, must be approved by a federal judge in Kansas (U.S. District Judge John W. Lungstrum in the District of Kansas ). It will create a fund to pay claims by farmers and others who contracted to price corn or corn byproducts after Sept. 15, 2013. If approved, money could be distributed to class members in the first half of 2019.
The settlement does not include exporters such as Cargill and ADM that are also suing Syngenta.
The settlement is believed to be the largest agricultural litigation settlement in U.S. history, according to four lawyers who led the litigation for corn producers. "America's corn farmers and related businesses were hurt economically and this settlement will provide fair compensation for their damages," the attorneys said in a joint statement. "It is an equitable result for all involved."
All farmers are eligible for the settlement, including those who might have opted out of previous Syngenta lawsuits. When funds are available farmers must submit a claim form to collect — notices will likely be mailed and farmers will need to submit forms, opt out or object to agreement terms.
The preliminary settlement did not "constitute an admission by either side concerning merits of the parties' allegations and defenses," Syngenta spokesman Paul Minehart said in a statement. Syngenta contended that corn prices dropped because of market forces, not China's rejection of Viptera. Most of the farmers suing Syngenta didn't grow Viptera or Duracade, but China rejected millions of tons of their grain because elevators and shippers mix grain from several suppliers, making it impossible to find corn free of the trait.
Background. In June of 2017, a federal grand jury in Kansas awarded nearly $218 million to about 7,300 growers who sued Syngenta over the corn modifications. Plaintiffs' experts in that trial estimated the economic damage was about $5 billion. Another trial was in progress in state court in Minnesota in September when a preliminary settlement was reached.
— Report: Pruitt backs E15 waiver, curbing trade of credits. EPA Administrator Scott Pruitt says he would sign a waiver allowing blends of 15% ethanol gasoline if he can do so legally, the Houston Chronicle reported (link). "I told the folks in Iowa, if the law allows me to do it I'll sign it tomorrow,” he said. “It doesn't make sense to only be able to sell nine months out of the year." Pruitt last year said he would ask staff to investigate whether EPA had the authority to issue a waiver under the Clean Air Act to allow year-round sale of E15 in all states. Some refining interests have proposed having EPA grant the waiver in exchange for a price cap on the cost of biofuel credits.
Pruitt also said he was considering limiting who can trade RINs. The idea would be aimed at prohibiting outside investors from the program, has backing from some ethanol producers and oil refiners. "There's some things on the trading platform I think should happen no matter what," he said, according to the newspaper. "There seems to be a hoarding of [Renewable Identification Numbers/RINs], which inflates the price of RINs. Some have talked about limiting the participants who buy and sell, so you can get away from some of the speculation that's taking place."
— EPA gives Philadelphia refiner a break in bankruptcy settlement. EPA will allow bankrupt refinery Philadelphia Energy Solutions (PES) to meet only a portion of its outstanding obligation under the Renewable Fuel Standard (RFS) as part of a settlement filed with the Bankruptcy Court in Delaware Monday. PES has blamed its financial failure on the RFS. In the future, PES will be expected to submit credits every six months, instead of annually. Reuters first broke the news of the settlement.
— China's Minister of Agriculture warned farmers not to "blindly" expand planting of corn this spring, noting that government reserves are still high and international prices are still relatively low. But analysts say a relatively tight corn market is due to rapid disposal of corn stockpiles. Minister Han Changfu advised listeners that China's strategy in agriculture is to let the market have a decisive role in resource allocation. He then ordered farmers not to respond to recent increases in market prices that are prompting them to expand corn planting this spring. Minister Han warned an expansion of corn planting would reverse the Ministry's "supply side structural adjustment" designed to reduce excess corn production capacity. He then urged farmers to continue the structural adjustment by planting crops that are "demanded by the market."
China's National Grain and Oils Center analysts estimate that imports of corn, sorghum, barley, DDGS, and cassava replaced 16.5 MMT of corn during 2016-17, 5 MMT less than the previous year. They think the antidumping investigation will further reduce imports of U.S. sorghum this year by 2.5 MMT.
— China to set up new body to manage grain reserves. China will dismantle the State Administration of Grain and will set up a new state and grain reserves administration, according to plans submitted to the national legislature, Xinhua reported. The new commission will be responsible for stocking, rotation and management of China's national strategic and emergency-aid materials, including grain, cotton and sugar, the report said.
— Mexico reports highly pathogenic bird flu case. Two outbreaks of H7N3 highly pathogenic avian influenza (HPAI) have been reported by Mexico to the World Organization for Animal Health (OIE). The case resulted in the depopulation of more than 1,900 birds — 1,900 at a farm in Guanajuato and 26 in a backyard operation in Queretaro. The cases were initially discovered in February, but difficulties in typing the virus required several diagnostic assays until confirmation. The notification was provided to the OIE Mar. 9 while the event started on Feb. 12, according to the notification to the OIE.
— Mixed voices in Europe re: Trump metals tariffs. German Chancellor Angela Merkel said she wanted to overcome the metals trade dispute with the U.S. via talks rather than retaliation, striking a more conciliatory tone on President Trump’s plan than has come from European Union officials, who handle trade for Germany and the bloc’s 27 other members. The EU has warned that if Washington doesn’t grant the bloc an exemption from the planned tariffs it would impose about $3.5 billion of levies on certain American products, challenge the tariffs at the WTO, and enact measures to safeguard European industries from steel and aluminum exports diverted from U.S. markets.
In a tweet Saturday Trump said, “The European Union, wonderful countries who treat the U.S. very badly on trade, are complaining about the tariffs on steel & aluminum. If they drop their horrific barriers & tariffs on U.S. products going in, we will likewise drop ours. The EU imposes a 10% duty on cars imported from the U.S. and some other countries, while the U.S. duty on cars imported from the EU is 2.5%, under global trade rules set in 1994.
— Other items of note:
Wall Street Journal editorial weighs in on RINs debate. An editorial in today's paper concludes, “The core problem is that the federal government has distorted the energy market by using subsidies and mandates to support biofuels. The solution is to end this political favoritism. But if the Trump Administration lacks the political fortitude to stand up to the ethanol lobby, at least it can limit the most destructive effects. When policy is this bad, almost anything is an improvement over the status quo.” Link to full editorial.
Japan to retract tariff on U.S. frozen beef April 1. Japanese import duties are set to drop back to 38.5% on April 1 after eight months at the rate of 50%. The higher rate began Aug. 1 after imports triggered Japan’s “safeguard mechanism,” designed to temper trade after steep spurts in imports. U.S. exports of frozen beef to Japan have struggled for the past eight months under higher than normal duties, said a spokesman for the U.S. Meat Export Federation.
Flake introduces bill to nullify steel, aluminum tariffs, but low odds given for measure. Sen. Jeff Flake (R-Ariz.), who is not seeking re-election, on Monday introduced legislation that would nullify the tariffs President Donald Trump imposed on steel and aluminum imports. Mexico and Canada, which are in the process of renegotiating the North American Free Trade Agreement with the United States, are initially exempted from the new tariffs. Flake said those exemptions would lead to uncertainty among other countries. While Senate Republicans are largely unified in their opposition to the new tariffs, GOP leaders will not likely seek to advance the bill. Senate Finance Chairman Orrin Hatch (R-Utah) said: “I’m not really happy with what the president’s done. I’m hoping we can resolve this. And the president’s been thinking it over too.” As for the White House, Press Secretary Sarah Huckabee Sanders said Monday, before Flake formally introduced his bill. “The president has been clear for quite some time what his position is and what his authority is under the 232 statute, and we’re moving forward.”
Trump, Trudeau talk steel and aluminum. Canadian Prime Minister Justin Trudeau called President Trump on Monday and the leaders discussed the North American steel and aluminum industries, both offices announced late Monday evening. “The prime minister acknowledged and supported the special consideration extended to Canada in the context of steel and aluminum tariffs that the president announced last week and emphasized that preserving our mutually beneficial supply chains is critical to jobs and businesses on both sides of the border,” Canada said. The White House added that Trump “emphasized the importance of quickly concluding the ongoing NAFTA negotiations to ensure the vitality of United States and North American manufacturing industries and to protect the economic and national security of the United States.” Trudeau will spend his week traveling across Canada to meet with steel and aluminum workers and businesses who rely heavily on the materials, his office also announced on Monday.
U.S. details five criteria for granting metal tariffs exemptions. The U.S. has outlined five criteria that allies and trading partners must meet to be granted an exemption to forthcoming tariffs on aluminum and steel, most of which are focused on examining the country’s contribution to fighting global overcapacity, the European Commission told EU countries on Monday. The U.S. will look first at whether a partner country uses trade defense measures to block dumped steel from its market. The U.S. will also determine whether the country supports anti-dumping and countervailing duty disputes lodged by the U.S. at the World Trade Organization and whether it participates in the global forum on steel excess capacity. The U.S. will also consider the historical trade volume on steel and aluminum with that country — which could be used to grant a yearly quota that would be exempt from the tariffs — and whether it is a security partner of the U.S. The five details were first reported by Politico.
U.K.'s Fox to meet in Washington with Ross, Lighthizer on metals tariffs. British Secretary of State for International Trade Liam Fox will be in Washington later this week for talks with Lighthizer and Ross about the steel and aluminum tariffs. “These unilateral trade measures have weak foundation in international law and they’re not consistent with the [U.S.] Department of Defense’s own judgement in an investigation that was conducted on the basis of national security,” Fox said Monday in a speech in Parliament. “There is undoubtedly a problem of overcapacity in the global steel market. But our strong view is that a global problem requires a global solution, not unilateral trade action.” Fox stressed that his visit this week was part of the unified EU response to the tariffs, which could include retaliation aimed at the United States, safeguard tariffs to keep displaced steel exports from entering the EU and a formal challenge at the World Trade Organization. The U.K. believes any EU response must be “measured and proportionate,” Fox said.
Biodiesel tax incentive extension. The National Biodiesel Board, and 45 other groups, sent a letter to congressional leadership calling for the reinstatement of the biodiesel tax credit for 2018. The letter comes ahead of a House Ways and Means hearing Wednesday (March 14) on tax extenders. Link to letter.
U.S. budget deficit $215.2 billion in February. Tax receipts fell in February which helped push the US government monthly deficit to $215.2 billion in February, according to the Treasury Department. For the first five months of Fiscal Year (FY) 2018, the deficit totals $391.0 billion, $40 billion (11.5 percent) greater than at this point in FY 2017. The February result, however, was in line with expectations for the budget red ink to be $216.0 billion.
Shea and Doud sworn in for USTR posts. Dennis Shea and Gregg Doud were welcomed Monday to their new trade positions by USTR Robert Lighthizer at a swearing-in ceremony. Shea will be going to Geneva to take up his post as ambassador to the WTO, while Doud will work out of Washington as the chief U.S. agriculture negotiator. Both were confirmed by the Senate on a voice vote in early March. Two more recently approved nominees are still waiting to be sworn in. Those are C.J. Mahoney and Jeffrey Gerrish, both for deputy USTR positions working out of Washington.
House GOP report on Russia and 2016 elections. GOP lawmakers drafted a report saying the House Intelligence panel’s probe of Russian election meddling found no evidence of collusion by Moscow with Trump’s campaign. The panel found “bad judgment” and some “inappropriate meetings” between members of the Trump campaign and Russians, but no sign that those amounted to collusion, said Rep. Mike Conaway (R-Texas), who has been heading the probe since last spring. The panel’s top Democrat, California Rep. Adam Schiff, in a statement Monday evening, called Republicans’ announcement a “tragic milestone for this Congress” and “yet another capitulation to the executive branch.”
U.S. farmers tap Fox News to get Trump's attention on trade policy. U.S. farmers, a key part of President Donald Trump’s base of support, are sending a trade message to the White House. With a TV advertisement that will air on Fox News’ Fox & Friends, Fox Business and MSNBC’s Morning Joe, farmers are launching their first major effort to use the airwaves to sway Trump on his trade policies in the aftermath of his metals tariffs. The half-million-dollar ad buy comes as agricultural groups are increasingly concerned that they will be among the hardest hit in the event that another country decides to retaliate against the U.S. for those tariffs. The ad is sponsored by Farmers for Free Trade, an advocacy group formed last year by several agriculture industry groups in response to a potential withdrawal from NAFTA and other trade policies that could be detrimental to agricultural exports. It will run both in the Washington media market and in the West Palm Beach, Florida area. Link to ad.
The White House thinks Congress could still pass an infrastructure bill before the November elections. House Speaker Paul Ryan (R-Wis.), in a speech last week, suggested Congress may pass a series of small infrastructure bills in lieu of a large measure. He cited the forthcoming FAA authorization and Water Resources Development Act (WRDA) authorization as examples of progress, though those are must-pass bills that aren’t part of the White House’s infrastructure plan. Meanwhile, Senate Commerce’s Surface Transportation and Merchant Marine Infrastructure, Safety and Security Subcommittee holds an infrastructure hearing today focusing on state and local transportation needs. On Wednesday, the Senate Commerce Committee will hear from five Cabinet secretaries for a hearing on the infrastructure proposal — appearing will be the secretaries of Energy, Labor, Agriculture, Commerce and Transportation.
Larry Kudlow is the leading contender to head the White House National Economic Council and would take the job if offered it, repots note. His emergence is notable because he publicly came out against President Trump's tariffs on steel and aluminum — the plan that led to Gary Cohn resigning as NEC director on March 6.
Senate advances bank deregulation bill, full Senate vote ahead. The Senate voted 66-30 Monday to limit debate on the nearly 200-page substitute amendment to Sen. Michael Crapo’s (R-Idaho) bank deregulation bill, a rollback of the 2010 Dodd-Frank financial overhaul. Twelve Democrats and Angus King (I-Maine) are co-sponsors. King and about 15 Democrats voted Monday to limit debate on the substitute amendment. The bill relaxes a major feature of Dodd-Frank, the obligation for the biggest banks to receive closer regulatory scrutiny from the Federal Reserve. Dodd-Frank set the asset threshold for such scrutiny at $50 billion; Crapo's bill would raise it to $250 billion, reducing the number of banks under the tightest regulation to as low as 16 from 45. The legislation also would exempt banks with less than $10 billion in assets from the Volcker rule that bars federally insured banks from trading with depositors’ money. The underlying bill is expected to pass sometime this week, with enough Democrats backing the measure to block a filibuster from liberal colleagues.
USDA will withdraw an animal welfare standard for organic livestock and poultry after delaying implementation of the Obama-era rule three times. The department said the proposed regulation exceeds its statutory authority. A notice is published in today's Federal Register (link).
I’ll drink to that… Russia leader Vladimir Putin claims credit for healthier Russia as vodka intake falls. Smoking and drinking have declined sharply and life expectancy has risen to 73 years.
— Markets. The Dow on Monday lost 157.13 points, 0.62%, at 25,178.61. The Nasdaq rose 27.51 points, 0.36%, at 7,588.32. The S&P 500 eased down 3.55 points, 0.13%, at 2,783.02.
New York Fed survey: inflation expectations rise. Inflation expectations rose to 2.83% in February, up from 2.71% in January, and the highest reading for the New York Fed survey on inflation since February 2017. Markets continue on alert for signs that inflation is starting to move higher, with that focus resulting in increased financial market volatility as it also has sparked expectations for the Fed to be more aggressive on raising interest rates in the year ahead.
Today's focus will be on the Consumer Price Index (CPI) data for any hints of rising inflation to help gauge whether the Federal Reserve will hasten its planned interest-rate increases. It's expected to come in at 0.2% M/M for both headline inflation and core, which excludes energy and food, or 2.2% and 1.9% Y/Y. A CPI figure that misses or meets estimates is likely to reaffirm the case for just three rate hikes in 2018, but rising inflation could get the Fed, which meets next week, to change its forecasts.
The OECD projects an improving global economy this year if trade tensions don’t undercut expansion. The OECD raised its projections for the U.S. in response to the tax and spending bills passed in recent months. While the agency didn't incorporate the impact of new U.S. tariffs into its "Interim Economic Outlook," it joined other organizations and governments in warning of the dangers posed by a trade conflict.
United States Steel is raising its forecast for the year, citing the U.S. move to impose a 25% tariff on most imported steel. On Monday, the company said that given the market dynamics and a decision to fire up part of an idled plant in Granite City, Ill., it now expects in 2018 to earn $885 million in profit and about $1.7 billion in earnings before interest, taxes, depreciation and amortization. In January, it guided a full-year profit of $685 million and $1.5 billion in Ebitda.
The Chinese government said today that it planned to overhaul supervision of the country’s debt-ridden financial sector, its environmental regulators and other essential government agencies. The move would further consolidate the Communist Party’s hold on official levers of power.