Evening Report | December 18, 2023

Evening Report
Evening Report
(Pro Farmer)

Check our advice monitor on ProFarmer.com for updates to our marketing plan.

 

Argentina to seek higher export tax for soy products... Argentina’s government said it would seek to raise the tax on soyoil and soymeal exports to 33% from the current level of 31%. As we reported last week, new President Javier Milei is also seeking to raise the export tax for corn and wheat by three percentage points to 15%. The new administration indicated it will leave the soybean export tax at 33%.

 

Brazil soybean exports top 100 MMT for first time... Brazil shipped 2 MMT of soybeans during the first half of December, base on preliminary customs data released today. While official data won’t come until the end of the month, that would push shipments for this calendar year above 100 MMT for the first time. Shipments through November were already a record at 98 MMT.

 

Key SAF announcement details... The update to the GREET model in March will play a pivotal role in determining the eligibility of fuels for the sustainable aviation fuel (SAF) credit. Click here to see guidance on the types of fuels allowed to receive tax credits and how the size of the credits will be calculated. Keys:

  • Corn-based ethanol and other renewable fuels likely will qualify for the SAF credit in relation to SAF produced and used in calendar years 2023 and 2024.
  • Treasury said the guidance means “numerous fuels will qualify for the credit, including valid biomass-based diesel, advanced biofuels, cellulosic biofuel, or cellulosic diesel that have been approved by EPA under the Renewable Fuel Standard (RFS).”
  • Following the GREET model update, the focus will shift toward the Clean Fuels Credit, scheduled to take effect on Jan. 1, 2025, replacing the SAF and other credits. The structure of this credit will have significant implications for the future growth of the biofuels industry, encompassing a wide range of feedstocks.
  • The SAF credit currently incentivizes the production of SAF that achieves a lifecycle GHG emissions reduction of at least 50% compared with petroleum-based jet fuel.
  • Producers of SAF are eligible for a tax credit of $1.25 per gallon to $1.75 per gallon. Under the rules, SAF that decreases GHG emissions by 50% is eligible for the $1.25 credit, and SAF that decreases GHG emissions by more than 50% is eligible for an additional $0.01 per gallon for each percentage point the reduction exceeds 50%, up to $0.50 per gallon.
  • Fuels that have a 50% or greater GHG emissions reduction via the most recent Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA) standard will continue to qualify.

 

Biden abandons plans for comprehensive trade pact with UK... President Joe Biden has abandoned plans for a comprehensive trade pact with Britain, which could have laid the groundwork for a full post-Brexit trade deal. The move comes in response to opposition from Biden’s own party in the Senate, where Senate Democrats argued the proposed agreement did not offer sufficient protection for American workers. This decision has effectively dashed the UK’s hopes of securing a free trade agreement (FTA) with the United States.

The UK’s desire for a free trade agreement with the U.S. dates back to before the Brexit referendum, and it faced early setbacks when former President Barack Obama suggested that Britain would be at the back of the queue for a trade deal if it left the EU. Although there was some support for an FTA during Donald Trump’s presidency in 2016, the likelihood of such an agreement has now plummeted to “zero” under the Biden administration.

 

EPA proposes new wastewater rules for meat and poultry processing plants... EPA says the new rules could lead to a reduction of 100 million pounds of water pollutants like nitrogen and phosphorus annually. This marks the first update of effluent limitation guidelines for this industry in a generation. The proposed guidelines aim to achieve the maximum feasible reduction in pollution using proven technology, considering economic viability. EPA plans to open the proposed regulations for public comment after their publication in the Federal Register. As part of a court agreement, EPA is obligated to finalize the standards by August 2025, following a lawsuit filed by environmental law firm Earthjustice during the Trump administration when EPA had decided against updating the regulations.

 

Study: Jones Act repeal could save East Coast $802 million in fuel costs... A new study suggests a small legislative change could result in significant savings for the East Coast, reducing the region’s annual fuel costs by $802 million. This change would also cut gasoline imports by 36% and jet fuel imports by 96%. The focus of the study is on the Jones Act, a 1920 law officially known as the Merchant Marine Act, which mandates that ships transporting cargo between U.S. points must be predominantly built, owned and crewed by Americans. Despite being framed as an “America First” policy, the Jones Act raises the costs of domestic coastal shipping, giving imported goods a competitive advantage.

The study argues that repealing the Jones Act would have had substantial economic benefits, particularly in terms of reducing fuel prices. According to the study, eliminating the Jones Act would have lowered East Coast gasoline, jet fuel and diesel prices by $0.63, $0.80, and $0.82 per barrel, respectively, during 2018-2019. It would also enable more efficient use of Gulf Coast oil by allowing it to be shipped to the Eastern Seaboard profitably.

The impact of the Jones Act is more significant the closer one is to the Gulf Coast, meaning that southeastern states would benefit more from a freer domestic oil trade than New England. However, the study notes that protectionist policies often result in smaller benefits for some industries or regions, making the politics surrounding Jones Act reform challenging.

A commentary article in the Wall Street Journal argues Congress should prioritize overcoming parochial interests and removing inefficient policies, such as the Jones Act. Repealing the Jones Act could have broad positive implications for various industries, including liquefied natural gas, Alaskan seafood, offshore wind energy, and more, ultimately reducing the cost of waterborne shipping and alleviating strain on highways, the opinion item notes. The study concludes that reducing protectionist policies like the Jones Act would be a true “America First” policy by lowering costs and increasing efficiency.

 

Atlantic Council introduces ‘Dollar Dominance Monitor’... The monitor tracks the global dominance of the U.S. dollar in terms of reserves, trade settlements and exchange transactions. This effort comes amid growing interest in alternatives to the dollar, particularly highlighted during the BRICS summit, where nations like Brazil, Russia, India, China and South Africa explored such options. Interest in de-dollarization has been on the rise since Russia’s invasion of Ukraine and subsequent economic sanctions. While creating a viable alternative to the U.S. dollar remains challenging, the demand for de-dollarization is stronger than ever, according to Josh Lipsky, senior director of the Atlantic Council’s GeoEconomics Center. This trend is significant, particularly in the context of national security and economic statecraft.

Although the yuan has seen increased usage in China’s global trade, it’s unlikely to replace the dollar anytime soon, especially in advanced economies. However, the expanding use of the yuan by China’s trading partners could reduce the impact of dollar-based sanctions, thereby weakening the U.S. economic leverage. In an interview with Bloomberg, Lipsky also emphasized the importance of the payment systems, or “pipes,” used for trade settlement, suggesting that building alternative networks to dollar-based systems could impact the dollar's influence on the global stage.

Bottom line: The Atlantic Council’s Dollar Dominance Monitor reflects the growing interest in reducing reliance on the U.S. dollar in global transactions, driven by various geopolitical factors and economic considerations. The yuan’s increasing role in international trade, though not a replacement for the dollar, could have consequences for the dollar’s dominance, especially if alternative payment systems gain traction.

 

Canada taking steps to accelerate its electrification plans... Canada is set to introduce new regulations which will mandate that all new passenger cars sold in the country must be zero-emission vehicles (ZEVs) by 2035. These regulations are designed to reduce wait times for electric vehicles (EVs) and ensure that there are enough affordable ZEVs available to meet the growing demand. Canada has set ambitious targets for the adoption of ZEVs, aiming for them to constitute 20% of all new car sales by 2026, 60% by 2030, and 100% by 2035. These goals align with the country's commitment to reduce emissions and combat climate change.

 Brian Kingston, CEO of the Canadian Vehicle Manufacturers’ Association, representing companies like Ford, Stellantis and GM, has expressed concerns about the affordability of ZEVs. He believes stronger incentives are needed to make electric vehicles more accessible to consumers, rather than imposing a mandate on the types of vehicles Canadians can purchase.

 

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