EPA's Wheeler Goes to Iowa and Doesn't Say What Biofuel Proponents Wanted

Posted on 08/14/2018 6:50 AM

Update on U.S./China trade issues | U.S., Mexico nearing NAFTA 2.0 deal

Acting EPA Administrator Andrew Wheeler had more fun eating at the Iowa State Fair than he did hearing from biofuel proponents who peppered him with questions about operation of the Renewable Fuel Standard (RFS).
     U.S. and Mexico trade officials are getting close to a finalized NAFTA 2.0 accord, with the final timeline still murky. If so, Canada will rejoin the trio.
     Regarding U.S./China trade news, Bloomberg reports another ship has departed the U.S. and is headed to China with more than 60,000 metric tons of soybeans. Meanwhile, Terry Branstad, U.S. Ambassador to China, said Chinese trade discussions continue, noting U.S. Treasury Secretary Steve Mnuchin has been in talks with Chinese officials over the past two weeks, so the countries are trying to negotiate. Meanwhile, new figures signal China’s economy may be slowing.
     Steel and aluminum tariffs bring more than $1.4 billion to Treasury and could total $7.5 billion this year, according to a Congressional Research Service report.


EPA's Wheeler doesn't give biofuel proponents what they want. A visit to the Iowa State Fair from acting EPA Administrator Andrew Wheeler did little to ease the concerns of Iowa agricultural leaders and biofuel proponents, despite discussing several issues relative to the Renewable Fuel Standard (RFS).

Under previous EPA administrator Scott Pruitt, the agency granted to some oil refineries waivers that allowed them to dodge the mandate. Wheeler did not say the agency would cease the waiver process, only that he would provide more transparency to the waiver process. “I know that’s been a point of contention,” Wheeler said during his interview with the Des Moines Register. “I want to provide more transparency about how we make those decisions.”

Ethanol supporters for years have called for year-round access to E15. Wheeler said the agency is “looking into” those proposals, saying he wants to be certain the agency has the legal authority to take such action. He again said any approval of E15 for year-round access likely will be part of a package deal. But ag leaders say any concessions to the oil industry as part of any such deal will weaken the mandate. Wheeler said the agency is "looking at the small refiner exemption ... and trying to provide more certainty around that." He also said EPA is looking at the Reid Vapor Pressure (RVP) situation which is a key on being able to sell E15 year-round, saying they are looking "what we can do." But he told the Sioux City Journal in an interview that he wanted to make sure the agency had the legal authority to allow the year-round E15 sales. As for the small refiner waivers, Wheeler told the paper, “I know that’s been a point of contention. I want to provide more transparency about how we make those decisions.”

Monte Shaw, executive director of the Iowa Renewable Fuels Association, said any such deal would not be greeted with approval from the renewable fuels industries. Shaw was one of the industry leaders to meet with Wheeler at the State Fair. "I was a little disappointed that he has pulled back from Pruitt's position that they do have the authority to grant year-round E-15. He says he wants to look at it further," Shaw said. "He explained that he wants to be absolutely certain it holds up in court. I get that, but at some point we need to move forward with our best legal argument." As for the small refiner waiver, Shaw said, “If you have a 15-billion (gallons mandated) RFS and every year you waive 1.5 billion gallons through the small refinery exemption, you really have a 13.5 billion (gallons mandated) RFS, which means you don’t have an RFS for corn ethanol because we already blended in the low 14 (billion gallons),” Shaw said.

Others attending the discussion with Wheeler included Iowa Gov. Kim Reynolds, Iowa ag secretary Mike Naig, U.S. Rep. David Young and former Iowa Farm Bureau president Craig Lang.

Wheeler said under his watch the agency will continue to examine ways to reduce regulations, and that a new rule regarding what small waterways are subject to federal regulations. In remarks at the fair, he said the agency was going to come with a new proposal relative to the Waters of the U.S. (WOTUS) rule "within the next 60 days." The certainty there, he said, would come with farmers not having to hire an attorney to understand what is and is not a wetland. Farmers will be able to "understand the law better to make their decisions."

On the RFS, Wheeler said it was an "important program, not just for the state of Iowa, but the entire country." Noting the Trump administration has made decisions on the Renewable Volume Obligations (RVOs) on time each year, Wheeler said, "that provides more certainty to the biofuels producers, American consumers and we're going to continue that."

U.S., Mexico nearing NAFTA 2.0 deal. The U.S. and Mexico are “very, very close” to resolving their bilateral NAFTA issues, White House Council of Economic Advisers Chairman Kevin Hassett said Monday, adding the negotiating team is going through what he termed “the final details,” he told Fox Business. Hassett said the Trump administration believes the final deal between the U.S. and Mexico “becomes a model for what Canada accepts with us as well.”

Update on U.S./China trade policy issues:

  • Bloomberg: Another ship has departed the U.S. and is headed to China with more than 60,000 metric tons of soybeans, even after China hit American soybeans with duties last month. The Chinese have increased their buying from producers like Brazil amid an intensifying trade war with the U.S., but it’s appearing more and more like China won’t be able to entirely shun U.S. supplies.
  • Branstad says Chinese trade discussions continue. Speaking in Des Moines over the weekend, the U.S. Ambassador to China, Terry Branstad, says he isn’t sure how long the impasse with China will last. “We’re continuing to have discussions,” Branstad says. “I’m trying to keep the leaders in Washington informed and do all that we can. We’ve had several meetings and we’re going to continue to work on it.” Branstad said U.S. Treasury Secretary Steve Mnuchin has been in talks with Chinese officials over the past two weeks, so the countries are trying to negotiate.
  • Branstad, a former Iowa governor, says President Trump is justified in putting tariffs on imports of Chinese goods into the U.S. He says China is in worse financial condition than the U.S. due to the drop in that nation’s stock market and currency value. “China has not treated us or other countries fairly for a long time with their stealing of technology and also not enforcing intellectual property rights, the trade deficit has gone up and up,” Branstad says. “We’re trying to get fair and reciprocal trade and we want to double ag exports over the next five years.”
  • Speaking at the Iowa State Fair, Branstad says it’s unfortunate American farmers have been collateral damage in the trade war and he’s unsure what it will take for China to finally cut a deal with the U.S. “What the United States has done, we’ve focused on the areas that they’ve been unfair on, stealing technology and that,” he says. “They have focused on agriculture which had nothing to do with this. That’s why we think what the Chinese have done is unfair and they need to come to the realization, just as they did with sorghum, that this doesn’t make sense and they’re hurting their own consumer.”
  • CFIUS update bill signed. On Monday, President Donald Trump signed into law an overhaul of how foreign investment in U.S. companies are regulated — a bill that was introduced primarily to repel threats from China.
  • USTR hearing on China tariffs next week. The Office of the U.S. Trade Representative will host a three-day hearing on its latest plans to impose more tariffs against China.
  • Chinese and Brazilian companies are looking to partner up to get more processed soymeal from the South American country, Reuters reports. Link.
  • Washington Post: Both sides of the political aisle stretch the truth in the soybean debate and China. Link.
  • Reuters: Brazilian farmers opting for soybeans instead of sugar as they eye China demand. China's demand for Brazilian soybeans has been on the rise, and Reuters reports that some Brazilian farmers have opted to plant soybeans instead of sugarcane. Government data shows that Brazilian soybean plantings have expanded 2 million hectares in two years, while the land planted to cane has fallen by 400,000 hectares. Some quoted in the item note that sugarcane has lost area to other crops besides soybeans. Plus, the shift away from sugarcane is also potentially putting the future of some of the 270 sugarcane mills at risk in Brazil.

Other items of note:

  • Steel and aluminum tariffs bring more than $1.4 billion to Treasury; could total $7.5 billion this year. A recent report prepared for members of Congress showed President Donald Trump's administration has collected more than $1.4 billion in new revenue from steel and aluminum tariffs. That figure could reach $7.5 billion this year — $5.8 billion on steel and $1.7 billion on aluminum – based on last year's import levels. The Congressional Research Service (CRS) estimated that, between March 23 and July 16, the U.S. reaped $1.1 billion and $344.2 million from levies on foreign steel and aluminum, respectively.

  • Elections today will focus on Minnesota and Wisconsin, where there are competitive races for the governor’s office and several House seats — Republicans and Democrats are angling to replace retiring Speaker Paul Ryan (R-Wis.). More than $12 million in outside money has been spent in the Republican primary to see who will challenge Sen. Tammy Baldwin (D-Wis.). In Minnesota, former governor Tim Pawlenty wants to capture the GOP nomination for the state office he once held. There are two open House races in Minnesota that give Republicans perhaps their best opportunities to pick up seats in November. Minnesotans will also vote in the primary to replace former Sen. Al Franken (D-Minn.), who resigned last year amid allegations of misconduct with women. Connecticut and Vermont are also voting. Meanwhile, Axios identified what it calls the five most competitive House races in the country, and they're all seats held by Republicans. Races in Iowa, Florida, Texas, California and Maine will help determine whether Dems will win the House in November, Axios reported.

  • ARC and PLC tool available with generic base acres that planted seed cotton. The Farm Service Agency (FSA) is notifying farmers with generic base acres that planted seed cotton that a new tool is available to assist them in understanding how the new seed cotton program may affect their FSA payments. It helps a producer make decisions on how to allocate generic base acres to other covered crops based on a producer’s planting history. Link to the tool, which was developed by Texas A&M University. The Bipartisan Budget Act of 2018 included seed cotton as a covered commodity under the Agriculture Risk Coverage (ARC) and Price Loss Coverage (PLC) program effective for the 2018 crop year. The Act also authorizes owners of a farm with generic base acres and a recent history of covered commodities a one-time opportunity to update the farm’s payment yield for seed cotton. Link to a notice for more details.

  • Deadline approaching for continuous Conservation Reserve Program enrollment. The deadline to sign up for enrollment in the Conservation Reserve Program (CRP) is Friday, Aug. 17.

  • Former USDA secretaries call for focus on nutrition. Dan Glickman, Ann Veneman and Tom Vilsack, former Agriculture secretaries under both Democratic and Republican administrations, argue that the latest farm bill debate has neglected nutrition, centering instead on work requirements for some Supplemental Nutrition Assistance Program recipients. They argue House and Senate negotiators should officially make diet quality a core SNAP objective while trying a pilot nutrition intervention program within SNAP. Link to their op-ed in The Hill.

  • EPA wants 14 months to finish up an air quality study of the Renewable Fuel Standard (RFS), saying in a court filing that the timeline “is the most expeditious one for the agency to complete the anti-backsliding study.” The review was mandated to ensure the RFS wasn’t worsening air quality, but it was supposed to be finished in 2010.

  • U.S. exporters probably shouldn’t count on reaping big gains in foreign markets as Washington imposes higher goods on imports. A new analysis from the New York Federal Reserve Bank (link) suggests that domestic producers will face higher costs for raw materials and components, a reality of modern supply chains that will make U.S. products more expensive on world markets. The Fed economists say increasing tariffs on Chinese goods could crimp U.S. exports, in part because many large exporters also rely heavily on imports for intermediate goods. Tariffs could slow growth by reducing productivity if businesses have to revamp their supply chains. The New York Fed’s analysis also cast doubt on whether the tariffs would help in reducing the trade deficit. Meanwhile, the Federal Reserve Bank of Atlanta reported in a paper published earlier this month (link) that more firms are reporting anxiety over capital investments and are reviewing any big ticket purchases. While only 6% of firms surveyed said they were cutting capital expenditures in response to tariffs, roughly 20% said they were reviewing their capital expenditure plans. About 60% of firms that were reassessing were doing so because of tariff concerns, the report concluded.

Markets. The Dow on Monday ended down 125.44 points, 0.50%, at 25,187.70. The Nasdaq lost 19.40 points, 0.25%, at 2,819.71. The S&P 500 declined 11.35 points, 0.40%, at 2,821.93.

Despite fears of Turkish contagion, odds of a Fed hike in September were unchanged from a week ago at 90%, according to pricing in federal funds futures, with the probability of another move in December seen at around 55%.

CBO cuts U.S. economic forecast slightly on trade policy implications. The Congressional Budget Office (CBO) slightly lowered its forecast for U.S. economic growth for this year and warned of increasing uncertainty from American plans to widen tariffs. The U.S. economy is projected to expand 3.1% this year, down from a previous forecast in April of 3.3%, the non-partisan group said. The expansion will ease to 2.4% in 2019, unchanged from April’s projection, on slowing growth in business investment and government purchases, the CBO said. Link to the CBO's director's statement about the report. Link to the CBO report.

New figures signal China’s economy may be slowing. Fixed-asset investment increased by just 5.5% year-on-year for January to July; industrial output also disappointed. The yuan has already weakened considerably this year, while a shrinking trade surplus produced a current-account deficit in the first half of 2018, China’s first in at least two decades. The National Bureau of Statistics of China reported that retail sales rose 8.8% in July vs. 9.0% consensus and 9.0% prior. Retail sales growth in China hasn't been in double-digits since April. Industrial production rose 6.0% during the month to miss the consensus expectation for a 6.3% gain and the 6.0% pace recorded in June. A national urban survey unemployment rate rose to 5.1% in July from the 4.8% mark in June.

The Turkish lira has stabilized. The lira is up 4.5% at 6.5730 per dollar. It's still down 73% this year.


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