Year-round E15 | WRDA bill vote in Senate | Hurricane Michael
— President Trump finally announced the move for year-round sales of E15. The president had his EPA unveil the widely expected news before he left Tuesday on a campaign visit to Council Bluffs, Iowa. As he left the White House earlier on Tuesday, Trump linked his E15 change to high oil prices, saying he was “helping our farmers” at the same time “we’re taking care of our refineries and our refiners.” “I want low prices,” Trump told reporters on the White House lawn. Ethanol is “an amazing substance," he said. “The farmers have been so terrific, and they produce great product, so I think it’s going to be great.” Trump linked his ethanol announcement with a call for the EPA to impose new restrictions on the trading of Renewable Identification Numbers (RINs), the credits refiners use to prove they have satisfied biofuel blending quotas.
While national outlets focused on his sharp words about Democrats (see below), local media gave generally positive coverage to his announcement that he has directed the EPA to make E15 ethanol-blended gasoline available year-round — some reports said that Trump asserted without evidence that Democrats opposed the move. Link to Des Moines Register article. Link to Omaha World-Herald coverage. The following are some comments Trump made on several topics:
On the Democrats: “You don't hand matches to an arsonist, and you don't give power to an angry left-wing mob. And that's what the Democrats are becoming.”
On immigration: “We need people coming in. We need people to run the farms. We're going to have people coming in. But they're going to come in legally, and they're going to come in through merit, through merit. It's called the merit system.”
On E15 and the RFS: “Today, we are unleashing the power of E15 to fuel our country all year long. Not eight months. All year long. The Dems will end ethanol. You know that. They're not going to approve ethanol. They will take it away as — we'll try and make it, like, so they can't do it to -- but they will find a way to take it away if you give them rights. You better get out there and vote for Republicans.”
On South Korea and other trade negotiations: “We've opened it up for you farmers, for you manufacturers. We've taken a horrible deal and made it a good deal. And now we're opening up or we're going to do something where we do even better, but we're going to open up Japan for trade and the European Union, which is brutal. They are brutal.”
On tax cuts and estate tax: “With Republicans in Congress, we passed the biggest package of tax cuts and reforms in American history. Big numbers. So important for the farmers and small business. To save your family farms and ranches, we've virtually eliminated the estate tax, also known as the death tax. So now if you like your children or love your children, you can leave your beautiful farm to your children and they won't have to pay any taxes. They won't have to go to your local banker, borrow money, and end up losing the farm, which was happening.”
— USDA's Perdue says farmer aid may be smaller than initial estimates: Reuters. The U.S.-Mexico-Canada Agreement (USMCA) may end up making the farmer aid plan drawn up by the administration smaller than originally estimated, USDA Secretary Sonny Perdue told Reuters in an interview. As the agency takes into account the USMCA, that could affect the total, he noted, adding that talks with Mexico and Canada on removing the steel and aluminum import duties — and presumably their retaliatory actions against U.S. products including ag goods — were just getting started.
Perdue also indicated he expected the rule to allow year-round sales of E15 would be ready before the 2019 driving season begins. "Year-round sale of E15 will increase demand for corn, which is obviously good for growers," Purdue said in a statement.
— Senate vote today on WRDA bill. The Senate plans to vote on sending a water infrastructure bill to the president's desk. The vote is on a measure (S 3021) that the House amended and passed last month. The Senate Tuesday voted 96-3 to limit debate on the motion to concur in the House amendment to the bill. The House used the initial Senate-passed measure as a vehicle for the compromise WRDA legislation. With strong bipartisan support, the bill is expected to be cleared by the Senate.
The bill would authorize $6.1 billion of federal spending on 12 Army Corps of Engineers projects, authorize $4.4 billion for the state drinking water revolving loan fund program and make changes to the Water Infrastructure Finance and Innovation Act program designed to ease the application process. It provides states and water utilities with highly subsidized financing to construct mega-projects such as water treatment plants or to replace lead pipes.
The bill also would have the National Academies study whether the Army Corps of Engineers should continue to be a part of the Department of Defense.
Not included: language sought by Rep. Peter A. DeFazio (D-Ore.), ranking Democrat on the Transportation and Infrastructure Committee, to make spending from the Harbor Maintenance Trust Fund automatic.
— Other items of note:
Heavy rains in the Midwest already snarling river traffic. Rains that have brought corn and soybean harvest to a halt in areas of the Midwest are also impacting traffic on the Mississippi River. Locks 16, 17 and 20 on the Mississippi River are closed, according to the U.S. Army Corps of Engineers, with reports quoting officials from the agency as saying that three more near those locks could also be closed soon.
Farmers, automakers and other businesses are feeling the effects of the U.S. steel and aluminum tariffs. Link to New York Times article.
Trump said he didn’t expect to meet Kim Jong Un until after U.S. elections in November, as the administration struggles to secure disarmament commitments from North Korea. The president said his campaign schedule prevented meetings before the Nov. 6 vote. Still, he said the administration had “made incredible progress” in negotiations over Pyongyang’s nuclear weapons program and was considering three to four locations for a second summit. “I just can’t leave now,” Trump told reporters aboard Air Force One
U.S. energy supply chains are undergoing yet another shift in sourcing. The upper Midwest’s beleaguered Bakken formation is experiencing a comeback, the Wall Street Journal reports (link), “stealing some of the thunder from the Permian Basin as producers in that prolific oil basin face challenges getting transportation for what they extract from shale fields.” Bakken oil production still remains about a third the size of the 3.4 million barrels per day produced in the Permian last month. But oil production in North Dakota has climbed to new records this year, helped by higher prices that have triggered more drilling and improved crude transportation in the area. The expansion may be helping fuel a resurgence in crude-by-rail transport this year. U.S. rail carloads of petroleum and petroleum products soared 41.5% in September, says the Association of American Railroads, and weekly average carloads reached their highest level since December 2015.
U.S. Trade Representative Robert Lighthizer and his Canadian counterpart, Chrystia Freeland, are meeting in Toronto to discuss the next steps for their new trilateral trade deal (USMCA). Jeffrey Emerson, a USTR spokesman, said Lighthizer and Freeland would discuss next steps on the trade deal.
Trump said he is considering Goldman Sachs Group’s Dina Powell to replace his departing ambassador to the United Nations, Nikki Haley. “Dina is certainly a person I would consider and she is under consideration,” Trump told reporters at the White House on the way to board the presidential helicopter as he embarked on a trip to Iowa. But he added “there are others. I’ve heard a lot of names.”
Former New York City Mayor Michael Bloomberg announced that he is formally changing his voter registration to Democrat, a possible step toward running for president in 2020.
— Markets. The Dow on Tuesday declined 56.21 points, 0.21%, at 26,430.57. The Nasdaq edged up 2.07 points, 0.03%, at 7,738.02. The S&P 500 fell 4.09 points, 0.14%, at 2,880.34.
“I don’t like it,” President Donald Trump said yesterday, referring to the pace of Federal Reserve rate hikes, adding “I like low interest rates.” The president backed up his position by saying that absent resurgent inflation, there’s no need to move too fast. Fed Chairman Jerome “Jay” Powell said last week he expects to stick with the current path of gradual interest-rate hikes while monitoring risks in the economy. Trump said he had not talked to Powell on the matter. "I like to stay uninvolved with that."
NY Fed's Williams sees rates getting to neutral in next year or so. The target range for the Fed funds rate should get or a normal or neutral level within "the next year or so," New York Fed President John Williams told reporters in Indonesia. "My view is our path today is getting us back to normal interest rates or neutral interest rates relatively quickly, over the next year or so,” Williams said. "From my perspective, the most important thing we can do now is get ourselves well positioned for whatever may come." Once the Fed gets rates to that neutral or normal point, Williams said the U.S. central bank then will be "better positioned for whatever may happen. If we need to raise rates more than expected, we can do that in a reasonable way. If the economy slows we can adjust to that." During his speech, Williams cautioned the Fed will not be able to give as much forward guidance on policy as rates get closer to that neutral stage. "The case for strong forward guidance about future policy actions is becoming less compelling," Williams commented. As that policy normalization process unfolds, he noted, "it will no longer be clear whether interest rates need to go up or down, and explicit forward guidance about the future path of policy will no longer be appropriate."
Will China’s yuan weaken past 7 per dollar for the first time in a decade? A former central bank adviser wrote in a China Securities Journal that tolerance of yuan weakness is needed to reform the exchange-rate regime. Some investors predict further losses for the currency ahead of next week’s Treasury Department decision on whether to name China a currency manipulator.
Roberto Azevêdo, the head of the WTO, called on defenders of the multilateral trading system to "raise their voices" to help it survive, flanked by the IMF's Christine Lagarde, World Bank's Jim Yong Kim and the OECD's José Ángel Gurría. "Let me be clear, the trading system is not perfect, we never said it was. But it represents the best efforts of governments around the world working together for 70 years to find ways to co-operate on trade issues."
It may be the beginning of the end for Sears. The long-struggling retailer could file for Chapter 11 bankruptcy protection as soon as this week, the Wall Street Journal reported, citing unidentified sources. Link. Sears has lost $11 billion since 2011; sales have dropped 60% over the same period; and it has closed hundreds of stores.