Trump announcement on RFS changes awaited | House clears stopgap spending bill
In today's updates:
* U.S. temporarily exempting more than 400 types of Chinese products from tariffs
Markets: Iran's foreign minister warned Thursday that any U.S. or Saudi strike on his country in response to the attacks on the kingdom’s critical oil facilities would lead to “all-out war.” Oil prices are still up almost 8% this week, despite Saudi Arabia's attempts to restore oil production as soon as possible.
— U.S./China trade policy update:
- The U.S. is temporarily exempting more than 400 types of Chinese products — like Christmas lights, plastic straws and printed circuit boards — from tariffs, according to documents set to be published today by the U.S. Trade Representative. The exemptions stem from more than 1,100 exclusion requests made by American companies and other entities.
- China overnight cut its new one-year benchmark lending rate for the second month in a row, taking a more accommodative stance due to the Sino-U.S. trade war.
- China is trying to woo Trump with farm-state visits, farm product purchases. Chinese officials will visit Omaha, Nebraska and Bozeman, Montana next week as trade talks continue. A Chinese delegation will visit American farm regions with U.S. officials next week in an effort to build goodwill amid ongoing trade negotiations, USDA Secretary Sonny Perdue told reporters on Thursday. "They want to see the production of agriculture. I think they want to build goodwill.”
- This week's U.S./China talks focused on agriculture, including Trump's repeated urgings for China to substantially boost purchases of American farm products. A delegation of about 30 Chinese officials, led by Vice Finance Minister Liao Min, met counterparts at the U.S. Trade Representative's (USTR) office near the White House. Deputy USTR Jeffrey Gerrish led the U.S. delegation.
- U.S. Commerce Secretary Wilbur Ross, in an interview on Fox Business Network on Thursday, said it remained unclear what China wanted and that "we will find out very, very shortly in the next couple of weeks... What we need is to correct the big imbalances, not just the current trade deficit," Ross said. "It's more complicated than just buying a few more soybeans."
- Trump trade advisor Michael Pillsbury told the South China Morning Post that President Trump could ramp up pressure by raising tariffs “to 50% or 100%” if there’s no deal soon. Some observers think Pillsbury is going too far with such statements and say Trump has never needed anyone to say what he may or may not do. But Pillsbury's comments Thursday was a negative cited for lower U.S. equities.
- China perspective. The editor of China's state-run Global Times newspaper cautioned that Beijing will maintain its tough stance, however. "Many U.S. officials easily misread China's goodwill, think it shows Beijing's weakness," Hu Xijin said on Twitter. "China doesn't like talking tough before the negotiations, but I know China is not as anxious to reach a deal as the U.S. side thought."
- A U.S. FedEx pilot was barred from leaving mainland China. China detained a former Air Force colonel as he prepared to depart for Hong Kong a week ago. He has since been released on bail. The American firm has been caught up in U.S./China tensions after it accidentally sent Huawei packages to the U.S. Link to NYT article.
- Boosting rare earth supply. President Trump and Australian Prime Minister Scott Morrison are set to release a plan today aimed at securing the supply of rare earth minerals amid growing concerns that China could cut off shipments of the treasured commodities. Rare earths are a group of 17 chemical elements used in everything from high-tech consumer electronics to military equipment. Australia contains only 2.8% of the world's rare earth reserves but accounts for more than half of the new projects in the global pipeline.
- 58% of Americans think President Trump’s trade war with China is bad for the U.S., according to a new survey. Details in the New York Times (link).
— China hog companies are in an expansion race, says Dim Sums: Rural China Economics and Policy. China's hog-farming companies posted steep year-on-year declines in sales last month — more evidence of China's shrinking pork supply — but they are also in a race to expand production capacity by building huge hog complexes of 500,000 head or more, Dim Sums notes. Reports issued by China's three biggest publicly listed hog-farming companies showed their combined sales of 2.17 million head during August 2019 were down 39% from August last year. Wens Corp. sales were down 34% from a year ago, Muyuan's sales were down 37%, and Zhengbang's sales were down 29%. Sales for the entire year from January to August were more robust due to large sales in the first half of the year.
— All RFS-related meetings now held with Trump; official announcement awaited. A group of oil-state senators met with President Donald Trump at the White House Thursday to discuss their concerns over his biofuels policy and reports of a coming package to boost biofuel usage, with pressure from both refiners and farmers with conflicting demands.
No details of Thursday's White House meeting have surfaced yet, although Sen. Bill Cassidy (R-La.) said in a tweet that Trump had been receptive. “Just spoke with @realDonaldTrump on the renewable fuel standard — the president is very engaged on the issue, and feels as if we can work towards a solution which protects jobs,” Cassidy wrote.
The White House has signaled it plans to take steps to boost biofuels and confront the anger from biofuel supporters over a recent slew of RFS waivers.
Sen. Chuck Grassley (R-Iowa) told reporters in a Tuesday call that Trump had verbally agreed to a plan that the lawmaker and biofuel industry representatives presented to the White House at a meeting last week. Grassley said the blueprint handed to Trump included a demand that the EPA make up for any biofuel volumes lost whenever it issues waivers to small refiners. “We want 15 billion gallons to be 15 billion gallons,” Grassley said. “You can waive all you want to waive for refineries, but we want 15 billion gallons.” Hours before Thursday’s White House meeting with oil-state senators, Grassley used Twitter to remind the president of his verbal agreement. “@realDonaldTrump 1wk ago U were gr8 in mtg about fixing EPA's waived gallons so both small refineries &biofuels industry can win I appreciate v much ur commitment 2help us w small refinery waived gal so we get 15B gal as law requires Farmers looking fwd to good news.” Grassley said he’s holding off praise for Trump or the EPA until he sees the biofuel demands officially granted in writing. “I’m not going to announce anything or say ‘cheers’ until I see it on paper because EPA is putting it on paper and I know that there’s a big voice for big oil in EPA,” Grassley said. “I’ve been hoodwinked so many times, not just by EPA on this issue but by other bureaucracies as well, so I’m going to see if what they talked about is the end product.”
EPA has until the end of November to finalize renewable fuel volume requirements for the next year.
Sen. Ted Cruz (R-Texas) in the past pressed Trump and the EPA for a cap on the price of Renewable Identification Numbers (RINs), which are tradable credits used to prove compliance with the RFS. Cruz has proposed capping the price of RINs at 10 cents, saying their high price harms the refining industry. Grassley, opposed to a cap on RIN prices, anticipates it could be among the demands oil senators presented to Trump. “We wouldn’t want a RIN cap — that would be bad — but they don’t need it,” Grassley said, adding that the prices of RINs are already low.
“I would speculate that the president is tired of dealing with it and is struggling with satisfying both big oil and biofuels,” Grassley said. “Maybe that’s where he has some shortcomings, trying to satisfy everybody.”
Perspective: The usually very talkative biofuel and corn industry lobbyists have gone virtually silent on the RFS topic of late. Unless there is an 11th hour change by President Trump, always a possibility, the silence says a lot about what appears to be good news ahead for biofuel proponents.
— House passes stopgap spending bill 301-123; Senate vote next week. The House clear a stopgap spending bill that would continue government funding through Nov. 21, after an ugly debate over mitigation trade aid to farmers.
Just three Democrats voted 'no' and 76 Republicans supported the measure. That signals likely bipartisan support for quick Senate passage of the continuing resolution (CR) next week.
Ag-related provisions include replenishment of the Commodity Credit Corporation funding used for trade mitigation and key farm program payouts. Specialty crop producers would benefit from a waiver of certain matching fund requirements for research grants in a new section added to the bill. Sugar beet processors would get some help as well, as would hemp growers.
— Senate Appropriators panel clears FY 2020 Ag spending with funding for ERS, NIFA relocations. The Senate committee voted 31-0 to approve the fiscal 2020 draft appropriations bill for USDA and the Food and Drug Administration. The bill, amended by a manager’s amendment package would provide $23.1 billion in discretionary funding and $128.6 billion in mandatory money. The House Agriculture appropriations bill would provide $24.3 billion in total discretionary funding for fiscal 2020. The total discretionary and mandatory funding in the House bill is $155.3 billion.
ERS, NIFA relocation funded in Senate measure, not the House. There was no discussion among Senate appropriators of one contentious provision in the bill that would provide $25 million to complete the contentious relocation of two USDA agencies. In the Agriculture Appropriations Subcommittee markup Tuesday, Chairman John Hoeven (R-N.D.) and ranking member Jeff Merkley (D-Ore.) said the relocation money for the Economic Research Service (ERS) and the National Institute of Food and Agriculture (NIFA) would likely be debated when the Senate and House reconcile differences in their bills. House appropriators approved a spending bill in May that prohibited the use of appropriated money to complete the move. The full House approved the measure as part of a bigger appropriations package. However, the bill is not law and USDA proceeded with its plans to send the agencies to the Kansas City metro area.
— U.S., Mexico reach new tomato pricing accord. The U.S. Commerce Department and Mexican tomato growers finalized an agreement Thursday that gives the U.S. the right to audit Mexican producers and U.S. tomato importers on a quarterly basis to ensure compliance with pricing laid out in the pact. As long as the agreement is in effect, the U.S. will not move forward with long-standing anti-dumping investigations against Mexico’s tomato industry that could result in hefty tariffs. Tomatoes are a top Mexican agricultural export to the U.S., constituting more than half of all tomatoes sold in the U.S.
Under the new agreement, the Commerce Department said provisions that allowed Mexican imports to be priced below pre-set reference prices have been tightened and that the department will review up to 80 Mexican growers and U.S. sellers on a quarterly basis for compliance. Mexican tomatoes also will be inspected to prevent the importation of “low-quality poor-condition tomatoes from Mexico, which can have price-suppressive effects on the market,” the Commerce Department said.
— Japan to vaccinate hogs against swine cholera. Discovery of swine cholera in several prefectures in Japan is prompting the government to begin vaccinating hogs for the disease in some prefectures, according to the Asahi Shimbun. The government announced the vaccination effort Sept. 20 in response to swine cholera being found for the first time in 26 years. The initial discovery was in Gifu more than a year ago, with subsequent discoveries in Aichi, Mie and Fukui prefectures with one found earlier this month in Saitama Prefecture.
Vaccinations would be limited to certain prefectures, the report said, as it is not possible to differentiate between hogs that have been vaccinated and those that have been infected. The report indicated the farm ministry would limit distribution of vaccinated hogs and products from those hogs to the areas where they were vaccinated.
— Other items of note:
Senate appropriators approve $250 million for election security. The Senate Appropriations Committee on Thursday adopted a bipartisan amendment to their fiscal 2020 Financial Services spending bill that would add $250 million in election security funding for states. The amendment, adopted by voice, would represent the committee’s first bipartisan agreement on election security funding since Congress approved $380 million in state grants two years ago.
Austria’s parliament voted to veto the trade deal negotiated between the European Union and the Mercosur group of South American countries. MPs are concerned that Brazil, a signatory, is failing to control fires in the Amazon rainforest. France and Ireland have also expressed concern. The trade pact took 20 years to negotiate but must be ratified by all EU members.
Iran's top officials coming to U.N. confab. Iranian President Hassan Rouhani and his foreign minister Mohammad Javad Zarif have both been granted visas to attend the U.N. opening.
State Department ordered two members of Cuba’s permanent mission to the United Nations in New York to leave the country over “attempts to conduct influence operations against the United States.” The State Department also announced it would restrict travel for all other members of the Cuban mission to just Manhattan. The Trump administration has accused Cuba of helping prop up embattled Venezuelan President Nicolás Maduro after Washington declared his government illegitimate.
Drone deliveries being tested for delivering food and beverages, medications, other household items. Walgreens and FedEx are partnering with Alphabet's Wing drone business in a new test delivery program. It will see food and beverages, over-the-counter medications and other household items be eligible to be delivered by drones in Christiansburg, Virginia this October. The city was selected as the test market, as Wing has been working closely with nearby Virginia Tech in Blacksburg to explore drone delivery as part of a Dept. of Transportation test program.
New York City Mayor Bill de Blasio announced he will end his bid for the 2020 Democratic presidential nomination, citing his struggles to qualify for the party's primary debates. "I feel like I've contributed all I can to this primary election and it's clearly not my time," he told MSNBC.
To no one's surprise, USDA extended DMC enrollment. USDA on Thursday extended the deadline to Sept. 27 for dairy producers to enroll in the Dairy Margin Coverage (DMC) program for 2019. The deadline had been Sept. 20. Link for details.
— Markets. The Dow on Thursday finished down 52.29 points, 0.19%, at 27,,094.79. The Nasdaq was up 5.49 points, 0.07%, at 8,182.88. The S&P 500 was up 0.06 point, 0.00%, at 3,006.79.
Ever wonder how negative yields work? Negative yields are occurring with greater frequency in global bond markets. What generates negative yields and why do investors continue to buy these money-losing bonds? The Wall Street Journal tackles the topic in a video (link).
Bank of Japan made major cuts to bond purchases a day after saying it wants a steeper curve and won't allow a prolonged decline in yields. The bank lowered buying across three maturity zones by a combined 50 billion yen ($463 million).
China's central bank took another step by reducing the one-year reference rate for bank loans in September.