As expected, Iowa lawmakers not happy with EPA decisions on RFS volume requirements
EPA on Friday proposed volumes for the amount of biofuels to be mixed in with motor fuels for 2020 (2021 for biodiesel), drawing criticism from Iowa politicians who say the agency underestimated demand. EPA noted Congress hasn’t restored biodiesel's lapsed $1-a-gallon tax incentive credit, a topic Congress still has under review. Link for details.
— No major changes in proposed RFS for 2020 biofuel, 2021 biodiesel levels. EPA as expected on Friday released its proposed 2020 biofuel and 2021 biodiesel levels under the Renewable Fuel Standard (RFS), making only a small change to the level for cellulosic and thus advanced biofuel compared to the 2019 levels the agency finalized in November 2018. Link for details.
The total renewable fuel level for 2020 is proposed at 20.04 billion gallons, up 120 million gallons from the 19.92 billion gallons for 2019.
EPA increased the proposed cellulosic biofuel and advanced biofuel levels compared to 2019 by 120 million gallons, which keeps those levels well below the statutory marks. Cellulosic biofuel was to be at 10.5 billion gallons for 2020 with advanced biofuel at 15 billion gallons. However, the industry has been well short of those marks and that has now triggered a “reset” of the RFS by EPA. That reset, however, will be handled on a separate path.
Conventional biofuel — primarily corn-based ethanol — is maintained at the statutory maximum level of 15 billion gallons. As with the 2019 levels, EPA indicated that were they not adjusting the 2020 levels to account for small refiner exemptions (SREs). EPA continues to take the stance that they would only reallocate any of the SRE gallons if those waivers were granted by the time the agency finalizes the rule — there are no SREs listed as pending for the 2019 or 2020 compliance years.
The biomass-based biodiesel (BBD) level is proposed at 2.43 billion gallons for 2021, unchanged from the level finalized for 2020. EPA is required to set the BBD level one year in advance. EPA noted Congress hasn’t restored biodiesel's lapsed $1-a-gallon tax incentive credit, a topic Congress still has under review.
The levels proposed could still be adjusted in the final version which EPA has pledged to complete under the timeline laid out by law — November 30, 2019, relative to the 2020 biofuel and 2021 BBD levels. But history shows that any changes are typically minimal.
Sen. Grassley not pleased with EPA action. “It’s unacceptable that EPA would set biofuel volumes below demand at a time when farmers, biofuels producers and agribusiness owners are forced to shed jobs and close plants,” Sen. Chuck Grassley (R-Iowa) said in a statement. “I urge President Trump to compel EPA to reverse course and keep his word to the forgotten Americans who have faithfully stood with him.” Meanwhile, Rep. Abby Finkenauer (D-Iowa) said on Twitter she was “disappointed” by the EPA proposal. “This decision is bad for our farmers and biofuel producers across the heartland,” she said.
— U.S./China trade policy update:
- Telephone talks scheduled. U.S. Trade Representative Bob Lighthizer and Treasury Secretary Steven Mnuchin will talk by phone with Chinese Vice Premier Liu He this week. Some reports suggest a U.S. team could be headed to Beijing soon.
- President Trump indicated Friday that imposing more tariffs on Chinese goods is still very much alive, if the two sides can’t reach an agreement. “We had a deal, and they broke it. … I think if they had it to do again, they wouldn’t. Because, right now, we put very big tariffs on, and we have a lot more to put on if we want,” Trump said.
- There has been no sign of a speedy resolution to U.S.-China trade tensions in recent meetings with American officials, Australia’s top finance minister said, despite President Trump’s more-conciliatory tone at last weekend’s Group of 20 summit. Australia’s Treasurer Josh Frydenberg said on Friday he had seen no sign during meetings with counterparts or recent separate talks with U.S. officials that a resolution was on the horizon. “These issues aren’t going away anytime soon,” Frydenberg said in an interview with the Wall Street Journal. Link for details.
- Citing national security, lawmakers want to ban military purchases of Chinese-made drones.
- The U.S. soybean industry is fighting to save the Chinese market it spent decades building, the Wall Street Journal reports (link). American trade association officials and farmers are regularly meeting with Chinese buyers to ensure business can resume when the Trump administration’s trade dispute ends.
— TASS: Russia eyeing Sevastopol as grain export hub to Middle East. The port of Sevastopol could become a hub for Russia to export grain and other products to the Middle East, according to a TASS report quoting Director of the Department of Agriculture of Sevastopol Dmitry Chumakov. "It was proposed to create a joint grain hub. ... We have accumulated up to 110,000 tonnes of grain, others do not have such capacities,” Chumakov stated. “Through the Bosporus grain goes to Oman, and from there to the countries of the Middle East.”
The hub is deep enough for large vessels to arrive and depart and it does not freeze. The goal is to move exports from Sevastopol from a current 250,000 tonnes per year to one million tonnes in the first year, 2.5 million tonnes in the second year and then three million tonnes. Eventually, Chumakov said, the export goal is to reach five million to 10 million tonnes.
— FAO, OECD see China pork output rising in 2020 forward. China has been severely impacted by African swine fever, with the disease cutting production in the country, according to the annual Agricultural Outlook 2019-2028 report from the UN Food and Agriculture Organization (FAO) and the Organization for Economic Cooperation and Development (OECD), but their production is expected to rise 2020 forward.
The report likened the situation in China with ASF to that from 2007-2008 when Porcine Respiratory and Reproductive Syndrome (PRRS) epidemic reduced domestic supply. The agencies said the current outlook sees pork production in 2019 in China down by 5%. “For 2020, production and consumption [are] projected to return to the 2018 level and resume its trend in growth for the remainder of the outlook period,” the report said. The supply shortage in China is expected to result in nearly two million tonnes of imports, the report noted. “With increased tariffs imposed on US exports of pigmeat, Brazil, Canada and the European Union are projected to benefit from China’s increased import demand.”
— Other items of note:
President Trump’s approval rating has risen to the highest point of his presidency in a WashPost/ABC News poll: 44% (39% in April), with 53% disapproving. Even the Trump-bashing Washington Post writes, “Trump has a narrow but real path to re-election.” But the headline for the item adds, “but a majority also see him as ‘unpresidential’.” Link to article.
President Trump said about plans to round up and deport undocumented immigrants: "I say they came in illegally and we're bringing them out legally. These are people where we have the papers, we've gone through the court system. They'll be starting fairly soon, but I don't call them raids."
Drug price executive order coming. President Trump said he's working on a drug pricing executive order to be announced "very shortly" that allow the U.S. to pay whatever the lowest drug prices as charged to other nations or companies. He called the soon-to-be proposed executive order "a favorite nations clause.”
China’s vice minister of agriculture said new outbreaks of African swine fever are slowing, but farmers have told Reuters that many cases are not being reported because local officials in some provinces are unwilling to verify the disease. Bottom line: Chinese officials continue to say that the ASF situation is slowing in the country while they continue to report new cases of the disease.
Iowa farmers received nearly $1 billion of the approximately $8.6 billion that USDA sent out in direct payments as part of its first trade mitigation package (MFP 1), the Des Moines Register reports. Only Illinois farmers received more. Link to article.
Inside the weather wars that “may threaten the daily forecast you depend on,” according to a Time magazine article (link). Private companies are seeing opportunity in weather forecasting. But experts fear a future wherein we have to pay for better predictions.
— Markets. The Dow on Friday was down 43.88 points, 0.16%, at 26,922.12. The Nasdaq declined 8.44 points, 0.10%, at 8,161.79. The S&P 500 lost 5.41 points, 0.18%, at 2,990.41.
The S&P 500 rose 1.6% this past week, finishing just shy of the historic 3,000 mark. The index is valued at 18 times projected 2019 operating earnings.
China's central bank could cut its benchmark policy rate for the first time in four years. The move would come if the U.S. Federal Reserve delivers a cut in late July, as Chinese policymakers step up support for the slowing economy. But an upbeat U.S. jobs report released Friday has increased expectations the Fed will hold off on rate cuts or may not be as aggressive as some in the market had hoped.
The Turkish lira declined as much as 3% against the dollar overnight after President Erdogan dismissed the central bank governor, reigniting concerns about independence and fueling concerns borrowing costs will be lowered faster than expected. Governor Murat Cetinkaya, whose four-year term was due to run until 2020, was replaced by his deputy Murat Uysal, just weeks before the central bank is scheduled to decide on policy.
EU officials are reportedly discussing naming Mark Carney, the outgoing governor of the Bank of England, as the next head of the International Monetary Fund.
The U.S. is overflowing with natural gas. Not everyone can get it. U.S. gas production is at a record high, but the infrastructure needed to move the fuel around the country hasn’t kept up. The result is price spikes, uneven distribution and fears of stifled economic growth. Distributors say one hurdle is the shipping Jones Act, which bars the large but foreign-built liquefied natural gas carriers that would help transport the fuel in U.S. domestic markets. Link to Wall Street Journal article.
Deutsche Bank will exit its global-equities sales and trading business and eliminate 18,000 jobs by 2022. Chief Executive Christian Sewing declined to give a regional breakdown of the planned cuts but said they wouldn’t be concentrated in one region. The bank expects to post a net loss in the second quarter of $3.14 billion as a result of the restructuring. Reports previously noted that Deutsche Bank has held discussions with Citigroup Inc. and BNP Paribas SA and others that could result in the sale or transfer of the bank's equities business.