EPA Whispers Some RFS Details to Reporters, But Fails to Release Info to Public

Senate Set to Approve House-Passed Measure to Halt Rail Strike, But Timing Unclear
 

USDA daily export sale: 114,300 metric tons of corn for delivery to Mexico during the 2022-2023 marketing year.

Soybeans and beef main sales activity to China in latest week. USDA’s weekly Export Sales update for the week ended Nov. 24 included net sales activity to China for 2022-23 of 927,379 tonnes of soybeans, 1,843 tonnes of corn and 1,228 running bales of upland cotton. No sales for 2023-24 to China were reported. Net sales for 2022 of 7,222 tonnes of beef and 273 tonnes of pork were reported, along with sales for 2023 of 329 tonnes of beef and 504 tonnes of pork.

Fed Chair Jerome Powell, speaking Wednesday, said there had been signs of progress on the inflation fight, including a slowdown in interest-rate sensitive sectors of the economy such as housing and improving supply-chain conditions. But he said an overheated labor market needed to cool more for the Fed to be confident that inflation would decline toward its 2% goal. He provided a clear signal that the central bank is on track to raise interest rates by a half percentage point at its next meeting, stepping down from an unprecedented series of four 0.75-point rate rises aimed at combating high inflation. “Despite some promising developments, we have a long way to go in restoring price stability,” Powell said.

Vessels linked to Russia’s largest grain trader shipped thousands of tons of stolen Ukrainian grain to global buyers, using a sophisticated system of feeder vessels and floating cranes, according to an investigation by the Wall Street Journal. More in Russia/Ukraine section.

Russia continued its attacks on the eastern Donbas region, the area of most intense fighting, while also bombing Kherson in the south, the Ukrainian army said. Meanwhile, NATO foreign ministers agreed to bolster support for Bosnia, Georgia and Moldova. And the U.S. signed a $1.2 billion contract to purchase six NASAMS air-defense systems for Ukraine; it will send eight in total.

The regular shipment of ammonia from Russia to ports on the Black Sea via Ukraine is likely to be restored soon, according to Martin Griffiths, the U.N.’s emergency-aid coordinator. He said an agreement, similar to the warring countries’ grain-export deal, might be reached this week. Ammonia is used to produce fertilizer around the world, he said, making it “hugely important, almost more important than grain.”

We have an update on WOTUS below. But there are still several lingering issues.

USDA has heard a lot of criticism regarding its planned rollout of Phase 2 of the Emergency Relief Program. A USDA press release about the matter was pulled back a few weeks ago. More in Policy section.

FTX's collapse is drawing Senate hearing scrutiny. CFTC Chairman Rostin Behnam is scheduled to testify before the Senate Agriculture Committee on a bill that would regulate trading of crypto assets including bitcoin.

On Wednesday Chongqing and Guangzhou, two of China’s biggest cities, said that they would ease some covid restrictions. More in China section.

Equities today: Global stock markets were mostly firmer overnight. U.S. stock indexes opened mixed with the Dow currently down around 100 points and the Nasdaq up slightly. In Asia, Japan +0.9%. Hong Kong +0.8%. China +0.5%. India +0.3%. In Europe, at midday, London +0.1%. Paris flat. Frankfurt +0.6%.

     Kroger rose more than 3% in premarket trading after raising its annual same-store sales and profit forecasts. On the flip side, Dollar General dropped 5% after reporting quarterly results that surprised investors on the downside while offering weak guidance.

     U.S. equities yesterday: All three major indices posted strong gains in the wake of comments from Fed Chairman Jerome Powell, capping off gains for the month of 5.7% for the Dow, 5.4% for the S&P 500 and 4.4% for the Nasdaq. The rise also marked a 20.4% rise for the Dow from its recent fall into bear market territory, but some said it was too quick to declare the bear market over. The Dow gained 737.24 points, 2.18%, at 34,589.77. The Nasdaq was up 484.23 points, 4.41%, at 11,468.00. The S&P 500 rose 122.48 points, 3.09%, at 4,080.11.

     The Dow has exited the bear market and has entered a new bull market, according to Dow Jones Newswires reports. The Dow has risen 20% from its recent low. However, the S&P 500 stock index is still on track for its worst year since 2008. The benchmark S&P 500 is up 17% from its YTD low, and while tech-heavy Nasdaq still has some ways to go, it has rebounded nearly 14%.

     The S&P 500 finished Wednesday above its 200-day moving average for the first time since April 7. The index closed below the trendline for 162 straight sessions, the longest such streak since a stretch ending in May 2009, according to Dow Jones Market Data.

Agriculture markets yesterday:

• Corn: March corn fell 2 1/2 cents to $6.67, down 29 3/4 cents for the month.  
• Soy complex: January soybeans rose 10 cents to $14.69 1/2, the contract’s highest close since Sept. 20. January soymeal rose $9.20 to $417.70, the highest close since Nov. 1. January soyoil fell 110 points to 71.88 cents.
• Wheat: March SRW wheat rose 14 cents to $7.95 1/2 and March HRW wheat gained 12 3/4 cents to $8.99 3/4. March spring wheat rose 8 1/2 cents to $9.43.
• Cotton: March cotton closed up the 400-point daily limit at 84.61 cents.
• Cattle: February live cattle climbed 87.5 cents to $155.675, the contract’s highest close since Nov. 22. January feeder futures surged $2.475 to $180.475.
• Hogs: February lean hogs rose $1.20 to $85.35, after earlier dropping as low as $83.725, the lowest intraday price since Oct. 17.
   

Ag markets today: Soybean futures led price declines overnight as the market pulled back from strong gains earlier this week. Corn and wheat faced mild selling pressure overnight. As of 7:30 a.m. ET, corn futures were trading 1 to 2 cents lower, soybeans were 9 to 12 cents lower and wheat futures were 5 to 7 cents lower. Front-month crude oil futures were more than $1 higher, and the U.S. dollar index was nearly 600 points lower this morning.

Technical viewpoints from Jim Wyckoff:

On tap today:

     • U.S. personal income for October is expected to rise 0.4% from the prior month, and consumer spending is forecast to rise 0.8% from the prior month. (8:30 a.m. ET) UPDATE: Personal income in the United States increased 0.7% from a month earlier in October of 2022, up from a 0.4% rise in September and above market expectations of a 0.4% gain. It was the strongest reading since October of 2021, primarily reflecting increases in compensation and government social benefits. The increase in compensation was led by private wages and salaries. Within private wages and salaries, both services-producing industries and goods-producing industries increased. The increase in government social benefits reflected increases in "other" benefits, primarily reflecting one-time refundable tax credits issued by states.
     • U.S. personal-consumption expenditures price index excluding food and energy for October is expected to rise 0.3% from one month earlier and 5% from one year earlier. (8:30 a.m. ET) UPDATE: The personal consumption expenditure price index in the United States increased by 6% year-on-year in October of 2022, below 6.3% in September. It is the lowest reading so far this year. Prices for goods increased 7.2% and prices for services 5.4%. Excluding food and energy, the PCE price index increased 5%, also below 5.2% in September. Month over month, the index rose by 0.3% in October of 2022, the same as in the previous month and matching market expectations.
     • U.S. jobless claims are expected to fall to 235,000 in the week ended Nov. 26 from 240,000 one week earlier. (8:30 a.m. ET) UPDATE: The number of Americans filing new claims for unemployment benefits decreased by 16,000 to 225,000 on the week ending Nov. 26, compared to market expectations of 235,000. The 4-week moving average was 228,750, an increase of 1,750 from the previous week's revised average. On a seasonally unadjusted basis, initial claims fell by 50,512 to 198,557, with notable decreases in Montana (-318), North Carolina (-133), and Arkansas (-131).
     • USDA Weekly Export Sales report. (8:30 a.m. ET)
     • S&P Global's U.S. manufacturing index for November is expected to hold at 47.6, unchanged from a preliminary reading. (9:45 a.m. ET)
     • Institute for Supply Management's manufacturing index is expected to fall to 49.8 in November from 50.2 one month earlier. (10 a.m. ET)
     • U.S. construction spending for October is expected to fall 0.2% from the prior month. (10 a.m. ET)
     • Federal Reserve speakers: Dallas's Lorie Logan to the Dallas Breakfast Group at 9:25 a.m. ET, Governor Michelle Bowman at the KBW CEO Strategy Forum at 9:30 a.m. ET, and Vice Chair for Supervision Michael Barr at the American Enterprise Institute at 3 p.m. ET

Was Powell’s Wednesday speech really bullish for U.S. equities? The marketplace deemed Federal Reserve Chairman Jerome Powell’s highly anticipated speech at the Brookings Institution Wednesday afternoon as leaning dovish on U.S. monetary policy. That rallied the U.S. stock market, pressured the U.S. dollar index and dropped U.S. Treasury yields. But the Sevens Report says: “Despite the big rally, Powell didn’t alter the Fed’s position on rate hikes and didn’t bring us any closer to a pivot. As such, we don’t see the comments as a material bullish catalyst… Powell’s comments were ‘less hawkish than feared,’ not ‘less hawkish.’ Markets had braced for Powell to repeat the brow beating of the past several speeches and that’s why stocks were lower into the speech. When that didn’t happen, it caused a knee-jerk chasing that saw stocks rally into the afternoon. The truth is much of yesterday’s reaction was because markets expected more negative commentary, and the surprise caused a sharp rally.”

     Bottom line: The battle is not over. And rates will stay elevated for "some time." Those are not dovish comments.

Personal spending in the U.S. increased 0.8% month-over-month in October of 2022, following a 0.6% rise in September and matching market forecasts. Figures continue to point to solid consumer spending, helped by a tight labor market and high savings, despite rising prices and borrowing costs. Within goods, the leading contributors were new motor vehicles, namely light trucks and gasoline. Within services, the largest contributor to the increase was spending for food services and accommodations, which was partly offset by a decrease in financial services and insurance, namely financial service charges, fees, and commissions.

South Korea’s exports fell the most in 2-1/2 years, suggesting the global economy is cooling as demand weakens and rates rise. Factory indexes across Asia showed factories are struggling too. At the center of Korea’s weakening exports is a deterioration in semiconductor demand. Memory-chip prices remain under pressure as China’s economy downshifts, damping demand for high-tech electronics and parts imported from elsewhere.

Market perspectives:

     • Outside markets: The U.S. dollar traded near its weakest level since mid-August, giving most Group-of-10 currencies a boost. Treasuries were little changed following a rally on Wednesday. The yield on the 10-year U.S. Treasury note was under pressure, trading around 3.59%, with a mostly lower tone in global government bond yields. Oil and gold rose while Bitcoin was flat after rallying more than 5% in the past two days. Crude prices were higher, with U.S. crude around $81.70 per barrel and Brent around $88.10 per barrel. Gold and silver futures are registering solid gains, with gold around $1,797 per troy ounce and silver around $22.39 per troy ounce.

     • WSJ: EU asks members to set Russia price cap at $60 a barrel. The EU has asked the bloc's 27 member states to approve a price cap on Russian oil of $60 a barrel, people familiar with the matter told the Wall Street Journal. All 27 member states need to approve the level of the price cap, and negotiations could or a different level could be agreed to later Thursday. But members have largely coalesced around a cap of $60 a barrel to such a degree that the commission believes it can get a deal at this level, the people said. Also, the Group of Seven (G7) still needs to approve the price for it to go into effect, and the group might not immediately agree with the EU decision.

     • $5.141: Average U.S. price per gallon for diesel fuel in the past week, 9.2 cents lower than the previous week and the lowest price since the week of Oct. 3, according to the Energy Information Administration.

     • Precious metals finished November with their best monthly performance since at least 2021. The nearest-traded futures contract for gold gained 6.7% on the month, snapping a seven-month losing streak.

       

     • Ag trade: South Korea purchased 133,000 MT of corn expected to be sourced from South America or South Africa. Algeria purchased between 450,000 and 500,000 MT of optional origin milling wheat.

     • NWS weather: Heavy snow for parts of the Northern/Central Rockies and the Sierra Nevada Mountains on Thursday... ...Lake-effect snow downwind from Lakes Erie and Ontario on Thursday... ...There is a Marginal Risk of excessive rainfall for parts of the California Coast and Pacific Northwest on Friday into Saturday morning.

Items in Pro Farmer's First Thing Today include:

     • Price pressure to open December
     • U.N. official: Deal close on resuming Russia ammonia exports via Ukraine
     • Lula proposes pact to curb Brazilian soy linked to Cerrado deforestation
     • Sharp monthly increases expected in soy crush, corn-for-ethanol use.
     • Light cash cattle trade at steady prices
     • Direct cash hog price firms

— Summary: The U.S. is considering a dramatic expansion in the training it provides to Ukrainian forces, including instructing as many as 2,500 Ukrainian soldiers a month at a U.S. military base in Germany, according to multiple U.S. officials cited by CNN. Since the start of the conflict Feb. 24, the U.S. has trained only a few thousand Ukrainian soldiers on specific weapons systems. But to combat Russia's ongoing aggression, officials say that a new regimen with "much more intense and comprehensive" training would benefit Ukraine as the onset of winter is expected to slow military operations. Separately, Russia's new expanded law on "foreign agents" comes into force today amid an intensifying crackdown on free speech and opposition under President Vladimir Putin.

• Russia lacks labor. The call-up of men to fight in Ukraine has left labor so scarce in Russia that entire industries are in distress.
  
• U.N. official: Deal close on resuming Russia ammonia exports via Ukraine. A deal is “quite close” to resume Russian ammonia exports via a pipeline to a Black Sea port in Ukraine, United Nations aid chief Martin Griffiths told a Reuters NEXT event on Wednesday, stressing that it was “almost more important” than ensuring grain exports. “The operation of that ammonia pipeline from Russia through Ukraine... is well understood, it’s not difficult, it can be started within a week or two. I think we’ll get there,” said Griffiths.
• Russian grain exports could reach 54 MMT. State-controlled trader United Grain Company (UGC) expects Russia to export 53 MMT to 54 MMT of grain in 2022-23, its deputy head Ksenia Bolomatova told an agriculture conference on Thursday. The country’s ag ministry forecasts the country will export around 50 MMT of grain this year.
• Ships linked to Russia smuggle Ukrainian grain. Vessels linked to Russia’s largest grain trader shipped thousands of tons of stolen Ukrainian grain to global buyers. The Wall Street Journal investigated the sophisticated system of feeder vessels and floating cranes used to smuggle grain, typically from the Crimean port of Sevastopol, to larger cargo ships waiting at sea. Link for details.

— After House easily clears bill averting a crippling nationwide U.S. freight rail strike, measure heads to the Senate.  Quick Senate action on the bill will depend on obtaining unanimous consent to waive days of standard procedural delays on floor votes, with several senators already signaling that may not occur.

     Labor Secretary Marty Walsh and Transportation Secretary Pete Buttigieg will meet with Senate Democrats at lunch today to discuss the legislation, which the House passed Wednesday on a 290-137 bipartisan vote.

     The bill would impose a labor agreement hammered out by rail companies, labor leaders and the Biden administration months ago but rejected by workers in four of 12 unions.

     The House separately voted 221-207 to pass a related bill that would revise the original deal to add seven days of paid sick leave to the contract, one of the chief sticking points between unions and companies. But only three Republicans voted for the sick leave measure, which signals hurdles in getting enough GOP support in the Senate to pass. The Senate could choose to go along with the change or ignore it without affecting the original legislation.

— Expected USDA release on Phase 2 of Emergency Relief Program (ERP) was pulled back. The reason largely is because of a lot of negative producer and farm-state lawmaker feedback on USDA’s apparent ERP Phase 2 approach. Says one source: “It violates the initial regulation that says it would run according to phase I. It requires producers to give over tax returns… private concerns. It operates as a whole farm program though it was never intended to.”

— EPA announces another step in WOTUS plans. The Office of Management and Budget (OMB) completed their review Nov. 30 of EPA’s final rule to set yet another definition of Waters of the U.S. (WOTUS), this one a final rule to replace the Navigable Waters Protection Rule from the Trump administration with a definition that goes back to the pre-2015 WOTUS rules but tweaked to account for court decisions.

     EPA is still developing a new definition that would have “further refinements” to the definition that would “take into account additional stakeholder engagement and implementation considerations, scientific developments, and environmental justice values.”

     Meanwhile, the U.S. Supreme Court will issue a decision on a case they heard in October on WOTUS that will also impact the agency’s yet-to-be detailed new definition.

— Biden administration’s choice to be the next U.S. ambassador to Russia, current U.S. ambassador to Amenia Lynne Tracey, appeared for her confirmation hearing Wednesday before the Senate Foreign Relations Committee. Tracy admitted that she will be serving in the role at a very difficult time in U.S./Russia relations, but said there was no reason to give up on the Russian people. “This is a tough environment. It’s tough to sometimes penetrate through the propaganda,” Tracy said. “When people have been drinking Kool-Aid for a long time, it’s hard to get them to drink water.” She has more than 30 years of Foreign Service experience, including being posted in the U.S. embassy in Moscow in 2014-2017. Tracy was hailed by both parties during the hearing and is expected to face little difficulty getting confirmed, potentially even before lawmakers exit later this month.  

— China is starting to chart a path towards rejoining the rest of the world in living with Covid. Beijing will allow some virus-infected people to isolate at home, starting with residents of its most-populous district, a significant shift that reflects the pressure officials are under from a record outbreak and public opposition to zero-Covid. On Wednesday, China’s top official in charge of the fight against Covid said the country’s efforts to combat the virus are entering a new phase, with the omicron variant weakening and more people getting vaccinated.

— Reuters: EPA to propose boost in biofuel blending volumes. EPA this week will propose increases in the amount of ethanol and other biofuels oil refiners must blend into fuel, Reuters reported late Wednesday, citing two sources familiar with the situation.

     EPA’s proposal reportedly calls for overall blending mandates of 20.82 billion gallons in 2023, 21.87 billion gallons in 2024 and 22.68 billion gallons in 2025, with volumes of conventional corn-based ethanol at 15 billion gallons in 2023 and 15.25 billion gallons each in 2024 and 2025. Advanced biofuel blending volume mandates in the proposal will be set at 5.82 billion gallons in 2023, 6.62 billion gallons in 2024 and 7.43 billion gallons in 2025, the sources said.

      There are differences in the levels two news outlets reported for conventional ethanol — primarily corn-based ethanol. Bloomberg reported those levels at 15 billion gallons for 2023, 14.91 billion gallons in 2024. Reuters reported the 15-billion-gallon figure for 2023, but said the marks for 2024 and 2025 would be 15.25 billion gallons.

     Bloomberg reported the proposal would also modestly boost quotas for biodiesel, which is typically made from soybean oil and other fats, up to 2.95 billion gallons in 2025 from 2.76 billion gallons this year. Absent from the reports was any specifics on renewable diesel where several new refineries are planned to produce the fuel. (Reuters had 2.82 billion gallons for 2023.)

     EPA comments. EPA official Bill Chalmsley, director of the Assessment and Standards Division in the Office of Transportation Air Quality, confirmed the agency would propose levels for 2023, 2024, and 2025. He made the comments to a meeting of the Mobile Sources Technical Review Subcommittee the levels proposed for all three years would be for increases in all four major categories under the RFS.

     EPA will also seek for the first time to make the use of biofuels to charge electric vehicles (EVs) as part of the renewable fuel program, giving EV car makers the ability to generate tradable credits, the sources said. The EV proposal will add up to 1.4 billion new credits by 2025, the sources added. So-called D3 credit volumes will grow from 720 million in 2023 to 2.13 billion by 2025, with overwhelming majority of the growth coming from credits generated by EVs, or e-RINs.

     Analysis: Says one industry analyst: “The story within the story is that virtually all of the growth proposed by the EPA in the total advanced category is in the cellulosic category to accommodate e-RINs, belying this administration’s push for electric vehicles. Meanwhile, biodiesel and renewable diesel volumes are flat. Disappointingly flat because this is the area of investment where actual renewable fuel is coming online and where major oil refiners have made investment. One must wonder if again policymakers are overly aspirational when it comes to cellulosic. Are they writing checks the industry can't cash?”

     Perspective: EPA is being faulted for not publicly announcing the RFS info, per a court order. In a too-cute-by-half move, EPA is saying it complied by supplying a signature to whatever they filed and wherever they filed it. As for news accounts, Reuters and Bloomberg have different figures for conventional ethanol and neither one of them had renewable diesel mentioned so that is an unknown. Release of RFS information, again, has been a crapshoot. The agency has maintained they would “sign” the proposed RFS levels by November 30 and finalize them by Jun. 14, 2023. EPA’s Chalmsley largely confirmed that, saying the agency expected to announce the proposed levels Thursday or Friday. Presumably the announcement will come with a pre-release version of the proposal from EPA followed by it appearing in the Federal Register within a week or two following the initial public release.

— Summary:

• Global Covid-19 cases at 643,408,586 with 6,635,388 deaths,
• U.S. case count is at 98,788,140 with 1,080,444 deaths.
• Johns Hopkins University Coronavirus Resource Center says there have been 653,502,647 doses administered, 267,804,921 have received at least one vaccine, or 81.28% of the U.S. population.  

— Sen. Mike Braun (R-Ind.) has made his 2024 campaign for governor official. Braun filed paperwork with Indiana election officials establishing a campaign committee to seek the state governorship, which will be open because Gov. Eric Holcomb (R) will be term limited. Braun will forgo a bid for a second Senate term in a Republican-friendly state where Donald Trump won by 16 percentage points in 2020 and Sen. Todd Young (R) was re-elected by 21 points on Nov. 8. The Republican primary is scheduled for May 2024 and an open Senate seat should draw serious consideration from many Republicans, including members of Indiana’s U.S. House delegation. Braun said he won’t resign until his Senate term is up.

— House Republicans release 2023 calendar. The Republican-led House will hold its first votes of the 118th Congress on Jan. 3, with plans to be in session for 30 weeks next year, according to a calendar released by incoming Majority Leader Steve Scalise (R-La.). Link.
 

— The IRS provided six years of former President Donald Trump’s federal income tax returns to the House Ways and Means Committee, one week after the Supreme Court denied Trump’s request to block the documents from being turned over. The billionaire has fought for three years to keep the returns confidential.

— Student loans: The Biden administration was dealt another setback in court Wednesday that will further complicate the revival of its student loan forgiveness plan. A second federal appeals court rejected the administration's bid to put on hold a ruling blocking President Biden's student debt relief policy. The move sets the stage for the Justice Department to take the case to the Supreme Court, which is already considering a separate request from the administration that it reverse another order blocking the program.

— Death of the Islamic State’s leader. Abu al-Hassan al-Hashimi al-Qurayshi, the head of the Islamic State, has been killed in combat, the group announced on Wednesday without offering more information. According to the U.S. military, he died in October. Al-Qurayshi succeeded Abu Ibrahim al-Hashimi al-Qurayshi, who was killed in a U.S. raid in Syria in February. In response, U.S. National Security Council spokesperson John Kirby said that “we certainly welcome the news of the death of another ISIS leader.”

WASDE | Crop Production | USDA weekly reports | Crop Progress | Food prices | Farm income | Export Sales weekly | ERP dashboard | California phase-out of gas-powered vehicles | RFS | IRA: Biofuels | IRA: Ag | Student loan forgiveness | Russia/Ukraine war, lessons learned | Election predictions: Split-ticket | Congress to-do list | SCOTUS on WOTUS  | SCOTUS on Prop 12 | New farm bill primer | China outlook |