Manchin: Not Working with White House on BBB; White House Says Talks Ahead

Canada loses first USMCA case on its dairy policy | EPA’s RFS confab
 

Market Focus:
• USDA daily export sale: 132,000 MT soybeans to unknown destinations, MY 2022-2023
• FOMC minutes to be scoured for more rate-rise clues
• Fed’s Neel Kashkari now sees two 2022 rate rises amid inflation surge
• More than 4.5 million people in America quit their jobs in November
• Progress in relieving port congestion, stocking store shelves and boosting workforce
• Toyota Motor for first time overtakes GM as the U.S.’ top-selling car company
• OPEC+ to increase oil output as concerns grew about lagging production
• Demonstrations underway in Kazakhstan, driven by outrage over surging gas prices
• France may allow utilities to burn more coal as it grapples with energy crunch
• Ag analyst and trader Richard Crow sums up market outlook
• Indonesia subsidizes cooking oil for consumers to tamp down prices
• Perspective on DC snow earlier this week
• Ag demand update
• Wheat leads overnight price pullback
• Talk of China buying U.S. soybeans, corn
• Cash cattle trade likely slow to develop
• Cash hog index jumps 

Policy Focus:
• Manchin said he’s not working with White House re: BBB
• White House says negotiations likely ahead with Manchin
• Manchin meets with Schumer, others re: filibuster 

China Update:
• China vs. Lithuania
• Talk of China buying U.S. soybeans, corn
• China to auction more wheat reserves
• China to ensure stable economic growth in Q1
• Walmart/Sam’s Club denies it purposely removed items from Xinjiang 

Trade Policy:
• Canada forced to end tariffs on U.S. dairy products after U.S. prevailed in first USMCA case
• Notices published on Canada’s request for USMCA case in lumber duties decision 

Energy & Climate Change:
• EPA held public hearing Tuesday on biofuels blending proposals under RFS
• Supreme Court to consider E15 case during Jan. 7 conference 

Livestock, Food & Beverage Industry Update:
• JBS investigation urged by U.S., European lawmakers
• KFC Beyond Fried Chicken launch set for Jan. 10 

Coronavirus Update:
• Only about 33% of all Americans have gotten their boosters
• Biden administration finalizing contracts to send half a billion free tests to homes
• CDC updates guidance on recommended Covid-19 isolation periods after criticism
• Lessons for hundreds of thousands of students in Chicago on hold
• WHO: Growing evidence Omicron variant causes relatively mild symptoms 

Politics & Elections:
• Democratic Reps. Rush, Lawrence will not seek re-election
• Wasserman: Redistricting ‘looks like a wash’
• Biden disapproval hits highest level in December
• Impact of GOP Nunes’ retirement: a possible Democratic pickup  
• Trump cancels Jan. 6 press conference 

Other Items of Note:
• Background on possible SWIFT sanction on Russia should it invade Ukraine
• Blue states ask Supreme Court to hear challenge to SALT cap
• North Korea launched a ballistic missile off its east coast on Wednesday
• USDA’s Vilsack to address American Farm Bureau meeting Jan. 10
• Deere to market fully autonomous tractor for farm tillage
 

Equities today: Global stock markets were mostly lower overnight. U.S. stock indexes are pointed toward narrowly mixed openings. Asian equities were mostly lower with the Nikkei bucking the trend. Hong Kong’s Hang Seng Index fell 382.59 points, 1.64%, at 22,907.25. The Nikkei was up 30.37 points, 0.10%, at 29,332.16. European equities are seeing advances in early trading. The Stoxx 600 was up 0.2% while most regional markets were seeing gains of 0.1% to 0.8%.

     U.S. equities yesterday: The Dow finished at a record, closing up 214.59 points, 0.59%, at 36,799.65. The Nasdaq ended down 210.08 points, 1.33%, at 15,622.72. The S&P 500 was down 3.02 points, 0.06%, at 4,793.54. Dragging on some stocks was another hike in the 10-year Treasury, whose yield reached 1.68% to close in on highs not seen since November.

On tap today:

     • ADP's employment report is expected to show that the U.S. private sector added 375,000 jobs in December. (8:15 a.m. ET)
     • IHS Markit's U.S. services index for December is expected to tick down to 57.3 from a preliminary reading of 57.5. (9:45 a.m. ET)
     • Federal Reserve releases minutes from its Dec. 14-15 meeting at 2 p.m. ET. See related item below.
     • Attorney General Merrick Garland remarks on efforts to hold accountable those responsible for the attack on the Capitol last year.

FOMC minutes to be scoured for more rate-rise clues. Minutes from the Dec. 14-15 Federal Open Market Committee (FOMC) will be released today and will be closely examined for additional signs relative to the U.S. central bank’s plans to increase interest rates this year. Updated economic projections issued at the meeting indicated a majority of FOMC members believed rate increases would be needed in 2022, with Fed Chairman Jerome Powell telling reporters any increase in the target range for the Fed funds rate would not come while the Fed is still tapering its bond purchases. The Fed also sped up that tapering effort and is now poised to end it in March. While the FOMC minutes do not attach names to any of the remarks that are summarized, their use of “some,” “few,” or “many” can provide additional color to the “dot plot” which summarizes the economic projections issued by Fed members. How the minutes recap Fed views on inflation and the jobs market will also be notable and the recap will no doubt underscore that the Covid situation will be a key in whether the U.S. economy unfolds as Fed members currently expect. But the main focus will be on timing and number of rate increases that Fed members saw as necessary or expected this year.

More than 4.5 million people in America quit their jobs in November, the most in two decades of tracking, as openings remained near a record. The rate of quitting has been especially high in hospitality and other low-wage sectors, where workers have been taking advantage of strong demand to look for jobs with better pay or working conditions. Wells Fargo analysts note: “Job openings dipped over November to end the month at 10.6 million. Along with some easing in the share of small businesses planning to hire, demand for workers appears to be cooling off a touch, although it remains plenty hot. With openings and hiring plans still near record rates, we look for hiring to have rebounded after November's underwhelming initial gain of 210,000 and have penciled in an increase of 400,000 jobs in December's payroll report to be released on Friday. While the emergence of the Omicron variant in late November represents a risk to how vigorously firms tried to staff up in December, the biggest headwind to hiring remains the availability of workers. The number of unemployed workers per job opening fell to a fresh record low of 0.65 in November, leaving businesses increasingly reliant on workers returning to the labor force.”

Fed’s Neel Kashkari now sees two 2022 rate rises amid inflation surge. Federal Reserve Bank of Minneapolis President Neel Kashkari, who has been one of the central bank’s biggest supporters of providing stimulus to help the economy navigate the coronavirus pandemic, said he now believes more aggressive monetary policy actions will be needed to deal with high inflation. Link for more via the WSJ.

Supply Chain Disruptions Task Force notes progress in relieving port congestion, stocking store shelves and boosting the workforce. The update session took place Dec. 22. Some of the info provided:

• A nearly 50% reduction in containers dwelling at the ports of Los Angeles and Long Beach for more than eight days, according to John Porcari, Port Envoy to the White House Supply Chain Disruptions Task Force. "This is striking progress since November," Biden said.
• 5 days was the average dwell time for containers at the Port of Long Beach, down from 12 days in mid-October, Porcari said.
• 4 days was the average dwell time for containers at the Port of Los Angeles, down from nine days in mid-October.
• $17 billion of funding is available in the bipartisan infrastructure framework (BIF) deal to speed and modernize the ports.
• There has been a 25% drop in ocean shipping prices between Asia and the West Coast, White House Press Secretary Jen Psaki said in a briefing following the task force meeting. Freightos data shows rates around $14,500 from Asia to the West Coast — a dip from peaks in September but still more than triple the rates in December 2020.

Toyota Motor has for the first time overtaken General Motors as the U.S.’ top-selling car company by annual sales, a change prompted largely by a global computer-chip shortage that dealt an uneven blow to the car business. The Japanese auto maker, which for decades has worked to expand its presence in the U.S., outsold GM by roughly 114,000 vehicles in 2021. The modern car can have hundreds, if not thousands, of computer chips, and with a growing semiconductor shortage, Toyota began stockpiling silicon ahead of its rivals. It was also earlier to bet on a recovering U.S. car market, cutting parts and production orders less sharply than competitors to make it better prepared for a return in demand.

Market perspectives:

     • Outside markets: The U.S. dollar index is slightly weaker ahead of U.S. economic updates, with the euro and British pound both firmer against the greenback. The yield on the 10-year U.S. Treasury note is slightly higher to trade around 1.65%. Gold and silver futures are moving slightly higher ahead of U.S. trading, with gold around $1,819 per troy ounce and silver around $23.12 per troy ounce.

     • Crude oil futures moved into positive territory ahead of US government inventory data due later this morning. US crude was trading around $77.30 per barrel and Brent around $80.40 per barrel. Crude was lower in Asian action, with US crude down 23 cents at $76.76 per barrel and Brent down 28 cents at $79.72 per barrel.

     • OPEC and Russia agreed to increase oil output as concerns grew about lagging production. OPEC+ oil producers agreed on Tuesday to continue their program of gradual monthly output increases in February, bolstering output by 400,000 barrels a day, but there are growing doubts about whether they can deliver on the additional barrels. A few producers in the 23-member OPEC Plus group, including Saudi Arabia and Iraq, are increasing output handily, but others are lagging. A range of issues, including political strife and underinvestment in drilling, are holding them back. The group agreed last year to boost output each month until production reaches pre-pandemic levels but reviews that policy every month. Oil prices surged after initially shrugging off the news in a bet that the latest Covid-19 surge won’t depress demand like earlier waves.

     • Demonstrations underway in Kazakhstan, "driven by outrage over surging gas prices, in the biggest wave of protests to sweep the oil-rich country for decades." Mass protests in Kazakhstan have prompted the country’s authoritarian government to resign and the president to impose a state of emergency in a crisis that threatens to destabilize the oil-rich former Soviet republic. Link for details via the New York Times.

     • France may allow utilities to burn more coal as it grapples with energy crunch. The French government is considering a plan that would allow electricity providers to burn more coal, as the country looks to head off potential winter power shortages, Bloomberg reported. Specifically, France is looking to increase the roughly 700-hour annual cap on running the country’s three remaining coal-fired power plants to around 1,000 hours for the first two months of 2022. The current limit was set in 2019 in a bid to curb France’s power sector carbon emissions. Most of the French power — typically around 70% — is generated by its sizable nuclear fleet, but with an unusually high number of reactors idled for maintenance the country is facing a potential electricity shortage this winter. “This measure is necessary to ensure security of electricity supply,” France’s Ecology Ministry said of the proposal. “It raises electricity production margins only for the most problematic period of winter in January and February 2022, while keeping the target of a definitive halt of coal stations in mainland France.” Under the draft decree submitted for public feedback, the cap would again be lowered after the first two months of 2022 but would not fall back to 700 hours until 2023.

     • Ag analyst and trader Richard Crow sums up market outlook: The markets are rebalancing for the South American problems. Crop losses are hard to gage in the U.S., but across a large area of Brazil it is harder. The Government of Parana stated yesterday the bean loss in Parana could be as much as 35%. Such a loss is 7 million tons.  If one adds RG and some loses due to wet conditions, the quantity could add. The smallest Brazil crop estimate I have seen is 134 million tons. Argentina has a hot dry forecast for two weeks. Crop losses there will be increasing. Parana crop rating yesterday fell completely “out of bed.”

     • Indonesia subsidizes cooking oil for consumers to tamp down prices. Indonesia’s government announced they will offer 1.2 billion liters of cooking oil to consumers at subsidized prices to help temper food price inflation, spending 3.6 trillion rupiah ($250.78 million) on the effort. The subsidy is funded via a levy on palm oil exports, chief economics minister Airlangga Hartarto and trade minister Muhammad Lutfi told a joint news conference. The government will sell cooking oil at 14,000 rupiah per liter, the officials said, compared with branded cooking oil priced at more than 20,000 rupiah per liter. The effort will involve 70 producers of cooking oil. There was no timeline given for the action.

     • USDA daily export sale: 132,000 MT soybeans to unknown destinations, MY 2022-2023

     • Ag demand: Tunisia purchased around 125,000 MT of soft wheat, 75,000 MT of durum and 75,000 MT of feed barley from unspecified origins. 

     • Perspective on DC snow earlier this week. Some 8.5 inches of heavy, wet snow was recorded in Washington, D.C., the most since Jan. 13, 2019, snapping tree branches and weighing down power lines. More snow fell in about eight hours than all of last winter, National Weather Service data shows.

     • NWS weather: A Slight Risk of heavy rainfall leading to flash flooding is in effect for parts of the coastal Pacific Northwest on Thursday... ...More heavy mountain snow in store from the Pacific Northwest spreading into the Northern/Central Rockies and Front Range... ...A low pressure system to continue producing blizzard conditions across portions of the Northern Plains/Upper Midwest this morning and heavy snow for the Great Lakes over the next couple of days... ...Cold air spills down into Great Plains and Midwest through Thursday... ...Another winter storm possible from the Tennessee Valley to the Northeast beginning Thursday.

Items in Pro Farmer's First Thing Today include:

     • Wheat leads overnight price pullback
     • Talk of China buying U.S. soybeans, corn
     • Cash cattle trade likely slow to develop
     • Cash hog index jumps
 

— Sen. Joe Manchin said he’s not working with the White House to find a path forward on Build Back Better (BBB). “There’s no negotiations going on at this time,” the West Virginia Democrat said near his Senate office Tuesday afternoon, disputing some prior reports that negotiations were taking place (link | link). Nevertheless, Democrats and Biden said they planned to work with Manchin to negotiate a bill he will approve, but nothing is happening so far, Manchin said. “I’ve never turned down talks with anybody,” Manchin told reporters. “I was very clear on where I stand, and I thought it was time to do that.” Manchin said he’s never altered his opposition to the bill after months of negotiating with Democrats and the White House. “But to just continue on and on as we have for five-and-a-half months, I haven't changed from the first day I talked to leadership. Everyone's been working I think in the best good faith they possibly can. I've just had a very difficult time and understanding where we are and where our country is and the concerns I have.” Manchin cited the nation’s high inflation rate and unemployment numbers as well as global geopolitical unrest as more pressing concerns for the White House.

     Later Tuesday, Senate Majority Leader Chuck Schumer (D-N.Y.) said the pair talked at least briefly about the BBB bill while the Senate was on its holiday break. “I talked to Sen. Manchin numerous times during the break,” Schumer told reporters. “Most of the discussions were on voting rights, but we did touch on BBB and I believe the Biden administration will be having discussions with Manchin with his cooperation and participation on BBB as we move forward.” Biden and Manchin spoke about two weeks ago, White House press secretary Jen Psaki said Tuesday, but she did not say whether they planned additional talks.

     Bottom line: Senate Democrats are putting the BBB plan on ice with negotiations stalled. However, Manchin said it’s likely Democrats will have an easier time coming to an agreement on climate change than on other areas of President Biden's proposed climate and social spending bill. “The climate thing is one that we probably can come to an agreement much easier than anything else,” he told reporters. Asked about the climate provisions, he said, “There’s a lot of good things in there.” 

— Manchin meets with Schumer, others re: filibuster. Sen. Joe Manchin (D-W.Va.) met Tuesday evening with Senate Majority Leader Chuck Schumer (D-N.Y.) and several other Senate Democrats about getting rid of the filibuster to pass an election overhaul package. When he left the session in Schumer’s office, Manchin said the “filibuster needs to stay in place any way, shape or form that we can do it.” However, Manchin outlined a few areas in the Senate rules he's willing to change, noting he is willing to get rid of the cloture vote on the motion to proceed to a bill — this would allow more bills to come to the floor for debate.

     Upshot: Manchin said any changes to the Senate’s filibuster rule should have the buy-in of Republicans. That deals a blow to the effort to advance elections bills that have become a focus of Senate Democrats. 
 

— China vs. Lithuania. China’s economic pushback against the European Union over Lithuania’s outreach to Taiwan has sparked divisions in the EU and raised fresh doubts about its ability to shield its giant market from Beijing’s pressure, the Wall Street Journal reports (link). China in recent weeks has effectively blocked Lithuanian firms from its market and started pressing European and U.S. firms with Lithuanian suppliers to cut those ties or risk being frozen out, according to U.S. and European officials. The Chinese pressure came after Taiwan in November opened a representative office under the island’s name in Lithuania’s capital, a move Beijing called an “egregious precedent” and vowed to retaliate. China’s economic measures show Beijing remains able to sidestep growing EU moves to defend its market from China’s economic behavior.

— Talk of China buying U.S. soybeans, corn. Part of the explosive move higher in soybean and corn futures on Tuesday was tied to unconfirmed rumors China was in the market for supplies of both U.S. commodities. If China indeed booked U.S. soybeans and corn yesterday, it should be confirmed via daily sales announcements by week’s end. (Source: Pro Farmer)

— China to auction more wheat reserves. China will auction another 500,000 MT of state-owned wheat reserves on Jan. 12. This is the second straight week of wheat sales from state reserves after China had not held any auctions since October.

— China to ensure stable economic growth in Q1. China will ensure stable economic growth in the first quarter of 2022, state radio quoted Premier Li Keqiang as saying. Beijing will implement larger tax and fee cuts and will provide targeted support for Covid-affected sectors such as services, Li said. Beijing will also increase transfer payments to local governments. Zhang Ming, senior economist at the Chinese Academy of Social Sciences, a top government think-tank, said the government would adopt “more expansionary” policies this year to prevent growth slowing further from the fourth quarter of last year. He says China’s economy could grow 5.3% to 5.5% this year. Meanwhile, Chinese banks are cutting back on loans. They are stocking up on financial instruments that count as loans to meet government-imposed quotas rather than actually lending money, over fears that China’s slowing economy makes defaults more likely.

— Walmart/Sam’s Club denies it purposely removed items from Xinjiang. Walmart branch Sam’s Club denied it deliberately removed products sources from Xinjiang in a call with analysts, terming the situation “a misunderstanding.” A Sam’s Club says Chinese consumers failed to find products from Xinjiang because the app does not support searches for products based on names of places. Chinese social media users and local news outlets criticized Sam’s Club last week for the removal of the products from its domestic online stores. China’s anti-graft agency accused the retailer of “stupidity and short-sightedness” over the matter.
 

— USMCA panel sides with U.S. in dispute with Canada over dairy. Canada did not live up to terms of the U.S.-Mexico-Canada Agreement (USMCA) by giving its dairy industry preferential treatment relative to tariff-rate quotas (TRQs) for dairy products into the Canadian market, but Canada insists the dispute settlement decision still shows Canada can maintain a supply management system. The verdict could allow American dairy farmers to increase sales to Canada by more than $200 million annually. Dairy exports to Canada have climbed by about $56 million, compared with when the USMCA took effect, according to Trade Data Monitor, which compiles global import and export data. This was the first-ever use of a new dispute resolution panel established by the USMCA.

     The USMCA panel was requested by the U.S. in May 2021 and determined Canada was not living up to the deal by reserving most of the in-quota quantity in its dairy tariff-rate quotas (TRQs) — 80% to 85% — for the exclusive use of Canadian processors. A statement from U.S. Trade Representative (USTR) Katherine Tai welcomed the finding. “This historic win will help eliminate unjustified trade restrictions on American dairy products and will ensure that the U.S. dairy industry and its workers get the full benefit of the USMCA to market and sell U.S. products to Canadian consumers,” Tai said.

     By limiting the portion of the TRQ available to American dairy products, the U.S. contended that meant that the Canadian dairy industry and not the market or importers would be determining the level of access into the Canadian market.

     Background. Under the USMCA, Canada was allowed to maintain 14 TRQs on milk, cream, skim milk powder, butter and cream powder, industrial cheeses, cheeses of all types, milk powders, concentrated or condensed milk, yogurt and buttermilk, powdered buttermilk, whey powder, products consisting of natural milk constituents, ice cream and ice cream mixes, and other dairy. USTR said that Canada had published notices in October 2020 and May 2021 that set aside a percentage of the quota for processors and for so-called “further processors,” USTR said, which was contrary to Canada’s USMCA commitments.

     USTR said the action undermined the value of the dairy TRQs for the U.S. dairy industry. The USMCA dispute settlement panel agreed that Canada setting aside a percentage of each TRQ specifically for Canadian processors was counter to Canada’s USMCA commitments. They further determined there is no distinction between initial processors and further processors which means that the restriction applies to all processors.

     Canada spins deal as keeping supply management program in place. Canada, however, maintained the USMCA decision still backed its ability to maintain its supply management program. The dispute settlement report “expressly recognizes the legitimacy of Canada’s supply management system,” Canadian Trade Minister Mary Ng and Agriculture Minister Marie-Claude Bibeau said in a joint statement. “Our government, as it proceeds with the next steps in the process, will continue to work closely with the Canadian dairy industry. Canada takes its commitments and obligations under international agreements seriously.” Despite that view, Canadian officials said that the government would make sure to come into compliance with the ruling. Canada’s dairy producers have long fought against opening their market. The country has around 11,000 commercial farms that hold substantial political sway because they are in a politically important region: rural central Canada, especially French-speaking Quebec. To protect those interests, Canada uses a quota system it calls supply management. Supporters say the system helps to stabilize prices and domestic capacity of a nutritional necessity.

     Next steps. The panel issued its report Dec. 20 (link), starting a clock that gives Canada 45 days — until Feb. 3 — to comply with the decision or face retaliation by the U.S. However, officials with USTR said they were not seeking to impose retaliation in the case, saying retaliation “was certainly not our focus” at this point. The U.S. would rather see some agreement reached in the matter, the officials said. Canada didn’t commit to a specific course of action but acknowledged the Feb. 3 deadline to resolve the matter. In a joint statement, Canada’s ministers of trade and agriculture said they “continue to stand up for its dairy industry, farmers and workers and the communities they support.”

     U.S. officials did not say what level of retaliation the U.S. might seek, but indicated it has the right to take countermeasures valued at the level of “impairment” caused by Canada’s actions.

     From January through October 2021, USTR said that US exports of dairy products to Canada totaled $478 million, making it the third largest export market for U.S. dairy products.

     U.S. groups predictably welcomed USMCA ruling. International Dairy Foods Association (IDFA), the International Cheese Council of Canada (ICCC) and others applaud the findings of the USMCA panel. “IDFA applauds the U.S. government’s commitment to ensuring Canada’s dairy trade obligations are upheld,” said IDFA President and CEO Michael Dykes. “IDFA is pleased to join our global dairy industry partners today in welcoming the USMCA panel’s findings and promoting Canadian dairy policy accountability.”

     “The ICCC welcomes the panel’s findings and looks forward to Canada living up to all the obligations it has committed to in the USMCA” said Patrick Pelliccione, ICCC chairman. “Our Members and Associate Members – small and medium-sized Canadian enterprises — look forward to TRQ policies that will ultimately reduce costs for Canadian consumers, deliver the stability and fairness that has been lacking in the existing system and allow importers to continue providing Canadians’ favorite cheeses at affordable prices.”

     The National Milk Producers Federation (NMPF) also welcomed the announcement. “The United States and Canada negotiated specific market access terms covering a wide variety of dairy products, but instead of playing by those mutually agreed upon rules, Canada ignored its commitments,” said Jim Mulhern, president and CEO of NMPF. “Today’s decision is an important victory for US dairy farmers and the millions of Americans whose jobs are tied to the U.S. dairy industry.”

     Bottom line. While the dispute settlement action was pursued by the Biden administration, the process began under the Trump administration in December 2020 when it requested consultations with Canada over the dairy TRQ implementation. Consultations were held Dec. 21, 2020, and failed to result in a satisfactory resolution. That prompted the May 2021 request for the USCMA panel to examine the issue under USMCA provisions.

     Canada’s reaction and characterization of the decision is interesting in that Canada’s dairy supply management program was not the focus of the U.S. case, but the operation of their TRQs.

     The decision has verified concerns expressed by the U.S. dairy industry — that Canada was not living up to terms of USMCA relative to giving the U.S. expanded access to the Canadian dairy market. The decision also shows that the dispute settlement provisions put in place under USMCA are not open-ended and bring decisions in a matter of months, not years. And there is a relatively tight compliance deadline if no appeal is registered.

— Notices published on Canada’s request for USMCA case in lumber duties decision by U.S. Department of Commerce. Canada Dec. 21 said they would request a dispute settlement panel under the U.S.-Mexico-Canada Agreement (USMCA) be established over the increased duties on imports of Canadian softwood lumber that were levied by the International Trade Administration (ITA), a unit of the U.S. Department of Commerce (DOC). ITA’s review of anti-dumping and countervailing duties saw the levies on imports of Canadian softwood lumber rise to 17.9%. Two notices appear in today’s Federal Register on the Dec. 28 filing of a request for a review panel by Conseil de l'Industrie Forestiere du Québec, Ontario Forest Industries Association, and several private companies (link) with another by the governments of Alberta, British Columbia, New Brunswick, Ontario, Québec and several lumber associations and lumber companies (link). The dispute settlement provisions under USMCA do have finite deadlines and thus this situation may set the stage for an eventual resolution to this decades-old dispute between the U.S. and Canada.
 

— EPA held public hearing Tuesday on its latest biofuels blending proposals under the Renewable Fuel Standard (RFS). The proposals would retroactively lower blending targets for 2020 while increasing them for 2022 — which has drawn anger from both the agriculture sector, which was disappointed by the 2020 decrease, and from refiners, who have been decrying the targets as burdensome. Advocates from both sides testified. EPA will continue to accept public comments on its proposed 2020, 2021 and 2022 mandates until Feb. 4, while refiners and importers will have until Feb. 7 to submit comments on proposed SRE rejections.

     Some comments:

• Chris Edgington, Iowa farmer and President of the National Corn Growers Association (NCGA): “Corn farmers produce low-carbon feedstock for low-carbon ethanol, offering immediate and affordable emissions reductions and a vital pathway for agriculture to help address climate change. But our success helping you meet these commitments depends on EPA sending a clear and firm message that volume requirements will be enforced. … As EPA finalizes and enforces the delayed 2022 RFS volumes and puts the RFS on track, we ask you to work with us to achieve greater emission reductions and cleaner air through use of more renewable, sustainable, affordable ethanol.”  (Link to NCGA news release)
• Emily Skor, CEO of Growth Energy: “During the previous administration, the small refinery exemption program undercut the goals of the RFS, preventing EPA from ensuring the RVO was met each year. We appreciate the agency’s work to end this abuse and return to a true implied conventional volume of 15 billion gallons in 2022, along with promoting strong growth in advanced biofuels. We are also pleased that the agency has finally proposed to restore the first 250 million gallons illegally waived in the 2016 RVO with a commitment on the second 250 million gallons for 2023. EPA’s proposal, however, has some serious flaws that need to be addressed. It sets an extremely troubling precedent of revising finalized volumes for 2020 and back-setting volumes for 2021 rather than driving growth in renewable fuels. The proposed retroactive cuts to 2020 exceed EPA’s legal authority, and negatively impact the entire agriculture and fuel supply chains.” (Link to Growth Energy news release)
• Geoff Cooper, President and CEO of the Renewable Fuels Association (RFA):
  “RFA supports the proposed volumes for 2022 for all categories of renewable fuel, and we specifically commend EPA for proposing to set the implied requirement for conventional renewable fuels at the statutory level of 15 billion gallons. We also support EPA’s proposal to account for projected exempt volumes from small refineries when setting RVO percentages. And, RFA agrees with EPA that, ‘in the interest of transparency,’ the Agency should release basic information about entities seeking exemptions from RFS compliance. … As for the 2021 RVO and the proposed revision to the 2020 RVO, we have serious concerns about EPA’s questionable use of its ‘reset’ authority. While we understand EPA has a statutory obligation to consider resetting future RFS volumes when certain thresholds are met, it does not appear that Congress intended for EPA to use its reset authority for the purpose of retroactively addressing unforeseen market anomalies like Covid or weather-related disasters.” (Link to RFA news release)
• David Cobb, Director of Federal Affairs at the National Biodiesel Board (NBB):
  “Today’s proposal -— while positive for future years’ growth — continues to undermine the industry and bow to the pressures of the refiners. The fact that this proposed rule opens another comment period for SREs just adds additional delays in finalizing a rule that is already late.” (Link to NBB news release w/ additional quotes)
• Brooke Coleman, Executive Director of the Advanced Biofuels Business Council (ABBC): “Many of my colleagues have and will talk about the issues associated with opening up 2020. But I want to talk about one aspect of that – retroactivity and its effect on innovation. RFS enforcement history has created an RFS believability problem that percolates and cycles through the whole supply chain. Failing to enforce the law, waiving it for dozens of oil refiners, retroactively opening old rules – it’s all retroactive compliance alleviation that undercuts innovation investment.” (Link to ABBC)
• Bakers to EPA: food supply ‘chaos’ looms if biofuel plan holds. American bakers said EPA’s plan to boost national biofuel-blending quotas would worsen supply-chain headaches caused by soaring demand for soybean oil used to make food and fuel. EPA should lower its proposed mandate to “prevent even more chaos in our already battered food supply system,” Lee Sanders, SVP of government relations for the American Bakers Association, said Tuesday during EPA hearing on the proposal. The agency also should fix its “faulty assumptions” underpinning the plan, she said.  Soy oil prices were 75% higher than EPA’s impact analysis estimate for 2020-21 and 91% for 2021-22, Sanders detailed. Ed Cinco, head of purchasing at Youngstown, Ohio-based Schwebel Baking Co., said surging soy oil prices amid limited supply means food manufactures face potential rationing or shortages in 2022. Schwebel, a bread supplier with sales of more than $100 million a year, has had to increase prices by double-digit percentages. Cinco said “That’s going to get passed along to the end user, causing more of a recession for people who are unemployed.” Reily Foods Co., which uses at least 65% vegetable oil to make its Blue Plate mayonnaise, has had to pass some of the higher soy oil costs to consumers, Karen Jensen, a food regulatory expert at the company, said at the EPA hearing. “EPA does have a mandate to consider the impact of consumer food costs when setting” biofuel quotas, she said.
• Paul Kelly with the American Petroleum Institute said the group supports EPA’s use of the reset authority to reduce 2021 standards “to match volumes already used, and retroactively reopening the 2020 renewable volume obligations due to the pandemic.” He acknowledged that reducing the 2020 volume standard to volumes actually used in the marketplace and adjusting the SRE volumes in the calculation of the percentage standards consistent with the proposed denial of pending petitions are necessary to address this unusual situation.”
• EPA's position is slanted toward large integrated refiners, because smaller operators without blending operations are unlikely to remain cost competitive at the rack or pump if large rivals can offset thinner retail margins with RIN credit sales, one U.S. refiner argued. "EPA's continuing insistence that all RIN costs are passed through represents the ultimate example of cognitive dissonance in our opinion," said PBF Energy government relations head Brendan Williams. "While refiners try to pass through costs as much as possible, a review of notes from financial analysts covering the refining sector quickly highlights the widespread recognition that RIN markets disadvantage merchant refiners for the benefit of integrated refiners and marketers."

— Supreme Court to consider E15 case during Jan. 7 conference. The U.S. Supreme Court is scheduled to consider whether it will review a July 2, 2021, decision handed down by the U.S. Court of Appeals for the D.C. Circuit that vacated a U.S. EPA rule allowing year-round E15 sales during its Jan. 7 conference.
 

— JBS investigation urged by U.S., European lawmakers. Senate Foreign Relations Committee Chairman Bob Menendez (D-N.J.), U.K. House of Commons MP Ian Liddell-Grainger and European Parliament Committee on Agriculture and Rural Development Chair Norbert Lins called for a coordinated investigation into Brazilian-owned company JBS, its parent company J&F Investimentos and subsidiaries in Europe and the U.S. “We also encourage our governments to scrutinize JBS’ antitrust and anticompetitive practices and assess whether the company’s abuses could permanently damage food supply chains,” lawmakers said in a statement.

— KFC Beyond Fried Chicken launch set for Jan. 10. Yum Brands’ Kentucky Fried Chick will launch a plant-based chicken option nationwide Jan. 10 at its more than 4,000 locations, with the Beyond Fried Chicken product created in partnership with Beyond Meat. The product will be offered for a limited time at participating locations nationwide while supplies last. It will replicate the chain’s famous fried chicken but is made with no animal products. It will be offered à la carte in six-piece or 12-piece sizes or there will also be a Beyond Fried Chicken combo meat that will also come with KFC Secret Recipe Fries that also contain no animal products. Reports note the product is not a vegan offering and the dipping sauces that come with do have animal-derived ingredients. Promotional materials indicate the Beyond Fried Chicken will be offered in packages with a green color theme as opposed to the ubiquitous red used by KFC for its chicken.

     Shares of Beyond Meat took off on the news, advancing 9% in premarket trade and giving the alternative protein maker a much-needed jolt. In the last 12 months, the stock has lost half its value, taking the firm's market cap down to $3.9 billion.

     Reports note that Beyond Meat poached industry veterans from Tyson Foods for its C-suite in December. Doug Ramsey took up the role as chief operating officer after three decades of overseeing Tyson's poultry and McDonald's businesses. Bernie Adcock was also assigned to a newly created position of chief supply chain officer following 30 years of working on operations and supply chain management at Tyson.
 

— Summary: Global cases of Covid-19 are at 295,339,080 with 5,459,818 deaths, according to data compiled by the Center for Systems Science and Engineering at Johns Hopkins University. The U.S. case count is at 57,063,456 with 830,284 deaths. The Johns Hopkins University Coronavirus Resource Center said that there have been 512,665,013 doses administered, 206,581,659 have been fully vaccinated, or 62.93% of the U.S. population.

     Only about 33% of all Americans have gotten their boosters.

— Biden administration is finalizing contracts for their initiative to send half a billion free tests to the homes of Americans. The first delivery from manufacturers is expected to start later this month.

— CDC has updated its guidance on recommended Covid-19 isolation periods after criticism that the previous guidance -— announced just last week — was confusing and incomplete. Now, the recommendations include a testing component, with the CDC urging people to take a rapid test near the end of their five-day isolation. If the test is positive, the CDC recommends isolating for a total of 10 days. If it’s not, the CDC still recommends avoiding travel and being in places where mask use isn’t possible for a total of 10 days. The testing recommendation may be challenging since at-home rapid tests are in short supply. Meanwhile, prices are going up for some of the cheapest and most popular at-home Covid-19 test kits in the U.S. Walmart and Kroger are raising their prices after the expiration of a deal with the White House. Instead of selling the kits at $14 per the White House’s agreement, Walmart is now selling the kits for $18.99 a box and Kroger for $23.99. A Walmart spokeswoman said the BinaxNOW tests are more readily available in physical stores.

— Lessons for hundreds of thousands of students in Chicago are on hold after city leaders canceled classes in response to teachers voting to switch to remote learning — 73% of Chicago Teachers Union members voted to suspend in-person teaching over Covid safety concerns. Teachers in Chicago, the nation's third-largest school district, voted late Tuesday to switch to remote learning, and city leaders reacted by canceling classes Wednesday for most of the district's 330,000 students. The Chicago Teachers Union voted to pause in-person learning and work remotely until Jan. 18, or until Covid-19 cases fall below a particular threshold. The union, which has roughly 25,000 members, is also demanding the district require negative tests from students and staff before returning to school. Chicago Mayor Lori Lightfoot said the vote constituted an "illegal work action," and Chicago Public Schools CEO Pedro Martinez described it as a "walkout."

     Chicago Public Schools officials dodged questions Tuesday about why they recently bought 100,000 laptops and sent many home if they didn't anticipate remote learning.

— World Health Organization said there is growing evidence that the Omicron variant of Covid-19 causes relatively mild symptoms. Nevertheless, China totally locked down Yuzhou, a city of 1.1 million, after discovering three asymptomatic cases. Hong Kong banned flights from the U.S., U.K. and six other nations and announced bars and restaurants will close from 6 p.m. as the city tries to control the spread of the omicron variant. By contrast, Boris Johnson, Britain’s prime minister, said he hoped to “ride out” the current wave without further restrictions. Meanwhile Emmanuel Macron, France’s president declared his strategy is to “piss off” the unvaccinated in his country.
 

— Rep. Bobby Rush (D-Ill.), chair of the House Energy and Commerce's energy subpanel, is not seeking re-election this year, he told Politico. Rush (who co-founded the Illinois Black Panther Party) plans to focus on his work as a pastor in Chicago's South Side after 30 years in the House. His district is in a comfortably Democratic area. FYI: Rush is the only person to beat Barack Obama in an election when the former president challenged Rush in a 2000 House Democratic primary and Rush won by more than 30 points.

     Meanwhile, Rep. Brenda Lawrence (D-Mich.) announced she will not be seeking re-election in the fall (Lawrence’s district is heavily Democratic), bringing the total number of Democrats planning to retire to 25 — only 11 Republicans have said they’re retiring at this point. Eleven other members — six Democrats and five Republicans —are also planning to leave their posts to run for Senate or governor.

— Wasserman: Redistricting ‘looks like a wash.’ The Cook Political Report’s David Wasserman released a new midterms analysis. It shows that with redistricting more than halfway over, Democrats are doing much better than many thought they would — particularly given that Republicans oversaw the redrawing of 187 districts while Democrats had only 75. Link for details. Wasserman concludes: “The far more dramatic effect of 2022 redistricting: a rise in the number of hyper-partisan seats at the expense of competitive ones. So far in completed states, the number of single-digit Biden and Trump seats has declined from 62 to 46 (a 26% drop). That means a House even less responsive to shifts in public opinion, with more ideological "cul-de-sac" districts where candidates' only electoral incentive is to play to a primary base.”

     Says Wasserman: “The surprising, good news for Democrats: on the current trajectory, there will be a few more Biden-won districts after redistricting than there are now — producing a congressional map slightly less biased in the GOP's favor than the last decade's. The bad news for Democrats: if President Biden's approval ratings are still mired in the low-to-mid 40s in November, that won't be enough to save their razor-thin House majority (currently 221 to 212 seats).”

— Biden disapproval hits highest level in December.  A new CNBC/Change Research poll of 1,895 registered voters, conducted over Dec. 17-20, shows President Biden’s “disapproval rating hit a new high in December as more voters signaled their unhappiness with his administration’s supervision of the economy and the Covid-19 pandemic.” In the survey, 56% “now say they disapprove of the job Biden is doing, the worst such reading of his presidency as he approaches the end of his first year in office.” Prior polls “in the series showed Biden’s disapproval rating at 54% in early September and 49% in April.” Biden’s approval rating “is now at 44%, down from 46% in September and 51% in April.”

— Impact of GOP Nunes’ retirement: a possible Democratic pickup. The Central Valley of California’s vast agricultural heartland has become a true political battleground, especially due to redistricting. Rep. Devin Nunes (R-Calif.), a staunch Trump ally from Tulare, officially resigned on Monday from the seat he held for nearly two decades to lead the former president’s new social media company. Based on draft maps released last year, Nunes was on track to have more of his district shift into the city of Fresno, which could have made winning more of a challenge. Rep. Jim Costa (D-Calif.), who currently represents a Fresno-area district, is planning to run in the new one this year. (There will first be a special election to replace Nunes until then.) Meanwhile, Rep. David Valadao, a Republican from Hanford, could also have a tougher fight to keep his seat in a face-off, the New York Times report, with Rudy Salas, a Democrat from Bakersfield. Valadao represents a district that has flipped between parties in exceedingly tight races. 

— Trump cancels Jan. 6 press conference. Former President Trump is scrapping a planned news conference on the one-year anniversary of the Jan. 6 riot at the U.S. Capitol. “In light of the total bias and dishonesty of the January 6th Unselect Committee of Democrats, two failed Republicans, and the Fake News Media, I am canceling the January 6th Press Conference at Mar-a-Lago on Thursday,” Trump said in a statement released by his Save America PAC.
 

— Background on possible SWIFT sanction on Russia should it invade Ukraine. In 2014, as Russia solidified its control over Crimea and supported separatist forces in eastern Ukraine, some in the U.S. proposed removing Russian banks from the SWIFT network, the central communications platform through which financial institutions send and receive information about transactions, trade instruments, and payments. That alarmed the Kremlin. Dmitry Medvedev, then the Russian prime minister, warned that limiting Russian banks’ access to SWIFT would be akin to an “act of war.” Russia kept its access to SWIFT for several reasons. European and U.S. businesses could see their investments in Russia imperiled, the Kremlin could strike back by threatening to cut off gas flows to Europe (sound familiar?), and a broader financial crisis could be set off if the Russian economy faltered. President Joe Biden reported that in a phone conversation in December, he had warned Russian President Vladimir Putin that Russia would face “severe consequences, economic consequences like you’ve never seen” — which many took as a thinly veiled reference, in part, to cutting Russia off from SWIFT.

     What is SWIFT? Launched in 1973, it is noted for its speed and the size of its network: banks desire access to it because so many other financial institutions rely on it as their principal means of interbank communication. Sen. Robert Menendez (D-N.J.) recently proposed a blueprint for Russia sanctions that in essence would compel SWIFT to delist Russian banks by threatening sanctions on Russian financial institutions and any entity providing them “services”. Lawmakers from both political parties have expressed support for this approach.

— Blue states ask Supreme Court to hear challenge to SALT cap. Four Democratic-leaning northeastern states are asking the Supreme Court to hear a case challenging the cap on the state and local tax (SALT) deduction created by Republicans’ 2017 tax law. New York, New Jersey, Connecticut and Maryland filed their SALT petition to the high court after a federal appeals court ruled against them in October.

— North Korea launched a ballistic missile off its east coast on Wednesday, the South Korean military said, its first ballistic missile in about two months, days after leader Kim Jong Un indicated that returning to stalled nuclear talks with the U.S. was a low priority for him this year. The apparent missile flew about 310 miles on a normal trajectory and landed in waters outside of Japan’s exclusive economic zone, officials in Tokyo said.

— USDA’s Vilsack to address American Farm Bureau meeting. USDA Secretary Tom Vilsack will address the American Farm Bureau Federation (AFBF) annual meeting in Atlanta Monday (Jan. 10). The meeting of the nation’s largest farm organization has typically been one where sitting secretaries of agriculture will appear to deliver remarks. However, unless the last three years when President Donald Trump addressed the group, it does not appear that President Joe Biden will make an appearance.

— Deere to market fully autonomous tractor for farm tillage. Deere and Co. said on Tuesday it will begin sales later this year of a "fully autonomous tractor that's ready for large-scale production," but limited for the moment to tillage. “The machine combines Deere’s 8R tractor, TruSet-enabled chisel plow, GPS guidance system, and new advanced technologies,” said Deere, which unveiled the autonomous tractor at a consumer technology show in Las Vegas. Deere said the tractor would increase productivity while overcoming any shortages of skilled labor. The autonomous tractor uses 12 stereo cameras to identify obstacles and a “deep neural network” to decide whether to stop or continue movement. GPS technology keeps the tractor within field boundaries and assures accurate movement down to the inch.