Reuters: Trump Orders EPA to Deny Gap-year RFS Waiver Requests; RINS Rally

Posted on 09/09/2020 8:17 AM

China rejects potential U.S. restrictions re: Xinjiang cotton | New aid package hurdles

 


In Today’s Updates


 

Market Focus:
* USDA daily sale: MY 2020-2021: 238,000 MT of soybeans to China
* USDA daily sale: MY 2020-21: 132,000 MT of soybeans to unknown destinations
* Nasdaq 3-day trek to 10% correction ties record set in 2000
* Small business confidence rises, but uncertainty index jumps as well
* China’s car sales grew at fastest rate in more than two years in August
* China sees moderating inflation levels

* Oil prices slumped to lowest level in nearly three months Tuesday
* July ethanol exports at just 74 million gallons to six-year low.
* Sugar TRQ increase, extension of entry period coming

 

Policy Focus:
* Reuters: Trump orders EPA to deny gap-year RFS waiver requests
* Covid aid package: Thin is in (Senate bill), but fat is where it's at (House approach)
* Final rule for CFAP 2 at OMB for review
* FSA to provide extra time for CFAP 1 signup in hurricane-impacted counties

 

U.S./China update:
* China rejects potential U.S. restrictions linked to Xinjiang cotton
* Criticism of Disney's live-action remake of Mulan is growing


Update on re-opening America... and around the world:
* Trade shows and exhibitions cautiously relaunching in Europe


Coronavirus update:
* Trials of Covid-19 vaccine put on hold for a second time
* South Dakota governor slams study tying 250,000 coronavirus cases to Sturgis rally

 

Politics & Elections:
* Sabato's Crystal Ball on Senate races: Jump ball
* Trump and Biden teams answer Farm Bureau questionnaire on key issues


Other Items of Note:
* Trump to announce reduction in troops in Iraq
* Highway bill extension could join short-term spending measure
* Nomination of Pendley to head BLM withdrawn
* Survey shows uninsured rate increased in 2019
* Trump backs extension of freeze on oil, gas drilling off coasts of Fla., S.C. & Ga.
* Trump nominated for Nobel Peace Prize

 


MARKET FOCUS


 

Equities today: U.S. stock futures are higher, after Tuesday's rout. European stocks rose while AstraZeneca Plc slipped on news it paused trials of a leading experimental Covid-19 vaccine when a participant got sick. The MSCI Asia Pacific Index fell 1%.

 

     U.S. equities yesterday: U.S. stocks fell sharply Thursday in their worst showing since June. The Dow fell 632.42, 2.25%, to 27,500.89. The Nasdaq dropped 465.44 points, 4.11%, to end the day at 10,847.69. Tuesday’s drop put the Nasdaq down 10% over the past three days — tying the record for the fastest 10% plunge in history. It marks the Nasdaq’s worst three-day stretch since August. The S&P 500 dropped 95.12 points, 2.78%, to 3,331.84.

     Record to correction

 

On tap today:

 

     • U.S. job openings and labor turnover survey for July is out at 10 a.m. ET.
     • Japan machinery orders for July are out at 7:50 p.m. ET.

 

Small business confidence rises, but uncertainty index jumps as well. Small-business optimism increased in August. While down from prepandemic levels, it's still holding above its historical 46-year average, according to a National Federation of Independent Business survey. The survey's uncertainty index posted its second-highest reading since 2017 last month. “We are seeing areas of improvement in the small business economy, as job openings and plans to hire are increasing, but many small businesses are still struggling and are uncertain about what the future will hold,” NFIB Chief Economist Bill Dunkelberg said.

 

    Uncertainty

 

China’s car sales grew at their fastest rate in more than two years in August, adding momentum to a second-half recovery in the world’s largest auto market after a pandemic-disrupted first six months of the year. China’s auto market is hoping to sustain the momentum through the end of the year, following two painful years of contracting sales volumes. Dealerships continued to lean on discounts and special promotions to draw down inventory.

 

     China cars

 

China sees moderating inflation levels. A recovery in global demand helped ease the rate of wholesale inflation in China while smaller increases in food prices helped to temper the price rise for consumers, according to the National Bureau of Statistics (NBS). The producer price index fell 2.0% in August from year ago versus the 2.4% decline registered in July. The wholesale inflation level matched expectations. The consumer price index increased 2.4% in August from year ago, easing from the 2.7% annual increase seen in July. Food prices were up 11.2% in August, down from a 13.2% rise over year-ago levels that was registered in July. Nonfood prices rose 0.1% from year ago in August, the first increase since February. As for food prices, NBS said August’s increase was 52.6% vs August 2019, down from the July rate of 85.7%.

 

Market perspectives:

 

     • USDA daily export sales:

        — MY 2020/2021:
238,000 MT of soybeans for delivery to China and 132,000 MT of soybeans for delivery to unknown destinations.

 

     • Oil prices slumped to their lowest level in nearly three months Tuesday, under pressure from a stalling recovery in demand and planned production expansions by OPEC that threaten to add to an existing glut of crude. Record oil imports by China, the return of automobiles to U.S. roads and steep production cuts fueled a rebound after crude prices crashed this spring. But Chinese purchases have slowed since mid-July, the comeback in American gasoline demand has stalled and the Organization of the Petroleum Exporting Countries is boosting output — all factors combining to push prices back down.

 

        Oil slump

 

     • Crude oil prices have shaken off earlier pressure and are higher ahead of the U.S. open. U.S. crude is trading around $37.40 per barrel while Brent crude is trading around $40.20 per barrel. In Asian action, crude was under pressure on demand concerns linked to slower economic growth. U.S. crude was down 28 cents at $36.48 per barrel while Brent crude was down 25 cents at $39.53 per barrel.

 

     • July ethanol exports at just 74 million gallons to six-year low. Data show U.S. ethanol exports slumping to just 74 million gallons in July, down 38% versus same month last year and the lowest total for July in six years.


     • Sugar TRQ increase, extension of entry period coming. USDA is expected Thursday to publish in the Federal Register a notice that would increase the fiscal year (FY) 2020 raw cane sugar tariff-rate quota and would extend the entry period for all sugar coming into the U.S. The increase for the FY 2020 raw cane sugar TRQ would total 90,718 metric tons raw value (MTRV) while the entry period for sugar coming in under the FY 2020 raw sugar TRQ would be extended through Oct. 31, one month later than the usual last entry date. In the notice to be published, USDA said the action was taken “after a determination that additional supplies of raw cane sugar are required in the U.S. market.” USDA also said they could make additional adjustments for FY 2020 “if needed.” Link for details.

 

CNN removes Redskins logo from photo of Biden and son. CNN appears to have altered a widely seen photograph of Joe Biden with his young son to remove the logo of the Washington Redskins. The Democratic nominee and former vice president initially shared the photo in June to commemorate Father's Day. However, when CNN featured the photograph in its Monday night special "Fight for the White House: Joe Biden's Long Journey," the Redskins logo was removed from the hat.

 

Farming tops national poll. For the first time in two decades, farming and agriculture is the business sector that has the most positive perception among Americans, according to a new Gallup poll. Link for details.

 


POLICY FOCUS


 

Reuters: Trump orders EPA to deny gap-year RFS waiver requests. President Donald Trump reportedly has instructed EPA to deny so-called gap-year small refinery exemptions (SREs) under the Renewable Fuel Standard (RFS) in a bid to bolster his support in farm country, according to a report from Reuters.

 

     The action would take the form of a direction from the White House, the report noted, and comes as Sen. Joni Ernst (R-Iowa) is facing a challenge in her bid for re-election to the U.S. Senate in November, facing competitive Democratic candidate Theresa Greenfield.

 

     EPA was flooded with gap-year SREs in the wake of the 10th Circuit Court of Appeals ruling in January that three SREs issued for the 2016 compliance year were invalid as they did not amount to extensions of prior SREs. That prompted multiple requests for SREs to be filed going back to the 2011 compliance year.

 

     Meanwhile, Politico is reporting that the Department of Justice has decided not to appeal the 10th Circuit Court ruling to the U.S. Supreme Court, another sign the administration has opted to side with biofuel backers on the issue.

 

     Perspective: The Reuters report, if accurate, would echo the signal Pro Farmer received recently when a White House contact said that Trump, in a future trip to Iowa, would have “good news” to report on the topic. With Arizona's 11 electoral votes up in the air, a state Trump won in 2016, the president cannot afford to lose Iowa, even though it has just 6 electoral votes. That is why Trump will be traveling to Minnesota several times before Nov. 3 elections — to win the state's 10 electoral votes. Trump lost Minnesota in 2016 by under 45,000 votes.

 

     Market impact: Reuters reported that renewable fuel credits (RINS) rose to a two-year high after their report.

 

Covid aid package: Thin is in (coming Senate bill), but fat is where it's at (House approach).

 

     The Senate plans to vote on a “skinny” coronavirus relief package this week that’s grown slightly from a version Republicans were circulating last month. Senate Majority Leader Mitch McConnell said the vote on the bill, via a legislative vehicle (S 178), could come Thursday. "Senators will not be voting on whether this targeted package satisfies every one of their legislative hopes and dreams," he said in floor remarks Tuesday.

 

     The GOP draft bill released didn’t come with an official price tag, but is expected to cost around $300 billion, after the $650 billion in new spending is offset with $350 billion of unspent funds from earlier coronavirus packages, well below Republicans’ nearly $1 trillion proposal in July. House Democrats continue to insist the price tag needs to be around $2.2 trillion.

 

     The legislative proposal includes:

 

     • Liability protection measures;
     • Another $300 in weekly unemployment benefits through Dec. 27;
     • $105 billion for an Education Stabilization Fund;
     • $31 billion for vaccine, therapeutic, and diagnostic development;
     • $16 billion for testing, contact tracing, and surveillance;
     • $5 billion for Child Care and Development Block Grants;
     • $5 billion annually over the next two years in federal tax credits for contributions to state programs that award scholarships to attend private schools;
     • Some offsets, which would come from canceling funding that hasn’t been used in Treasury Department and Federal Reserve lending programs and the Paycheck Protection Program. To reduce the net cost, Republicans would cancel $204 billion out of $500 billion appropriated to the Federal Reserve and Treasury Department in the March aid package for loans to businesses and states and municipalities;
     • The $146 billion rescinded from PPP funds would be redirected into a nearly $258 billion expansion of the program for eligible businesses to apply for a second loan;
     • $20 billion in direct funding for the ag sector, which combined with the $14 billion replenishment of the Commodity Credit Corporation (CCC) already secured in the CARES Act, will provide USDA with $34 billion in funding to assist producers. The draft bill says, “Emulates the successful approach in the CARES Act, giving the Secretary of Agriculture broad authority to address Covid-related impacts on our farmers, ranchers, growers and processors.”
     • $500 million to direct federal assistance to all fishers, fishery participants, and communities that have been affected by the coronavirus.

 

     Perspective: Do not get too excited about the GOP plan. Reason: Not only is McConnell finding it hard to get enough Republicans to vote for it (some say too much funding while others say not enough), House Democrats said the measure was dead before arrival. If the too much, not enough tussle continues much longer, then the debate will turn to whether or not Democrats have made the decision to punt the issue until after elections when they expect they will have more to a lot more leverage after assessing Nov. 3 outcomes.

 

Final rule for CFAP 2 is at OMB for review. The coming Coronavirus Food Assistance Program (CFAP) expansion (CFAP 2) by USDA is closer to be being announced as the final rule was sent to the Office of Management and Budget (OMB) for review on Sept. 4. This rule likely would address conditions since the April 15 date referenced in the initial CFAP effort that has seen $9.4 billion paid out as of Aug. 31. The program targeted providing some $16 billion in payments using funds from the CARES Act and Commodity Credit Corporation (CCC) borrowing authority.

 

— FSA to provide extra time for CFAP 1 signup in hurricane-impacted counties. The signup deadline for the Coronavirus Food Assistance Program (CFAP) is Friday, Sept. 11, a one-month extension from the original deadline. However, State FSA Directors can extend the signup deadline in counties affected by Hurricane Laura to Oct. 9.

 

Update on China:

  • China rejects potential U.S. restrictions linked to Xinjiang cotton. China has criticized what are expected to be limits on imports of cotton and tomato products from the Xinjiang region of China via Withhold Release Orders that would allow the U.S. Customs and Border Patrol (CBP) to detain shipments based on the suspicion that they were produced under forced-labor in Xinjiang.

    "I think the U.S. cares nothing about human rights," Chinese Foreign Ministry spokesman Zhao Lijian said in a briefing in Beijing. "It is only using this as a pretext to oppress Chinese companies, destabilize Xinjiang and slander China's Xinjiang policy.” He reiterated that China will take whatever actions are needed to safeguard the rights and interests of Chinese companies.

    Reuters interviewed CBP official Brenda Smith who said the situation would cover the entire supply chains for cotton and tomatoes. “We have reasonable, but not conclusive, evidence that there is a risk of forced labor in supply chains related to cotton textiles and tomatoes coming out of Xinjiang,” Smith said. “We will continue to work our investigations to fill in those gaps.”

    The situation with targeting Xinjiang and the Xinjiang Production and Construction Corps (XPCC) would have major impacts. European retail orders are requiring declarations from the exporter in China that no Xinjiang cotton or Xinjiang processing was a part of the retail product order.

    China recently announced an increase of 400,000 tonnes in the cotton import quota for processing. China watchers think China will likely increase its cotton imports as it seeks to provide “Xinjiang-free” cotton products into the export market, including from the U.S., Brazil and African countries.

     
  • Criticism of Disney's live-action remake of Mulan is growing after the film's end credits revealed a "special thanks" to government entities in Xinjiang, where China is accused of committing rights abuses against millions of Uighur Muslims. It also included the public security bureau in the city of Turpan, where there are believed to be over a dozen "re-education camps" that hold Uighurs in extra-judicial detention.
     
  • U.S./China Phase 1 tracker: China’s purchases of U.S. goods. Link.

Update on reopening America... and around the world:

  • Trade shows and exhibitions that were shut down by the pandemic are now cautiously relaunching in Europe for what show organizers hope will be a broader resumption of fairs next year. This year’s shows in Europe, often combining a limited physical event with an online component, are unlikely to be highly profitable, the Wall Street Journal reports (link). But organizers say they will serve to test what works and what doesn’t ahead of next year, when they expect some economic normalcy to return and some travel restrictions to be lifted, even as the coronavirus continues to loom.

Coronavirus update:

  • Summary: Source: Johns Hopkins University as of 6:30 a.m. ET.

    — 27,598,479: Confirmed cases world-wide, and 898,020 deaths
    — 26,387: New U.S. cases recorded yesterday
    — 6,328,051: Total confirmed cases in the U.S.
    — 445: Deaths in the U.S. recorded yesterday
    — 189,680: Total U.S. deaths
    — 83,964,567: Tests conducted in the U.S.

    Link to Covid Case Tracker

    Link to Our World in Data

     
  • Trials of a Covid-19 vaccine developed by Oxford University and AstraZeneca were put on hold for a second time, after a participant contracted an “unexplained illness”. Much hope has been pinned on the vaccine, which is being tested on tens of thousands of people in Phase-3 trials. A spokesman said such pauses were normal; illnesses often happen by chance. Shares of AstraZeneca tumbled over 8% in after-hours trading on Tuesday after the drugmaker paused clinical trials. However, the stock has since pared losses to 1% as British health minister Matt Hancock explained that the procedure is "not necessarily" a setback and it "depends on what they find when they do the investigation." AstraZeneca confirmed that the pause "is a routine action" and it was trying to expedite the review to "minimize any potential impact on the trial timeline."
     
  • South Dakota governor slams study tying 250,000 coronavirus cases to Sturgis rally. A study by a California research group estimates that the Sturgis motorcycle rally in South Dakota led to more than 260,000 coronavirus cases in the month following the event. Researchers from the Center for Health Economics and Policy Studies at San Diego State University published their findings Saturday in a 63-page report. The estimate is dramatically more than the number of cases tied to the rally reported by both the South Dakota health department and the Associated Press. South Dakota Gov. Kristi Noem on Tuesday said the study was "fiction," and she criticized journalists who reported on it. Link to USA Today article.

 


POLITICS & ELECTIONS


 

  • Links
    2020 Presidential Election Interactive Map
    The Green Papers
    Real Clear Politics
    — Presidential debates: Scheduled to occur Sept. 29, Oct. 15 and Oct. 22.
    — VP debate: Scheduled for Oct. 7.
    Days until election

     
  • Sabato's Crystal Ball on Senate races: Jump ball. “We still think a 50-50 Senate is the likeliest outcome, with the vice president of the presidential winner breaking ties,” the election publication says. Link. “The Senate is still very much in danger for Republicans, but what we have seen in recent weeks and months is an urgency to save the Senate as the last firewall against a possible Democrat trifecta in the White House, House and Senate,” said Jessica Taylor, who analyzes Senate races for the nonpartisan Cook Political Report. A Wall Street Journal election article (link) says control of the Senate will ride on Trump's fortunes. It says the continued strength of Democratic presidential nominee Joe Biden, who leads Trump in polls nationally and in several battleground states, has kept the Senate majority within reach of the party and reinforced a favorable outlook for Democrats defending their majority in the House. “Election watchers and strategists from both parties are expecting many voters to stay aligned down-ballot with the party of their presidential pick, especially with campaigning hindered by Covid-19,” the WSJ article concludes.

    As for control of the House, here's what the publications says: “Overall, we now have 232 districts at least leaning to Democrats, 192 districts at least leaning to Republicans, and 11 Toss-ups. If we split the Toss-ups roughly down the middle (6-5 Republican), we’d be looking at a 237-198 Democratic-controlled House, or a two-seat gain from the 235-200 Democratic House elected in 2018. Our general feeling the whole cycle has been to not expect much net change in the House overall, although the Democrats appear a bit better positioned to net seats than Republicans do at this point.” Link to House and White House contests.

     
  • Trump and Biden teams answer Farm Bureau questionnaire on key issues impacting the ag sector. Link

 


OTHER ITEMS OF NOTE


 

  • President Trump will announce a reduction in troops in Iraq today, the White House said. America has around 5,200 troops there, primarily fighting Islamic State, which has been much reduced in recent years. A cut in the number of troops in Afghanistan — currently over 8,000 — will also be announced soon, a result of America’s deal with the Taliban.
     
  • Highway bill extension could join short-term spending measure. As the expiration date for the current surface transportation law approaches quickly, lawmakers are deciding whether to pass a standalone extension or have it hitch a ride with a continuing resolution. Members of both parties have signaled that they see an extension of the current law. The White House indicated its support last week for extending the existing highway law as part of a continuing resolution (CR) if necessary.
     
  • Nomination of Pendley to head BLM withdrawn. The White House announced that the nomination of William Perry Pendley to be director of the Bureau of Land Management (BLM) has been withdrawn. No other information was provided, but Pendley’s nomination has been opposed by several lawmakers and environmental groups. He has led the bureau in an acting capacity since July 2019.
     
  • Survey shows uninsured rate increased in 2019. Roughly 33.2 million Americans, or 10.3%, lacked health insurance in 2019, according to new data released today by the Centers for Disease Control and Prevention.
     
  • Trump backs extension of federal freeze on oil, gas drilling off the coasts of Florida, South Carolina and Georgia. President Trump announced in Florida on Tuesday an extension of a moratorium on oil and gas leasing in the eastern Gulf of Mexico and a smaller portion of the central Gulf through June 30, 2032, a 10-year extension of the prior date of June 30, 2022. “This withdrawal prevents consideration of these areas for any leasing for purposes of exploration, development, or production during the 10-year period beginning on July 1, 2022, and ending on June 30, 2032,” the executive order said. “This withdrawal does not apply to leasing for environmental conservation purposes, including the purposes of shore protection, beach nourishment and restoration, wetlands restoration, and habitat protection.”
     
  • Trump nominated for Nobel Peace Prize. Just weeks after helping to broker peace between Israel and the United Arab Emirates, President Trump has been nominated for the 2021 Nobel Peace Prize. The nomination submitted by Christian Tybring-Gjedde, a member of the Norwegian Parliament, lauded Trump for his efforts toward resolving protracted conflicts worldwide.

 

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