Trump to unveil tax reform ideas | North Korea | Harvey update | Japan baking execs in N. Dakota | Icahn resurfaces | U.S.-China ag trade dispute | Mexico and NAFTA 2.0 | China launches antidumping probe | U.S. ports increase traffic | U.S. ag export, import forecasts raised
— President Trump today will unveil his ideas for a tax overhaul. The president today in Springfield, Mo., will provide some Republican goals to reduce the bills of businesses but also to stimulate investment, create jobs, increase competitiveness and promote growth. Trump is expected to say that the U.S. economy is "rigged" to favor the wealthy and that Congress should close loopholes to help Main Street.
Republicans agree on including a full repeal of the estate tax, which the Trump administration called for in its plan. The levy applies to estates worth more than $5.49 million, which will only touch an estimated 5,200 people in the country this year. (National Economic Council director Gary Cohn jokingly dismissed concerns over the cost of the repeal in a meeting with Senate Democrats earlier this year by saying, “Only morons pay the estate tax,” according to the New York Times.)
— North Korea update. North Korean leader Kim Jong Un said the recent missile that crossed over Japan was a “meaningful prelude” to containing the American territory of Guam, adding that his regime would conduct more ballistic missile tests. The United Nations said in a statement that it “strongly condemns” the action, but did not seek to escalate sanctions against the Pyongyang regime. Trump said yesterday that all options are under consideration in response to the latest provocation.
— Tropical Storm Harvey makes landfall again. The storm has come ashore again, this time just west of Cameron, Louisiana, with rainfall and flooding still a factor. "Although the rain has ended in the Houston/Galveston area, the Beaumont/Port Arthur area was particularly hard hit overnight, with about 12.5 inches reported at the Jack Brooks Regional Airport since 7 pm CDT," the National Hurricane Center (NHC) said.
The storm is moving north-northeastward and is traveling faster and is headed for the lower Mississippi and lower Tennessee Valleys the next few days. Maximum winds are expected to decline and it looks to become a tropical depression by tonight, according to the NHC. While still able to deposit hefty rainfall amounts, NHC said the speed the storm is now traveling "will prevent rainfall totals from being anywhere near what occurred over southeastern Texas." Even though the threat of heavy rains in Houston/Galveston has ended, NHC warned, "catastrophic and life-threatening flooding will continue in and around Houston eastward into southwest Louisiana for the rest of the week."
Gauges have shown 52 inches and 49 inches of rain. "If either of these are confirmed, it would be the heaviest storm-total rainfall from any tropical cyclone in the continental U.S. in records dating to 1950, topping the 48-inch storm total in Medina, Texas, from Tropical Storm Amelia in 1978,” according to the Weather Channel.
Port Houston was closed again today and may not allow sailings until Saturday, leaving several cargo ships still waiting out the storm in the Gulf of Mexico, and the energy and bulk-focused Port of Corpus Christi says it may not resume normal operations until Monday as some 30 cargo vessels wait at anchor.
Meanwhile, President Donald Trump will return to Texas on Saturday and perhaps go to Louisiana, depending on the weather. Press secretary Sarah Sanders said that this time, the president will be in a more southern part of the state "that was hit really hard, and so he'll have the chance to meet with some of the evacuees."
Gasoline futures were up about 3% this morning, now at their highest since July 2015, on supply concerns due to Harvey-related refinery closures — front-month futures have gained 9.25% since Hurricane Harvey made landfall in Texas. Oil prices, in turn, were dipping on worries that less crude will be needed to be refined.
Preliminary estimates from Moody’s Analytics put the economic cost for south-east Texas at $30 billion to $40 billion — although many think it could climb higher.
— Texas beef herd and Harvey. Texas Governor Greg Abbott (R) has declared 54 counties a disaster area in the state, with Texas A&M University's David Anderson saying about 27% of the state's 4.46 million-head beef cow herd is in those 54 counties. "Given that it's August, I'm not sure that we would've seen a lot of the calves already sold. So, you have a lot of young calves out there too that are in that disaster area," Anderson said.
Cattlemen will be looking to USDA for assistance once the process of determining the impacts and losses takes shape, with USDA pledging programs like Emergency Assistance for Livestock, Honeybees and Farm-Raised Fish Program (ELAP) and Livestock Indemnity Program (LIP), disaster programs included in the 2014 Farm Bill, will be available to provide help. Access will be dictated by USDA Secretary Sonny Perdue making disaster determinations.
Details. Ranchers whose pastures have been flooded by Hurricane Harvey, leaving cattle stranded or displaced, will get emergency assistance from USDA. There also are several state programs that provide assistance. At the federal level, the ELAP will provide support to ranchers. ELAP was included in the 2014 Farm Bill, authorizing up to $20 million in funds in a fiscal year. It covers losses not covered under the other disaster assistance programs such as the Livestock Indemnity Program (LIP), which provides benefits to livestock producers for livestock deaths in excess of normal mortality. LIP provides payments equal to 75% of the market value of the applicable livestock. As with ELAP, LIP eligibility must also first be determined by USDA Secretary Sonny Perdue.
— EPA approves emergency fuel waiver requests from Texas and Georgia. Gasoline and diesel fuel requirement waivers have been approved for Texas and Georgia by the EPA. The agency waived the highway diesel fuel red dye requirements in Texas to allow the use of non-road diesel fuel for highway vehicles involved in emergency response and disaster recovery though Sept. 15 and the requirement for low-volatility gasoline for 13 counties around Atlanta, Georgia, has been waived until Sept. 15 due to supply disruptions.
— No Jones Act, Harvey-related waiver requests as of yet. No requests for waivers of the Jones Act which requires only U.S.-built vessels can move commodities between U.S. ports, according to the US Customs and Border Protection agency, a spokesman told Bloomberg BNA via email. The Jones Act was temporarily waived in 2012 after Superstorm Sandy hit the U.S. East Coast.
— Japan baking executives in North Dakota. Japanese baking company executives are in North Dakota this week to view the U.S. grain system and gain a better understanding of U.S. wheat production, quality and crop breeding, according to the North Dakota Wheat Commission. The visit comes as the state is reeling from drought which reduced the hard red spring wheat crop.
— Icahn: biofuels fight will continue as refinery losses mount. Billionaire Carl Icahn, who recently left his role as unpaid adviser to President Donald Trump, said an oil industry push for structural changes to the U.S. biofuels mandate will persist, even if the EPA as expected rejects requests from refiners to relieve them of the regulatory burden. The remarks were the first on the topic from Icahn since an Aug. 19 letter announcing his departure as a special regulatory adviser to the president.
Independent oil refiners say the design of the Renewable Fuel Standard (RFS) program is flawed and are looking at several tools to pursue changes, including litigation, Icahn said. That includes a lawsuit filed Tuesday by the Small Retailers Coalition, a trade group representing about 200 convenience store owners and independent fuel retailers. The group is challenging EPA’s latest annual biofuel volume requirements, arguing they give an advantage to big refiners and truck stops at their expense.
At issue is the structure of the EPA’s renewable fuel program, which puts the onus on refiners and importers to satisfy annual volume levels. Like Icahn, the majority owner of independent oil refiner CVR Energy Inc., the group has said changes are required to that compliance burden, called the "point of obligation." Without revisions, the group says in its filing with the U.S. Court of Appeals for the District of Columbia, coalition members "will be forced to cease operations or sell their businesses to their larger competitors."
Icahn previously has argued that costs to comply with the biofuels requirements are burdensome and that the onus for compliance should be moved away from refiners and shifted further down the fuel supply chain to entities such as fuel blenders.
— U.S.-China ag trade dispute focus at WTO. The World Trade Organization's Dispute Settlement Body has a meeting planned for Thursday, including a U.S. challenge to Chinese agricultural import policy, which the U.S. claims is unfairly keeping out billions of dollars’ worth of foreign crops. China is widely expected to move to delay the start of this case. Under WTO rules China wouldn't be able to block a second request for a panel. That would likely come at the next meeting of the Dispute Settlement Body, scheduled for Sept. 29.
Details. The U.S. filed a dispute challenging China's tariff rate quotas (TRQs) for imports of rice, wheat, and corn. Under the quotas, a low tariff rate applies to imports up to a certain quantity; if a country sends more than that amount, higher duties apply to the additional imports. The U.S. accuses China of administering these TRQs in a manner that violates the obligations it made when it joined the WTO, which unfairly undermines U.S. farm exports. The U.S. alleges that China did not maximize its use of the TRQs; if the TRQs had been fully used, China would have imported as much as $3.5 billion worth of additional crops in 2016, according to USDA.
Another pending case is a U.S. challenge that argues that China provided more than $100 billion in illegal government subsidies for producing these three crops.
— Mexico's Guajardo: End of NAFTA is a possibility. Mexico Economy Minister Ildefonso Guajardo told lawmakers in Mexico City that trade between U.S. and Mexico would continue without NAFTA. “No one sits down to trade talks without a plan B,” Guajardo said. "This is not going to be easy," Guajardo told senators in Mexico City. "The start of the talks is like a roller coaster." He said Mexico would not accept a NAFTA 2.0 deal that comes at too high a cost, and that Mexico can pass laws to reassure foreign investors that they are protected even without NAFTA. Some Mexican products would face high tariffs without NAFTA.
Responding to the comments, Canadian Prime Minister Justin Trudeau said his government would continue to work "seriously" to improve the trade agreement.
Mexico Foreign Minister Luis Videgaray and Guajardo are in Washington, D.C., for meetings on specific trade relations topics. Videgaray met with U.S. Secretary of State Rex Tillerson and National Security Adviser H.R. McMaster. The two officials are slated to meet with U.S. Commerce Secretary Wilbur Ross, Trade Representative Robert Lighthizer and White House Senior Adviser Jared Kushner.
— China launches antidumping probe on some U.S., EU and Singapore rubber imports. China's Ministry of Commerce announced it has launched an antidumping investigation on imports of hydrogenated butyl rubber from the U.S., European Union (EU) and Singapore, with the year-long investigation looking at imports from April 2016 to March 2017. The products are used to produce heat-resistant material, the ministry said, and the probe seeks to determine if the products have been sold at a discount, hurting sales and margins for the domestic industry in China.
— U.S. ports increase traffic despite fears of trade protectionism. Increasing numbers of containers have been flowing through U.S. ports protectionist threats from President Donald Trump. Six of the nine largest ports — including Long Beach, California and Savannah, Georgia — have broken monthly records for traffic in the past year.
— U.S. FY 2017 agricultural export, import forecasts raised. USDA has increased its forecast for the value of U.S. agricultural exports for fiscal year 2017 to $139.8 billion and imports to $116.2 billion, according to the latest Outlook for U.S. Agricultural Trade update. The levels now forecast by USDA would result in a trade surplus of $23.6 billion, versus a May forecast of a $22.5 billion surplus on forecast exports of $137 billion against $114.5 billion in imports.
For FY 2018, USDA's initial outlook is for exports valued at $139 billion and imports at $115.5 billion, both down from the revised FY 2017 levels. The FY 2018 forecast levels would result in a near-unchanged ag trade surplus of $23.5 billion.
The lower value of forecast exports for FY 2018 is largely on smaller corn and cotton export forecasts. "Corn exports are forecast down $1.6 billion to $8.0 billion due to lower volumes and unit values," USDA said. "Strong competition from South America is expected to trim exports. Cotton is forecast at $4.5 billion, down $1.3 billion from the fiscal 2017 estimate, as sharply higher stocks outside of China will limit U.S. export opportunities and put downward pressure on prices." The smaller import forecast reflects "reductions in livestock and dairy products, oilseeds and products, and sugar and tropical products," USDA said.
Bottom line: The updated figures translate into USDA seeing exports averaging $10.2 billion the remaining three months of FY 2017. The value of U.S. agricultural exports has not fallen under $10 billion since June 2016. USDA's updated import forecast would translate into imports at $8.7 billion over the next three months. The FY 2017 agricultural export forecast would match the FY 2015 mark while imports for FY 2017 will still be a record.