Evening Report | December 30, 2022
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Holiday schedule; Happy New Year from Pro Farmer... All markets and government offices are closed Monday, Jan. 2, in observance of New Year’s Day. As a result, there will be no Pro Farmer market reports next Monday. Grain and livestock markets will reopen at 8:30 a.m. CT on Tuesday, Jan. 3. Pro Farmer wishes you a safe and happy New Year’s celebration and a prosperous 2023.
Another WSJ editorial snarks at ethanol... The Wall Street Journal (WSJ) editorial personnel are very much opposed to the Renewable Fuel Standard (RFS) program. Their latest commentary takes on EPA’s recent announcements, saying it found “a convoluted way to expand ethanol subsidies to boost EVs.”
“Large refiners have started producing ‘advanced’ biofuels while smaller ones must buy credits known as Renewable Identification Numbers (RINs),” the WSJ item notes. “Increasing compliance costs have driven several small refiners to shut down. A refining shortage, especially on the East Coast, is a major reason prices for gasoline and diesel shot up early in the summer far more than for crude.”
The EPA proposal, the editorial says, “is one more way to boost EV margins at the likes of Tesla, which lobbied for inclusion in the RFS. As EPA explains, the new eRINs credits will ‘incentivize activities that can increase electrification of the fleet, which could include lowering the cost of EVs and/or increasing the availably [sic] of public access charging infrastructure.’”
WSJ’s bottom line: “The details of the scheme would win a Rube Goldberg award… In sum, the [Biden] administration is proposing another huge wealth transfer from folks who drive gas-powered cars to Tesla and other makers of electric vehicles.”
EPA releases new rule for defining WOTUS, but Supreme Court ruling pending…As expected the Environmental Protection Agency today issued a new rule defining Water of the United States (WOTUS) under the Clean Water Act. Longstanding exemptions for farming activities were maintained while an exclusion for prior converted cropland that had been in Trump administration’s Navigable Waters Protection Rule. The 514-page rule was released by the EPA and the Army Corps of Engineers (link).
Link to fact sheet.
“The final rule restores essential water protections that were in place prior to 2015 under the Clean Water Act for traditional navigable waters, the territorial seas, interstate waters, as well as upstream water resources that significantly affect those waters,” the two agencies say in a joint news release. “As a result, this action will strengthen fundamental protections for waters that are sources of drinking water while supporting agriculture, local economies and downstream communities.
The rule takes effect 60 days after it is formally published in the Federal Register.
The rule largely revives a definition of WOTUS released during the Reagan-era, updated to accommodate limits the Supreme Court has placed on federal jurisdiction during the intervening 36 years. The latest definition is an effort by the Biden administration to find a “durable” solution for protecting wetlands and streams—an issue that has been hotly debated since the Clean Water Act’s passage in 1972. Through the years, the question has triggered regulatory back-and-forth, intense lobbying and legal and political brawls among developers and agricultural and environmental groups.
The new rule would give federal protection to large waterways, like interstate rivers and streams and wetlands that are adjacent to them. Wetlands would be considered adjacent if they are connected to those larger waterways with “relatively permanent” surface water connections, or if they have “significant” hydrological or ecological “nexus” to those protected tributaries. Those terms are rooted in a 2006 Supreme Court case, Rapanos v. United States, which splintered the justices 4-1-4 and resulted in two competing tests to determine if property is beholden to Clean Water Act permitting requirement.
The agencies issued a “joint coordination memo” with the USDA and said they would “enhance consideration of regional differences in (WOTUS) implementation” through training and continued development of methods to assess streamflows in the Great Plains and Western Mountains; Northeast and Southeast; and the Arid West. EPA and the Corps also issued separate joint coordination memo “t ensure the accuracy and consistency of jurisdictional determinations” under the final rule.
Link to learn more about the case.
Fast-food group sues to block California labor law... A group of businesses and restaurant trade groups sued Thursday to stop California from implementing a new labor law boosting protections for fast-food workers. The landmark California law would, among other things, create a worker representative body with the power to raise wages. The group, known as the Save Local Restaurants coalition, is attempting to qualify a referendum that would put the law on hold and ask California voters whether to uphold or repeal it on the November 2024 ballot.
Pro Farmer ag event, person(s) and story of the year... Each year is unique, presenting a new set of circumstances that shape agriculture and our lives. As 2022 comes to a close, it’s time to look back on the events, stories and people that were most influential over the past year.
Pro Farmer ag event of the year: Russia invades Ukraine. The event of the year was a no-brainer. Russia’s invasion of Ukraine on Feb. 24 shocked the world, prompting Pro Farmer’s lead headline in the Feb. 26 issue: “Russia invades Ukraine... Europe’s ‘darkest hours since WWII.”
The war closed Ukraine’s ports on the Black and Azov seas, triggering an explosive rally in grain and soy markets amid disruptions to global trade flows. Front-month corn futures surged to $8.27 — only 16 3/4¢ below the all-time high posted in 2012. Front-month soybeans hit $17.84, just 10 3/4¢ shy of the market’s all-time high. Front-month SRW wheat futures surged to a new high of $14.25 1/4.
Combined, Ukraine and Russia account for nearly 30% of global wheat exports and almost one-fifth of world corn exports. Ukraine is also the world’s largest producer of sunflower seeds and sunflower oil. Combined with Russia, the two countries account for nearly 80% of global sunseed oil exports. They also account for nearly one-third of the world’s barley exports.
Energy prices also spiked higher since Russia is a major producer and exporter of oil, natural gas and fertilizers. Front-month crude oil rallied to $130.50, the second highest ever behind the 2008 surge to $147.27. Natural gas prices jumped to $10.028, though that was only the fifth highest price and well below the record $15.780 in 2005. Diesel and fertilizer prices also spiked.
Prices have dropped sharply from those levels and Ukrainian grain started flowing via Black Sea ports in August, but the war continues and global impacts from Russia’s invasion are still being felt as Western sanctions remain intact.
Pro Farmer ag persons of the year: Guterres, Erdoğan. After extended negotiations, a 120-day deal to resume Ukraine’s grain exports via three Black Sea ports was signed in late July and shipments started by early August. A parallel deal allowed the resumption of Russian grain and fertilizer exports. Shipments were allowed via a “humanitarian corridor,” with all incoming and outgoing vessels inspected at Istanbul, Turkey, by representatives from Ukraine, Russia, Turkey and the United Nations. The grain export deal was extended for another 120 days on Nov. 18, without changes, though UN officials committed to freeing up more shipments of Russian grain and fertilizers.
Ag exports from the two countries aren’t back to their pre-war levels, but concerns with global trade flows have eased.
Many officials helped negotiate the deal to resume Black Sea grain and fertilizer exports, but UN Secretary-General António Guterres and Turkish President Recep Tayyip Erdoğan were the ones that brought Russia and Ukraine to the negotiating table — twice — and got the deals signed. For their efforts, Pro Farmer recognizes Guterres and Erdoğan as the ag persons of 2022.
Pro Farmer ag story of the year: Fight against inflation. Inflation surged to the highest levels in more than 40 years in the U.S. and other countries in 2022. Russia’s invasion of Ukraine, China’s Covid-19 lockdowns, major transportation disruptions and other logistics struggles all contributed to the decade’s-high prices.
The Fed and other central banks around the world aggressively raised interest rates to combat surging inflation. As 2022 comes to a close, there are signs inflation has peaked and central banks have slowed their rate of increase to interest rates... but the battle will continue well into 2023.
The question will be whether the Fed and other central banks can get inflation under control and negotiate a soft landing. Inflation will remain a threat to consumers and the economy in 2023.
Honorable mentions for ag story, event and person. Farmers: Producers around the world continued to deal with huge price volatility, adverse weather, inputs supply and price constraints and lingering Covid impacts.
Crop insurance agents: They are not only a farmer’s No. 1 financial advisor on crop and livestock insurance but also advise on FSA programs. Agents helped with farm bill choices, MFP, Covid aid and disaster assistance.
La Niña: It caused adverse weather in North America, South America and Australia for a second straight year.
Vladimir Putin: The man behind our event of the year — even though his impact was extremely negative.
Jon Doggett: CEO of National Corn Growers Association gets a “lifetime achievement” award for 20-plus years of service. He influenced five farm bills, two versions of the RFS and this year publicly pushed for year-round E15.
