Markets
Weather remains a prime concern for grain markets Thursday with the extended forecast showing better hope for planting opportunities. Weekly jobless claims and an update of first quarter U.S. GDP will be relased at 7:30 a.m. CDT, followed by pending home sales at 9 a.m. The Department of Energy's inventory reports are due out at 9:30 a.m. and 10 a.m. CDT. USDA's weekly export sales report is due out Friday morning, adjusted by this week's holiday schedule.
Weather
Thursday features light to moderate rain in the eastern Midwest, continuing to hinder field work and planting. Light showers are also in store in the far Southern Plains and portions of the western Midwest. Other areas will be dry with seasonal to above-normal temperatures. The next week is not as wet in major crop areas; however, periods of rain are still likely. Crop progress will remain much-delayed.
Welcome
Thursday, May 30, 2019
WOTUS Sent Back to EPA - Judge Finds EPA Failed to Follow Administrative Procedure Act
OMAHA (DTN) -- The 2015 waters of the United States, or WOTUS, rule may have suffered a final defeat, as a Texas court Tuesday granted a motion for summary judgement to the American Farm Bureau Federation that sends the rule back to EPA.
The U.S. District Court for the Southern District of Texas ruled EPA violated the law in making changes in the final rule that were not proposed in the preliminary rule.
"The court finds that the final rule violated the notice-and-comment requirements of the APA (Administrative Procedure Act) and therefore grants summary judgment in favor of the plaintiffs on this ground," the court said in its ruling.
"The court remands the final rule to the appropriate administrative agencies for proceedings consistent with this order."
In drafting the 2015 rule, EPA relied heavily on a so-called draft connectivity report that included the agency's analysis of numerous studies on the connected nature of the nation's waters.
After an EPA scientific advisory board issued comments on the draft connectivity report on Oct. 24, 2014, the agency re-opened the public comment period on the rule for one month.
"However, the agencies declined to do the same after issuing the revised version of the connectivity report on Jan. 15, 2015," the court said in its ruling.
"This meant that the proposed rule was never open for public comment after the final connectivity report was finalized. Almost six months after publishing the final connectivity report, the agencies released the final rule on June 29, 2015, which proposed a different definition of the phrase WOTUS."
In particular, EPA's final rule departed from the proposed rule in a key aspect. The final rule defined adjacent waters using distance-based criteria rather than the ecologic and hydrologic criteria used in the proposed rule.
For example, the final rule changed the term "neighboring" to mean "all waters located within 100 feet of the ordinary high water mark" of a jurisdictional water.
"This was the first time that the agencies gave notice that they intended to define adjacency by precise numerical distance-based criteria rather than the ecologic and hydrologic criteria in the proposed rule," the court said in its ruling.
Texas Attorney General Ken Paxton said the ruling was important because it will aid EPA in repealing the rule.
"This critical federal court decision is a major victory for the people of Texas' ability to regulate their own natural resources, including ponds, puddles and streams on private property, and a major win for property owners, whose land would have been subject to unlawful and impractical EPA regulations," Paxton said in a statement.
In a statement to DTN Wednesday evening, an EPA spokesperson said the agency has concerns about the 2015 rule and will consider the court's ruling in repealing the rule.
"Like the court, EPA has serious concerns about the legal underpinnings of the 2015 rule," the agency said in a statement.
"EPA and the Army Corps have made these concerns clear in the proposed repeal of the 2015 rule, including that the rule may have exceeded the agencies' statutory authority under the Clean Water Act. We're in the process of reviewing the public comments we received on that proposal and anticipate taking a final action on the proposal this summer. We are committed to following the rule of law, and we will take the district court's order into account when taking final action on its proposed repeal of the 2015 rule."
WOTUS BATTLE
On April 3, 2019, Texas Attorney General Ken Paxton asked the Texas court to issue a national injunction on the 2015 WOTUS rule, after a court in Ohio denied a similar motion earlier this spring.
After a long series of court actions the past couple of years, a split remains between states still under jurisdiction of the 2015 rule and those that are not.
At present, the rule is on hold in 28 states and in effect in 22.
In the meantime, EPA continues to work on finalizing a new rule.
For the past three years, the 2015 WOTUS rule has been hung up by dozens of lawsuits and legal procedures across the country.
A number of court and government actions were taken in 2018 on the WOTUS rule, including:
-- In January, EPA finalized a rule to delay the 2015 rule by two years to allow for an agency rewrite.
-- In February, attorneys general in 10 states sued EPA, alleging the rule to delay was unlawful. A federal court threw out the rule.
-- Also in February, the AFBF and other agriculture groups asked a court in Texas for a national preliminary injunction to prevent the 2015 rule from taking effect.
-- In June, the U.S. District Court for the District of Georgia issued a preliminary injunction against WOTUS in 11 states.
-- In August, a federal judge in the U.S. District Court for the District of South Carolina ruled EPA did not follow the Administrative Procedures Act in finalizing its rule to delay the 2015 WOTUS for two years. As a result, the rule took effect in 26 states. That meant the rule was on hold in 24 states at that time.
-- Also in August, the AFBF asked an appeals court in Virginia to stay the ruling in South Carolina.
-- At the end of August, the AFBF asked the Georgia court to issue a national injunction to prevent the 2015 rule from taking effect.
The U.S. District Court for the Southern District of Texas ruled EPA violated the law in making changes in the final rule that were not proposed in the preliminary rule.
"The court finds that the final rule violated the notice-and-comment requirements of the APA (Administrative Procedure Act) and therefore grants summary judgment in favor of the plaintiffs on this ground," the court said in its ruling.
"The court remands the final rule to the appropriate administrative agencies for proceedings consistent with this order."
In drafting the 2015 rule, EPA relied heavily on a so-called draft connectivity report that included the agency's analysis of numerous studies on the connected nature of the nation's waters.
After an EPA scientific advisory board issued comments on the draft connectivity report on Oct. 24, 2014, the agency re-opened the public comment period on the rule for one month.
"However, the agencies declined to do the same after issuing the revised version of the connectivity report on Jan. 15, 2015," the court said in its ruling.
"This meant that the proposed rule was never open for public comment after the final connectivity report was finalized. Almost six months after publishing the final connectivity report, the agencies released the final rule on June 29, 2015, which proposed a different definition of the phrase WOTUS."
In particular, EPA's final rule departed from the proposed rule in a key aspect. The final rule defined adjacent waters using distance-based criteria rather than the ecologic and hydrologic criteria used in the proposed rule.
For example, the final rule changed the term "neighboring" to mean "all waters located within 100 feet of the ordinary high water mark" of a jurisdictional water.
"This was the first time that the agencies gave notice that they intended to define adjacency by precise numerical distance-based criteria rather than the ecologic and hydrologic criteria in the proposed rule," the court said in its ruling.
Texas Attorney General Ken Paxton said the ruling was important because it will aid EPA in repealing the rule.
"This critical federal court decision is a major victory for the people of Texas' ability to regulate their own natural resources, including ponds, puddles and streams on private property, and a major win for property owners, whose land would have been subject to unlawful and impractical EPA regulations," Paxton said in a statement.
In a statement to DTN Wednesday evening, an EPA spokesperson said the agency has concerns about the 2015 rule and will consider the court's ruling in repealing the rule.
"Like the court, EPA has serious concerns about the legal underpinnings of the 2015 rule," the agency said in a statement.
"EPA and the Army Corps have made these concerns clear in the proposed repeal of the 2015 rule, including that the rule may have exceeded the agencies' statutory authority under the Clean Water Act. We're in the process of reviewing the public comments we received on that proposal and anticipate taking a final action on the proposal this summer. We are committed to following the rule of law, and we will take the district court's order into account when taking final action on its proposed repeal of the 2015 rule."
WOTUS BATTLE
On April 3, 2019, Texas Attorney General Ken Paxton asked the Texas court to issue a national injunction on the 2015 WOTUS rule, after a court in Ohio denied a similar motion earlier this spring.
After a long series of court actions the past couple of years, a split remains between states still under jurisdiction of the 2015 rule and those that are not.
At present, the rule is on hold in 28 states and in effect in 22.
In the meantime, EPA continues to work on finalizing a new rule.
For the past three years, the 2015 WOTUS rule has been hung up by dozens of lawsuits and legal procedures across the country.
A number of court and government actions were taken in 2018 on the WOTUS rule, including:
-- In January, EPA finalized a rule to delay the 2015 rule by two years to allow for an agency rewrite.
-- In February, attorneys general in 10 states sued EPA, alleging the rule to delay was unlawful. A federal court threw out the rule.
-- Also in February, the AFBF and other agriculture groups asked a court in Texas for a national preliminary injunction to prevent the 2015 rule from taking effect.
-- In June, the U.S. District Court for the District of Georgia issued a preliminary injunction against WOTUS in 11 states.
-- In August, a federal judge in the U.S. District Court for the District of South Carolina ruled EPA did not follow the Administrative Procedures Act in finalizing its rule to delay the 2015 WOTUS for two years. As a result, the rule took effect in 26 states. That meant the rule was on hold in 24 states at that time.
-- Also in August, the AFBF asked an appeals court in Virginia to stay the ruling in South Carolina.
-- At the end of August, the AFBF asked the Georgia court to issue a national injunction to prevent the 2015 rule from taking effect.
ASF Outbreak Shifts in China - Signs of Pork Shortage Now Showing Up in Major Chinese Cities
BEIJING, China (DTN) -- The impact of China's African swine fever outbreak has grown, as the disease arrived in one of the country's largest production areas while pork stockpiles are rapidly falling as well.
The Ministry of Agriculture and Rural Affairs (MOA) announced on Tuesday that an African swine fever (ASF) case was found in Bobai County in South China's Guangxi Province. It was just one hog infected within a small farm, but the location created immediate concerns for the industry. Another outbreak was reported last Saturday on a farm of 104 hogs in Yunnan Province, another southern China province.
Industry observers are now speculating whether this latest report out of Bobai County will be used as a policy to curb pork shipping out from Guangxi Province.
Bobai County is one of the largest hog-producing counties in China. The county typically has stocks of 500,000 sows and produces 6.2 million head of hogs annually. In the U.S., such production would rank Bobai County behind only Iowa, North Carolina and Minnesota for hog production.
Since at least April, there have been questions about a possible outbreak in Bobai County because of hog fatalities, but there was no official confirmation of the outbreak in the county. Hog farms started selling their hogs as early as possible to reduce their risk. Many hog farms have already emptied their barns at a lower price. Those hogs had been shipped to other regions of the country.
"The situation is getting worse in South China," said an industry expert who asked to remain anonymous. "Hog stocks in Guangdong and Guangxi provinces had left only less than half of the pig population."
Guangdong and Guangxi are two provinces in southern China and export pork to other regions, include Hong Kong and Macao.
The Ministry of Agriculture said its sow herd in China is 22% smaller than at the same time last year, but many in the industry say this number could be more than 30%.
ASF does not harm humans, though it is deadly to pigs and there is no vaccine or cure yet.
Government officials have now started testing all pork stockpiles in China for possible contamination.
"Many companies and restaurants had stored frozen pork early this year when the price was low and also later on when farmers wanted to sell off pork as there was an outbreak of ASF. It is highly possible frozen pork in storage has been contaminated," said the expert.
Surprisingly, pork prices in Beijing and Shanghai were not creeping higher because companies were selling the stockpile before the mandatory ASF testing.
Tang Ke, head of the Market and Economy Information Department of MOA, said last month that the price of pork had already shot up in March and could rise by as much as 70% year on year to record levels in the second half of this year.
Industry is expecting a pork shortage in China in the second half of the year. Imports will be the only help to China to fill the market demand for pork. Currently, USDA shows 122,000 metric tons of pork sales to China this year, with 72,800 metric tons already shipped. Canadian pork exports to Chin rose in value over the first three months of the year with a significant increase in March in variety meats such as offal. China also recently approved Argentina as an exporter as well.
In the U.S., the pork industry and USDA officials have ramped up efforts to keep ASF out of the country. USDA officials testified earlier this month that biosecurity and import controls have been increased, though they acknowledged ASF would be a difficult disease to control once it arrives in the country. The economic impact, especially from lost exports, would be devastating to the industry. USDA officials also indicated ASF is a difficult disease to find a vaccine for or decontaminate a farm once an outbreak occurs.
Over the past few weeks, ASF has spread in Asia with Vietnam reporting more than 2,500 outbreaks and 1.55 million diseased animals since early May, according to the latest report from the World Organization for Animal Health, known by its French acronym OIE.
African swine fever has become a greater focus for the OIE. The group announced just Tuesday that it was launching a global initiative with the United Nations Food and Agriculture Organization to curb the spread of ASF. The OIE called on countries that are both infected and free of the disease to tighten biosecurity and traceability controls, as well as manage wild populations of hogs.
"Because of its complex epidemiology, it isn't possible to control ASF without a coordinated response from the different sectors involved," the OIE stated.
The Ministry of Agriculture and Rural Affairs (MOA) announced on Tuesday that an African swine fever (ASF) case was found in Bobai County in South China's Guangxi Province. It was just one hog infected within a small farm, but the location created immediate concerns for the industry. Another outbreak was reported last Saturday on a farm of 104 hogs in Yunnan Province, another southern China province.
Industry observers are now speculating whether this latest report out of Bobai County will be used as a policy to curb pork shipping out from Guangxi Province.
Bobai County is one of the largest hog-producing counties in China. The county typically has stocks of 500,000 sows and produces 6.2 million head of hogs annually. In the U.S., such production would rank Bobai County behind only Iowa, North Carolina and Minnesota for hog production.
Since at least April, there have been questions about a possible outbreak in Bobai County because of hog fatalities, but there was no official confirmation of the outbreak in the county. Hog farms started selling their hogs as early as possible to reduce their risk. Many hog farms have already emptied their barns at a lower price. Those hogs had been shipped to other regions of the country.
"The situation is getting worse in South China," said an industry expert who asked to remain anonymous. "Hog stocks in Guangdong and Guangxi provinces had left only less than half of the pig population."
Guangdong and Guangxi are two provinces in southern China and export pork to other regions, include Hong Kong and Macao.
The Ministry of Agriculture said its sow herd in China is 22% smaller than at the same time last year, but many in the industry say this number could be more than 30%.
ASF does not harm humans, though it is deadly to pigs and there is no vaccine or cure yet.
Government officials have now started testing all pork stockpiles in China for possible contamination.
"Many companies and restaurants had stored frozen pork early this year when the price was low and also later on when farmers wanted to sell off pork as there was an outbreak of ASF. It is highly possible frozen pork in storage has been contaminated," said the expert.
Surprisingly, pork prices in Beijing and Shanghai were not creeping higher because companies were selling the stockpile before the mandatory ASF testing.
Tang Ke, head of the Market and Economy Information Department of MOA, said last month that the price of pork had already shot up in March and could rise by as much as 70% year on year to record levels in the second half of this year.
Industry is expecting a pork shortage in China in the second half of the year. Imports will be the only help to China to fill the market demand for pork. Currently, USDA shows 122,000 metric tons of pork sales to China this year, with 72,800 metric tons already shipped. Canadian pork exports to Chin rose in value over the first three months of the year with a significant increase in March in variety meats such as offal. China also recently approved Argentina as an exporter as well.
In the U.S., the pork industry and USDA officials have ramped up efforts to keep ASF out of the country. USDA officials testified earlier this month that biosecurity and import controls have been increased, though they acknowledged ASF would be a difficult disease to control once it arrives in the country. The economic impact, especially from lost exports, would be devastating to the industry. USDA officials also indicated ASF is a difficult disease to find a vaccine for or decontaminate a farm once an outbreak occurs.
Over the past few weeks, ASF has spread in Asia with Vietnam reporting more than 2,500 outbreaks and 1.55 million diseased animals since early May, according to the latest report from the World Organization for Animal Health, known by its French acronym OIE.
African swine fever has become a greater focus for the OIE. The group announced just Tuesday that it was launching a global initiative with the United Nations Food and Agriculture Organization to curb the spread of ASF. The OIE called on countries that are both infected and free of the disease to tighten biosecurity and traceability controls, as well as manage wild populations of hogs.
"Because of its complex epidemiology, it isn't possible to control ASF without a coordinated response from the different sectors involved," the OIE stated.
IGC: Consumption to Outstrip Supply - Grain Consumption to Outstrip Supply in 2019-20
(Dow Jones) -- Global grain consumption will grow faster than supply in the 2019-20 season, the International Grains Council said Thursday, a combination that would squeeze inventories for a third straight year.
The intergovernmental organization forecast that grain consumption would rise 1.2% from a year prior to 2,192 million tons, driven by a 1.5% increase in industrial grain usage. Total grain supply, a combination of production and the previous year's stockpiles, is expected to grow by only 0.4%.
As a result, the IGC said grain inventories will continue to run down, falling by 2.4% to 602 million tons at the end of the 2019-20 season.
Evidence that demand is strengthening relative to supply could bolster the rally in crop prices that began in mid-May, ignited by weather-related disruption in the U.S. Midwest.
Until then, crop prices had suffered a yearlong downturn amid concerns about the world economy and the U.S.-China trade dispute, as well as booming exports from the Black Sea region and Latin America. But after surging for more than two weeks, corn futures on the Chicago Board of Trade hit a three-year high of $3.48 a bushel on Wednesday.
The IGC stressed that its supply and demand forecasts for the coming year are tentative, especially for soybeans, which are highly exposed to the trade dispute.
The organization forecast that international trade in grains will rise 1% in 2019-20 from a year before. At 369 million tons, it said trading volumes will slightly exceed their 2017-18 peak, mainly as a result of higher shipments of wheat and barley.
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Washington Insider: China Not Currency Manipulator, Treasury says
The New York Times reported this week that Treasury Secretary Steven Mnuchin told a congressional hearing recently that the administration had declined to label China a currency manipulator.
This decision came “despite President Trump’s repeated complaint “that Beijing has weakened the renminbi as a way to take advantage of the United States on trade,” the Times said.
Secretary Mnuchin said the decision could avoid further escalating tensions between Washington and Beijing, which have grown heated after a breakdown in negotiations this month.
He explained that China “remains on the Treasury Department’s watch list,” along with the “currency practices” of Germany, Ireland, Italy, Japan, Malaysia, Singapore, South Korea and Vietnam. And, he emphasized that the administration will continue to raise concerns about China’s activity in managing its currency.
Mnuchin said that Treasury still has “significant concerns” about China’s currency practices and criticized it for lacking transparency. The renminbi has fallen in value by 8% in the last year as China’s bilateral trade surplus in goods with the United States grew to $419 billion as of the end of 2018.
The biannual currency exchange report — the fifth of Trump’s presidency — also updated its criteria for designating countries as currency manipulators, allowing the United States to monitor the foreign exchange practices of a broader set of economies.
The United States has not officially designated another country as manipulator since it assigned that label to China in 1994. Doing so is supposed to prompt negotiations to resolve the problem, but in practice the punitive measures that the designation allows are minor.
The changes put in place in the latest report broadened the criteria necessary to generate the “manipulator” label. Any nation whose trade in goods with the United States exceeds $40 billion will now be monitored.
In addition, if a country actively intervenes in foreign exchange markets for six out of 12 months, rather than the current eight-month threshold, it will be closer to being flagged for manipulation.
A Treasury Department official said that even with the new thresholds, no country in recent years would have been designated. China meets only one of the thresholds, but the department added it to the watch list because of the size of its trade surplus.
Last week, the Commerce Department proposed a rule change that would allow the United States to expand its ability to penalize countries that manipulate their currencies. It proposed to levy countervailing duties when foreign governments “subsidize” their products by weakening their currencies relative to the United States dollar, the department said.
A senior Treasury Department official told the Times that the Commerce Department proposal was a separate matter that would not affect how the Treasury executed its designations.
As a presidential candidate, Trump made labeling China a currency manipulator a central plank of his economic policy, promising in his “contract” with American voters that he would direct the secretary of the Treasury to label China a currency manipulator in the first 100 days of his presidency.
While the Treasury has not yet done so, the administration has used other avenues to push China to refrain from manipulating its currency, primarily through trade negotiations with Beijing.
During a meeting between the American and Chinese delegations at the White House in February, Mnuchin said that a currency agreement between the two countries had been reached.
At that meeting, Trump said currency manipulation was “a very important subject which a lot people didn’t even think in terms of.”
American officials described the agreement as a pledge by China not to devalue its currency and to improve transparency around its foreign exchange practices.
In March, the governor of China’s central bank, Yi Gang, described the agreement as an understanding that both countries would avoid devaluing their currencies to achieve a competitive advantage for their exports.
He said that both countries would also continue to comply with previous currency agreements among the Group of 20 economies, to maintain close communication about currency markets and disclose detailed information in accordance with International Monetary Fund standards.
Democrats have been arguing that the president is being too soft on China, the Times said.
With trade negotiations between the two countries at an impasse, it is unclear when or whether the two sides will come to a formal agreement that includes a currency provision. The president has accused China of backing out of a trade pact with the United States and said on Monday during a trip to Japan that he was “not ready to make a deal.”
While no further discussions between the two countries are scheduled, Trump said he believes China will eventually agree to America’s trade terms.
Clearly, currency rules are important and the details in the proposed currency deal with China should be watched closely as they emerge, Washington Insider believes.
Court Overturns Obama WOTUS Rule
A federal judge in Galveston, Texas, has struck down the Obama administration's Waters of the U.S. (WOTUS) rule on procedural grounds.
Judge George C. Hanks ruled that EPA violated the Administrative Procedures Act by adding distance limits in the final regulation that were not a "logical outgrowth" of the proposal. He also cited the agency closing off the public comment period on the rule before EPA issued a key scientific report that undergirded the rule.
However, the ruling still keeps the WOTUS rule in place as the judged declined to rule on the challenges to the rule. That means the measure is still on the books in around half the states that are not covered by preliminary injunctions.
China Will Not Appeal WTO Ruling on TRQ Administration
For a second time, China is opting not to appeal a ruling by the WTO Dispute Settlement Body (DSB), this time in the case where the WTO said that China's administration of their tariff rate quotas (TRQs) on wheat, rice and corn did not meet their WTO obligations.
The Chinese also opted to not appeal an earlier ruling which found the country's support for its wheat and rice producers did not meet its WTO commitments.
China said while it was "disappointed" with some of the findings by the WTO, they would not appeal, saying it had "respect" for the WTO rules and said it would "earnestly fulfill" its obligations and would comply with the decision
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