Trump victory ushers in ag trade uncertainty

Spanish Market: Agriculture
06/11/24

Donald Trump's election victory brings with it a great deal of agriculture trade uncertainty, as the president-elect has promised to expand on aggressive tariffs implemented during his first term.

On the campaign trail Trump proposed tariffs of up to 20pc on all foreign goods and 60pc tariffs on all imports from China. Reigniting trade tensions with China is a primary concern for US agriculture markets, particularly for US soybean exports as China is the largest purchaser of US soybeans.

Market sentiment is not yet clear on the immediate impact of the election results. Some participants believe Trump's victory may increase the rate of US corn and soybean purchases ahead of Trump taking office in January, while others think buyers may take a step back and wait for prices to settle after the election. Some US buyers are also avoiding long term contracts to import soybean products due to the risk of future tariffs.

Argus assessed fob US Gulf prices for corn and soy rose slightly on 6 November. Fob US Gulf corn rose by $2.27/t for both December and January, and by $1.97/t for February, to $211.52/t, $205.22/t, and $208.66/t respectively. Soybeans gained even less, with December up $0.73/t, January up $0.74/t, and February flat, totaling $411.62/t, $411.44/t, and $411.44/t respectively.

The minimal gains in fob US Gulf prices indicate a mixture of indifferent and uncertain sentiments as to the expected policy changes under a new US administration.

China's current marketing year purchase commitments for US soybeans total 11.13mn t, down about 7pc from the previous year's 12.02mn t. Chinese purchases of 2024-25 crop soybeans from the US were behind pace earlier in the year, partially due to concerns about the election and US trade policy. China made its first purchase of 2024-25 crop soybeans in July, but purchased US new crop soybeans as early as January during the 2023-24 marketing year.

China's purchases of US corn have also been slower than the previous year, at currently at 20,000t, down by nearly 98pc from the year prior level of 910,000t.

LatAm opportunity

Latin American countries may benefit from Trump's election, as the potential for hampered US exports to China would open leave an opening for Latin American imports. In the previous trade war, China placed retaliatory tariffs on the US and in return purchased less US soybeans, filling the gap primarily with Brazilian product.

Though China does not purchase as much US corn compared to soybeans, the potential for another trade war could leave a small gap for corn exports to China that Latin America could fill. In May, China approved two varieties of genetically modified (GM) corn for import that are grown in Argentina, allowing the country to export corn more easily to China. Market participants in Argentina believe there may be an opportunity to increase exports if China limits US purchases.

This year, much of Brazil's corn has been sold domestically as demand has increased in Matto Grosso, but the country may also be of benefit from the US election if Chinese demand increases.

US agriculture inputs at risk

Trump has also made promises to appoint Robert F Kennedy Jr to his administration, who has been outspoken against pesticide-intensive agriculture. Kennedy's views run counter to many of the polices enacted under Trump's first term, which included rolling back pesticide regulations. Notably, the EPA rejected a proposed ban of chlorpyrifos that are used in pesticides, which were later banned by the administration of President Joe Biden.

Trump has not yet defined Kennedy's role in his administration, but market participants are concerned he could place restrictions on chemical inputs that help improve US crop yields.

The US Department of Agriculture forecast US corn yields for the 2024-25 crop at 183.8 bu/acre and 53.1 bu/acre on 11 October, two new records that are partly due to chemical inputs utilized by most American farmers.

By Rachel Nelson

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05/11/24

Port of Vancouver grinds to halt as picket lines form

Calgary, 5 November (Argus) — Commodity movements at the port of Vancouver have halted as a labour dispute could once against risk billions of dollars of trade at Canada's busiest docks. The International Longshore and Warehouse Union (ILWU) Local 514 began strike activity at 11am ET on 4 November, following through on a 72-hour notice it gave to the BC Maritime Employers Association (BCMEA) on 1 November. The BCMEA subsequently locked out workers hours later that same day, 4 November, which the union says is an overreaction because the union's job action was only limited to an overtime ban for its 730 ship and dock foreman members. Natural resource-rich Canada is dependent on smooth operations at the British Columbia port of Vancouver to reach international markets. The port is a major conduit for many dry and liquid bulk cargoes, including lumber, wood pellets and pulp, grains and agriculture products, caustic soda and sodium chlorate, sugar, coal, potash, sulphur, copper concentrates, zinc and lead concentrate, diesel and renewable diesel liquids and petroleum products. These account for about two-thirds of the movements through the port. Canadians are also reliant on the port for the import of consumer goods and Asian-manufactured automobiles. The two sides have been at odds for 19 months as they negotiate a new collective agreement to replace the one that expired in March 2023. Intervention by the Canada Industrial Relations Board (CIRB), with a hearing in August and September, followed by meetings in October with the Federal Mediation and Conciliation Service (FMCS), failed to culminate in a deal. The BCMEA's latest offer is "demanding huge concessions," according to the ILWU Local 514 president Frank Morena. The BCMEA refutes that, saying it not only matches what the ILWU Longshore workers received last year, but includes more concessions. The offer remains open until withdrawn, the BCMEA said. A 13-day strike by ILWU longshore workers in July 2023 disrupted C$10bn ($7.3bn) worth of goods and commodities, especially those reliant on container ships, before an agreement was met. Grain and cruise operations are not part of the current lockout. The Westshore coal terminal is also expected to continue operations, the Port of Vancouver said on 4 November. The Trans Mountain-operated Westridge Marine Terminal, responsible for crude oil exports on Canada's west coast, should also not be directly affected because its employees are not unionized. In all, the port has 29 terminals. By Brett Holmes Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

US railroad-labor contract talks heat up

04/11/24

US railroad-labor contract talks heat up

Washington, 4 November (Argus) — Negotiations to amend US rail labor contracts are becoming increasingly complicated as railroads split on negotiating tactics, potentially stalling operations at some carriers. The multiple negotiating pathways are reigniting fears of 2022, when some unions agreed to new contracts and others were on the verge of striking before President Joe Biden ordered them back to work . Shippers feared freight delays if strikes occurred. This round, two railroads are independently negotiating with unions. Most of the Class I railroads have traditionally used the National Carriers' Conference Committee to jointly negotiate contracts with the nation's largest labor unions. Eastern railroad CSX has already reached agreements with labor unions representing 17 job categories, which combined represent nearly 60pc of its unionized workforce. "This is the right approach for CSX," chief executive Joe Hinrichs said last month. Getting the national agreements on wages and benefits done will then let CSX work with employees on efficiency, safety and other issues, he said. Western carrier Union Pacific is taking a similar path. "We look forward to negotiating a deal that improves operating efficiency, helps provide the service we sold to our customers" and enables the railroad to thrive, it said. Some talks may be tough. The Brotherhood of Locomotive Engineers and Trainmen (BLET) and Union Pacific are in court over their most recent agreement. But BLET is meeting with Union Pacific chief executive Jim Vena next week, and with CSX officials the following week. Traditional group negotiation is also proceeding. BNSF, Norfolk Southern and the US arm of Canadian National last week initiated talks under the National Carriers' Conference Committee to amend existing contracts with 12 unions. Under the Railway Labor Act, rail labor contracts do not expire, a regulation designed to keep freight moving. But if railroads and unions again go months without reaching agreements, freight movements will again be at risk. By Abby Caplan Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

US biofuel feedstock use dips in August

31/10/24

US biofuel feedstock use dips in August

New York, 31 October (Argus) — Renewable feedstock usage in the US was down slightly in August but still near all-time highs, even as biomass-based diesel production capacity slipped. There were nearly 3.5bn lbs of renewable feedstocks sent to biodiesel, renewable diesel, and sustainable aviation fuel production in August this year, up from fewer than 3bn lbs a year prior, according to the US Energy Information Administration's (EIA) latest Monthly Biofuels Capacity and Feedstocks Update report. August consumption was 0.4pc below levels in July and 0.5pc below record-high levels in June. US soybean oil consumption for biofuels rose to 39.3mn lbs/d in August, up by 2.1pc from a year earlier on a per-pound basis and up 6.9pc from a month prior. The increase was entirely attributable to increased usage for renewable diesel production, with the feedstock's use for biodiesel slipping slightly from July. Canola oil consumption for biofuels hit 14.2mn lbs/d, up by 58.1pc from a year prior on a per-bound basis but still 19.4pc below record-high levels in July. Distillers corn oil usage, typically less volatile month-to-month than other feedstocks, bucked that trend to hit a high for the year of 13.6mn lbs/d in August. That monthly consumption is up 13.6pc from a year earlier and 20.9pc from a month earlier. Among waste feedstocks, usage of yellow grease, which includes used cooking oil, rose to 22.4mn lbs/d in August, up 13.8pc from levels a year prior and 5.8pc from levels in July. Tallow consumption for biofuels was at 18.6 mn lbs/d over the month, an increase of 27.8pc from August last year but a decrease of 13.4pc from July this year. Production capacity of renewable diesel and similar biofuels — including renewable heating oil, renewable jet fuel, renewable naphtha, and renewable gasoline — was at 4.6bn USG/yr in August, according to EIA. That total is 24.1pc higher than a year earlier and flat from July levels. US biodiesel production capacity meanwhile declined to fewer than 2bn USG/yr over the month, down by 4.3pc from a year earlier and 1.3pc from a month earlier. US biomass-based diesel production capacity has expanded considerably in recent years, but refiners have recently confronted challenging economics as ample supply of fuels used to comply with government programs has helped depress the prices of environmental credits and hurt margins. The industry is also bracing for changes to federal policy given this year's election and a new clean fuel tax credit set to kick off in January. That credit, known as "45Z", will offer a greater subsidy to fuels that produce fewer greenhouse gas emissions, likely encouraging refiners to source more waste feedstocks over vegetable oils. That dynamic is already shaping feedstock usage this year, with Phillips 66 executives saying this week that the company's renewable fuels refinery in California is currently running more higher carbon-intensity feedstocks ahead of a shift to using more waste early next year. By Cole Martin Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

US court set to weigh biofuel blend mandates

31/10/24

US court set to weigh biofuel blend mandates

New York, 31 October (Argus) — A US court on Friday will weigh some novel issues that could affect enforcement of the Renewable Fuel Standard (RFS), the federal program that sets minimum biofuel blending levels for domestic motor fuel supplies. The Environmental Protection Agency (EPA) in last year's RFS regulation required refiners and importers to blend increasing volumes of renewable fuel from 2023-2025. But the rule differed from past obligations in a crucial way. While the RFS law set annual volume targets of cellulosic, advanced and conventional biofuels through 2022, it tasked EPA with setting volumes in subsequent years by balancing factors such as the environmental impacts of biofuels, energy security, expected production and consumer costs. In a consolidated case to be heard Friday by the US Court of Appeals for the District of Columbia Circuit, environmental groups and oil refiners are separately challenging aspects of how the EPA applied those factors in setting 2023-25 volumes. The court has previously affirmed the legality of many RFS rules. "Past cases always give you some perspective on how the DC court might see it," said Susan Lafferty, a partner at law firm Holland & Knight. "But the DC court could also say, ‘not relevant anymore because this is a different part of the statute that we are working with.'" Refiners say EPA misapplied the criteria, upping compliance costs more than necessary by setting targets for cellulosic and conventional biofuels too high and targets for advanced biofuels too low. They also challenge EPA's balancing of potential impacts, noting that the agency assumed that all parties can easily pass the costs of compliance on to consumers. In a separate case this year, the DC Circuit discarded EPA rejections of program waiver petitions, in part because judges disagreed that refiners can easily pass on the cost of Renewable Identification Number (RIN) credits used to show compliance with the RFS program. EPA used this pass-through theory in the 2023-2025 rule "like a magic wand, waving it around to dismiss any argument that the rule will cause harm", the American Fuel and Petrochemical Manufacturers and small refineries said in a case filing. Lafferty expects the judges at Friday's hearing to probe the extent to which EPA's volumes relied on this pass-through theory, "a policy that now this very court has gutted." Environmentalists have similarly targeted EPA's cost analysis, arguing that the agency downplayed the environmental drawbacks of growing crops for energy. The Center for Biological Diversity and the National Wildlife Federation argue that EPA has legal discretion to set post-2022 volumes for corn- and soybean-derived biofuels as low as zero. EPA counters that the court owes the agency deference in evaluating scientific data and making predictive judgments. And biofuel groups that have intervened argue that the program is designed to require more biofuel production even if there are no formal volume requirements in law anymore. While EPA's post-2022 authority to set blend mandates is a new issue, the DC Circuit has handled various cases about EPA's implementation and has generally been deferential to the agency's volume decisions. The court this year upheld 2020-2022 targets. In a 2019 decision, the court kept volumes in place , despite telling EPA to more deeply weigh endangered species impacts. While the court might take issue with some aspects of EPA's latest rule, including the agency's lateness in finalizing volumes, judges could again be reluctant to upend fuel markets if they find only small oversights. Depending on how skeptical judges appear about EPA's arguments on Friday, the case could cause concern for biorefineries. A decision is expected next year, meaning any order for EPA to better justify its decisions or go back to the drawing board would likely fall to the next president's administration. On the panel for Friday's hearing are two judges familiar with the program: Democratic appointee Cornelia Pillard, who wrote the opinion this year upholding 2020-2022 blend mandates, and Republican appointee Gregory Katsas, who dissented and said those volumes were excessive. The third judge on the panel is Democratic appointee J. Michelle Childs. RINcrease or decrease RIN market activity has thinned as participants await the results of the court case and November's presidential election. In its latest rule, EPA aimed to provide a clearer picture over a longer timeline by finalizing volumes over multiple years. But the agency underestimated the growth in renewable diesel production, partly because of unexpectedly high feedstock imports. The result has been persistent oversupply, which took D4 biomass-based diesel credit prices from around 150¢/RIN in spring last year to as low as 42¢/RIN a year later according to Argus assessments. Multiple refiners have consequently dialed back biofuel production. In the past, RIN prices have proven sensitive to legal developments as traders anticipate supply and demand shifts. Prices softened this summer after the DC Circuit vacated small refinery waivers, leaving it unclear whether many facilities would have to buy RIN credits at all. By Cole Martin and Matthew Cope Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

US ag trade deficit looms over US election

29/10/24

US ag trade deficit looms over US election

Washington, 29 October (Argus) — A deepening of the US' agriculture trade deficit is a concern for many in the industry ahead of the 5 November election, as proposals of even more aggressive tariffs against China could further cut US soybean and corn exports. Former president and Republican presidential candidate Donald Trump has made reducing the overall US trade deficit a key issue of his campaign, vowing to subject all imports from China to punitive tariffs. In September he told the American Farm Bureau Federation (AFBF) that he intends to "permanently end our reliance on China for all critical goods and strengthen domestic Buy American and Hire American policies" if elected president. Trump has proposed tariffs of up to 20pc on all foreign goods and 60pc tariffs on all imports from China, and plans the "Trump Reciprocal Trade Act," which promises a 100pc reciprocation of any tariffs placed on US products from other countries. During his first term in office, Trump sparked a trade war with China that led to retaliatory tariffs against US grains — contributing to the first US agriculture trade deficit in 60 years. The USDA projects that for the current fiscal year the US' agriculture trade deficit will reach $42.2bn, the largest deficit on record. While vice president and Democratic presidential candidate Kamala Harris has been less vocal about trade policies on the campaign trail than her opponent, she has continued to indicate a hard line toward Chinese goods. Trump trade concerns Trump's first presidency featured trade disputes with China that started in 2018 with a 25pc tariff on goods such as cars and aircraft parts. China retaliated with a 25pc tariff on US soybeans and corn. The US' decades-long agriculture trade surplus reversed the next year. As a way to settle the dispute, the US and China signed a "Phase One" deal in January 2020 that required Beijing to step up purchases of US agricultural and energy products. But China never fully implemented that agreement, citing the economic disruption from the Covid-19 pandemic. Chinese tariffs on US grains remain in place, but with an annually renewed waiver that restricts them. Currently, Chinese tariffs on US ag products are at a most favored nation rate of 3pc for soybeans and 1pc for corn within sales quotas and 65pc for out-of-quota, according to a study by the World Agricultural Economic and Environmental Services (WAEES). The study noted that the out-of-quota tariff rate has historically not been applied, even after corn imports exceed the quota of 7.2mn metric tons (t). If China were to cancel the waiver that blocks the 25pc retaliatory tariff, US soybean exports to China could decline by 51.8pc from baseline levels, dropping by 14mn-16mn t annually, according to the WAEES. Corn would also fall, by 84.3pc or 2.2mn t annually. But if China matches Trump's proposed 60pc tariff, WAEES says US soybean export loss would total 25mn t. Any further deterioration of US agricultural trade with China would likely benefit South American countries, such as Brazil, which can readily fill the gap. Brazil's soybean production and total exports have been steadily rising, with the country reaching record soybean production of 161mn t and record soybean exports of 102mn t for the 2024-25 crop year, according to estimates from the US Department of Agriculture (USDA). The share of Brazilian soybeans exported to China increased during the Trump-era trade war by three percentage points from 80pc of exports in 2017 to 83pc in 2018, according to the Associação Nacional dos Exportadores de Cereais (ANEC). A quieter approach While Harris' message on trade may appear more measured, the current administration that she serves in has kept most of the Trump era Chinese tariffs in place. The section 301 tariffs imposed under Trump have not been repealed, and in May 2024 the US Trade Representative expanded tariffs further, albeit in a more targeted fashion on specific sectors of the Chinese economy, such as semi-conductors and electric vehicles. Harris was one of 10 senators that voted against the passage of the US-Mexico-Canada (USMCA) trade agreement in 2020 on account of worker protection and environmental concerns. The USMCA will be up for review in 2026. The Harris campaign told the AFBF in September that she will "not tolerate unfair trade practices from China or any competitor that undermines American farmers and ranchers." Where Trump's rhetoric worries some in the market as being too harsh, others worry a possible Harris administration may not be tough enough on reversing the ag trade deficit. The limited focus on the issue on the campaign trail, combined with the continued tariffs and little new action makes participants nervous that the deficit may not be properly addressed. By Rachel Nelson Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

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