Used Cooking Oil (UCO) Hot Topic in Congress; Brazil Authorized to Export UCO to U.S.

Vilsack interview | Potential dockworkers’ strike at East and Gulf Coast ports | Bird flu | Food prices | Camper sales plunge

MARKET FOCUS

• High prices and interest rates hit consumers: Midwest camper sales drop 60%
• Nvidia’s stock saw a rare decline on Thursday
• Oil prices headed for second consecutive weekly gain
• Cyber-attacks on U.S. infrastructure pegged to China
• Houthi threats raise Red Sea ship insurance, call for more naval forces
• Potential dockworkers’ strike at East and Gulf Coast ports is looming
• Ag markets today
• BP to buy Bunge’s 50% stake in their sugar and ethanol joint venture
• COFCO International, Ltd. and Growmark agree to transactions re: U.S. grain assets
• The Philippines plans to build 17 new deep-water ports
• Ag trade update
• NWS weather outlook
• Pro Farmer First Thing Today items

CONGRESS

• Update on FY 2025 Agriculture/FDA Appropriations
  

RUSSIA & UKRAINE

• Russia to adjust grain export duties on July 1
• Refineries in Russia attacked
  

POLICY

• Vilsack comments on farm bill issues and climate-smart practices
  

CHINA

• Soybeans, sorghum and cotton remain most of U.S. export sales activity to China
• China says EU friction could trigger ‘trade war’
• China’s FDI plunges at record rate
• China seeks to stabilize beef cattle production amid declining prices
• Beijing escalating tensions in South China Sea
• China’s EV industry received at least $231 billion in state subsidies & aid 2009 to 2023
  

ENERGY & CLIMATE CHANGE

• Brazil authorized to export used cooking oil (UCO) to U.S.
• Biden administration urged to scrutinize Chinese used cooking oil (UCO) imports
• USDA releases updated Climate Adaptation Plan for 2024-2027
• Green Plains to capture carbon dioxide emissions from three Neb. ethanol plants
  

LIVESTOCK, NUTRITION & FOOD INDUSTRY

• Bird flu impacts U.S. milk production
• HPAI detected in Iowa turkey flock
• Lael Brainard: Grocery prices stabilizing, urges corporations to cut prices further
  

POLITICS & ELECTIONS

• Big bucks for Trump
  

OTHER ITEMS OF NOTE

• Supreme Court upholds Trump-era tax on foreign income

— Equities today: In Asia, Japan -0.1%. Hong Kong -1.7%. China -0.2%. India -0.4%. In Europe, at midday, London -0.5%. Paris -0.4%. Frankfurt -0.3%. The U.S. Dow opened around 70 points higher.

U.S. equities yesterday: The Dow managed to register gains while losses in tech shares weighed on the S&P 500 and Nasdaq. The Dow was up 299.90 points 0.77%, at 39,134.76. The Nasdaq fell 140.64 points, 0.79%, at 17,721.59. The S&P 500 was down 13.86 points, 0.25%, at 5,473,17.

— Nvidia’s stock saw a rare decline on Thursday, dropping as much as 8% from its morning high and settling 3.5% lower at $131 by mid-afternoon. This drop erased $277 billion from Nvidia’s market value, reducing it to $3.27 trillion and placing it behind Microsoft after briefly surpassing it earlier in the week.

— Oil prices are headed for a second consecutive weekly gain following a draw in U.S. stockpiles. Benchmark Brent, which held above $85 a barrel, is on course to advance more than 3% this week, while WTI traded near $81.

— Ag markets today: Corn, soybeans and wheat posted mild corrective gains overnight, recouping a small portion of Thursday’s sharp losses. As of 7:30 a.m. CE, corn futures were trading 2 cents higher, soybeans were 3 to 8 cents higher, winter wheat futures were 1 to 4 cents higher and spring wheat was 3 to 5 cents higher. The U.S. dollar index was around 200 points higher, and front-month crude oil futures were trading just below unchanged.

Slow developing cash cattle trade. Despite higher bids in the northern market, cash cattle trade has been slow to develop this week, as feedlots are seeking even higher prices. Barring something bearish today, cash sources expect trade to eventually be seen at higher prices, though active movement may not come until after this afternoon’s Cattle on Feed Report.

Cash hog index drops, pork cutout firms. The CME lean hog index is down 17 cents to $90.55, marking declines in four of the last five days. After Thursday’s sharp decline, July lean hog futures held a 60-cent premium to today’s cash quote. The pork cutout value ended a three-day skid, rising 18 cents on Thursday amid strong gains in bellies ($10.04) and ribs ($5.68).

— Agriculture markets yesterday:

• Corn: July corn fell 10 1/4 cents to $4.39 3/4, closing near the session low.
• Soy complex: July soybean futures plunged 18 3/4 cents to $11.55 1/4 and settled on session lows. July meal futures sunk $7.00 to $357.60 and closed on session lows. July bean oil futures dipped 33 points to 43.97 cents.
• Wheat: July SRW wheat fell 9 1/4 cents to $5.72 3/4 and hit a two-month low. July HRW wheat closed down 8 3/4 cents at $5.92. Prices closed near mid-ranges. July spring wheat fell 14 cents to $6.18 3/4. July SRW wheat futures posted a fourth down-day in a row, while July HRW hit six straight daily declines.
• Cotton: July cotton futures sunk 18 points to 70.85 cents and settled nearer session lows.
• Cattle: August live cattle rose 45 cents to $182.55. August feeder cattle closed down 12 1/2 cents at $259.825. Both markets posted mid-range closes.
• Hogs: Hog futures negated a big portion of early-week gains Thursday, with nearby July falling $2.625 to $91.15 and most-active August diving $2.45 to $89.125.
  

— Quotes of note:

• Cyber-attacks on U.S. infrastructure. “Attacks targeting infrastructure essential to protect, support, and sustain military forces and operations worldwide or that may cause potential disruptions to the delivery of key goods or services to the American people must be our top priority.” — Homeland Security Secretary Alejandro N. Mayorkas in a newly released memo that said cyber attacks from China were a leading risk to U.S. critical infrastructure.
  
• “Only pirates do this. Only pirates board, steal, and destroy ships, equipment and belongings.” — Gen. Romeo Brawner Jr., the Philippine military’s chief of staff, on a Chinese coast guard attack on a Philippine supply ship.
  
• “The fish that got away was big.” — Masa Son, the founder of SoftBank, on selling his company’s stake in Nvidia in 2019, missing out on the meteoric rise in the chip company’s stock price. (SoftBank would have reaped some $150 billion in additional paper gains.) Speaking at SoftBank’s annual meeting today, Son also said that he had wanted to buy Nvidia in 2016, but couldn’t make a deal work.
  

— Another sign that high prices and interest rates are hitting consumers? Camper sales are said to be down significantly with some dealers in the Midwest reporting a 60% decline. Indications are interest rates on loans for a camper are around 10%, making it a much more costly purchase when camper prices can be around new car prices.

Market perspectives:

— Outside markets: The U.S. dollar index was firmer, with the euro and British pound weaker against the greenback. The 10-year Treasury note yield was weaker, trading around 4.22%, with a mixed tone in global government bond yields. Crude oil futures were little changed, with U.S. crude around $81.31 per barrel and Brent around $85.70 per barrel. Gold and silver were mixed, with gold higher around $2,379 per troy ounce and silver weaker around $30.56 per troy ounce.

— European Union’s naval force in the Red Sea needs to more than double in size due to increasing attacks by Iran-backed Houthi rebels, according to Rear Admiral Vasileios Gryparis. Since February, four EU vessels have patrolled the waters off Yemen, assisting 164 ships, shooting down over a dozen drones, and destroying four anti-ship ballistic missiles. The Houthis began attacking vessels last year to pressure Israel and its allies over the Gaza Strip conflict, disrupting global shipping and forcing many ships to reroute around southern Africa. The Houthis recently warned they would target ships owned by companies docking in Israel, increasing the risk for commercial shippers. Gryparis, lobbying in Brussels for more resources, noted the limited number of assets available and the vast area to be covered. The U.S. Navy has an aircraft carrier strike group in the region, but U.S. and UK bombing campaigns have failed to stop the attacks, leading to more frequent targeting of their vessels. The Houthis have threatened to expand their operations to the Mediterranean, though they lack evidence of capability to strike that far, according to Bloomberg (link). The EU mission, with a defensive mandate, aims to increase its geographic range without becoming more confrontational. Currently, Operation Aspides, focused near the Bab-el-Mandeb Strait, struggles to provide close protection due to the high volume of daily ship traffic. Gryparis expects the operation’s mandate, ending in February 2025, to be extended. EU foreign service spokespeople did not respond to requests for comment.

— Potential dockworkers’ strike at East and Gulf Coast ports is looming due to stalled contract negotiations between the International Longshoremen’s Association (ILA) and the U.S. Maritime Alliance. The current six-year labor contract covering approximately 85,000 ILA workers is set to expire on Sept. 30, 2024. The ILA has accused major shipping companies like Maersk and APM Terminals of violating the current contract by implementing automated systems, such as the “Auto Gate” system, which processes trucks without ILA labor. The union claims this breaches their contract. Talks will remain suspended until the automation issue is resolved. Besides job security concerns, the ILA is seeking generous pay increases and robust protections against job losses due to automation in the new contract.

Although a strike is not imminent, the last strike occurred in 1977. The rise of automated technologies is causing concern among dockworkers who fear job losses. Shippers are taking the threat seriously, with some diverting cargo to West Coast ports to avoid disruptions. An already stressed supply chain, affected by issues in the Red Sea and Panama Canal, would face additional pressure. If negotiations continue to stall, the Biden administration is expected to intervene, as it did during last year’s West Coast dockworkers’ dispute.

— BP has agreed to buy Bunge’s 50% stake in their sugar and ethanol joint venture, BP Bunge Bioenergia, for $1.4 billion, aiming to finalize the deal by the end of 2024. This acquisition will give BP full ownership of the venture, which can produce 50,000 barrels per day of ethanol equivalent from sugar. The transaction includes debt and lease obligations of around $1.2 billion, resulting in a net payout to Bunge of $800 million. The operation spans 11 mills in five Brazilian states, processing 32 million metric tons of sugarcane into ethanol and over 1 million metric tons of sugar annually. BP is making this move to capitalize on the expected rise in demand for low carbon biofuels and sustainable aviation fuel (SAF). However, BP will pause new biofuel projects at its Lingen facility in Germany and Cherry Point refinery in Washington state while assessing three other projects.

— Chinese-owned COFCO International purchased Growmark’s share of a grain terminal on the Mississippi River near St. Louis and Growmark acquired COFCO’s grain warehouse in Chicago. Link for details.

— The Philippines plans to build 17 new deep-water ports to enhance its supply chains for agricultural products and fertilizers, aiming to control food prices. Agriculture Secretary Francisco Tiu Laurel Jr. announced this at a business forum in Manila, citing a 27-year backlog in agricultural infrastructure investment. He emphasized the need for more ports to reduce production costs for corn, rice, and other goods. The agriculture department has a 2024 budget of around 210 billion pesos ($3.6 billion), with plans to double it in 2025 to address food security concerns. Laurel, who became agriculture secretary last November, noted that the new ports could decrease fertilizer prices by up to 15%. However, he did not provide details on costs or funding. Rising food prices have significantly impacted Filipinos, prompting the government to reduce rice import tariffs. Improving agricultural supply chains was a key promise of President Ferdinand Marcos Jr. when he took office in 2022. Despite the agriculture sector’s importance, it remains underdeveloped due to past policy mismanagement.

— Ag trade update: Taiwan purchased 104,150 MT of U.S. milling wheat. South Korea purchased 66,000 MT of corn expected to be sourced from South America or South Africa.

— NWS weather outlook: Record hot temperatures continue over portions of the Midwest/Ohio Valley while expanding over the Mid-Atlantic... ...Heavy rain and flash flooding concerns across the Upper Midwest Friday and Great Lakes Saturday... ...Risk for flash flooding in the Four Corners Region Friday... ...Heat building over much of the West heading into the weekend.

Items in Pro Farmer’s First Thing Today include:

• Grains rebound overnight
• French wheat crop ratings unchanged
• Eurozone business growth slows sharply
• Cattle on Feed Report out this afternoon

— Senate committee to address FY 2025 Agriculture/FDA Appropriations starting July 8, House vote expected July 22. The Senate Appropriations Committee is expected to address the fiscal year (FY) 2025 Agriculture/FDA and Legislative Branch appropriations measures starting the week of July 8. Despite a gap between Republicans and Democrats on domestic versus defense spending, Committee Chair Patty Murray (D-Wash.) emphasized the need for increased defense spending to be matched by an equal rise in nondefense spending. She criticized last year’s agreement for a 1% boost in both areas as insufficient.

Senate Appropriations Agriculture-FDA Subcommittee Ranking Member John Hoeven (R-N.D.) anticipates the Agriculture/FDA measure will be among the first to move forward. The House Appropriations Committee plans to take up its Agriculture/FDA measure on July 10, with a full House vote expected the week of July 22. However, it remains unlikely that both chambers will finalize their spending plans and reconcile differences before the start of FY 2025 on Oct. 1.

— Russia to adjust grain export duties on July 1. Adjusted duties on Russian grain exports will take effect as of July 1, 2024, Interfax news reported. Russian Ag Minister Oksana Luth proposed raising base prices for calculating export duties for wheat, barley and corn by 1,000 rubles ($11.27) per metric ton.

— Vilsack: Farm-state lawmakers ‘have to get realistic’ to get a new farm bill. USDA Secretary Tom Vilsack told us on AgriTalk, “I don’t think we’re close to getting a farm bill done until the folks who are negotiating the farm bill are realistic about what’s doable within a constrained resource environment.” He noted GOP farm bill proposals “essentially require a significant amount of additional funding.” He said, “I think there’s an opportunity to creatively use the CCC (Commodity Credit Corporation) in a way that actually does provide some additional resources or capacity. But I don’t think it’s anywhere near $53 billion.” Regarding climate-smart programs as the next revenue stream for farmers, Vilsack said: “We’re beginning to see products that are actually generating value added.” He noted the 45Z tax credit, “which is really the significant tax credit for individual and bundled activities on the climate smart side that will allow us to qualify ethanol that’s produced from those crops to benefit from sustainable aviation fuel. That’s a new opportunity.” Link to details of the interview via our Special Report out earlier today. And you hear hear Vilsack’s comments on AgriTalk (link) after this morning’s program.

— Soybeans, sorghum and cotton remain most of U.S. export sales activity to China. USDA data for the week ended June 13 showed additional sales activity to China for 2023-24 including net sales of 55,109 metric tons of sorghum, 213,700 metric tons of soybeans, and 82,194 running bales of upland cotton. No sales for corn were reported. The only activity for 2024-25 was net sales of 9,240 running bales of upland cotton and no activity for wheat. For 2024, net reductions of 692 metric tons of beef and net sales of 170 metric tons of pork were reported.

— China says EU friction could trigger ‘trade war.’ The European Union may trigger a ‘trade war’ if it continues to escalate tensions, China’s commerce ministry said, accusing the bloc of foul play during its anti-subsidy probe into Chinese electric vehicles. “The European side continues to escalate trade frictions and could trigger a ‘trade war,’” a statement attributed to the commerce ministry’s spokesperson said. “The responsibility lies entirely with the European side. In its countervailing duties investigation, the European side intimidated and coerced Chinese enterprises, threatened to apply punitive high tariff rates, and demanded overly broad information,” it added.

— China’s FDI plunges at record rate. Foreign direct investment (FDI) into China fell for an 11th straight month in April to 58.5 billion yuan, the lowest monthly value since November. During the first four months of this year, FDI plunged 27.1% from year-ago to 360.2 billion yuan, a record decline.

— China seeks to stabilize beef cattle production amid declining prices. China’s ag ministry published new regulations to stabilize the production of beef cattle as the industry faces declining prices and heavy losses. The ministry said it will instruct farms to adjust breeding reasonably, eliminate old and low-yielding cattle as appropriate, optimize herd structure and improve production efficiency. Main beef cattle producing areas should actively seek support from financial institutions, it said. The ministry also called for measures to increase the supply of forage and reduce costs. Local areas should raise grass planting in cultivated land and as well using beaches, abandoned land and saline-alkali land. To strengthen disease prevention, the ministry said it would support large-scale farms to increase biosafety measures and build disease-free communities.

— Beijing is escalating tensions in the South China Sea, with the Chinese coast guard attacking vessels resupplying a Philippine military outpost using axes, knives, and spears. This is the first time China has used bladed weapons against Philippine seamen, increasing the risk of conflict with the U.S.-allied Philippines, the Wall Street Journal reports (link). The tensions threaten global supply chains already strained by disruptions at the Suez Canal, causing shipping delays, port congestion, and higher freight costs. The conflict centers on a submerged reef claimed by the Philippines 25 years ago by running a dilapidated warship aground, which China asserts control over along with most of the South China Sea. Philippine President Ferdinand Marcos Jr. warned that if a Filipino dies in such confrontations, he would consider it an “act of war.”

— China’s electric-vehicle industry received at least $231 billion in state subsidies and aid from 2009 to 2023, despite a decrease in support per vehicle over time. More than half of this total came from sales-tax exemptions, according to research by the Center for Strategic and International Studies. In response, the European Union announced plans to increase tariffs on vehicles from China, following a similar move by the U.S. to quadruple its tariffs.

— Brazil has been authorized to export used cooking oil (UCO) to the United States, according to the Brazilian government. UCO, which is crucial for producing biodiesel and sustainable aviation fuel (SAF), is expected to play a significant role in the aviation industry’s efforts to reach net-zero emissions by 2050. Currently, SAF makes up only 0.2% of jet fuel use, but it is projected to account for 64% of the industry’s net-zero actions by 2050. The U.S. has recognized international certification for Brazil’s compliance with specific sanitary and technical standards, and the Brazilian government will provide certification on the traceability, identity, and origin of UCO. This authorization adds another source of UCO to the U.S. market, where imports have increased significantly to support biofuel production. The surge in UCO shipments from China has led some in the U.S. to advocate for limits on these imports (see next item). There are also reports out of China that the country is putting more emphasis on SAF production domestically and that could decrease its exports of UCO.

— Biden administration is being urged to scrutinize Chinese used cooking oil (UCO) imports amid concerns about their authenticity and potential contamination with higher carbon intensity virgin oils like palm. A bipartisan group of six U.S. Senators, led by Sen. Roger Marshall (R-Kan.), is pressing for more rigorous verification processes to ensure UCO imports are not fraudulent, which could undermine U.S. renewable fuel policies. This comes after a surge in UCO imports from China, which reportedly increased from less than 200 million pounds in 2020 to over 3 billion pounds in 2023. Lawmakers are worried that fraudulent UCO imports could distort the commodity’s value and lead to Renewable Identification Number (RIN) fraud under the Renewable Fuels Standard (RFS). European investigations have previously found fraudulent UCO imports from China, prompting increased scrutiny there, which may have shifted questionable imports towards the U.S. The Senators have asked USDA, EPA, U.S. Customs and Border Protection (CBP), and other relevant agencies to verify the authenticity of current UCO imports and to outline measures to prevent counterfeit feedstocks from benefiting from U.S. tax credits.

— USDA released its updated Climate Adaptation Plan for 2024-2027, building on the initial plans from 2021. The new plan deepens the assessment of climate risks and integrates climate adaptation into USDA’s policies, programs, funding, facilities management, and procurement. It emphasizes leveraging historical data and projections to assess climate-related risks, managing those risks, and expanding climate adaptation across more department functions and programs. Ongoing efforts include new soil health investments through the Regional Conservation Partnership Program (RCPP), expansion of USDA Climate Hubs for climate change information exchange, and increased support for research and development of climate-smart agricultural practices and technologies.

— Ethanol maker Green Plains announced plans to start capturing carbon dioxide emissions from three Nebraska ethanol plants in the second half of 2025. The captured emissions will be transported via pipeline for sequestration in Wyoming. Link for details.

— Bird flu has impacted U.S. milk production, with Texas and Kansas being the first states where the virus was detected in dairy cattle. According to USDA data, milk output in these states declined in March and April, contrary to the typical seasonal increase. Texas saw a significant 4.9% drop in milk production in March, compared to the national decline of 0.5%. While the virus continues to spread, its overall impact on milk production is expected to be limited, as many dairy cows can recover. Milk futures have risen by about 27% since the first outbreak in dairy cattle was announced, driven by tight global supplies.

— HPAI detected in Iowa turkey flock. The Iowa Department of Agriculture and USDA’s Animal and Plant Health Inspection Service (APHIS) have detected a case of highly pathogenic avian influenza (HPAI) in a commercial turkey flock in Sac County, Iowa. This is Iowa’s third detection of HPAI in poultry this year.

— White House Adviser Lael Brainard says grocery prices stabilizing, urges corporations to cut prices further. After the largest inflationary surge in prices in half a century, White House national economic adviser Lael Brainard announced that grocery prices may be stabilizing, noting a 1% inflation rate over the past 12 months. However, she emphasized that corporations need to reduce their prices further. During a speech on President Biden’s economic record, Brainard attributed high inflation in 2022 and 2023 to pandemic-related supply chain disruptions and Russia’s invasion of Ukraine. Despite declining shipping costs and global food commodity prices, grocery prices have remained high, and store margins are still above pre-pandemic levels. The 2021 increase in SNAP benefits and the launch of Summer EBT grocery assistance this year will aid low-income families facing higher food prices. Grocery prices had soared by 11.4% in 2022 and 5% in 2023, with USDA forecasting a 1.2% increase this year. Critics attribute inflation to excessive spending under President Biden.

It is important to keep this in perspective as grocery prices rarely decline, with only two years since 1974 when that happened —2016 (1.3%) and 2017 (-0.2%). USDA will update its forecast for food prices in 2024 Tuesday (June 25).

— Big bucks for Trump. Ahead of 2024’s first Biden-Trump presidential debate next Thursday, billionaire Timothy Mellon donated $50 million to a super PAC supporting former President Donald Trump last month, helping him outraise President Joe Biden for the second consecutive month. Shortly after receiving the money, the super PAC booked $100 million in ad spots through Labor Day. Cryptocurrency billionaires Tyler and Cameron Winklevoss each donated $1 million in bitcoin to support Trump, attacking the Biden administration’s “war on crypto.”

Trump and the Republican National Committee raised $141 million last month, compared with Biden and the Democratic National Committee’s $85 million. And a partial count yesterday showed Trump and the RNC had a war chest of at least $170 million, compared with $212 million for Biden and the DNC.

Mike Bloomberg recently gave nearly $20 million to President Biden’s re-election efforts. And Melinda French Gates gave Biden her first political endorsement: “This year’s election stands to be so enormously consequential for women and families that, this time, I can’t stay quiet,” she posted on X.

— Supreme Court upheld a Trump-era tax on foreign income, preserving the nation’s tax system and potentially aiding Democratic efforts to tax the assets of the wealthy. A Washington State couple, supported by the Competitive Enterprise Institute, argued that a 2017 law imposing a one-time tax on Americans with significant ownership in foreign companies was unconstitutional. The justices rejected this challenge in a 7-to-2 ruling.

This decision is significant for its implications on a potential wealth tax, which President Biden and other Democrats support. Such a tax would target multimillionaires’ unrealized gains as their assets appreciate, a measure conservative opponents deem unconstitutional.

Opinions from the case reveal a sharp divide among justices regarding a wealth tax. Justice Ketanji Brown Jackson indicated that decisions on taxation should be left to Congress and voters, while Justice Amy Coney Barrett expressed hesitation about supporting a wealth tax. This decision has ignited debate, with Sen. Elizabeth Warren (D-Mass.) advocating for a wealth tax to create a fairer system, while Dan Greenberg of the Competitive Enterprise Institute predicts a favorable reception for wealth tax opponents in the court.

Taxation remains a contentious issue in the current election, with Donald Trump proposing cuts for the wealthy and corporations, and President Biden advocating for increased taxes on the rich to appeal to working-class voters and organized labor. Treasury Secretary Janet Yellen has criticized relying on tax cuts for growth, though she has also opposed a global wealth tax.

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