Evening Report | July 8, 2024

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Corn crop conditions modestly improve... USDA rated 68% of the corn crop as “good” to “excellent” as of Sunday, up one point from the previous week. Analysts expected no change. The “poor” to “very poor” rating held at 9%.

USDA reported 24% of the crop was silking (14% average) and 3% was in dough stage (2%).

Soybean conditions also unexpectedly improve... USDA rated 68% of the soybean crop as “good” to “excellent,” up one point from last week, whereas analysts expected no change. The “poor” to “very poor” rating held at 8%.

USDA reported 34% of the soybean crop was blooming (28% average) and 9% was setting pods (5%).

Cotton conditions post another big decline... USDA rated 45% of the cotton crop as “good” to “excellent,” down five points from last week. The “poor” to “very poor” rating increased six points to 23%. The cotton crop in Texas was rated 35% in the top two categories and 32% in the bottom two.

USDA reported 52% of the crop was squaring (50% average) and 19% was setting bolls (15%).

Spring wheat conditions improve... USDA rated the spring wheat crop as 75% “good” to “excellent,” up three points from last week, whereas analysts expected no change. The “poor” to “very poor” rating held at 4%. In top producer North Dakota, the crop was rated 81% in the top two categories and 3% in the bottom two.

USDA reported 59% of the crop was headed, one point behind the five-year average.

Winter wheat harvest remains well ahead of average... USDA reported the winter wheat harvest reached 63% done as of Sunday, 11 points ahead of the five-year average and equal to analysts’ expectations. Harvest is finished in Oklahoma (96% average), while it stood at 92% in both Texas (93%) and Kansas (72%).

India mulls easing rice export limits... India may relax restrictions on exports of some rice varieties to avoid a glut in the country before the new crop arrives in the market in October, Bloomberg reported, citing people familiar with the matter. India is considering allowing white rice shipments with a fixed duty, said the people. Authorities may also scrap a 20% tax on parboiled rice exports and impose a fixed levy instead to discourage underpricing of cargoes.

Biden released regulatory roadmap... President Joe Biden shared a regulatory roadmap that could be impacted by a potential Trump administration. The White House released the spring Unified Agenda detailing agency timelines for various regulations. The agenda is significant as Biden campaigns against former President Donald Trump, who plans to repeal many rules if elected. The agenda is seen as ambitious and more of a signal to interest groups rather than a guarantee of completion.

Of note: Upcoming rules risk repeal if finalized during the Congressional Review Act’s “look-back” window.

USDA Initiatives:

· USDA plans to codify its higher blends infrastructure program to expand higher-ethanol fuel availability, with a proposed rule expected by May 2025.

· USDA is working on the greenhouse gas technical assistance program under the Growing Climate Solutions Act, with a proposed rulemaking notice in August and a final rule by October.

EPA Regulations:

• EPA will publish a final rule in August updating worker protection standards for pesticide use, including who is allowed within pesticide application zones.

• On biofuels policy, EPA said it would combine next year’s announcement of minimum biofuel blending through the Renewable Fuel Standard (RFS) with proposed changes to improve the program’s implementation. A notice of proposed rulemaking is slated for March, with a final rule envisioned for December 2025.

Forest Service Actions:

• In January, the Forest Service will propose regulations to advance carbon stewardship in national forests through vegetation management and land use, though the timeline is undetermined.

• By December 2024, the Forest Service plans to finalize a rule to allow carbon storage projects on forest system land, exempting these projects from a prohibition on the permanent use of national forests and grasslands.

Treasury Rules:

• Treasury aims to finalize rules from the 2022 Inflation Reduction Act (IRA) to support clean energy projects.

• Treasury is working on a proposal introduced in May that offers significant incentives for clean energy projects starting in 2025 and beyond.

• For the first time, the agenda includes credits under Sections 45Y and 48E of the IRA for electric power projects that reduce greenhouse gas emissions, including those using fossil fuels. Public comment period ends in August.

• Another proposed rule from December aims to establish production credits for clean hydrogen (IRA 45V). Hydrogen producers have urged quicker implementation of these credits.

Interior Department:

• Monarch Butterfly: Decision on designating as threatened or endangered expected by December 4, delayed from September.

• Migratory Bird Treaty Act: December decision on permit system allowing limited harm to birds with mitigation steps.

• FWS Refuge System: Proposal to promote biological integrity and health, with over 146,000 public comments received, due in December.

• Offshore Oil Regulations: New rules to stiffen regulations and limit drilling eligibility based on financial and environmental criteria.

o Bond Requirement: Offshore oil companies must obtain a bond before contesting penalties, rule expected this summer.

o Oil Spill Response: Update to 22-year-old regulations.

o Fitness to Operate Standards: Due in January 2025.

• National Park Service: Public notice by December on eliminating fees for low-impact commercial filming and designating off-road vehicle routes at Big Cypress National Preserve (Florida) and horse/bicycle routes at Mammoth Cave National Park (Kentucky).

Global trade in goods and services rebounding from last year’s downturn... According to a report by UNCTAD, trade in goods increased by 2% in the first half of the year, adding $250 billion, while services grew by $100 billion compared to the same period in 2023. The rebound in global trade was driven by economic strength in the U.S. and robust exports from developing Asian nations.

Despite the overall slowdown in international commerce last year, industrial policies like the U.S. Inflation Reduction Act, China’s Made in China 2025 initiative and the EU’s Net Zero Industry Act boosted demand for specific goods.

The report notes a 50% rise in electric vehicle trade among major economies, while competition remains strong for solar panels and electric vehicles. However, the battery value chain sector is becoming increasingly concentrated among a few major exporters, with low trade reallocation.

UNCTAD foresees three potential implications:

1. Increased concentration in global trade

2. Splintering into major trade blocs

3. Rising protectionism and costs

U.S. intensifying scrutiny on Chinese land purchases near military bases... There are concerns with Chinese purchases of land near U.S. military based regarding national security and espionage, according to a special report by the Epoch Times. In May, President Joe Biden issued an executive order shutting down MineOne Partners Ltd., a Chinese-owned firm near Warren Air Force Base in Wyoming. Chinese investors made the most land transactions among foreign nationals from 2020 to 2022, prompting increased federal and state attention. Despite significant Chinese land holdings in states like Texas and North Carolina, federal legislation to limit such purchases has stalled.

The Government Accountability Office (GAO) identified weaknesses in tracking foreign land purchases, calling for better coordination and data sharing. At a congressional hearing, lawmakers expressed alarm over Beijing’s efforts to undermine U.S. security, emphasizing the threat posed by the Chinese Communist Party (CCP).

Chinese telecommunications firms installing cell towers near military bases raised suspicions of eavesdropping. The Cybersecurity and Infrastructure Security Agency warned of Chinese hackers pre-positioning for potential cyberattacks. Experts advocate for a holistic government approach to address CCP threats, suggesting moving CFIUS oversight from the Treasury to the Defense Department.

State-level actions include bans on foreign adversaries owning land near military facilities, with several states enacting such laws. High-profile cases, like Chinese land purchases near Laughlin Air Force Base in Texas and Grand Forks Air Force Base in North Dakota, have intensified scrutiny. The federal government has expanded CFIUS’s powers to include more sensitive military sites.

Bottom line: Concerns about espionage, intellectual property theft, and potential sabotage of the U.S. food supply underscore the need for vigilant monitoring of foreign land purchases near critical infrastructure.

Some states fined for SNAP errors... Several states are facing penalties from the federal government due to high error rates in administering SNAP (food stamp) benefits:

• Alaska is facing an $11.9 million fine for a 60% error rate in 2023, the highest in the nation.

• Washington D.C. is facing a $4.4 million penalty for a 20% error rate.

• Other states with high error rates include New Jersey (33.48%) and South Carolina (20.94%).

USDA considers an error rate above 6% to be unacceptable. States that exceed this threshold for two consecutive years face financial penalties.

Errors can include overpayments or underpayments of benefits, as well as providing benefits to ineligible recipients. The national overpayment error rate for fiscal year 2023 was 10.03%, with an underpayment rate of 1.64%. These errors are generally not due to fraud, but rather unintentional mistakes by state agencies or recipients that affect eligibility determinations or benefit amounts.

States facing penalties have options to address the fines:

• They can pay the full amount immediately.

• They can invest 50% of the penalty amount in improving their SNAP administration systems.

Canada averts potential labor disruption at its Pacific Coast ports... A strike was averted after the labor-relations board deemed a strike notice from the union representing ship and dock foremen illegal. This would have been the second consecutive summer of labor issues at these crucial west coast gateways, which handle about 25% of Canada’s annual trade, amounting to roughly C$800 million (about $586 million) daily.