CFTC Releases Financial Reform Rulemaking Information
The Commodity Futures Trading Commission (CFTC) released a list of 30 areas for future rulemaking related to the financial reform bill signed by President Obama. Some of the areas under the “Dodd-Frank Wall Street Reform and Consumer Protection Act” will require only one rule, while others will require more. While many of the rules will be CFTC's sole responsibility, others will be developed with the Securities and Exchange Commission or a banking regulator.
The commission has created a new section on its website at http://www.cftc.gov/LawRegulation/OTCDerivatives for the rulemaking process and invites the public to submit comments. The major aspect of the law pertaining to the CFTC is that it brings the previously unregulated swaps market under regulatory oversight. For example, swaps that are accepted by a clearinghouse must be centrally settled. Unregulated swaps will be subject to new capital and reporting requirements.
Some of the rules that the CFTC will have to write in this area include those pertaining to position limits for the products, how clearinghouses and the agency will determine which swaps will be required to be cleared, classification of entities as dealers and major users, and clearinghouse ownership and governance.
The rulemaking for the 30 areas were divided into eight broad groups: comprehensive regulation of swap dealers and major swap participants; clearing; trading; data; particular products; enforcement; position limits; and “other titles.” Position limits will require rules setting the limits, large trading reporting requirements, and definitions for bona fide hedging and aggregate limits.
Senate Rejects Estate Tax Permanent Repeal
The Senate rejected an attempt to permanently repeal the estate tax. The Senate voted 39-59 against a motion by Sen. DeMint (R-SC) that would have allowed him to employ a legislative procedure to add a provision to legislation extending unemployment benefits (H.R. 4213) that would permanently repeal the estate tax.
The estate tax expired on Dec. 31, ’09 and if Congress fails to act, the tax will snap-back to 55% in ’11, with an exemption level of $1 million.
The Administration, House Democrats and a number of Senate Democrats support an extension of the 45% tax rate and the $3.5 million exemption level from ’09.
Efforts continued throughout the week to attach the so-called Kyl-Lincoln plan to legislation related to small business programs. The compromise would set the top rate at 35% with a $5 million exemption level for individuals ($10 million for couples) phased in over 10 years and indexed for inflation. It also would provide a stepped up basis for inherited assets.
House Passes Manufacturing Enhancement Bill
Despite the opposition of the Republican leadership because of its earmark ban, the House passed the U.S. Manufacturing Enhancement Act of 2010 (H.R. 4380), previously known as the Miscellaneous Tariff Bill (MTB), by a vote of 378-43 under suspension of the rules.
The MTB would suspend US tariffs for hundreds of inputs into the US manufacturing process that are not produced in the United States. Duty suspensions and reductions proposed in the bill are subject to a vetting process to ensure that no domestic producers of the affected products exist.
Passage of the bill opens the way for Senate consideration and the Senate is expected to act quickly.
The measure passed by the House contained tariff suspensions that had expired and had both a House and Senate sponsor. The legislation allows a company affected by an expired suspension to petition Customs for a refund of duties paid. The Ways and Means Committee is reportedly working on a second bill that would include new duty suspensions.
The National Council of Textile Organizations, the American Apparel and Footwear Assoc., and the National Assoc. of Manufacturers were among those that supported the House-approved legislation. They applauded passage of the bill, saying it would support US jobs by driving down the cost to US manufacturing businesses. According to an industry source, four dozen provisions directly benefited US textile, apparel and footwear industries.
In a related development, the House Energy and Commerce Committee approved by voice vote legislation (H.R. 4692) that would require the President to publish a national manufacturing strategy and establish a National Manufacturing Strategy Board. The board would conduct a “comprehensive analysis” of the US manufacturing sector, which would include assessments of “the current domestic and international environment” for US manufacturing, forecasts for the sector, and “matters affecting the competitiveness, growth, stability, and sustainability” of the sector, such as productivity, trade balance, job creation and workforce development.
In a June report, the National Assoc. of Manufacturers favored a manufacturing strategy that would “embrace specific action items, not just nonbinding goals and recommendations.” The report outlined a number of policy proposals to help the manufacturing sector, including changes to tax policy, increased public investment in infrastructure projects, and reducing trade barriers for US exports.
The Committee’s ranking member, Rep. Barton (R-TX), said that the bill was “designed to avoid facing up to the real problem facing American manufacturing: bad tax policy.” He said that the United States currently had the second-highest corporate tax rate among developed nations, with Japan having the highest corporate tax rate.
OMB Asks For Science, Technology Priorities
The administration's Office of Management and Budget issued a memorandum to all federal departments and agencies directing them to prioritize science and technology in their upcoming FY12 budget submissions.
In their ’12 budget submissions, agencies should focus resources on addressing six challenges, the memo stated. These are promoting sustainable economic growth and job creation; defeating the most dangerous diseases and achieving better health outcomes for all while reducing health care costs; and moving toward a clean energy future to reduce dependence on energy imports while curbing greenhouse gas emissions.
The remaining three challenges are “understanding, adapting to, and mitigating the impacts of global climate change; managing the competing demands on land, fresh water and the oceans for the production of food, fiber, biofuels and ecosystem services based on sustainability and biodiversity; and developing the technologies to protect our troops, citizens and national interests.”
Reid Abandons Carbon Limits in Energy Bill
Still without enough Democratic support to move climate legislation, Senate Majority Leader Reid (D-NV) discarded carbon dioxide emissions caps from his energy bill, vowing instead to bring a modest oil spill and energy efficiency measure to the floor before the August recess.
Reid said the energy bill will include four components: the oil spill legislation, a program providing rebates to homeowners who take steps to improve heating and cooling efficiency, incentives for long-haul trucks to switch to natural gas, and funding for water conservation efforts. He said he will bring the measure to the floor before the August recess.
Many Senate Democrats still want a comprehensive approach but with time running out and Republicans united in their opposition to climate legislation, Sen. Reid said he had no choice but to abandon even a scaled-back bill that would have capped only greenhouse gas emissions from power plants.
The NCC and other agricultural groups have been critical of the emissions caps provisions in proposed legislation because of the increased energy and input costs those caps would cause. However, greenhouse gas regulations are far from dead as EPA continues to implement Clean Air Act regulations, which eventually will place limits on emissions of power plants and other industries.
Chemical Security Law Reauthorization Markup Slated
Later this month, the Senate Homeland Security and Governmental Affairs Committee plans to mark up legislation that would reauthorize federal chemical security law, which is set to expire on Oct. 4. The Committee expects to address both a version passed by the House that would permanently extend the law and expand its coverage as well as a bill sponsored by committee ranking member Sen. Collins (R-ME).
The House Chemical and Water Security Act (H.R. 2868), passed in Nov. ’09, would reauthorize the chemical facility security program and expand it to require the use of inherently safer chemicals (IST) in some cases. It also would force water systems to adopt security measures for the first time and would cover port facilities now regulated under the Maritime Transportation Security Act. Agricultural interests are concerned that the IST provision could result in the government-mandated substitution of important agricultural inputs such as ammonium nitrate or certain pesticide active ingredients.
The Continuing Chemical Facilities Antiterrorism Security Act of 2010 (S. 2996), introduced by Sen. Collins, would retain current chemical facility antiterrorism standards and extend them for five years. S. 2996 would not cover water treatment plants or maritime facilities and does not contain an IST provision.
Sen. Lieberman (I/D-Conn.), the Committee chairman, supports several key aspects of H.R. 2868, including IST while Collins opposes the IST provision.
The Chemical Facility Antiterrorism Standards (CFATS) were established as interim rules under a ’06 appropriations bill. Authority for the CFATS program expired in Oct. ’09 but was extended for another year. Under the CFATS rules, DHS requires all high-risk chemical facilities to complete security vulnerability assessments, develop site security plans and implement protective measures necessary to meet DHS-defined risk-based performance standards.
Homeland Security Secretary Janet Napolitano has said that the department will work with Congress to obtain permanent authorization of CFATS.
EPA Considering More Stringent PM Levels
Later this month, the EPA’s Clean Air Scientific Advisory Committee (CASAC) will review a draft policy assessment which some say could result in unprecedented regulation of particulate matter. According to EPA’s Second Draft Policy Assessment for Particulate Matter (PM), issued earlier in the month, EPA may consider regulating coarse PM at levels as low as 65-85 μg/m3 - twice as stringent as the current standard.
Because of the high dust levels found in arid climates, many critical western industries have a difficult time meeting the current standard of 150 μg/m3. In some of these areas, “no-till” days have already been proposed for agriculture, severely hindering farmers’ ability to maintain productive operations. If EPA regulates dust at the level of 65-85 μg/m3, areas across the country would be classified as “nonattainment,” forcing states to impose extreme dust control requirements on businesses across the board.
The policy assessment (PA) is the latest step in EPA’s ongoing review of the PM National Ambient Air Quality Standards (NAAQS), as required every five years under the Clean Air Act.CASAC is scheduled to discuss the document on July 26. According to the document, “This PA is intended to “bridge the gap” between the relevant scientific evidence and technical information and the judgments required of the EPA Administrator in determining whether, and if so how, to revise the PM NAAQS.
“If the EPA does indeed consider regulating coarse particulate matter at lower levels, they are, once again, putting a tremendous and unrealistic burden on rural America,”emphasized Sen. Grassley (R-IA). “How would a farmer control the dust combining soybeans or the dust kicked up by cattle running around? I understand the EPA’s concern in protecting the health of Americans, but they have also shown a complete disregard for agriculture.”
Bangladesh, Pakistan Manufacturers on Trade Mission
Textile executives from five Bangladeshi and three Pakistani textile mills will tour the US Cotton Belt on July 25-Aug. 2 to become more familiar with US cotton production, processing and marketing and to meet with US exporters.
All COTTON USA Special Trade Missions are aimed specifically at building trading ties between the US cotton industry and key textile manufacturing leaders – with an overall goal of helping US cotton capture additional market share overseas.
Pakistan is the world’s third largest cotton consumer, with 11.6 million bales of consumptions estimated for the ’10 marketing year. Bangladesh is the world’s sixth largest consumer and is estimated to consume 4.25 million bales this year.
“The United States supplies more than half of the cotton that these eight textile participating manufacturers import each year,” said Wallace L. (Wally) Darneille, a Lubbock, Texas, cooperative official and president of Cotton Council International (CCI), which sponsors the trade mission. “This is a wonderful opportunity to give these important U.S. cotton customers an intimate look at our industry infrastructure and our commitment to reliably supply quality fiber to the world marketplace.”
The participants will participate in an ICE Futures seminar; visit a farm and gin in the Corpus Christi, TX, area; observe cotton research in North Carolina, and tour the USDA cotton classing office in Bartlett, Tenn. They will meet with exporters in the four major Cotton Belt regions and get briefings from CCI, the NCC, American Cotton Producers, Cotton Incorporated, American Cotton Shippers Assoc., Texas Cotton Assoc., Lubbock Cotton Exchange, AMCOT, Western Cotton Shippers Assoc., Southern Cotton Growers Assoc., Plains Cotton Growers Assoc., San Joaquin Valley Quality Cotton Growers Assoc. and Supima.
US Mill Cotton Use Steady
According to the Commerce Dept., June (five-week month) total cotton consumption in domestic mills was 164.9 million pounds for a seasonally adjusted annualized rate of 3.49 million bales (480-lb). Last year’s June annualized rate was 3.16 million bales.
The May (4-week month) estimate of domestic mill use of cotton was lowered by 171,000 pounds to 136.5 million pounds. The revised seasonally adjusted annualized rate of consumption for May is 3.58 million bales. This is higher than last year’s May annualized rate of 3.33 million bales.
Based on Commerce estimates from Aug. 2, ’09-July 3, ’10, projected total pounds consumed during crop year ’09-10 would be 1.6 billion pounds or 3.42 million bales. USDA’s latest estimate of ’09-10 crop year mill use is 3.40 million bales.
Preliminary domestic mill use of cotton for July and revised June figures will be released by Commerce on Aug. 26.
Sales Weak, Shipments Strong
Net export sales for the week ending July 15 were 95,500 bales (480-lb). This brings total ’09-10 sales to approximately 13.9 million bales. Total sales at the same point in the ’08-09 marketing year were approximately 14.3 million bales. Total new crop (’10-11) sales are 3.3 million bales.
Shipments for the week were 344,100 bales, bringing total exports to date to 11.4 million bales, compared with the 12.6 million bales at the comparable point in the ’08-09 marketing year. With less than a month remaining in the marketing year, weekly shipments must average roughly 427,800 bales to reach the USDA projection of 12.3 million bales.
Effective July 23-29, ’10
Adjusted World Price, SLM 11/16
65.84 cents
*
Fine Count Adjustment ('09 Crop)
0.28 cents
Fine Count Adjustment ('10 Crop)
0.38 cents
Coarse Count Adjustment
0.00 cents
Marketing Loan Gain Value
0.00 cents
Import Quotas Open
3
Special Import Quota (480-lb bales)
200,452
ELS Payment Rate
0.00 cents
*No Adjustment Made Under Step I
Five-Day Average
Current 5 Lowest 3135 CFR Far East
NA
Forward 5 Lowest 3135 CFR Far East
82.88 cents
Coarse Count CFR Far East
NA
Current US CFR Far East
NA
Forward US CFR Far East
83.60 cents
'09-10 Weighted Marketing-Year Average Farm Price
Year-to-Date (August-May)
61.92 cents
**
**August-July average price used in determination of counter-cyclical payment
