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Market News

June 14, 2019

Dominica welcomes removal from EU blacklist

ROSEAU, Dominica (CMC) —Dominica Tuesday welcomed the decision of the European Union to remove the island from its list of non-cooperative tax jurisdictions.

“The Government had done all that was required of it to be removed off the list. That vindication has come. The European Union has removed Dominica from the blacklist and put them on the white list,” said the Government's legal adviser, senior counsel, Anthony Astaphan.

Astaphan, speaking on the State-owned DBS radio said the removal from the blacklist proves that the Roosevelt Skerrit Government was being honest when it complained about its inclusion in the first place.

“It is 100 per cent consistent with what representatives of the government, including the prime minister, had said should have been the result in the first place,” he said, noting that persons seeking to secure cheap political points tried to discredit the Government without listening, appreciating and understanding what the true facts were.

In a June 6 memo, the general secretariat of the Council of the European Union noted that it is removing the island from the “list of non-cooperative jurisdictions for tax purposes” following its commitment to the Organization for Economic Cooperation and Development's Multilateral Convention on Mutual Administrative Assistance.

In April, Prime Minister Skerrit told Parliament that Dominica did not want an apology from Europe over the blacklisting saying “all we want is to remove our name from the blacklist because we have done everything and we have gone beyond what was required by the international community”.

Article published June 14, 2019 on jamaicaobserver.com

U.S. farmers experimenting with hemp as China trade war drags on

HAYSVILLE, Kansas (Reuters) - A growing number of U.S. farmers battered by low grain prices and the threat of a prolonged trade war with China are seeking salvation in a plant that until recently was illegal: hemp.

A cousin of cannabis plants that produce marijuana, hemp is used in products ranging from food to building materials and cannabidiol, or CBD oil, which is being touted as a treatment for everything from sleeplessness to acne to heart disease.

Interest in hemp picked up with the passage of the 2018 Farm Bill in December, which removed hemp from the federal Drug Enforcement Administration’s list of controlled substances and put it under the oversight of the U.S. Department of Agriculture (USDA). Unlike marijuana, industrial hemp doesn’t contain enough of the psychoactive chemical THC to give users a high.

The new rules call for the USDA to award hemp planting licenses to farmers but the agency has not yet regulated the process, meaning individual states are still issuing the licenses.

Industrial hemp plantings this year could double from the 78,176 acres seeded in 2018, said Eric Steenstra, president of advocacy group Vote Hemp. In 2017, 25,713 acres were planted on pilot programs authorized under the 2014 farm bill.

The U.S. hemp market is growing along with supply. U.S. sales of hemp reached $1.1 billion in 2018 and are projected to reach $1.9 billion by 2022, according to Vote Hemp and the Hemp Business Journal, a trade publication.

The profit potential is high: A good yield of food-grade hemp, for instance, can net farmers about $750 per acre, said Ken Anderson, founder of Prescott, Wisconsin-based hemp processor Legacy Hemp. Hemp seeds can be baked in to bread or sprinkled onto cereal or salads.

“That’s a profit that blows corn and wheat and everything else out of the water,” he said.

By comparison, soybeans bring in $150 or less per acre, and sales of the U.S. crop to China have fallen sharply since the onset of the trade war last year.

Before they can cash in on hemp, however, U.S. farmers must learn the science of producing an unfamiliar crop and wrestle with shifting regulations and other uncertainties.

“Nobody has any experience whatsoever,” said Rick Gash, 46, a businessman in Augusta, Kansas, who plans to grow his first-ever hemp crop on a horse pasture on his old family property.

CBD oil, which is concentrated in the hemp plant’s flowers, made up an estimated 23 percent of hemp sales in 2017, according to the Hemp Business Journal.

While the USDA oversees hemp planting, regulation of hemp products mostly falls to The Food and Drug Administration (FDA). Though the agency has not approved food and supplements containing CBD, such products are widely available and the agency has done little to curtail their sales.

Furthermore, the FDA mainly has jurisdiction over commerce between states, meaning products developed and sold locally in states that have more tolerant laws for hemp products is legal.

“To date, the FDA has only gone after people making aggressive claims - cancer treatment claims, AIDS treatment claims and the like,” said attorney Jonathan Havens, former FDA regulatory counsel and current co-chair of cannabis law practice at Saul Ewing Arnstein & Lehr.

Other CBD products with no health claims or ‘soft’ claims have drawn no federal enforcement, he said, “causing many people to confuse availability with legality.”

The FDA said in a statement to Reuters it had developed a strategy to evaluate existing CBD products and create lawful pathways for bringing them to market.

The agency knows some companies are marketing products containing hemp-derived compounds in ways that violate the law but has prioritized those making unwarranted health claims for enforcement action, the FDA said.

“Our biggest concern is the marketing of products that put the health and safety of consumers at greatest risk, such as those claiming to prevent, diagnose, treat, or cure serious diseases, such as cancer,” the agency said in the statement.

CBD ICE CREAM?

Despite the uncertainty, analysts at U.S. financial services firm Cowen & Co estimate that products with CBD as an ingredient will generate $16 billion in retail sales for humans and animals in the U.S. by 2025.

Companies are also making big bets: Kroger Co, the nation’s largest grocery chain, said on Tuesday it plans to sell CBD creams, balms and oils in nearly 1,000 stores across 17 states.

Unilever Plc’s Ben & Jerry’s ice cream chain said in a May 30 statement it planned to debut CBD-infused ice cream flavors as soon as consuming the oil is “legalized at the federal level.”

In Kentucky, which launched a pilot program for hemp in 2014, farmers who used to grow tobacco are finding hemp grown for CBD oil to be a profitable alternative with a better reputation.

“When I was growing tobacco, everyone said I was growing something that’s bad for your health,” said Brian Furnish, an eighth-generation tobacco farmer. “It’s fun to grow something that is making people feel better.”

Farther west, in the U.S. midsection where farmers are more familiar with commodity crops like corn and wheat and have been more scarred by the trade war, some see hemp as a rotational crop grown on a larger scale for seed and fiber, rather than for its labor-intensive CBD oil.

The Kansas Department of Agriculture began issuing licenses to growers this spring, allowing the crop to be cultivated in the state this year for the first time in decades.

Jason Griffin, a specialist at Kansas State University, remains skeptical of the crop’s potential and cringes when he hears descriptions like ‘gold rush’ to describe it.

Beyond navigating changing regulations, expensive seed is one of many challenges that pioneering hemp farmers will face.

Special equipment for harvesting hemp may also be required, although some growers have been able to re-purpose the combines they already own. The hemp plant’s flowers are typically harvested by hand, while hemp for fiber is grown in fields and must be cut mechanically and dried in the field before storage.

Farmers are particularly dependent on the end buyers of hemp, as there are few third-party brokers to sell it as there are for other cash crops.

“You can’t just go to the local grain elevator and ask what’s your cash price for hemp grain right now,” said Legacy Hemp’s Anderson.

He often cautions farmers not to plant seeds until they have a contract with a buyer because prices vary widely. Legacy Hemp signs contracts with farmers before the planting season.

Other farmers are concerned over the long-term prospects. Montana wheat farmer Nathan Keane is growing female hemp plants exclusively for CBD oil, starting in a greenhouse and transplanting each plant later by hand.

“Honestly, I think the CBD thing is going to be a bubble,” he said. “I will ride the wave … but I’m really hoping the sustainability of hemp is going to be in the grain and the fiber.”

Article published June 14, 2019 on reuters.com

Euro gains in global use, but dollar still dominates

The euro has gained ground as a global currency used for government reserves as US economic sanctions deter some countries’ use of the dollar, the European Central Bank (ECB) said in a report Thursday.

The euro’s share of measurable foreign reserves held by central banks and governments around the world rose 1.2 percentage points during 2018 to 20.7 per cent, reversing a declining trend.

The dollar’s share dropped slightly to 61.7 per cent. That is down more than seven percentage points from its peak level before the global financial crisis of 2007-2009.

“It’s primarily diversification away from the dollar, which benefits the euro,” ECB executive board member Benoit Coeure said.

The dollar, however, is still very much the dominant currency for international trade, borrowing and reserves, despite a slow diversification towards other currencies over recent years, most recently towards the Chinese yuan.

Factors affecting the dollar’s use include countries selling dollars to support their own currency, and US financial sanctions such as those against Russia, which has moved some holdings to other currencies to avoid US restrictions.

Russia sold about US$100 billion worth of US dollar-denominated assets in the wake of new rounds of US sanctions, making the euro Moscow’s main currency holding with 39 per cent of reserves. The United States has imposed sanctions over a raft of issues, including the annexation of Ukraine’s Crimean Peninsula, human rights abuses, support for the Syrian government, illicit trade with North Korea, election interference and cyberattacks.

China also slightly reduced its dollar holdings in the form of US Treasuries, by about US$60 billion, during a period of trade tension with the US, leaving its holdings at a still-massive US$1.1 trillion. The Chinese currency, a newcomer in terms of being a global reserve currency, doubled its share to just under two per cent. Other currencies used as reserves are the Japanese yen and the British pound, and to a lesser extent, the Canadian dollar and the Australian dollar.

Another reason dollar reserves declined is believed to be the sales of dollar assets by emerging-market countries that are trying to keep their national currencies from falling against the dollar.

The dollar is used for a broad range of purposes, including purchases of aircraft, oil and other goods traded internationally, as well as borrowing by companies and governments. Its dominant role translates to low financing costs for the US government due to demand for dollar-denominated assets, including government bonds. It can also bring less desirable side effects: use of the dollar as a safe haven during times of turmoil can raise the dollar’s exchange rate, making life harder for US exporters.

Article published June 14, 2019 on Jamaica-gleaner.com

Stocks Retreat With Oil as Gold Extends Advance: Markets Wrap

U.S. equity futures slid with European stocks following a mixed session in Asia. Oil edged lower after Thursday’s surge on the heels of a suspected attack on tankers in the Gulf.

Ten-year Treasury yields erased a decline after U.S. retail sales posted a broad-based gain in May and the prior two months were revised higher, suggesting consumer spending is healthy enough to limit the case for a Federal Reserve interest-rate cut in the near term. S&P 500 futures declined and Nasdaq 100 contracts slid as Broadcom Inc. cut its annual sales forecast, citing trade war concerns. The Stoxx Europe 600 Index fell the most in two weeks. Gold climbed above $1,350 an ounce, a level last seen in April 2018.

With heightened U.S.-China trade tensions threatening to weaken already fragile global economic growth and geopolitical concerns ratcheting up in the Middle East, equity investors had been banking on more support from central banks. The odds of the Fed lowering the fed funds rate target next week are higher than many expect, according to BMO strategists, though DoubleLine Capital’s Jeffrey Gundlach said he doesn’t think policy makers will cut interest rates this month.

Elsewhere, Chinese shares fell while Japan’s Topix index rose. The yuan was steady after Chinese industrial production in May missed estimates. Oil headed for a weekly drop as investors continued to monitor developments in the Middle East, with the U.S. blaming Iran for Thursday’s suspected tanker attacks.

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