Following today’s deadline for interested party comments, the U.S. Department of Energy will begin to consider sixteen pending applications to export natural gas to countries like Japan with whom the United States does not have a free trade agreement. The issue is a contentious one: energy producers, many other U.S. companies and a large, bipartisan swath of Congress have urged DOE to approve all export license applications, but opposition has materialized among certain domestic consuming industries and environmental groups. As a result, the Obama administration has delayed consideration of all but one application, and is expected to eventually permit a portion of the remaining exports in an attempt to placate both sides of the debate.
As I explain in a new Cato Institute paper, however, such a Solomonic decision might achieve the administration’s political objectives but will do nothing to fix the fundamental problems raised by U.S. export regulations for natural gas or similar rules for crude oil. These exports continue to be governed by licensing systems adopted when the United States was a net energy importer and dependent on fossil fuels for energy production – a picture far different from the production, price, and trade realities that exist today due to revolutionary fossil fuel extraction technologies like hydraulic fracturing (“fracking”) and horizontal drilling. In fact, domestic production of crude oil and natural gas has skyrocketed in recent years, driving down prices, boosting downstream industries, creating ample export opportunities and potentially reversing the United States’ historic position as a net energy importer. However, our gas and oil export licensing systems – respectively governed by the Natural Gas Act of 1937 and the Energy Policy and Conservation Act of 1975 – continue to treat fossil fuel exports as a rarity and subject them to a long, opaque approval process under which the federal government retains ample discretion to approve or deny most export license applications.
Perhaps unsurprisingly, these outdated systems, and the restrictions they impose on U.S. exports, create a host of problems:
- First, by depressing domestic prices and subjecting export approval to the whims of government bureaucrats, the U.S. licensing systems retard domestic energy production, discourage investment in the oil and gas sectors, and destabilize the domestic energy market. Artificially low prices prevent producers from achieving a sustainable rate of return on the massive up-front costs required to drill and extract oil and gas, and investors lack any assurances under the discretionary licensing systems that domestic prices will not collapse when output increases. Such concerns have led the IEA to recently warn that U.S. export restrictions put the “American oil boom” at risk. And contrary to certain politicians’ claims, independent reports show that the exportation of oil and gas would not cause a traumatic spike in prices, thus enabling consumers to continue to benefit from hypercompetitive U.S. fuel and feedstock supplies.
- Second, restricting U.S. gas and oil exports could hurt the U.S. economy. Recent studies indicate that these exports – even in unlimited quantities – would not only benefit U.S. energy producers, but also increase real household income.
- Third, both export licensing systems raise serious concerns under global trade rules. The General Agreement on Tariffs and Trade (GATT) prohibits WTO Members from imposing export restrictions implemented via slow or discretionary licensing systems like those at issue here. Moreover, several nations, including the United States, impose anti-subsidy measures (called “countervailing duties” or “CVDs”) on downstream exports (e.g., steel) due to export restrictions on their upstream inputs (e.g., iron). Thus, the crude oil and natural gas licensing systems could lead to anti-subsidy duties on energy-intensive U.S. exports that negate the very price advantages created by the licensing systems – a heightened risk, given that American exporters are increasingly targeted by foreign CVD actions.
- Fourth, current policy contradicts several other Obama administration priorities. Most obviously, restricting oil and gas exports undermines the president’s National Export Initiative and stands in stark contrast to his full-throated advocacy of other energy exports, particularly renewables like biofuels and solar panels. Moreover, the use of export restrictions to benefit downstream industries contradicts longstanding U.S. policy of using countervailing duties to discourage foreign imports that unfairly benefit from export restrictions on upstream inputs. Finally, the U.S. government has long opposed restrictive and opaque export licensing systems in WTO negotiations and dispute settlement. The current U.S. export licensing regulations for oil and gas contradict these positions and undermine multilateral efforts to rein in such restrictions.
If President Obama really wants to develop America’s vast energy resources, grow the U.S. economy, restore some coherence to U.S. trade and energy policy, and avoid potentially embarrassing trade conflicts, he should order DOE to immediately approve all, not just some, of the pending license applications for natural gas and crude oil. He then should pursue, with Congress, an overhaul of our archaic licensing systems so that they reflect the new American energy landscape and the United States’ position as a global export power. Such reforms would bolster investment, production, and employment in the oil and gas sector, stabilize the U.S. energy market and benefit the overall economy, avoid the myriad policy and legal problems raised by the current system, and produce a rare moment of bipartisan comity in Washington. It’s a no-brainer.
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Argentine soy exports flat despite Mississippi River woes
Hugh Bronstein, Reuters | Updated: 01/09/2013
Grains powerhouse Argentina lacks the soybean reserves needed to compensate for potential U.S. supply bottlenecks cause by low Mississippi River levels, putting the spotlight on neighboring Brazil, where harvesting has already begun.
U.S. barge shippers have worried over recent days about slowdowns on the drought-reduced Mississippi River. Traders look toward the Southern Cone when logistical problems crop up in the United States, which is the world’s No. 1 soybean exporter.
But with less than one million tonnes of beans in reserve, Argentina will mostly stay out of the supply chain until the country’s 2012/13 crop starts getting harvested in March, said local market experts and a trader at a major export company.
Brazil is also running low on 2011/12 soybeans. But some harvesting of the 2012/13 crop has begun with the bulk of the crop expected to be brought in February, a good month ahead of Argentina.
"Argentina had a major drought that reduced its 2011/12 crop and the new harvest will not start for another two months," said the Buenos Aires-based trader, who asked not to be named.
"The Argentine crushing industry is operating at 60 percent capacity, so I don’t expect the Mississippi situation to have an effect on what we do," he said.
So the onus for meeting the South American supply is falling on No. 2 world soybean exporter Brazil, the trader and other market sources said.
Argentina, the world’s top exporter of soyoil and meal and its No. 3 supplier of soybeans, has 0.9 million tonnes of beans left from the 2011/12 season, according to the Rosario grains exchange.
"Beans are running low and the farmers who have reserves are not seeing prices attractive enough for them to sell what they have left," said Patricia Bergero, an analyst at the exchange.
Soybean futures were pushed down on Wednesday by forecasts of a record-busting Brazilian crop.
The country will produce 82.7 million tonnes of soybeans in early 2013, government agency Conab said, raising its forecast from the 82.6 million tonnes it estimated in December and well above the 66.5 million tonnes harvested last season.
Brazil exported just 135,000 tonnes of soybeans in December due to the weak 2011/12 crop, compared with 1.47 million from December of 2011.
The U.S. Department of Agriculture on Friday is also expected to raise its forecast of Brazil’s soybean harvest by 0.9 percent from last month to 81.8 million tonnes, according to a Reuters poll. (Additional reporting by Caroline Stauffer in Brazil; Editing by Theodore d’Afflisio)
Statistics: Posted by yoda — Wed Jan 09, 2013 2:50 pm
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Russia may curb grain exports after all
Russia may impose grain export curbs after all to quell a rise in domestic prices of the grain, the country’s economy minister said, as Russia’s continued success in shipments continues to erode supplies.
Andrei Belousov, Russia’s economy minister, said it was "quite possible" that the government, which two years ago banned shipments altogether after dryness devastated grains production, would restrict exports of this year’s drought-hit crop.
The comments fostered a rise in prices of wheat, Russia’s main grain export, which stood 1.6% higher at $8.93 ¾ a bushel in Chicago at 10:10 UK time (04:10 Chicago time), while gaining 0.8% in Paris and 1.2% in London.
And they appeared to put Mr Belusov on a collision course with Deputy Prime Minister Arkady Dvorkovich, who said at the end of August, after a meeting with farm ministers which eschewed trade curbs, that "we consider any export restrictions harmful.
"We will use the instruments we have – market interventions and information exchange with market participants.
"As long as I am in charge of this sector, I will be against any export restrictions."
Separately on Friday, Mr Dvorkovich said that Russia did not plan to impose export curbs.
Mr Belusov said on Friday: "The issue of [a] grain exports ban is the issue of domestic grain prices dynamics.
"We are witnessing such a trend at the moment… With such a trend, it’s quite possible, that the government will decide to restrict grain exports."
The government will discuss grain exports "this autumn".
Clashes within governments are not uncommon at times of rising grain prices, with agriculture ministers often seeking to protect the interests of farmers, for which high prices may offer compensation for a poor crop.
Meanwhile, economy ministers, attempting to keep a lid on inflation, often pursue action to depress food prices or, as in Ukraine last year, opportunities to raise revenues through export levies.
Prices of Grade 3 wheat stood at 8,450 roubles a tonne as of a week ago, up 28% on values at the start of June, before US, and then former Soviet Union, droughts sent world grain prices soaring.
The rises have been underpinned by weak inventories left over from last year’s campaign, with inventories held by farmers starting August at their lowest in nine years.
The price of Grade 4 wheat, the typical export grade, was 8,425 roubles a tonne, a gain of 30% over the same period.
However, with values of foreign grain rising too, the increases, while cutting the discount of Russian wheat exports compared with rival supplies, has not eliminated it entirely, with the country on Wednesday winning a 150,000-tonne order from Iraq against international competition.
Traders flagged the higher price of some $377 a tonne, excluding freight, that Iraq appears to have paid, compared with the values of $320-350 a tonne paid by Egypt at tenders undertaken earlier, but also for November shipment.
The Iraq price "is going to provide some very tough competition in the interior" for any merchants which have yet to source grain for Egypt, Swiss-based analysis group Fryer said.
‘Soon dry up’
Fryer analysts added, in comments made before Friday’s announcement: "We now suspect that unless there is a clear mandate from the [Russian] government that allows sales into November," implying that any curbs might not be go live until late in the year.
Even so, it may be too late for buyers to source large quantities of the grain ahead of any curbs, with logistics at Russia’s main Black Sea port already appearing tight, given the three ships bound for Iraq to load, besides 13 panamax cargos to Egypt in the October-to-November timeframe.
The fate of Russia’s exports is being closely watched given that their decline will shift demand from importers to other origins, notably European and North American supplies.
At UK grain merchant Gleadell, trading manager Jonathan Lane said: "Black Sea wheat offers will soon dry up, Southern hemisphere wheat production is forecast 10m tonnes lower than last year, and a tighter EU surplus is seen replacing declining Black Sea exports."
Statistics: Posted by yoda — Fri Sep 21, 2012 10:01 am
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Second Asian Financial Crisis comes into view as exports slump
Posted on 20 September 2012
Chinese manufacturing slowed down for the 11th consecutive month and could actually now be in recession while the once powerful Japanese export machine is breaking down with output down eight per cent in July and 5.3 per cent in August, the third successive month of contraction.
It increasingly looks like the Second Asian Financial Crisis is almost upon us. To make matters worse there have been riots in China targeting Japanese manufacturing plants and bellicose nonsense from some quarters about how China could do without Japanese foreign direct investment.
Japan is the largest foreign investor in China with huge interests and such nationalism from economists is stupid and arrogant. In fact, there is nothing like a trade war to turn a business slowdown into a deep depression, that last happened in the 1930s.
In China the preliminary reading was 47.8 for a new purchasing managers’ index by HSBC and Markit Economics. That compared with a final 47.6 last month and marks the longest run of readings below 50 in the survey’s eight-year history. A reading above 50 indicates expansion.
The HSBC/Markit survey is generally accepted as more reliable than the official statistics that often reflect political rather than economic reality. Chinese stocks dropped sharply on this news as did key industrial commodity prices. If the workshop of the world is in trouble so are its suppliers.
How Japan has managed to keep its economy afloat all these years with labour costs ten times higher than Mainland China is a mystery to many in the economics profession. But it has seemed to come seriously unstuck this year with the nationwide closedown of its nuclear power stations coming at a time of very high oil prices, and imported oil has been the main substitute for nuclear power.
The Bank of Japan joined the Fed and ECB yesterday with a giant money printing exercise of its own but then in a world of competitive currency devaluation it really had no choice or its exports would have taken another hit.
Asian Financial Crisis
Both Japan and China are powerful drivers of the Asian region’s economy as a whole. Australia supplies industrial raw materials to both Asian economic super powers. Countries like Vietnam and Cambodia do work outsourced from China at even cheaper labour costs.
In fact, the Chinese advantage in labour costs has been erroding rapidly and in Shanghai modern Western lifestyles are supported by similar wage packets. Some observers say China has passed the stage of easy and rapid growth and now needs to go through a recession and consolidation period.
That’s not going to be good news for the rest-of-the-world either as China kept the global economy moving in the 2008-9 crisis. Asia could actually get the worst of the downturn this time round. China is a massive bubble economy about to implode and will bring Japan down with it.
Statistics: Posted by yoda — Thu Sep 20, 2012 12:05 am
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UK wheat exports tumble as stocks grow thin
UK wheat exports tumbled to their lowest in at least two years, as inventories began to run low – heralding the squeeze on old-crop supplies which drove prices back above £200 a tonne.
Wheat shipments from the European Union’s third-ranked wheat producer reached 70,262 tonnes in May, down by nearly one-half on April’s total, and indeed the lowest figure for at least two seasons.
The decline reflected a slump in exports outside the EU to a mere 246 tonnes, marking the end of a run of shipments to Algeria and the US.
However, shipments to other European countries fell too, notably to Spain, usually the top buyer of UK wheat, which took only 4,000 tonnes during the month.
‘Historically low stocks’
The trade drop came in a period in which prospects for supplies of feed grains, which form a large part of the UK crop, appeared healthy, with the US looking set at the time for a record corn harvest.
Meanwhile, UK wheat supplies were running thin ahead of the harvest, with shipments having reached 2.24m tonnes by the end of April, not far short of an exportable surplus for 2011-12 estimated by agriculture officials at 2.45m tonnes.
This forecast assumed stocks closing the marketing year, at the end of last month, at a "historically low" 1.53m tonnes.
In fact, UK wheat prices saw an end-of-season rally which took London’s July futures to £210 a tonne, close to the record high of £222 a tonne, as rains provoked fears for a delayed harvest, and boosted demand for crop left over from last year.
FCStone commodity risk manager Jaime Nolan Miralles said on Tuesday: "Continuous rains and poor sunshine hours [will ensure] harvest will see delays of between two and three weeks.
"Quality will definitely underperform last year’s averages," he added.
Statistics: Posted by yoda — Tue Jul 17, 2012 10:04 am
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Euro Crisis Hits German Exports
Container ships and carriers in Hamburg’s port, which saw less traffic in April due to a fall in international trade in Germany.
The German economy has seemed surprisingly resistant to the ill effects of Europe’s financial crisis. But an April drop in exports suggests that Europe’s largest economy maybe not be immune after all.
For much of 2010 and 2011, the German economy seemed immune to the euro crisis that was raging around it. Now, however, it looks as though those days are over. Several indicators show that dark clouds are gathering over the country’s economic output. The latest of those came on Friday.
According to data released on Friday by Germany’s Federal Statistical Office, exports fell by 1.7 percent in April in comparison with March. The fall, while expected, was twice what most economists had forecast at in marks the first time in 2012 that German exports have fallen. In total, Germany exported €81.7 billion ($102 billion) worth of goods in April.
The data revealed that Germany can no long count on the strength of growth in developing countries to offset the euro crisis. Exports to euro-zone countries mired in debt crises fell by 3.6 percent in April. Even though exports to non-European countries actually grew 10.3 percent in the month, demand from China and India has slowed and German companies worried.
"German companies have the feeling that foreign demand is not as dynamic as before and that the global economy is entering a weak phase," Dekabank economist Andreas Scheuerle told the conservative daily Die Welt. Still, he added, the main problem was more local. "The weakness is coming from the euro zone, where the debt crisis is not only taking the form of budget plans and savings programs, but it is also creating more uncertainty about the economic situation that’s being reflected in weaker investment."
Sources of Worry
German domestic demand has also reflected that uncertainty. The Federal Statistical Office also showed that imports fell to their lowest levels in two years, dropping 4.8 percent in April. Germans imported €72.7 billion ($91 billion) worth of goods in April, 1 percent less than in April 2011. Analysts are expecting exports to remain weak in the coming months.
Other indicators have also proven sources of worry in recent days. Germany’s blue chip stock index, the DAX, has had an extremely rough two weeks as the situation in Spain continues to unsettle investors. In May, the Ifo business climate index, one of the country’s leading economic pulse checks, fell for the first time in half a year. The German automobile industry registered a 13 percent drop in exports in May against the same month in 2011.
Despite the warning signs Germany’s economy still remains the strongest in Europe. Even with the drop, exports in April were 3.4 percent higher than the same month last year. German exports are also positive overall this year, up 5.2 percent in the first four months of the year over the same period last year.
Statistics: Posted by yoda — Fri Jun 08, 2012 5:31 am
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Grain exports from dryness-hit Russia to fall 28%
Russia’s grain exports could fall by more than one quarter in the forthcoming season, a deeper decline than forecast in a benchmark US report, in part thanks to the worsened prospects for crops in dryness-tested south, SovEcon said.
The influential analysis group pegged Russia’s grain shipments, which mainly comprise wheat, in 2012-13 at 20m tonnes, a drop of 28% on its estimate for the current – unusually strong – season.
The US Department of Agriculture last week pegged the decline in Russian grain exports at 19%, to 20.8m tonnes.
SovEcon said that its forecast reflected in part a dearth in unsold inventories in areas close to port expected at the end of 2011-12, following the rapid pace of exports, and the closure of a railway incentive which has drawn replacement supplies from Russia’s interior.
The end of June will bring the end of a period of discounted transport from Siberia, where stocks are relatively plentiful.
‘Potential for Sukhovey winds’
However, SovEcon also flagged the impact of "unfavourable weather" in southern regions, from which exports are largely drawn, and which has attracted increasing market attention, given the spur to global wheat prices which the first warnings in June 2010 over Russia’s last drought gave to prices.
Russia is typically seen as a supplier of ample supplies of competitively priced wheat.
At FCStone, Jaime Nolan-Miralles, noting that "temperatures remain high and precipitation low" in southern Russia, said: "Memories of yield decimation a couple of years back remain fresh in the markets mind."
Indeed, in an echo of 2010, official Russian forecasters have warned of a high risk of fire in rain-neglected areas.
Benson Quinn Commodities analyst Jonathan Watters noted talk of "the potential for Sukhovey winds, which destroyed much of the crop in 2010".
The Sukhovey winds, which blow in from Asian desert areas, have a history of disrupting agricultural output in Russia and Ukraine.
‘Crop development well behind’
At Australia & New Zealand Bank, Paul Deane said that in southern Russia, "crop development is now well behind this time last year and the long-term average.
"Some areas are even being compared to the 2003 crop which was southern Russia’s smallest harvest in a decade."
Earlier this week, the Moscow-based Institute for Agricultural Market Studies warned of "drought conditions" affecting "the vast region of Rostov, Stavropol, Volgograd, some parts of Krasnodar and Voronezh".
Even if rains do appear, as some forecasters believe, "some [crop] damage already looks irreparable".
And Viktor Zubkov, on a trip to southern Russia, said that "For this time of year the state of sugar beet, winter wheat and feed crops is not very good and differs from last year’s for the worse. The shoots are stunted", according to the Itar-Tass news agency.
Statistics: Posted by yoda — Thu May 17, 2012 5:45 am
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Wheat exports from Argentina, a keen price competitor on the world market, are to tumble more than 30% thanks to a switch to barley, sowings of which will soar to their highest since at least the 1950s.
Argentine farmers will sow 4.0m hectares with wheat for harvest late this year, a fall of some 20% and matching a 35-year low, US Department of Agriculture’s bureau in Buenos Aires said.
The forecast reflects farmer disillusionment at government restrictions on wheat exports aimed at guaranteeing the country enough of the grain to meet domestic demand.
While the government has ditched export quotas in favour of a scheme which reserves 7m tonnes for Argentine consumers, a system it believes will boost domestic wheat prices, "many [farmers] doubt this will be the case this year", the USDA bureau said.
"Producers are disorientated and discouraged," believing the protection of local supplies means "prices suffer a significant discount due to the lack of competition between local flour mills and exporters".
The decreased acreage should translate into a crop of about 12.0m tonnes, and exports of 6.2m tonnes, the lowest for 17 years, bar the drought-affected result two seasons ago.
Attache forecasts, Argentine wheat 2012-13, and (2011-12 estimate)
Planted area: 4m hectares, (5.0m hectares harvested)
Production: 12m tonnes, (14.5m tonnes)
Domestic consumption: 5.78m tonnes, (5.93m tonnes)
Exports: 6.2m tonnes, (9.0m tonnes)
In 2011-12, the South American country is expected to ship 9.0m tonnes of wheat.
Argentina’s wheat supplies are of particular interest in wheat markets given their price competitiveness, signally winning business from Middle Eastern and North African buyers this season, from under the noses of European exporters, despite the extra costs of transporting grain across the Atlantic.
In the last tender by Gasc, the state grain buyer for Egypt, the top wheat importing country, two weeks ago Argentine wheat was priced at $264.45 a tonne, excluding freight, cheaper than Canadian, European and Ukrainian offers, and all but one bid of US soft red winter wheat.
Switch to barley
Argentine growers will replace wheat in their sowings plans with barley, for which area is expected to soar by one-half to 1.5m hectares, the highest since easily-accessible records begin at the start of the 1960s.
Attache forecasts, Argentine barley 2012-13, and (2011-12 estimate)
Planted area: 1.5m hectares, (1.05m hectare harvested)
Production: 5.4m tonnes, (4.0m tonnes)
Exports: 4m-tonne export surplus, (3.0m tonnes of exports forecast)
"Producers are finding barley a very good alternative to wheat as the government does not intervene in barley marketing," the attaches said.
Furthermore, the country, which until recently grew barley largely under contract for brewers, has found good export buyers, in markets such as China, which started to buy from Argentina last year, and the European Union, whose own malting barley crop suffered from a damp harvest.
As an extra plus point, barley’s shorter growing season gives farmers a better chance of squeezing in a follow-on second crop, probably soybeans.
Indeed, the clamour to grow barley is such that "there are some doubts about the availability of seed", the bureau said, in comments which tally with those of other observers.
The Canadian Wheat Board last week forecast that Argentina would "have a sizeable barley crop" in 2012-13.
http://www.agrimoney.com/news/switch-to … -4322.html
Statistics: Posted by yoda — Mon Mar 26, 2012 8:51 pm
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Curbs in wheat exports have returned to the former Soviet Union after all in the form of unofficial curbs on Ukraine shipments, in face of dire prospects for the 2012 harvest, the US Department of Agriculture said.
Russia, the region’s top exporter, two weeks ago eased concerns over resuming its own trade curbs, in lifting to 27m tonnes, from 23m-25m tonnes, a ceiling for grain shipments this season.
However, Ukraine, once known as the breadbasket of the former Soviet Union, appears to have limited its own shipments by striking "non-official agreements" with state traders to focus on corn shipments instead, USDA officials said.
"Bureaucratic barriers and severe winter conditions–low temperatures, high winds and ice in the ports–have been identified as the main obstacles to exporting wheat," the USDA said.
"However, those hurdles have not impeded corn exports that gallop ahead at a pace unheard of before."
With Ukraine’s wheat stocks seen ending 2011-12 at twice average levels, "there seem to be no economic reasons" for the country’s exports of the grain lagging so far behind the historical pace.
"An unofficial lid has likely been applied to wheat exports," to protect supplies of a grain "expected to be in short supply next season following substantial damage to winter crops".
‘Does tick some boxes’
Indeed, such an agreement would boost the chances of Ukraine avoiding a wheat shortfall in 2012-13 even if autumn sowings, damaged by drought and extreme cold, emerge from winter in as poor shape as expected.
Mykola Azarov, the Ukraine prime minister, last week forecast that 3.5m acres of winter grains, more than 40% of the sown area, will be reseeded with spring crops.
And such an arrangement would also limit the chances of political fall-out, after exports quotas in 2010-11, and levies in the early months of this season, provoked criticism from international buyers and Ukrainian farmers.
"Politically, it does tick some boxes for Ukraine. But it also shows again the difficulties you are dealing with if you try to rely on Black Sea wheat for supplies," a UK grain trader told Agrimoney.com.
"It is often cheap. But some would say ‘cheap for a reason’.
Statistics: Posted by yoda — Tue Feb 14, 2012 11:30 am
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