News/Markets/Policy Updates: Oct. 21, 2024
— The People’s Bank of China as expected cut interest rates on a key reference rate for mortgage loans by a quarter of a percentage point, as the country stepped up efforts to shore up the imploding property sector, revive growth and fight off deflation. The benchmark five-year loan prime rate was lowered from 3.85% to 3.6%, while the one-year lending rate was also cut from 3.35% to 3.1%, according to the People’s Bank of China. Of note: The People’s Bank of China suggested more easing is likely soon. Chinese stock markets rose on the news. — For the first time in two months Donald Trump has taken the lead in the Economist’s U.S. election model, which now gives him a 54 in 100 chance of winning the election (link). “Just as national polls showed many undecided and third-party voters choosing Kamala Harris in August, some of the remaining ones — possibly Republican leaners all along have recently lined up behind Trump,” the Economist noted. — Nate Cohn’s analysis of the 2024 presidential race (link) reveals a tightening contest with no clear favorite. The race has shifted slightly in Trump’s favor, but the overall picture remains incredibly close. The race is essentially tied in five critical battleground states: Pennsylvania, Michigan, Nevada, Wisconsin, and North Carolina. Cohn emphasizes the closeness of the race, stating: “In North Carolina, Pennsylvania and Michigan, neither candidate even ‘leads’ by more than two-tenths of a percentage point. Neither can realistically win the presidency without winning at least one of these states.” Cohn cautions against reading too much into small polling differences: “The polls simply are not precise enough for a 0.2-point edge to convey any meaningful information. For all purposes, the race is tied; don’t feel any sorrow or take any solace in whether your candidate is on the right or wrong side of that 0.2-point gap.” The past week’s polls indicate a shift towards Trump: “This past week’s polls made a clearer case for movement toward Mr. Trump.” Cohn cites several national polls showing Trump gaining ground, including Fox News, Fairleigh Dickinson University, Marquette Law School, Ipsos, and Emerson College. North Carolina: A potential exception. North Carolina appears to be the only state where Kamala Harris may have gained ground. Cohn speculates on the possible influence of Hurricane Helene: “At a minimum, the storm and the recovery almost certainly kept the state focused on something other than the presidential election for most of the last month.” — Trump’s McDonald’s visit sparks photo op and campaign controversy. During a campaign stop at a McDonald’s in suburban Philadelphia, Donald Trump worked the fry station and bagged orders while questioning Kamala Harris’ claim of past employment with the chain. Trump avoided addressing the minimum wage issue, which has troubled the restaurant’s franchise owner. McDonald’s emphasized neutrality in response, stating it does not endorse candidates and has extended an invitation to the Harris/Walz campaign for a similar visit. In a letter the company sent to franchisees, it said that the company “does not endorse candidates for elected office. We are not red or blue — we are golden.” Of note: McDonald’s in Feasterville-Trevose, Pennsylvania, was a staged event, with the restaurant closed to the general public during his visit. — Focus on House races in California. Several election watchers have indicated close House races in California could determine which political party heads the chamber after Nov. 5 elections. Speaker Mike Johnson’s (R-La.) potential retention of the House GOP majority in 2024 may be attributed to an unexpected source, writes WSJ columnist Allysia Finley: progressive policies in California (link). The Golden State, traditionally a Democratic stronghold, is witnessing a shift that could impact the national political landscape. For the first time since 1988, Republican voter registration in California is showing signs of growth in a presidential election year, Finley notes. In seven crucial districts, the GOP has narrowed the voter registration gap by 1 to 3 percentage points over the past two years. The Public Policy Institute of California reports that Republican gains have been observed across all demographic groups, with particularly strong showings among: The Latino shift is especially notable, with a recent poll showing Kamala Harris leading among Latinos by only 19 points, a significant drop from Joe Biden’s 52-point margin in 2020. The Republican resurgence in California can be attributed to key issues: These problems, exacerbated by Democratic policies in Sacramento, have led to voter dissatisfaction. In the Central Valley, Democratic candidates Adam Gray and Rudy Salas are facing challenges in their bids to unseat Republican incumbents: Both Gray and Salas have voting records supporting policies that increased gasoline prices, which Republicans are using in their campaign messaging. Meanwhile, the GOP sees opportunities in coastal Orange County, particularly in the 47th District, where Republicans recently overtook Democrats in voter registration. Key races include: The issues: Republican candidates are focusing on issues like crime and economic concerns, while Democrats are emphasizing abortion rights. GOP candidates are highlighting: Democratic candidates are: However, the effectiveness of the abortion issue may be diminishing as voters prioritize economic and quality-of-life concerns. Bottom line: The political landscape in California reflects growing dissatisfaction with progressive governance, potentially benefiting Republicans in the upcoming House races. This shift could have significant implications for the national balance of power in Congress. — Billionaire Trump supporter Elon Musk is giving some voters $1 million each in battleground states to register to vote. Some election law experts say that’s illegal. The giveaway is limited to registered voters in battleground states like Pennsylvania, Georgia, Nevada, Michigan, Wisconsin, and North Carolina. Musk aims to gather over a million signatures from voters in these crucial states. The first $1 million prize was awarded to a Trump supporter at an event in Harrisburg, Pennsylvania. Richard Hasen, a law professor at UCLA, has characterized Musk’s actions as “clearly illegal.” He cites federal law 52 U.S.C. § 10307(c), which prohibits knowingly paying or offering to pay for voter registration or voting. David Becker, a former Justice Department official, argues that the exclusivity of the prize for registered voters in key swing states suggests an intent to sway the election outcome, which could raise legal issues. But others question whether compensating someone to sign a petition is equivalent to paying them to register or vote. Bradley Smith, former chairman of the Federal Election Commission, defends Musk’s actions, stating that he’s compensating people to sign a petition, not to register to vote. — On Tuesday, the IMF publishes its latest World Economic Outlook, a twice-yearly analysis and projections of economic prospects for the global economy, plus its Global Financial Stability Report. On Thursday, IMF managing director Kristalina Georgieva gives a press briefing on the Global Policy Agenda, identifying the policy challenges faced by the IMF membership and proposing policy responses. — Putin pushes for BRICS payment system to challenge dollar’s dominance. At the BRICS summit in Kazan that begins Tuesday, Russian President Vladimir Putin will advocate for a new financial system to bypass U.S.-led sanctions. The proposed “BRICS Bridge” aims to create a digital payments network, enabling cross-border transactions via central banks without relying on the dollar or correspondent banks. Inspired by the mBridge project from the Bank for International Settlements, the initiative reflects growing dissatisfaction with dollar-based systems among emerging economies. While the plan faces challenges — particularly from distrust between BRICS members like India and China — it marks a bold attempt to reshape global financial infrastructure and reduce American dominance. — The First National Bank of Lindsay in Oklahoma closed on Friday, prompting the FDIC to step in to protect depositors. The bank will reopen under new management as The First Bank and Trust Company of Duncan. Analysts warn this closure could signal broader challenges ahead for community and regional banks. — Israel’s military announced plans for a significant escalation in its offensive against Hezbollah, targeting the group’s financial institutions across Lebanon. This move marks a dramatic expansion of Israel’s campaign, which has already resulted in substantial casualties and displacement. Israeli military spokesman Daniel Hagari stated: “We will strike several targets in the coming hours and additional targets throughout the night.” The primary focus of these strikes will be branches of the al-Qard al-Hassan Association (AQAH), a financial network with ties to Hezbollah. An Israeli intelligence official explained the rationale behind this strategy: “The purpose of these strikes is to target the ability of Hezbollah to function both during the war but also afterwards, to rebuild and to rearm the organization on the day after, and [to target] the grip Hezbollah has on large parts of the Lebanese society.” AQAH plays a significant role in Lebanese society, particularly among the Shia community. It offers interest-free loans in U.S. dollars, which many people rely on for various purposes, including education and small businesses. Israeli Prime Minister Benjamin Netanyahu recently warned: “You have an opportunity to save Lebanon before it falls into the abyss of a long war that will lead to destruction and suffering like we see in Gaza.” |
| MARKET FOCUS |
— Equities today: Asian and European stock indexes were mixed to weaker overnight. U.S. stock indexes are pointed to lower openings. In Asia, Japan -0.1%. Hong Kong -1.6%. China +0.2%. India -0.1%. In Europe, at midday, London -0.1%. Paris -0.7%. Frankfurt -0.6%.
U.S. equities Friday and for the week: All three major indices finished higher Friday, and the Dow and S&P 500 scored weekly gains, both with their longest string of weekly gains for 2024. For the week, the Dow rose 0.96%, the Nasdaq was up 0.79%, and the S&P 500 gained 0.85%. On Friday, the Dow was up 36.86 points, 0.09%, at 43,275.91 — the Dow surpassed the 43,000 points mark for the first time ever while posting its 37th through 40th record close of the year. The Nasdaq rose 115.94 points, 0.63%, at 18,489.55. The S&P 500 moved up 23.20 points, 0.40%, at 5,864.67, setting its 47th record close of the year and second of the week.
The Dow is up 7.3% over the past six weeks, while the S&P is up 8.4%. The Nasdaq has rallied 10.8%.
Of note: One-in-five S&P 500 companies publish their third quarter results this week, including:
Monday: Nucor and SAP.
Tuesday: 3M, General Motors, Lockheed Martin, and Verizon Communications.
Wednesday: AT&T, Coca-Cola, Newmont, NextEra Energy, Tesla, and T-Mobile US.
Thursday: Honeywell International, Southwest Airlines, United Parcel Service, and Western Digital.
Friday: Colgate-Palmolive, HCA Healthcare, and Sanofi.
— Kenvue, the maker of Band-Aids and Tylenol, is jumping 5% in premarket trading. The Wall Street Journal reported that activist investor Starboard Value has built a stake in the company and is agitating for change to boost the stock price. The company, a spinoff from Johnson & Johnson, went public in May 2023.
— Oil futures declined on Friday, with Brent crude falling by $1.39 (1.87%) to settle at $73.06 per barrel, and U.S. West Texas Intermediate (WTI) dropping by $1.45 (2.05%) to $69.22. Both benchmarks saw their steepest weekly declines since early September, with Brent down over 7% and WTI losing about 8%.
— Weekly movement for other commodities and bonds: Crude Oil WTI -8.4% to $69.22/bbl. Gold +2.3% to $2,736.4/oz. Natural Gas -14.5% to 2.25. Ten-Year Bond Yield -0.2 bps to 4.075.
— Ag markets today: Corn, soybeans and wheat mildly rebounded overnight from poor closes last Friday. As of 7:30 a.m. ET, corn futures were trading 2 cents higher, soybeans were 6 to 8 cents higher, winter wheat markets were 3 to 5 cents higher and spring wheat was 2 to 3 cents higher. Front-month crude oil futures were around $1.50 higher, and the U.S. dollar index was 130 points higher.
Wholesale beef rally continues. Wholesale beef prices firmed $1.39 for Choice and 68 cents for Select on Friday, while movement totaled 126 loads. The rally in wholesale beef has resulted in packer margins running solidly in the black despite the six-week string of gains in cash cattle prices.
Cash hog index, pork cutout inch up. The CME lean hog index is up 11 cents to $83.96 as of Oct. 17. December lean hog futures finished last Friday $6.135 below today’s cash quote. The pork cutout firmed 18 cents on Friday to $96.59, driven by strong gains in primal bellies and ribs.
— Agriculture markets Friday and for the week:
• Corn: December corn futures declined 2 cents to $4.04 3/4, marking an 11-cent loss on the week.
• Soy complex: November soybeans slid 18 3/4 cents to $9.70 and closed down 35 1/2 cents on the week. December soymeal fell $2.50 to $315.60 but notched a 50-cent week-over-week gain. December soyoil fell 77 points to 41.82 cents and marked a weekly loss of 151 points.
• Wheat: December SRW wheat futures fell 16 3/4 cents to $5.72 3/4, nearer the session low and hit a three-week low. On the week, December SRW lost 26 1/4 cents. December HRW futures dropped 15 1/4 cents to $5.80 3/4, near the daily low and on the week down 23 3/4 cents. December spring wheat fell 12 1/2 cents to $6.16 1/4 and lost 27 1/4 cents on the week.
• Cotton: December cotton rose 23 points to 70.99 cents but lost 122 points on the week.
• Cattle: December live cattle futures rose $1.15 to $187.325, nearer the daily high and for the week down 25 cents. November feeder cattle futures closed up $1.85 at $247.60, nearer the session high and on the week down $2.20.
• Hogs: Futures ended the week on a firm note, with nearby December futures ending the day up 15 cents to $77.825. That represented a weekly rise of 17.5 cents. The December hog contract essentially ended the week unchanged, which hides the fact that the market suffered big early losses, then rebounded dramatically on Wednesday.
— Of note:
• Blind-folded investing. “It probably pays to not think too much, just close your eyes and buy probably Magnificent Seven.” — Carson Block, Chief investment officer, Muddy Waters.
• $65 is how much a Girl Scouts of the USA membership is set to cost in 2027, up from $25 today. The national organization, which projected a net operating loss of roughly $5 million for fiscal year 2024, says steeper fees will help it avoid having to scale back or eliminate some of its services. Dues will remain at $25 for the next year, then rise to $45 for the 2026 membership year and to $65 in 2027.
— Malanga analyzes inflation trends, economic outlook, and policy risks. Dr. Vince Malanga, president of LaSalle Economics, acknowledges the challenges ahead, noting that inflation has been trending lower throughout the year due to various factors:
• China’s export policy
• Federal Reserve’s restrictive policy
• Strong productivity growth
• Declining commodity prices
• Favorable calendar effects
“China’s policy of exporting its surplus capacity to the world amid weak activity was surely an important factor,” Malanga states, highlighting the global impact of China’s economic strategies.
Malanga emphasizes the positive impact of productivity growth on unit costs and corporate pricing flexibility. Malanga observes, “Strong productivity growth is keeping unit costs in check and is enabling companies to adopt more flexible pricing. This has benefited the quality as well as the quantity of profits.”
Looking ahead, Dr. Malanga identifies several factors that could influence the economic landscape:
• Changing calendar effects
• Moderating shelter component in price indexes
• Volatile oil prices due to Middle East tensions
• Agricultural commodity supply conditions
• China’s monetary and fiscal policy initiatives
• OPEC production dynamics
He expresses concern about potential geopolitical risks, stating, “A direct confrontation between Israel and Iran is a worry as is the potential Saudi response to it.”
Despite the challenges, Dr. Malanga remains cautiously optimistic about inflation in the near term. He concludes, “Looking out over the next six months, our guesstimate is that while further reductions in the inflation rate may be difficult to achieve, any measurable upward tilt is unlikely.” This outlook suggests a potential stabilization of inflation rates in the coming months.
Malanga’s comments suggest that the current economic conditions may allow for further policy adjustments by the Federal Reserve. However, Malanga warns that bond investors will be closely monitoring these developments, particularly considering concerns over the fiscal outlook. He notes, “This is scary because recent interest rate declines have done little to boost residential and commercial activity,” highlighting the complex relationship between monetary policy, interest rates, and economic activity.
— All but one of Canada’s six biggest lenders now expect the central bank on Wednesday to cut borrowing costs by half a percentage point after inflation fell below the policymakers’ 2% target for the first time in more than three years.
Market perspectives:
— Outside markets: The U.S. dollar index was higher, with the euro and the British pound losing ground against the greenback. The yield on the 10-year U.S. Treasury note rose, trading around 4.14%, with a positive tone in global government bond yields. Crude oil futures are solidly higher, with U.S. crude around $70.70 per barrel and Brent around $74.40 per barrel. Gold and silver futures were up, with gold around $2,750 per troy ounce (see next item) and silver around $34.21 per troy ounce.
— Gold hits record high amid geopolitical tensions, election uncertainty. Gold surged to an all-time high of $2,732.45 per troy ounce on Monday, gaining 40% over the past year. Central bank rate cuts, geopolitical tensions in the Middle East, and uncertainty surrounding the upcoming U.S. presidential election between Kamala Harris and Donald Trump are driving demand for the metal as a safe-haven asset. Analysts project further price growth, with UBS strategist Joni Teves setting a $3,000 target for 2025. Central bank gold buying reached record highs, while physical demand in China has slowed due to elevated prices. Silver has also rallied, hitting its highest levels in nearly 12 years.
— Euro parity risk returns amid Trump tariff threats and ECB cuts. The euro faces mounting pressure, with markets warning that a return to parity with the dollar is plausible. The risk escalated after the European Central Bank (ECB) issued a second consecutive rate cut and Donald Trump hinted at new tariffs targeting Europe. Hedge funds have increased bearish bets against the euro, with traders seeking protection against further drops, reflecting concerns about Europe’s economic vulnerabilities. Analysts suggest a Trump victory could trigger deeper ECB rate cuts, further weakening the euro amid a potential global trade war.
— U.S. ports surge amid tariff, labor uncertainty and record-high trade volumes. The ports of Los Angeles and Long Beach just wrapped up their busiest peak season ever, breaking records set during the pandemic-driven shipping frenzy of 2021. The surge comes as businesses race to beat potential tariff hikes and avoid disruptions from labor disputes. With cargo volumes remaining high through the end of the year, importers are bringing in goods early to avoid both new tariffs and a potential East and Gulf Coast port shutdown ahead of the 2025 Lunar New Year and the U.S. presidential transition.
— USDA daily export sales:
• 169,926 MT corn for to Mexico, 2024-2025 marketing year
• 130,000 MT corn to South Korea, 2024-2025 marketing year
• 198,192 MT corn to unknown destinations, 2024-2025 marketing year
• 116,000 MT soybeans to unknown destinations, 2024-2025 marketing year
• 264,000 MT soybeans received in the reporting period for delivery to unknown destinations during the 2024-2025 marketing year
— Ag trade update: South Korea purchased 65,000 MT of corn expected to be sourced from the U.S. Israel tendered to buy up to 120,000 MT of corn from Brazil, EU or Black Sea region and up to 120,000 MT of feed barley from the EU or Black Sea region. Bangladesh tendered to buy 50,000 MT of optional origin non-basmati parboiled rice.
— NWS outlook: Lingering scattered thunderstorm activity for the Central/Southern Plains today... ...Cool and rainy across the Northwest today... ...Well above average temperatures in the northern tier spreads south.
Items in Pro Farmer’s First Thing Today include:
• Corrective buying in grains overnight
• Little drought relief HRW areas, Black Sea region
• Brazil gets some needed rains
• Best week for Brazil’s soybean planting but pace still lags
| RUSSIA/UKRAINE |
— Russia intensified its drone attacks on Kyiv and other Ukrainian cities, marking an escalation as winter approaches. Ukraine’s military administration reported that about a dozen drones targeted Kyiv from multiple directions. Ukraine’s air defenses successfully intercepted and destroyed all the attacking drones, according to Serhii Popko, head of the Kyiv City Military Administration. These attacks are part of a broader Russian strategy to target Ukraine’s energy infrastructure as winter approaches. This tactic, which Moscow has employed in previous years, aims to increase pressure on the Ukrainian population during the coldest months. Ukraine is currently operating with only about one-third of its pre-war energy output Rolling blackouts have become a daily reality in many regions. The country faces a potential electricity shortage of about one-third of expected peak demand.
— Ukraine’s 2024-25 grain exports reach 13 MMT, surpassing last year’s pace. Ukraine’s grain exports for the 2024/25 season (July-June) have hit 13 million metric tons (MMT) as of Oct. 21, according to the Ukrainian Agriculture Ministry, up from 8.3 MMT by Oct. 23, 2023. The total includes 7.2 MMT of wheat, 3.8 MMT of corn, and 1.7 MMT of barley. Exports in October alone reached 2.6 MMT, significantly higher than the 1.6 MMT exported by the same point last year.
| CHINA UPDATE |
— Chinese soybean imports from U.S. surge but Brazil still top supplier. Of China’s 11.37 MMT of soybean imports in September, 8.45 MMT originated from Brazil, while 1.71 MMT came from the U.S., a 13-fold surge from last year. For the January-September period, soybean imports from Brazil rose 13% from the same period last year to 62.24 MMT, while arrivals from the U.S. fell 15% to 14.55 MMT.
— Canada’s tariff exemptions raise hopes for eased canola trade with China. Canada’s move to temporarily exempt certain Chinese imports from tariffs has sparked optimism that China might ease or delay its antidumping investigation into Canadian rapeseed. The Canadian Finance Ministry Friday said that relief would be granted under specific and exceptional circumstances to “ensure that Canadian industry has sufficient time to adjust supply changes.” Following the announcement, Chinese rapeseed meal futures declined, reflecting market hopes for improved trade relations.
— China conducts first operations under swap facility to bolster stock market. PBOC said it conducted its first operations under a swap facility designed to bolster the stock market, exchanging assets worth 50 billion yuan ($7.03 billion) with brokerages, fund companies and insurers on Monday. PBOC said 20 institutions participated in the swap operations with a fee rate of 20 basis points. Separately, more than 20 Chinese listed companies, including China Petroleum and Chemical Corp (Sinopec) and China Merchants Port Group announced plans to tap special central bank lending for share buybacks and purchases.
Of note: In the “blue box” we reported that the People’s Bank of China (PBOC) cut benchmark lending rates by 25 basis points. The one-year loan prime rate (LPR), the benchmark for most corporate and household loans, was lowered to 3.10%. The five-year LPR, a reference for property mortgages, was cut to 3.6%.
| TRADE POLICY |
— EU execs fret about tariffs. European company executives are more preoccupied than their U.S. counterparts about Donald Trump’s promise to impose tariffs on all imports if he retakes the White House. Bloomberg notes (link) that mentions of “tariff” on earnings conference calls so far this period have soared in Europe, outpacing instances on U.S. calls by a ratio of 5 to 2 in October. By far, the characterizations are negative.
| ENERGY & CLIMATE CHANGE |
— Updated Treasury guidance on the Sustainable Aviation Fuel (SAF) 40B credit provides important clarifications and changes for those seeking to qualify for the credit. Link to notice. Here are the key points:
Updated GREET model. The Treasury has specified that those using the 40BSAF-GREET 2024 model to calculate emissions reduction percentages must now use the October 2024 version of the model. This update addresses a calculation issue in the previous April 2024 version, specifically related to catalyst inputs for Alcohol to Jet (ATJ) SAF pathways.
Impact on ATJ SAF pathways. The change in the model lowers the emissions associated with catalyst input for ATJ SAF pathways. This adjustment could potentially affect the eligibility of certain fuels for the credit.
SAF credit requirements. To qualify for the SAF credit, which ranges from $1.25 to $1.75 per gallon, the fuel must demonstrate a minimum reduction of 50% in lifecycle greenhouse gas emissions.
Timeline and availability. The SAF credit is only available through the end of 2024, so this update comes relatively late in the credit’s lifecycle.
Transition to Clean Fuels Production Credit. The Biden administration is working on the details of the new 45Z Clean Fuels Production credit, scheduled to start on Jan. 1, 2025. This credit is intended to replace and consolidate various expiring fuel incentives.
Uncertainty around 45Z guidance. There is uncertainty about whether the guidance for the 45Z credit will be available before the credit takes effect. This could potentially create challenges for producers planning to claim the credit in early 2025.
Registration requirements for 45Z. To be eligible for the 45Z credit for production starting Jan. 1, 2025, taxpayers must obtain a signed registration letter from the IRS dated on or before Jan. 1, 2025. The IRS set a deadline of July 15, 2024, for applications to be processed in time for the Jan. 1, 2025, start date.
Potential impact on corn acreage. It is unclear whether the model change will significantly affect the level of corn acreage that would qualify as a feedstock for the SAF credit. While these updates provide some clarity, the transition from the current SAF credit to the new 45Z Clean Fuels Production credit may present challenges for producers due to the tight timeline and pending guidance.
Background. Recall that the CSA Pilot Program establishes climate smart agriculture practices for cultivating domestic corn and soybeans as SAF feedstocks. The program provides an additional reduction credit for CSA corn (10 gCO2e/MJ) and CSA soybean (5 gCO2e/MJ) when used in SAF production. Farmers participating in the CSA Pilot Program must implement specific practices:
• For corn: no-till farming, planting cover crops, and using enhanced efficiency nitrogen fertilizer.
• For soybeans: no-till farming and planting cover crops.
Farmers and SAF producers must maintain detailed records and comply with specific requirements to participate in the program.
Of note: Those provisions have dramatically reduced the level of acreage and thus corn and soybean production that would qualify as feedstocks for the SAF credit. The hope has been that the coming 45Z credit will adjust those requirements and provide more flexibility.
| LIVESTOCK, NUTRITION & FOOD INDUSTRY |
— USDA’s new poultry payment rule sent to OMB for review. USDA has submitted a final rule on poultry grower payment systems and capital improvements to the Office of Management and Budget (OMB) for review, with release expected in November. The rule aims to address payment disparities and transparency concerns in poultry production. The final rule would propose amendments to address what USDA labels “certain problematic practices related to poultry grower payment systems and capital improvement programs” including “payment disparities and reductions that are unconnected to commoditized flock performance, and transparency concerns related to additional capital investments in poultry production facilities and equipment.” However, with the presidential election nearing, a potential Republican administration could alter or halt its implementation.
| OTHER ITEMS OF NOTE |
— Texas allows farmers to tap Rio Grande amid drought and Mexico water delays. Texas Agriculture Commissioner Sid Miller on Oct. 17 issued an executive order allowing Texas farmers and ranchers to tap into the Rio Grande for irrigation purposes. This decision comes in response to a severe drought situation exacerbated by delayed water deliveries from Mexico, which are required under the 1944 Water Treaty between the United States and Mexico.
Background. The 1944 Water Treaty governs the allocation of water resources from the Rio Grande and Colorado River between the United States and Mexico. Under this agreement, Mexico is obligated to deliver an average of 350,000 acre-feet of water annually from its Rio Grande tributaries to the United States, totaling 1.75 million acre-feet over a five-year cycle.
Several factors have contributed to the current water crisis:
• Drought conditions: The region has been experiencing severe drought, putting strain on water resources.
• Delayed water deliveries: Mexico has fallen behind on its water deliveries to the United States, with a reported deficit of approximately 265 billion gallons.
• Climate change: Erratic weather patterns linked to climate change have exacerbated water scarcity issues.
• Growing population: Increasing populations on both sides of the border have led to higher water demand.
In response to these challenges, Commissioner Sid Miller’s executive order aims to: • Allow Texas farmers and ranchers to use water from the Rio Grande for irrigation.
• Utilize excess water flowing from Mexico’s Marte Gomez reservoir due to recent heavy rains.
• Prevent water waste by redirecting flow that would otherwise be lost to the Gulf of Mexico.
Commissioner Miller stated, “Enough is enough. We’re done sitting around waiting for someone else to act. There is no reason the water overflow south of the Amistad and Falcon international reservoirs should go down the Rio San Juan to the Rio Grande and be wasted.”
Agricultural impact: The water shortage has already affected the agricultural sector, with the last sugar mill in the Rio Grande Valley closing in February 2024 due to lack of water.
| KEY LINKS |
WASDE | Crop Production | USDA weekly reports | Crop Progress | Food prices | Farm income | Export Sales weekly | ERP dashboard | California phase-out of gas-powered vehicles | RFS | IRA: Biofuels | IRA: Ag | | Russia/Ukraine war, lessons learned | | SCOTUS on WOTUS | SCOTUS on Prop 12 pork | New farm bill primer | | Gov’t payments to farmers by program | Farmer working capital | USDA Ag Outlook Forum |