Biden Administration Sets Use of GREET Model for SAF Credits, Full Details in March

Senate stays in session on some progress re: Ukraine aid/border talks

Jim Wiesemeyer

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December 15, 2023 10:14 AM

Senate stays in session on some progress re: Ukraine aid/border talks

Today’s Digital Newspaper

MARKET FOCUS

‘Market pricing in too fast a pace of cuts’: UBS Global Wealth Management
Top Fed official says talk of March interest rate cut is ‘premature’
Yellen: Economy continues to grow, labor market remains strong, inflation down
Costco seeing deflation by as much as 20% to 30% in ‘big and bulky items’
Mortgage rates drop to levels not seen since August
Argentina’s president remains committed to peso-dollar transition
Ag markets today
USDA daily export sales:
— 134,000 MT soybeans to China during 2023-2024 marketing year
— 447,500 MT soybeans to unknown destinations during 2023-2024 marketing year
Ag trade update
NWS weather outlook
Pro Farmer First Thing Today items

CONGRESS

Senate to stay in session as Ukraine aid/border talks see some progress

ISRAEL/HAMAS CONFLICT

Biden admin. indicating a decrease in U.S. support for Israel’s military campaign

RUSSIA & UKRAINE

Bank of Russia raises key interest rate by 100 basis points (bps) to 16%
Ukraine takes big step toward European Union membership
Hungary’s PM vetoes $55 billion financial package intended for Ukraine
Ukraine keeps grain export outlook unchanged despite higher production estimate
Romania’s Constanta port exports record grain volume in first 11 months of 2023

POLICY

Stabenow blocks bill to allow whole milk in school lunches
House Ag panel discord over failure to address new farm bill

CHINA

China’s industrial production showed robust growth in November
China’s retail sales in November falls short of expectations
China keeps rates unchanged, pumps record liquidity into banking system
China to run budget gap of 3% of GDP in 2024
China’s corn breeders ready to double GMO planting in 2024

TRADE POLICY

Port of Los Angeles chief warns against 10% import tariff

ENERGY & CLIMATE CHANGE

Biden admin. adopts ethanol-backed SAF tax credit method, plans March update
Shortage of U.S.-made ships hampers offshore wind industry

HEALTH UPDATE

CDC urges higher vaccination rates in response to rising respiratory diseases

POLITICS & ELECTIONS

Supreme Court to hear Jan. 6 case

OTHER ITEMS OF NOTE

Cotton AWP rises, remaining well above level to trigger LDPs

MARKET FOCUS

— Equities today: Asian and European stock markets were mostly higher overnight. U.S. Dow opened around 100 points lower but has since pared the losses. In Asia, Japan +0.9%. Hong Kong +2.4%. China -0.6%. India +1.4%. In Europe, at midday, London -0.5%. Paris +0.6%. Frankfurt +0.4%.

U.S. equities yesterday: While gains were more subdued Thursday, the Dow still managed to push out to a new record finish. The Dow ended up 158.11 points, 0.43%, at 37,248.35. The Nasdaq rose 27.59 points, 0.19%, at 14,761.,56. The S&P 500 gained 12.46 points, 0.26%, at 4,719.55.

The Dow is up 2.8% for the week and is headed for a nine-week winning streak, its longest run since 2019. The S&P 500 is less than 1.6% away from a record close set in January 2022.

— Agriculture markets yesterday:

Corn: March corn futures fell 1/4 cent before settling at $4.79 1/4, on session lows.
Soy complex: January soybeans rose 6 1/2 cents to $13.14, ending the session above the 10-day moving average, while January meal rose $1.50 to $403.70. January soyoil fell 32 points to 49.51 cents.
Wheat: March SRW wheat rose 10 1/2 cents at $6.15 3/4. March HRW wheat gained 4 1/2 cents at $6.36 1/2. Prices closed nearer their daily highs. March spring wheat rose 3 3/4 cents to $7.17 1/4.
Cotton: March cotton fell 37 points to 80.81 cents, closing near the session low.
Cattle: February live cattle rose 70 cents to $167.925 and near mid-range. January feeder cattle gained $1.975 to $219.35, nearer the session low and hit a two-week high early on.
Hogs: The December hog contract expired at $67.175 at noon today, down 75 cents from Wednesday. In contrast, February futures led the 2024 contracts sharply higher, leaping $3.75 to $70.475.

— Ag markets today: Corn, soybeans and wheat traded on both sides of unchanged in a quiet overnight session. As of 7:30 a.m. ET, corn futures were trading steady to fractionally higher, soybeans were a penny lower to 2 cents higher, winter wheat futures were trading fractionally on either side of unchanged and spring wheat was mostly 4 to 6 cents higher. Front-month crude oil futures were around 50 cents higher, and the U.S. dollar index was around 125 points higher.

Cattle futures working on solid weekly gains. Live cattle futures strengthened on Thursday, marking three of the past four days with corrective gains. As of yesterday’s close, the February contract was up $2.20 for the week. If the contract finishes today above last Friday’s closing level, it would be the first weekly gain in a month, though bulls would still have work to do to break the sharp downtrend from the September high.

Uptick in cash hog index short-lived. After a 43-cent gain in the CME lean hog index on Thursday, today’s quote (as of Dec. 13) is down 38 cents to $67.75. February lean hog futures, which assumed lead-month status after the December contract expired on Thursday, ended yesterday at a $2.725 premium to today’s cash quote. If traders build that premium, it would convey increased confidence a seasonal low in the cash market will come soon.

— Quotes of note:

Top Fed official says talk of March interest rate cut is ‘premature’. John Williams, president of the Federal Reserve Bank of New York, and ally of Fed chair Jay Powell, says policy could still be tightened if progress on inflation stalls.
“The market is pricing in too fast a pace of cuts... We think the experience of this rate cycle is that it pays to listen to the Fed.” — Solita Marcelli, chief investment officer for the Americas at UBS Global Wealth Management.
“A soft landing is the economy continues to grow, the labor market remains strong, and inflation comes down. And I believe that’s the path we’re on.” — U.S. Treasury Secretary Janet Yellen.
Costco seeing deflation by as much as 20% to 30% in “big and bulky items,” such as televisions and furniture sets because of lower freight costs. This was the last quarter before CEO Craig Jelinek retires and hands over the reins to Chief Operating Officer Ron Vachris. Costco Wholesale beat expectations for first-quarter earnings and declared a special $15 a share dividend. The warehouse club reported revenue of $57.8 billion and a 3.8% rise in same store sales, meeting expectations. Food and sundries boosted sales, and Costco sold $100 million of gold bars.
Want to write a song like Taylor Swift? Intel CEO Pat Gelsinger told a crowd gathered to see new products that Artificial Intelligence on laptops will be the “star of the show” in 2024. The company has demonstrated some functions that could be done off the cloud, including transcribing notes or generating a song in the style of Taylor Swift.

— Mortgage rates have dropped to levels not seen since August as the Federal Reserve hints at potential interest rate cuts next year. The average 30-year fixed-rate mortgage is now at 6.95%, with further decreases expected. These lower rates could attract new buyers to the housing market, although increased demand may keep housing prices elevated. Freddie Mac reported the decline in mortgage rates, while the yield on 10-year Treasury notes, which influences mortgage rates, reached 3.949%, the lowest since late July. Approximately 96% of mortgage holders already have rates below 6.9%, but this recent drop could incentivize first-time homebuyers. Redfin’s index tracking requests for tours and related services has increased by 3% compared to the previous month, and refinance activity has also seen a rise.

Of note: The National Association of Realtors expects the 30-year fixed-rate mortgage to average 6.3% in 2024. The Mortgage Bankers Association’s forecast calls for 6.1% rates by the end of 2024. Realtor.com predicts rates will fall to 6.5% by the end of that year.

— Argentina’s president remains committed to peso-dollar transition. Argentina’s President Javier Milei still has the intention to eventually replace the country’s peso with the U.S. dollar, despite the recent sharp devaluation of the peso as part of an initial economic shock therapy, according to Economy Minister Luis Caputo. He confirmed that the long-term goal is to achieve dollarization, but he did not provide a specific timeline for when this currency transition might occur. He emphasized that President Milei’s campaign promises of dollarization and closing the central bank remain unchanged.

Following the initial devaluation, the official exchange rate was reduced, and Caputo stated that it would continue to be reduced by 2% each month going forward. The parallel exchange rate, known as the blue-chip swap rate, was around 1,040 pesos per dollar at the time of the report.

Market perspectives:

— Outside markets: The U.S. dollar index was firmer, with most foreign currencies weaker against the greenback. The yield on the 10-year U.S. Treasury note was weaker, trading around 3.91%, with a mixed tone in global government bond yields. Crude oil futures continued to move higher, with U.S. crude around $72.10 per barrel and Brent around $77.20 per barrel. Gold and silver futures were advancing ahead of US economic data, with gold around $2,056 per troy ounce and silver around $24.46 per troy ounce.

— U.S. crude prices have been on the decline, recently logging their longest streak of weekly losses in five years as investors worry that demand will falter in 2024. Now, crude is on track to end the week higher. West Texas Intermediate crude futures, the U.S. benchmark, settled at $71.58 a barrel on Thursday. Brent crude, the international benchmark, rose to $76.61 a barrel. Both are edging up again early Friday.

— USDA daily export sales:

134,000 MT soybeans to China during 2023-2024 marketing year
447,500 MT soybeans to unknown destinations during 2023-2024 marketing year

— Ag trade update: South Korea purchased 68,000 MT of corn and 60,000 MT of feed wheat – both optional origin. Algeria purchased 30,000 MT of Argentine corn and 35,000 MT of optional origin soymeal. Bangladesh canceled a tender to buy 50,000 MT of wheat.

— NWS weather outlook: There is a Slight Risk of excessive rainfall over parts of southern Georgia and Florida on Saturday... ...There is a Slight Risk of severe thunderstorms over parts of Florida on Saturday... ...Light snow over parts of the Midwest.

Items in Pro Farmer’s First Thing Today include:

• Quiet overnight grain trade
• Record Nov. NOPA crush expected
• Eurozone PMI contracts further in December

CONGRESS

— Senate will be in session next week to work towards reaching an agreement on border security issues. A border agreement is essential for the Senate to proceed with passing an aid package for Ukraine and Israel. Senate Majority Leader Chuck Schumer (D-N.Y.) emphasized the importance of members being present and ready to work during this upcoming week. He expressed hope for reaching an agreement on border security but stated that regardless of the outcome, the Senate will vote on a supplemental proposal next week. The supplemental package totals $110.5 billion and is expected to be one of the last items the Senate deals with before concluding its legislative activities for the year. Some progress has been made towards reaching a border security deal.

ISRAEL/HAMAS CONFLICT

— Biden administration is indicating a decrease in U.S. support for Israel’s military campaign amid the heavy bombardment of Gaza. President Joe Biden expressed his desire for Israel to transition to a lower-intensity strategy, given the significant loss of life in the Gaza Strip, with over 18,000 Palestinians killed in less than three months. This has led to a growing divide between President Biden and Israeli Prime Minister Benjamin Netanyahu, who has stated that Israel will continue its fight against Hamas until achieving “absolute victory.” To demonstrate continued U.S. support while also addressing civilian casualties, U.S. National Security Adviser Jake Sullivan is in the occupied West Bank. This visit aims to reaffirm the U.S. commitment to the region while urging leaders to take measures to reduce civilian casualties.

RUSSIA/UKRAINE

— Bank of Russia raised its key interest rate by 100 basis points (bps) to 16%, a move that was in line with market expectations. The central bank indicated that it plans to maintain an elevated monetary policy for an extended period to counter rising inflationary pressures. This decision follows a series of rate hikes totaling 850 bps since the beginning of the bank’s tightening cycle in July.

The decision to increase the key policy rate was driven by several factors. Inflation expectations among consumers and businesses were on the rise, posing a risk of unsustainable price growth. Higher borrowing costs were considered necessary due to stronger-than-expected Russian GDP growth, which is expected to surpass the central bank’s previous October estimate of over 3%. Despite a slowdown, credit growth remains at historically high levels.

Furthermore, the bank pointed out that demand continues to outpace domestic capacity, largely attributed to a labor force crisis resulting from the Kremlin’s earlier military mobilization efforts. Inflation is projected to end the year below 7.5% but is anticipated to return to the 4%-4.5% range by 2024. This rate hike reflects the Bank of Russia’s commitment to managing inflation and maintaining stability in the country’s economy.

— Ukraine has taken a significant step toward European Union membership as leaders in Brussels have agreed to initiate negotiations with the country. Ukrainian President Volodymyr Zelenskyy celebrated this unexpected decision as a “victory” for Ukraine and Europe. Notably, Hungary, which had previously promised to block this move during the EU summit, did not participate in the vote.

However, despite this achievement for Ukraine, negotiations on funding hit a roadblock when Hungary’s Prime Minister vetoed a crucial 50 billion euro ($55 billion) financial package intended for Ukraine.

— Ukraine keeps grain export outlook unchanged despite higher production estimate. Ukraine is sticking to its combined grain and oilseeds exportable surplus forecast of 50 MMT despite a higher crop outlook, the first deputy ag minister said. The ministry last week raised its 2023 grain and oilseeds harvest forecast to 81.3 MMT from 79.1 MMT previously. As of Dec. 16, Ukraine had exported 15.3 MMT of grain in 2023-24, down from almost 20 MMT on that date last year. Ukraine’s 2023-24 grain exports included 6.5 MMT of wheat, 7.7 MMT of corn and 933,000 MT of barley.

— Romania’s Constanta port exports record grain volume in first 11 months of 2023. Romania’s Black Sea port of Constanta smashed its grain export record this year thanks to a surge in shipments from Ukraine. Ukrainian grain accounted for roughly 40% of the total — 13 MMT — up from 8.6 MMT in all of 2022. The port’s previous all-time high exports were 25 MMT.

POLICY UPDATE

— Stabenow blocks bill to allow whole milk in school lunches. Senate Ag Committee Chair Debbie Stabenow (D-Mich.) prevented Sen. Roger Marshall (R-Kan.) from passing the Whole Milk for Healthy Kids Act by unanimous consent in the Senate. This legislation, already approved by the House, aims to allow whole milk back into the school lunch program, reversing a ban that has been in place for over a decade. Stabenow’s opposition to the measure is based on her belief that it goes against the Dietary Guidelines for Americans. She had signaled her intent to block the bill before it was brought to the Senate floor. Stabenow emphasized the importance of maintaining school meal standards that are rooted in dietary science, rather than promoting specific food products. She suggested those advocating for the inclusion of whole milk in school meals should participate in USDA’s review of the school meal program rather than having Congress intervene in the process.

— House Ag panel discord over failure to address new farm bill. There is a disagreement in the House regarding comments made by House Ag Committee Ranking Member David Scott (D-Ga.) who expressed his disappointment in the House’s failure to address a new farm bill in December, as House Speaker Mike Johnson (R-La.) had previously promised when he assumed his role. This statement by Scott quickly provoked a response from Republicans on the panel, who pointed out on social media that Scott had previously issued a statement welcoming the extension of the 2018 Farm Bill. This extension was seen to allow lawmakers more time to develop the new bill without being constrained by the approaching deadlines at the end of 2023, when certain provisions of the 2018 Farm Bill were set to expire.

Of note: Some say this raises questions about the progress and timing of the farm bill legislative effort and that Democrats may want to wait until after 2024 elections to complete a farm bill on the belief they may retake control of the House.

CHINA UPDATE

— China’s industrial production showed robust growth in November, increasing by 6.6% year-on-year. This growth rate was notably higher than the previous month’s gain of 4.6% and exceeded market expectations of 5.6%. It marked the fastest pace of industrial production growth since February 2022. This growth was primarily driven by accelerated increases in mining (3.9% compared to 2.9% in October), manufacturing (6.7% compared to 5.1%), and utilities (9.9% compared to 1.5%).

For the first eleven months of 2023, industrial output in China increased by 4.3% compared to the same period in 2022, reflecting continued expansion in the country’s industrial sector.

— China’s retail sales in November falls short of expectations. Retail sales recorded a year-on-year expansion of 10.1%. Although this marked a notable increase from the previous month’s growth of 7.6%, it fell short of market expectations, which had predicted a growth rate of 12.5%. This growth represents the 11th consecutive month of expansion in retail turnover and the fastest rate of increase since May.

Several sectors contributed to this growth, including clothing (22.0% compared to 7.5% in October), communications equipment (16.8% compared to 14.6%), autos (14.7% compared to 11.4%), gold, silver, and jewelry (10.7% compared to 10.4%), furniture (2.2% compared to 1.7%), and oil products (7.2% compared to 5.4%). However, sales of grain and food oil maintained the same pace of growth at 4.4% as in October.

Sales declined for cosmetics (-3.5% compared to 1.1%) and office supplies (-8.2% compared to 7.7%). Additionally, retail trade growth slowed for home appliances (2.7% compared to 9.6%) and daily necessities (3.5% compared to 4.4%).

For the first eleven months of 2023, China’s retail sales increased by 7.2% compared to the same period in 2022, indicating overall growth in the retail sector.

— China keeps rates unchanged, pumps record liquidity into banking system. The People’s Bank of China (PBOC) kept the rate on 1.45 trillion yuan ($203.97 billion) worth of one-year medium-term lending facility (MLF) loans to some financial institutions unchanged at 2.50%. With 650 billion yuan of MLF loans set to expire this month, the operation resulted in a net 800 billion yuan of fresh fund injection into the banking system, the biggest medium-term liquidity injection ever, amid weak domestic demand.

— China to run budget gap of 3% of GDP in 2024. Chinese leaders agreed at an annual meeting on the economy this week to run a budget deficit of 3% of gross domestic product in 2024, three sources with knowledge of the matter told Reuters, while other fiscal support may be covered by off-budget debt. While the deficit figure is lower than this year’s revised 3.8% target, suggesting Beijing wants to maintain fiscal discipline and is not considering a big aid package next year, the option to issue off-budget sovereign debt gives it flexibility to step up stimulus to maintain stable economic growth. Two of the sources told Reuters special sovereign bonds could be issued to pay for extra expenditures as needed. One of them said they could amount to 1 trillion yuan ($140.16 billion). Link to Reuters item.

— China’s corn breeders ready to double GMO planting in 2024. Chinese corn breeders are preparing for the planting of more than double the amount of GMO corn next year, three industry sources told Reuters, with Beijing expected to tightly control the situation. GMO corn reportedly will be allowed on around 10 million mu, or about 670,000 hectares (1.66 million acres), in eight provinces next year, including the northeastern province of Liaoning for the first time. Beijing permitted planting of GMO corn on about 4 million mu (270,000 hectares) this year in what it described as trials but has not yet issued any public guidance for 2024.

TRADE POLICY

— Port of Los Angeles chief warns against 10% import tariff. The chief of the nation’s largest port, the Port of Los Angeles Executive Director Gene Seroka, in an interview Thursday on Bloomberg TV, voiced concerns about the potential impact of a 10% tariff on all U.S. imports, as proposed by former President Donald Trump. Such a tariff, Seroka warns, would have devastating consequences for an economy heavily reliant on trade. Los Angeles, in conjunction with neighboring Long Beach, accounts for nearly 40% of the nation’s imports, making it particularly vulnerable to the effects of such a tariff. Trump had suggested this 10% tax on all imports into the U.S. from all countries in August, describing it as a means to bolster the economy.

However, the White House viewed this idea as a sweeping tax on the middle class, and economists like Nobel Prize winner Paul Krugman expressed concerns about the potential repercussions. While the direct impact on GDP might not be substantial, such a move could undermine the rules-based global trading system and trigger retaliatory measures from U.S. trading partners. It could also exert upward pressure on consumer prices at a time when inflation is slowing, and the Federal Reserve is considering ending interest rate hikes.

Despite these concerns, Seroka offered a cautiously optimistic outlook for the economy and trade in 2024. The Port of Los Angeles experienced a 19% year-on-year increase in container imports and exports last month, signaling positive momentum. Seroka anticipates a more normal flow of cargo as companies replenish their inventories. He also noted that exports through Los Angeles have been on the rise, particularly driven by agricultural products and finished manufactured goods bound for Asia and other destinations.

While trade with China has declined slightly, it hasn’t plummeted dramatically. Last year, 57% of goods passing through the Los Angeles port either originated from or were destined for China. This year, that figure stands at approximately 53%, indicating a shift but not a drastic drop in trade volume with China.

ENERGY & CLIMATE CHANGE

— Biden administration adopts ethanol-backed SAF tax credit method, plans March update. The Biden administration announced on Friday that it will adopt a methodology favored by the ethanol industry for claiming tax credits on sustainable aviation fuel (SAF), marking a significant victory for the U.S. corn lobby. However, the administration also plans to update this methodology by March 1, which has raised some uncertainty for corn-based ethanol producers, as it may lead to stricter requirements for SAF feedstocks. The law allocates tax credits for biofuels that can demonstrate that they cut greenhouse gas emissions by 50% or more. Link to Treasury release.

Details: The SAF credit currently incentivizes the production of SAF that achieves a lifecycle GHG emissions reduction of at least 50% compared with petroleum-based jet fuel. Producers of SAF are eligible for a tax credit of $1.25 per gallon to $1.75 per gallon. Under the rules, SAF that decreases GHG emissions by 50% is eligible for the $1.25 credit, and SAF that decreases GHG emissions by more than 50% is eligible for an additional $0.01 per gallon for each percentage point the reduction exceeds 50%, up to $0.50 per gallon.

Treasury said that the guidance issued today (Dec. 15) means that “numerous fuels will qualify for the credit, including valid biomass-based diesel, advanced biofuels, cellulosic biofuel, or cellulosic diesel that have been approved by EPA under the Renewable Fuel Standard (RFS).

Of note: Fuels that have a 50% or greater GHG emissions reduction via the most recent Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA) standard will continue to qualify.

Reaction:

“While there are important carbon modeling details that still need to be worked out, we are optimistic that today’s guidance will open the door to an enormous opportunity for America’s farmers, ethanol producers, and airlines,” Renewable Fuels Association (RFA) President Goeff Cooper said.
Michael McAdams, President of the Advanced Biofuels Association (ABFA), stated: “Recognizing that a one-size-fits-all approach is impractical, the Biden Administration’s acknowledgment of this reality is crucial for achieving significant carbon reductions in air travel… The ABFA has continuously fought to extend SAF tax credits and to increase the Renewable Fuel Standard. As the name suggests, SAF is the most viable sustainable aviation fuel option to reach our shared goal of net zero emissions by 2050 and demonstrates why we need an all-of-the-above climate strategy. Our member companies have already made great investments and advancements in SAF production, and we hope that today’s announcement signals further government support for the technology.”
The National Corn Growers Association (NCGA) said it is pleased that Treasury is embracing the model. “Given that GREET was created by the U.S. government and is widely respected for its ability to measure reductions in greenhouse gas emissions from the farm to the plane, we are encouraged that Treasury will adopt some version of this model,” said Minnesota farmer and NCGA President Harold Wolle. “At the end of the day, we are eager to help the aviation sector lower its carbon footprint, and we look forward to working with the involved agencies over the coming months to ensure the final model helps us achieve that goal.”
The American Carbon Alliance (ACA) released the following statement from ACA CEO Tom Buis: “Ethanol is the largest sustainable low-carbon fuel that yields advantages beyond conventional energy uses. GREET is the most realistic model in measuring the carbon intensity of biofuels. The American-made GREET model will allow ethanol to serve as the primary feedstock for Sustainable Aviation Fuel, and help the U.S. to become energy independent in the very near future. This change is the right decision and benefits American aviation, boosts energy security, and enhances our path to independence from foreign oil suppliers.”

The aviation industry, responsible for about 2% of global energy-related carbon dioxide emissions, faces challenges in decarbonization due to the difficulty of electrifying its equipment. Airlines argue that incentives are necessary to promote SAF, which can significantly reduce greenhouse gas emissions compared to petroleum fuel but is typically more expensive.

The Biden administration had been divided over whether to recognize the Department of Energy’s Greenhouse Gases, Regulated Emissions, and Energy Use in Technologies (GREET) model, which allows ethanol-based SAF to qualify for tax credits under the Inflation Reduction Act. Ethanol producers and corn farmers have been eagerly awaiting this decision, as SAF represents a potential avenue for increasing ethanol demand.

The guidance aims to narrow the price gap between SAF and traditional jet fuel, although the administration could not provide specific data on the extent of the price reduction.

Ethanol industry groups have been advocating for the GREET model, while environmentalists prefer standards that prioritize feedstocks like used cooking oil and animal fat. USDA Secretary Tom Vilsack emphasized the capacity of farmers and producers to supply feedstocks for a potentially sizable market. Vilsack has said his agency is contributing to updating the GREET model and said the move by the Treasury Department reflects the agency “recognizing and appreciating the importance of the GREET platform.”

The GREET model will be updated to incorporate new emissions data and modeling related to factors such as land use changes, livestock activity, and emissions reduction strategies like carbon capture and renewable natural gas. Fuel produced in 2023 that meets these updated standards will be eligible for tax credits. Various government agencies, including the Environmental Protection Agency, Departments of Agriculture, Energy, and Transportation, are collaborating on the scientific updates to the methodology.

Bottom line: The forthcoming update to the GREET model will play a pivotal role in determining the eligibility of fuels for the sustainable aviation fuel (SAF) credit. It is anticipated that corn-based ethanol and other renewable fuels will qualify for the SAF credit in relation to SAF produced and used in calendar years 2023 and 2024. Following the GREET model update, the focus will shift towards the Clean Fuels Credit, scheduled to take effect on Jan. 1, 2025, replacing the SAF and other credits. The structure of this credit will have significant implications for the future growth of the biofuels industry, encompassing a wide range of feedstocks.

— Shortage of U.S.-made ships hampers offshore wind industry. The American offshore wind industry is facing challenges due to a shortage of specialized ships needed for turbine installation, the Wall Street Journal reports (link). In the U.S., wind farm companies are required to use vessels that are both American-made and American-operated to transport turbine components to offshore sites, as mandated by the century-old Jones Act. However, there is a scarcity of such vessels to meet the industry’s demands.

One of the new ships under construction, the Charybdis, which measures 472 feet in length, is experiencing delays and cost overruns at a Texas shipyard. These supply chain disruptions, combined with rising inflation and interest rates, have led to increased costs for homeowners who will ultimately pay for offshore wind power. This situation has raised concerns about the viability of the U.S. wind market.

As a result of these delays, wind farm companies are exploring workarounds that can raise project expenses and, in some cases, lead to the abandonment of plans. For instance, Danish wind giant Ørsted cited ship delays as one of the reasons for canceling two wind farm projects off the coast of New Jersey.

Bottom line: This shortage of specialized vessels is a significant hurdle for the growth of the American offshore wind industry.

HEALTH UPDATE

— CDC urges higher vaccination rates in response to rising respiratory diseases. The CDC issued a warning about the pressing need to increase vaccination rates across the United States due to a rise in respiratory diseases. Notably, there has been a significant decline in flu vaccination rates, with approximately 7 million fewer adults receiving their flu shots this season compared to the previous year. The overall vaccination coverage for both adults and children stands at around 36%, according to CDC data. Additionally, vaccination rates for Covid-19 remain low, with only 17% of adults and about 8% of children having received the latest shot.

Meanwhile, the new vaccine for respiratory syncytial virus (RSV) has been taken by just around 16% of adults aged 60 and above. Respiratory disease activity is currently most pronounced in the Southern United States but is rapidly increasing in other regions as well.

OTHER ITEMS OF NOTE

— Cotton AWP rises, remaining well above level to trigger LDPs. The Adjusted World Price (AWP) for cotton rose to 65.67 cents per pound, effective today (Dec. 15), up from 63.63 cents per pound the prior week. The AWP remains well above the level of 52 cents per pound that would trigger a Loan Deficiency Payment (LDP) under U.S. farm programs. Meanwhile, USDA announced Special Import Quota #9 would be established Dec. 21 for the import of 33,103 bales of Upland Cotton, applying to supplies purchased not later than March 19, 2024, and entered into the U.S. not later than June 17.

KEY LINKS

Policy Updates