Biden, G7 Urge Restraint as Israeli Leaders Threaten Reprisals Against Iran

Note: Abbreviated report today as I am in Houston, Texas, for a speech.

— Outside markets: Oil gained for a third day amid tensions in the Middle East, while U.S. equity futures fell. Japan’s Topix index rose more than 1% after new prime minister Shigeru Ishiba said the economy isn’t ready for another interest-rate increase. The yen fell to a more than one-month low against the dollar, extending its 2% decline Wednesday. The yen was also weighed down by stronger-than-expected September U.S. private-sector employment data. The Hang Seng Index sank as much as 4.5%, its biggest intraday drop in almost two years. Markets in mainland China remain shut for Golden Week.

— Biden urges restraint as Israeli leaders threaten reprisals against Iran. President Biden called on Israel to avoid attacking Iran’s nuclear facilities in response to recent missile strikes, as the G7 seeks to prevent further escalation in the region. Israeli leaders, including Prime Minister Netanyahu, have vowed to retaliate after Iran fired 200 ballistic missiles, causing damage at Israeli military sites. The conflict has intensified across Lebanon and Gaza, with Israel pressing forward in a ground offensive against Hezbollah despite U.S. efforts to de-escalate.

Of note: To reduce the tensions, Saudi Arabia’s Foreign Minister Prince Faisal bin Farhan and Iranian President Masoud Pezeshkian met in Qatar, the state-run Saudi Press Agency reported. Pezeshkian met Qatar’s ruler, Sheikh Tamim bin Hamad Al Thani, shortly before. Qatar said it would keep trying to stabilize the region.

Bottom line: Western capitals are pressuring Israel to focus any counterattack against Iran on military targets in the country, and not its oil or nuclear research facilities. Meanwhile, capitals fret about the potential refugee crisis a major, long-lasting war in Lebanon could cause, and how an increase in people fleeing the Middle East could impact domestic politics.

— Oil prices rise amid Middle East tensions following Iran’s missile attack on Israel. Oil prices saw a brief spike on Wednesday following Iran’s missile barrage against Israel, though gains were tempered as traders evaluated potential disruptions to global energy supplies. Brent crude initially surged to $76.14 before settling at $73.84. U.S. West Texas Intermediate rose 27 cents (0.39%) to $70.10. Analysts warned that further escalation in the region, which accounts for a third of global oil production, could jeopardize energy infrastructure, including key transit points like the Strait of Hormuz. Despite the heightened risk, OPEC+ reaffirmed its plans to gradually restore 2.2 million barrels per day of production.

Crude oil price gains were limited by a large build in U.S. crude inventories, which rose by 3.9 million barrels in the last week, exceeding expectations of a 1.3-million-barrel draw. Rising gasoline stocks and ongoing refinery maintenance also contributed to the inventory build.

— Biden urges port employers to restart talks amid dock workers’ strike, warns of “man-made disaster. President Biden called on U.S. port employers to resume negotiations with striking dock workers, warning that the strike, which has shut down major container ports on the Atlantic and Gulf coasts, could exacerbate the economic fallout from Hurricane Helene. The strike stems from wage disputes and concerns over automation. Biden criticized port employers for delaying talks, calling for a swift resolution to avoid further economic disruption.

— The ongoing port strike on the U.S. East and Gulf Coasts is expected to have significant impacts on supply chains and the broader economy, according to recent assessments by Moody’s and other experts. Moody’s believes the strike will “snarl supply chains” and have negative credit implications for retail and consumer goods sectors. The affected ports handle more than half of U.S. container imports, facilitating the transport of a wide range of goods from toys to fresh fruit to industrial components.

Experts warn that if the strike persists beyond a couple of weeks, it could lead to significant supply chain shocks. This may result in shortages of various products, including perishable goods, auto parts, and other consumer items.

There are concerns that a prolonged strike could fuel inflation, particularly for certain goods:
• Food products, especially perishables like bananas, are vulnerable to price increases.
• Auto parts shortages could potentially drive up car prices.
• Overall, even a modest increase in inflation could impact the Federal Reserve’s decisions on interest rates.

A prolonged strike lasting months could lead to:
• Shortages of raw materials for manufacturing.
• Potential layoffs in manufacturing plants and related industries like shipping and logistics.

— Speaker Johnson estimates $35 billion needed for Hurricane Helene relief, urges prioritizing federal spending. House Speaker Mike Johnson (R-La.) emphasized the need to prioritize federal spending amid the $35 trillion national debt. Congress has already allocated $20 billion for FEMA in a recent stopgap bill, but additional relief measures may take time. Johnson rejected calls from some lawmakers from hurricane-ravaged states for Congress to return early from a break running through the Nov. 5 election in order to pass a relief measure. Johnson said Wednesday that officials would need “30 days or more” to finish assessing the damage from the storm before Congress acts. He called for bipartisan cooperation but hinted at concerns over national debt, raising questions about potential offsets for disaster aid. Senators from impacted states are pushing for immediate disaster relief legislation.

Of note: President Joe Biden deployed up to 1,000 soldiers to aid in Hurricane Helene relief efforts as death toll surpasses 181 people.

— USDA announced up to $7.7 billion in funding for conservation practices on working lands in FY 2025, with $5.7 billion coming from the Inflation Reduction Act for climate-smart initiatives and $2 billion from the 2018 Farm Bill. The funds will support programs like the Environmental Quality Incentives Program and the Conservation Stewardship Program. These efforts have already assisted over 28,500 farmers, applying conservation measures to 361 million acres since 2023. Link for details.

— Update on CARB’s proposed revisions to the Low Carbon Fuel Standard (LCFS) regulations:

Expansion of oilseed limits. CARB is maintaining its proposal from August to limit credit generation for certain crop-based biofuels, while expanding the scope of feedstocks affected:
• The original proposal in August included a 20% cap on credit generation for biofuels made from soybean and canola oil.
• In the latest revision, CARB has added sunflower oil to this 20% cap.
• This means only 20% of the volume of fuel made from soybean, canola, or sunflower oil would be eligible to generate LCFS credits,

Rationale for including sunflower oil. CARB’s decision to include sunflower oil appears to be preemptive:
• Currently, there are no approved users of sunflower oil for biofuel production in California’s LCFS program.
• CARB states this addition is “responsive to public feedback that limiting this provision to soy and canola could lead to incentives to increase use of other oilseeds for biofuel production.”

Unchanged targets and timeline. Despite the expanded feedstock restrictions, CARB is maintaining other key aspects of its August proposal:
•The program’s annual targets will still become 9% tougher in 2025.
• The 2030 goal remains a 30% reduction in transportation fuel carbon intensity from 2010 levels.
• CARB is keeping to its adoption schedule for these changes.

Industry reactions. The proposed changes have received mixed reactions:
• Environmental groups argue the restrictions don’t go far enough to protect against cropland expansion and food supply competition.
• Agribusiness and some fuel producers warn that the concept goes against the program’s carbon-neutral focus.
• The Iowa Soybean Association opposes stringent field-level certification for corn and soybeans, arguing it fails to take a risk-based approach.

Grace period for existing facilities. CARB has proposed a grace period for facilities already using the restricted feedstocks:
• Facilities certified to use soybean, canola, or sunflower oil before the new rules are adopted can continue generating credits until 2028.
• This is an extension from the previously proposed 2026 cut-off.

— CFTC takes first fraud action in voluntary carbon credit market against former CEO Kenneth Newcombe. The Commodity Futures Trading Commission (CFTC) has taken significant action against Kenneth Newcombe, the former CEO of CQC Impact Investors, for alleged fraud in the voluntary carbon credit market. This case marks the CFTC’s first enforcement actions targeting fraud in this emerging market. Kenneth Newcombe, former CEO and majority shareholder of CQC Impact Investors LLC (CQC), a Washington D.C.-based carbon credit project developer, is accused of fraud and reporting false information related to voluntary carbon credits. The alleged fraudulent scheme took place from at least 2019 to December 2023. Newcombe is accused of reporting false and misleading information to at least one carbon credit registry and third-party reviewers to misrepresent the quality of the company’s emissions-reduction projects. The goal was allegedly to obtain far more carbon credits than the company was entitled to receive, which were then sold to others.

CFTC’s actions extend beyond Newcombe:
• CQC Impact Investors LLC itself faces charges for engaging in a deceptive scheme related to its carbon emission reduction projects.
• Jason Steele, CQC’s former Chief Operating Officer, has also been charged and has settled with the CFTC.
• These actions are part of a broader crackdown, with parallel criminal and civil actions announced by the U.S. Attorney’s Office for the Southern District of New York and the Securities and Exchange Commission.

This case highlights significant issues in the voluntary carbon credit market:
• It reveals potential vulnerabilities in the verification and issuance processes of carbon credits.
• The fraud allegedly resulted in the over-issuance of millions of carbon credits, particularly from clean cookstove projects.
• Verra, the world’s largest carbon crediting registry, has suspended 27 projects run by CQC pending an internal review.

Of note: Kenneth Newcombe was considered a pioneer in developing carbon offsets, making these allegations particularly impactful for the industry. His background includes: A 16-year tenure on Verra’s board of directors; Significant roles at the World Bank and in the private sector, where he was a major proponent of carbon trading.

— Toyota delays North American EV production to 2026, cuts global target amid U.S. market challenges, but continues long-term investments. The move signals a significant shift in its EV strategy. Initially slated to begin production in 2025, the postponement, along with scaled-back expectations for global production from 1.5 million to 1 million EVs by 2026, reflects the challenges Toyota and other automakers are facing in the EV market. Despite the delay, Toyota remains committed to long-term investments in the EV sector, recognizing that tightening environmental regulations will eventually drive demand. The company is still moving forward with plans to introduce 10 new EV models globally by 2026 and continues investing in its Kentucky plant, emphasizing its faith in the U.S. market’s potential growth. This move, however, also involves a strategic pullback: Toyota will not produce new Lexus electric SUVs in North America as previously planned, instead opting to import them from Japan.

— Macron warns EU risks collapse without investment and regulatory reform. French President Emmanuel Macron warned that the European Union could face collapse if it continues over-regulating and under-investing. Speaking at a Bloomberg panel, Macron cautioned that the EU would be “out of the market” within two to three years if it follows its current path. He urged support for cross-border mergers to strengthen competition with U.S. firms and backed a temporary tax on France’s largest companies to address domestic fiscal pressures.

— Iowa AG leads 22-state coalition to challenge Massachusetts pork law (Question 3) in appeal. lowa Attorney General Brenna Bird led a coalition of 22 states in filing an amicus brief to support an appeal against a district court ruling that upheld Massachusetts’ Question 3 (Q3) law. Question 3 is a Massachusetts law approved by voters in 2016 that sets minimum size requirements for farm animal containment. Similar to California’s Proposition 12, Q3 prohibits the sale of pork from hogs born to sows housed in pens that don’t comply with Massachusetts’ standards. However, Q3 goes a step further by also banning the transportation of non-compliant pork through Massachusetts.

The coalition of states, led by Iowa AG Bird, argues several points against Q3:
• Extraterritorial regulation: They contend that Massachusetts is overstepping its authority by effectively regulating farming practices in other states.
• Economic impact: The attorneys general claim Q3 poses “crippling costs” for farmers and could lead to “skyrocketing prices” for consumers.
• Interstate commerce: The ban on transporting non-compliant pork through Massachusetts is seen as a potential disruption to interstate commerce.
• State sovereignty: AG Bird argues that “Massachusetts does not get to tell Iowans how to raise their pork.”

This appeal comes in the wake of the U.S. Supreme Court’s decision to uphold California’s Proposition 12 in a 5-4 vote. The ruling on Prop 12 has emboldened supporters of similar laws while prompting opponents to seek new legal strategies.

The outcome of this appeal could have significant implications for:
• Pork industry: Producers may face increased costs and logistical challenges if Q3 is upheld.
• Interstate commerce: The transportation ban aspect of Q3 could affect pork distribution across New England.
• State-level regulations: The case may influence how far states can go in regulating products based on out-of-state production methods. of such regulations on the agriculture industry.

— In Pennsylvania, incumbent Democratic Sen. Bob Casey and GOP challenger Dave McCormick are set tonight for the first of two scheduled debates. A new poll released on Wednesday by the Cook Political Report with Amy Walter has Casey leading by seven percentage points, 52% to 45%. Vice President Kamala Harris is leading Trump in Pennsylvania by 49% to 47%, per the same poll.

— EPA finalizes rule to strengthen pesticide protections for farmworkers and communities. EPA has reinstated the 2015 Agricultural Worker Protection Standard’s Application Exclusion Zone (AEZ) requirements to safeguard farmworkers, their families, and nearby communities from pesticide exposure. Link to EPA release. This rule finalizes the agency’s 2023 proposed rule (link) without change. The rule extends protections beyond agricultural establishments, reinstates safety distances, and offers flexibility for family farms. The new rule will be effective 60 days after publication of the federal register notice and will be available in docket EPA-HQ-OPP-2022-0133 at the Regulations.gov page (link).

— FDA, EPA, USDA launch tool to simplify GMO regulatory process for biotech companies. The U.S. Food and Drug Administration (FDA), Environmental Protection Agency (EPA), and USDA launched a new web-based tool to help biotechnology companies better understand and navigate the regulatory requirements for genetically modified organisms (GMOs). This tool is part of a broader effort to modernize and streamline the regulatory framework for biotechnology products in the United States. Link to the new tool.

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