Farmers Paying Less for Diesel Fuel; Time to Lock in Prices?

News/Markets/Policy Updates: July 30, 2024

MARKET FOCUS

· U.S. national debt surpasses $35 trillion
· Post-pandemic boom in U.S. manufacturing slowing
· BP reports second-quarter earnings surpassing analyst expectations
· ADM reports second quarter 2024 earnings, revealing significant decrease in profits
· Amazon significantly expanding fast delivery services to rural areas in U.S.
· McDonald’s introducing new items to attract choosy consumers
· Federal Reserve expected to keep interest rates unchanged
· End of trucking recession in sight as freight rates rise
· Eurozone’s GDP expanded by 0.3% quarter-on-quarter in the second quarter
· Germany’s economy contracted in the second quarter of the year
· Ag markets today
· Diesel fuel costs have gone down for U.S. farmers
· Get ready for more U.S. pork exports to Mexico
· Thailand raises 2024 rice export forecast to 8.2 million metric tons
· Indigenous groups pull out of working group on Brazil’s Ferrograo railway
· Ag trade update
· Officials in West Texas declare state of emergency
· NWS outlook
· Pro Farmer First Thing Today items

CONGRESS

· Schumer planning show vote on House-approved tax package
· Senate Approps may miss goal of moving all spending plans before August recess

RUSSIA & UKRAINE

· White House unveils new $1.7 billion lethal aid package for Ukraine

POLICY

· USDA officially announces changes to ECO for 2025 crop year

CHINA

· China’s Xi calls for faster measures to boost domestic consumption
· China’s FDI continues to plunge
· China’s COSCO Shipping, Fortescue to build green fuel supply chain

ENERGY & CLIMATE CHANGE

· Dept. of Energy announces purchase of 4.65 million barrels of oil for SPR
· House Republicans oppose Biden’s procurement rule

LIVESTOCK, NUTRITION & FOOD INDUSTRY

· USDA extends comment period on livestock competition rule

HEALTH UPDATE

· Sinergium Biotech leads H5N1 avian flu vaccine project

POLITICS & ELECTIONS

· Kari Lake and Mark Lamb face off in the Arizona Republican Senate primary today

— Equities today: Asian and European stock indexes were mixed overnight. U.S. Dow opened slightly higher and is now up around 170 points. In Asia, Japan +0.2%. Hong Kong -1.4%. China -0.4%. India +0.1%. In Europe, at midday, London -0.2%. Paris +0.4%. Frankfurt +0.4%.

U.S. equities yesterday: U.S. equities opened the week narrowly mixed with the Dow weaker and the Nasdaq and S&P 500 moving slightly higher. The Dow was down 49.41 points, 0.12%, at 40,593.93. The Nasdaq gained 12.32 points, 0.07%, at 17,370.20. The S&P 500 was up 4.44 points, 0.08%, at 5,463.54.

— A post-pandemic boom in U.S. manufacturing is slowing due to declining consumer demand, the Wall Street Journal reports (link). Manufacturers are responding by laying off employees and reducing production to manage falling orders and rising inventories. Deere has reduced its hourly workforce by about 15% since November and is cutting production to avoid excess inventory. Agco plans to cut 6% of its global salaried workforce by year-end. Polaris is reducing shipments to dealers as discretionary spending declines. Higher interest rates, rising operating costs, a stronger U.S. dollar, and lower commodity prices are contributing to the slowdown in factory activity nationwide. This deceleration follows pandemic-induced supply imbalances and rapid shifts in consumer demand.

— BP reported second-quarter earnings of $2.8 billion in underlying replacement cost profit, surpassing analyst expectations of $2.5 billion. Earnings per share were 17 cents, above the 15 cents estimated by FactSet. The higher profit was achieved despite weaker refining margins and lower oil prices in 2024 compared to the record earnings seen in 2022. BP increased its dividend by 10% to 8 cents per share for Q2 and announced a $3.5 billion share buyback program for the second half of 2024. BP’s share price has remained relatively flat this year, underperforming compared to U.S. rivals Exxon and Chevron, which have seen gains of 16% and 5%, respectively. BP’s earnings beat, despite challenges in refining margins, may signal positive results for peers like Exxon and Chevron, which are set to report their earnings on Aug. 2.

— ADM (Archer-Daniels-Midland) reported its second quarter 2024 earnings, revealing a significant decrease in profits compared to the same period last year. Here are the key takeaways from the earnings report:

Financial performance:
· Net earnings: $486 million, down from $927 million in Q2 2023
· Earnings per share (EPS): $0.98, compared to $1.70 in Q2 2023
· Adjusted EPS: $1.03, missing analysts’ expectations of $1.22
· Revenue: $22.248 billion, an 11.7% decrease from $25.190 billion last year

Missed expectations:
· The company’s results fell short of Wall Street estimates. Analysts had predicted earnings of $1.22 per share and revenue of $23.19 billion.

Full-year guidance:
· Despite the challenging quarter, ADM affirmed its full-year EPS guidance, maintaining its expectation of adjusted earnings per share in the range of $5.25 to $6.25.

Management commentary:
· Juan Luciano, Chair of the Board and CEO, stated that ADM delivered “solid results” despite challenging market conditions. He expressed confidence in the company’s full-year expectations, citing anticipated improvements in crush and ethanol operations, focus on operational excellence, and the team’s agility.

Segment performance:
· Ag Services & oilseeds: Experienced challenges due to large South American crops and shifts in farmer selling behaviors
· Carbohydrate solutions: Delivered solid results driven by favorable Starches & Sweeteners and ethanol margin environments
· Nutrition: Showed sequential improvement and is expected to continue increasing performance

Stock performance:
· ADM shares have fallen 12% since the beginning of the year, while the S&P 500 index has risen 15%. The stock has declined 26% over the last 12 months.

Outlook:
· The company expects improved margin opportunities in Ag Services & Oilseeds for the remainder of the year. ADM also anticipates continued strong performance in the Carbohydrate Solutions (sweeteners and ethanol) segment.

— Amazon is significantly expanding its fast delivery services to rural areas in the United States, aiming to improve its logistics network and enhance customer satisfaction in these less densely populated regions. This initiative follows years of refining delivery systems in urban areas and represents a strategic move to increase sales and market penetration in rural communities. The company has leased or purchased over 16 million square feet of new warehouse space in the U.S. this year, adding to its existing 413 million square feet of industrial real estate. The influx of Amazon packages has overwhelmed rural post offices, leading to delays in regular mail delivery and increased workloads for postal workers. In Bemidji, Minnesota, for instance, the local post office faced significant backlogs and extended working hours for carriers.

— McDonald’s is introducing new items to attract choosy consumers, especially lower-income diners. This includes testing a double-beef-patty Big Arch burger overseas and expanding its McCrispy and McSpicy chicken sandwiches. The company reported disappointing June-quarter earnings, with net income down from the previous year. Adjusted earnings were $2.97 per share and revenue was $6.49 billion, both below analyst expectations. Same-store sales globally fell by 1%, marking the first decline since 2020. Amid a price war with other fast-food chains, McDonald’s $5 bundle has been popular, with 93% of franchisees offering the deal. The bundle includes a McDouble or McChicken sandwich, four-piece Chicken McNuggets, small fries, and a small soft drink. CEO Chris Kempczinski aims to grow McDonald’s loyalty program from 166 million to 250 million members. Currently, loyalty members account for 25% of sales and tend to spend more and visit more frequently. Meanwhile, McDonald’s launched a new drink-focused chain, CosMc’s, to compete with Starbucks and Dunkin’. CosMc’s, which also features Krispy Kreme doughnuts, is attracting more affluent customers than traditional McDonald’s locations. McDonald’s plans to maintain its full-year guidance for new stores, capital expenditures, and operating margins. The company is set to open 10,000 more locations within the next four years, aiming for a total of 50,000 stores by 2027.

— Ag markets today: Soybeans faced followthrough selling overnight, while corn and wheat dropped more than they gained Monday. As of 7:30 a.m. ET, corn futures were trading 3 to 4 cents lower, soybeans were 9 to 13 cents lower, SRW wheat was 11 to 12 cents lower, HRW wheat was 14 to 16 cents lower and HRS wheat was 12 to 14 cents lower. The U.S. dollar index was modestly firmer, and front-month crude oil futures were around 50 cents lower.

Strong performance by wholesale beef. Wholesale beef prices firmed $1.04 for Choice to $314.81 and $4.06 for Select to $301.52 on Monday. Despite the price strength, movement was strong at 145 loads. Even with that wholesale market strength, packer cutting margins remain solidly in the red as the average cash cattle price climbed $1.54 last week to $195.21.

Cash hog fundamentals continue to strengthen. The CME lean hog index is up another 44 cents to $92.29 as of July 26, matching the mid-May high and marking the 11th straight daily gain. The pork cutout value firmed $1.61 to $106.78 on Monday, the highest level since mid-August 2023. The firming pork cutout has kept packer margins in the black, giving them incentive to keep raising cash prices.

— Agriculture markets yesterday:

• Corn: December corn rose 2 1/4 cents to $4.12 1/4, ending near the session high.

• Soy complex: November soybean futures sunk 9 cents to $10.39 1/2 though settled nearer session highs. September meal futures rose 70 cents to $335.0 and near session highs. September bean oil futures fell 43 points to 42.58 cents.

• Wheat: December SRW wheat rose 6 3/4 cents to $5.55 1/4 and near the session high. December HRW wheat gained 7 1/4 cents to $5.69 1/4 and nearer the session high. September spring wheat futures firmed 3 cents to $5.94 1/2.

• Cotton: December cotton rose 122 points to 69.21 cents, closing nearer the session high

• Cattle: October live cattle fell $1.75 to $186.80 and nearer the session low. October feeder cattle closed down $3.10 at $255.20 and nearer the session low.

• Hogs: October lean hog futures plunged $3.375 to $74.825 though settled off session lows. Nearby August futures sunk $2.025 to $91.45.

— Quotes of note:

• Federal Reserve is expected to keep interest rates unchanged at 5.3% during its meeting today and Wednesday (announcement day). The central bank is anticipated to signal potential rate cuts starting in September. After three years of rapid price increases, inflation has significantly slowed. The Fed is now concentrating on its second major objective, the labor market, aiming to control inflation without increasing unemployment.

• Soft sales at McDonald’s. “The consumer across a number of these markets is being very discriminating, and I would point out consumer sentiment in most of our major markets remains low.” — McDonald’s Chief Executive Chris Kempczinski, on the fast-food giant’s sales softening last quarter.

• Back to basics. “After three years of breaking every record, we’re settling back into the old steel business.” — Jeremy Flack, CEO of steel and aluminum distributor Flack Global Metals.

— Eurozone’s GDP expanded by 0.3% quarter-on-quarter in the second quarter of 2024, matching the growth rate from the first quarter and exceeding the forecast of 0.2%. This growth was driven by positive performances in several major economies within the Eurozone, including France, Italy, and Spain. However, Germany, the largest economy in the Euro Area, experienced a contraction of 0.1% during the same period.

Country-specific performances
· France: France’s economy grew by 0.3% in Q2 2024, contributing positively to the overall Euro Area growth.
· Italy and Spain: Both countries also reported economic growth, though specific figures were not detailed in the sources.
· Germany: In contrast, Germany’s economy contracted by 0.1% in Q2 2024. This contraction followed a 0.2% growth in Q1 2024, highlighting ongoing economic challenges.

Germany’s contraction can be attributed to several factors:
· High Interest Rates: The industrial sector has been particularly strained by high interest rates, which have likely dampened investment and economic activity.
· Investment and Construction Sector: Preliminary data suggests that investment and the construction sector were significant drags on the economy.
· Weak Industrial Orders and High Inventory Levels: These factors, along with precautionary savings, have further weighed on economic performance.

Despite these challenges, there is some hope for a rebound in the second half of the year. Potential positive surprises could come from improvements in industrial order books and the highest increase in real wages in over a decade, which might boost consumer spending.

— U.S. national debt has reached a new milestone, surpassing $35 trillion for the first time on Monday, July 29. This increase comes just 209 days after the national debt first exceeded $34 trillion in early January 2024. The rapid accumulation of debt highlights the ongoing fiscal challenges faced by the United States.

Key points about this development:
· Accelerating debt growth: The national debt is growing at an unprecedented pace. It took only about seven months to add another trillion dollars to the debt.
· Historical context: For perspective, the national debt was around $907 billion just four decades ago.
· Debt-to-GDP ratio: The debt held by the public (excluding intragovernmental holdings) is projected to reach 99% of the U.S. gross domestic product (GDP) this year.
· Future projections: The Congressional Budget Office (CBO) estimates that the debt-to-GDP ratio will surpass 106% by 2027, breaking a nearly 80-year-old record set in 1946.

Contributing factors:
· Rising interest rates, increasing the cost of servicing existing debt
· Expanding mandatory spending programs like Social Security and Medicare
· Higher-than-expected costs of pandemic-era programs and recent tax credits

Budget deficit: The federal government is projected to run a $1.9 trillion budget deficit this year, which would be the third largest in U.S. history.

Future challenges: Congress and the next administration will face several fiscal deadlines in 2025, including the expiration of the current debt limit suspension on Jan. 1.

Market perspectives:

— Outside markets: The U.S. dollar index was weaker ahead of U.S. economic data with the euro and yen both firmer against the greenback. The yield on the 10-year U.S. Treasury note was weaker, trading around 4.17%, with a mixed tone in global government bond yields. Crude oil futures were lower, with US crude around $75.65 per barrel and Brent around $78.90. Both were seeing losses in Asian trading. Gold and silver futures were firmer ahead of U.S. market action, with gold around $2,386 per troy ounce and silver around $27.97 per troy ounce.

— Recent trends indicate that diesel fuel costs have gone down for U.S. farmers, providing some financial relief in an industry heavily reliant on this fuel type. As of mid-2024, diesel prices have been on a downward trajectory. In June 2024, the average price for a gallon of diesel in the U.S. was $3.72, which marked the lowest level in two years. This decline represents a significant drop from the record highs seen in the summer of 2022, when diesel prices peaked at $5.81 per gallon due to factors like the Russia-Ukraine war and supply chain disruptions. Experts are optimistic about the continuation of this trend. Patrick De Haan, head of petroleum analysis for GasBuddy, has advised farmers to consider locking in their diesel supplies for the fall, as prices are expected to fall by up to 25 cents per gallon over the next few weeks. This projection aligns with broader expectations for diesel prices to decline throughout 2024, which should provide ongoing relief across various industries, including agriculture.

Of note: There is only a 20-cent spread between gasoline and diesel at some locations in Iowa — diesel still more than gasoline but a much narrower spread than before. This weekend E15 was $3.39, and diesel was $3.59.

While the overall outlook is positive, it’s important to note that diesel prices can be volatile and subject to sudden changes due to refinery issues or geopolitical events. However, for the immediate future, the forecast suggests stable and lower diesel prices as the U.S. transitions from summer to autumn.

— End of trucking recession in sight as freight rates rise. For the first time in nearly two years, the average cost of moving goods by truck is set to rise by 0.2% year-on-year this month, signaling a potential end to the trucking recession, according to Bloomberg (link). Trucking executives are optimistic, noting that demand is returning to pre-pandemic levels. Knight-Swift Transportation Holdings Inc. CEO Adam Miller expects demand to build as we exit Q3 and see seasonal activity in Q4. The Russell 3000 Trucking Index, including major companies like JB Hunt Transport Services Inc. and Old Dominion Freight Line Inc., rose 9% this month, reversing an 8% drop from the first half of the year. Retailers are working through excess inventory and placing advance orders to avoid delays due to port backlogs and strikes. This has contributed to an increase in freight demand.

Despite the positive outlook, challenges remain. Manufacturing activity is still low, consumers are struggling, and there is an oversupply of trucks. The industry is in the early stages of recovery, with profits not expected to return to pandemic-era highs.

As many as 14% more truck drivers are on the road compared to March 2020, while freight volumes have only increased by 4%. Retailers are also favoring rail transport due to its lower cost.

— Get ready for more U.S. pork exports to Mexico. The average price for liveweight hogs in Mexico has reached approximately 50.90 pesos per kilogram, which translates to about $1.25 per pound liveweight. In contrast, the average price in the U.S. is significantly lower, at around 92¢ per pound lean or 68¢ per pound liveweight. Factors contributing to high prices in Mexico:

· Reduced hog inventory: Mexico has been experiencing a reduction in hog inventory due to months of financial losses, leading to fewer hogs available in the market. This scarcity drives up prices as demand outstrips supply.
· Inflation and cost of production: Inflation has increased the cost of groceries and feed, impacting pork prices. Despite some relief from lower feed prices, the overall cost pressures remain high.
· Shift in consumer preferences: With high beef prices due to extended droughts, consumers are increasingly substituting pork for more expensive beef cuts. This shift in demand has put additional upward pressure on pork prices.
· International trade dynamics: The price differential between the U.S. and Mexican pork markets has created a significant arbitrage opportunity. This has led to a surge in U.S. pork exports to Mexico, further tightening the supply in the Mexican market and supporting higher prices.

Impact on U.S. pork exports. Given the high prices in Mexico, U.S. pork exports to Mexico are expected to remain strong. The price disparity makes U.S. pork highly attractive to Mexican importers, ensuring robust demand for U.S. pork products.

Bottom line: The unprecedented price spread between U.S. and Mexican hog prices is primarily driven by reduced hog inventory in Mexico, inflationary pressures, and shifts in consumer preferences. These factors, combined with favorable international trade conditions, are expected to sustain strong U.S. pork exports to Mexico, supporting hog prices in both countries for the foreseeable future.

— Thailand raised its 2024 rice export forecast to 8.2 million metric tons (MMT), up from the previous outlook of 7.5 MMT, driven by demand from major markets, higher production, and a weaker Thai baht. However, this forecast still represents a 6.5% decline from 2023, when exports reached 8.77 MMT, surpassing the target of 8 MMT. So far in 2024, exports have totaled 5.08 MMT, a 25% increase from the previous year. The increased demand comes from countries like Indonesia and the Philippines, which are securing rice supplies for food security.

— Indigenous groups pull out of working group on Brazil’s Ferrograo railway. Indigenous people who see a threat to their ancestral lands from the construction of a railway to carry grains to a port in the Amazon pulled out of a work group created by the Brazilian government last year to advance the project. The Munduruku and Kayapo people, along with tribes from the Xingu reservation said in a letter to the transport ministry the work group was not doing its job of discussing the 1,000-km (620-mile) Ferrograo railway with all parties. The groups say the railway would lead to deforestation and affect the lands of 16 Indigenous peoples “all this to increase the profits of large transnational companies that export soybeans and corn.” Brazil’s Supreme Court last year suspended the plan pending more studies on the impact of the controversial railway.

— Ag trade update: Japan is seeking 119,145 MT of milling wheat in its weekly tender.

— Officials in West Texas declare state of emergency after area experiences more than 100 earthquakes over the past week; cause of seismic activity is suspected to be from oil and gas extractions. From the first large quake of magnitude 4.9, the county has experienced a total of 103 earthquakes, including 12 of magnitude three or more, said Justin Rubinstein, a geophysicist with the U.S. Geological Survey in Menlo Park, California. The rash of earthquakes is not naturally occurring, as Texas in general is not a very seismically active part of the country. Instead, it is “almost 99% likely” to be linked to local oil fields, Rubinstein said.

— NWS outlook: Daily scattered flash flooding and severe weather from the Mid-Atlantic into the Northern Plains/Midwest... ...Dangerous mid-summer heat wave to expand across the Central U.S. and Southeast; more hot weather across the West.

(NWS )

Items in Pro Farmer’s First Thing Today include:

• Grains face pressure overnight
• Corn CCI improves, ratings slip for soybeans and spring wheat
• Crop Progress Report highlights
• Cordonnier leaves U.S. yield, production forecasts unchanged

— Senate Majority Leader Chuck Schumer is planning a show vote on a House-approved tax package that has been stalled due to GOP resistance. Schumer (D-N.Y.) aims to highlight which lawmakers support the tax bill’s provisions and which do not. The measure has faced prolonged opposition, particularly from Idaho Senator Mike Crapo, the ranking Republican on the Senate Finance Committee, who reiterated his opposition on Monday. Despite this, some Republicans, like Senator Todd Young of Indiana, have expressed support for the legislation. The bill includes provisions to temporarily expand the child tax credit and restore several business deductions that have bipartisan appeal. It is not expected to clear the Senate.

— Senate Appropriations Committee may miss its goal of moving all spending plans before the August recess. The markup of the fiscal year (FY) 2025 Homeland Security appropriations package has been delayed, with members seeking more information on Secret Service funding. Senate Appropriations Vice Chair Susan Collins (R-Maine) stated that subcommittee leaders are in contact with the Secret Service to guide spending recommendations. The committee aimed to complete markup of all 12 spending plans before the recess, returning on Sept. 9. Committee Chair Patty Murray (D-Wash.) remains hopeful the full Senate will vote on spending bills in early September. However, the House has only cleared five of the 12 plans, making it unlikely that lawmakers will resolve significant differences in time, which means a continuing resolution would be needed to keep the government funded beyond Sept. 30.

— White House unveiled a new $1.7 billion lethal aid package for Ukraine, consisting largely of missiles and ammunition for missile, artillery and air defense systems the U.S. has already provided to Ukraine in its fight against Russia.

— USDA officially announces changes to the Enhanced Coverage Option (ECO) insurance program for the 2025 crop year. We alerted last week that these changes were coming. ECO is currently approved for 36 crops and RMA is expanding coverage options to almonds, apples, blueberries, grapes, and walnuts for the 2025 crop year and to citrus crops where the Supplemental Coverage Option is currently available in California and Arizona for the 2026 crop year. Premium support for all ECO-covered crops will increase to 65% to make the policy more affordable (same subsidy level available for SCO). This means the government will cover a larger portion of the premium costs, potentially making ECO more affordable for farmers. Previously, the government paid 51% of the premium for yield policies and 44% for revenue policies under ECO. Link to RMA announcement.

Facts and figures. Producers purchased the ECO option on revenue policies for 11.3 million acres this year, according to RMA. In 2023, producers were paid $414 million in ECO-revenue protection indemnities and 12 million acres were enrolled in the option.

ECO provides additional area-based coverage for a portion of a producer’s crop insurance policy deductible and can be purchased as an endorsement to various crop insurance policies. It offers 90% or 95% trigger levels, where a loss becomes payable based on expected yield or revenue. Trigger is the percentage of expected yield or revenue at which a loss becomes payable. ECO coverage is unaffected by participation in USDA’s Farm Service Agency’s (FSA) Agriculture Risk Coverage program for the same crop, on the same acres. Producers may select ECO regardless of FSA farm program election.

— China’s ruling Communist Party pledges to prioritize boosting consumer spending amid weak domestic demand, which threatens the country’s annual growth target despite an export boom. At a recent meeting led by President Xi Jinping, senior leaders agreed to shift economic policies toward improving livelihoods and promoting spending. They also promised new measures to support the economy but provided no specifics. Investors remain skeptical, pushing 10-year government bond yields to new lows, while the stock market showed mixed reactions. The Politburo’s broad pledges were seen as lacking detail, with economists urging unconventional measures to revive investor confidence. The meeting indicated a more realistic short-term economic assessment, paving the way for more supportive measures. Officials called for preventing excessive competition within industries and reassured that current economic challenges are temporary pains during the transition to new growth drivers. They also pledged support for local governments to convert unsold homes into public housing and ensure the completion of delayed units.

Key quotes:
· “Domestic effective demand is insufficient.”
· “[Challenges] in the external environment have increased.”

In response, officials signaled more supportive economic policies are coming:
· “Counter-cyclical regulation must be strengthened, and active fiscal policies must be implemented.”
· “We must launch a batch of incremental policy measures as soon as possible.”

The Politburo wants this policy support to “focus on boosting consumption.”
· “The focus of economic policies should be more on benefiting people’s livelihood and promoting consumption.”

One thing notably absent from the meeting readout: Policy support for the real estate sector.

Impact assessment from Trivium China: “The meeting readout was uncharacteristically blunt in its assessment of the economy and its demands for more policy support. The call for more active fiscal policy means infrastructure spending will increase in H2. The emphasis on boosting consumption suggests that an expansion of the consumer trade-in initiative is likely; officials may also roll out targeted measures like consumption vouchers or subsidies to promote domestic tourism. We’re doubtful this support will catalyze a sustained increase in consumption. Consumer confidence and spending will remain muted until the property sector picks up. Without more aggressive property sector support measures, that pick-up is at least six months away.”

— China’s FDI continues to plunge. Foreign direct investment (FDI) into China plunged 29.1% from year-ago to 498.91 billion yuan during the first half of this year, a record decline for the period. About 12.8% of the total, or 63.75 billion yuan went into the high-tech manufacturing industries, up 2.4 percentage points from the same period last year.

— China’s COSCO Shipping, Fortescue to build green fuel supply chain. China’s COSCO Shipping Corporation has signed a preliminary agreement with Australia’s Fortescue to jointly build a green fuel supply chain to help reduce pollution from the shipping industry, the Chinese company said on Monday. Link to details via Reuters.

— Dept. of Energy (DOE) announced the purchase of 4.65 million barrels of oil for the Strategic Petroleum Reserve (SPR), with deliveries scheduled to the Bayou Choctaw SPR site between Oct. 1 and Dec. 31, 2024. This purchase is part of a broader effort to replenish the SPR, which was significantly depleted following the release of 180 million barrels in response to the global supply disruptions caused by Russia’s invasion of Ukraine in 2022. DOE said they directly purchased a total of 43.25 million barrels of oil for the SPR for an average price of $77. DOE also noted they worked with Congress to halt the sale of 140 million barrels of SPR crude that had previously been scheduled.

The SPR currently holds approximately 375 million barrels of crude oil, a substantial decrease from the roughly 600 million barrels it held at the beginning of 2022. The DOE has been actively working to refill the reserve, having directly purchased a total of 43.25 million barrels of oil at an average price of $77 per barrel. This effort also includes the cancellation of previously mandated sales of 140 million barrels of SPR crude, thus securing these volumes for the reserve.

DOE Deputy Secretary David Turk emphasized the need for additional funds to continue replenishing the SPR. The DOE currently has $1.2 billion available, which would allow for the purchase of around 15 million barrels of crude. Turk indicated that the administration aims to secure more funding from Congress to further bolster the reserve, though he did not specify the exact amount needed.

The Biden administration’s strategy for replenishing the SPR includes direct purchases, exchange returns, and legislative measures to avoid unnecessary sales unrelated to supply disruptions. This approach aims to maintain the SPR’s operational readiness and protect the nation’s energy security while securing favorable deals for taxpayers.

— House Republicans oppose Biden’s procurement rule. House Republicans are urging the Biden administration to withdraw a proposed rule requiring the disclosure of greenhouse gas emissions and climate-related financial risks for federal contractors. Eight Republicans on the House Natural Resources Committee argue that the rule imposes significant financial burdens on contractors. They highlight that the Science Based Targets Initiative (SBTi) would validate manufacturers’ claims, costing contractors thousands in fees and potentially hundreds of thousands annually for implementing science-based targets. The proposed rule impacts the Department of Defense, General Services Administration, and NASA. While the administration is unlikely to withdraw the rule, it would likely be subject to change if Republicans win the White House in the upcoming election.

— USDA extends comment period on livestock competition rule. USDA’s Agricultural Marketing Service (AMS) has extended the comment period for its proposed rule on Fair and Competitive Livestock and Poultry Markets by 15 days, moving the deadline to Sept. 11. Previously, comments were due by Aug. 27. The rule aims to define unfair practices as those that harm market participants and the market. The agency will publish a Federal Register notice to announce the extension.

— Sinergium Biotech leads H5N1 avian flu vaccine project. Argentina-based Sinergium Biotech will spearhead a project to accelerate the development of a human vaccine against the H5N1 avian flu virus, announced by the World Health Organization (WHO) and the Medicines Patent Pool. The initiative aims to enhance pandemic preparedness, particularly in low- and middle-income nations, by fostering pharmaceutical development and production capabilities. Sinergium Biotech has developed candidate H5N1 vaccines. Upon establishing proof-of-concept, the technology, materials, and expertise will be transferred to manufacturing partners. In early July, the U.S. Dept. of Health and Human Services awarded Moderna a $176 million contract for developing an mRNA-based bird flu vaccine. The CDC states that the risk to the public from H5N1 is currently low.

— Kari Lake and Mark Lamb face off in the Arizona Republican Senate primary today, among other candidates. Lake is a former news anchor for Fox 10 News in Phoenix who transitioned into politics. She is known for her strong conservative stance and alignment with former President Donald Trump. Lake previously ran for Governor of Arizona in 2022 but narrowly lost to Democrat Katie Hobbs. Lamb is the Sheriff of Pinal County, Arizona, known for his tough stance on law enforcement and border security. He has been in office since 2017 and has built a reputation through media appearances and his involvement in conservative causes. Polls indicate that Lake is leading in the primary, with a significant double-digit advantage over Lamb. This lead is attributed to her strong name recognition and substantial fundraising efforts.

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