Fed’s Key Inflation Rate Fell More Than Expected in June

Congress leaves with key funding & farm bill matters in limbo: See you in mid-September

USDA daily export sales to China, Mexico, and Unknown Destinations

• 325,000 metric tons soybeans to China during the 2023-2024 marketing year
• 171,460 metric tons soybeans to Mexico during the 2023-2024 marketing year
• 413,000 metric tons soybeans to unknown destinations during 2023-2024 marketing year

Congress departed for its long summer break, with lawmakers returning in mid-September. With progress way behind in appropriations measure, that clearly signals a farm bill extension. More in Congress section, including several last-minute-filed farm bill-related measures.

New Jersey Governor Phil Murphy signed legislation banning sow crates and veal-calf stalls. Meanwhile, the so-called EATS Act, the livestock industry’s answer to California’s Proposition 12, could jeopardize more than 1,000 health, safety, and welfare laws on the state level and threaten states’ rights, said a report by a Harvard Law School group. Details on both of these items in Livestock section.

The National Pork Producers Council (NPPC) released its third quarter pork industry economic update to provide a snapshot of top pork industry issues, current trends, and marketing conditions impacting U.S. pig farmers. Details in Livestock section.

The U.S. Centers for Disease Control and Prevention (CDC) is raising an alarm about the link between lone star tick bites and meat allergies. Details in Health section.

German chemical giant BASF has reported a decline in its earnings for the second quarter of 2023, attributing it to lower prices and volumes in several of its business sectors. However, the company’s agriculture division stood out as an exception, where it managed to increase prices. Details in Markets section.

Railroad companies such as Union Pacific, CSX, and Norfolk Southern are facing significant profit declines amid a persistent freight recession.

Ford Motor has delayed its electric vehicle (EV) production targets and cautioned about escalating losses, citing slower-than-anticipated uptake of its EVs.

U.S. regulators plan to make large banks bolster their financial footing, moves that could have an outsize effect on companies such as American Express and Morgan Stanley that rely on types of fee income targeted by the new rules. Banking regulators on Thursday proposed new rules that could raise overall capital requirements by nearly 20% at the largest banks, officials said. More in Markets section.

The Bank of Japan surprised financial markets by choosing to ease its control over bond yields, the equivalent of an interest-rate increase.

Global coal usage this year is predicted to level with last year’s record-setting high, according to a recent report from the International Energy Agency. Details in Markets section.

New legislation under consideration in the Senate could obligate automakers to continue including AM broadcast radio in all new cars, despite resistance from manufacturers of electric vehicles.

Russia/Ukraine items today include:
• Peter Zeihan on ‘the end of Ukrainian agriculture.’
• Russia’s decision to withdraw from the Black Sea Grain Initiative is expected to challenge Ukraine’s economy further.
• African leaders press Putin for grain deal.
• Russia nearly triples wheat exports to Africa in H1.
• The U.S./Russia relationship appears to be at a low point, with Russia’s ambassador to the U.S. characterizing it as “practically nonexistent” following a recent development.
• Brazil denied an American request to extradite Sergei Cherkasov, an alleged Russian spy.

Lawmakers reappointed Phillip Swagel to a second four-year term as Congressional Budget Office director.

China has maintained its position as the world’s largest meat importer since 2019, despite a recent decrease in imported meat volumes, according to a USDA Economic Research Service report. Details in China section.

China has accused unnamed U.S.-backed hackers of targeting its earthquake monitoring center, potentially for espionage purposes.

The Labor Department issued its first-ever hazard alert for heat and plans to step up enforcement in agriculture and construction, high-risk industries. “Federal law requires employers to protect workers against heat,” says the alert, issued late Thursday. “Employers have a legal and moral responsibility not to assign work in high heat conditions without protections in place for workers, where they could be literally worked to death. This is true even in Texas, despite its recent law limiting local ordinances on heat illness protections.” The alert added: “The agency is planning enhanced enforcement actions, with a strategic focus on geographic locations and industries where high heat impacts vulnerable worker populations. This means more inspection activity as well as a broader use of enforcement tools, especially where workers are in clear danger.”

The U.S. Forest Service is awarding more than $1 billion in grants for the planting of trees that is aimed at helping to bring down temperatures in the long term. And the Department of Housing and Urban Development is providing “billions” to open cooling centers and make buildings more heat resistant.

The Biden administration is poised to issue a proposal as early as today ordering automakers to increase the average fuel economy of their vehicles.

The U.S. Supreme Court has allowed work to continue on the controversial Mountain Valley Pipeline, a $6.6 billion project managed by Equitrans Midstream. This decision resolves the company’s request and nullifies lower-court orders that previously halted the construction. The pipeline is approximately 300 miles long and is supported by Sen. Joe Manchin, a Democrat from West Virginia. The Mountain Valley Pipeline project has, however, sparked serious backlash from environmental activists.

Facebook removed content related to Covid-19 in response to pressure from the Biden administration, including posts claiming the virus was man-made, according to internal company communications viewed by the Wall Street Journal.

Equities today: Asian and European stock markets were mixed in overnight trading. U.S. Dow opened around 180 points higher. In Asia, Japan -0.5%. Hong Kong +1.3%. China +1.8%. India -0.2%. In Europe, at midday, London +0.1%. Paris -0.2%. Frankfurt -0.1%.

U.S. equities yesterday: The major indices finished in the red, falling into negative territory late in the day. The Dow was down 237.40 points, 0.67%, at 35,282.72. The Nasdaq declined 77.17 points, 0.55%, at 14,050.11. The S&P 500 was down 29.34 points, 0.64%, at 4,537.41. All three indexes are still up for the week, but barely.

Railroad companies such as Union Pacific, CSX, and Norfolk Southern are facing significant profit declines amid a persistent freight recession. The downturn, marked by reduced sales, is being exacerbated by an uptick in labor costs. Second quarter operating profits for these companies have fallen by a minimum of 12% when compared to the same period last year. Signs of recovery from the freight recession remain scant, putting additional financial pressure on these railroad companies.

German chemical giant BASF has reported a decline in its earnings for the second quarter of 2023, attributing it to lower prices and volumes in several of its business sectors. However, the company’s agriculture division stood out as an exception, where it managed to increase prices. In light of this, BASF has also reduced its full-year earnings outlook. In an effort to mitigate these losses and improve profitability, the company is rolling out cost-saving measures designed to yield annual savings of roughly 300 million euros (equivalent to $330.4 million). Despite the current downturn, BASF anticipates that the global demand for its products will not continue to decrease in the second half of 2023. This expectation is influenced by a decline in chemical raw material inventories across various customer industries. However, Dr. Martin Brudermüller, Chairman of the Board of Executive Directors, indicated a cautious outlook, predicting a slow recovery due to an expected slower-than-anticipated growth in global consumer goods demand. As a result, he foresees that profit margins will continue to be squeezed. BASF’s lackluster performance mirrors similar trends within the chemical sector, with other firms in the industry also presenting disappointing results in their recent earnings updates.

Biggest banks face 19% boost in capital requirements. U.S. banking regulators, including the Federal Reserve, FDIC, and the Office of the Comptroller of the Currency, announced a significant overhaul of capital rules. This is proposed as a safeguard, compelling large lenders to bolster their financial buffers and better handle unexpected losses. Banks possessing assets of at least $100 billion are expected to see a 16% increase in the amount of capital they must hold. The eight largest banks could experience an estimated 19% surge, while lenders with assets between $100 and $250 billion will have to hold roughly 5% more capital.

The comprehensive overhaul covers risks associated with a range of financial products, such as credit-default swaps, corporate bonds, derivatives, repos, commodities, and option contracts. The involved agencies put forward different models to calculate risk-weighted assets tied to diverse products. This marks a significant shift in the way lenders calculate risks associated with their offered services. More details about this overhaul are disclosed in a 1,000-plus-page document released by the agencies.

Agriculture markets yesterday:

• Corn: December corn futures fell 6 cents as the tumbling wheat market pressured prices, settling at $5.42 1/4.
• Soy complex: November soybeans fell 22 cents to $13.98, ending the session below the 10-day moving average and near the session low. August meal fell 20 cents to $464.50. August soyoil fell 166 points to 68.61 cents.
• Wheat: December SRW wheat fell 6 3/4 cents to $7.35 1/2, nearer the session low. December HRW wheat rose 3/4 cent to $8.78 and near mid-range. December spring wheat rose 7 1/2 cents to $9.15.
• Cotton: December cotton plummeted 355 points to 84.38 cents, the contract’s largest daily loss since August 2022.
• Cattle: August live cattle fell 62 1/2 cents to $178.05 today and nearer the session low. August feeder cattle rose 45 cents to $244.65 and nearer the session high.
• Hogs: August lean hog futures edged up 37.5 cents to $102.25 Thursday, while the deferred contracts posted varying losses.
  

Ag markets today: Corn, soybeans and SRW wheat extended Thursday’s losses overnight, while the HRW and HRS markets also weakened. As of 7:30 a.m. ET, corn futures were trading 6 to 7 cents lower, soybeans were mostly 8 to 11 cents lower, the winter wheat markets were mostly 9 to 10 cents lower and spring wheat was 7 to 8 cents lower. Front-month crude oil futures were modestly weaker, while the U.S. dollar index was down more than 350 points.

Market quotes of note:

• Christine Lagarde, the ECB’s president, suggested that the central bank could pause on raising rates in September, as data showed high prices sapping consumers of their buying power, putting the bloc’s economy at risk. Data this morning from Germany showing that Europe’s biggest economy is stagnating underscored this concern.
  
• Ford Motor has delayed its electric vehicle (EV) production targets and cautioned about escalating losses, citing slower-than-anticipated uptake of its EVs. According to CFO John Lawler, pricing is a significant factor impacting adoption rates. To tackle this, Ford has recently decreased prices on its electric F-150 Lightning pickup, rolling back multiple price hikes from the past years. “The transition to EVs is happening, it just may take a little longer,” Lawler said after the automaker’s second-quarter results. Still, Ford performed well in its second-quarter results, surpassing Wall Street’s expectations driven by robust pricing and demand for their traditional and commercial vehicles.
  
• Scorched earth. With record temperatures spanning the globe, July is shaping up to be the hottest month on record, according to data released by space and weather divisions of the European Union and the United Nations. It surpasses a previous record set in 2019 and comes after last month registered as the hottest June ever. The rising temperatures, including in the Earth’s oceans, prompted United Nations Secretary-General António Guterres to declare, “The era of global warming has ended; the era of global boiling has arrived.”
  

Could a recession still be years away? Even though forecasters have predicted a downturn since the Federal Reserve began increasing interest rates more than a year ago, they have consistently pushed back the predicted start date of this predicted recession. A Wall Street Journal article (link) says an unusual aspect is that this predicted recession would occur after only four years of economic expansion. In the recent history, expansions have averaged 8.6 years, which suggests a continuing economic expansion could potentially push the recession a few years into the future. The key challenge for the Federal Reserve, the article concludes, would be to manage inflation to a level that does not force the economy into a contraction.

Market perspectives:

• Outside markets: The U.S. dollar index was weaker, with the euro and British pound firmer against the greenback. The yield on the 10-year U.S. Treasury note was weaker, around 3.95%, with a mixed tone in global government bond yields. Crude oil was little changed, with U.S. futures around $80 per barrel and Brent around $83.70 per barrel. Gold and silver were higher ahead of the inflation updates, with gold around $,1955 per troy ounce and silver around $24.43 per troy ounce.

• The Bank of Japan surprised financial markets by choosing to ease its control over bond yields, the equivalent of an interest-rate increase. As a result, Japan’s 10-year yield has reached its peak since 2014, a change that induced significant fluctuations in the value of the yen. This decision has prompted discussions about whether Japan is beginning to standardize its policy. Japanese stocks and bonds fell sharply. U.S. bond markets experienced a decline due to anticipations that increased yields in Japan could motivate investors to pull their money out and return it to Japan. This is significant because Japanese investors constitute the largest foreign group holding U.S. government debt. Despite the market’s drop, the U.S. Treasury’s 10-year yields remained steady at 4%, despite having increased by 13 basis points just the day before.

• Global coal usage this year is predicted to level with last year’s record-setting high, according to a recent report from the International Energy Agency. Some analysts say this trend could potentially hinder initiatives to combat climate change by reducing fossil fuel consumption. The coal market, which experienced significant upheaval due to the trifecta of the Covid-19 pandemic, war in Ukraine, and other disruptions over the past three years, has reverted to patterns seen before the pandemic. Decreasing demands for coal in Europe and the U.S. have been counterbalanced by burgeoning coal use in Asia.

• Ag trade: South Korea purchased 68,000 MT of corn expected to be sourced from South America or South Africa.

• NWS weather outlook: There is a Slight Risk of excessive rainfall over parts of the Great Lakes/Ohio Valley on Friday and over the Central Appalachians on Saturday... ...There is an Enhanced Risk of severe thunderstorms over parts of the Great Lakes/Ohio Valley westward to the Middle Missouri Valley... ...Excessive Heat Warnings and Advisories from parts of Central/Southern Plains eastward to the Northeast/Mid-Atlantic and smaller areas over portions of California, Southwest, and the Southern Rockies.

Items in Pro Farmer’s First Thing Today include:

• Grains face pressure overnight
• Russia cuts wheat export tax
• Cash cattle standoff continues
• Cash hog advance slows

— Legislative activity in the House abruptly stalled Thursday due to escalating disputes over spending levels and contentious social matters, raising concerns about a possible government shutdown before the Sept. 30 deadline.

As House and Senate members have now left Washington D.C. for the extended August recess, none of the budget disagreements have been resolved.

The House’s planned return date is Sept. 12, leaving just 12 scheduled workdays that month to accomplish a significant agenda. This includes the passage of 11 out of 12 annual appropriations bills, and resolving differences with the Senate, making the threat of a shutdown at least possible.

Background: The two chambers are about even at the Committee level, with all completed by the Senate and all but two by the House. The House has completed one appropriations bill, but the Senate has completed none. The Senate last night cleared its version of the fiscal year (FY) 2024 defense authorization bill in an 86-11 vote, two weeks after House Republicans pushed through a party-line bill packed with controversial provisions.

Of note: More than $100 billion separates the House and Senate government-funding bills, a gap that will make bicameral talks especially challenging ahead of the Sept. 30 deadline to avoid a shutdown.

House Speaker Kevin McCarthy (R-Calif.) tempered the delay in the appropriations process. McCarthy met with Senate Majority Leader Chuck Schumer (D-N.Y.) and indicated they discussed the possibility of beginning negotiations on the FY 2024 spending measures before Sept. 30. “Leader Schumer had the same commitment that I had. Let’s get this work done and let’s try to get it done before Sept. 30,” he said.

McCarthy said the House GOP already is cutting spending. “It’s not just the Ag bill. It’s any bill that comes to the floor. We are going to look at any place that we can find and save money, because we’re saving the hard-working American taxpayer their money,” he said.

The chances of approving a continuing resolution (CR) are murky, considering the profound disagreements over expenditures and the nonchalance of extreme conservatives toward the repercussions of a federal closure. “If necessary, we should exploit a governmental shutdown as a bargaining chip,” stated Rep. Bob Good (R-VA) this week. “The majority of our actions here are flawed, to begin with.”

President Joe Biden and legislative heads had optimistically aimed for a tough but agreed compromise on spending limits to prevent a debt default, which they believed would facilitate a comparatively hassle-free budget process. However, these plans have been disrupted due to some House hardliner insistence on more substantial cuts and inclusion of language on topics like abortion, gender, and other societal issues.

As for the House FY 2024 Ag/FDA appropriations bill, Democrats and hardline Freedom Caucus members are both unhappy with House appropriators’ proposal to fund agriculture programs. The far-right-wing faction of the Republicans holds the view that recouping previously approved dollars via the current bill, known as rescissions, shouldn’t be classified as cuts. The internal conflicts within the House GOP, including a contentious abortion pill proposal, leave the Agriculture/FDA spending plan in a state of uncertainty.

Rep. Victoria Spartz (R-Ind.) wants to cut off funding to USDA to operate the fee-funded research and promotion programs, known as checkoffs. No taxpayer dollars are used in administering checkoff programs, which are funded entirely by the producers who pay into them. Rep. Spartz took to the floor during a procedural hearing on the House Agriculture Appropriations bill (HR 4368) to defend her amendment, where she repeatedly claimed commodity checkoff boards lacked transparency. But the American Soybean Assn. points out that “each national checkoff program follows rigorous auditing and financial documentation required by USDA and the U.S. Government Accountability Office.”

Freedom Caucus Chairman Scott Perry (R-Pa.) filed amendments attacking various aspects of the federal sugar program, which is regularly targeted during farm bill debates.

Although the final House bill will not become law due to Democratic control of the Senate and President Joe Biden’s very likely refusal to sign, the disputes hint at future challenges when considering the farm bill this fall. In the Rules Committee meeting Wednesday, legislators debated about the spending amount in the bill for nutritional programs, specifically focusing on the Special Supplemental Nutrition Program for Women, Infants, and Children. Rules ranking member and House Agriculture Committee member Jim McGovern (D-Mass.) lambasted agricultural appropriations leader Rep. Andy Harris (R-Md.) for not sufficiently funding the program. McGovern criticized the lack of support for vulnerable populations, sarcastically commenting about newborns lacking super PACs. He also denounced the bill as “one of the most offensive” ones he’s seen on nutrition-related matters. Harris defended his funding cuts, arguing that they are needed to control excessive spending in Washington D.C.

House Ag Committee Chair G.T. Thompson (R-Pa.) has said he isn’t interested in changing SNAP work requirements in the farm bill. But Democrats are careful about not getting rolled on this issue and have established a House Democratic task force led by Rep. Bennie Thompson (D-Miss.) aiming to center around the threat to SNAP and other food programs. Democrats hope this focus will stop them getting rolled by Republicans during the farm bill negotiations. “If we don’t stand up and fight back, there are going to be a lot of people who could go hungry in this country,” said Rep. Jim McGovern (D-Mass.), a longtime anti-hunger advocate who sits on the task force.

Regarding a new farm bill, it is now clear there will be a short-term extension, as some provisions expire at the end of September. The real farm bill deadline is at the end of the year. Thompson said he hopes to have a full committee markup in September.

Some lawmakers did the usual before they exited for a six-week recess: introduce bills, in this case several farm bill related measures. These include a proposal by Sens. Chuck Grassley (R-Iowa) and Sherrod Brown (D-Ohio) to tighten commodity program payment limits (link for summary; link for text). The Grassley-Brown bill would set a maximum commodity payment of $125,000 per person and $250,000 per farm per year; similar to the current limit of $125,000 per farmer with spouses automatically eligible for subsidies. Within that cap, marketing loan gains and loan deficiency payments would be capped at $75,000 per operation. The bill would require recipients to perform at least 1,000 hours of labor and management annually, equal to working full time for 25 weeks (or 50% of their commensurate share of total farm labor and management requirements). It would be a “hard cap” because it would eliminate loopholes and lax definitions now available. The Grassley-Brown bill also would remove a provision that doubles the payment limit for peanut farmers and would end an exemption from payment limits for farms organized as general partnerships.

Also on Thursday, Sen. Cory Booker (D-N.J.) filed a bill to restrict corporations and their subsidiaries, pension funds and investment funds from buying or leasing agricultural land. The investors could keep the land they own now but would be eligible for USDA programs.

Meanwhile, the New Democrat Coalition, a group of 100 center-left House Democrats, outlined its priorities for an upcoming farm bill, marking the first time the coalition has done so.

Bottom line: The last time we went without an omnibus spending measure was in 2005 in completing the 2006 appropriations. Republicans lost the House that year. Says one Washington veteran: “Truth be told, nobody in the real world knows what an appropriations bill is.”

— The House approved a measure, 221-206, to repeal a Biden administration rule that expanded federal protections for the lesser prairie chicken under the Endangered Species Act. Despite passing with bipartisan approval in the Senate back in May, the resolution, known as SJRes. 9, is anticipated to be vetoed by President Joe Biden. A two-thirds majority from voting members in both legislative chambers is enough to nullify a presidential veto. The House still must decide on another Senate-passed measure, SJRes. 23, which is looking to restore a rule from the Trump era that tightens the interpretation of “critical habitat” under the Endangered Species Act.

— The House Ag Committee, by voice vote, approved legislation (HR 4763) that would establish a regulatory framework for cryptocurrencies and clarify the authority of the Commodity Futures Trading Commission in regulating digital commodities. The top Democrat on the panel, Rep. David Scott (Ga.), said he couldn’t support the crypto bill in its current form. “As it currently stands the bill is inadequate on several levels and as such,” Scott said Thursday. The legislation doesn’t go far enough to protect investors and prevent conflicts of interest, he said.

The Senate included an amendment to the defense bill passed Thursday aimed at curbing the use of crypto in illicit transactions. The measure would require the Treasury Department to set examination standards for financial firms engaged in crypto activities. It would also mandate that the department conduct a study on combating tools used to make crypto transactions more anonymous. That would include recommendations for legislation or regulation to address the technologies and data on their usage.

— New legislation under consideration in the Senate could obligate automakers to continue including AM broadcast radio in all new cars, despite resistance from manufacturers of electric vehicles. On Thursday, the Senate Commerce, Science, and Transportation Committee voted to move forward with a revised bipartisan bill (S 1669). This bill directs the Department of Transportation to mandate carmakers to preserve AM radio functionality in all new vehicles without imposing additional charges. This legislation could have significant implications for future car models, especially those produced by electric vehicle manufacturers.

— Peter Zeihan on ‘the end of Ukrainian agriculture.’ Zeihan, an American author on geopolitics, writes that the situation concerning the grain deal between Russia, Ukraine, and Turkey, brokered by the United Nations, appears to be deteriorating. Russia has withdrawn from the agreement, and Ukrainian agriculture is facing a severe threat. He says Russia has reportedly been engaging in aggressive actions towards the infrastructure that facilitates the delivery of Ukrainian wheat, corn, and sunflower to global markets. The intention behind these actions could be a bid to undermine the Ukrainian economy and potentially incite a famine in the region.

As alternative paths for exporting these commodities prove challenging and inefficient due to cost and risk factors, Ukraine’s exports have already taken a significant hit, decreasing by two-thirds even prior to this deal’s collapse. The winter wheat crop, in particular, is expected to greatly suffer, with the current situation predicting it could be the last sizable harvest to make it to international markets, Zeihan notes.

If Russia persists in targeting agricultural infrastructure in Ukraine, Zeihan says not only might the Ukrainian capacity to export crops be affected, but its potential to feed its own citizens could also be compromised. There are predictions that Ukraine could transition from an exporter to an importer of food within a year due to this situation.

Facts and figures: Ukraine has harvested 11.2 million metric tons (MMT) of the 2023 grain crops, according to the Ukrainian Ministry of Agriculture, including 8.063 MMT of wheat, 2.881 MMT of barley and 280,100 metric tons of peas.

— Russia’s decision to withdraw from the Black Sea Grain Initiative is expected to challenge Ukraine’s economy further. This move might cause a rift with China, the major importer of Ukrainian grain, as reported by the Wall Street Journal (link). Statistics reveal that 24% of grain exports through the initiative were directed towards China, with Spain (18.2%) and Turkey (9.9%) trailing behind. Additionally, out of all the corn exports through this deal, 34.2% were shipped to China, while 25.7% were delivered to various other countries and 18.3% to Spain. Despite Russia’s exit, China has urged for the continuation of the deal, although so far, this hasn’t shifted Russia’s stance. Russia reaffirmed that it could independently manage the quantities of agricultural goods previously transported through the Black Sea deal.

— African leaders press Putin for grain deal. African leaders pressed Russian President Vladimir Putin to renew a deal on the export of Ukrainian grain and move ahead with their peace plan to end the Ukraine war. The African leaders are fearful of the war’s impacts on food prices, especially since Russia ended the Black Sea grain deal. Putin said rising world food prices were a consequence of Western policies that predated the war in Ukraine. He said Moscow respected the African peace proposal on Ukraine and was carefully studying it.

— Russia nearly triples wheat exports to Africa in H1. Russia exported 9 MMT of wheat to African countries during the first half of this year, Interfax news reported, citing Russian Agriculture Minister Dmitry Patrushev. That was nearly triple the level of the same period last year. Overall ag exports nearly doubled during the same period.

— The U.S./Russia relationship appears to be at a low point, with Russia’s ambassador to the U.S. characterizing it as “practically nonexistent” following a recent development. This change in diplomatic relations is mainly due to the Biden administration’s decision to send cluster munitions to Ukraine. Cluster munitions, often called cluster bombs, are weapons that carry numerous smaller bomblets or submunitions. These weapons have a wide area of effect, as the canisters break open at a specified altitude, distributing bomblets across a large area. While these weapons can potentially be highly effective against military targets, they pose significant risks for civilian populations due to their wide-range impact. Ukraine has begun using these cluster bombs, supplied by the United States, as part of a counteroffensive which is gaining momentum after initially slow progress. However, the use of cluster munitions is controversial due to its potential effects on civilians, escalating further tension between the involved nations.

— Brazil denied an American request to extradite Sergei Cherkasov, an alleged Russian spy. The U.S. had possibly hoped to swap Cherkasov for Evan Gershkovich, a correspondent for the Wall Street Journal jailed in Russia on trumped-up charges of espionage. The U.S. indicted Cherkasov in March, accusing him of studying in the country under a false identity while gathering intelligence about the war in Ukraine.

— Legislation proposed in the House aims to help specialty crop farmers by establishing a grant scheme to mitigate the expenses tied with implementing automation into their systems.

Rep. David Valadao (R-Calif.) introduced two bipartisan bills to improve the domestic specialty crop industry — the Specialty Crop Domestic Market Promotion Program Act and the Specialty Crop Mechanization Assistance Act. Specialty crops are a cornerstone of California agriculture — the state produces the most specialty crops in the country both in quantity and diversity, with over 400 different commodities produced in the state per year.

The Specialty Crop Mechanization Assistance Act outlines creation of a grant scheme overseen by USDA’s Agricultural Marketing Service. It would facilitate the funding for purchases and training relating to “automated systems and tools.” To become eligible, grant recipients must match at least 50% of the offered funds. It includes investments like equipment to manage dust levels during harvesting, grinding and chipping, sorting, phytosanitary treatments, infrared and pasteurization tools, traceability methods, and storage and warehousing provisions. The grant scheme could also extend to the procurement of drones, sensors, and similar equipment types. Link to text of bill.

The Specialty Crop Domestic Market Promotion Program Act would create a program that helps specialty crop producers market their products to access American markets. It replicates the popular Market Access Program (MAP) through USDA’s Agriculture Marketing Service (AMS) specifically for specialty crop producers to break into niche domestic markets. Link to text of bill.

More information from Rep. Valadao’s office:

Industry Supporters: California Fresh Fruit Association, Almond Alliance, Specialty Crop Farm Bill Alliance

Specialty Crop Domestic Market Promotion and Development Program Act of 2023

To amend the Specialty Crops Competitiveness Act of 2004 to direct the Secretary of Agriculture to establish a program under which the Secretary will award grants to eligible organizations to encourage the development, maintenance, and expansion of commercial domestic market for domestically produced specialty crop commodities.

• The existing Market Access Program (MAP) through USDA’s Agriculture Marketing Service (AMS) is an extremely popular and impactful program for American farmers hoping to access foreign food markets. Funded at $200 million, MAP time and again provides a valuable return on investment for our nation’s ag producers.
• We hope to replicate this program domestically for Specialty Crop producers, especially for times of extreme market stress/anomalies.
  • During the port crises that resulted from the COVID Pandemic, our farmers were faced with vast surpluses of their product that had no access to shipment overseas. These are high-value, perishable goods. Should a domestic marketing program exist, our producers and industry groups would be able to apply for federal dollars that would go towards marketing their products across the United States, driving up demand in times of high supply to keep costs profitable, or at least stable.
    • This also cuts down on overall food waste by providing specialty crop growers the opportunity to move more product.
• Cosponsors: Darren Soto, Jim Costa, Doug LaMalfa
  

Specialty Crop Mechanization Assistance Act of 2023

To amend the Specialty Crops Competitiveness Act of 2004 to direct the Secretary of Agriculture to establish a program under which the Secretary will award grants to specialty crop producers to acquire certain equipment and provide training with respect to the use of such equipment.

• Our specialty crop producers are facing ever-increasing input costs to produce their high value foods. To remain competitive, we must make it easier for farmers to adopt advanced, innovative technologies that reduce costs of all kinds, especially in the labor department.
• This bill aims to create a reimbursement-based cost-share program which would permit growers/processors to invest more in these time/money-saving technologies.
  • It’s frustrating to visit ag expositions that showcase incredible technologies when, more often than not, they are simply too expensive for a typical farmer to invest in and deploy on their operations.
• Cosponsors: Jim Costa, Doug LaMalfa, Jimmy Panetta

— Lawmakers reappointed Phillip Swagel to a second four-year term as Congressional Budget Office director, House and Senate Budget Committee leaders announced yesterday. His next term will end Jan. 3, 2027.

— Senate Majority Leader Chuck Schumer (D-N.Y.) on Thursday filed motions to cut off debate on Philip Jefferson’s nomination to be vice chair of the Federal Reserve and on Lisa Cook and Adriana Kugler’s nominations to sit on the Fed’s Board of Governors. This sets up Senate votes for early September to install three of President Joe Biden’s picks to the central banking system.

— China has maintained its position as the world’s largest meat importer since 2019, despite a recent decrease in imported meat volumes, according to a USDA Economic Research Service report (link). In 2022, its imports were 43% higher than those of Japan, the second-largest meat-importing country. Factors such as disease, strict environmental laws, and the departure of small-scale farmers have limited China’s meat supply, resulting in an increase in domestic prices and making imports more appealing.

Pork, the most consumed meat in China, generally dictates the nation’s meat supply and demand trends. The African swine fever epidemic in 2019 substantially lowered China’s pork supply, which boosted its position as the world’s top meat importer over Japan. Even though pork production recovered and meat imports subsequently fell, China retained its ranking in 2022.

At the same time, beef imports have been increasing because longer production cycles, insufficient grazing lands, and persistent disease have hindered China’s ability to meet domestic beef demand. Chinese consumers are also consuming more poultry—mainly because it tends to be the most affordable meat—yet rising feed costs and diseases have inflated domestic poultry prices, leading to higher poultry imports.

While China’s meat consumption appeared to reach a peak after 2014, statistical models project that consumption will continue to rise through 2031. Trends such as changes in diet and moderate growth in income and prices drive this prediction. However, the Covid-19 pandemic and subsequent economic downturn in 2022 have dampened consumption and the associated import prospects. Other factors — like ongoing disease risks and the high cost of livestock feed, which lowers profitability for local producers — continue to impact the market.

— China has accused unnamed U.S.-backed hackers of targeting its earthquake monitoring center, potentially for espionage purposes. City administrators in Wuhan reported that malware was found in an earthquake reporting system’s data collection stations, operated by the Wuhan Seismic Monitoring Centre in Hubei. Investigators indicated that a Trojan virus created a backdoor into the compromised devices, allowing the hackers to take control and steal seismic intensity data.

While the police’s statement did not name a specific source, a report by CCTV suggested that the U.S. was behind the attack. China condemned the incident as “irresponsible behavior” but refrained from officially naming the U.S. as the perpetrator. Geoscientist Zhao Weiguo highlighted that detailed seismic data can potentially be used for military purposes, such as identifying underground structures suitable for air-raid shelters or bunkers.

It was also mentioned that the U.S. Geological Survey operates some seismic monitoring stations in China. Zhao warned that hacking the system could either allow for theft of critical data or sabotage of the system, both of which could have serious consequences, especially during conflict.

These accusations from China come at a time when Washington and Western intelligence agencies have blamed Beijing for conducting cyber intrusion campaigns globally, including the reported hacking of the email accounts of high-ranking U.S. officials and potential threats to critical U.S. infrastructure.

China’s foreign ministry has labeled these claims from the U.S. as “attacks and smears.” Mao Ning, ministry spokeswoman, insisted that the U.S. should stop “politicizing and weaponizing” cybersecurity and urged for common rules to be established and followed through dialogue.

— The U.S. Supreme Court issued an order permitting Equitrans Midstream Corp. to continue construction of the Mountain Valley Pipeline in West Virginia, thus overturning a lower-court ruling that had halted the project. This decision is seen by some as a victory for Sen. Joe Manchin (D-W.Va.).

In a brief statement, the Supreme Court suggested it might consider legal challenges posed by environmental groups, however, no clear reason was given as to why it decided to allow the pipeline construction to go forward.

This decision represents a setback for the Wilderness Society and other environmental organizations that sought an injunction to stop the project. They contended that the construction of the Mountain Valley Pipeline would detrimentally affect endangered species and accused the Forest Service and Bureau of Land Management of violating environmental laws by greenlighting the project. Lawyers representing these groups argued that a 19th-century Supreme Court ruling established that Congress can outline how court cases should be heard, but stressed that the Supreme Court should not dictate how federal courts must rule, as this would constitute a constitutional infraction on judicial powers.

In contrast, attorneys for the pipeline firm stated the need for swift action from the Supreme Court to keep the pipeline’s build-out plans on schedule. The company aims to complete the 300-mile pipeline in time for winter when demand for natural gas increases. It’s reported that most of the pipeline, except a 3-mile segment crossing the Jefferson National Forest, is essentially complete.

Background. Designed to meet the growing energy demand in the South and Mid-Atlantic regions, this $6.6 billion project delivers gas from the Marcellus and Utica fields in Pennsylvania and Ohio. However, the project’s timeline has been hampered by several court challenges. Notably, the Supreme Court ruling revolved around two disputes brought forth by the Wilderness Society and ten environmental groups.

Several lawmakers, including Manchin, have championed the project and its continuation. Sen. Manchin, up for re-election in 2024, expressed his relief at the Supreme Court’s decision, stating it upheld the law passed by Congress and sanction by the President. Similarly, Patrick Morrisey, West Virginia’s Attorney General, commended the decision and highlighted the project’s importance for West Virginia and the nation.

West Virginia Governor Jim Justice Sen. Shelley Moore Capito (R-W.Va.) also provided statements supporting the Supreme Court’s decision, emphasizing the pipeline’s value for American energy and jobs.

— The Biden administration is reportedly preparing to propose a mandate that would require automakers to enhance the average fuel efficiency of their vehicles, with persons familiar with the situation indicating that the announcement could come as early as today. This proposed regulation, anticipated to be announced by the National Highway Traffic Safety Administration, will apply to vehicle models of 2027 and onwards.

This potential policy announcement comes during a time of increasing gasoline prices and an ambitious push from the Biden administration for 50% of all vehicles sold in the U.S. to be electric or emissions-free by 2030. The prior proposition from this governmental body last April required automakers to upgrade their average fuel economy to about 49 miles per gallon by 2026.

General Motors (GM) has already expressed concerns to the Environmental Protection Agency over the proposed emissions requirements. In a July 5 filing, GM declared that federal regulations and separate legislations in six states might necessitate selling more than 50% of automobiles from electric vehicles (EVs) by 2030 — an objective the Biden administration supports but that GM suggests might be challenging to meet.

— New Jersey Governor Phil Murphy signed legislation banning sow crates and veal-calf stalls, which activists say significantly limit the mobility of the animals. By implementing this law, New Jersey becomes the 15th U.S. state to inhibit the use of such restraints, including “battery” cages for egg-laying hens, as announced by the Humane Society of the United States, a strong advocate for this legislation (link for details).

The new regulation seeks to ban gestation crates that severely confine the movements of breeding pigs before birth, as they represent an intolerable degree of cruelty, according to state Senate President Nick Scutari, one of the bill’s sponsors. The law mandates that the state Agriculture Department establishes, within six months, rules and protocols governing the confinement and treatment of breeding sows and veal calves. Some exceptions exist, such as the two weeks before sows are about to give birth or when they are nursing piglets.

Recall that on Thursday, we reported Triumph Foods, a pork processor company, has filed a lawsuit questioning the legality of a voter-initiated law in Massachusetts. This law requires farmers to allot more space to breeding sows, and restricts the sale of pork produced on farms situated outside the state that fail to meet the Massachusetts standard. A similar law, California’s Proposition 12, was recently deemed constitutional by the U.S. Supreme Court; however, Triumph Foods’ argument is that the ruling was based on specific claims, not on the principle itself, suggesting that future challenges are possible. Additionally, Triumph Foods is seeking a delay in implementing the Massachusetts law, known as Question 3, until their case is resolved. The law was set to come into effect on Aug. 24. Triumph Foods headquarters is located in St Joseph, Missouri.

Of note: The so-called EATS Act, the livestock industry’s answer to California’s Proposition 12, could jeopardize more than 1,000 health, safety, and welfare laws on the state level and threaten states’ rights, said a report by a Harvard Law School group. Link for details.

— Economic update analyzes pork industry issues and dynamics. The National Pork Producers Council (NPPC) released its third quarter pork industry economic update to provide a snapshot of top pork industry issues, current trends, and marketing conditions impacting U.S. pig farmers.

Key takeaways from the Q3 update include:

• California Proposition 12 creates significant challenges and market uncertainty for pig farmers across the country and has far-reaching implications beyond the pork industry.
• Persistently high production costs continue to be a major challenge to pig farmers’ profitability. Average cost and breakeven levels are 9% higher than one year ago and have increased 60% over three years.
• So far this year, negotiated hog and pork cutout values, on average, have been about 20% below the same week last year. Prices have gained seasonal momentum over the past three months but remain below year-ago levels.
• Hog slaughter and pork production increased an estimated 1.2% and 0.3% respectively through mid-July 2023. USDA is now projecting a 1.4% increase in pork production this year, while domestic pork availability is expected to drop 2.5% to 49.8 pounds per capita for 2023.
• Inflation has cooled to 3.1%, though the prices of many consumer necessities like food and housing continue to increase more rapidly than the pre-pandemic average. Inflation, rising interest rates, and other macro-level factors may continue to strain consumer purchasing power, which impacts demand for meat and pork.

“The U.S. pork industry is incredibly important not only to agriculture but to the entire U.S. economy,” said Scott Hays, NPPC president and pork producer from Missouri. “As producers face an unprecedented economic environment caused by dynamic market conditions and exacerbated further by California Proposition 12, our industry is incredibly resilient as demonstrated by generations of farm families who continue to take pride in producing affordable, nutritious protein for consumers.”

To download the report, visit NPPC’s pork industry economic update page.

Listen to NPPC Economist Holly Cook discuss the report.

— McDonald’s, the fast food corporation, has announced plans to test a new small-sized spinoff restaurant chain named CosMc’s. The name hails from CosMc, a former McDonaldland mascot that was featured in the company’s advertisements during the 1980s and 1990s. McDonald’s CEO, Chris Kempczinski, stated that while CosMc’s will maintain core McDonald’s elements, it will also foster its own distinctive personality. The testing phase of this new concept is slated to commence early next year in several locations spanning a limited geographical area. The announcement was made in conjunction with the company’s Q2 results.

— The U.S. Centers for Disease Control and Prevention (CDC) is raising an alarm about the link between lone star tick bites and meat allergies. It warned that these tick bites might lead to alpha-gal syndrome (AGS), a condition that has affected up to 450,000 people since 2010. This disorder is triggered by alpha-gal, a sugar present in meats like pork, beef, and lamb, as well as mammalian-derived products including milk products and certain medications. Furthermore, consumption of these alpha-gal-containing products post a tick bite can result in serious allergies. As there is no cure for AGS, sufferers must avoid these products for life. CDC warns that the incidences of AGS in the U.S. are predicted to rise with the expanding geographic range of the lone star tick and increasing testing trends.

Johanna Salzer, a senior author at CDC, suggested that the actual burden of AGS could actually be higher due to challenges in diagnosis. Symptoms can be non-specific and inconsistent, there might be difficulties in accessing healthcare, and there’s also a lack of awareness amongst clinicians, leading to a huge number of potential undiagnosed cases.

— White House rules out pardon for Hunter Biden. The White House said Thursday that there is no possibility that President Biden would end up pardoning his son, Hunter Biden. A federal judge on Wednesday rejected Hunter Biden’s plea deal on tax charges and said that she wasn’t ready to accept the terms of a revised deal.

— Cotton AWP rises. The Adjusted World Price (AWP) for cotton rose to 69.74 cents per pound, effective today (July 28), up from 66.18 cents per pound the prior week. The level remains well above the mark of 52 cents that would trigger an LDP for cotton. Meanwhile, USDA said that Special Import Quota #15 will be established August 3 for 39,606 bales of upland cotton, applying to supplies purchased not later than Oct. 31 and entered into the U.S. not later than January 29, 2024.

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