Florida Prepares for Hurricane Milton as FEMA Faces Criticism Over Helene Response

China’s top economic planner will hold a press briefing on Tuesday

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October 07, 2024 08:19 AM

News/Markets/Policy Updates: Oct. 7, 2024

— Florida prepares for Hurricane Milton as FEMA faces criticism over Helene response. Florida is bracing for Hurricane Milton, expected to hit the state’s west coast at midweek — it is expected to become a powerful Category 4 hurricane with winds exceeding 130 mph over the southern Gulf of Mexico, and is forecast to make landfall on Florida’s west coast on Wednesday. It is forecast to strike between Cedar Key and Naples, which includes the Tampa area. A “dangerous situation” is shaping up for Florida, said NHC Director Michael Brennan. Florida Gov. Ron DeSantis said there is no doubt Florida will suffer a significant blow from the storm. The warning comes amid continued political bickering over FEMA’s response to the devastation caused by Hurricane Helene, which recently ravaged the Southeast, particularly North Carolina, leaving 227 dead. Airlines have issued travel waivers for affected travelers. Republican lawmakers, including House Speaker Mike Johnson (R-La.), have harshly criticized the Biden administration’s handling of FEMA, calling the response to Helene an “abject failure.” President Biden defended FEMA, citing the deployment of over 7,000 personnel and $137 million in aid. FEMA Administrator Deanne Criswell refuted claims that resources were misallocated and reassured Floridians that the agency is prepared for Milton. Congress recently approved $20 billion in additional FEMA funding, but lawmakers won’t return to Capitol Hill until after the election.

— House Speaker Johnson: No immediate congressional action needed for Hurricane Helene relief. House Speaker Mike Johnson (R-La.) stated that Congress does not need to act immediately on federal disaster relief for Hurricane Helene, as it will take time to assess the specific damage and needs. Despite President Biden’s recent request for $1.6 billion to help with recovery, Johnson emphasized that detailed aid requests must be based on actual damages. The political debate around hurricane relief is heightened by the upcoming U.S. elections, with GOP nominee Donald Trump criticizing the Biden administration’s response and making false claims about FEMA funds being diverted to aid migrants. FEMA has refuted these.

— China’s top economic planner will hold a press briefing on Tuesday to discuss a package of policies aimed at boosting economic growth. The briefing will include five senior officials from the National Development and Reform Commission, including Chairman Zheng Shanjie, according to a notice from the government on Sunday. Expectations are rising among analysts for Beijing to expand public spending as part of its stimulus package.

— CBO: Biden/Harris Medicare drug plan could cost taxpayers over $20 billion in three years. The Congressional Budget Office (CBO) forecasts (link) that the Biden/Harris administration’s new Medicare prescription drug plan could cost taxpayers over $20 billion in the next three years. The increase in federal spending, driven by higher subsidies for premiums and risk corridors, is expected to add at least $5 billion in extra costs in 2025 alone, contributing to the federal deficit. House and Senate Republican lawmakers criticized the plan, linking it to the Inflation Reduction Act and accusing the administration of attempting to cover up its impact ahead of the election. CBO analysis suggests a sharp rise in premiums, with costs for standard Medicare Part D coverage increasing significantly for 2025.

— The key economic data for the week of Oct. 7 will be the release of the September Consumer Price Index (CPI) on Thursday. The report is expected to show continued easing of overall inflation, bringing it closer to the Federal Reserve’s 2% target. However, attention will be focused on the core CPI, which excludes food and energy. Fed policymakers remain concerned about the persistence of inflation in non-housing services and shelter costs, which have been less responsive to the Fed’s restrictive monetary policies, despite improvements in commodity prices and normalized supply chains.

— Republicans scramble as independent Dan Osborn challenges Sen. Deb Fischer in Nebraska. There are growing concerns within the Republican Party regarding the Nebraska Senate race, where incumbent Sen. Deb Fischer (R-Neb.) is facing a challenge from independent candidate Dan Osborn, , a political newcomer who is gaining traction. He is positioning himself as a nonpartisan alternative in a state that has traditionally leaned Republican, but where voters may be open to new leadership. Despite Nebraska’s strong Republican base (Trump won the state by nearly 20 points in 2020), the emergence of Osborn has shifted the dynamics. Republican groups have started investing in the race to bolster Fischer’s campaign.

The Cook Political Report with Amy Walter recently moved the race from “solid Republican” to “likely Republican,” signaling that while Fischer remains favored, the race is now more competitive than expected.

MARKET FOCUS

— Equities today: In Asia, Japan +1.8%. Hong Kong +1.6%. China closed. India -0.8%. In Europe, at midday, London +0.4%. Paris +0.1%. Frankfurt -0.2%. U.S. Dow is currently down around 200 points. Investors continue to wait for the Israeli response to Iran. Economically, German Manufacturers’ Orders and Eurozone retail sales both missed estimates. The latest Atlanta Fed GDPNow estimate is for third-quarter growth of 2.8%, slower than in the second quarter, but still strong. Goldman Sachs has reduced the odds of a U.S. recession to 15%.

U.S. equities Friday and for the week: All three major indices finished higher Friday in the wake of the strong jobs update and managed to eke out gains for the week with the Dow up 0.09%, the Nasdaq was up 0.1%, and the S&P 500 gained 0.22%. On Friday, the Dow was up 341.16 points, 0.81%, at 42,352.75. The Nasdaq rose 219.37 points, 1.22%, at 18,137.85. The S&P 500 gained 51.13 points, 0.90%, at 5,751.07.

The event schedule is dominated by AI events for Nvidia, AMD, and Hewlett Packard Enterprise. The Q3 earnings season will also kick off, with Delta Air Lines, PepsiCo and JPMorgan Chase some of the big names due to report.

The dollar index rose more than 2% last week, its best week in more than two years; Brent crude oil futures rose 9% on the week for their best week since January 2023 (see related item); and the Dow ended at a record closing high.

— WSJ: Activist investor Starboard takes $1 bil. stake in Pfizer, pressuring for turnaround amid struggles. Activist investor Starboard Value has taken a $1 billion stake in Pfizer, pushing for changes to improve the drugmaker’s struggling performance, the Wall Street Journal reports (link). Pfizer’s stock has plummeted since its pandemic highs, largely due to overestimating demand for Covid-19 products. While the company has made large acquisitions, such as a $43 billion purchase of biotech Seagen to bolster its cancer drug portfolio, other products have struggled to fill the gap left by declining Covid-19 sales. Pfizer is also facing increased competition for major products like Eliquis and Xeljanz. Starboard has engaged former Pfizer executives to help its efforts, as CEO Albert Bourla faces pressure from investors to refocus the company.

— Boeing and its largest union return to wage talks today after two weeks of stalemate. Each day of strike is costing the planemaker an estimated $100 million in lost sales.

— Chevron plans to sell its oil sands assets in Athabasca and Duvernay Shale to Canadian Natural Resources for $6.5 billion in an all-cash deal, expected to close in the fourth quarter of this year. The assets contribute around 84,000 barrels per day to Chevron’s output. This sale will give Canadian Natural Resources a 90% ownership stake in the Athabasca Oil Sands project, with Shell holding the remaining share. The sale is part of Chevron’s broader strategy to divest $10 billion to $15 billion in assets.

— Berkshire Hathaway is ending its hands-off approach to managing BNSF Railway as Greg Abel, Warren Buffett’s successor, expresses dissatisfaction with the railroad’s profitability, the Wall Street Journal reports (link). BNSF has brought in Ed Harris, a veteran of precision scheduled railroading (PSR), to overhaul its operations. PSR, popular with investors for improving efficiency, has been resisted by BNSF but is now being considered to boost results. However, this strategy faces criticism from workers, regulators, and customers for potentially sacrificing jobs, safety, and service quality. BNSF’s operating earnings fell 14% last year, lagging behind its competitor, Union Pacific. BNSF’s operating ratio in Q2 was 68.2%, the worst among major railroads. Its contribution to Berkshire Hathaway’s overall earnings also dropped to 10.4% in early 2024, down from 13.9% in 2023.

“Just run the trains on time. Just start the train. Something as simple as that gives your team a fighting chance to stay on schedule.” — Ed Harris, a proponent of precision scheduled railroading who is now consulting at BNSF.

— Oil prices climbed on Friday, marking their biggest weekly gains in over a year amid growing concerns of a wider conflict in the Middle East. Brent crude futures rose 0.6% to $78.05 per barrel, while U.S. West Texas Intermediate (WTI) crude gained 0.9% to settle at $74.38 per barrel. The weekly gains for Brent were over 8%, while WTI surged 9.1%, reflecting the highest increases since January and March 2023, respectively. President Biden said on Thursday that there had been “discussions” about support for an Israeli attack on Iran’s oil facilities. Biden has said he will not support an attack on Iran’s nuclear sites, and cautioned Israel against hitting Iran’s oil fields. Although Iran produces a modest 2% of the world’s oil supply, it holds a strategically crucial position due to its control over the Strait of Hormuz. This narrow waterway is critical because roughly 20% of the world’s oil supply, much of it from Gulf countries, passes through it. Any disruption, such as Tehran blocking access to the Strait, would have severe repercussions on global oil markets, leading to price spikes and potentially causing a ripple effect on global economies. Meanwhile, Saudi Arabia and seven other oil producers have agreed to unwind some of their production cuts, though the plan has been delayed.

Of note: Analysts at Capital Economics suggested that oil prices would most likely need to reach $90 a barrel to become a factor for central banks. As of Friday, the price of Brent crude was $78 per barrel.

Global conflicts and economic factors, such as oil prices and instability, have a direct influence on domestic politics, particularly U.S. elections. Companies are monitoring these developments because the election’s outcome could significantly affect trade relations, taxes, and regulatory policies that impact their operations. For Vice President Kamala Harris’ campaign, a spike in oil prices and heightened global turmoil pose political challenges. Rising energy costs tend to strain household budgets and increase inflation, which can hurt voter sentiment. Global instability could also lead to a perception that the administration is struggling with foreign policy or economic management, both of which could weaken Harris’ electoral prospects. In this context, economic disruptions from international conflicts may sway voter priorities, making it harder for her to present a compelling platform focused on domestic improvements if global issues dominate the conversation.

— Ag markets today: Corn, soybeans and wheat faced followthrough selling during the overnight session. As of 7:30 a.m. ET, corn futures were trading around a penny lower, soybeans were 5 to 6 cents lower and wheat futures were unchanged to 3 cents lower. The U.S. dollar index was holding near unchanged while front-month crude oil futures are around $1.85 higher.

Cash cattle extend price rally. Cash cattle prices firmed for a fourth consecutive week, though the official price for last week won’t be known until late this morning. With margins deep in the red, it’s unlikely packers will want to raise cash cattle prices again this week, though feedlots won’t be in any hurry to move cattle at lower prices. Extended cash negotiations are likely.

Rise in cash hog index ends. The CME lean hog index is down 7 cents to $84.83 as of Oct. 3, ending a three-day rise. October lean hog futures finished Friday 80.5 cents below the cash index, while December hogs held a $8.68 discount.

— Agriculture markets Friday and for the week:
• Corn: December corn futures fell 3 1/2 cents to $4.24 3/4, nearer the daily low but on the week up 6 3/4 cents.
• Soy complex: November soybeans fell 8 1/4 cents to $10.37 3/4 and marked a 28-cent loss on the week, while December soymeal closed $2.00 lower at $330.50 and down $13.60 week-over-week. December soyoil fell 56 points to 43.97 cents and for the week, rose 161 points.
• Wheat: December SRW wheat futures fell 13 3/4 cents to $5.89 3/4 and nearer the daily low. For the week, December SRW gained 9 3/4 cents. December HRW wheat futures dropped 13 1/2 cents to $5.98, nearer the daily low and for the week up 21 1/4 cents. December spring wheat fell 7 3/4 cents to $6.38 1/2 but rose 30 1/4 cents on the week.
• Cotton: December cotton rose 54 points to 73.27 cents and rose 55 points on the week.
• Cattle: Cattle futures ended the week on a firm note, with expiring October live cattle surging $1.00 to $187.00 and most-active December rose 60 cents to $187.00, also. The latter represented a weekly advance of $2.525. Expiring October feeder futures rallied 65 cents to $249.625, while most-active November climbed $1.15 to $249.275. That marked a weekly gain of $3.575.
• Hogs: Expiring October hog futures sagged 15 cents to $84.025, while most-active December skidded 25 cents to $76.15. The latter quote represented a weekly rise of $2.775.

— Quotes of note:

• Nomura analyst: Fed likely to downsize rate cuts to 25 basis points in November and December. The Federal Reserve is expected to reduce its rate cuts to 25 basis points at its November and December meetings, according to Aichi Amemiya from Nomura Securities. He cites Fed Chair Jerome Powell’s influence and dovish stance as reasons for this outlook, moving away from larger cuts. Powell’s leadership shaped the decision at the September meeting, where the committee opted for a 50 basis-point cut after a close call. Amemiya forecasts further quarterly cuts in 2025, with the next FOMC meeting scheduled for Nov. 6-7, following key data releases and the U.S. elections.

• Larry Summers : Fed’s September rate cut was a mistake amid strong jobs data. Former Treasury Secretary Larry Summers criticized the Federal Reserve’s decision to cut interest rates by 50 basis points in September, calling it a mistake following strong U.S. job growth data. Nonfarm payrolls rose by 254,000 in September, surpassing expectations, while unemployment fell to 4.1%. Summers, pointing to a “high neutral rate environment,” urged caution in future rate cuts. The strong labor market data has shifted expectations toward a smaller, 25 basis-point rate cut at the Fed’s Nov. 6-7 meeting.

• Druckenmiller cautions Fed against further rate cuts after strong jobs data. Billionaire investor Stanley Druckenmiller expressed concerns that the Federal Reserve might be cornered into future rate cuts following stronger-than-expected September payroll growth. Druckenmiller warned that with GDP above trend, corporate profits strong, and equity markets at all-time highs, there’s little sign of economic restriction. His comments follow a broader Wall Street sentiment urging caution on rate cuts, as traders scale back expectations for a large cut in November, questioning the Fed’s September 50 basis-point reduction.

— Malanga: FOMC faces economic crossroads: interest rate cuts loom amid recession signals, global economic uncertainty. The FOMC is currently navigating a challenging economic landscape, says Dr. Vince Malanga, president of LaSalle Economics. While it believes it is meeting its price stability goal, manufacturing is in recession, but the service sector remains robust, Malanga observes. The labor market, he thinks, is puzzling, with strong job growth but no rise in total hours worked, hinting at productivity gains. Interest rate cuts are expected, but concerns loom, including a growing government deficit and mixed signals in the bond market.

The housing sector is under pressure due to high mortgage rates, and Malanga believes the FOMC may need to adjust its quantitative tightening strategy to support the housing market. Of note, he says price stability faces challenges with the end of favorable calendar effects, and stable housing prices will be crucial to maintaining this stability.

Malanga signals global factors, particularly China’s stimulus measures, have influenced commodity prices, except for oil, which is affected by Middle Eastern tensions. Oil price trends are uncertain, with the possibility of either inflationary shocks or deflationary pressure from an oil market share war. Broader concerns about China’s long-term economic stability and U.S. fiscal policy create further uncertainty, suggesting to Malanga that the future of inflation may depend more on global dynamics than central bank policy alone.

— Vietnam’s Q3 GDP growth accelerates to 7.4% despite typhoon disruptions. Vietnam’s GDP grew by 7.4% year-on-year in Q3 2024, an acceleration from the 7.09% growth in Q2 and the highest rate since Q3 2022, despite disruptions caused by the worst typhoon in decades. Strong final consumption, contributing nearly 60% to overall growth, rose by 7.02%, while exports surged by 15.68%. Sector-wise, services and industry/construction activities saw increased growth, though agricultural output slowed. For the first nine months of 2024, GDP grew by 6.82%, with the government targeting annual growth between 6.8% and 7.0%, while remaining cautious of global economic challenges.

Market perspectives:

— Outside markets: The U.S. dollar index was weaker, with only the euro showing slight strength against the greenback. The yield on the 10-year U.S. Treasury note topped 4% for the first time in some two months with a mostly higher tone in global government bond yields. Crude oil futures continued to rise on unease over the situation in the Middle East, with U.S. crude around $76 per barrel and Brent around $79.55 per barrel. Gold and silver futures were mixed, with gold higher around $2,628 per troy ounce and silver weaker around $32.18 per troy ounce.

— Japan’s new finance minister signals policy actions in response to sharp yen movements amid economic uncertainty. Japan’s new finance minister, Katsunobu Kato, signaled that the government will consider policy actions in response to sharp currency movements based on their impact on the real economy, rather than directly targeting foreign-exchange markets. His comments come as global economic uncertainties contribute to volatility, with the yen weakening significantly against the dollar in recent months. Kato acknowledged the mixed effects of a weak yen — raising import costs for essentials like food and energy while benefiting exporters with higher overseas profits. The yen’s fluctuations have been driven by speculation over U.S. and Japanese monetary policies and the global economic outlook, with the dollar reaching 162 yen in July and recently trading at 148.40 yen. Kato expects the Bank of Japan (BOJ) to pursue monetary policies aimed at achieving stable 2% inflation.

Meanwhile, the new prime minister, Shigeru Ishiba, who took office last week, has hinted at continuity with his predecessor’s economic policies, focusing on deflation exit strategies and stimulating investments. He has instructed ministers to develop an economic stimulus package to address rising prices, likely including cost-of-living relief. Though inflation is rising, officials remain cautious about declaring the end of deflation. The BOJ raised its policy rate to 0.25% in July and may raise it further if economic conditions improve, although concerns remain about the global outlook.

— WTI crude oil prices rose to a six-week high at $76 per barrel. Rising tensions in the Middle East are fueling concerns over potential disruptions in oil supply. Last week’s Iranian missile attack, along with Israel’s military actions in Gaza and Lebanon, have heightened fears of broader conflict. President Biden has discouraged direct strikes on Iran’s oil infrastructure, signaling a preference for alternative responses, which adds to the uncertainty of how these geopolitical issues might unfold. Iran’s oil output is near full capacity, but it is now at risk due to the increased likelihood of conflict in the region. Despite these geopolitical concerns, questions about global oil demand linger, particularly due to economic uncertainty in China. China is a major oil consumer, and its demand is a critical factor in the global market. China’s expected economic stimulus measures could boost demand, depending on the scale and effectiveness of the policies.

— Gold futures rose 0.4% to $2,678.90 per troy ounce, driven by increased safe-haven demand amid rising tensions in the Middle East, as Israel plans a retaliatory strike against Iran. This rise in gold prices has occurred despite a sharp increase in U.S. Treasury yields following stronger-than-expected U.S. nonfarm payroll data. Additionally, the U.S. dollar has strengthened, which typically pressures gold prices, making the current rally particularly notable, according to SP Angel analysts.

— Grain trader and analyst Richard Crow on grain markets: “The latest Commitments of Traders report shows significant buying across commodities, with notable positions in corn (63,000 contracts), soybeans (40,000), meal (45,000), and smaller gains in wheat, sugar, cattle, and cotton. As the market anticipates Friday’s WASDE report, questions arise about whether seasonal buying, traditionally timed with Columbus Day, has been pre-empted. Key drivers of this buying activity include large short covering, lower interest rates, global tensions, fears of a crude oil rally, and dry weather in Brazil.”

— USDA daily export sales:
• 155,000 MT corn to Mexico, 2024-2025 marketing year
• 172,500 MT soybeans to unknown destinations, 2024-2025 marketing year

— Ag trade update: Saudi Arabia purchased 307,000 MT of milling wheat, with the bulk of it likely to be sourced from Russia. Algeria tendered to buy a nominal 50,000 MT of optional origin soft milling wheat. Bangladesh tendered to buy 50,000 MT of optional origin milling wheat. Iran tendered to buy 120,000 MT of corn from Brazil, Europe or the Black Sea region and 120,000 MT of feed barley from the EU or Black Sea region.

— NWS outlook: Hurricane Milton continues to intensify over the southwest Gulf of Mexico and is expected to move northeastward towards the Florida Peninsula by the middle of the week... ...Very heavy rainfall well ahead of Hurricane Milton brings the threat of flash flooding to the central/southern Florida Peninsula and Keys... ...Record-breaking heat continues early this week for California and the Desert Southwest, with much above average temperatures also expected for the Intermountain West and Plains.

Items in Pro Farmer’s First Thing Today include:

• Grains lower to open the week
• Another week of open U.S. harvest weather, central Brazil gets needed rains
• Eurozone investor morale rises in October.

ISRAEL/HAMAS CONFLICT

— Private traders dominate Gaza food supply as UN aid falters amid war. Private traders have taken over much of the food supply in Gaza, filling the void left by dwindling UN aid, the Financial Times reports (link). These traders, often navigating dangerous conditions and paying hefty black-market fees, now provide 60% of goods entering the enclave. However, rising costs and profiteering have led to soaring prices for basic goods, leaving many Palestinians unable to afford food despite supply availability. The ongoing conflict has made humanitarian efforts more perilous, with intense bombardments, a lack of safe crossings, and widespread lawlessness complicating aid delivery.

— On Saturday, Oct. 5, a 4.5 magnitude seismic event occurred in Iran’s Semnan province near Aradan city at a shallow depth of 10 kilometers (6.2 miles). This shallow depth, unusual for natural earthquakes, has sparked speculation that the event might be linked to an underground nuclear test rather than a natural tremor. Analysts, including those at SP Angel, noted that the event’s characteristics resemble those of a nuclear detonation. The proximity to known Iranian nuclear facilities and the timing amidst heightened tensions between Iran and Israel have fueled further speculation.

Iran/Israel tensions have escalated following Iran’s missile attack on Israel and Israel’s offensive in Lebanon. The possibility of a nuclear test could lead to stronger international sanctions on Iran.

Of note: While speculation is strong, confirmation of a nuclear test has yet to be made, and further scientific investigation is required. The situation remains volatile, with significant potential consequences for regional stability and global energy markets.

RUSSIA/UKRAINE

— Ukrainian grain exports for 2024-25 (July/June) reached 11.2 million metric tons (MMT) as of Oct. 7, up from around 7.2 MMT at this point in 202-/24, according to Agriculture Ministry data, including 6.5 MMT of wheat, nearly 3 MMT of corn, and over 1.4 MMT of barley.

— On Oct. 6, a Russian missile strike damaged a civilian cargo ship in the Ukrainian port of Pivdennyi, marking another incident in the ongoing conflict between Russia and Ukraine. The vessel, identified as the “PARESA,” was flying the flag of Saint Kitts and Nevis and was carrying 6,000 metric tons of Ukrainian corn at the time of the attack. The strike was carried out using an Iskander-M ballistic missile, as reported by the Office of the Prosecutor General of Ukraine. The attack occurred overnight and was part of a larger assault that included both missile and drone strikes on the Odesa region. None of the 15 crew members aboard the vessel were injured in the attack. However, the ship itself sustained damage, though the extent of the damage was not detailed. This incident is part of a concerning trend of attacks on civilian vessels in the Black Sea region as it marks the 20th civilian ship to be attacked by Russian forces, according to Ukraine’s Restoration Ministry. It is the third Russian attack on a civilian vessel in the Black Sea region in a month.

The missile strike was not isolated to the port area: A gas pipeline was damaged, though the leak was promptly contained. Warehouse buildings and cargo trucks were also affected.

— Russia’s agriculture minister announced that the country’s grain production forecast will be adjusted due to harvest issues in war-affected regions. The extent of the adjustment has not been specified, but the impact of ongoing conflicts is expected to influence the final grain production estimate.

CHINA UPDATE

— China’s Sept forex reserves rise more than expected. China’s foreign exchange reserves grew by $28.2 billion to $3.316 trillion last month from $3.288 trillion in August. That’s the highest level since December 2015. The yuan strengthened about 1.1% against the U.S. dollar in September, while the dollar last month weakened around 1% against a basket of other major currencies.

— China’s gold reserves unchanged for fifth straight month in September. China’s gold holdings stood at 72.8 million troy ounces at the end of last month. The value of the gold reserves, however, rose to $191.47 billion from $182.98 billion at the end of August. Global central banks, which actively bought gold in 2022-2023, are on track to slow purchases in 2024 from 2023, according to the World Gold Council, but to keep them above the pre-2022 level. This is partly due to the pause in purchases by the People’s Bank of China, which until May had bought gold for 18 consecutive months.

TRADE AND TRANSPORTATION POLICY

— Container Port Performance Index reveals China’s lead over U.S. Ports, impacting global trade and influence. The Container Port Performance Index 2023 (link) highlights a significant gap between the efficiency of Chinese and American ports, with implications for global trade and economic competitiveness. This ranking system is based on the amount of time a ship spends in port, which is a crucial metric for assessing port efficiency and overall trade facilitation.

The Container Port Performance Index 2023 reveals a stark contrast between Chinese and American port efficiencies:
• Yangshan port in China ranks No. 1 globally
• Not a single U.S. port appears in the top 50
• The highest-ranked American port, Charleston, S.C., comes in at 53rd place

China has been actively investing in ports throughout Latin America, which could have significant implications for regional trade dynamics and U.S. influence:
• The port of Chancay in Peru is a prime example of China’s port investments in the region. This $3.5 billion project is 60% owned by the China Ocean Shipping Group (Cosco) and is set to become a key hub connecting Latin America and Asia.
• Chinese state-owned companies have built, financed, or currently operate several ports and related infrastructure in strategic locations across the Western Hemisphere, including areas near the Panama Canal and the Caribbean Sea.

Implications for trade and influence. China’s superior port performance and investments in Latin American infrastructure could have several consequences:
• Trade efficiency: Chinese-operated ports may offer faster processing times, potentially redirecting trade flows in their favor.
• Economic influence: By investing in and operating key ports, China can strengthen its economic ties with Latin American countries.
• Strategic positioning: These ports could potentially be used for more than just commercial purposes, raising concerns about their use for intelligence gathering or military purposes.

U.S. competitiveness: The lack of highly efficient U.S. ports in the global rankings could impact America’s ability to compete in global trade. The United States has been taking steps to counter China’s growing influence in Latin American ports:
• The U.S. International Development Finance Corporation provided a $150 million loan to Ecuador to expand and modernize a port.
• The U.S., along with the Inter-American Development Bank, plans to co-finance $3 billion worth of high-quality critical infrastructure projects throughout Latin America and the Caribbean.

Reason behind the U.S. lack of port competitiveness: Labor unions. U.S. labor unions, particularly those representing dockworkers, are actively fighting against automation at U.S. ports. This is evident from the recent strike and ongoing negotiations between the International Longshoremen’s Association (ILA) and port employers.

The ILA has taken a firm stance against automation at ports: • The union is “steadfastly against any form of automation — full or semi — that replaces jobs or historical work.”
• ILA President Harold Daggett called for “absolute airtight language that there will be no automation or semi-automation.”
• The union’s executive vice president, Dennis Daggett, labeled automation as a “cancer.”

The recent strike by ILA workers on the East and Gulf Coasts was partly motivated by concerns over automation. The union is seeking protection from technologies like driverless trucks, automated cranes, and automated gate checkpoints. Automation remains a sticking point in ongoing contract negotiations.

West Coast dockworkers faced similar issues in the 1960s, negotiating protections against job losses due to automation. The current ILA contract includes a clause requiring both parties to agree on workforce protections before implementing semi-automated technology.

Of note: Link to Wall Street Journal commentary item on this topic.

ENERGY & CLIMATE CHANGE

— Big Oil lobbies Trump to preserve key parts of Biden’s climate law amid IRA debate. Major oil companies, including Exxon Mobil, Occidental Petroleum, and Phillips 66, are urging Donald Trump and Republican lawmakers not to dismantle key provisions of the Inflation Reduction Act (IRA) that benefit the industry, the Wall Street Journal reports (link). While initially opposed to the law, Big Oil has since embraced its billions in tax credits for low-carbon projects like carbon capture, hydrogen, and renewable fuels, which are vital to their long-term investments. Despite widespread Republican opposition to the IRA, oil executives fear a rollback under a potential Trump administration could undermine their costly investments in these technologies. The WSJ item says some industry leaders have personally lobbied Trump and his allies, emphasizing that these IRA-supported initiatives could boost U.S. jobs and manufacturing. However, smaller fracking companies and conservative hard-liners remain critical of the law, particularly its renewable energy incentives.

— BP is shifting its energy transition strategy, abandoning its ambitious target of reducing oil and gas production by 2030 in favor of increasing output, Reuters reports (link). Initially, BP aimed for a 40% cut in production by 2030, which was reduced to 25% last year. Now, the company plans to expand oil and gas production through new projects in Iraq, Kuwait, and the Gulf of Mexico, as well as exploring assets in the Permian Basin. This marks a significant pivot as BP prioritizes profitability over its renewables expansion amid rising costs and supply chain challenges.

BP has also scaled back its investment in offshore wind, biofuel projects, and hydrogen initiatives. The company is targeting $2 billion in cost savings by 2026 and is expected to unveil the revised strategy in February.

Meanwhile, rival Shell has similarly scaled back its renewable energy projects, emphasizing a renewed focus on oil and gas.

LIVESTOCK, NUTRITION & FOOD INDUSTRY

— USDA invests over $11 million to strengthen U.S. dairy industry. USDA announced $11.04 million in funding under the Dairy Business Innovation Initiatives (DBI) to support small and mid-sized dairy businesses. The grants aim to enhance production, marketing, and distribution of dairy products, providing technical assistance and fostering innovation. Funds will be distributed to four regional initiatives across the U.S., including in California, Tennessee, Vermont, and Wisconsin, to improve dairy supply chain resiliency and create economic growth. Link for details.

POLITICS & ELECTIONS

— Japan’s new PM Shigeru Ishiba faces key test in upcoming snap election amid military and policy challenges. Ishiba, who recently won leadership of the ruling Liberal Democratic Party (LDP), aims to strengthen Japan’s military and promote equitable urban development. His vision, however, hinges on the outcome of an upcoming snap election, which he has called for on Oct. 27. By seeking early validation from the public, Ishiba hopes to solidify his mandate and secure political momentum for his agenda. However, the snap election poses significant risks. If the opposition gains control, they could shift Japan’s priorities away from Ishiba’s military strengthening toward increased social spending and improving ties with China, which marks a substantial departure from his more conservative platform. The opposition’s stance could reshape Japan’s domestic and foreign policy, reducing military expenditures and adopting a less hawkish approach in the region.

KEY LINKS