Traders Surprised by Fitch’s Downgrade of U.S. Debt; White House Blasts Decision

Putin mulls return to Black Sea grain pact | Farm bill update | SPR | Helping Taiwan

Market indicators are showing a likely downturn due to the recent decision by Fitch Ratings to downgrade the United States’ AAA long-term credit rating. It’s only the second time in history this has happened. This downgrade doesn’t appear likely to have a negative effect on the market for Treasury notes. Despite the lowered credit rating, demand from investors for such securities is expected to remain high. But analysts note this decision signals the ongoing apprehensions on Wall Street about political instability, further exacerbated by tactics over the debt limit that seem to be becoming a norm in Washington. This kind of political brinkmanship is a cause for worry among market participants, as it adds uncertainty to the overall economic environment. See Markets section for details.

Donald Trump was indicted over efforts to reverse the 2020 election. The former president has been accused of four criminal charges. These are reportedly related to his actions after the 2020 election loss, which allegedly led to the Jan. 6, 2021, U.S. Capitol attack by his supporters. The case implies that Trump used anonymous co-conspirators to further his attempts to maintain power. Another federal criminal case has been launched against Trump under the Biden Administration. Speculation about Trump’s potential contention for the 2024 presidential race adds another layer of complexity to these legal circumstances. Trump denies any wrongful actions and claims these charges are politically motivated.

The on-again, off-again, Black Sea grain pact may be resurrected if signals are being read correctly. All this comes as Russian drones damaged a Ukrainian port in Izmail, a city on the Danube River near the border with Romania. See Russia & Ukraine section.

FarmDoc looks at fertilizer prices. See Markets section.

The Dept. of Energy appears to be holding up refilling portions of the SPR, based on a Bloomberg report. Details below.

As expected, some farm bill speculation has surfaced, but most are simply trial balloons or efforts to find additional spending. Key is that any mandatory change to garner more spending will be dead on arrival among many lawmakers. We have some farm bill updates in the Policy section.

BofA revoked its forecast for a recession, becoming the first large Wall Street bank to officially reverse its call.

The July ADP Employment report recorded strong private sector hiring, noting an addition of 324,000 jobs for the month. However, contrasting data came from the JOLTS report released on Tuesday.

Something sure to get China’s attention: The Financial Times reports that the White House intends to ask Congress to fund weapon supplies for Taiwan as part of a supplementary budget request for Ukraine. Meanwhile, China announced two new leaders for its People’s Liberation Army (PLA) Rocket Force, surprising many and causing speculation about shifts in the branch which oversees the nation’s nuclear and ballistic missiles. More in China section.

Members of the World Trade Organization (WTO) reached an agreement on most of the outstanding issues concerning dispute settlement reform. But there are several loose ends, as explained in the Trade Policy section.

EPA is set to address tighter water regulations related to Consolidated Animal Feeding Operations (CAFOs). More in Livestock section.

There’s a debate within the Biden administration about the role of ethanol in qualifying for sustainable aviation fuel (SAF) tax credits. See Energy & Climate Change section.

A bright idea? As of yesterday, most incandescent light bulbs have become unavailable for purchase in the U.S., due to new energy efficiency regulations.

California utility company PG&E is discontinuing what was formerly considered a key fire prevention measure: a tree-trimming program. More in Energy section.

Major U.S. pharmacy chains, such as Rite Aid, CVS, and Walgreens, are gearing up for the fall respiratory virus season by beginning to roll out vaccine appointments for flu and Respiratory Syncytial Virus (RSV).

Equities today: Asian and European stock markets were mostly lower in overnight trading. U.S. stock indexes are pointed to lower openings. Asian stocks retreated for a second day amid fresh signs of an economic slowdown in China while the overall sentiment was downbeat after Fitch downgraded the U.S. sovereign credit rating. In Asia, Japan -2.3%. Hong Kong -2.5%. China -0.9%. India -1%. In Europe, at midday, London -1%. Paris -0.5%. Frankfurt -0.7%.

U.S. equities yesterday: The Dow ended up 71.15 points, 0.20%, at 35,630.68. The Nasdaq declined 62.11 points, 0.43%, at 14,283.91. The S&P 500 eased 12.23 points, 0.27%, at 4,576.73.

Fitch Ratings has downgraded the United States’ long-term foreign currency issuer default rating from AAA to AA+ due to expected fiscal deterioration over the next three years and a rise in the overall debt burden. The downgrade follows a previous warning in May, when Fitch placed the AAA rating on negative watch due to disagreements among lawmakers regarding the debt ceiling.

The downgrade references the country’s recent debt limit arguments, which have been a consistent issue for about two decades, despite a bipartisan agreement to suspend the debt limit until 2025. Fitch indicates that such political standoffs and last-ditch resolutions are leading to declining confidence in fiscal management.

Fitch also pointed out the rise in the general government deficit, projected to increase to 6.3% of GDP in 2023 from 3.7% in 2022. Despite cost cutting measures included in the Fiscal Responsibility Act, Fitch believes it will only cause minor improvements to the medium-term fiscal outlook.

Furthermore, Fitch warns that a mix of tightening credit conditions, a decrease in business investment, and a slowdown in consumption could potentially push the economy into a mild recession by the end of 2023 and into the beginning of next year.

This downgrade echoes a similar action by Standard & Poor’s in 2011, which lowered the U.S. credit rating due to political risk and to avoid a default.

U.S. Treasury Secretary Janet Yellen issued an immediate rebuke to the downgrade:

“I strongly disagree with Fitch Ratings’ decision. The change by Fitch Ratings announced today is arbitrary and based on outdated data. Fitch’s quantitative ratings model declined markedly between 2018 and 2020 — and yet Fitch is announcing its change now, despite the progress that we see in many of the indicators that Fitch relies on for its decision. Many of these measures, including those related to governance, have shown improvement over the course of this Administration, with the passage of bipartisan legislation to address the debt limit, invest in infrastructure, and make other investments in America’s competitiveness.”

Of note: It was only two weeks ago that President Biden created a team to assess ways to avert future standoffs over the country’s debt limit. “Now that the latest debt ceiling crisis is behind us, it is necessary to explore all legal and policy options to prevent Congress from ever again holding hostage the full faith and credit of the United States,” the White House statement said at the time. The working group, consisting of administration officials and no Republican members, is being led by White House Counsel Stuart Delery and National Economic Council Director Lael Brainard.

Walmart is No. 1 on Fortune’s Global 500, which ranks the world’s largest corporations by revenue for fiscal 2022. The top 10:

1. Walmart (U.S.)
2. Saudi Aramco (Saudi Arabia)
3. State Grid (China)
4. Amazon (U.S.)
5. China National Petroleum (China)
6. Sinopec (China)
7. ExxonMobil (U.S.)
8. Apple (U.S.)
9. Shell (Britain)
10. UnitedHealth Group (U.S.)
    

Agriculture markets yesterday:

• Corn: December corn futures fell 5 3/4 cents to $5.07 1/4 and nearer the session low.
• Soy complex: November soybeans rose 9 1/2 cents to $13.41 1/4, securing a close above the 200-day moving average. September soymeal rose $4.30 to $428.10, while September soyoil gained 128 points, closing at 64.39 cents.
• Wheat: December SRW wheat fell 13 1/2 cents to $6.78 1/4. December HRW wheat closed down 11 3/4 cents to $8.17 3/4. Prices closed nearer the session lows and hit a two-week low. December spring wheat was unchanged at $8.69 1/2.
• Cotton: December cotton rose 150 points to 86.22 cents, near the session high.
• Cattle: August live cattle futures surged $1.45 to $179.5, while deferred contracts saw greater gains. August feeder futures rallied $2.875 before settling at $248.475, near the daily highs.
• Hogs: Hog futures couldn’t sustain moves to fresh summer highs Tuesday morning, with nearby August futures slipping 45 cents to $103.675 at the close and most-active October sliding 35 cents to $85.65. The cash and wholesale markets slipped.
  

Ag markets today: Corn and wheat futures posted corrective gains overnight after Russia attacked a key Ukrainian port but have come well off their highs this morning. Soybeans initially traded higher but have weakened. As of 7:30 a.m. ET, corn futures were trading 2 to 3 cents higher, soybeans were 10 to 11 cents lower, winter wheat markets were 5 to 8 cents higher and spring wheat was 3 to 4 cents higher. Front-month crude oil futures were around 60 cents higher, and the U.S. dollar index was modestly weaker.

Market quotes of note:

• Markets were taken aback by Fitch’s downgrade of U.S. debt yesterday. ING Economics notes that EUR/USD rose, “but the greenback is enjoying safe-haven demand to the detriment of high-beta currencies. We doubt this will be a long-lasting driver for FX markets and the focus will rapidly shift back to data. In Brazil, the central bank should start cutting rates today: we expect 25bp.”
  
• Oil and gas exploration spending slowdown. Rystad Energy says in a new report that actual discoveries aren’t going as well as hoped, noting 55 discoveries were made in 1H23 vs 80 in 1H22, while this year’s discoveries also hold fewer barrels, on average, than last year’s. Upstream companies “are eager to capitalize on the increased demand for fossil fuels and find additional resources, but recent results have been lackluster,” says Rystad’s Aatisha Mahajan in a note. “If exploration efforts continue to yield unimpressive results for the remainder of the year, 2023 could be a record-breaker for the wrong reasons.”
  
• BofA revoked its forecast for a recession, becoming the first large Wall Street bank to officially reverse its call. Economists pointed to low unemployment and easing price pressures as key to the change. “Recent incoming data has made us reassess our prior view that a mild recession in 2024 is the most likely outcome for the U.S. economy,” they wrote in a note to clients. “Growth in economic activity over the past three quarters has averaged 2.3%, the unemployment rate has remained near all-time lows, and wage and price pressures are moving in the right direction, albeit gradually.” They forecast U.S. GDP growth of 2% for the quarter-ended December, 0.7% in 2024, and 1.8% in 2025. That’s about 0.5 percentage points and 0.7 points higher in 2023 and 2024 than assumed previously, they wrote.
  

On tap today:

• Economic reports. Motor Vehicle Sales | ADP Employment Report

• Energy reports. EIA Petroleum Status Report | Weekly Ethanol Production | Genscape weekly crude inventory report | Earnings: Occidental; Phillips 66.

• USDA reports. NASS: Broiler Hatchery

The July ADP Employment report recorded strong private sector hiring, noting an addition of 324,000 jobs for the month. Even though it was a decrease from the revised June figure of 455,000 jobs, it significantly outpaced the expected slow down to around 185,000 jobs. This trend continues to indicate a robust jobs market.

However, contrasting data came from the JOLTS report released on Tuesday. It showed a figure of 9.582 million for June, falling below expectations and lower than the revised 9.616 million in May. These findings suggest a drop in the number of people leaving the job market and a decrease in job openings. This marks the second consecutive month where the total number has been under 10 million.

The interplay of these figures creates a mixed outlook on the broader Employment report set to be published by the Department of Labor on Friday. Notably, the ADP data has previously proven not to be a dependable indicator of the broader jobs report, as demonstrated in June when the ADP report initially stated nearly 500,000 jobs while the Employment report only noted 209,000 jobs, a slowdown from the June result of 306,000.

Market perspectives:

• Outside markets: The U.S. dollar index was weaker, with the euro and Swiss franc managing gains against the greenback. The yield on the 10-year U.S. Treasury note increased to around 4.02% with a mixed tone in global government bond yields. Crude oil futures gave back some of their earlier advances but remain higher ahead of U.S. gov’t inventory data. U.S. crude was trading around $81.80 per barrel and Brent around $85.30 per barrel. Gold and silver futures were posting gains, with gold around $1,988 per troy ounce and silver around $24.54 per troy ounce.

• Gold gained along with other safe-haven assets after Fitch removed its top tier rating for U.S. sovereign credit.

• Oil prices have spiked to their highest point in three months due to an enhanced economic outlook and supply reductions from prominent global producers, the Wall Street Journal reports (link). Some market analysts predict further increases in benchmark crude-oil futures, potentially reaching around $100 a barrel. If prices rise further, it would result in higher gas costs for drivers, adding pressure to officials at the Federal Reserve and other key central banks who are endeavoring to reduce inflation back to their target levels.

• The U.S. gov’t has decided not to proceed with its plan to purchase 6 million barrels of oil to replenish the Strategic Petroleum Reserve (SPR), due to the escalating cost of crude oil. Bloomberg reports administration delaying SPR restocking on rise in prices. The Biden administration’s Department of Energy (DOE) has rejected offers for oil to put back into the SPR as prices have moved above $80 per barrel, according to sources cited by Bloomberg. The administration also rejected offers in January on a restock effort due to price levels. However, the latest decision has not yet become public, the report noted.

Last year, the Biden administration set a record by releasing 180 million barrels from the SPR to control soaring gas prices. The administration had intentions to refill the SPR when oil prices fell within the range of $67 to $72 per barrel.

However, observers have seen U.S. crude prices rise to their most significant monthly increase in over a year. This trend is likely to continue, induced by new cuts in the production of oil by major producers such as Saudi Arabia and Russia.

Also, recent data reveals that U.S. commercial stockpiles of oil dwindled by 15.4 million barrels for the week ending on July 28. All these factors, including the tightening supply of oil and its upwardly rising cost, have influenced the U.S government’s decision to withdraw its previous plan of purchasing oil for the SPR.

“The DOE remains committed to its replenishment strategy for the SPR, including direct purchases when we can secure a good deal for taxpayers; exchange returns; and cancellation of planned sales where drawdown is unnecessary, in coordination with Congress,” Energy Department Deputy Chief of Staff Bridget Bartol told Bloomberg.

• Fertilizer prices, despite remaining high in a historical context, have been experiencing a consistent drop over the past year from the peak they reached in Q2 2022, according to a FarmDoc assessment (link). Factors behind this reduction are price-driven demand shrinkage, increased investments in enhancing global production capacity, and market adaptations to the Russia-Ukraine conflict. The report notes the enduring downward price trend could potentially advocate for a “wait and see” strategy for setting fertilizer prices for 2024. However, current futures bids for the 2024 corn and natural gas crops indicate a shift back to market conditions last seen in mid-to-late 2021. Similarly, fertilizer prices are nearing levels observed in 2021. Given these market predictions and potential divergences, it may be advisable to contemplate pre-setting prices for at least some of the 2024 fertilizer requirements to mitigate potential uncertainties.

• Ag trade: Taiwan purchased 65,000 MT of corn expected to be sourced from Brazil. Egypt tendered to buy an unspecified amount of wheat, with results expected later this morning.

• NWS weather outlook: There is a Moderate Risk of excessive rainfall over parts of the Middle Mississippi Valley on Wednesday and a Slight Risk over parts of the Ohio/Tennessee Valleys and Southern Appalachians, along with two areas over the Northern/Central Plains on Thursday... ...There is a Slight Risk of severe thunderstorms over parts of the Middle Mississippi Valley on Wednesday and the Central High Plains on Thursday... ...Excessive Heat Warnings and Advisories from parts of Central/Southern Plains and the Lower Mississippi Valley/Central Gulf Coast.

Items in Pro Farmer’s First Thing Today include:

• Corn and wheat firmer, soybeans lower
• Russia reiterates demands for restarting Black Sea grain deal
• Wholesale beef prices jump
• Pork cutout retreats

— Russian drones damaged a Ukrainian port in Izmail, a city on the Danube River near the border with Romania. In July Russia withdrew from an agreement under which it allowed Ukraine to export grain across the Black Sea; since then its air force has been targeting Ukrainian ports.

— Russia appears to be open to returning to the Black Sea grain deal, according to U.S. Ambassador to the U.N. Linda Thomas-Greenfield. However, she emphasized that the U.S. has yet to observe any factual evidence affirming this. She re-emphasized that for provisions enhancing Russian grain and fertilizer exports to be implemented, Russia needs to rejoin the deal.

Putin and Erdogan talk. During a phone conversation with Russian President Vladimir Putin, Turkish President Tayyip Erdogan reiterated the importance of the Black Sea grain deal and expressed his intention to continue his efforts in its reestablishment. Erdogan stressed the need to avoid actions that could increase tensions amid the ongoing Russia-Ukraine conflict, defining the Black Sea initiative as a “bridge of peace.”

TASS news agency conveyed, as per Reuters, that Putin confirmed to Erdogan that Russia will be ready to participate in the Black Sea grain deal again, given the conditions that broaden Russian grain and fertilizer exports are established. This has been a consistent demand from Russia, particularly after they opted out of the deal in July.

— Permanent ag disaster relief program measure introduced. Rep. Mike Thompson (D-Calif.) along with Sens. Dianne Feinstein (D-Calif.) and Alex Padilla (D-Calif.), and Rep. Doug LaMalfa (R-Calif.) introduced the Agricultural Emergency Relief Act. The aim is to establish a permanent relief program for farmers who lose crops due to natural disasters. The lawmakers pointed out that due to climate change, natural disasters are happening more frequently and with greater intensity, causing considerable impact on the farming sector.

The Agricultural Emergency Relief Act intends to rectify the absence of a standing relief program, addressing the administrative changes and subsequent delays that afflict the current relief process. The legislation is designed to provide prompt financial assistance to farmers suffering from disaster-related crop losses and will be particularly beneficial for those that grow specialty crops.

Under this legislation, events qualifying for assistance include droughts, wildfires, floods, hurricanes, derechos, excessive heat and moisture, winter storms, and freeze events, including polar vortexes. Farmers applying for relief payments would need to purchase crop insurance for the two years following the receipt of a payment.

To cater to specialty crop growers, payment calculations can be based either on the indemnities reported to the USDA or on losses in revenue.

The bill also allows Congress to continue to appropriate supplemental disaster funds in response to the level of damage incurred in a specific year or event.

The lawmakers urged making the existing Emergency Relief Program (ERP) permanent, stating its importance to ensure the continuity of farming operations and to safeguard the U.S’ food security.

— Hoeven talks farm bill in North Dakota. Sen. John Hoeven (R-N.D.), who serves as the Ranking Member of the Senate Ag Appropriations Committee and holds a senior position on the Senate Agriculture Committee, has been collecting feedback on the impending farm bill. He has been communicating with local farmers, agribusinesses, and crop insurance providers during a listening session in Leeds, North Dakota. He emphasized the importance of the following:

• Maintaining and enhancing crop insurance, crucial for many farmers managing risk. Hoeven highlighted that higher coverage levels may aid Northern Plains farmers, offering protection from natural disasters.
• Modernizing the counter-cyclical safety net, including the Agriculture Risk Coverage (ARC) and Price Loss Coverage (PLC) programs. He pointed out that these programs need to adapt to current market realities and the production costs that farmers now encounter.

As the next farm bill is being prepared, Hoeven argued the importance of reinforcing the farm safety net, including crop insurance, ARC, and PLC. This not only ensures their competitive presence in global markets but also incorporates farmers’ insights into impactful policy decisions, he said.

Hoeven has been striving to fine-tune USDA programs, making them more effective for producers. Among his initiatives are safeguarding the U.S. sugar policy, improving transparency and competition in cattle markets, and ameliorating livestock disaster programs such as the Livestock Indemnity Program (LIP), the Livestock Forage Program (LFP) and the Emergency Livestock Assistance Program (ELAP).

Of note: Hoeven stressed the need for voluntary, farmer-friendly programs instead of a one-size-fits-all approach to minimize regulatory burden on agricultural producers. This suggests he would oppose any Senate effort to mandate acreage base updates.

— The White House intends to ask Congress to fund weapon supplies for Taiwan as part of a supplementary budget request for Ukraine, aiming to speed up the delivery of weapons amid an escalating threat from China, according to the Financial Times (link/paywall), who cited two individuals familiar with the plans. Should this request be approved by Congress, Taiwan will receive weapons through a U.S. taxpayer-funded system called “foreign military financing,” marking a first for the country. The White House is anticipated to put forth this request within the month.

This move follows a recent White House announcement that the U.S. will supply Taiwan with $345 million worth of weapons from stockpiles for the first time, utilizing a system known as “presidential drawdown authority,” which has previously been used for weapon deliveries to Ukraine.

— China announced two new leaders for its People’s Liberation Army (PLA) Rocket Force, surprising many and causing speculation about shifts in the branch which oversees the nation’s nuclear and ballistic missiles. Wang Houbin has been named commander and Xu Xisheng the political commissar of the force. Both were promoted by Chinese leader Xi Jinping. The move may indicate Xi’s concern over the Rocket Force leadership, particularly at a time when China’s missile program takes on increased importance due to recent tensions with Taiwan, analysts note. The move has led to some questioning the force’s ability to complete its missions reliably and efficiently, especially when China’s buildup of its nuclear arsenal is viewed as an effort to deter potential U.S. intervention in Taiwan’s affairs.

The recent leadership change in the Rocket Force follows a similar situation that occurred in China’s diplomatic leadership last month, leading to even more uncertainty. Analysts suggest these moves might be part of Xi’s efforts to ensure top leaders’ loyalty within the most powerful sectors of the PLA.

— China recently announced tax-relief measures focused on aiding small businesses, which are currently grappling with sluggish domestic consumption. One significant move is the extension of the exemption from value-added tax till 2027 for companies generating monthly sales less than 100,000 yuan ($13,900). These measures come as a response to wavering economic stability, as China has experienced slowed economic progress following a period of robust recovery from the pandemic.

— Members of the World Trade Organization (WTO) have reached an agreement on most of the outstanding issues concerning dispute settlement reform, as reported by Marco Molina, the Deputy Permanent Representative of Guatemala to the WTO. These findings came about through an ongoing informal process, aiming to develop a reform proposal for consideration at the 13th Ministerial Conference of the WTO next year.

This progress occurred under Molina’s guidance, who led the consensus-building process to reinstate WTO’s two-tiered dispute settlement process by 2024. This process was initially agreed upon during the organization’s 12th Ministerial Conference in 2022. Since the current dispute resolution body, the Appellate Body, has been non-operational following the U.S.’ objections to it. Because of this situation, some dispute rulings remain unaddressed, and any resulting trade sanctions cannot be implemented.

However, many members have joined the EU-initiated Multi-Party Interim Appeal Arbitration Arrangement (MPIA) while disputes involving non-MPIA members, including the U.S., are still unresolved. Molina indicated that consensus has been reached on about 80% of outstanding issues, and for the remaining 20%, negotiations are in progress.

Following the WTO’s summer pause, he plans to continue consultations aiming to address all outstanding issues before the end of September. He perceives this task positively and believes that solutions can be found despite the existing differences. Molina plans to initiate the drafting process after the summer break and insists on its multilateral, transparent nature with all members invited to participate.

Molina also informed members that he would share a preliminary calendar of future meetings soon, as the process ahead is likely to be intense. He noted a narrow timeframe for members to conclude the informal effort.

Reaction to Molina’s presentation was mixed among the thirty members responding. The African Group, represented by Cameroon, put forward a proposal for a more formal process through the Dispute Settlement Body (DSB). Some voiced concerns about the speed and regularity of meetings, emphasizing transparency and inclusivity. In contrast, others argued that the current approach is already transparent, inclusive, and multilateral and warned that formalizing it at this stage could impede further progress.

DSB Chair Petter Olberg acknowledged the varied responses and emphasized the need to consider resource constraints when planning future meetings. He suggested a broader agreement was needed before a formal process could begin, leaving the exact timing open-ended. This issue will be reviewed after the summer break.

— Senate Republicans urge EPA to withdraw climate rule for power plants. Some 39 Senate Republicans, including Minority Leader Mitch McConnell (Ky.), John Thune (S.D.) and Shelley Moore Capito (W.Va.) are urging EPA to withdraw its proposed limits on coal and nuclear power gas emissions, arguing in a letter (letter/PDF) to EPA Administrator Michael Regan that the agency “grossly misinterpreted” its authority under the Clean Air Act, the Washington Post reports (link). The letter, the article says, “offers a window into the approach Republicans might take if they gain full control in Washington, and the legal arguments that GOP attorneys general might make when challenging the final rule in court.”

— There’s a debate within the Biden administration about the role of ethanol in qualifying for sustainable aviation fuel (SAF) tax credits. They are attempting to define eligibility criteria that will satisfy both supporters of ethanol and those favoring other feedstocks, Reuters reports.

Proponents of ethanol insist that without this fuel, the administration wouldn’t be able to deliver on its objective of providing at least 3 billion gallons of SAF per year to the aviation industry. Contention arises around the model used to calculate carbon offsets for the fuel.

The Inflation Reduction Act (IRA/Climate Bill) has mandated the usage of the Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA) tool, developed by the International Civil Aviation Organization, or a similar approach, for gauging SAF emissions.

However, the ethanol industry favors the Department of Energy’s Greenhouse Gases, Regulated Emissions and Energy Use in Technologies (GREET) model, as it accounts for indirect land-use change in a manner more beneficial to ethanol. The administration is reportedly considering an approach that incorporates elements of the GREET model into feedstock evaluation, but a compromise has yet to be reached.

Support for including ethanol in the SAF process, especially in relation to tax credit eligibility under the IRA, has been backed by ethanol advocates, farm-state legislators, and some aviation firms.

— As of yesterday, most incandescent light bulbs have become unavailable for purchase in the U.S., due to new energy efficiency regulations. These rules are impacting most bulbs derived from technology patented by Thomas Edison in the 19th century. This change is predicted to boost LED bulb sales. However, the transition has encountered resistance from Republicans.

— California utility company PG&E is discontinuing what was formerly considered a key fire prevention measure: a tree-trimming program. This program entailed spending approximately $2.5 billion to cut or clear more than a million trees growing near power lines. The Wall Street Journal reports (link) that following an internal analysis and discussions with utility executives, PG&E has determined that the efforts were primarily ineffective. Consequently, the company is shifting its focus to new power-line settings as a more effective strategy for reducing wildfire risks. This decision has inspired considerable controversy among the company’s board members and has also attracted attention from California regulatory bodies.

— Mountain Valley Pipeline update. The Federal Energy Regulatory Commission (FERC) is asking for the dismissal of challenges brought by environmentalists against decisions made in relation to the Mountain Valley Pipeline. The case was filed in the U.S. Court of Appeals for the District of Columbia Circuit. FERC argues the court cannot offer effective relief for the case, as FERC has been instructed to either carry out a supplemental environmental impact statement (EIS), or provide reasons for its absence. The agency referenced certain provisions in the debt limit law which, they argue, eliminate the necessity for an EIS. FERC also contends that the opportunity for a re-hearing on this issue has expired.

— EPA is set to address tighter water regulations related to Consolidated Animal Feeding Operations (CAFOs) following a petition filed in 2017. The petition argues that CAFOs manage to bypass necessary permits due to a loophole in the stormwater regulations. The EPA has pledged to respond by Aug. 15, following an agreement reached in the United States Court of Appeals for the Ninth Circuit in April. The groups that initiated the petition have also agreed to voluntarily drop their legal action by Aug. 29, pending the EPA’s response.

— Major U.S. pharmacy chains, such as Rite Aid, CVS, and Walgreens, are gearing up for the fall respiratory virus season by beginning to roll out vaccine appointments for flu and Respiratory Syncytial Virus (RSV). These vaccines are available to anyone aged 3 or above for flu, and adults 60 and above are eligible for the RSV vaccine. These pharmacies also plan on offering new Covid-19 vaccines, pending FDA authorization or approval and CDC’s recommendation. This rollout is dependent on their first receiving approval from the FDA and a recommendation from the CDC.

— The indictment of former President Donald Trump, related to his efforts to overturn the 2020 election, is making national headlines. He faces a range of serious charges which are likely to vastly complicate his political future. Key points to note, according to the New York Times:

• Trump faces four counts: a conspiracy to violate civil rights, a conspiracy to defraud the government, corrupt obstruction of an official proceeding, and a conspiracy to execute this obstruction. Trump is due to appear in a Washington federal court tomorrow in response to these charges.
• This new indictment adds to a string of previous state and federal charges, possibly making these some of the gravest the ex-president has faced. As a result, he may have to appear in multiple criminal trials next year.
• His 2024 campaign could potentially suffer under the weight of these legal proceedings. He has been using his political action committee to cover the legal costs, but it’s uncertain how keen donors will continue to be in financing these bills.
• Despite these legal troubles, the latest Republican polls suggest he maintains significant sway over around one-third of the GOP electorate.
• Trump’s response to the charges is to label them as “Election Interference” and a desperate move by President Biden, using the circumstances as an opportunity for fund-raising.
• Other potential contenders for the 2024 Republican nomination like Governor Ron DeSantis and Senator Tim Scott are navigating their journeys amidst Trump’s challenges. While DeSantis has not seen his position bolstered, Tim Scott has managed to gather prominent financiers for funding, which might signal his emergence as a potential alternative to Trump.

Bottom line: It remains to be seen how these legal issues will impact Trump’s political endeavors and strength within the GOP, and whether other party contenders will manage to capitalize on his challenges.

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