U.S. Inflation Slips to 2.9% in July, Lower Than Expected

News/Markets/Policy Updates: Aug. 14, 2024

— Equities today: Asian and European stock indexes were mixed overnight. U.S. Dow opened flat to slightly higher. The day’s big event is the release of the U.S. July consumer price index — see results below. In Asia, Japan +0.6%. Hong Kong -0.4%. China -0.6%. India +0.2%. In Europe, at midday, London +0.4%. Paris +0.4%. Frankfurt +0.5%.

U.S. equities yesterday: All three major indices notched gains following wholesale inflation data that came in below expectations. The Dow rose 408.63 points, 1.04%, at 39,765.64. The Nasdaq was up 407.00 points, 2.43%, at 17,187.61. The S&P 500 gained 90.04 points, 1.68%, at 5,434.43. The S&P 500 has recovered some of its recent losses and is now less than 5% from its record high set in July. All three major averages are back above their Aug. 2 closing level, where they were before the dramatic Aug. 5 global market sell-off.

— Cargill, the world’s largest crop trader, has experienced a significant decline in its revenues, dropping almost 10% from record levels in its most recent fiscal year. This decline is primarily attributed to the ample global crop supplies, which have led to a decrease in agricultural commodity prices. For the fiscal year ending in May, Cargill’s revenue fell to $160 billion, down from approximately $177 billion in the previous period. The abundant supply of key crops such as corn, soybeans, and wheat has been a major factor in depressing prices. USDA’s latest reports indicate comfortable supply levels for these commodities, further contributing to the downward pressure on prices. This has affected not only Cargill but also other major agricultural companies, as the market faces challenges from low crop prices and reduced processing margins. In response to these challenges, Cargill is undergoing a significant restructuring. The company plans to streamline its operations by reducing the number of business units from five to three as part of its 2030 strategy. This restructuring aims to “streamline and simplify” operations amid the downturn in global commodity prices. The new structure will include divisions focused on Food, Ag & Trading, and a Specialized Portfolio, which will largely concentrate on animal nutrition and health. “As we move forward, we are not looking for short-term fixes. Instead, we are focused on a transformational strategy that will fundamentally change the way we run Cargill to ensure we drive long-term profitable growth,” the company said.

— Mars reaches a nearly $30 billion all-cash deal to acquire Kellanova, a snack maker with brands including Pringles and Cheez-It, the WSJ reported (link). Shares of Kellanova, which was spun off from Kellogg last year, jumped in premarket trading, climbing 8% to above $80. That’s near the $83.50 per share level apparently agreed to by Mars in the all-cash deal, and up from the $60 level since reports of the merger first surfaced in early August. The latest deal would be the largest packaged-food transaction since the merger between Kraft and H.J. Heinz in 2015, and some are even anticipating a new era of food-industry consolidation. That has raised the risk of antitrust hurdles.

— The U.S. Department of Justice (DOJ) is considering a significant antitrust move to break up Google following a landmark court ruling that found the company monopolized the online search market. This would be the first attempt by Washington to dismantle a company for illegal monopolization since the efforts against Microsoft two decades ago.

The DOJ is exploring several options, with breaking up Google being the most severe. This could involve splitting off parts of Google’s business, such as the Android mobile operating system and the Chrome web browser. However, less drastic measures are also under consideration. These include forcing Google to share more data with competitors and implementing measures to prevent the company from gaining an unfair advantage in artificial intelligence products.

This development follows a significant legal victory for the DOJ, which accused Google of using its search dominance to stifle competition. The ruling is part of a broader global scrutiny of tech giants, with the U.S. attempting to catch up with regions like Europe, which have already implemented more stringent regulations on major tech companies. There are significant legal and practical challenges involved in breaking up a company like Google. Critics argue that such a drastic measure might not be justified unless there is clear evidence of anticompetitive behavior beyond typical business practices.

— Ag markets today: Soybeans posted modest corrective gains overnight, while the corn and wheat markets faced light followthrough selling. As of 7:30 a.m. ET, corn futures were trading fractionally lower, soybeans were 4 to 5 cents higher, winter wheat markets were mostly 2 to 3 cents lower and spring wheat was steady to fractionally lower. The U.S. dollar index was down around 100 points, and front-month crude oil futures were modestly weaker.

Wholesale beef prices continue to strengthen. Wholesale beef prices firmed for a third straight day, with Choice rising $1.10 to $316.93 and Select increasing 44 cents to $300.61 on Tuesday. Despite the stronger prices, movement increased to 138 loads, signaling active retailer buying.

Cash hog index slide continues. The CME lean hog index is down another 58 cents to $90.34 as of Aug. 12, the seventh straight daily decline. During that span, the index has fallen $3.30 after posting a seasonal peak on Aug. 1. August lean hog futures, which expire today and are settled against the index on Friday, closed yesterday at a 44-cent discount to the index. October hogs finished yesterday at a $17.49 discount to today’s quote.

— Agriculture markets yesterday:

• Corn: December corn futures fell 4 1/4 cents at $3.97 1/4 and nearer the session low. Prices Monday hit a contract low.
• Soy complex: November soybeans fell 23 1/2 cents to $9.62 1/2, while December soymeal edged $5.40 lower to $299.20 and September soyoil fell 119 points to 40.29 cents. Each marked contract low closes.
• Wheat: December SRW futures fell 8 cents to $5.51 3/4 and settled nearer session lows. December HRW futures fell a penny to $5.62 1/2. September HRS futures rose 3/4 cent to $5.93. December SRW futures closed at a two-week low.
• Cotton: December cotton fell 108 points to 67.99 cents, near the session low. Cotton futures continued to be limited by the 20-day moving average, which has served as resistance.
• Cattle: October live cattle futures firmed 72.5 cents to $180.75 though settled well off intraday highs. September feeder cattle futures climbed $2.675 to $242.175.
• Hogs: October lean hogs fell $1.475 to $72.85, near mid-range and hit a four-week low.

— Quotes of note:

• The stock market surged Tuesday following benevolent inflation data and encouraging comments from a top Fed official. Federal Reserve Bank of Atlanta President Raphael Bostic cheer investors with comments at the conference of African American Financial Professionals. He said he was encouraged by recent inflation figures and reiterated his stance that it’s likely he’ll be ready to cut rates by the end of the year. “I’m hopeful that in the next several months, we’ll be at a place where we have an economy that’s pretty much fully normalized,” Bostic added. Bostic said he expects the U.S. economy will be in a place to lower interest rates within the next several months, adding he doesn’t currently see a recession on the horizon. “A recession is not in my Outlook. I think there’s still enough momentum in the economy that we can see slowing and not see labor markets deteriorate to a level of considerable concern,” Bostic said. When asked specifically if the Fed would cut rates soon, Bostic said policymakers want to be absolutely sure inflation is sustainably trending back to the central bank’s 2% inflation target. “It would be really bad if we started cutting rates and then had to turn around and raise them again, right? That would introduce all sorts of uncertainty,” Bostic said. “But it’s coming. It is coming. If the economy evolves as I expect, you all will have bigger smiles on your face by the end of the year.” He also pointed out that in the past year, the unemployment rate went from 3.4% to 4.3% while the U.S. economy was producing roughly 200,000 new jobs a month. That’s way above the natural replacement rate for payroll growth. Meanwhile, the supply of workers in the economy is also growing. “That’s actually a good problem to have. People are starting to see opportunity. They’re chasing it.”

• Economist Oliver Allen from Pantheon Macroeconomics suggests that the recent uptick in optimism among U.S. small businesses may be temporary. The National Federation of Independent Business’s monthly confidence survey showed a surprising boost in sentiment, even with ongoing concerns about inflation and the labor market. Allen attributes this surge partly to political factors and stock market performance. He notes that many small-business owners lean conservative, and the perceived increasing chances of a Donald Trump victory in the upcoming election, following President Biden’s poorly received debate performance in June, may have lifted their spirits in July. However, with Kamala Harris gaining traction for the Democrats and the stock market showing signs of instability, Allen warns that the mood could turn gloomier in the August survey.

— U.S. inflation report for July 2024 indicates a continued easing of inflationary pressures, with the Consumer Price Index (CPI) rising by 2.9% from a year earlier. Core prices, which exclude food and energy, increased by 3.2% over the previous 12 months and 0.2% since June. This reflects a moderation in inflation compared to earlier in the year. Economists had anticipated that the annual inflation rate would remain steady at 3.0%, with core inflation slightly cooling to 3.2%. Factors contributing to the slowdown include easing costs for cars, airfare, and housing, although auto insurance costs are expected to rise.

Of note: It’s the first time inflation has fallen below 3% since March 2021.

The report will probably move central bankers closer to cutting interest rates at the Sept. 17-18 FOMC meeting. For months, Fed officials have said they won’t trim borrowing costs until they’re confident inflation is easing to normal levels.

The food index increased 0.2% in July, as it did in June. The index for food at home rose 0.1% in July. Three of the six major grocery store food group indexes increased over the month while the other three indexes declined in July. The index for meats, poultry, fish, and eggs rose 0.7% in July as the index for eggs increased 5.5%. The fruits and vegetables index rose 0.8% over the month and the nonalcoholic beverages index increased 0.5%.

The index for other food at home fell 0.5% in July, after rising 0.5% in June. The cereals and bakery products index also decreased 0.5% over the month, and the dairy and related products index declined 0.2%.

The food away from home index rose 0.2% in July, after rising 0.4% in each of the preceding two months. The index for limited-service meals rose 0.3%, and the index for full-service meals increased 0.1% over the month.

The index for food at home rose 1.1% over the last 12 months. The meats, poultry, fish, and eggs index rose 3.0% over the last 12 months, and the nonalcoholic beverages index increased 1.9%. Over the same period, the index for other food at home rose 0.9%. The index for cereals and bakery products was unchanged over the last 12 months. In comparison, the fruits and vegetables index fell 0.2% over the year, as did the dairy and related products index.

The index for food away from home rose 4.1% over the last year. The index for limited-service meals increased 4.3% over the last 12 months, and the index for full-service meals rose 3.8% over the same period.

(New York Times, Karl Russell )

— Mortgage rates have seen a sharp decline in recent weeks, leading to a surge in refinancing activity. The Mortgage Bankers Association reported a 35% increase in refinance applications last week compared to the previous week, and a 118% increase compared to the same week last year. While rates only dropped 1 basis point last week, they have fallen by 33 basis points over the past four weeks and are 62 basis points lower than a year ago. The refinance share of mortgage activity jumped to 48.6% from 41.7% as homeowners capitalize on lower rates, despite high home prices and limited supply.

— The National Bureau of Economic Research (NBER) Business Cycle Dating Committee plays a crucial role in defining recession periods in the United States. Here is an overview of their role and methodology:

• Definition of recession: The NBER defines a recession as a significant decline in economic activity that is spread across the economy and lasts more than a few months. This decline is typically visible in indicators such as production, employment, real income, and other economic measures.
• Determination of peaks and troughs: The committee is responsible for identifying the dates of peaks and troughs in economic activity, which mark the beginning and end of recessions. A recession begins at the peak of economic activity and ends at the trough, after which the economy enters an expansion phase.
• Use of multiple indicators: The committee does not rely solely on GDP to define recessions. Instead, it considers a range of economic indicators, including real personal income less transfers, nonfarm payroll employment, real personal consumption expenditures, wholesale-retail sales adjusted for price changes, and industrial production. This comprehensive approach allows for a broader assessment of economic conditions.
• Retrospective analysis: The committee’s approach is retrospective, meaning it waits until sufficient data are available to avoid major revisions to the business cycle chronology. This often results in recession announcements being made months after the actual economic peak or trough has occurred.
• Judgment-based decisions: While the committee considers various economic indicators, there is no fixed rule about which measures are used or how they are weighted. The committee exercises judgment in interpreting these indicators to determine whether a recession has occurred.

— New Zealand’s central bank unexpectedly cut its benchmark interest rate by 25 basis points to 5.25%, marking the first reduction since March 2020 and a year ahead of its forecast. This move, driven by a faster-than-expected economic contraction, signals more cuts to come. The decision aligns with recent rate cuts by the EU, UK, and Canada, all occurring before any action from the U.S. Federal Reserve.

Market perspectives:

— Outside markets: The U.S. dollar index was weaker ahead of the CPI report, with the euro and Japanese yen both firmer against the U.S. currency. The euro rose to its strongest level against the dollar since January ahead of U.S. inflation data, surpassing $1.10. The yield on the 10-year U.S. Treasury note was firmer, trading around 3.84% ahead of inflation data, with a mostly lower tone in global government bond yields. Crude oil futures remained higher but off of levels seen in overnight action, with U.S. crude around $78.55 per barrel and Brent around $80.95 per barrel. Gold and silver were modestly higher ahead of inflation data, with gold around $2,512 per troy ounce and silver around $27.98 per troy ounce.

— The Pro Farmer Crop Tour starts Monday and will garner a lot of attention. Meanwhile, smaller tours are taking place, and crop ideas will flow.

— The soybean market is currently experiencing significant challenges, with prices reaching multi-year lows due to a combination of factors affecting supply and demand.

• Price decline: Soybean prices have fallen to under $10 per bushel, marking an almost four-year low. This decline is attributed to an abundant global supply and relatively low demand. Brazil is expected to produce a large crop, further increasing global supply, while improved weather conditions in the U.S. have benefited crop yields. (The average closing price for soybeans in 2020 was $9.5344, with the year opening at $9.5625 and reaching a low of $8.2175.)
• Supply factors: USDA estimates a record American harvest, pegging the soybean harvest at 4.589 billion bushels, which is about 2.6% more than previous estimates. This increase is partly due to an expansion in planted acres and favorable weather conditions, including ample rainfall and limited heat.
• Demand challenges: Despite substantial sales, new crop sales are at a 20-year low, influenced by strong competition from Brazilian and Argentinian soybeans. Additionally, China has increased its purchases of cheaper Brazilian beans, affecting U.S. market demand.
• Market outlook: The market is expected to continue facing pressure unless there is a significant change in supply dynamics. The current conditions suggest that selling may occur on price bounces, with the market searching for a bottom that could be influenced by planting decisions for the next year’s crop.

— The soybean market in Brazil is currently experiencing lower prices, which have been somewhat mitigated by the depreciation of the Brazilian real. The real has depreciated by 11% against the U.S. dollar this year, largely due to concerns about Brazil’s fiscal deficit. This depreciation has provided Brazilian soybean farmers with a competitive edge over their U.S. counterparts by allowing them to endure lower commodity prices more effectively, as these prices are typically denominated in dollars.

The weaker real has encouraged Brazilian farmers to increase their sales, contributing to a decline in benchmark prices. Despite the drop in soybean futures by nearly 13% in U.S. dollar terms, the decline is reduced to only 1.7% when prices are converted into reais. This currency situation has allowed Brazilian farmers to maintain higher revenue from soybean sales compared to the previous year, thus shielding them from the full impact of the global price decline.

However, if the Brazilian real were to rally, it could negatively impact Brazilian soybean producers by reducing their competitive advantage and increasing the costs of imported agricultural inputs like crop nutrients and pesticides, which are priced in dollars.

In contrast, the Argentine soybean sector is facing challenges due to export taxes, which are cutting into prices for farmers. These taxes reduce the profitability of soybean exports from Argentina, further complicating the situation for Argentine farmers who are already dealing with global price pressures.

— France’s wheat crop for 2024 is facing challenges in both production volume and quality. The French Ministry of Agriculture has estimated the wheat production to be below 30 million tonnes, marking it as the smallest since the 1980s due to adverse weather conditions, including heavy rains. The crop is showing mixed milling quality, with satisfactory protein levels like last year, but with erratic test weights. The Hagberg falling numbers, a key milling specification, are generally satisfactory, according to FranceAgriMer and crop institutes Arvalis and Terres Inovia, although specific figures for wheat quality results were not provided.

The overall production is expected to fall by 10 million tonnes compared to previous years, and French wheat exports are projected to decline by 50% in the marketing year 2024-25. The planted area for soft wheat is also expected to decrease significantly due to the unfavorable weather, with regions like Nouvelle-Aquitaine experiencing the largest drops in planted areas.

— The Port of Los Angeles saw a record volume of goods processed last month as importers rushed to bring in holiday merchandise early. This surge is driven by efforts to avoid tariffs, disruptions from Red Sea cargo diversions, and a potential strike by East and Gulf Coast dockworkers in October. Additionally, the port handled 54% more empty containers than last year, indicating that even more cargo is expected to arrive soon.

— The Panama Canal is struggling to regain the trust of traders in liquefied natural gas (LNG) and food commodities after a historic drought last year forced significant restrictions on transit, the Financial Times reports (link). The canal’s operations, which are critical for global trade, have been impacted by reduced rainfall, leading to fewer ships, particularly LNG and dry bulk carriers, using the route. Although the canal hopes to return to near-full capacity in September, ongoing challenges, including climate change and the need for more reliable water sources, threaten its long-term viability. The situation has also led to increased costs and the rerouting of some shipments via longer, but more reliable, alternatives. Panama is working on long-term solutions to the water crisis, but the process is complex and faces domestic political challenges.

— Ag trade update: Jordan tendered to buy 120,000 MT of optional origin milling wheat.

— Tropical Storm Ernesto is on the verge of becoming a dangerous hurricane as it approaches Puerto Rico and the Caribbean. Although the storm’s center will pass northeast of Puerto Rico, it is expected to bring 8 to 10 inches of rain, raising the risk of flash flooding and mudslides, according to the National Hurricane Center. Residents are being urged to prepare for widespread power outages, as the island’s electrical grid, still under repair from Hurricane Maria in 2017, remains vulnerable. Some cruise lines have adjusted their itineraries to avoid the storm’s strong winds and rough seas.

— NWS outlook: Flash flooding and severe weather threat forecast to stretch from the central/northern Plains to the Midwest over the next few days... ...Potentially dangerous heat anticipated across the southern Plains, lower Mississippi Valley, and Gulf Coast.

(NWS)

Items in Pro Farmer’s First Thing Today include:

• Soybeans firmer, corn and wheat weaker overnight
• Payment terms limited Egypt’s wheat buy
• Eurozone GDP stable in Q2
• UK consumer inflation rises but core prices ease

— The Biden administration has approved a $20 billion weapons deal with Israel, despite calls from rights activists to halt arms sales due to the high civilian death toll in Gaza. The deal includes 50 F-15 fighter jets, tens of thousands of tank and mortar cartridges, and military cargo vehicles. Although President Biden has been urging Israel and Hamas to agree to a ceasefire, the weapons from this sale would take years to be delivered to Israel.

— Ukraine’s recent incursion into the Russian border region of Belgorod has led to the declaration of a regional emergency after new attacks by Ukrainian forces. Kyiv claims to have taken control of hundreds of square miles of Russian territory in this rare cross-border operation. The advance has forced tens of thousands of Russians to flee their homes, prompting regional authorities to seek a federal emergency declaration from the Russian government. This marks the first time since World War II that foreign troops have entered Russian territory, creating a significant embarrassment for the Kremlin. Despite Russian President Vladimir Putin’s vow to “kick the enemy out,” his military has so far been unable to halt the Ukrainian advance.

Of note: Russia is withdrawing some of its military forces from Ukraine to respond to a Ukrainian offensive into Russian territory.

— Ukraine’s grain exports for the 2024-25 season have reached 5.26 million metric tons (MMT) as of Aug. 14, which is significantly higher than the 3.12 MMT recorded by the same time last year. This year’s exports include 2.4 MMT of wheat, 2 MMT of corn, and 795,000 metric tons of barley. In August alone, exports have reached 1.56 MMT, up from 848,000 metric tons at this point in August 2023.

Despite the increase in exports, the overall forecast for the 2024-25 season suggests a decrease in grain and oilseed production and exports. The Ukrainian Grain Association (UGA) expects grain and oilseed exports to fall by 18.2%, with production dropping by 9.7% due to reduced acreage under grain crops. Corn production is expected to decrease to 25.5 million tonnes, and wheat production is forecasted to be 19.1 million tonnes, both lower than previous estimates.

The increase in exports so far may be attributed to a combination of factors, including strategic sales and possibly favorable early season conditions. However, the long-term outlook remains cautious due to anticipated reductions in production and logistical challenges.

Ukraine’s corn production may fall to 20 MMT to 21 MMT from around 30 MMT in 2023 if drought continues, producer group Ukrainian Agrarian Council told Reuters. Most of Ukraine experienced a heatwave in July, which producers expect will decrease the yield of late crops by around 30%. Analysts and traders have predicted Ukraine’s corn crop at between 23 MMT and 25 MMT, while USDA earlier this week cut its forecast by 500,000 MT to 27.2 MMT.

— Farmdoc: Price declines raise concerns for 2023-2024 farm incomes; budgeting crucial as support payments unlikely. Ongoing price declines are raising concerns about farm incomes for 2023 and 2024. Current trends suggest that PLC and ARC-CO payments are unlikely to be triggered for corn, soybeans, or wheat in most areas for 2023, according to Farmdoc (link). It notes even if these supports are triggered for 2024, payments wouldn’t be received until October 2025. With this outlook, farmers will need to focus on careful budgeting and cash flow planning for the remainder of 2024 and into 2025.

— Chinese traders seeking to avoid big state banks as bond buying continues. Chinese traders are paying a premium for government bonds to evade regulators seeking to tame an unprecedented rally, people familiar with the matter told Bloomberg. Traders from non-bank financial firms, including insurers, are specifying in their orders to brokers that they don’t want to buy from any of the big state banks since regulators have told the nation’s largest lenders to keep records of their counterparties. This end-around comes amid Beijing’s efforts to rein in a record-breaking rally in bonds amid concerns over financial stability. Chinese authorities delivered a harsh warning to bond investors on Wednesday, saying they will crack down on any illegal actions that disrupt the bond market and threaten systemic risk, according to a commentary Wednesday in a newspaper backed by the People’s Bank of China.

— China’s 48 million unbuilt homes threaten to prolong crisis. At least 48 million homes in China have been sold before construction has been completed, suggesting the country’s property crisis won’t be resolved anytime soon, according to a report from Bloomberg Intelligence (link).

— John McNally, a senior advisor at Scotiabank, highlights the challenges that carbon policy uncertainty poses for businesses and investors in Canada. As the country grapples with a cost-of-living crisis and political campaigning, carbon pricing has become a contentious issue. McNally points out that even though the current federal carbon tax, which includes income-tested rebates, may leave households better off, public dissatisfaction is growing.

The opposition Conservative party, leading in polls, is advocating for the repeal of the carbon pricing system. However, McNally warns that this move could derail Canada’s progress towards its climate goals. He emphasizes the need for creative policies that can strike a balance between reducing emissions, maintaining affordability, and ensuring energy security. McNally also cautions that eliminating carbon pricing without a viable alternative could lead to higher costs, particularly as trading partners begin to impose tariffs on countries that lack robust carbon pricing mechanisms.

— USDA announced a one-year testing program to assess the presence of the H5N1 avian flu virus in beef from culled dairy cows. This initiative follows confirmation that pasteurization effectively eliminates the bird flu virus in dairy products. The testing will involve collecting approximately 800 samples nationwide from milk cows sent to slaughter, beginning in mid-September. José Esteban, USDA’s undersecretary for food safety, stated that this program aims to determine if the H5N1 virus is present in asymptomatic cows and to trace any detected infections back to their source.

This testing is part of broader efforts to ensure food safety, as USDA and other agencies continue to monitor and manage the spread of H5N1 in livestock. USDA has already conducted tests on beef tissue from cull dairy cows at select facilities, finding no viral particles in 108 out of 109 samples. The virus was first identified in U.S. dairy cattle in March 2024 and has been confirmed in herds across 13 states.

— Institute for Justice sues Florida over ban on cultivated meat, citing unconstitutional protectionism. The Institute for Justice (IJ), a nonprofit public interest law firm, filed a lawsuit against a new Florida law that bans the production, distribution, and sale of cultivated meat. Cultivated meat is made from real animal cells without the need to raise or kill animals. The lawsuit, filed in the U.S. District Court for the Northern District of Florida, argues that the law is unconstitutional, claiming it favors local meat producers by restricting out-of-state competition and undermines the national common market.

Paul Sherman, a senior attorney at IJ, asserts that the law is not about safety but about stifling innovation and limiting consumer choice. IJ has partnered with UPSIDE Foods, a pioneering company in cultivated meat, founded by cardiologist Dr. Uma Valeti. Valeti started UPSIDE Foods to create a humane and sustainable way to produce meat, which is FDA and USDA-approved for safety and quality.

The law, signed by Florida Governor Ron DeSantis on May 1, 2024, and effective from July 1, 2024, has been criticized by some for its protectionist motives. Florida officials, including Governor DeSantis, have expressed concerns that cultivated meat poses a threat to traditional agriculture. IJ attorney Suranjan Sen argues that Florida cannot ban a product that is lawful in other states just to protect its local businesses from competition.

— Indonesia’s plan to provide free school meals, spearheaded by President-elect Prabowo Subianto, aims to improve nutrition for over 80 million school children at a projected cost of $28 billion. This initiative is expected to significantly boost dairy consumption and imports, as the country currently meets only 16% of its dairy demand with domestic fresh milk production. The plan is anticipated to require 4 million metric tons of milk, matching USDA’s estimate of Indonesia’s milk consumption in 2024.

Currently, Indonesia’s per capita milk consumption is 16.27 kilograms, which is considerably lower than the global average of 100 kilograms. The high cost of raising dairy cattle, partly due to limited land availability, poses challenges to increasing domestic production. At the end of 2023, Indonesia had just under 260,000 head of dairy cattle.

To address these challenges, the Indonesian government plans to import live dairy cattle and employ sexed insemination techniques to boost domestic milk production. This approach aims to reduce dependency on milk imports and support the free school meals program. The government has allocated IDR 71 trillion in the 2025 budget for this initiative, with trial runs already underway in some schools.

The program is expected to increase demand for dairy imports from countries like New Zealand, which currently exports nearly NZ$1 billion ($600 million) of dairy products to Indonesia. Additionally, live cattle imports from Australia are anticipated to rise as part of efforts to expand local milk production. However, the implementation of the free school meals program will prioritize underdeveloped, frontier, and remote areas, and milk distribution may initially be limited due to the small domestic supply.

— President Joe Biden announced significant new funding for cancer research during his first official trip since exiting the 2024 race. The “Cancer Moonshot” program, originally launched during his vice presidency and recently bolstered with billions in funding, aims to cut cancer deaths in half over the coming decades. Biden unveiled $150 million in new research grants, including $23 million to Tulane University, where the announcement was made. This push for funding comes as the White House seeks to allocate resources amid uncertainty ahead of November. The initiative is deeply personal for Biden, whose eldest son, Beau Biden, died of brain cancer in 2015 at age 46.

— Ilhan Omar wins primary. Rep. Ilhan Omar (D-Minn.), a member of the progressive “Squad,” secured victory in the Democratic primary for Minnesota’s 5th Congressional District. She defeated her main challenger, Don Samuels, a former Minneapolis City Council member, by more than ten percentage points. This win is significant for Omar, especially after two other “Squad” members, Cori Bush and Jamaal Bowman, lost their primaries, partly due to heavy spending by pro-Israel groups. In contrast, Omar’s race did not attract the same level of external financial intervention. Omar will face Republican Dalia al-Aqidi in the November general election. Given the Democratic stronghold in the 5th District, where Democrats have a substantial registration advantage, Omar is heavily favored to win.

— Royce White, a former NBA player and conservative populist, has won the Republican nomination to challenge Democratic Sen. Amy Klobuchar in the upcoming U.S. Senate election in Minnesota. White’s candidacy has been marked by controversy and has garnered significant attention within the Minnesota Republican Party. Royce White was a first-round pick by the Houston Rockets in the 2012 NBA Draft. However, he never played for the team due to his mental health issues, including an anxiety disorder and a fear of flying, which he openly discussed to raise awareness about mental health in sports. He briefly played for the Sacramento Kings and later in international leagues and the Big3 3-on-3 basketball league. White ran unsuccessfully for a U.S. House seat in 2022 before securing the GOP nomination for the Senate in 2024. He has positioned himself as a candidate who can appeal to younger voters and voters of color, particularly in urban areas like Minneapolis-St. Paul. White has been criticized for making derogatory remarks on social media, including antisemitic conspiracy theories and comments about women. These statements have drawn national media attention and criticism from within his party. White has faced legal challenges, including court actions for unpaid child support and accusations of misappropriating campaign funds during his 2022 congressional run. He has denied these accusations and is working to resolve the issues. Despite the controversies, White has received endorsements from far-right figures like Steve Bannon and has been backed by the Minnesota Republican Party. His campaign has been marked by fiery rhetoric and a focus on populist issues.

White is considered a long shot against Klobuchar, who has been a U.S. Senator since 2007 and has a strong electoral track record. Klobuchar’s campaign is well-funded, with a significant financial advantage over White’s campaign.

— Japan is set to get a new leader this fall after Prime Minister Fumio Kishida said he wouldn’t seek to stay in office. Prime Minister Fumio Kishida said he won’t run for a second term as head of the long-ruling Liberal Democratic Party in September. Just a week after market turbulence rocked Japan Kishida announced that he would resign amid waning popularity in the wake of political scandals. “Politics cannot function without public trust,” he declared. “I made this heavy decision thinking of the public, with the strong will to push political reform forward.”

— Four-state Colorado River Talks focus on water conservation credits amid broader negotiations; tribes push for greater role. Colorado River officials from four states, including Colorado, are engaged in negotiations with the federal government to establish a new agreement aimed at conserving water and receiving credits to protect against potential future cutbacks. These discussions are part of broader efforts involving the seven Western states that rely on the Colorado River, as they work on future guidelines for operating the river and its reservoirs.

Besides state and federal negotiations, tribal leaders are also seeking a more significant role in the management of the Colorado River. A historic agreement was recently signed to allow the Colorado River Indian Tribes (CRIT) to lease or exchange part of their Arizona water allocation. This agreement is part of ongoing efforts by tribes to secure water rights and resources, although tribal leaders continue to advocate for equal standing in river management discussions.

The new agreement on the Colorado River is poised to have significant impacts on water usage for both agriculture and urban areas:

Impact on agriculture
• Reduction in water usage: The agreement aims to reduce water consumption by 3 million acre-feet over the next three years. Since agriculture uses over 80% of the river’s water, farmers will be incentivized to reduce water usage by being paid not to farm certain lands (a practice known as fallowing).
• Financial incentives: Farmers will receive compensation, funded by the Inflation Reduction Act, for reducing water usage. The most common compensation rate is $400 per acre-foot of water saved. This financial incentive is seen as a new source of income for some farmers, while others view it as insufficient.
• Shift in farming practices: The agreement encourages farmers to adopt climate-smart production practices and upgrade infrastructure to address the long-term drought crisis. This includes transitioning to less water-intensive crops and improving on-farm water efficiency.
• Concerns and challenges: Some farmers are concerned about the impact on their livelihoods and argue for higher compensation to cover increased production costs and prevent food shortages. The agreement is seen as a temporary solution, with discussions on long-term strategies needed beyond 2026.

Impact on urban areas
• Water conservation: Cities and urban areas will also participate in water conservation efforts. The agreement includes provisions for cities to receive financial support for temporary water reductions, which will help manage their water supply more sustainably.
• Potential for increased water costs: The agreement resets the price signal for water, which could lead to changes in water costs for urban users. This may impact how cities manage and allocate their water resources.
• Environmental considerations: The agreement includes environmental assessments to ensure that conservation efforts do not adversely affect communities, wildlife, or air quality. This is important for urban areas that rely on the Colorado River for drinking water and other uses.

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