U.S. Inflation Slows to 2.4% in September, Slightly Above Forecasts

Hurricane Milton Exits Florida, Avoiding Worst-Case Scenario

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October 10, 2024 09:00 AM

News/Markets/Policy Updates: Oct. 10, 2024

— Hurricane Milton update from Associated Press: “More than 3 million without power as Hurricane Milton slams Florida, causes deaths and flooding” … landfall south of Tampa, avoiding worst-case scenario … no drinking water in St. Petersburg … tornadoes crisscross the state … still a hurricane as it moves offshore at Cape Canaveral.”

Last night, Milton made landfall as a Category 3 storm near Siesta Key, Florida, halfway down Florida’s Gulf Coast. Tampa Bay was spared a direct hit. Officials in Florida will assess the damage in their cities today. The storm has dumped up to 18 inches of rain in the Tampa Bay Area and brought flash flooding to St. Petersburg, Sarasota, Venice and other communities. Winds tore off a big portion of the roof of Tropicana Field, home to the Tampa Bay Rays baseball team.

The storm made landfall a couple of hours earlier than expected, which Florida Gov. Ron DeSantis said was fortunate because it meant the storm came before high tide. Otherwise, the flooding would have been worse. DeSantis says he is “cautiously optimistic” that there will be less damage than anticipated when the storm was a Category 5. State officials are working with FEMA to streamline debris removal procedures.

The storm made landfall as a Category 3 hurricane, the National Hurricane Center said, with maximum sustained winds were estimated at 120 miles per hour. By late evening, Milton was downgraded to a Category 2 hurricane and has since weakened to a Category 1 storm as of early this morning.

The storm did not appear to impact U.S. energy interests as the Bureau of Safety and Environmental Enforcement (BSEE) never activated its system of monitoring the level of natural gas and oil production in the Gulf affected by the storm.

Florida fertilizer production has been impacted by the storm with Mosaic saying they idled their Florida operations mining for phosphate rock used in fertilizer production. As much as 42% of U.S. ammonium phosphate, 32% of U.S. phosphate rock, and half of U.S. wet-processed phosphoric acid production capacity is located near Tampa Bay, according to Veronica Nigh with The Fertilizer Institute, with 40% of all U.S. phosphate fertilizer exports and 27% of total fertilizer exports moving through the port of Tampa Bay. “Certainly the impact of these hurricanes is going to continue to lead to elevated phosphate prices for the foreseeable future,” she said.

Fruit prices could also be affected because Florida accounts for 17% of the nation’s citrus production, with the center of the state serving as the highest-producing region. World Weather Inc. notes, “Preliminary wind data suggests widespread citrus fruit droppage should have occurred as a result of the storm’s excessive wind and the odds are good that flooding has many fruit and vegetable crops that are produced close to the ground at least vulnerable to damage.”

Trucking rates are expected to jump after the storm as capacity constricts further.

Ports closed. Ports in Palm Beach, Canaveral, Fernandina, Jacksonville, Key West, Fort Myers, Manatee, Sarasota, St. Petersburg and Tampa were closed Wednesday, according to the U.S. Coast Guard. Ports in Panama City and Port St. Joe were open with restrictions. The hurricane was already impacting freight markets ahead of landfall. Shippers and carriers were avoiding the Lakeland area.

— Trump is counting heavily on rural Pennsylvania voters to win the state in 2024. Rural voters are the second largest voting bloc in Pennsylvania after suburban voters. Geographically, the widest swaths of Pennsylvania remain Trump country. Trump managed to increase his net vote totals in rural regions from 2016 to 2020, despite rural areas losing population faster than other parts of the state. Lancaster County’s rural areas moved heavily Republican in recent elections. Trump, who last month held a farmer and manufacturer roundtable in Pennsylvania last month, visited Scranton and Reading on Wednesday.

Vice President Kamala Harris sees opportunities to cut into Trump’s rural support:
• The Harris campaign has opened 16 of its 50 coordinated offices in predominantly rural counties that Trump won by double digits in 2020.
• Harris is launching targeted efforts to court Republican voters in rural Pennsylvania, including radio ads featuring former Trump voters.
• The campaign is holding events with Republican figures like former Trump administration officials to appeal to GOP voters.
• Harris is visiting rural red counties as part of her battleground state tour.

Of note: Part of Harris’ Pa. strategy: Lose red counties by less.

— Updates on Harris/Trump contest:
• Kamala Harris says she’s “not Joe Biden,” but has been reluctant to draw a detailed contrast with the incumbent.
• Donald Trump said he supports ending “double taxation” on U.S. citizens who live abroad, an idea that could win support from an often-overlooked group of voters.
• Harris’ political team has raised $1 billion since entering the presidential race in late July. Trump’s team has announced collecting roughly $430 million jointly with the Republican Party during the three months between the start of July and the end of September.
• The majority of Black voters consistently vote Democrat. However, the Democratic party is having difficulty retaining Black voters in Michigan. According to a recent NAACP poll, one in four Black men under 50 support former President Donald Trump over Vice President Harris.
• Trump has ruled out participating in a debate rematch with Harris, despite offers from CNN and Fox News. CNN had proposed an Oct. 23 debate, while Fox News offered to host one in Pennsylvania on Oct. 24 or 27. The Harris campaign confirmed receiving Fox’s invite and indicated Harris would have accepted if Trump had agreed by CNN’s Thursday deadline.

— A recent Washington Post poll (link) found that Donald Trump maintains a lead over Vice President Kamala Harris among likely Ohio voters: Trump: 51%, Harris: 45%. This 6-point lead is similar to Trump’s 8-point winning margin in Ohio four years ago. The poll shows a tight race for the U.S. Senate seat in Ohio: Democratic Sen. Sherrod Brown: 48%, Republican Bernie Moreno: 47%, This difference falls within the poll’s margin of error of ±3.5 percentage points.

— Centrist Rep. Don Bacon (R-Neb.) is facing a tough race from Democratic state Sen. Tony Vargas, who is leading in multiple recent polls. But Bacon got a major endorsement last week — from Ann Ashford, the widow of former Rep. Brad Ashford (D-Neb.), whom Bacon beat in 2016.

— Republicans favored to flip Senate, Democrats hold slight edge in House: Economist model. The Economist’s new forecast model, updated daily, gives Republicans a two-in-three chance of flipping the Senate, likely securing 51 seats in the upcoming elections. Democrats face a tough battle, needing to hold on in red states like Ohio and Montana. Meanwhile, the House race is much tighter, with Democrats holding a slight edge and a three-in-five chance of winning a majority. As for a full party sweep of the White House and both chambers, both parties have a one-in-four shot, making the race highly competitive.

— Democratic Senate control slips as Republicans gain momentum in key states. Nate Cohn in the New York Times (link) outlines the increasingly challenging path for Democrats to maintain Senate control. With Joe Manchin retiring in West Virginia, Republicans are expected to flip that seat. In Montana, Republican Tim Sheehy leads Democratic incumbent Jon Tester by seven points, according to a New York Times/Siena poll. “Without Montana, the Democratic path to the Senate would require flipping a red state,” writes Cohn, noting tough odds in states like Texas and Florida, where Republicans Ted Cruz and Rick Scott hold leads. Even an independent bid in Nebraska may not offer Democrats a clear advantage.

MARKET FOCUS

— Equities today: Asian and European stock indexes were mostly firmer overnight. U.S. Dow opened 60 to 80 points lower. In Asia, Japan +0.3%. Hong Kong +3%. China +1.3%. India +0.2%. In Europe, at midday, London -0.1%. Paris -0.1%. Frankfurt flat.

U.S. equities yesterday: U.S. equities finished higher as traders awaited US inflation data due Thursday morning, with the Dow and S&P 500 registering new record closes. The Dow rose 431.63 points, 1.03%, at 42,512.00. The Nasdaq rose 108.70 points, 0.60%, at 18,291.62. The S&P 500 was up 40.91 points, 0.71%, at 5,792.04.

— Elon Musk is promising to unveil the future of Tesla today. Tesla is scheduled to host an event in California today (10 p.m. ET) to reveal its plans for self-driving “robotaxis.”

— Two of the nation’s biggest banks will kick off earnings season for lenders Friday when JPMorgan Chase and Wells Fargo report results.

— Delta Air Lines boosts Q4 earnings outlook amid strong holiday travel demand. Delta Air Lines expects its fourth-quarter adjusted earnings to rise to between $1.60 and $1.85 per share, up from $1.28 a year ago. The company attributes this optimism to strong travel demand and robust holiday bookings, despite anticipating a 1-point revenue dip due to the U.S. presidential election. “We do anticipate seeing a little choppiness around the election,” said CEO Ed Bastian, noting that consumer spending might slow temporarily as people pause discretionary investments, a trend seen in previous national elections.

— Oil prices fell on Wednesday due to rising U.S. crude inventories, but concerns over potential Iranian supply disruptions from the Middle East conflict and Hurricane Milton limited losses. Brent crude settled at $76.58 per barrel, down 60 cents (0.8%), and WTI dropped 33 cents (0.5%) to $73.24.

— Ag markets today: Winter wheat markets traded moderately higher overnight, while corn and spring wheat posted mild gains and soybeans pivoted around unchanged. As of 7:30 a.m. ET, corn futures were trading 2 cents higher, soybeans were mostly a penny lower, winter wheat futures were 6 to 8 cents higher and spring wheat was 3 to 5 cents higher. The U.S. dollar index was trading just below unchanged, while front-month crude oil futures were around $1.00 higher.

Slow going on cash cattle negotiations. Cash cattle negotiations have yet to get underway. Packers are hoping to buy cattle at lower prices after four weeks of strength despite negative margins. Feedlots are in no hurry to move cattle at lower prices as they are content to add to already record carcass weights amid reduced feedlot numbers.

Cash hog fundamentals remain choppy. The CME lean hog index is up 25 cents to $84.47 as of Oct. 8. The index is in the middle of the recent choppy range, 46 cents above the Sept. 27 low and 43 cents below the Oct. 2 high. The pork cutout firmed 39 cents to $95.20 on Wednesday. The cutout is holding in a short-term choppy range from the September low at $92.91 to this month’s high at $96.31.

— Agriculture markets yesterday:
• Corn: December corn rose 1/4 cent to $4.21, but nearer the session low.
• Soy complex: November soybeans rose 4 cents to $10.20 1/4 and nearer the session high. December soybean meal dipped $1.80 to $321.20 and nearer the daily low. December soybean oil fell 3 points to 43.06 cents and nearer the session high.
• Wheat: December SRW wheat rose 4 1/4 cents to $5.99 but ended nearer the session low. December HRW wheat rose a nickel to $6.08 3/4, forging a close above the 100-day moving average. December spring wheat advanced 3 1/4 cents to $6.48 1/4.
• Cotton: December cotton fell 2 points to 72.25 cents and nearer the daily low.
• Cattle: Cattle and feeder futures set back Wednesday, with nearby October live cattle slipping 27.5 cents to $188.20, while most-active December fell 65 cents to $187.225. Expiring October feeder futures sank $1.05 to $249.275 and November feeders tumbled $1.625 to $248.675.
• Hogs: December lean hog futures plunged $1.60 to $75.575 and settled nearer session lows.

— Quotes of note:

• Dallas Fed President Lorie Logan cautions against rapid rate cuts, citing inflation risks. In a speech at an energy conference in Houston, Dallas Fed President Lorie Logan warned that easing monetary policy too quickly could spur excess demand and reignite inflation. She urged the Federal Open Market Committee (FOMC) to proceed cautiously in reducing the federal funds target, emphasizing the importance of monitoring financial conditions. While job growth has slowed, Logan noted that the labor market remains strong. Logan, not a current FOMC voter, stressed the need for gradual action in managing policy changes.

• Piper Sandler analysts warn gov’t data may mislead on economic growth. Piper Sandler’s Nancy Lazar and Chris Menzenski caution that recent major revisions in government data may be sending misleading signals about the economy. They point to an 818,000 reduction in past payrolls and a $1 trillion upward revision in gross domestic income as examples of substantial errors in “hard” data. Using “soft” non-government indicators like business confidence, PMIs, and labor surveys, they argue the economy is growing slower than official data suggests, largely due to the lagging effects of the Federal Reserve’s 2022-2023 tightening measures.

• “Automation impacts humans and Americans. If you have kids, you should be concerned about automation.” — Marc Santoro, a dockworker at the Port of New York and New Jersey.

— U.S. inflation slows to 2.4% in September, slightly above forecasts. The U.S. annual inflation rate slowed to 2.4% in September 2024, the lowest since February 2021, marking six consecutive months of decline. However, the figure slightly exceeded expectations of 2.3%. Price growth eased for shelter and energy costs, with gasoline and fuel oil prices dropping significantly. Conversely, inflation accelerated for food and transportation. Core inflation edged up unexpectedly to 3.3%, while the monthly core inflation rate remained steady at 0.3%, surpassing forecasts of 0.2%.

Food inflation accelerated in September. Food prices were up 2.3% on an annualized basis in September, up from 2.1% in August, with grocery prices rising 1.3% after having been at a 0.9% level in August. Overall, food prices climbed 0.4% over the month, slightly up from 0.1% in August. Grocery prices rose 0.4 percent over the month after they were flat in August.

Egg prices jumped again after several months of price increases. In September, egg prices rose 8.4%, up from 4.8% the month before.

Perspective: While many tout the slowing of headline inflation to 2.4%, the rise in the core rate could potentially raise questions, especially with the Federal Open Market Committee (FOMC) noting Fed officials were convinced inflation was moving lower toward their 2% goal. The numbers do not appear to have shifted market expectations for two rate reductions at the remaining Fed meetings in 2024. This also marked the final CPI reading before the Nov. 6-7 FOMC meeting.

— U.S. jobless claims surge to 14-month high, raising prospects for Fed rate cuts. Unemployment claims in the U.S. rose by 33,000 to 258,000 for the week ending Oct. 5, exceeding expectations and reaching a 14-month high. The rise, driven by factors including Hurricane Helene’s impact in states like North Carolina and Florida, suggests a weakening labor market. This increase strengthens forecasts that the Federal Reserve may implement rate cuts in its upcoming decisions. Additionally, outstanding claims rose by 42,000 to 1.86 million, while the four-week average of initial claims climbed to 231,000.

— FOMC minutes reveal closer decision on rate cut size. The Federal Open Market Committee (FOMC) minutes from the Sept. 17-18 meeting indicate that the decision to lower interest rates by 50 basis points was more contentious than the final vote suggested. While a “substantial majority” of participants favored the 50-basis point cut, some members still advocated for a smaller 25-basis point reduction.

Rationale for rate cut
• The committee agreed that “significant progress” had been made since setting the previous target range of 5.25% to 5.5%.
• Those supporting the larger cut argued it would better align monetary policy with recent inflation and labor market indicators.

Arguments for a smaller cut. Some participants preferred a 25-basis point cut, citing:
• Inflation still being somewhat elevated
• Solid economic growth
• Low unemployment rates
• A few members noted that a smaller reduction could signal a more gradual path of policy normalization

Economic outlook. Almost all participants agreed that:
• Upside risks to inflation had diminished
• Downside risks to employment had increased
• The committee viewed recent inflation readings as consistent with a return to the 2% goal, though housing prices remained a concern

Labor market conditions. FOMC members observed easing labor market conditions, citing:
• Slowdown in payroll employment growth
• Uptick in unemployment rate
• Lower readings on hiring and job vacancies
• Reduced quits and job-finding rates

Future policy direction. The minutes emphasized that future monetary policy decisions would be conditional on economic developments rather than following a preset course. The committee agreed on the importance of communicating that the recent policy recalibration should not be interpreted as evidence of a less favorable economic outlook or a signal of more rapid policy easing.

Bottom line: The minutes reveal a more nuanced discussion than the final vote suggested, with gradual rate reductions likely in the future, barring significant changes in economic data. Futures traders see a 79% probability of a quarter-point cut by the Fed when it meets next month, with a 21% probability of a pause. The latest economic projections by Fed officials showed they expect interest rates to fall one percentage point this year, and another percentage point next year. That would put the target range around 3.25% to 3.5% by the end of 2025.

— Social Security’s cost-of-living adjustment will be 2.5% in 2025, down from the 3.2% seen in 2024, the Social Security Administration said on Thursday. The average COLA over the last 20 years has been 2.6%, according to the Senior Citizens League, a nonpartisan advocacy group.

The increase in monthly checks will be for some 72.5 million Americans receiving retirement or disability benefits. On average, Social Security retirement benefits will increase by almost $50 to $1,976 per month starting in January, the Social Security Administration said. The cost-of-living adjustment, known as COLA, will apply to Social Security benefits starting in January, and Supplemental Security Income benefits beginning on Dec. 31.

Background. The Social Security Administration bases its annual COLA calculation on the percentage change in the CPI for urban wage earners and clerical workers in the third quarter compared with a year earlier. Those workers cover about 30% of the population, according to the Bureau of Labor Statistics. Based on the annual adjustment, the maximum amount of earnings subject to the Social Security tax will also increase next year to $176,100 from $168,600.

— World Bank upgrades South Asia’s 2024 growth forecast to 6.4%, citing strong domestic demand. The World Bank raised its growth forecast for South Asia to 6.4% in 2024, up from its previous 6% estimate, driven by stronger domestic consumption in India and faster recoveries in Bhutan, Nepal, and Sri Lanka. Despite these upgrades, growth forecasts for Bangladesh and the Maldives were downgraded due to policy uncertainties and debt concerns. Inflation in the region is expected to moderate as currency depreciation and supply issues ease, but vulnerabilities remain, particularly in fiscal and climate-related risks.

— Southern Ag Today: USDA farm income projections misinterpreted, masking sector disparities. USDA’s latest Net Farm Income (NFI) projection for 2024, at $140 billion, reflects a 4.4% decline from 2023. Southern Ag Today economists Joe Outlaw and Bart Fischer note (link) that as critics argue, this broad measure often leads to misconceptions about the state of U.S. agriculture. “It is widely used in Washington D.C. as a measure of how well farmers and ranchers are doing,” but the NFI doesn’t reflect individual realities across sectors, as noted in the analysis.

The report highlights a deeper issue: while overall NFI fell by 6.7%, “significant losses in crop agriculture are being masked by the recent boom in livestock profitability.” Wheat farmers, for instance, face a projected 50% decline in their net cash farm income (NCFI), which renders the overall NFI figure misleading for them. The analysis warns against celebrating the aggregate NFI without recognizing the “complete misuse of the data” for struggling sectors like crop agriculture.

— Farm debt rises in latest quarter. The KC Federal Reserve released their latest Ag Finance Update (link) and farm debt has risen, but delinquencies are low. Details:

Farm debt increase. Farm operating debt at commercial banks has seen a significant increase:
• Non-real estate farm debt grew by approximately 10% compared to the previous year during the second quarter of 2024.
• The increase was even more pronounced at agricultural banks, where non-real estate debt rose by about 15% year-over-year.
• Real estate farm debt also increased, though at a slower pace - about 2% overall and 6% at agricultural banks.

This rise in farm debt is attributed to several factors:
• A softening agricultural economy
• Lower farm sector liquidity
• Higher financing needs among farmers

Credit conditions. While debt has increased, credit conditions have shown signs of tightening:
• The loan-to-deposit ratio for farm lenders reached its highest level since 2020.
• Agricultural bank liquidity has declined from record levels.
• There’s increased competition for deposits, leading to greater use of alternative funding sources at community banks.

Delinquency rates. Despite the rise in debt, delinquency rates on farm loans remain low:
• About 1% of real estate and non-real estate farm loans were past due by at least 30 days in the second quarter.
• This represents a slight increase from record low levels a year ago.
• Approximately half of the increase was due to newly delinquent loans past due 30 to 89 days.

Several factors are contributing to the current state of farm finances:
• Crop prices have returned to more normal levels after recent record highs.
• Global demand for crops has slowed.
• Interest rates are higher than they’ve been in about 15 years.
• The Federal Reserve recently cut rates by half a point, which may provide some relief.

Outlook. While the increase in farm debt is significant, there are some positive indicators:
• Capital levels at agricultural banks have improved slightly.
• USDA projects only a small increase in the bankruptcy rate among farmers this year compared to last year, with 2022 and 2023 having record low levels.

Market perspectives:

— Outside markets: The U.S. dollar index was slightly firmer, while most foreign rival currencies were weaker against the greenback. The yield on the 10-year U.S. Treasury note climbed to around 4.09% ahead of the CPI report, with a positive tone in global government bond yields. Crude oil futures were higher, with U.S. crude around $73.95 per barrel and Brent around $77.30 per barrel. Gold and silver futures were slightly higher ahead of inflation data, with gold around $2,630 per troy ounce and silver around $30.79 per troy ounce.

— Less port congestion. Supply chains are slowly catching up and ship queues outside major East and Gulf coast ports are down from their peaks after last week’s three-day strike by dockworkers, according to a Bloomberg tally using vessel tracking data.

— Turkey to allow low-tariff corn imports through year-end. Turkey will allow imports of 1 MMT of corn at a tariff rate of 5% until the end of the year, the trade ministry said. The import quota will secure supply/demand balance for corn since domestic production is insufficient to meet consumption. The current 130% tariff will be imposed on corn imports exceeding 1 MMT.

— Ag trade update: Japan purchased 115,050 MT of milling wheat via its weekly tender, including 56,690 MT U.S., 34,610 MT Canadian and 23,750 MT Australian.

— NWS outlook: Impacts from Milton will wind down through early Thursday as the Hurricane departs the Florida Peninsula and moves into the open Atlantic... ...Unseasonably very warm temperatures continue over much of the western and central U.S., some record-tying/breaking highs will be possible... ...Most of the country will see dry conditions through Friday.

Items in Pro Farmer’s First Thing Today include:

• Wheat and corn firmer, soybeans choppy overnight
• Strategie Grains maintains wheat production estimate, raises corn and barley crops
• Exchange lowers Argentine wheat production forecast

CONGRESS

— Tim Johnson, a Democrat who served as a U.S. Senator from South Dakota for three terms, passed away on Tuesday, Oct. 8, at the age of 77, due to complications from a recent stroke. Johnson’s political career in South Dakota spanned over four decades. He began as a state legislator in 1979, was elected as South Dakota’s congressional representative in 1987, secured his first Senate victory in 1997, served three terms in the U.S. Senate, and retired in 2014 rather than seeking re-election. Johnson was notable for being the last Democrat to hold statewide office in South Dakota. He was known for his centrist approach to politics, his ability to secure federal funding for South Dakota and his resilience, particularly after suffering a life-threatening brain hemorrhage in 2006.

ISRAEL/HAMAS CONFLICT

— President Joe Biden and Israeli Prime Minister Benjamin Netanyahu held their first phone conversation in over a month, amid rising tensions in the Middle East. The call, which included Vice President Kamala Harris, focused on several key issues:

• U.S./Israel relations. The conversation marked a significant moment in U.S./Israel relations, which have been strained in recent months. Despite these tensions, Biden reaffirmed the United States’ “ironclad commitment to Israel’s security” and condemned Iran’s recent missile attack against Israel.

• Iran and regional tensions. Biden and Netanyahu discussed the escalating situation with Iran, following Tehran’s launch of approximately 200 ballistic missiles at Israel on Oct. 1. The U.S. played a crucial role in helping defend against this attack, demonstrating its continued support for Israel’s security.

• Israel’s operations in Lebanon. The call took place against the backdrop of Israel’s extensive military campaign against Hezbollah in Lebanon. This operation has resulted in the elimination of most of Hezbollah’s senior leadership, including Hassan Nasrallah; at least 1,500 casualties from Israeli airstrikes; and the displacement of over 900,000 people in Lebanon, according to UN reports.

• Potential Israeli retaliation. While the White House readout did not mention a potential Israeli strike against Iran, this topic was likely discussed given the recent events. The U.S. has been attempting to temper Israel’s response to Iran’s missile attack, with Biden previously stating he would not support strikes on Iranian nuclear facilities.

RUSSIA/UKRAINE

— Russian ag ministry to meet with exporters on Friday. Russia’s Agriculture Ministry has called the country’s major grain exporters to a meeting on Friday, three sources close to the matter told Reuters. Presumably, the meeting will be about wheat export levels for 2024-25. The ministry is expected to release its revised estimate for the 2024 grain harvest today. The estimate will determine how much wheat can be exported in 2024-25.

POLICY UPDATE

— USDA offers livestock disaster aid amid wildfire losses in North Dakota. Following recent wildfires in western North Dakota, USDA’s Livestock Indemnity Program (LIP) offers assistance to ranchers for livestock deaths beyond normal mortality due to adverse weather. “Documentation of loss is critical,” emphasized Mary Keena of NDSU Extension, urging producers to record inventory and loss data before disposal. Beau Peterson of USDA added, “LIP permits the use of contemporaneous records for proof of inventory and death losses.” Approved carcass disposal methods include burial, composting, and incineration, with specific guidelines for each. Ranchers facing stress due to the wildfires are encouraged to seek emotional support via 9-8-8.

USDA’s Farm Service Agency (FSA) has current information detailing the disaster assistance programs available to ranchers specific to livestock death. Link to the full overview.

CHINA UPDATE

— Another week of mostly subdued U.S. ag export sales to China. USDA weekly Export Sales data for the week ended Oct. 3 for 2024-25 included no activity for wheat and corn, net sales of 5,500 metric tons of sorghum, 583,395 metric tons of soybeans, and net reductions of 8,008 running bales of upland cotton. Sales activity for 2024 included net sales of 4,155 metric tons of beef and 557 metric tons of pork.

— China kicks off swap facility to aid stock market. The People’s Bank of China (PBOC) said it would start accepting applications from financial institutions to join a newly created funding scheme, initially worth 500 billion yuan ($70.62 billion), to aid capital markets. Under the swap facility, eligible securities firms, fund companies and insurers can use their assets including bonds, stock ETFs and holdings in constituents of the CSI 300 Index as collateral in exchange for highly liquid assets such as treasury bonds and central bank bills. PBOC first announced the scheme on Sept. 24 as part of a broad package of policies to stimulate the economy and boost capital markets.

— Chinese Premier Li Qiang discusses potential fiscal stimulus with economists. During a symposium chaired by Premier Li Qiang on Tuesday, economists proposed ideas for Beijing’s upcoming fiscal stimulus, focusing on supporting households and stabilizing the real estate market. Luo Zhiheng, chief economist at Yuekai Securities, recommended issuing additional treasury bonds, expanding special-purpose bonds, and establishing a real estate stabilization fund. Similarly, Zhang Ming of the Chinese Academy of Social Sciences suggested issuing RMB 1 trillion in special treasury bonds this October and RMB 4 to 5 trillion in early 2025 to repair household and business balance sheets and boost infrastructure investment. Both economists advocate for a central government-funded stimulus, which Luo said should “provide subsidies to certain groups” and optimize debt resolution. Zhang highlighted the need to “stabilize the real estate market.” This focus on households and real estate could shape Beijing’s stimulus, with more details expected at the Ministry of Finance press conference on Saturday.

ENERGY & CLIMATE CHANGE

— IEA: Renewables to generate nearly half of global electricity by 2030, but fall short of UN targets. The International Energy Agency (IEA) reports that renewable energy is on track to generate almost half of global electricity by the end of the decade, with over 5,500 gigawatts of capacity expected by 2030 — nearly triple the growth seen between 2017 and 2023. However, this growth trajectory is still not enough to meet the United Nations’ goal of tripling global renewable capacity.

“Renewables are moving faster than national governments can set targets for,” said IEA Executive Director Fatih Birol. He noted that renewable energy now offers “the cheapest option to add new power plants in almost all countries around the world.”

China is projected to account for nearly 60% of all new renewable capacity by 2030, making it home to almost half of the world’s total renewable capacity. Solar photovoltaic energy is expected to lead the charge, contributing 80% of capacity growth by 2030, thanks to falling costs and supportive policies.

Despite the rapid progress, the IEA cautioned that “this is not quite sufficient to reach the goal of tripling renewable energy capacity worldwide.” The agency urged governments to modernize grids, streamline permitting processes, and enhance international cooperation to address financing challenges in emerging markets like Africa and Southeast Asia.

— Inpasa, Brazil’s largest corn ethanol producer, has significantly expanded its operations with the launch of a new biorefinery expansion. This development marks a major milestone in Brazil’s corn ethanol industry and positions Inpasa as a global leader in corn-based ethanol production. The newly expanded biorefinery, located in Sinop, Mato Grosso state, is now operational and boasts impressive production capabilities:
• Annual ethanol production capacity: 2.1 billion liters
• Corn processing capacity: 4.6 million tons per year

This expansion makes the Sinop plant one of the world’s largest corn ethanol production facilities.

Inpasa has made a substantial investment in this expansion project:
• Total investment: R$4.1 billion (approximately $614.3 million)

The Sinop biorefinery utilizes corn from Brazil’s second harvest (safrinha) as its primary feedstock. Besides ethanol, the plant will produce other valuable by-products:
• Dried Distillers Grains with Solubles (DDGS): A high-protein animal feed
• Corn oil: Used in various industries, including biodiesel production

Inpasa’s choice of location for this expansion is strategic. Mato Grosso state is a leading corn-producing region in Brazil, particularly for second-crop corn. This proximity to raw materials helps reduce transportation costs and ensures a steady supply of corn for ethanol production.

LIVESTOCK, NUTRITION & FOOD INDUSTRY

— Nearly 10 million pounds of ready-to-eat meats recalled due to listeria contamination. BrucePac, an Oklahoma-based company, is recalling approximately 9.99 million pounds of ready-to-eat meat and poultry products potentially contaminated with Listeria monocytogenes. The recall covers products made between June 19 and Oct. 8, which were distributed nationwide to establishments, restaurants, and institutions. The affected items bear establishment numbers “51205 or P-51205" inside or under the USDA mark of inspection. The issue was discovered through routine testing by USDA’s Food Safety and Inspection Service (FSIS) (link). No adverse reactions have been reported. However, FSIS is concerned that some of the recalled products may still be available for use in restaurants, institutions, and other establishments

This recall is one of the largest in recent history, affecting products manufactured over a nearly four-month period.

— California becomes bird flu hotspot with third human case and two more suspected infections. California has become the U.S. epicenter for bird flu, with a third confirmed human case and two more suspected infections among Central Valley farmworkers. All five human cases in California involved dairy farm workers experiencing mild symptoms. Despite the risk to the public remaining low, state officials expect additional cases. The bird flu, which jumped from birds to cattle earlier this year, has led to 96 infected dairy herds in California. Agricultural impacts have been minimal, with stable milk production and prices.

— August pork exports surpass previous year; beef exports decline. U.S. pork exports in August showed an increase compared to the previous year, driven by strong demand from Mexico. According to data from USDA and compiled by the U.S. Meat Export Federation (USMEF), beef exports experienced a decline, while lamb exports saw an uptick, reaching their highest volume since January.

Pork exports. August pork exports totaled 238,989 metric tons (mt), marking a 6% increase from the previous year. The export value rose by 8% to $702.9 million. Key highlights include:
• Strong performance in Western Hemisphere: Exports to Central and South America, the Caribbean, and the ASEAN region showed positive trends.
• Record-breaking shipments: Malaysia received record-high shipments, while exports to Colombia achieved a value record.
• Year-to-date figures: From January through August, pork exports reached nearly 2 million mt, up 4% from the previous year, with a 7% increase in value to $5.68 billion.

USMEF President and CEO Dan Halstrom noted the importance of defending market share and expanding consumption in increasingly competitive markets.

Beef exports. Beef exports in August showed a downward trend:
• Total volume: 102,682 mt, down 6% from the previous year and the lowest since January.
• Export value: $845.9 million, a 4% decrease.
• Mixed performance: While exports to Mexico, Taiwan, the Middle East, and the ASEAN region increased, lower shipments to Japan, South Korea, and China/Hong Kong offset these gains.
• Year-to-date figures: Through August, beef exports were 3% below the previous year at 856,834 mt, but 4% higher in value at just under $7 billion.

Halstrom acknowledged the challenges in Asian markets but expressed optimism about the ongoing tourism rebound in the region.

Lamb exports. Lamb exports showed a positive trend, reaching their highest volume since January. Exports of U.S. lamb reached 288 mt in August, up 170% from last year’s low volume. Export value was $1.16 million, up 70%. These results drove January-August exports 20% above last year’s pace in volume (1,946 MT) and 23% higher in value ($10.2 million). While larger shipments to the Caribbean and Mexico accounted for most of this growth, exports also trended higher year-over-year to the Philippines, Canada, Guatemala and Taiwan.

OTHER ITEMS OF NOTE

— EPA’s lead pipe replacement rule faces legal challenges over high compliance costs. EPA’s newly finalized rule requiring water systems to replace lead service lines by 2037 is expected to face legal challenges, with compliance costs potentially reaching $90 billion, according to Bloomberg. Small water systems are expected to be hit hardest, especially when combined with new PFAS standards. Federal funding covers only a fraction of the costs, with $15 billion earmarked for lead pipe replacement through the infrastructure law. Water systems are also required to inventory lead lines by Oct. 16, with enforcement actions looming for non-compliance. Legal challenges may delay the rule’s 2027 implementation date.

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