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Transition to SAF: understanding demand response to jet fuel price changes... Farmdoc Daily says, “Traditional petroleum-derived jet fuel use has been the target of climate and environmental policy. Such policy aims to reduce emissions created by jet fuel use by encouraging a switch to lower-emission sustainable aviation fuels (SAF) made from plant biomass, vegetable oils, sugars, and alcohols including ethanol. For U.S. agriculture, corn and soybean oil markets view SAF as a potentially significant source of future demand. The success of SAF-focused policies in both reducing environmental damage and driving demand for feedstocks like corn ethanol or soybean oil depends in part on how airlines respond to market changes caused by such policies.”
Farmdoc Daily notes, “The price responsiveness of demand appears low: Since taxes or subsidies to encourage a transition to SAF may impact prices but do not shift willingness to pay for air travel, policymakers should understand airlines responsiveness to price changes. Broadly, the data suggest airlines’ change in quantity demanded may be small compared to the size of the price changes.”
Farmdoc Daily also notes, “Price responsiveness may not be uniform across time and direction: Another possible interesting property of jet fuel demand is its asymmetric response to the price increases and decreases. The reduction in jet fuel demand due to a $1 per gallon price increase may differ from the increase in demand caused by a $1 per gallon price decrease. Policymakers therefore must understand the net price impact of the stack of policies applied to the aviation fuel market. Otherwise, they might overemphasize or underemphasize the possible consumption change after implementing the policy.”
In conclusion, Farmdoc Daily says, “Complex characteristics of airlines’ response to the jet fuel price changes make it difficult for policymakers to anticipate the possible impact of policies to decarbonize the aviation sector. However, descriptive analysis suggests airlines’ fuel use might be relatively unresponsive to price changes. Levels of responsiveness differ depending on the direction of price changes, going up or down. Moreover, in the long-run, higher prices might spur investment in fuel efficiency and end up increasing consumption, or at least increasing it relative to what it would have been in the absence of fuel efficiency improvements. From the perspective of carbon emissions reduction efforts, these characteristics of aviation fuel usage may result in modest reductions in the short term.
“Policies that encourage a shift from petroleum-derived jet fuel to SAF will increase the demand for feedstocks like corn ethanol and soybean oil, but the extent of this increase also depends on airlines’ responsiveness to fuel price changes. Price-unresponsive demand creates more opportunity for high-cost fuel producers than if fuel users would drastically cut use in response to higher prices. However, feedstock suppliers may face trade-offs between producing SAF and other products, such as food for humans and feed for livestock. The impact of the varied set of policies regarding SAF cannot be anticipated without understanding the direction and extent of airlines’ responsiveness to fuel prices.”
Legal uncertainty surrounding CTA... The ongoing legal battle over the Corporate Transparency Act (CTA) and its Beneficial Ownership Information (BOI) reporting requirements has seen significant developments:
- Dec. 3, 2024: A nationwide injunction against the CTA was issued by the U.S. District Court for the Eastern District of Texas.
- Dec. 23, 2024: The Fifth Circuit Court of Appeals stayed the injunction, reinstating the CTA.
- Dec. 26, 2024: The Fifth Circuit vacated its earlier stay, potentially reinstating the injunction.
This legal turbulence has created uncertainty for businesses and entities subject to BOI reporting requirements. Key points include:
- Uncertain compliance obligations: Conflicting rulings make it difficult for entities to determine their next steps.
- Deadline extensions: FinCEN extended the BOI reporting deadline to Jan. 13, 2025, but this may change based on court outcomes.
- Expedited appeals process: A final decision is expected soon but remains unpredictable.
Guidance for affected entities
- Stay updated: Monitor legal and regulatory updates closely.
- Prepare for compliance: Begin drafting BOI reports to ensure readiness if the CTA is upheld.
- Consult experts: Legal counsel can clarify obligations amidst this complex situation.
U.S. trade deficit widens in November... The U.S. trade deficit in goods widened to $102.86 billion in November from a downwardly revised $98.3 billion the prior month, an advance estimate showed. Imports rose 4.5% to $279.21 billion, compared to $267.25 billion in October. Exports increased 4.4%, reaching $176.36 billion, up from $168.99 billion in October.
Trump’s tariff threats are setting off a global supply chain ‘freakout’... Across the world, businesses aren’t waiting until U.S. Inauguration Day on Jan. 20 to see which countries, products or tariff rates are announced in President-elect Donald Trump’s widely telegraphed trade wars, according to Bloomberg. The mere threat of his universal tariffs is sparking a scramble that’s leaving the global trading system prone to bottlenecks, saddled with higher costs and vulnerable to disruptions should an economic shock come along.
“We’re still in the freakout period,” Robert Krieger, president of Los Angeles-based customs brokerage and logistics advisory firm Krieger Worldwide, told Bloomberg. “There’s about to be a king tide in the supply chain.”
To get ahead of the game, some firms are frontloading orders. Others are seeking new suppliers or, if that’s not possible, renegotiating terms with existing ones. A common theme: The renewed stress comes with higher costs, in the form of bigger inventories, costlier expedited shipping, or taking a chance on untested partners. Profits will suffer and expenses will be reduced elsewhere, they said. Ultimately consumers will foot the bill.
China’s ports saw double-digit growth in container throughput in the two weeks around the election and that rose further to an almost 30% gain in the second week of December. International air freight flights have increased by at least a third each week since mid-October and economists expect that’ll continue as customers rush to frontload orders.
The busiest container gateway in the U.S., made up of the twin ports of Los Angeles and Long Beach, is seeing a surge of inbound shipments — not unlike the wave that accompanied Trump’s first tariff volleys at China. Both ports smashed pandemic-era records in the third quarter and volumes are expected to stay elevated into the new year.
Egypt buys large volume of mostly Russian wheat... Egyptian grain state-buyer, Mostakbal Misr for Sustainable Development, secured its wheat requirements through the end of June 2025, with total contracts reaching 1.267 MMT, sources with direct knowledge told Reuters. Most of the wheat is Russian, according to the sources.
Russian court seizes property of grain trader Rodnie Polya... A Russian court seized the property of grains trading house Rodnie Polya, including a Black Sea area loading terminal, as part of a shakeup of the trading sector in the world’s biggest wheat exporter. The court accused Rodnie Polya of breaking the law on the grounds its owner Pyotr Khodykin, who holds a Saint Kitts and Nevis’ passport, controlled the port terminal, a strategically important enterprise. Russian law bans foreigners from holding stakes in such enterprises.
On Thursday, Russia’s second-largest lender, VTB, said it has acquired an agricultural company in southern Russia that was nationalized after its former owners were accused of corruption and fled Russia.
Japan’s finance minister reiterates concerns over excessive FX moves... Japanese Finance Minister Katsunobu Kato reiterated concerns over a sliding yen, repeating his warning to take action against excessive currency moves. The Bank of Japan (BOJ) has taken a cautious approach to raising borrowing costs amid uncertainty over Trump’s economic plans. This dropped the yen to 158.09 per dollar on Thursday, the weakest level since July 17.
However, a summary of opinions from the BOJ December policy meeting released on Friday showed some officials becoming more confident about a near-term rate increase, while others remained wary amid uncertainties over the trend for wages and Trump’s policies. This suggests an interest-rate increase next month remains on the table.
Meanwhile, BOJ announced it will reduce its purchases of Japanese government bonds (JGBs) from January, continuing a gradual slimming down of its massive debt holdings. BOJ will cut monthly JGB purchases by a further 410 billion yen ($2.6 billion) to about 4.5 trillion yen per month