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Fed’s Goolsbee: Port strike could have bigger impacts after two weeks... Chicago Federal Reserve Bank President Austan Goolsbee on Thursday said retailers and others have stockpiled about two weeks worth of items in anticipation of the dockworkers’ strike, but if it goes on longer the supply-chain disruptions could put some upward pressure on prices and drag on the economy. “It starts as an inconvenience and it gets worse the longer it goes,” Goolsbee told Chicago public radio station WBEZ.
S&P Global Rating’s Satyam Panday told Reuters the longer the strike persists, the larger the economic impact – and it could influence the Fed’s monetary policy. He said, “I think time is of the essence of non-linear impact here. But we have seen that the inventory levels right now in the economy are pretty healthy. So maybe perhaps if this gets resolved within the next week or so, it may not have so much of an impact overall, but as time goes by, it’ll start to show up in some shortages, and some pricing points... My guess is the Fed is probably going to look through this strike if it just turns out to be a short-term impact... If it starts to affect negatively the jobs, and the GDP numbers of the economy, then yes, they might just be influenced by that and go with a 50 basis point [cut] in fact. But again, it is all highly uncertain at the moment.”
Major retailers making backup plans for the holidays if strike persists... Major retailers stocked up ahead of the strike and are preparing alternative shipping plans to ensure goods arrive in time for the peak holiday season if the East Coast and Gulf port strike lingers. Some are planning to reroute shipments through the West Coast and/or use air freight. Retailers account for about half of all container shipping volume, according to eMarketer analyst Sky Canaves.
But having a “plan B” comes with risks for retailers. “If the strike lingers, it will be difficult for retailers to form a plan B without fear of being stuck with excess inventory once the strike ends,” said Michael Ashley Schulman, chief investment officer at Running Point Capital Advisors. “Depending on how long the strike lasts, many retailers and auto lots may reduce holiday sales events because they won’t have enough goods available.”
Winter wheat drought footprint shrinks... As of Oct. 1, the Drought Monitor showed 71% of the U.S. was covered by abnormal dryness/drought, down two percentage points from the previous week. USDA estimated 44% of the U.S. winter wheat crop was experiencing drought conditions, down six points from last week. Drought areas in HRW states increased, aside from Montana, while drought areas declined in SRW states, especially through the Tennessee and eastern Ohio river basins.
In HRW areas, dryness/drought covered 93% of Kansas (no D3 or D4), 52% of Colorado (no D3 or D4), 77% of Oklahoma (12% D3, no D4), 74% of Texas (9% D3 or D4), 93% of Nebraska (no D3 or D4), 87% of South Dakota (2% D3, no D4) and 85% of Montana (9% D3 or D4).
In SRW areas, dryness/drought covered 61% of Missouri (no D3 or D4), 70% of Illinois (no D3 or D4), 93% of Indiana (no D3 or D4), 86% of Ohio (18% D3 or D4), 78% of Michigan (no D3 or D4), 40% of Kentucky (3% D3, no D4) and 64% of Tennessee (no D3 or D4).
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CARB revises proposal to LCFS regulations... The California Air Resources Board (CARB) updated its Low Carbon Fuel Standard (LCFS) regulations proposal. CARB is maintaining its proposal from August to limit credit generation for certain crop-based biofuels, while expanding the scope of feedstocks affected. The original proposal in August included a 20% cap on credit generation for biofuels made from soybean and canola oil. CARB has added sunflower oil to this 20% cap. Companies would be eligible for LCFS credits for no more than 20% of their biomass-based diesel that comes from soybean, canola or sunflower oil.
CARB’s decision to include sunflower oil appears to be preemptive. Currently, there are no approved users of sunflower oil for biofuel production in California’s LCFS program. CARB states this addition is “responsive to public feedback that limiting this provision to soy and canola could lead to incentives to increase use of other oilseeds for biofuel production.”
Despite the expanded feedstock restrictions, CARB is maintaining other key aspects of its August proposal. The program’s annual targets will still become 9% tougher in 2025. The 2030 goal remains a 30% reduction in transportation fuel carbon intensity from 2010 levels. CARB is keeping to its adoption schedule for these changes.
The proposed changes have received mixed reactions. Environmental groups argue the restrictions don’t go far enough to protect against cropland expansion and food supply competition. Agribusiness and some fuel producers warn that the concept goes against the program’s carbon-neutral focus. The Iowa Soybean Association opposes stringent field-level certification for corn and soybeans, arguing it fails to take a risk-based approach.
CARB has proposed a grace period for facilities already using the restricted feedstocks. Facilities certified to use soybean, canola or sunflower oil before the new rules are adopted can continue generating credits until 2028. This is an extension from the previously proposed 2026 cutoff.
Egypt planning for major wheat import savings... Egypt has plans to slash wheat imports and spend less on subsidized bread by adding corn or sorghum as ingredients, five industry sources briefed on the plans told Reuters. Under the supply ministry’s plan, which was presented to bakers and millers at the end of September, corn flour would be mixed with wheat flour at a 1:4 ratio, starting in April 2025, saving about 1 MMT of wheat, two sources in the baking industry said. Introducing corn flour as an ingredient could allow for significant hard currency savings if locally grown corn was used, though not if the corn was imported. The government scrapped an earlier plan to increase the rate at which flour used in subsidized bread is extracted from wheat, after resistance from industry lobbies, three of the industry sources said.
The proposals could save the government millions of dollars but face opposition from bakers and millers who could lose out financially and argue that bread quality would suffer. The change could produce bread with a different texture and smell, making it unpopular with consumers.
IMF: Escalation of Middle East conflict poses significant economic risks... The International Monetary Fund (IMF) said an escalation of the conflict in the Middle East could have significant economic ramifications for the region and the global economy. IMF is closely monitoring the situation in southern Lebanon with “grave concern.” While it’s too early to predict specific impacts on the global economy, economies in the region have already suffered greatly, especially in Gaza.
IMF will monitor commodity prices, including oil and grains, as well shipping costs, for global economic impacts.
IMF will update its economic projections for all countries and the global economy later this month when the global lender and World Bank hold their fall meetings in Washington.
ADM suspends CO2 injections following second leak... ADM has halted carbon dioxide (CO2) injections at its Decatur, Illinois, carbon capture facility after discovering a second leak. The company said it identified brine movement to different underground layers 5,000 feet deep. This incident follows a previous leak that prompted EPA to issue a proposed enforcement order accusing ADM of violating federal regulations. In response to the latest leak, ADM informed EPA of its decision to pause CO2 injections and outlined plans for further diagnostic testing over the next two weeks. EPA concurred with ADM’s decision and requested additional information about the leak and the company’s operational resumption plans.
California investigating possible human case of H5N1 virus... California is investigating a possible case of H5N1 virus in a person who had contact with infected dairy cattle, the state’s public health department said. The person displayed “mild symptoms.”
Meanwhile, FDA said today it would begin testing raw milk intended for pasteurization at dairy plants to better understand the prevalence of H5N1 in milk. Participation in the study, set to begin Oct. 28, is voluntary and pasteurized dairy products remain safe to consume, the agency said.