Evening Report | September 24, 2024

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Vancouver grain terminal workers go on strike... Workers at grain terminals at the Port of Vancouver have gone on strike during the busy harvest season. Members of the Grain Workers Union Local 333 walked off the job on Tuesday morning, disrupting exports of Canadian grains and oilseeds. Negotiations broke down on Friday between the GWU and the Vancouver Terminal Elevators’ Association.

Canadian Labor Minister Steven MacKinnon said, “At my request, parties have agreed to resume negotiations alongside federal mediators. After a bumper crop summer, Canadian farmers and businesses need to get their harvest to market. Parties need to work hard to get a deal.”

Realagriculture.com notes that in July 2023, around 7,400 cargo workers at the Port of Vancouver who are also members of the ILWU went on strike for 13 days, disrupting nearly $10 billion in trade, according to the Greater Vancouver Board of Trade. This latest port worker strike comes less than a month after both of Canada’s main railways — Canadian National Railway (CN) and Canadian Pacific Kansas City Railway (CPKC) — were shut down due to a dual labor stoppage that was ended when the federal government imposed final and binding arbitration.

Lawmakers push to extend clean fuels tax credit, limit to U.S. feedstocks... A bipartisan group of lawmakers has proposed extending the 45Z tax credit for low-carbon biofuels through 2034 and restricting the credit to U.S.-produced feedstocks like corn ethanol and vegetable oils. The 45Z credit is currently set to expire at the end of 2027. The tax credit, set to begin in January under the Inflation Reduction Act, currently allows foreign feedstocks.

There are concerns that without this restriction, the credit could incentivize increased imports of feedstocks like used cooking oil from China or ethanol from Brazil, potentially undermining U.S. producers. This push comes as biofuel and agricultural groups are actively lobbying on how the 45Z credit should be implemented. The Treasury Department has yet to release final rules/guidance for the credit. The lawmakers argue that restricting the credit to domestic feedstocks would align with the original intent of supporting U.S. energy independence and creating new markets for American farmers. However, this change could face opposition from some fuel producers who currently rely on imported feedstocks.

Lawmakers proposing legislation related to the 45Z Clean Fuel Production Credit include:

· A bipartisan group of senators led by Sherrod Brown (D-Ohio) and Roger Marshall (R-Kan.).

· Reps. Mike Carey (R-Ohio), Claudia Tenney (R-N.Y.), Ann Kuster (D-N.H.), and Mariannette Miller-Meeks (R-Iowa), who introduced the “Biodiesel Tax Credit Extension Act of 2024.”

· Congressman Brad Finstad (R-Min.), who led a bipartisan, bicameral letter with 51 colleagues urging action on the 45Z credit.

· Reps, Eric Sorensen (D-Ill.), Mariannette Miller-Meeks (R-Iowa) and Nikki Budzinski (D-Ill.), who co-led Finstad’s letter.

· Sens. Joni Ernst (R-Iowa), Tammy Duckworth (D-Ill.), John Thune (R-S.D.) and Amy Klobuchar (D-Min.), who also co-led Finstad’s letter.

· A group of 39 bipartisan members of the U.S. House of Representatives who wrote to Treasury Secretary Janet Yellen.

Brazil looking to become leader in SAF industry... Brazil is making significant strides in the development and production of sustainable aviation fuel (SAF), positioning itself as a potential leader in this emerging market. Brazil has the potential to produce around 50 billion liters (13.2 billion gallons) of feedstock-based aviation fuel by 2030, according to Airbus Brazil President Gilberto Peralta. This ambitious target highlights Brazil’s commitment to becoming a major player in the SAF industry.

Brazil possesses several advantages that make it well-suited for SAF production:

· Biofuel experience. Brazil has a rich history in biofuel production, especially ethanol from sugarcane, which provides a solid foundation for pioneering SAF.

· Abundant feedstock. The country has access to vast natural resources and growing renewable energy infrastructure, which are crucial for SAF production.

· Aviation sector. Brazil’s expansive aviation sector, with over 100 airports and a fleet of over 2,000 aircraft, provides a strong domestic market for SAF.

Several initiatives are underway to advance SAF production in Brazil:

· BioQAv project: Led by Boeing, Embraer, GOL and World Energy, this project aims to produce hydro processed esters and fatty acids (HEFA) from used cooking oil.

· BioValor project: Amyris, TotalEnergies and LanzaTech are collaborating to produce alcohol-to-jet (ATJ) fuel from sugarcane bagasse.

· H2Fly project: Siemens Energy, Airbus and EMBRAPII are working on producing synthetic paraffinic kerosene (SPK) from green hydrogen and carbon dioxide.

Despite the promising outlook, there are challenges to overcome:

· Feedstock competition. Brazil will need to strategically ensure feedstock availability for both SAF and green diesel production, considering its current dependence on sugarcane for ethanol and soybean oil for biodiesel.

· Sustainability requirements. Not all biofuels meet the strict environmental, social and economic sustainability certification requirements for SAF. Deforestation concerns, particularly related to soybean production, need to be addressed.

· Infrastructure and investment. Significant investments in infrastructure and technology will be required to scale up SAF production to meet the projected potential.

Hog herd expected to be fractionally bigger than year-ago... Analysts expect USDA’s Hogs & Pigs Report on Thursday afternoon to show the U.S. hog herd grew 0.2% from year-ago to 76.285 million head as of Sept. 1. Market hog inventories are expected to be up 0.4%, while the breeding herd is anticipated to be down 2.1%. Analysts expect USDA to report a 0.9% smaller summer pig crop despite ongoing record litter sizes, as summer farrowings likely declined 1.4%. Looking forward, analysts expect farmers to farrow 0.4% fewer sows during fall but 0.1% more this winter. As always, USDA’s revisions to past data will be key.

Johnson vows no omnibus spending bill before Christmas to avoid shutdown... House Speaker Mike Johnson (R-La.) is taking a firm stance on government spending as he navigates the challenges of avoiding a government shutdown. He has made a significant promise to his colleagues and the public: There will be no omnibus spending bill before Christmas.

Johnson is defending his plan for a bipartisan, clean three-month continuing resolution (CR), which sets the stage for a crucial spending debate during the lame-duck session. The House GOP leadership intends to bring this bill to the floor on Wednesday, using a suspension of the rules procedure. This approach will require substantial support from Democratic representatives to pass.

Johnson emphasized several key points during a Republican conference meeting and subsequent press conference:

· He argued that shutting down the federal government 39 days before the election would be “political malpractice.”

· He presented polling data to demonstrate that a shutdown is unpopular among key voters.

· He firmly stated that members would not vote on a massive, year-end omnibus bill right before Christmas.

Johnson’s strategy appears to be focused on preserving his political future, according to Punchbowl News. If Republicans maintain their majority, he aims to avoid an end-of-year omnibus, which could coincide with his efforts to secure votes to remain speaker. In the event of a Trump victory in the presidential election, Republicans may want to delay government funding deadlines to allow Trump to influence spending decisions. Johnson has made similar promises to the House Freedom Caucus, a group that has been critical of his CR plan and has often challenged leadership on spending issues.

Despite Johnson’s promises, several challenges remain:

· The 2024 legislative calendar is limited, with only a few weeks remaining.

· The House has only passed five of its spending bills, while the Senate hasn’t passed any.

· There’s a high likelihood that some bills will need to be combined unless the funding deadline is extended again.

· If House Republicans lose their majority, the probability of an omnibus bill being considered increases significantly.

When questioned by Punchbowl News about the potential impact of this CR move on his ability to remain speaker, Johnson responded: “I’m not [worried]. We have to make tough decisions in leadership. This is the last available option to us. None of us like it. But we can’t shut the government down... The reason we are in the situation is because of Chuck Schumer. They did not put one appropriations bill on the floor in the Senate.”

House Appropriations Committee Chair Tom Cole (R-Okla.) suggested that Johnson’s political future may be more dependent on election results than the CR debate.

AMLO seizes U.S.-owned port in final days, escalating tensions with investors... Mexico’s outgoing President Andrés Manuel López Obrador finalized the expropriation of a U.S.-owned Vulcan Materials port and quarry, declaring it a natural protected area. The move, days before he leaves office, has deepened U.S./Mexico tensions, with Vulcan warning of a “chilling effect” on future trade and investment.

Colombia fully reopens to U.S. beef after lifting H5N1 ban... The U.S. Meat Export Federation (USMEF) announced that Colombia has lifted its ban on U.S. beef from states affected by H5N1 in dairy cows, restoring access to beef from 13 states. USMEF President Dan Halstrom expressed gratitude to USDA teams and Colombian importers, emphasizing the significant impact the ban had on trade, with exports dropping to less than $850,000 in July. Prior to the ban, U.S. beef exports to Colombia averaged $3 million per month.

Trump expands tax proposals to appeal to key voter groups ahead of election... Donald Trump’s growing list of tax proposals targets various constituencies, from tipped workers and retirees to higher-income residents in Democratic-led states. He has proposed eliminating taxes on tips, Social Security and overtime pay, while reversing a key provision of his 2017 tax law — the SALT deduction cap. In a speech in Georgia, Trump outlined his vision to use tax breaks and other incentives to bolster U.S. manufacturing, in an aim to win over working-class voters. However, uncertainty surrounds which of these proposals Trump would prioritize if elected, as his campaign faces scrutiny over how these tax cuts — estimated to cost $11 trillion — would be financed.

Moody’s warns U.S. must tackle rising deficits to maintain top credit rating... Moody’s Ratings cautioned that the next U.S. administration must address widening budget deficits to preserve the country’s Aaa credit rating. In a new report, analysts predict a divided government will limit sweeping fiscal reforms, necessitating bipartisan compromises. Without significant policy changes, Moody’s warns of a weakening fiscal position, unsustainable debt levels and potential credit rating downgrades. The expiration of the federal debt limit early next year is highlighted as a key challenge.