Consumer Prices Rose 0.4% in September, More Than Expected

Is USDA’s CCC Charter Act going to be the creative ‘surprise’ in any new farm bill?

Today’s Digital Newspaper

MARKET FOCUS

USDA daily export sales for MY 2023-2024: 124,545 MT of corn for delivery to Guatemala and 295,000 MT of soybeans for delivery to unknown destinations.
Consumer prices increased by 0.4% in September, slightly surpassing expectations
Social Security Administration announces 3.2% cost-of-living adjustment for 2024
Delta's quarterly profit tops estimates on booming international travel
Microsoft gets IRS tax notice demanding payment of $28.9 billion in back taxes
Fed indicates rates near peak as inflation concerns persist (FOMC minutes)
UAW expanding its strike to include 8,700 workers at a Ford truck plant in Kentucky
Oil prices have been volatile in recent months
IEA lowers 2024 oil demand growth forecast on economic concerns and EV adoption
OPEC reaffirmed its outlook for robust growth in global oil demand in 2023 and 2024
Ag markets today
Ag trade update
October crop reports out at noon ET
El Niño weather phenomenon threatens rice market with production losses, price rally
NWS weather outlook
Pro Farmer First Thing Today items

ISRAEL/HAMAS CONFLICT

Israel launches fresh airstrikes on Gaza
Secretary of State Blinken in Israel for talks aimed at averting expansion conflict
Yellen downplays global economic impact of Israel-Hamas conflict

RUSSIA & UKRAINE

Russia reimposes capital controls to stabilize the faltering ruble
Russia attacks Ukrainian grain storage

POLICY

EPA withdraws appeal of injunction on WOTUS rule, citing compliance with SCOTUS
Vilsack expects Congress to pass farm bill by year-end, emphasizes creativity needed

CHINA

World Bank revival efforts led by U.S. seek to counter China's influence
China raises corn crop estimate
China's sovereign wealth fund slightly increases holdings in four largest banks

ENERGY & CLIMATE CHANGE

Fossil fuel subsidies soar to $7 trillion in 2022, raising climate and economic concerns
Chinese battery companies spreading supply chains overseas to bypass U.S. rules

LIVESTOCK & FOOD INDUSTRY

HPAI detected in fourth commercial turkey operation, raising concerns

CONGRESS

Scalise faces uphill battle in bid for House speaker, struggles to secure GOP support
House panel to investigate Hamas funding, including possible crypto involvement

OTHER ITEMS OF NOTE

Big idea on Bigfoot
Today’s calendar of events

MARKET FOCUS

— Equities today: Asian and European stocks were mostly higher overnight. U.S. Dow opened around 30 points higher. In Asia, Japan +1.8%. Hong Kong +1.9%. China +0.9%. India -0.1%. In Europe, at midday, London +0.8%. Paris +0.5%. Frankfurt +0.7%.

U.S. equities yesterday: U.S. equities registered modest gains as traders assessed wholesale inflation data and looked ahead to consumer-level data due Thursday morning. The Dow rose 65.57 points, 0.19%, at 33,804.87. The Nasdaq gained 96.83 points, 0.71%, at 13,659.68. The S&P 500 was up 18.71 points, 0.43%, at 4,376.95.

— Delta's quarterly profit tops estimates on booming international travel. Delta Air Lines on Thursday reported stronger-than-expected quarterly profit on strong international travel, but trimmed its full-year outlook due to higher fuel costs.

— Microsoft has received a notice from the Internal Revenue Service (IRS) demanding payment of $28.9 billion in back taxes, along with interest and fines, for the tax years spanning from 2004 to 2013. In response, Microsoft has announced its intention to file an appeal against this IRS claim. The issue pertains to the practice of transfer pricing, generally used by companies to reduce their tax burden by shifting profits to tax havens. "We disagree with the proposed adjustments and will vigorously contest the NOPAs through the IRS’s administrative appeals office and, if necessary, judicial proceedings," said Microsoft. The company does not expect a final resolution in the next 12 months.

— Agriculture markets yesterday:

Corn: December corn rose 2 1/2 cents to $4.88, closing near the session high and above the 10-day moving average.
Soy complex: November soybeans fell 19 cents to $12.52 1/2, near the session low and hit a four-month low. December soybean meal lost 40 cents at $377.10 and near mid-range. December bean oil closed down 51 points at 52.72 cents.
Wheat: December SRW futures fell 2 1/2 cents on the session to $5.56, settling near the session’s midpoint. December HRW futures dropped 4 cents before closing at $6.67 1/4. December spring wheat fell 5 1/4 cents to $7.18 1/4.
Cotton: December cotton closed down 40 points at 85.05 cents and hit a six-week low early on.
Cattle: Expiring October live cattle futures ended Wednesday at $184.50, up $1.925, while most-active December jumped $1.975 to $186.975. Meanwhile, October feeder futures advanced $2.225 to $250.175 and most-active November feeders surged $1.65 to $252.00.
Hogs: December lean hog futures fell $1.45 to $69.975 Wednesday, while expiring October futures rallied 20 cents to $82.15.

— Ag markets today: Corn, soybean and wheat futures were relatively quiet during the overnight session as traders await USDA’s October crop reports later this morning. As of 7:30 a.m. ET, corn futures were trading fractionally higher, soybeans were 4 to 5 cents higher, winter wheat futures were 1 to 2 cents higher and spring wheat was mostly 3 to 4 cents higher. Front-month crude oil futures were around 80 cents higher, and the U.S. dollar index was about 100 points lower.

Limited cash cattle trade. As expected, this week’s cash cattle trade has been slow to get started. So far, only light sales at roughly steady prices have been reported in the far northern market. Cash sources are spilt on eventual prices for the week, with some thinking steady/firmer and others steady/weaker.

Cash hog index halts extended price drop. The CME lean hog index is up 14 cents to $82.40 (as of Oct. 10), marking the first increase since Sept. 20. Still, the index remains in a steep seasonal decline and is down $10.55 from this time last year.

— Quotes of note:

62: The number of U.S. corporate bankruptcies in September, up from 56 in August as expectations for interest rates to remain high for longer than previously anticipated added to economic pressures, according to data provider S&P Global Market Intelligence.
China: “If anyone plans to completely disentangle itself from the China supply chain now, it’s just not possible.” — Pan Hua of Chinese EV battery supplier GEM.
“Overall, your grocery bills are still more expensive than they were in 2019 by a large amount,” said Stephen Juneau, an economist at Bank of America. “When you go to the grocery store, I’m sure you still feel like you’re getting less bang for your buck.”

— Consumer prices increased by 0.4% in September, slightly surpassing expectations.

The consumer price index (CPI) rose by 3.7% compared to the previous year, higher than the estimated 3.6%.
On a monthly basis, consumer prices advanced by 0.4%, easing from a 0.6% gain in August but exceeding market expectations of 0.3%.
Core CPI, excluding food and energy prices, also increased by 0.3% for the month and 4.1% on a 12-month basis, aligning with expectations. It marked the lowest reading since September 2021.
Shelter costs played a significant role in the inflation increase, with a 0.6% monthly rise and a 7.2% year-on-year increase.
Energy costs saw a 1.5% rise, including a 2.1% increase in gasoline prices and an 8.5% increase in fuel oil prices.
Food prices increased by 0.2% for the third consecutive month (details below).
Service prices, which are crucial for gauging long-term inflation trends, saw a 0.6% gain excluding energy services and a 5.7% increase on a 12-month basis.
Market impact: Some say this raises the prospect slightly that the Federal Reserve may raise interest rates following similarly robust recent data on the strength of the jobs market. Fed Funds futures signal a 10% chance of a November increase, down from 30% chance after the jobs report. Attention now will be on the Personal Consumption Expenditures Price Index data — the Fed’s preferred inflation gauge — due October 27 in the Personal Income and Outlays data.

More on food prices. On an annual basis, food prices rose 3.7% in the year through September, a decrease from 4.3% in August.

Prices for groceries climbed 0.1% in September from the month before, down from 0.2% in August.

The cost of eating at restaurants rose 0.4% over the month, up from 0.3 percent in August.

Prices for fruits and vegetables were flat in September after falling 0.2% the month before.

A gauge of costs for meats, poultry and fish rose 0.4%t after rising 1 percent in August. Pork prices increased 1.6%.

Egg prices picked up again after falling the prior month. In September, egg prices increased 0.9% from August. Egg prices are down 14.5% over the past year.

CPI

— Social Security Administration announced a 3.2% cost-of-living adjustment for 2024. These benefit adjustments are made annually to help benefits keep pace with inflation. Recipients will see the increase reflected in their January checks. On average, Social Security retirement benefits will increase by more than $50 per month starting in January. More than 66 million Social Security beneficiaries will see the 3.2 % cost-of-living adjustment (COLA) beginning in January 2024. Increased payments to approximately 7.5 million people receiving SSI will begin on Dec. 29, 2023. (Note: some people receive both Social Security and SSI benefits). Link for details. Link to fact sheet showing the effect of the various automatic adjustments.

— Fed indicates rates near peak as inflation concerns persist. The Federal Reserve's minutes from the Sept. 19-20 Federal Open Market Committee (FOMC) meeting reveal a commitment to maintaining a restrictive monetary policy stance to combat inflationary pressures and return inflation to the Fed's 2% target.

Here are key takeaways:

Steady Rates with Unanimous Support: The FOMC decided unanimously to keep the Fed funds rate within the range of 5.25% to 5.5%, with "almost all participants" in agreement with this action. However, the minutes did not specify the preferences of the few members who differed.
Focus on Restrictive Policy: There is consensus among FOMC participants that maintaining a restrictive monetary policy for an extended period is crucial to achieving the 2% inflation goal.
Data-Driven Approach: FOMC decisions will continue to be driven by incoming data, including indications of disinflation and labor market conditions.
Balance Sheet Runoff: The reduction of the Fed's portfolio will continue as outlined earlier, even after the Fed starts reducing rates. This is considered essential for achieving macroeconomic objectives.
Inflation Concerns: Fed staff highlighted the risks of inflation and other factors, including the United Auto Workers strike, which could impact the economy. Inflation has been slowing but remains elevated.
Bond Market Activity: Staff noted that medium- and long-term bond yields increased more than short-term Treasuries, driven by higher term premiums and real yields. Borrowing costs for various sectors increased moderately.
Credit Conditions: Bank credit conditions tightened somewhat, but credit remained accessible to businesses and households. Credit quality has slightly deteriorated in several sectors, but delinquency rates have also risen.’
Outlook: Fed officials believe that policy is at or near its peak, and decisions will continue to be guided by data. Upcoming data releases, including the Consumer Price Index and the Personal Consumption Expenditures Price Index, will be crucial for future monetary policy decisions.

Bottom line: The Fed remains vigilant in its efforts to combat inflation, emphasizing the importance of a restrictive monetary policy and continued balance sheet reduction, while closely monitoring economic data to inform future decisions.

Market perspectives:

— Outside markets: The U.S. dollar index was weaker, with only the euro firmer against the greenback. The yield on the 10-year U.S. Treasury note was weaker ahead of economic data, around 4.54%, while global government bond yields were mostly higher. Crude oil futures moved solidly higher ahead of U.S. gov’t inventory data that was delayed a day by Monday’s U.S. holiday. U.S. crude was around $84.65 per barrel and Brent around $87.15 per barrel. Gold and silver were stronger ahead of CPI data, with gold around $1,895 per troy ounce and silver around $22.27 per troy ounce.

— UAW expanding its strike to include 8,700 workers at a Ford truck plant in Kentucky. The United Auto Workers (UAW) union significantly escalated its strikes against Detroit Three automakers Wednesday by going on strike against a major Ford truck plant in Louisville, Kentucky, the Associate Press reported. In a surprise move, the 8,700 members left their jobs about 6:30 p.m. at the plant, which makes profitable heavy-duty F-Series pickup trucks and large SUVs. UAW President Shawn Fain said in a statement that the union has waited long enough “but Ford hasn’t gotten the message” to bargain for a fair contract. Ford called the strike expansion “grossly irresponsible” but said it wasn’t surprising given the UAW leadership’s statements that it wanted to keep Detroit automakers wounded with “industrial chaos.”

— Oil prices have been volatile in recent months: they are up by 18% since June, to $85 a barrel, but down by 12% since its peak in September of $97.

— IEA lowers 2024 oil demand growth forecast amid economic concerns and EV adoption. The International Energy Agency (IEA) revised its oil demand growth forecast for 2024, lowering it to 880,000 barrels per day (bpd), down from the previous estimate of 1 million bpd. This adjustment is attributed to several factors, including economic concerns, the increasing adoption of electric vehicles, and other energy efficiency measures.

However, there is a more optimistic outlook for 2023, with the IEA increasing its forecast to 2.3 million bpd, up from the earlier projection of 2.2 million bpd.

The IEA is closely monitoring the actions of OPEC+ countries and whether they will reverse supply limits. The agency suggests that if these additional cuts are removed in January, it could tip the balance towards a surplus, which may help replenish depleted oil inventories.

Regarding Russia, the IEA observed that despite Russia's commitment to reducing crude exports until the end of 2023, shipments of crude oil and products increased by 460,000 bpd in September, reaching a total of 7.6 million bpd. Crude oil alone accounted for 250,000 bpd of this increase.

Looking ahead to 2024, the IEA anticipates challenges stemming from higher interest rates in Western countries aimed at slowing economic activity. Additionally, the strength of the U.S. dollar is tempering demand in lower-income countries. These factors collectively contribute to the IEA's adjusted oil demand growth forecast for 2024.

— OPEC reaffirmed its outlook for robust growth in global oil demand in 2023 and 2024, citing indications of a resilient global economy and the expectation of increased demand in China. The organization's monthly report maintains that world oil demand is anticipated to grow by 2.25 million barrels per day (bpd) in 2024, compared to a growth of 2.44 million bpd in 2023. These forecasts remain unchanged from the previous month.

The report acknowledges that the lifting of pandemic lockdowns in China has contributed to the rise in oil demand in 2023. Notably, OPEC has consistently projected more significant demand growth for the following year compared to other forecasters, such as the International Energy Agency (IEA; see previous item). OPEC anticipates that solid global economic growth, especially in China, will continue to drive oil consumption in 2024.

Of note: OPEC and its allies, collectively known as OPEC+, have been restricting oil supplies since 2022 to support oil prices.

The report cautions that oil demand for the remainder of this year and into the next may face challenges in various parts of the world. Consequently, OPEC has slightly adjusted its forecasts for total world demand in the current quarter and the first three months of 2024. The organization attributes these adjustments to ongoing uncertainties and economic developments in OECD Europe and other regions.

Despite the pledged supply cuts by OPEC+, the OPEC report highlights that OPEC oil production increased in September, primarily driven by higher production levels in Nigeria, Saudi Arabia, and Kuwait.

— 16,495: Carloads of motor vehicles and car parts carried by U.S. railroads in the first week of October, up 18.9% from the same week last year following 15.2% annual growth in September, according to the Association of American Railroads.

— October crop reports out at noon ET. USDA will release its Crop Production and Supply & Demand Reports at noon ET. USDA’s 2023-24 domestic balance sheets will reflect Sept. 1 stocks and the final 2023 wheat crop estimate, along with any changes to this year’s corn and soybean crop forecasts. Key will be what USDA does with its new-crop usage projections to account for the supply changes. Traders expect USDA to trim its production estimates to 15.101 billion bu. for corn and 4.134 billion bu. for soybeans. New-crop ending stocks are expected to come in at 2.138 billion bu. for corn (2.221 billion bu. in September), 233 million bu. for soybeans (220 million bu. in September) and 647 million bu. for wheat (615 million bu. in September).

— USDA daily export sales for MY 2023-2024: 124,545 MT of corn for delivery to Guatemala and 295,000 MT of soybeans for delivery to unknown destinations.

— El Niño weather phenomenon threatens rice market with production losses and price rally. The rice market is facing increased concerns as the latest El Niño weather phenomenon starts to impact countries like Indonesia, Vietnam, and the Philippines, potentially affecting rice output. Any reduction in production could lead to a tightening of global supply and reignite a rally in prices, which had recently eased after reaching their highest levels in nearly 15 years. India, the world's leading rice exporter, is considering extending a 20% export levy on parboiled rice as a measure to control domestic prices in anticipation of upcoming elections. This move may contribute to keeping the rice market constrained and heighten the risk of elevated food inflation. Link to details via Bloomberg.

— NWS weather outlook: Significant weather system to bring heavy rainfall, severe weather, and even higher elevation snow from the Rockies into the Upper Midwest/Great Lakes... ...Heavy rain/flash flooding and severe weather likely to continue into Thursday for parts of the Gulf Coast and northern Florida.

Items in Pro Farmer's First Thing Today include:

     • Grains modestly firmer awaiting USDA reports
     • Exchange cuts Argentine wheat crop estimate, raises soybean outlook
     • Strategie Grains raises EU wheat, corn crop estimates

ISRAEL/HAMAS CONFLICT

— Israel launches fresh airstrikes on Gaza. In a recent escalation of the ongoing conflict, Israel conducted new airstrikes in Gaza, resulting in the tragic death of at least 51 individuals, as reported by the Palestinian health ministry. Over the course of five days, more than 1,100 people have lost their lives due to Israeli military actions. The situation has further deteriorated, with the United Nations revealing that approximately 338,000 people have been displaced, and half a million residents are facing a shortage of food supplies.

The crisis deepened on Wednesday when electricity was cut off in Gaza. Israel has maintained a blockade on the region, limiting its access to essential external fuel supplies. Israel's actions are in response to a violent attack launched by Hamas, the militant group that currently governs Gaza.

To address the humanitarian crisis, there were reports suggesting the establishment of safe corridors for refugees. However, Egypt has reportedly rejected this proposal, as reported by Reuters.

Israeli Energy Minister Israel Katz said nothing would be allowed into Gaza until the captives were released. "Not a single electricity switch will be flipped on, not a single faucet will be turned on, and not a single fuel truck will enter until the Israeli hostages are returned home," he tweeted.

Of note: U.S. Secretary of State Antony Blinken arrived in Israel for talks aimed at averting a regional expansion of the conflict there. He plans to meet Friday with Palestinian President Mahmoud Abbas, whose authority is confined to the occupied West Bank, and Jordan's King Abdullah II.

— Treasury Secretary Yellen downplays global economic impact of Israel-Hamas conflict. The war between Israel and Hamas is unlikely to have a significant impact on the global economy, Treasury Secretary Janet Yellen said Wednesday. "While we are monitoring potential economic impacts from the crisis [in Israel], I'm not really thinking of that as a major driver of the global economic outlook," she told delegates at the International Monetary Fund (IMF) and World Bank.

Stock markets around the world have largely brushed off the conflict, with Wall Street posting gains Tuesday partly boosted by a fall in oil prices.

IMF chief economist Pierre-Olivier Gourinchas said it is still too early to assess how the war could affect economic growth in the region and the rest of the world. But for now, the IMF sees better odds that central banks will manage to tame inflation without tipping the global economy into recession.

RUSSIA/UKRAINE

— Russia reimposes capital controls to stabilize the faltering ruble. This measure requires forty-three of the nation's largest exporters, including major oil producers, to exchange their foreign-currency earnings for rubles on the domestic market. The Russian ruble has experienced significant devaluation and stands as one of the world's poorest-performing currencies this year, prompting the Bank of Russia to respond by increasing interest rates.

— Russia attacks Ukrainian grain storage. A Russian drone strike hit a grain storage facility at a port in the southern Ukrainian region of Odesa overnight, damaging some of the stored grain. Ukrainian officials didn’t disclose how much grain was damaged.

POLICY UPDATE

— EPA withdraws appeal of injunction on WOTUS rule, citing compliance with Supreme Court decision. The Environmental Protection Agency (EPA) decided to withdraw its appeal of a court injunction that had prevented the enforcement of the March Waters of the United States (WOTUS) rule in 24 states. EPA made this choice based on its recently finalized revised rule in September, which the agency believes aligns the WOTUS rule with the requirements set by a U.S. Supreme Court decision that had necessitated the rewriting of the original March rule. The court granted the EPA's motion to dismiss its appeal on Tuesday.

— Vilsack expects Congress to pass farm bill by year-end, emphasizes creativity needed. USDA Secretary Tom Vilsack expressed confidence that Congress will meet the Dec. 31 deadline to pass the farm bill or temporarily extend its predecessor, but he emphasized the need for creativity to address the deadlock over farm group demands for a larger safety net.

Key points:

Vilsack urged lawmakers to think innovatively and beyond the conventional boundaries of the farm bill to address rural America's pressing issues.
The original goal for enacting the new farm bill was September 30, the date when some provisions of the 2018 Farm Bill officially expired. However, leaders of the Senate and House Agriculture committees say the real target is Dec. 31.
An end-of-year deadline is essential to avoid the "dairy cliff" on Jan. 1, when the government-guaranteed price of fresh milk would significantly increase. Dairy would be the first major commodity to be affected if a reversion to the 1949 statute is triggered.
Vilsack called the consequences of inaction unacceptable and indicated a belief that Congress will either extend the life of the 2018 farm bill or pass a new one.
Vilsack highlighted the need for a broader view of government tools available to support rural America, including the $30 billion borrowing authority via USDA’s CCC Charter Act, and the $20 billion allocated in the 2022 climate, healthcare, and tax law for USDA conservation programs focusing on climate mitigation.
The challenge lies in drafting the bill, as there isn't sufficient funding in the existing farm bill to increase reference prices, which farm groups are advocating for to offset high production costs.
Vilsack also noted the importance of retaining climate funds for conservation programs, as they align with farmers' climate support efforts.
The Agriculture Secretary emphasized the necessity of not limiting his department's ability to use the $30 billion CCC reserve appropriately, as Republicans have proposed strict limits on access to it.
Vilsack pointed out that attention should be paid to effective reference prices (ERPs) in addition to statutory reference prices (SRPs) in the farm bill discussions. ERPs would have a significant impact on crops like corn, soybeans, and wheat.

Bottom line: Vilsack believes that Congress will act by the end of the year to pass the farm bill or extend its predecessor. However, he stressed the need for creative solutions to address contentious issues, including reference prices and climate funding.

Comments: It is looking like if there are indeed going to be some creative funding ideas for any new farm bill, one potential path could be via the CCC Charter Act. Farm-state lawmakers have already signaled Vilsack to tap the fund for trade promotion and food aid. There could be creative avenues to tap the fund for farmer safety net (Title I) provisions seeking funding. Recall that Congress replenishes the $30 billion borrowing authority once it gets near being depleted. It’s been called USDA’s ATM machine by some. A caveat could be how the Congressional Budget Office (CBO) would score such creativity. ARC and PLC are already funded through CCC so this could be presented as an expansion of that authority. Plus, if lawmakers restrict what USDA can do with CCC authority, that could open up more room to use it for the Title I safety net. If they don't restrict, then there could be a question of the need to update the borrowing authority and expand it since it has not been updated since 1987.

CHINA UPDATE

— World Bank revival efforts led by U.S. seek to counter China's influence. Over the past year, Treasury Secretary Janet Yellen has been on a global mission to rejuvenate the World Bank, a 79-year-old institution that has long been a cornerstone of the U.S.-led international order. While the primary goal is to assist developing nations in overcoming poverty, recovering from the pandemic, and addressing climate change, there's also a secondary objective: demonstrating that the U.S.-led global order remains preferable to one dominated by China, the Wall Street Journal reports (link).

— China raises corn crop estimate. China’s ag ministry raised its 2023 corn production forecast by 3.29 MMT to a record 288.23 MMT, which would be up 11.03 MMT from last year. Despite the bigger production estimate, the ministry left its 2023-24 corn import forecast at 17.5 MMT.

— China's sovereign wealth fund, Central Huijin Investment, has slightly increased its holdings in the country's four largest banks, including Bank of China, for the first time since 2015. This move has sparked optimism that Chinese authorities may intervene to stabilize the stock market, which has seen an outflow of global funds. Beijing is considering implementing new economic stimulus measures and may raise its 2023 budget deficit by issuing additional sovereign debt. Market strategist Redmond Wong from Saxo Capital Markets suggests that Huijin's modest investments are likely aimed at providing support to share prices in this context.

ENERGY & CLIMATE CHANGE

— Fossil fuel subsidies soar to $7 trillion in 2022, raising climate and economic concerns. A report by the International Monetary Fund (IMF) shows that $7 trillion were allocated to direct and indirect subsidies for fossil fuels in 2022. Several factors, including the conflict in Ukraine and subsequent energy price spikes, contributed to this significant increase.

The upward trajectory of fossil fuel subsidies had already been underway prior to the Ukraine crisis, as highlighted by accompanying infographics. Experts anticipate that these subsidies will continue to rise, primarily due to the economic growth of countries in the Global South, which has led to increased consumption of coal, oil, and gas.

The scale of government support for fossil fuels is significant, equivalent to slightly over 7% of the global economy. To put this into perspective, this sum surpasses the combined global spending on education, which accounts for 4.3% of the world's gross domestic product.

The IMF emphasizes that curtailing fossil fuel subsidies could not only align humanity with climate goals but also potentially prevent 1.6 million premature deaths annually and boost government revenues by a substantial $4.4 trillion.

— Chinese battery companies are spreading their supply chains overseas in hopes of bypassing U.S. rules aimed at shutting them out of the American electric-vehicle market. Businesses that supply crucial raw materials for EV batteries have been pursuing deals with U.S. free-trade partners South Korea and Morocco. The Wall Street Journal reports (link) that Chinese suppliers are hoping to supply companies eligible for U.S. gov’t incentives and to tap into growing U.S. production of batteries and electric cars despite restrictions aimed at penning in Chinese suppliers. It’s the latest sign of how supply chains supporting electric vehicles are being shaped to respond to both demand and geopolitical complications. Chinese companies this year have struck deals worth more than $4.5 billion in South Korea, while at least four Chinese firms plan to build plants in Morocco, a country rich in phosphates, a key raw material for batteries.

LIVESTOCK, FOOD & BEVERAGE INDUSTRY

— HPAI detected in fourth commercial turkey operation, raising concerns. The highly pathogenic avian influenza (HPAI) cases have increased to four in commercial turkey operations this month. USDA is expected to officially announce that a commercial turkey flock in Meeker County, Minnesota, consisting of 140,000 birds, has been confirmed to have HPAI. The Minnesota Board of Animal Health confirmed the detection on Oct. 11, following the initiation of quarantine on Oct. 8. Prior to this, the USDA's Animal and Plant Health and Inspection Service (APHIS) had already confirmed HPAI in three other turkey operations earlier in the month. These cases involved 47,300 birds in Jerauld County, South Dakota, and two flocks in Sanpete County, Utah, with a total population of 141,800 birds. The spread of HPAI in commercial turkey operations is raising concerns in the poultry industry.

CONGRESS

— Scalise faces uphill battle in bid for House Speaker, struggles to secure Republican support. Rep. Steve Scalise's victorious moment as the GOP nominee for House Speaker was swiftly followed by significant challenges. To secure the position, Scalise must gather 217 Republican votes, but opposition is already mounting against him, with more than a dozen Republican members expressing reservations. He can only afford to lose four Republican votes while securing the speakership.

Scalise won his way into the House Republican nomination for speaker, topping Rep. Jim Jordan 113-99. In reality, according to Punchbowl News, the vote was 110-100. “Scalise had the support of the three delegates from U.S. territories who can’t vote for speaker on the House floor. And Rep. Cory Mills (R-Fla.), a Jordan supporter, didn’t vote because he was in Israel. So in order to win the speakership, Scalise has to increase his vote total by 107. OK, the real hard-core ‘Never Scalise’ vote is probably 20 to 30 members, although it’s hard to estimate. Scalise can only afford to lose four votes on the floor.”

Key challenges include:

Hard-Right Opposition: The same faction that posed difficulties for former Speaker Kevin McCarthy is proving problematic for Scalise. Despite his conservative profile, Scalise has ties to the party establishment, making him a target for GOP upstarts who are skeptical of the status quo.
Shutdown Concerns: Some Republicans seek detailed plans from Scalise on how he will handle the impending government shutdown when funding expires on Nov. 17. This issue was a stumbling block for McCarthy, and Scalise must provide a satisfactory response to gain support.
Diverse Demands: Scalise faces a multitude of demands from different factions within the party, making it challenging to address them all. While he has won over some skeptics with specific promises, other demands pull in different directions.

Bottom line: At least six lawmakers announced Wednesday they wouldn’t support Scalise’s candidacy, all but guaranteeing the chamber could face another protracted Speaker vote like McCarthy’s 15-ballot ordeal at the start of the year. Reps. Marjorie Taylor Greene (R-Ga.) and Lauren Boebert (R-Colo.) are among the pro-Jordan holdouts. Rep. Jim Jordan (R-Ohio), however, said he offered to deliver a nominating speech on Scalise’s behalf.

His nomination could also trigger leadership vacancies, prompting other lawmakers to vie for these positions.

The selection of the next House Speaker is critical for Republicans, as it affects their ability to move forward with legislation, including providing aid to Israel in response to recent events in the Middle East, aid to Ukraine, fiscal year 2024 spending bills and a new farm bill.. The unresolved leadership question may impede legislative progress in the near term.

Of note: Scalise arrived on Capitol Hill in 2008, after winning a special election to replace Representative Bobby Jindal, who was elected governor. In Louisiana, Scalise represents the First Congressional District, a place where the fossil fuel industry is king. In his bid for leadership support, Scalise emphasizes his impressive fundraising abilities. He is considered one of the top fundraisers among Republicans, second only to former Speaker Kevin McCarthy (R-Calif.). Throughout his congressional career, he has raised nearly $170 million to support Republican candidates in various elections.

— House Senate Banking Committee to investigate Hamas funding, including possible crypto involvement. The Senate Banking Committee, led by Chair Sherrod Brown (D-Ohio), announced its intention to investigate the financial aspects of the recent Hamas terror attacks in Israel. This inquiry will delve into the funding sources of these attacks, with a particular focus on whether cryptocurrency played a role.

Both Brown and Sen. Tim Scott (R-S.C.) have joined bipartisan efforts urging the Biden administration to freeze $6 billion in Iranian assets recently unlocked as part of a prisoner swap agreement. This move is part of a broader strategy to impose penalties on Iran, a longstanding supporter of Hamas. Republicans, including Senate Minority Leader Mitch McConnell and Sen. Tom Cotton (R-Ark.), say the Biden administration has not taken a strong enough stance on Iran and seek to immediately freeze the released assets.

The White House emphasizes these funds are designated for humanitarian purposes, such as food and medicine. National Security Adviser Jake Sullivan confirmed that none of the money has been spent thus far. But naysayers note money is fungible and gives Iran more flexibility in funding other things like aid to Hamas.

OTHER ITEMS OF NOTE

— Big idea on Bigfoot. Link for details.

— Calendar of events today include:

Thursday, Oct. 12:

Federal Reserve. Atlanta Fed President Raphael Bostic scheduled to speak.
Russia WTO membership. U.S. Trade Representative holds a hearing by teleconference of the interagency Trade Policy Staff Committee on Russia's implementation of its obligations as a member of the World Trade Organization (WTO).
Young, beginning and small farmer and rancher rule. Farm Credit Administration holds a meeting to consider the Young, Beginning, and Small Farmers and Ranchers Final Rule.
Derivatives markets. The Peterson Institute for International Economics (PIIE) holds a virtual discussion on "Which Markets Should be Centrally Cleared?" focusing on derivative transactions.
China and telecoms. Hudson Institute holds a virtual discussion on "The Chinese Telecom Threat."
Poland election. Brookings Institution holds a virtual discussion on "Poland's election and the direction of democracy in Central Europe."
Israel. Carnegie Endowment for International Peace (CEIP) holds a virtual discussion on "Israeli Democracy Under Threat."
Weather extremes. Environmental and Energy Study Institute (EESI) holds a briefing on 'Innovations in Weather Intelligence to Tackle Extreme Weather."
Economic reports. Jobless Claims | CPI | Treasury Budget
Energy reports. EIA Petroleum Status Report | Weekly Ethanol Production |Singapore onshore oil product stockpile weekly data | EIA Natural Gas Report | IEA monthly Oil Market Report | OPEC monthly Oil Market Report | ICE gasoil October contract expires | Holiday: Brazil; Equatorial Guinea; Venezuela.
USDA reports. FAS: Cotton: World Markets and Trade | Grains: World Markets and Trade | Oilseeds: World Markets and Trade | World Agricultural Production | Livestock: World Markets and Trade ERS: Meat Price Spreads WAOB: NASS: Crop Production | Cotton Ginnings

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Consumer Prices Rose 0.4% in September, More Than Expected

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