Evening Report | November 14, 2023
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Stabenow urges farm leaders to push for new farm bill... Senate Ag Committee Chair Debbie Stabenow (D-Mich.) today emphasized the need for farm leaders to express a sense of urgency in passing a new farm bill. While a continuing resolution includes a one-year extension of the expired 2018 Farm Bill, through September 2024, Stabenow stressed the importance of passing a new farm bill in 2024 and urged farm leaders to coalesce around the effort.
Meanwhile, Sen. John Boozman (R-Ark.), ranking member on the committee, noted farm groups understand the differences in the current situation compared to 2018 but stressed the need to do the right thing, including potential changes to reference prices. The biggest issue currently facing the committee is awaiting scores from the Congressional Budget Office, with the potential inclusion of agricultural funding from the Inflation Reduction Act (IRA) into the farm bill being a consideration. Stabenow and other Democrats have said that if IRA provisions are brought into the farm bill, they still want the money devoted to the climate-smart conservation programs that are in the climate bill.
Stabenow urges tangible benefits from AI in agriculture... Senator Stabenow emphasized that artificial intelligence (AI) and advanced technologies should offer tangible benefits to growers without overshadowing existing production-boosting technologies at a Senate Ag Committee hearing titled “Innovation in American Agriculture: Leveraging Technology and Artificial Intelligence.” She expressed concerns the attention given to AI might divert resources from readily available technologies accessible to growers. Stabenow also raised questions about whether the companies developing AI solutions could potentially control the supply of recommended fertilizers and seeds, leading to conflicts of interest.
Witnesses at the hearing acknowledged the benefits of new technologies, including increased crop yields and reduced waste, but stressed the importance of providing clear benefits to growers. They emphasized that technology products must offer practical solutions to address the challenges faced by farmers and should be deployed thoughtfully and responsibly.
The hearing follows President Joe Biden’s executive order on AI, which requires developers to share safety test results and other critical data with the federal government. The order also directs cabinet agencies, including the Agriculture secretary, to provide guidance on the use of AI and algorithms in government services.
Jahmy Hindman, Senior Vice President and Chief Technology Officer for Deere & Co., supported legislative proposals to broaden eligibility for USDA conservation and loan programs, encouraging more growers to adopt technology-driven products. He emphasized the importance of incentives for increasing growers’ productivity and profitability, which would contribute to meeting the needs of the growing world population. Hindman urged the committee to consider including these bills in the next five-year farm bill reauthorization, expected in 2024.
Privacy concerns regarding growers’ data were also discussed during the hearing, with Stabenow highlighting the need to protect growers’ data privacy while harnessing the benefits of AI and precision agriculture tools.
U.S. consumer inflation eases more than expected in October... The annual consumer inflation rate slowed to 3.2% in October from 3.7% in both September and August. Energy prices declined 4.5% from last year, with gasoline prices down 5.3%. Food prices rose 3.3% on an annualized basis in October, with food away from home (grocery store) prices up 2.1% and food away from home (restaurant) prices up 5.4%. Core inflation, which strips out volatile food and energy prices, eased to 4.0% from 4.1% the previous month.
Ukraine launches insurance program for grain vessels... Ukraine has initiated an insurance program in collaboration with broker Marsh McLennan and Lloyd’s of London to provide coverage for grain vessels departing from its deep-sea ports, Bloomberg reports. This move comes after a Russian missile recently struck a ship. The program, valued at $50 million, offers insurance against military risks for ships, aiming to facilitate easier access to coverage for transporting goods from Ukraine via sea. This initiative is particularly important for Ukraine, a major agricultural exporter reliant on foreign exchange earnings from food exports. Despite the ongoing conflict and security concerns in the Black Sea region, ships continue to transport grain and metals from Ukraine’s ports.
Biden, AMLO to meet... President Biden and Mexican President Andrés Manuel López Obrador will discuss ongoing efforts to strengthen bilateral relations and “address issues of shared concern” during a meeting on Friday in San Francisco, the White House said. It is not certain whether the two leaders will discuss Mexico’s impending ban on GMO corn for human consumption.
Panama Canal facing significant challenge due to a lack of rainfall... October marked the driest month in Panama since record-keeping began in 1950. This water shortage is leading to reduced traffic through the Panama canal.
By February, it is expected that only 18 ships per day will be able to traverse the canal, which is roughly half the number from the previous year. This situation affects virtually every type of commodity and manufactured product, but it is particularly critical for the energy sector. In the previous year, nearly half of the goods, measured by weight, passing through the canal’s locks consisted of oil and gas-based products. These products include diesel, gasoline and liquefied petroleum gas (LPG), and the global energy supply chain heavily relies on the canal for their transportation.
This issue becomes even more relevant as the U.S. is exporting propane, a type of LPG commonly used in barbecues and outdoor heaters, at record levels. In October, propane shipments reached a record of 2.1 million barrels per day, up significantly from an average of approximately 1.3 million barrels per day in 2022, according to data from the U.S. Energy Information Administration.
U.S. climate report warns of worsening crisis amid continued fossil fuel use... The Fifth National Climate Assessment, a federally mandated report released recently, highlights the impacts of the climate crisis are being felt across the entire United States and are projected to worsen in the next decade if fossil fuel usage continues. While the report acknowledges a slow decrease in planet-warming pollution in the U.S., it emphasizes this reduction is insufficient to meet the nation’s climate targets.
In response to the report, President Joe Biden announced over $6 billion in funding aimed at enhancing climate resilience. This funding will focus on strengthening the country’s electric grid, improving water infrastructure, reducing flood risks in communities and advancing environmental justice initiatives.
EU officials discussing reinforcement of the $60 per barrel price cap on Russian oil exports... EU officials have concerns with the cap because “almost none” of Russia’s oil exports are being traded below this level. In contrast, the U.S. has different priorities, as it worries about the potential impact of stricter sanctions and enforcement on global oil prices. The goal of the price cap is not only to maximize the amount of Russian oil sold under it but also to change Russia’s incentives.
Russia has been skilled at working with shadow tankers and oil traders to trade oil without relying on Western insurance or to avoid detection for sanctions violations. Despite these efforts, Western oil sanctions have increased the cost of Russian oil sales to Asia by an estimated $36 per barrel. This has affected netback revenue from oil sales, even as the gap between Russia’s Urals blend and the European Brent benchmark has narrowed to less than $10 per barrel.
Petroleum products that originate in Russia take a circuitous path to a Greek refinery that serves the U.S. military and other Western nations, a Washington Post examination of shipping and trade data shows. The finding underscores the porousness of the sanctions and the failure to aggressively enforce them.
Recently, the U.S. Treasury Department sent notices to 30 ship managers of nearly 100 vessels suspected of violating sanctions. This action reflects ongoing efforts to enforce sanctions on Russian oil exports.
IEA: Global oil markets not as tight as expected... The International Energy Agency (IEA) raised its oil demand growth forecasts for this year and next despite slower economic growth in nearly all major economies. But IEA indicated global oil markets will not be as tight as previously anticipated as upward revisions in supply will outpace demand. For 2023, IEA expects world demand to rise by 2.4 million barrels per day (bpd), up from 2.3 million bpd seen previously. For 2024, IEA raised its oil demand growth forecast to 930,000 bpd from 880,000 bpd. On Monday, OPEC raised its forecast for world oil demand growth in 2023 to 2.46 million barrels per day (bpd), up 20,000 bpd from the previous forecast. For 2024, OPEC sees demand rising by 2.25 million bpd, unchanged from last month. The major difference between IEA and OPEC for next year’s use would be equivalent to roughly 1% of daily world oil use.
Meanwhile, IEA increased its forecasts for global fuel consumption this year, primarily because of unexpected strength in China’s demand for oil.
Exxon Mobil diversifying its business by venturing into lithium mining... The energy giant has commenced lithium drilling operations in Arkansas, aiming to produce the mineral for use in electric vehicle (EV) batteries by 2027 and become a major supplier to EV manufacturers by 2030. This strategic move by Exxon is driven by its long-term vision for the rise of EVs and electrification in the transportation industry the Wall Street Journal reports.
However, Exxon’s entry into the lithium market comes at a challenging time. Lithium prices have dropped by more than 60% in the year through early October due to an influx of new supplies and a slowdown in the growth of EV sales. Despite this, Exxon anticipates demand for internal combustion fuels in light-duty vehicles will peak around 2025. The company projects a nearly 25% increase in global EV sales and a fourfold increase in lithium demand by 2030, underscoring its commitment to positioning itself for the future of the automotive industry.
U.S. opens FY 2024 with slightly smaller monthly deficit... In October, the U.S. government recorded a monthly deficit of $66.6 billion, which was slightly larger than anticipated but represented an improvement compared to the $88 billion deficit in October 2022. This improvement was due in part to a boost in government receipts, reaching a record high of $403 billion. These increased receipts were partly attributed to tax payments from Californians who had deferred their tax bills due to severe late-winter storms.
On the expenditure side, government outlays also increased, reaching $470 billion, compared to $406 billion in the same month the previous year. Notably, interest payments on the national debt experienced a substantial surge, rising to $88.9 billion in October, up from $47.6 billion in the same month last year.
