VP Pence in Iowa today as ethanol proponents ready for visit
In Today’s Updates
* Jobless claims dip below 1 million for first time in more than four months
* Fed officials warn the government's pandemic response is hobbling the recovery
* Kudlow: No executive order on a capital gains cut
* July budget deficit falls, but FY 2020 deficit still rising
* U.S. annual inflation is subdued and unlikely to alter the Fed's dovish turn
* Oct. cattle within $3 of pre-Covid prices
* Gold prices rally again
* Fuel tax receipts rebound near pre-pandemic levels
* IEA: Coronavirus crisis has "cast a long shadow" over crude demand
* Big share of global tanker fleet stuck in growing flotilla off China’s coast
* Phillips 66 to convert San Francisco-area oil refinery into biofuels plant
* USDA announces daily export sales
* Dems and Trump administration remain 'miles apart' on negotiations
* EPA's Wheeler comments about status of 'gap year' waiver requests from refineries
* VP Mike Pence in Iowa today; ethanol and biodiesel advocates are ready
* SBA's PPP ends with $134 billion unspent
* Sales of U.S. ag products to China continue
* U.S. ag attaché in China sees 2021 hog numbers at 80% of pre-ASF levels
* China says frozen chicken wings from Brazil positive for coronavirus
U.S. food & beverage industry update:
* Billboard's allegedly linking meat and pandemic pop up across Los Angeles
* Sen. Bennett wants USDA, Labor IGs to investigate Trump and food plants
Update on re-opening America... and around the world:
* Big 12 wants to play
* Coronavirus cases in the U.S. climbed to a four-day high of nearly 56,000
Politics & Elections:
* Trump pounces on fracking position of Kamala Harris
* Trump to visit Wisconsin as Democrats prep convention
* Trump not barred by law from holding acceptance speech from White House lawn
Other Items of Note:
* USDA continues investigation into seed packets
* Hearing on produce imports today
* CFTC nomination
* U.S. tweaks Airbus retaliation but does not increase total level
Equities today: Global stock markets were mixed in overnight trading and the U.S. stock indexes are pointed toward slightly lower openings. Overnight, the MSCI Asia Pacific Index added 0.5%, with Japan's Topix index closing 1.2% higher. In Europe the Stoxx 600 Index slipped.
U.S. equities yesterday: The Dow closed up 289.93 points, 1.05%, at 27,976.84. The Nasdaq gained 229.42 points, 2.13%, at 11,012.24. The S&P 500 rose 46.66 points, 1.40%, at 3,380.35.
On tap today:
• USDA Weekly Export Sales, at 8:30 a.m. ET.
• U.S. jobless claims, due at 8:30 a.m. ET, are expected to edge down from the previous week but remain at historically elevated levels.
• U.S. import prices for July are estimated to have risen 0.6%. (8:30 a.m. ET)
• Atlanta Fed President Raphael Bostic speaks before the National League of Cities Constituency Groups Virtual Summit at 11 a.m. ET.
• Fed Board Governor Lael Brainard speaks at an event hosted by the Federal Reserve Bank of San Francisco at 3 p.m. ET.
• EIA weekly natural-gas storage report is due at 10:30 a.m. ET.
• China's industrial output for July is out at 10 p.m. ET.
Jobless claims dip below 1 million for first time in more than four months. Between Aug. 2 and 8, a seasonally adjusted total of 963,000 Americans filed new claims for jobless benefits, 228,000 claims fewer than the roughly 1.2 million applications from the week before. New applications for unemployment benefits are down significantly from a peak of near 7 million in March. The number of people collecting unemployment benefits through regular state programs, which cover the majority of workers, also decreased at the beginning of August. That figure, at about 15.5 million, was still well above the pre-pandemic peak of 6.6 million in 2009.
Kudlow: No executive order on a capital gains cut. The White House is not considering an executive order to carry out the president’s push for a cut in the capital gains tax because Congress probably would have to change the rate, administration officials said. “Structural changes to tax rates,” said Larry Kudlow, Trump’s senior economic adviser, “likely require congressional legislation.”
Fed officials talk about Covid and U.S. economy. Federal Reserve Bank of Boston President Eric Rosengren said the U.S.' over-eagerness to reopen commercial activity without sufficiently containing the spread of Covid-19 had backfired. Rosengren, speaking to the South Shore Chamber of Commerce in Massachusetts on Wednesday, said resurgences of the virus have led to a slowdown measured by high-frequency economic data. That slowdown, he said, is likely to continue, causing him to worry that an increasing number of temporary layoffs may turn into permanent job losses despite significant fiscal and monetary policy intervention. “Even as official restrictions relax, many people may prefer to continue avoiding activities that require social interaction in order to protect their own health,” he said. “With such a pattern of behavior taking hold, momentum in the economy toward returning quickly to full employment would likely fade.” Rosengren compared the U.S.’ poor performance in containing the virus to Europe, where many countries cracked down harder on mobility and public activity, causing a sharp economic downturn but leading to a quicker, stronger recovery. “As a result of this more successful virus-containment policy, visits by Europeans to retail and recreation locations have now experienced a more robust recovery compared with American visits to such locations and are close to their pre-pandemic levels,” he said. Rosengren said he “strongly” supported taking additional fiscal action to help businesses and households survive the crisis despite mounting federal government debt. But, he added, more spending should be combined with more robust efforts to contain the virus. “Taking strong fiscal actions and taking very few public-health actions is completely the wrong mix,” he said. “If you want to actually make sure the debt doesn’t explode you have to make sure we get the pandemic under control,” adding that “it’s much cheaper to wear masks than it is to have fiscal policy.”
Dallas Fed President Robert Kaplan sounded similar in remarks. “The rebound continues but, with the resurgence of the virus in a number of locations in the United States, that has muted the rebound,” he later told the Lubbock Chamber of Commerce. “A number of countries around the world have gotten the virus transmission rates to relatively low levels and are recovering at a very rapid rate.” Kaplan called on U.S. officials to push harder for the widespread adherence to protective behaviors, especially the use of face masks, and said it would also help the nation avoid having to pile up debt. “I would much rather have a health-care discipline and follow these protocols than keep spending a trillion dollars-plus every three months of money that we’re just going to have to pay back later,” he said.
July budget deficit falls, but FY 2020 deficit still rising. The federal government registered a deficit in July of $62.99 billion, down substantially from the $864.1 billion in June, in large part as deferred tax payments came in. Tax payments had been delayed until July 15 for taxpayers and businesses and those payments helped to trim the monthly budget shortfall as Covid-19-related spending continued. Federal government receipts were at $563.5 billion — including $373 billion in individual income tax payments – against outlays of $626.5 billion for the monthly shortfall. But the cumulative deficit for Fiscal Year (FY) 2020 still increased to $2.807 trillion.
U.S. annual inflation is subdued and unlikely to alter the Fed's dovish turn, say analysts. Over the last year, overall prices are up 1% and core prices are up 1.6%.
• USDA today announced the following export sales via its export sales reporting:
— Export sales of 197,000 metric tons of soybeans for delivery to China during the 2020-2021 marketing year;
— Export sales of 110,000 metric tons of corn for delivery to unknown destinations. Of the total, 30,000 metric tons is for delivery during the 2019-2020 marketing year and 80,000 metric tons is for delivery during the 2020-2021 marketing year; and
— Export sales of 202,000 metric tons of soybeans for delivery to unknown destinations during the 2020-2021 marketing year.
• Oct. cattle are within $3 of prices the market was trading pre-Covid.
• Gold recorded its biggest drop in years on Tuesday, then gained most of it back yesterday.
• Crude oil prices weakened in Asian action after OPEC said it looked for demand to fall more than expected. U.S. crude was down four cents at $42.62 per barrel and Brent crude eased eight cents at $45.35 per barrel. Price pressure has only increase slightly ahead of the U.S. trading start, with U.S. crude around $42.55 per barrel and Brent around $45.25 per barrel.
• Fuel tax receipts rebound near pre-pandemic levels. American drivers are returning to the road after months of coronavirus stay-at-home orders, with revenue from gasoline and diesel taxes nearing pre-pandemic levels. The U.S. government collected more than $3.8 billion in fuel taxes in July, up from less than $2.2 billion in June. The levies feed into the Highway Trust Fund, the primary financing source for highway and transit projects.
• Coronavirus crisis has "cast a long shadow" over crude demand, the IEA said in its latest oil market report, as it lowered its forecasts for the first time in several months. Due to ongoing weakness in the aviation and travel sectors, the agency sees global crude demand for 2020 at 91.1M barrels per day, down 140K bpd from a previous projection and reflecting a fall of 8.1M bpd Y/Y. The agency also revised down its 2021 global oil demand estimate by 240K barrels per day to 97.1M bpd. The International Energy Agency (IEA) cut its estimates for global oil demand for almost every quarter through the end of 2021, with the second half of this year getting the steepest downgrade.
• A big share of the global tanker fleet is in a holding pattern, stuck in a growing flotilla off China’s coast. The crude-laden vessels have been lining up for weeks at a time as ports struggle to handle the millions of barrels of inbound oil, the Wall Street Journal reports (link), a sign of the big gap between supply and demand in global energy markets. Brokers say dozens of ships have been waiting for more than a month to unload their cargoes but that ports and inland storage sites are filled to the brim. Prices for tanker transport have plummeted from historic highs in the spring, leaving the vessels to below breakeven levels. Lloyd’s List Intelligence reports ships carrying more than 71 million barrels of crude were at anchor near China ports last week, accounting for 41.4% of all crude being held in floating storage.
• Phillips 66 plans to convert a San Francisco-area oil refinery into a biofuels plant, the oil industry’s latest move amid depressed fuel consumption and growing U.S. regulatory pressures.
A 30-ton robot could help crops withstand climate change. On a green swatch of desert south of Phoenix, a 30-ton robot is tending crops that the U.S. government hopes will help meet energy needs as the earth’s climate rapidly shifts. The robot, dubbed the “Scanalyzer,” is the world’s largest field scanner, lumbering daily over 2 acres of crops to measure their growth as part of a project funded by the U.S. Department of Energy and the Bill and Melinda Gates Foundation. The program’s goal is to identify and refine the best crops for producing biofuels, to reduce reliance on fossil fuels. It could also help identify food crops that can thrive in drier, hotter conditions as climates change. Link to details and video from the Wall Street Journal.
— Democrats and the Trump administration remain "miles apart" on negotiations over a coronavirus stimulus deal, said House Speaker Nancy Pelosi (D-Calif.). Treasury Secretary Steven Mnuchin reached out to Pelosi on Wednesday to renew stalled coronavirus relief talks, but their conversation showed the impasse continues.
Following the conversation, Pelosi (D-Calif.) and Senate Minority Leader Chuck Schumer (D-N.Y.) issued a joint statement accusing the administration of “refusing to budge... Democrats have compromised. Repeatedly, we have made clear to the administration that we are willing to come down $1 trillion if they will come up $1 trillion," Pelosi and Schumer said in their statement. “However, it is clear that the administration still does not grasp the magnitude of the problems that American families are facing.”
Later on Wednesday, Mnuchin issued a statement disputing Democrats’ version of the call. “Earlier today, Speaker Pelosi and I spoke by phone," Mnuchin said. "Her statement is not an accurate reflection of our conversation. She made clear that she was unwilling to meet to continue negotiations unless we agreed in advance to her proposal, costing at least $2 trillion.” He added that “The [Trump] Administration is willing to move forward with legislation that allows for substantial funds for schools, child care, food, vaccines, hospitals, [aid] for small businesses, rental assistance, broadband, airports, state and local government assistance, and liability protection for universities, schools, and businesses.” He closed his statement by saying "The Democrats have no interest in negotiating.”
Mnuchin said he is advocating a piecemeal approach to pandemic aid discussions, pushing a figure just above $1 trillion for the next relief package but adding that he’s open to additional negotiations with Democrats’ on more funds. “We can always come back later in the year or January and do a sixth bill,” he said on Fox Business Network. “We don’t have to do everything at once.”But top Democrats rebuffed that approach, saying it’s not a serious proposal. Mnuchin made it clear: “The White House is not budging from their position concerning the size and scope of a legislative package.”
White House economic adviser Larry Kudlow isn't too worried about the impasse, saying the economy is "doing great right now" and won't come to harm if the two sides can't agree.
Bottom line: If an agreement is not reached by the end of this week, many think this issue will be punted until September or later.
— EPA Administrator Andrew Wheeler commented again about the status of so-called “gap year” waiver requests from refineries asking for relief from their Renewable Fuel Standard obligations from previous years, Because the petitions go back as much as eight years, Wheeler said he is not sure how long it will take to review them. “One question that I personally have is how can you prove an economic harm in 2012 if you’re still in existence today?” Wheeler took questions from a State FFA officer and Brownfield reporter Larry Lee during a Wisconsin farm tour.
Determining Renewable Volume Obligations (RVO) under the RFS for 2021 is also proving to be challenging, Wheeler acknowledged, due to the economic impact of Covid-19. “People are still not driving as much as previous years, we take that into account when we set the RVO,” said Wheeler. “We’re still going through all the data to try to figure out what the impact Covid is going to have on the RVO... Then we also have to look at what the remedy is because the appropriate remedy would not be to give people current year RINS for something from 2012 or 2013.”
The gap year waiver applications are now back at EPA for review after being sent to EPA from the Department of Energy. “They just started sending them to us the week before last, so our guys are just now starting to look at them.”
Asked if the waiver application reviews will be done before the election, Wheeler said, “I’m not sure how long it’s going to take us to review them.” The EPA administrator revealed EPA did send a package to the Office of Management and Budget for review a few months ago, but he says the entire landscape has changed since then, and the agency started working on RVO rules before COVID-19 hit.
RVO timeline likely to slip. Wheeler said EPA has been proud to be able to meet the deadline for the RVO proposal the previous three years of the administration but “it does not look like we’re going to be on time this year.”
Perspective: More follow-up questions should have been asked. For example, EPA sent the RVO 2021 to OMB after Covid. After that did EPA “suddenly” realize Covid was still affecting things? Wheeler also needs to be challenged more on the 2021 RVO as to why hasn't OOB sent it back and said, rework it.
— VP Mike Pence in Iowa today and Iowa ethanol and biodiesel advocates are ready. Biofuel proponents today in Des Moines, Iowa, will press the Trump administration to “swiftly” deliver on promises to bolster renewable fuels, warning that voters in the state are increasingly skeptical of the commitment to the sector.
“Iowa may very well hang in the balance,” and action is important now, before Election Day, said the Iowa Corn Growers Association, Iowa Renewable Fuels Association, Iowa Soybean Association and Iowa Biodiesel Board in a letter to Vice President Mike Pence ahead of his visit to the state. The groups said EPA should reject dozens of refinery applications for retroactive waivers of biofuel-blending requirements and set a robust Renewable Fuel Standard mandates for 2021. “If the Trump administration is delaying this important action until after the election, how can we interpret that as anything but turning your back on farmers and biofuels producers?” the groups said.
— Update on China:
- Sales of U.S. ag products to China continue. USDA data for the week ended Aug. 6 included the following activity for China
For 2019-20: 76,748 tonnes of corn, 348,344 tonnes of sorghum (including 336,300 tonnes that were late reported) and 420,500 tonnes of soybeans (including 354,800 tonnes reported late).
For 2020-21, 3,000 tonnes of wheat, 348,000 tonnes of sorghum, 1,705,000 tonnes of soybeans and net reductions of 21,472 running bales of upland cotton.
For 2020, USDA reported net sales of 1,927 tonnes of beef and net reductions of 8,798 tonnes of pork. There were also sales of 8,800 running bales of cotton for 2021/22.
- U.S. ag attaché in China sees 2021 hog numbers in China at 80% of pre-ASF levels. Chinese hog production in 2020 slumped to record lows, with 2021 beginning hog numbers to be up 9% and sow numbers up 15%, according to a USDA ag attaché report. Pork production in 2021 will rise to 41.5 million tonnes, up from a record low of 38 million tonnes in 2020, with the pig inventory at the end of 2021 forecast at 370 million head, equivalent to over 80% of levels prior to the African Swine Fever (ASF) outbreak. The combination of government policies and higher prices are spurring the production response, the report said. As “industry estimates the average per head profit was 2,814 RMB ($402 USD).” Pork imports are forecast to be at 3.7 million tonnes in 2021, down from 4.3 million in 2020, the report said. “Covid-19 continues to directly and indirectly constrain pork imports, including the Chinese government taking regulatory action against foreign facilities,” the report said. “China’s opaque policies towards imported meats will create a significant amount of business uncertainty among the meat industry.” Beef imports for 2021 are forecast at 2.7 million tonnes, down from 4.3 million tonnes in 2020. “Similar to pork, Chinese authorities have implemented a number of new trade requirements related to Covid-19, which will create a significant amount of business uncertainty among the meat industry,” the report said.
- China says frozen chicken wings from Brazil positive for coronavirus. Officials in the port city of Shenzhen said that a sample of frozen chicken wings from Brazil tested positive for coronavirus, with the Shenzhen Epidemic Prevention and Control Headquarters warning that the public should take precautions to reduce infection risks from imported meat and seafood. This comes after China said that it found traces of the coronavirus on packaging of frozen shrimp from Ecuador.
- U.S./China Phase 1 tracker: China’s purchases of U.S. goods. Link.
— Update on implementation of CARES 1, including CFAP:
- SBA's PPP ends with $134 billion unspent. The Small Business Administration (SBA), which runs the Paycheck Protection Program (PPP) with the Treasury Department, stopped accepting new applications on Saturday. Over 5.2 million loans totaling $525 billion have been approved since the program launched April 3, according to a report published by the SBA. The average loan amount was $101,000.
— Food and beverage industry update:
- Billboard's allegedly linking meat and pandemic pop up across Los Angeles. Animal rights advocates have put up 19 billboards across Los Angeles that connect the eating of animals to pandemics and pay tribute to an activist killed in Canada earlier this summer while giving comfort to pigs on the way to slaughter. The billboards, which went up July 27 for four weeks, are in neighborhoods ranging from Hollywood, Silver Lake and Echo Park to downtown L.A. The campaign was organized by LA Animal Save and The Animal Alliance. Both groups are trying to make the connection between the Covid-19 pandemic and what they see as the harmful effects of meat eating and the factory farm industry, even as the pandemic itself has forced them to curtail some of their regular activities. Link for more.
- Sen. Bennett wants USDA, Labor IGs to investigate Trump and food plants. Sen. Michael Bennet (D-Colo.), a member of the Senate Agriculture Committee, asked the inspectors general at USDA and Labor departments to investigate how President Donald Trump’s use of the Defense Production Act to keep meat plants open may have affected the health of workers. In a letter (link) to USDA Inspector General Phyllis Fong and Labor Department Acting Inspector General Larry Turner, Bennett requested Fong and Turner review:
▪ USDA and Department of Labor actions (or inaction) regarding meat processing plants and the related Covid-19 outbreaks;
▪ The use of voluntary health and safety standards at meat processing facilities;
▪ The federal government’s communication of authority, standards, and expectations with state, local, worker, and industry stakeholders;
▪ The movement of USDA inspectors between facilities amid outbreaks
▪ The provision of personal protective equipment to USDA inspectors;
▪ Any federal actions following the Defense Protection Act order on April 28, 2020 that affected outbreaks at meat processing and other agricultural facilities.
— Update on reopening America... and around the world:
- Big 12 wants to play. A day after the Big Ten and Pac-12 conferences revealed they would postpone their seasons until at least the spring semester, the Big 12, which includes Oklahoma and Texas, said it intended to hold league games beginning Sept. 26.
— Coronavirus update:
- Summary: Source: Johns Hopkins University as of 6:30 a.m. ET.
— 20,637,374: Confirmed cases world-wide, and 584,556 deaths
— 55,910: New U.S. cases recorded yesterday
— 5,197,377: Total confirmed cases in the U.S.
— 1,499: Deaths in the U.S. recorded yesterday
— 166,027: Total U.S. deaths
— 63,731,305: Tests conducted in the U.S.
Coronavirus cases in the U.S. climbed to a four-day high of nearly 56,000, breaking a downward trend that culminated Tuesday when the U.S. reported 46,800 new cases, its lowest new daily tally since Aug. 3.
Link to Covid Case Tracker
Link to Our World in Data
POLITICS & ELECTIONS
— 2020 Presidential Election Interactive Map
— The Green Papers
— Days until election
- Trump pounces on fracking position of Kamala Harris. Just hours after Harris was named Joe Biden’s running mate, Trump cast the California Democrat as an oil industry and fracking foe. “She is against fracking. She’s against petroleum products,” Trump said at a White House news conference. “I mean, how do you do that and go into Pennsylvania or Ohio or Oklahoma or the great state of Texas? She’s against fracking.” Biden has made clear he would not seek an outright ban on fracking, which could only be imposed through congressional action. But Harris and Biden have both promised to curtail oil and gas development on federal lands and waters managed by the U.S. government. And a senior campaign official reiterated last month that Biden would block new fracking on federal lands.
- Trump to visit Wisconsin as Democrats prep convention. Trump will go to Oshkosh, Wis., on Monday as the Democratic National Convention opens, the Milwaukee Journal Sentinel reports. Trump’s campaign is considering holding a live event, the Sentinel reports. He will also visit Minnesota on Monday, Arizona on Tuesday and Pennsylvania on Thursday, according to other media reports.
- Trump and Republican National Convention planners are not barred by law from holding the president’s nationally televised nomination acceptance speech from the White House lawn or the executive residence, according to a government advisory opinion sent from Erica Hamrick, the deputy chief of the Hatch Act Unit at the Office of Special Counsel sent to House Oversight and Reform Chairwoman Carolyn Maloney (D-N.Y.).
OTHER ITEMS OF NOTE
- USDA continues investigation into seed packets. USDA as of earlier this week has more than 9,000 emails from consumers that have received unsolicited packets of seed, presumably sent from China, according to Osama El-Lissy with USDA's Animal and Plant Health Inspection Service (APHIS). So far, USDA has only received 925 seed packets and has gone through those and so far, El-Lissy said, has only found two noxious weeds — dodder and water spinach. “We are working to figure out who is actually sending those shipments and more importantly, to stop future shipments,” El-Lilly told USDA Radio. USDA has also been working with their counterparts in China to identify the actual senders, he noted, saying they know the names of the companies but do not know background information. USDA said it has been working with primary commerce companies to “use their own systems in stopping future shipments.” USDA has said it hasn’t identified any link to agricultural terrorism, though the situation is evolving and officials are evaluating every possibility.
- Hearing on produce imports today. Public feedback on imports of fresh produce into the U.S. will be gathered via a public hearing by the Office of the U.S. Trade Representative, USDA and U.S. Department of Commerce. The on-line session will feature opening remarks from USTR Bob LIghthizer, USDA Secretary Sonny Perdue and Commerce Secretary Wilbur Ross. Another session is set for Thursday, Aug. 20. The sessions were previously to have taken place in April but were postponed due to the Covid-19 pandemic. While attention has been focused on Mexico by Florida produce growers, farmers in other states cited actions by Canada, Chile, Paraguay and Peru as competition concerns in public comments filed before the hearing.
- CFTC nomination. President Trump intends to nominate Robert Bowes to be a commissioner on the Commodity Futures Trading Commission (CFTC), according to a White House statement. Bowes has been an appointee at the Housing and Urban Development Department and currently serves at the Office of Management and Budget. He previously worked at Fannie Mae and was a vice president at Chase Manhattan Bank in corporate finance, according to the statement.
- U.S. tweaks Airbus retaliation but does not increase total level. The U.S. has made a “modest” modification to its list of products targeted under the trade retaliation over Airbus subsidies, removing certain U.K. and Greek products from the list, but adding an equal amount of products from Germany and France. The overall level of $7.5 billion remains unchanged and tariffs on aircraft will remain at 15% and at 25% for all other products. “The EU and member states have not taken the actions necessary to come into compliance with WTO decisions,” U.S. Trade Representative Bob Lighthizer said in a statement. “The United States, however, is committed to obtaining a long-term resolution to this dispute. Accordingly, the United States will begin a new process with the EU in an effort to reach an agreement that will remedy the conduct that harmed the U.S. aviation industry and workers and will ensure a level playing field for US companies.”
The U.S. did not lower or remove tariffs on EU foods, wine and spirits, a move which the Distilled Spirits Council of the United States said would mean additional harm for U.S. businesses “already suffering.” Airbus expressed disappointment in the US announcement, calling for the EU to respond. “Airbus trusts that Europe will respond appropriately to defend its interests and the interests of all the European companies and sectors, including Airbus, targeted by these tariffs,” a company spokesman said.
Lighthizer said that Washington will start a new process with the European Union aiming to reach a long-term resolution to the dispute. It is not clear what the “new process” is that was referenced by Lighthizer, but it is clear that the US views the actions announced thus far as not enough to reduce the tariffs, but apparently enough to keep the U.S. from increasing the tariffs as was proposed. A European Commission spokesperson acknowledged the U.S.’ decision to not “exacerbate the ongoing aircraft dispute by increasing tariffs.”