G.T. Thompson Remains Upbeat on New Farm Bill This Year

USDA's ERS to survey Midwest corn and soybean farmers on cover crops

Today’s Digital Newspaper

MARKET FOCUS

U.S. personal consumption expenditure (PCE) price index above market forecasts
Exxon Mobil and Chevron report decline in quarterly earnings
Yellen expresses optimism regarding current economic trends
Powell says heightened focus on deficits a ‘candidate’ for contributing to higher yields
Byron Wien, influential voice on the markets, has died
Mortgage rates hit 7.79%, highest in more than 20 years
Ford Motor withdraws 2023 guidance due to tentative contract with UAW
UPS sees downturn in shipments
Ag markets today
China washing out Brazil bean buys?
USDA's ERS to survey Midwest corn and soybean farmers on cover crops
NWS weather outlook
Pro Farmer First Thing Today items

CONGRESS

House passes Energy and Water appropriations bill in 210-199 vote
Congressional agenda ahead
George Santos (R-N.Y.) faces and expulsion vote next week

ISRAEL/HAMAS CONFLICT

Biden administration imposes new sanctions to cut off financing to Hamas

RUSSIA & UKRAINE

Ukrainian officials deny reports of Black Sea grain export corridor shutdown
Ukrainian grain exports in 2023-24 marketing year have fallen to 8.72 MMT
Ukraine will receive additional $150 million in military equipment from U.S. stockpiles

POLICY

House Democrats haven’t decided to back a 2018 Farm Bill extension
"GT" Thompson remains optimistic about passing a new farm bill this year
FarmDoc’s Jonathan Coppess writes again on reference prices
CRP can’t offer new contracts
Tax specialist Paul Neiffer writes about ‘The Drawbacks of Bonus Depreciation’

CHINA

Li Keqiang, former China Premier sidelined by Xi Jinping, dies at 68
Chinese jet flies within 10 feet of U.S. bomber: Pentagon
Three Chinese EV giants revealed as subjects of EU subsidy probe

TRADE POLICY

G7 trade chiefs to address supply chain resilience, economic coercion

ENERGY & CLIMATE CHANGE

Indonesia conducts its first commercial flight using SAF
DOE invests $36 million in marine carbon capture and removal projects

POLITICS & ELECTIONS

Rep. Dean Phillips kicking off long-shot Democratic primary challenge to Biden
Federal judge orders Georgia to redraw districts due to racial discrimination

OTHER ITEMS OF NOTE

Subdued reaction to U.S. strike of Iranian-backed sites in Syria
Cotton AWP eases lower

MARKET FOCUS

— Equities today: Asian and European stocks were mixed overnight. U.S. Dow openedly slightly lower with other exchanges mixed. In Asia, Japan +1.4%. Hong Kong +2.1%. China +1%. India +1%. In Europe, at midday, London +0.3%. Paris -0.6%. Frankfurt +0.4%.

U.S. equities yesterday: All three major indices ended with losses with both the Nasdaq and S&P 500 unable to trade in positive territory during the session. The Dow ended down 251.63 points, 0.76%, at 32,784.30. The Nasdaq fell 225.62 points, 1.76%, at 12,595.61. The S&P 500 declined 49.54 points, 1.18%, at 4,137.23.

— Exxon Mobil and Chevron report decline in quarterly earnings despite higher oil prices following recent mega deals. Exxon attributed its reduced profits to increased costs in its chemicals division, while Chevron reported a nearly 40% drop in earnings from its upstream business. Notably, these financial results follow recent major acquisition announcements by both companies. Exxon is set to acquire shale company Pioneer Natural Resources and pipeline operator Denbury, while Chevron recently finalized a $53 billion deal to purchase Hess.

— Agriculture markets yesterday:

Corn: December corn fell 3/4 cent to $4.79 1/4 and nearer the session low.
Soy complex: November soybeans fell 8 3/4 cents to $12.79 1/2, closing near the session low and below the 20-day moving average. December meal rose 30 cents to $429.50, while December soyoil fell 86 points to 51.74 cents.
Wheat: December SRW wheat rose 11 cents to $5.79 1/2 and near the session high. December HRW wheat gained 5 3/4 cents at $6.54 3/4, nearer the session high and hit a more-than-two-year low early on. December spring wheat futures rose 3 1/2 cents to $7.24 1/4.
Cotton: December cotton rose 78 points to 84.59 cents and closed above 100-day moving average for the first time since Oct. 19.
Cattle: Expiring October live cattle futures rose 57.5 cents to $181.70 Thursday, while most-active December slipped 10 cents to $179.325. October feeder futures went off the board 57.5 cents higher at $240.55. Nearby November feeders tumbled $1.55 to $236.50.
Hogs: Hog futures rose again Thursday, with nearby December gaining $1.125 to $68.625.

— Ag markets today: Soybeans recouped most of their losses the two previous days during overnight trade, while corn also traded to the upside and wheat had a varied tone. As of 7:30 a.m. ET, corn futures were trading 2 to 3 cents higher, soybeans were mostly 12 cents higher, winter wheat markets were steady to 2 cents lower and spring wheat was steady to fractionally higher. Front-month crude oil futures were about $1.50 higher, and the U.S. dollar index was around 150 points higher.

Packers raise cash cattle bids. Cash cattle trade so far this week was at solidly lower prices, though trading volume was light as most feedlots passed. Packers began raising their cash bids on Thursday, suggesting increased interest. It still appears the average cash cattle price will be lower this week, but it might not be as weak as once expected.

Cash hogs drop, pork cutout firms. The CME lean hog index is down another 22 cents to $78.19 as of Oct. 25 amid seasonally building slaughter supplies. The pork cutout value firmed $1.00 on Thursday and has shown signs of stabilizing in the $86.50 to $88.50 range.

— Quotes of note:

Treasury Secretary Janet Yellen expressed optimism regarding the current economic trends, indicating that there are no indications of an impending recession. Yellen described the economy as resembling a "soft landing," following a robust report on gross domestic product, primarily driven by strong consumer spending. Yellen also said she didn’t expect growth to stay at the third quarter level, predicting instead it could come in at 2.5% for the year. She added that the economy is showing “tremendous robustness” and rates would likely stay higher for longer.
Federal Reserve Chair Jerome Powell says a heightened focus on deficits is a “candidate” for contributing to higher yields. Treasury Secretary Janet Yellen said the main driver is U.S. economic resilience, something Powell also highlighted last week. That in turn “suggests that interest rates are likely to stay higher for longer,” the Treasury chief said. She added that “we have to put forward fiscal plans that will keep the deficit manageable,” and “the higher the interest-rate path the more that we need to do.” it’s still possible yields come down in time, Yellen said. Many of the underlying trends that held them low pre-pandemic are “still in force,” such as demographics, she said. And Powell indicated that sentiment among bond buyers is something that could shift in time. How investors respond to the Nov. 1 debt-issuance plan from the Treasury will offer a good gauge of that sentiment.
Byron Wien, an influential voice on the markets, has died. The former Blackstone and Morgan Stanley investment strategist whose annual “10 Surprises” list made him a must-read, died Wednesday at age 90. “When he’s right, you can make a fortune,” the market commentator Jim Cramer said of Wien in 2018.
“I feel a keen sense not to become the next roadkill. If we become second class, we become irrelevant over time.” — Prabhakar Raghavan, Google’s senior vice president overseeing search and other products. As the search giant began its defense in the Justice Department’s landmark antitrust case, he argued that Google built a dominant business to fend off its many rivals.

— U.S. personal consumption expenditure (PCE) price index in the U.S. rose 0.4% month-over-month in September 2023, the same as in August and above market forecasts of 0.3%.

Details: Prices for goods increased 0.2% and prices for services rose 0.5%. Food edged up 0.3% and energy surged 1.7%.

The annual PCE rate was 3.4%, the same as an upwardly revised 3.4% in the previous month and in line with forecasts.

Meanwhile, annual core PCE inflation which excludes food and energy, slowed to 3.7%, the lowest reading since May 2021, matching forecasts of 3.7% and after a downwardly revised 3.8% in August.

The monthly rate rose to a four-month high of 0.3% from 0.1% in August, in line with expectations.

Bottom line: PCE inflation is the Fed's preferred inflation metric, and September figures showed that inflationary pressures continue to slowly moderate although the rates remain above the central bank target of 2%.

— Mortgage rates hit 7.79%. Mortgage rates rose for the seventh week in a row, according to Freddie Mac. The average 30-year fixed-rate mortgage is now at 7.79%, up from 7.63% last week. That was once again the highest since late 2000.

Market perspectives:

— Outside markets: The U.S. dollar index was firmer, with the euro, yen and British pound all weaker against the greenback. The yield on the 10-year U.S. Treasury note was slightly higher, around 4.86%, with a lower tone in global government bond yields. Crude oil futures continued to gain ahead of U.S. trading on concerns about the Middle East. U.S. crude was around $84.60 per barrel while Brent was around $88.35 per barrel. Gold and silver futures were lower ahead of U.S. inflation data, with gold around $1,992 per troy ounce and silver around $22.85 per troy ounce.

— Ford Motor withdrew its 2023 guidance due to a tentative contract with the United Auto Workers (UAW), potentially putting an end to a month-long strike. While the company reported an 11% increase in revenue to $43.8 billion in the third quarter, largely attributed to strong pickup truck sales, overall results fell slightly below analysts' expectations. The third-quarter pretax profit, excluding one-time items, stood at $2.2 billion, falling short of Wall Street's anticipated operating profit of $2.6 billion from sales of $43.9 billion. In July, Ford had forecasted a pretax profit range of $11 billion to $12 billion for 2023.

The six-week UAW strike is estimated to cost Ford approximately $1.3 billion in adjusted earnings over two quarters. The tentative agreement, pending UAW member approval, includes a 25% wage increase and the reinstatement of cost-of-living adjustments, potentially adding $1.5 billion to Ford's annual labor costs, according to JPMorgan.

Ford's electric vehicle (EV) business, known as Model e, reported a $1.3 billion loss on 36,000 vehicle sales, with lower pricing influenced by Tesla's price cuts affecting results. CFO John Lawler mentioned that the EV business is improving, albeit at a slower pace than hoped, and disclosed a delay in $12 billion worth of EV capital spending. A battery plant in Kentucky will be postponed to balance supply and demand, and production of the Mustang Mach E is slowing down.

Wells Fargo analysts noted that Ford's hourly labor cost, including benefits, is set to reach $67 this year and is expected to rise to $88 by 2027. This places it higher than foreign automakers' estimated hourly labor costs in the mid-$50s and Tesla's range of $45 to $50, the Wall Street Journal reported.

— 17.3 million: Average daily U.S. domestic package volume at UPS in the third quarter, down 11.5% from the same period last year and the lowest level since the third quarter of 2020. “It’s not that the consumer is not healthy. They’re spending their dollars differently." — UPS CEO Carol Tomé.

— China washing out Brazil bean buys? Eight to 10 cargoes of Brazilian beans for November shipment reportedly may have been canceled by China. Brazilian soybeans for cost and freight contracts were at a 5¢ to 15¢ per bu. premium to the U.S. Gulf last week. Brazilian prices for December and January are still cheaper than those for the Gulf.

— USDA's ERS to survey Midwest corn and soybean farmers on cover crops. USDA's Economic Research Service (ERS) announced plans to conduct a voluntary survey of corn and soybean farmers in the Midwest. The survey aims to study farmers' preferences for participating in programs that support cover cropping and gather information about current cover cropping practices. USDA is interested in supporting the long-term adoption of climate-smart conservation practices, including cover crops, through technical assistance and financial incentives. The study will focus on federal programs like the Environmental Quality Incentive Program (EQIP) and the Conservation Stewardship Program (CSP). The survey will explore how contract flexibility, ease of application, payments, and other factors influence farmers' willingness to enroll their fields in cover crop programs. The results will be compared with those of farmers with no history of using cover crops in federal programs and will be used in research publications to provide information to stakeholders and the public regarding farmer preferences for planting cover crops and participating in related programs. Comments on the survey are due by Dec. 26. Link for details.

— NWS weather outlook: Heavy rain and scattered flash flooding chances extend from the Southern Plains through the Lower Ohio Valley... ...Moderate to locally heavy snow forecast across the Central Rockies this weekend... ...Bitter early season cold snap expected across much of the Great Plains and Rockies, while record-breaking warmth is found across the East and Gulf Coast.

Items in Pro Farmer's First Thing Today include:

     • Corn and beans firmer, wheat mixed overnight
     • Subdued reaction to U.S. strike of Iranian-backed sites in Syria
     • China’s Former Premier Li Keqiang dies
     • China’s industrial profits post another gain in September
     • Russia cuts wheat export tax

CONGRESS

— House passes Energy and Water appropriations bill (HR 4394) in 210-199 vote. The bill initially included $52.4 billion in discretionary funding level, a $1.6 billion cut compared with fiscal year 2023, though conservatives slashed additional spending before the passage vote. The measure, which funds the Energy Department and other agencies, rescinds more than $5.5 billion from the Inflation Reduction Act, including a $4.5 billion program for homeowners to switch to more energy efficient appliances and a $1 billion grant program to help states craft more stringent building energy codes. The bill also slashes the Energy Department’s energy efficiency and renewable energy office funding by 42% below last year’s levels and revokes $15 billion in loan authority from the department’s loan guarantee program.

While the House measure isn’t expected to pass the Democratic Senate, it represents the Republican’s starting point as they negotiate spending with Democrats ahead of a mid-November government shutdown deadline.

The adopted amendments to the bill include language to sell an emergency cache of 1 million barrels of gasoline, and provides $2.4 billion for domestic uranium enrichment by reallocating existing funds from a credit program being used to subsidize existing nuclear reactors.

— The congressional agenda ahead. The House left yesterday for a long weekend and is set to return to work on Wednesday. The Senate will reconvene on Monday.

In the House, Speaker Mike Johnson (R-La.) detailed a plan to move next week to the Legislative Branch, Interior-Environment, and Transportation-HUD appropriations bills. He also proposed skipping the markups for the Commerce-Justice-Science and Labor-HHS-Education bills, the last two that haven’t been reported by the Appropriations Committee. Labor-HHS-Education Subcommittee Chair Robert Aderholt (R-Ala.) said yesterday lawmakers plan to skip his markup, but Commerce-Justice-Science Chair Hal Rogers (R-Ky.) said that “all avenues are being explored” on this bill.
In the Senate, members have yet to vote on passage of the three-bill package covering Agriculture-FDA, Military Construction-VA, and Transportation-HUD. But appropriators expect a second package when that one’s finished. Sen. Jerry Moran (R-Kan.) said he expects the next batch to include Energy and Water, Commerce-Justice-Science, and Interior-Environment appropriations.
The Senate Appropriations Committee will meet Tuesday to discuss President Joe Biden’s $106 billion request for a supplemental spending bill with funds for Ukraine, Israel, the Indo-Pacific, and the U.S./Mexico border.
Johnson plans to split Israel and Ukraine aid bills, the speaker told Fox News last night. “We’re not going to abandon them,” he said about Ukraine, but he added the US has a stewardship responsibility on funding oversight. Johnson said Reps. Mike Garcia (R-Calif.), Dan Crenshaw (R-Texas) and other GOP lawmakers have drafted a document with “12 critical questions for the White House to answer as a condition for additional support” for Ukraine. Johnson gave this document to National Security Adviser Jake Sullivan, who is “studying it.”
SALT deduction. Republicans will meet next week on whether to add an increase to the $10,000 state-and-local tax deduction cap to the GOP’s tax package, Rep. Anthony D’Esposito (R-N.Y.) told Bloomberg Tax. The Ways and Means Committee advanced the bill in a party line this summer.
A GOP effort to scrap a USDA diversity policy fell well short in the Senate. The resolution by Sen. Roger Marshall (R-Kan.) was defeated by a 47-50 vote. Marshall targeted a 2022 policy barring discrimination based on gender identity and sexual orientation.

— Rep. George Santos (R-N.Y.) will face a vote to expel him from the House next week in a push from his Republican colleagues in the New York delegation over his federal criminal indictments. Rep. Anthony D’Esposito (R-N.Y.) notified the House on Thursday of his intent to offer a privileged resolution to expel Santos, just a day into the House functioning again after Republicans selected Speaker Mike Johnson. That means Johnson must call for a vote within two legislative days.

ISRAEL/HAMAS CONFLICT

— Biden administration imposes new sanctions to cut off financing to Hamas by singling single out people who “are facilitating sanctions evasion by Hamas-affiliated companies” as well as assets and financial networks, the Treasury Department said in a statement.

RUSSIA/UKRAINE

— Ukrainian officials deny reports of Black Sea grain export corridor shutdown, assert its continued functionality. Ukrainian officials, including President Volodymyr Zelenskyy, have vehemently denied recent reports from a Ukrainian consulting firm and a British company, which suggested that the newly established corridor for Ukrainian grain exports in the Black Sea had ceased operations. Zelenskyy addressed the corridor's status and vessel insurance in a phone call with British Prime Minister Rishi Sunak, with the Ukrainian president's office confirming their commitment to maintaining the corridor's functionality despite perceived threats. Deputy Prime Minister Oleksandr Kubrakov dismissed the reports of cancellation or unscheduled stoppage of the temporary Ukrainian corridor as false, asserting that all routes established by the Ukrainian Navy for civilian vessels remain valid and in use. As evidence of its continued operation, it was revealed that 23 ships were currently loading at Ukrainian ports in Odesa, Chornomorsk, and Pivdennyl, and a total of 51 ships have utilized the corridor, exporting more than 1.3 million metric tons of agricultural products and other cargo.

— Ukrainian grain exports thus far in the 2023-24 marketing year have fallen to 8.72 million metric tons (MMT), according to data from the Agriculture Ministry, noting that by Oct. 28, 2022, grain exports totaled 12.34 MMT. The current total included 4.4 MMT wheat, 3.5 MMT corn and 669,000 metric tons of barley.

— Ukraine will receive an additional $150 million in military equipment from U.S. stockpiles, as the Biden administration sends more air defense missiles, rockets, artillery ammunition, anti-tank and anti-aircraft weapons to the country while it fends off Russia’s invasion

POLICY UPDATE

— House Democrats haven’t decided to back a 2018 Farm Bill extension and remain hopeful of moving a bipartisan farm bill, House Minority Leader Hakeem Jeffries (D-N.Y.) told reporters Thursday. House Republicans “continue to play ideological games” as some tout deep cuts in the next farm bill, Jeffries said, but “at the end of the day, there’s no circumstance where any meaningful piece of legislation is moving through the House of Representatives unless it is bipartisan.”

— House Agriculture Committee Chairman Glenn "GT" Thompson (R-Pa.) remains optimistic about passing a new farm bill this year, despite calls from the Senate for a one-year extension of the expiring 2018 Farm Bill. Thompson in an interview with Bloomberg echoed comments he also made to AgriTalk in which he emphasized the importance of completing a five-year farm bill, acknowledging the likelihood of a short-term extension to facilitate the process. However, he stressed that any extension should be "as clean as possible," without additional spending or shifts in priorities. Thompson expressed concerns that a loaded extension bill could hinder their ability to focus on the five-year legislation. While advocating for a new bill, he is also mindful of funding challenges in addressing key issues like the farmer safety net within limited resources.

— FarmDoc’s Jonathan Coppess writes again on reference prices. A FarmDoc article (link) concludes: “If recent reports are accurate that the House Agriculture Committee is considering a controversial proposal to reduce conservation, SNAP, and rural development funding by $50 billion to offset the projected costs of increasing reference prices, an extension of the 2018 Farm Bill is likely the least bad option. It may even be worth considering a continuation of the current farm program authorities for another five years rather than gamble away the current farm bill coalition.”

The latest discussion centers around the implications of a reported House Agriculture Committee proposal and the complexities associated with the Congressional Budget Office's (CBO) scoring of agricultural policies. The proposal in question relates to raising reference prices and its potential impact, both politically and financially. It is estimated that such a change would cost approximately $50 billion over a 10-year period. Coppess writes that this amount is significant in the context of the entire 10-year baseline budget for Title I, which amounts to nearly $66 billion, with a substantial portion allocated to Price Loss Coverage (PLC) from fiscal year (FY) 2024 to FY 2033.

The discussion highlights the challenging political dynamics surrounding this proposal, noting that previous efforts to cut funding for the Supplemental Nutrition Assistance Program (SNAP) nearly derailed the passage of the 2014 and 2018 Farm Bills, resulting in initial defeats on the House floor. The current proposal, if pursued, is seen as potentially more contentious, as it could create divisions between farmers, rural communities, and low-income Americans reliant on SNAP benefits. Furthermore, Coppess writes, it may lead to conflicts among farmers, particularly those vying for conservation funding versus those receiving additional farm program payments.

The conversation delves into the "CBO gamble," emphasizing the significance of CBO scoring rules. The figures presented illustrate actual crop prices from 2008 to 2022, along with various CBO price projections spanning from 2008 to 2033. The effective reference price calculation introduced in the 2018 Farm Bill is emphasized for its role in helping farmers adapt to price fluctuations and mitigate large spending projections in the years following a farm bill's expiration.

Comments from one farm policy observer: “Coppess has long opposed reference prices on ideological grounds. He advocated altogether omitting PLC in 2014 and providing only ARC with no reference price in it. The result would have been catastrophic for farmers. This commentary is merely an extension of that.”

Another contact notes: “He’s implicitly saying that trimming 3% from the rest of the farm bill to make sure the farm safety net works for farmers is a bridge too far and is grounds for saddling farmers with status quo for another 5 years.”

— CRP can’t offer new contracts. The expiration of the 2018 Farm Bill on Oct. 1 has stranded the land-idling Conservation Reserve Program (CRP), and USDA cannot offer new contracts, revise existing contracts, or process applications to enroll cropland in the reserve. Link for details via the National Sustainable Agriculture Coalition.

— Tax specialist Paul Neiffer writes about "The Drawbacks of Bonus Depreciation.” The respected tax specialist discusses the challenges faced by larger farmers when trading in farm equipment, particularly in relation to tax implications. A reader's example involves a trade of equipment with a $3.5 million trade value for $4.0 million of new equipment, taking into account Section 179 limitations and 80% bonus depreciation.

The key points addressed are:

Section 179 Limitations: The total purchase price of farm equipment at $4 million exceeds the Section 179 limit for 2023, which is $1,160,000. Section 179 starts to phase out dollar-for-dollar once costs exceed $2,890,000. In this scenario, Section 179 deductions are not allowed.
80% Bonus Depreciation: Despite 80% bonus depreciation, the farmer cannot fully depreciate the equipment purchases. With 80% bonus, the depreciation amount is $3.2 million, leaving $800,000 unaccounted for. An additional $160,000 in first-year depreciation is possible, but $640,000 of equipment cost remains undeducted for the current year.
Trade-In Value vs. Purchase Cost: The trade-in value of $3.5 million is less than the $4 million purchase cost. As a result, the farmer nearly breaks even in terms of total depreciation ($3.36 million) compared to the gain ($3.5 million), assuming 100% bonus depreciation was originally taken. However, the farmer desires to deduct the entire amount in the year of purchase, which is not possible with 80% bonus depreciation.
State Tax Issues: State tax considerations can be problematic, especially if the state does not follow federal bonus depreciation rules. Although the net book value of equipment for state income tax purposes is usually close to the trade-in value for farmers who trade equipment annually, certain states may have complexities in their add-backs for bonus depreciation, leading to timing issues.
Leasing: Leasing can also pose tax challenges. In the case of a finance lease, it is treated similarly to a purchase, maintaining the same situation. In contrast, an operating lease may report the trade-in value as income, potentially equal to 100% of the trade-in value. The deduction for an operating lease is based on the lease terms, potentially resulting in higher income recognition in the year of the trade.

Bottom line: The article emphasizes that farmers and others have become reliant on bonus depreciation, and its withdrawal can present difficulties. The author suggests that once bonus depreciation is fully phased out, equipment decisions will likely be based on their impact on farm operations rather than tax savings. Smaller farmers can continue to benefit from Section 179 deductions, allowing them to write off equipment in the year of purchase, although Neiffer notes this may not be the best approach for farmers who finance their equipment. It is often preferable to align depreciation deductions with principal payments on loans.

Note: The above is from Neiffer’s popular Farm CPA Report, available by subscription (link).

CHINA UPDATE

— China's Former Premier Li Keqiang, reform advocate overshadowed by Xi, passes away at 68. Li, known for advocating economic reforms but increasingly sidelined by President Xi Jinping, has passed away at the age of 68 due to a heart attack. His death occurred just months after stepping down from his role as the nation's second-highest official. Li’s passing was announced on the government's website. A trained economist and once a contender for China's top leadership position, Li championed pro-market reforms and emphasized the benefits of a more liberal economic vision. He guided the world's second-largest economy through challenges such as a trade war with the United States, a property crisis, and the Covid-19 pandemic. However, Li's influence waned over his decade-long tenure as head of government, with President Xi Jinping assuming key responsibilities traditionally held by the premier. Xi's consolidation of power within the Communist Party ultimately resulted in Li being left off China's most powerful body, the Politburo Standing Committee, and being replaced as premier by Xi's ally, Li Qiang.

Bottom line: Li's death marks the end of an era where reform-minded leaders like him faced diminishing influence in a China increasingly dominated by Xi Jinping's leadership style and agenda.

— Chinese jet flies within 10 feet of U.S. bomber, Pentagon says. The fighter jet neared a B-52 during a maneuver over the South China Sea on Tuesday night, the U.S. military said. Link for details via the New York Times.

— Three Chinese EV giants revealed as subjects of EU subsidy probe. Three of China’s biggest automakers have been picked as the sampled companies subject to an anti-subsidy probe the European Union is launching into new electric cars imported from China, according to a European Commission document seen by Caixin (link).

TRADE POLICY

— G7 trade chiefs to address supply chain resilience and economic coercion amid geopolitical tensions. Trade ministers from the Group of Seven (G7) nations are set to convene in Osaka to formulate strategies aimed at strengthening global supply chains and reducing vulnerability to economic coercion, particularly from countries like China. This gathering takes place against a backdrop of heightened geopolitical risks stemming from conflicts in the Middle East and Ukraine, as well as strained diplomatic relations marked by sanctions and trade barriers designed to bolster industrial security. Underlining the importance of supply chains, the G7 will engage in discussions with nations including India, Indonesia, Australia, Chile, and Kenya.

The agenda for the meeting encompasses various trade-related topics, including food security, climate change, equitable trade rules, economic coercion, and supply chain resilience. The G7, chaired by Japan this year, intends to issue a joint statement at the conclusion of the weekend gathering.

The conflict in Ukraine has resulted in bottlenecks in food and energy supplies, while the situation in Israel and Gaza threatens to exacerbate global polarization as casualties mount. Nations have implemented trade barriers, sanctions, and subsidies to safeguard their interests in collaboration with like-minded partners. Items such as semiconductor chips, vital for applications ranging from AI development to weapon manufacturing, and critical minerals used in electric vehicle battery production are at the core of these actions.

Global commerce to slow. With the global economy grappling with high inflation in the U.S. and Europe and a sluggish post-pandemic recovery in China, the World Trade Organization predicts that global commerce is expected to grow at a rate significantly lower than what was forecasted six months ago.

ENERGY & CLIMATE CHANGE

— Indonesia conducts its first commercial flight using SAF. Indonesia flew its first commercial flight using palm oil-blended jet fuel. The palm-oil blended sustainable aviation fuel (SAF) is produced by Indonesian state energy firm PT Pertamina and seen as a way of cutting the aviation industry’s carbon footprint.

— DOE invests $36 million in marine carbon capture and removal projects. The Department of Energy (DOE) has announced a $36 million investment in 11 projects focused on developing marine carbon dioxide removal (mCDR) capture and storage technologies. These initiatives are part of the DOE's Sensing Exports of Anthropogenic Carbon through Ocean Observation (SEA-CO2) program. The primary objectives of these projects are to support innovative approaches for measuring, reporting, and validating mCDR processes and to identify cost-effective and energy-efficient solutions for carbon removal. mCDR techniques leverage the natural carbon capture and storage processes present in the ocean, offering the potential to mitigate and eliminate hundreds of millions of tons of harmful carbon dioxide emissions annually, in conjunction with other carbon dioxide removal methods.

POLITICS & ELECTIONS

— Federal judge orders Georgia to redraw districts due to racial discrimination, adding black-majority districts. In a significant ruling, U.S. District Judge Steve Jones declared that certain congressional, state Senate, and state House districts in Georgia were drawn with racial discrimination. The judge has mandated that the state must create an additional Black-majority congressional district. Furthermore, Judge Jones instructed Georgia's Republican-majority General Assembly and governor to redraw two new Black-majority districts in the state Senate and five in the state House.

Judge Jones has set a deadline of Dec. 8 for the state to act, warning that he will not allow the 2024 elections to proceed under the current district maps. This necessitates the convening of a special legislative session since lawmakers are not scheduled to meet until January.

This ruling follows a September trial where the plaintiffs argued that Black voters continue to face opposition from white voters and require federal intervention to ensure fair representation. In contrast, the state argued that court intervention on behalf of Black voters was unnecessary.

The ruling could potentially shift one of Georgia's 14 congressional seats from Republican to Democratic control. In 2021, GOP lawmakers redrew the congressional map, altering the balance from an 8-6 Republican majority to a 9-5 Republican majority.

This case in Georgia is part of a broader wave of litigation following the U.S. Supreme Court's recent reaffirmation of its interpretation of the Voting Rights Act. The court rejected a challenge to the law brought by Alabama. Similar legal challenges regarding dilution of Black residents' voting power have emerged in Alabama, Florida, Arkansas, Kentucky, Louisiana, New Mexico, South Carolina, Tennessee, Texas, and Utah.

While orders to redraw legislative districts could potentially reduce Republican majorities in the state House and Senate, they may not necessarily lead to a Democratic takeover. Key: Will the courts grant the GOP a stay past 2024 elections? Link for details via the Atlanta-Journal Constitution.

Recall that North Carolina legislators gave the GOP an edge in the 2024 congressional elections. The new districts drawn by the legislature will make it easier for the GOP to maintain control of the narrowly divided House by favoring Republicans in 10 of the 14 districts. Rep. Jeff Jackson (D-N.C.) isn’t running for re-election in the House, a sign that North Carolina Democrats are resigned to running under the new GOP-drawn maps. State Republicans passed a new map on Thursday that will almost certainly eliminate three Democratic incumbents — Reps. Wiley Nickel (D-N.C.), Kathy Manning (D-N.C.) and Jackson. The map also shifts Rep. Don Davis’ (D-N.C.) seat a couple of points to the right, but it remains a competitive district.

Bottom line: Redistricting in the South is a mixed bag for Democrats this cycle. While the party may lose four seats in North Carolina, ongoing redistricting efforts could grant Democrats seats in Alabama, Louisiana and Georgia.

— Minnesota Dem Rep. Dean Phillips to announce presidential campaign challenge against Biden. In a move that's been hinted at for months, Minnesota Representative Dean Phillips is set to challenge President Joe Biden in the Democratic presidential primary election. Phillips' intention to run for president was far from a secret, as his "Dean Phillips for President" van, a vintage 1960s "Government Repair Truck" that has been a familiar sight in his congressional district, was prominently parked in Concord, New Hampshire, where he will file for the New Hampshire presidential primary by the Friday deadline. Link to details via Minneapolis StarTribune.

A calendar in the New Hampshire Secretary of State's office confirmed Phillips' filing for the presidential primary, with volunteers for his campaign handing out fliers inviting people to a Friday rally. Phillips' campaign has been marked by slogans like "Everyone's Invited" and "Make America Affordable Again."

While some within the Democratic Party have expressed disappointment in Phillips for challenging Biden instead of supporting the president against a potential rematch with Republican Donald Trump, Phillips has argued that Democrats must avoid "sleepwalking" into a repeat of the 2016 election and has urged Biden to "pass the torch." The primary campaign is expected to be a closely watched development in the upcoming election season.

OTHER ITEMS OF NOTE

— Cotton AWP eases lower. The Adjusted World Price (AWP) for cotton is at 68.72 cents per pound, effective today (Oct. 27), down from 69.82 cents per pound the prior week and the second week in a row under 70- cents. The level is still well above the mark of 52 cents that would trigger a loan deficiency payment. Meanwhile, USDA announced that Special Import Quota #2 will be established Nov. 2 for the import of 39,634 bales of upland cotton, applying to supplies purchased not later than Jan. 30 and imported into the U.S. not later than April 29.

KEY LINKS

G.T. Thompson Remains Upbeat on New Farm Bill This Year

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