Initial Glitches for USDA’s New System for Reporting Weekly Export Sales Data

California to announce today a ban on sales of new cars that use gasoline by 2035

USDA has deployed a new system for reporting its weekly export sales data and the information is appearing to generate significant questions as total sales figures are shown as well over 1 million tonnes for commodities like wheat, corn and soybeans. Reuters has now reported that the export sales data for the week ended August 18 has not yet been published by USDA.

The federal government is providing substantial student debt cancellation to borrowers with loans held by the Department of Education. The department is also extending a pause on student loan repayments through Dec. 31 and said borrowers should plan to resume payments in January 2023. The historic move instantly eliminated student loan debt for 32% of all borrowers — given they fall below the income cap — and erased at least half of the student loan debt held by 20.5% of borrowers. The relief will be tempered by a resumption of student loan repayments in January after a near three-year pandemic pause. We have details and analysis in the Policy section.

Traders focus on Friday comments by Fed Chairman Jerome Powell. See below how some predict what he will or should say. 

A congressionally created $3.1 billion debt relief program for financially distressed farmers who borrowed money through USDA programs could be in place within weeks, said USDA Secretary Tom Vilsack on Wednesday. Speed is vital, he said, because a moratorium on debt collections and foreclosures could expire in October. Details in Policy section.

California is ditching gas. The state will announce today that it’ll ban the sale of new cars that use gasoline by 2035. Other states are expected to follow. Given California’s size and influence on other states, that could affect a third of the U.S. auto market. We have details below.

Central bankers gathering in Jackson Hole, Wyo., this week are worrying about the lasting power of inflation. Traders are focused on Friday’s comments from Fed Chairman Jerome Powell.

Oil prices climbed for a second day after Saudi Arabia and some of its OPEC+ allies suggested cutting output, with global crude benchmark Brent up 1% to $101.22 a barrel.

President Biden should take urgent action on the deteriorating situation at the Zaporizhzhia nuclear-power plant in Ukraine, dozens of former senior officials and nonproliferation experts wrote in a private bipartisan letter to the White House.

The Internal Revenue Service is waiving or refunding more than $1.2 billion of penalties for Americans who filed their 2019 or 2020 tax returns late.

Equities today: Global stock markets were mixed overnight. U.S. Dow opened slightly higher and then dipped lower. Investors are still cautious ahead of the PCE price index, which is due out on Friday, along with comments from Fed Chairman Jerome Powell at a Fed confab in Jackson Hole, Wyoming (see below for some comments on what Powell may say). Markets are expecting Powell to lean hawkish on U.S. monetary policy and on the Fed’s fight against inflation. JPMorgan Asset Management's Bob Michele said Powell should use his address to give more clarity on how hawkish the Fed intends to be. Benchmarks rose in Japan, Australia, South Korea and China. Trading was temporarily delayed in Hong Kong. Benchmarks rose in Europe in early trading. In Asia, Japan +0.6%. Hong Kong +3.6%. China +1%. India -0.5%. In Europe, at midday, London +0.1%. Paris -0.1%. Frankfurt +0.2%.

     U.S. equities yesterday: The Dow climbed 59.64 points, 0.18%, to 32,969.23. The S&P 500 rose 12.04 points, 0.29%, to 4,140.77, while the Nasdaq added 50.23 points, 0.41%, to close at 12,431.53.

     Dividend payouts by U.S. companies rose to an all-time quarterly high in the three months ending June 30, hitting $144.4 billion, according to the Janus Henderson Global Dividend Index, a quarterly study of global dividend trends.

Agriculture markets yesterday:

• Corn: Corn futures ended mixed, with nearby contracts firmer and deferred contracts lower. December futures rose 2 cents to $6.57 1/4, the contract’s highest closing price since June 28.
• Soy complex: November soybeans fell 4 cents to $14.57 after earlier rising to $14.84 1/2. September soymeal fell 80 cents to $467.70. September soyoil fell 82 points to 68.77 cents.
• Wheat: December SRW wheat rose 12 3/4 cents at $8.13 1/4. December HRW wheat gained 14 1/4 cents at $8.93 1/4 and hit a three-week high. December spring wheat futures climbed $8.00 to $9.20.
• Cotton: December cotton futures rose 184 points at 114.07 cents.
• Cattle: October live cattle fell 82.5 cents to $143.775, the lowest closing price since Aug. 9. September feeders rose 57.5 cents to $183.025.  
• Hogs: October lean hogs fell $2.525 to $90.375, the contract’s lowest closing price since July 5. Pork cutout values fell $12.53 Tuesday to $105.08, a 2 1/2-month low that was led by a decline of nearly $49 in bellies. The CME lean hog index fell 80 cents to $119.18, a one-month low, and is expected to drop to $118.00 today.
   

Ag markets today: December corn rose a seventh consecutive session and remains near a two-month high amid concern Midwest heat will curtail production, with Pro Farmer Crop Tour results indicating smaller crop prospects in western Iowa. Soybean futures also rose while wheat was mixed. At 7:45 a.m. ET, corn was 7 to 9 cents higher, soybeans were 1 to 3 cents higher and wheat was 4 cents lower to 3 cents higher. Front-month crude oil futures were up slightly and the U.S. dollar index was about 300 points lower.

Technical viewpoints from Jim Wyckoff:

On tap today:

     • U.S. jobless claims are expected to increase to 255,000 in the week ended Aug. 20 from 250,000 one week earlier. (8:30 a.m. ET) UPDATE: Initial jobless claims, a proxy for layoffs, decreased to a seasonally adjusted 243,000 last week from a revised 245,000 the previous week, the Labor Department said Thursday. The weekly number has been on an upward trend since reaching a 50-year low in March. Last week’s total was below the 2022 peak set in July of 261,000 but above the 2019 weekly average of 218,000. The four-week moving average for initial claims, which smooths out weekly volatility, rose by 1,500 to 247,000. Continuing claims, a proxy for the number of people receiving government unemployment payments, decreased by 19,000 to 1.42 million in the week ended Aug. 13. Continuing claims are reported with a one-week lag.
     • U.S. gross domestic product for the second quarter is expected to contract at a 0.5% annual rate, revised from an earlier estimate of a 0.9% decline. (8:30 a.m. ET) UPDATE: Inflation-adjusted gross domestic product, or the total value of all goods and services produced in the economy, decreased at a 0.6% annualized rate in the April to June period, Commerce Department data showed Thursday. That reflects an upward revision to consumer spending and compares with a previously reported 0.9% contraction. Thursday’s report is the second of three estimates for quarterly GDP. The third revision, due in September, will be inclusive of additional economic data.
     • USDA Weekly Export Sales report, 8:30 a.m. ET.
     • USDA Food Price update, 9:00 a.m. ET.
     • Kansas City Fed's manufacturing survey is expected to fall to 10 in August from 13 one month earlier. (11 a.m. ET)
     • Kansas City Fed's Jackson Hole Economic Symposium begins today.

Between two million and four million Americans aren’t working due to the long-term effects of Covid-19, according to a new Brookings Institution report (link) released Wednesday. The inability to work translates to roughly $170 billion a year in lost wages, the report estimates. Three million full-time workers is about 1.8% of the U.S. civilian labor force.

Following an unprecedented level of flight disruptions this summer, airlines are preemptively slashing tens of thousands of flights from their fall and winter schedules. That includes American Airlines trimming 31,000 flights from its November lineup and British Airways chopping 10,000 that were on deck for winter as carriers point fingers at the ongoing pilot shortage.

What some analysts say about Fed Chair Jerome Powell ahead of Friday comments:

     Slowing pace of rate hikes: "I think he will lay out a case, as he did in his last press conference, for slowing the pace of increases. We had two 75-basis-point moves. Our expectation would be, barring significant data surprises, that the September move is 50," said Jan Hatzius, chief economist at Goldman Sachs. "I don't think he will be specific about the number, but I do think he will be saying there is a risk of over-tightening, and therefore it makes sense to go a little bit more slowly than the outsized increases."

     Unfinished business: "It's safe to assume one of Powell's objectives will be to communicate that there remains work to be done to combat inflation and the hiking cycle isn't nearing its end," wrote Ian Lyngen, rates strategist at BMO Capital Markets.

     Turbulence ahead? "Throughout this year, what we've seen is the volatility around the Fed-funds rate has created market volatility," noted Michael Arone, managing director at State Street Global Advisors. "I think that all of this 'trying to find that level' has induced this volatility, and I think the markets are underestimating where the Fed will end up."

     What Powell will and won’t say: "We maintain that inflation will resolve on its own as distortions fade, and likely drive a Fed pivot," related Marko Kolanovic, chief global markets strategist at J.P. Morgan. "In Chair Powell's remarks, we do not expect him to tip his hand on the size of the next move, which will depend on upcoming releases, but we believe he will push back against the idea that a dovish policy pivot is coming soon."

Market perspectives:

     • Outside markets: The U.S. dollar index is lower in early U.S. trading. Meantime, the yield on the 10-year U.S. Treasury note is fetching 3.086%. Bond yields have been on the rise recently. Treasury yields are rising as investors bet that the economic recovery will stave off a recession a bit longer. Crude is higher, with U.S. crude around $95.40 per barrel and Brent around $101.05 per barrel. Gold and silver futures were higher ahead of GDP data, with gold around $1,774 per troy ounce and silver around $19.13 per troy ounce.

     • Oil prices are back above $100 a barrel this week on comments from the Saudi Arabian energy minister that output could be cut. A group of Wall Street analysts believe it will end September at $115 a barrel as supply tightens.

     • Pro Farmer Crop Tour boosts fears of lower corn yields as yield outlooks trail 2021 averages while futures in Chicago climb to two-month high on supply concerns (see next item). “If the western corn belt is not as good as last year and the eastern corn belt isn’t better than last year, we are going to have a production deficit,” Brent Judisch, Iowa farmer and a scout on the western leg of the Pro Farmer Crop Tour told Bloomberg. “There’s no way around it.” Data collected earlier in the week showed yields in South Dakota, Ohio, Nebraska and Indiana trailing last year’s average. The bad news continued on Wednesday with figures showing the same kind of trend for many fields in Illinois, the No. 2 U.S. producer. Preliminary findings in parts of Iowa were also disappointing. On one route, scouts started in Bloomington, Illinois, and headed northwest toward Iowa. The further west they went, the more the dryness became apparent. The parched soils were a strong indicator that this year’s crop will hardly be one of the best. “Today, we saw more consistency, but it was not superb -- I don’t think there’s much of a ‘wow’ effect,” said Brian Grete, leader of the eastern leg and editor for Pro Farmer newsletter. Today, scouts will finish up their measurements in Iowa and southern Minnesota. A good crop in that state also has the potential to make up for losses in other areas. Mark Bernard, a crop consultant and owner of Agro-Economics and an eastern leg tour scout, noted that while corn isn’t looking great, soybean plants are faring better. The oilseed crop grows later into the season, so more rains in the next few weeks will help with plant development. “I’m more optimistic on soybeans,” Bernard said.

     • Day 3 Pro Farmer Crop Tour results for Illinois and western Iowa. Scouts on day 3 of the Pro Farmer Crop Tour Wednesday determined an average corn yield of 190.71 bu. per acre in Illinois, down from last year’s 196.3 bu. per acre estimate and but up from the three-year Tour average of 185.62 bu. per acre. Soybean pod counts in a 3’x3’ square averaged 1,249.70 for Illinois, down from an average of 1,279.79 in 2021 and but up from the three-year Tour average of 1,174.95.

     In western Iowa, average corn yields for Districts 1, 4 and 7 were 181.12, 180.8 and 173.7 bu. per acre, respectively, compared to 183.96, 201.1 and 192.47 bu. per acre, respectively, in 2021. The averages for the previous three years for Districts 1, 4 and 7 are 183.37, 188.74 and 187.83, respectively.

     Western Iowa pod counts for Districts 1, 4 and 7 averaged 1,089.74, 1,258.94 and 1,223.85, respectively, compared with 1,089.35, 1,225.24 and 1,367.61 averages for 2021. The averages for the previous three years for Districts 1, 4 and 7 are 1,066.2, 1,199.57 and 1,250.92, respectively.

     On Day 4 of the Crop Tour today, scouts will sample more fields in Iowa as well as fields in southern Minnesota. The Tour concludes tonight in Rochester, Minnesota.

     • Fertilizer producer CF Industries will halt ammonia production at its remaining UK plant in response to soaring natural gas prices, a move that could reduce carbon dioxide supply crucial to the food industry. Link to details via Bloomberg.

     • Citi cut its outlook for Maersk, Hapag-Lloyd and Zim on expectations of a deeper slowdown in global demand, citing a few reasons: a reduction in consumption, flagging U.S. home sales and rising inflation. They’re all negative omens for an industry that moves about 80% of global trade. Meanwhile, Drewry said the spot rate for the benchmark route from Asia to the U.S. fell to $4,949 per 40-foot container, marking the first time the index has slipped below $5,000 since December 2020.

       

     • The Rhine River’s water level at a key waypoint is set to decline in the coming days, curbing the amount of cargo that barges can carry.

     • India to restrict wheat flour exports to bring down local prices. India’s ban on wheat exports announced in May significantly increased wheat flour export demand, with the government detailing a 200% rise in exports during April-July versus year-ago levels. The government said they were making a “partial” modification of the policy to restrict wheat flour exports in a bid to bring down flour prices.

     • NWS weather: Heavy showers and some thunderstorms are expected to move across Georgia toward the Carolinas this morning as scattered thunderstorms linger along the Gulf Coast... ...Threat of strong thunderstorms expected to shift from the upper Midwest to the Great Lakes today followed by a better chance of severe thunderstorms across New England on Friday... ...Showers and thunderstorms could lead to locally excessive rainfall over parts of the northern Rockies and northern High Plains as well as the Four-corners region.

Items in Pro Farmer's First Thing Today include:

     • Corn futures gain seventh straight session overnight
     • Cash cattle prices appear to be slipping
     • Hog futures extend slump as cash market nosedives  

— Key features of student loan debt relief announced by President Joe Biden:

• Summary: Out of the around 45 million Americans with federal student loan debt, the plan announced Wednesday by President Joe Biden gives $10,000 in relief for all borrowers with an annual income (in either the 2020 or 2021 tax year) below $125,000 ($250,000 for couples) and $20,000 in relief for those who qualified for federal Pell grants earmarked for low-income undergraduates below the income cap. Over 60% is the proportion of borrowers who received Pell grants and are eligible for $20,000 in relief, according to the White House. The Education Department said it will release additional details on how borrowers can claim relief in the weeks ahead. The proposed regulations will be published in the Federal Register and the public will be able to comment on the draft for 30 days.
• Varied response to announcement. President Biden has acknowledged the polarized response. “I understand that not everything I’m announcing today is going to make everybody happy,” he said yesterday. “But I believe my plan is responsible and fair.”
• Timing: The announcement did not specify when the debt forgiveness would take effect but suggested that it would be by the end of the year. The Education Department can’t grant forgiveness automatically to every eligible borrower. Instead, borrowers whose income data isn’t already filed with the department will have to apply and demonstrate that they meet the limit. According to the Biden administration, “nearly 8 million borrowers may be eligible to receive relief automatically because relevant income data is already available to the U.S. Department of Education.” The White House said borrowers who took out federal loans by June 30 of this year are eligible for forgiveness. Loans taken out after that date will not be eligible.
• Tax impact: While debt forgiveness is often treated as income for tax purposes, the canceled student debt will be exempt, like some other federal student debt forgiveness programs. Senate Majority Leader Chuck Schumer helped get the 2021 American Rescue Plan to include a provision that would make all types of student loan forgiveness tax-free through December 2025, to make sure that any future debt cancellation would not be treated as taxable income. However, the discharged debt is likely subject to state income tax in several states.
• 32% of all borrowers: The initiative could instantly wipe out all outstanding federal student loans for up to 14.6 million borrowers who held less than $10,000 in debt as of the end of June, accounting for 32% of all borrowers, according to federal data, provided those individuals fall below the income cap.
• Impact: The policy will also erase at least half of the student loan debt held by the 20.5% of borrowers who owe between $10,000 and $20,000 and will take a significant chunk out of the $20,000 to $40,000 owed by another 21.4% of borrowers.
• But… The relief does not mean much for the most indebted Americans: Some 38% of the $1.62 trillion in total outstanding federal student loan debt is held by borrowers with balances of more than $100,000, even though they account for just 7.5% of all borrowers.
• The action doesn’t affect student loans issued by private lenders, just the ones directly from the federal government. But private loans make up less than 10% of total student loan debt in the U.S.
• For borrowers enrolled in standard plans who owe more than will be forgiven, the new relief offers a choice: Continue making the same monthly payments but pay off their loans sooner or reduce monthly payments but stick with the 10-year payoff period.
• The cost of an education has been steadily rising. Average tuition and fees for full-time undergraduate students at private universities stood at $37,600 for the 2021-22 academic year, about 19% higher than they were a decade earlier, according to data from the Department of Education. That does not include room and board. For public universities, average tuition and fees were $9,400 in 2020–21, about 10% higher.
      
• Analysis: Despite the income cap, research shows the White House plan still slightly favors higher-income Americans. Analysis of a $10,000 blanket relief program published Tuesday by the Penn Wharton Budget Model found 69.79% of overall debt forgiveness would go to the top 60% of Americans by income, while individuals who make between $82,400 and $141,096 — placing them between the 60th and 80th percentile — would receive the greatest share of overall forgiveness, at 28.1%, though the additional relief for Pell grant recipients should bring further benefit to lower-income borrowers. According to the administration, 87% of the benefits would go to borrowers earning $75,000 a year or less.
• Of note: Higher-earning Americans hold more student loan debt, with the top 10% of individuals holding 17.4% of all debt compared to 13.8% for the bottom 20% of earners, according to the most recent installment of the Federal Reserve’s Survey of Consumer Finances in 2019.
• Cost: A blanket $10,000 forgiveness plan would have cost the federal government $311 billion in 2022, according to Penn Wharton Budget Model estimates, but the income limit would only save the government a relatively small $12.6 billion. Research shows the income cap helps make the policy less regressive and benefits poorer Americans more. That doesn’t include the estimated $20 billion it will cost to extend the moratorium on loan payments through the end of the year — a delay that benefits rich and poor borrowers alike. The moratorium so far is estimated to have cost some $115 billion.
• Inflation impact: The action will add to the federal deficit over time since borrowers will repay less, or none, of their loans to the federal government, but it doesn’t involve the immediate outlay of federal funds. Economists say that a tailored debt cancellation plan is unlikely to exacerbate short-term inflationary pressures, but could add to them in the long term, especially if universities continue to raise tuition because students might expect their loans to eventually be canceled. Jason Furman, a former Obama economic adviser who has opposed the move, wrote on Twitter: “Pouring roughly half trillion dollars of gasoline on the inflationary fire that is already burning is reckless.” Others argue that the move doesn’t address the underlying problem of soaring higher-education costs, with some worried that universities may raise tuition and students may borrow more if they believe debt could be canceled again.
• Capping repayment levels. How will income-driven plans change? The administration is proposing a rule that would slash the cost of loan repayment for borrowers in the income-driven repayment program. This proposal would:
• Cap monthly payments at 5% of discretionary income instead of the current 10%. Reduce the amount of income considered “discretionary,” lowering the monthly payment amounts.
• Forgive loans after 10 years of repayments for borrowers who owe $12,000 or less.
• Prevent loan balances from growing by having the federal government cover the difference between the borrower’s monthly payment and the amount of interest owed.
• Under the proposed regulation, enrolled borrowers making less than 225% of the federal poverty line wouldn’t have to make monthly payments on their loans.
• Extending the repayment pause. The pandemic-era halt to student loan repayments was again extended — but the administration is warning that this is the last time. At the start of the new year, repayments will resume.
• The Education Department is also proposing long-term changes to the Public Service Loan Forgiveness program, which provides loan forgiveness to borrowers who take public service jobs. In addition, the department will publish an annual list of degree programs with the worst debt levels in the country and ask colleges turning out graduates with high debt loads to develop plans to bring down debt levels.
• Court challenges likely. The policy is expected to face challenges in court. The administration is basing its legal authority for cancellation in part on the Covid-19 national emergency, citing financial harms suffered by borrowers. It also rescinded a Trump administration memo that concluded that legal authority doesn’t exist for mass cancellation. Biden’s plan will test the legal limits of the federal government’s authority to cancel student debt. Its success could depend on how courts would interpret the education secretary’s powers under the 1965 Higher Education Act, which allows the secretary to “consent to modification” of loans, and “compromise, waive, or release” unspecified amounts of student debt. President Biden has previously raised questions about whether he has the power to take executive action to cancel student debt on a large scale. “I don’t think I have the authority to do it by signing with a pen,” Biden said during a CNN town hall last year.

— Vilsack details farmer debt relief, but definitions still being determined. The Inflation Reduction Act (IRA) included provisions for debt relief for “distressed” borrowers totaling some $3.1 billion and another $2.2 billion for farmers who experienced discrimination. USDA Secretary Tom Vilsack provided information on the programs but said the department will still have to define “distressed” borrowers and will also have to define what constitutes discrimination in USDA loan programs. “It’s a new program, which requires a lot of thought. We want to make sure we do it right,” said Vilsack, who noted that lawmakers did not define who they meant by “distressed borrowers of direct or guaranteed loans” administered by the Farm Service Agency (FSA).

     FSA has direct loans to around 100,000 borrowers and around 22% of those are delinquent or are have problems making payments. USDA could phase in the debt relief to try and provide help to those most in need, Vilsack said.

     In an interview with CNN, Vilsack said USDA will not directly handle the discrimination portion, saying it would be run by outside entities that have handled claims in the past regarding discrimination. Vilsack said that would address concerns from applicants that their claims will not be handled fairly.

     Timing of the debt relief provisions would likely be tied to the expiration of the Covid health emergency declaration in October as that also removes the moratorium on foreclosures on borrowers that are behind in their USDA loans. “We know we have to act quickly,” said Vilsack during a teleconference. “It could be a phased-in program” that begins with borrowers in the most precarious positions and then be broadened to encompass other at-risk operators.

     Also on Wednesday, USDA said it would spend up to $550 million on projects to enable underserved farmers to access land, credit, and markets and to train a diverse next generation of agricultural professionals. Vilsack said the funding would advance “equity for all, including people who have been underserved, marginalized, and adversely affected by persistent poverty and inequality.” Some $300 million would be devoted to projects to increase access to land, capital, and markets, and $250 million would go to colleges serving minority students.

— Summary: Ukrainian officials said at least 25 people were killed in an attack on a train station as Russia conducted missile strikes across Ukraine on Wednesday. The attack was one of several Russian strikes carried out in the region on Ukrainian Independence Day. Separately, Russia's defense minister today said Russian authorities will provide the necessary assistance for an inspection of the Zaporizhzhia nuclear plant.

• Some $15 billion of direct investment foreigners pulled out of Russia in the first quarter of 2022, easily the worst figure on record.

• Here’s a quick snapshot of the war’s toll on key asset prices over its first six months:
  
  

— Biden names second woman to head the Secret Service. Kim Cheatle becomes the second woman to head the Secret Service. Cheatle rose through the ranks during 27 years with the agency and served on Biden’s security detail when he was vice president. Cheatle, currently an official with PepsiCo, will become the agency’s second female chief in its 157-year history. Cheatle rose to become the first woman to serve as the agency’s assistant director of protective operations, one of the most prominent jobs in the Secret Service.

— China’s central bank announced a one trillion ($146 billion) yuan stimulus plan amid the severe headwinds facing the world’s second-largest economy and the consequences of China’s zero-Covid policy and a property market slowdown. China’s State Council announced a 19-point package focused mainly on infrastructure. It comes on top of a series of other stimulus measures such as financing for banks and last week’s interest-rate cut from the central bank. Even with the new spending, Goldman Sachs is sticking to its prediction that China will expand just 3% in 2022, well short of the 5.5% target set by the state at the start of the year.

— Honda said its plant in the Chinese city of Chongqing will remain closed this week as the local government extended an order to curb power use and shut factory operations.

— Taiwan’s government proposed putting more than $19 billion towards its defense budget next year, which would represent almost a 15% increase on current spending.

— The World Trade Organization said merchandise trade flows slowed last quarter and will likely stay weak in the second half. That’s still consistent with the WTO’s forecast for 3% growth in global merchandise trade in 2022. The pressure on trade growth is coming from the Russian war in Ukraine but there was some support from the lifting of some Covid lockdowns in China.

— California to ban sales of all new gas-powered cars beginning in 2035. California regulators are expected to ban the sale of all new gasoline-powered vehicles beginning in 2035, a major step for the largest auto market in the United States and one that the Democratic government hopes can accelerate the transition toward electric vehicle adoption. The rule is expected to take effect Thursday following a vote by the California Air Resources Board, according to the New York Times (link). It also sets interim targets to help phase out the sale of internal combustion engine models: By 2026, it states, 35% of new cars sold must be zero-emissions vehicles — an amount that climbs to 68% in 2030. Currently, just 12% of new cars sold in the state are electric vehicles.

     At least 12 other states are already in line to adopt California’s zero-emissions vehicle. “Affordability is the biggest issue,” Autotrader analyst Michelle Krebs told Axios. “I don’t know if there will be enough vehicles at an affordable price by 2035."

     Details: The proposed rules would establish a credit system for automakers supplying California car dealerships and take effect in 2026. In that year, 35% of all new cars an auto manufacturer sells to California dealerships would need to be either zero-emission, plug-in hybrid or hydrogen-powered vehicles. That would increase to 68% in 2030 and 100% by 2035. If carmakers failed to meet the mandated percentages, they would be required to obtain credits from another manufacturer that had exceeded that quota. The state could also penalize automakers that fail to meet the targets, fining them roughly $20,000 for every vehicle short of their target in a given year. Some new gas-powered vehicles will still be allowed to be sold, but they must be plug-in hybrids. According to air quality officials, the new regulations would reduce greenhouse gas emissions from cars by more than 50% in 2040, compared with if no action were taken. Tailpipe emissions are the leading contributor of carbon dioxide in California and accounted for about 40% of the state’s greenhouse gas emissions in 2019. State officials say the plan would cut smog-forming nitrogen oxides by more than 25% in 2037. They estimate the rule will result in over 1,400 fewer deaths from heart disease, and help Californians avoid more than 700 emergency room visits for asthma between 2026 and 2040.

     California holds the distinction as the only state that can regulate cars, because of a provision in the Clean Air Act that allows it to seek a waiver from federal rules. Other states can follow California’s more stringent standards.

     Comment of note: “I think what we’re asking Californians to do — and the other states that follow California — is to change personal transportation in a way that hasn’t been changed since we went from horses to internal combustion engines,” said Brian Maas, president of the California New Car Dealers Assn., which represents more than 1,200 franchised new car and truck dealer members.

     Perspective: The U.S. government, Ford Motor and General Motors set a goal to have half of new cars sold by 2030 be EVs. At about 8% of new U.S. car sales now, EVs sales must gain about 5 percentage points a year for the next eight years to achieve that. "Despite this positive trend, California's EV sale mandates are still very aggressive — even in California with decades of supportive EV policies — and will be extremely challenging," said John Bozzella, CEO of the Alliance for Automotive Innovation. "That's just a fact." The state's objectives depend on many factors, such as "inflation, charging and fuel infrastructure, supply chains, labor, critical mineral availability and pricing, and the ongoing semiconductor shortage."

— Manchin wants Democrats to deliver on promised permitting language. Top Democrats and the White House promised Sen. Joe Manchin (D-W.Va.) to pass a separate bill this fall to speed up the permitting process for new energy projects, an important issue in Manchin's home state. Manchin is hoping to attach the permitting package to a stopgap funding bill that must pass by Sept. 30 to prevent a government shutdown. “It either keeps the country open, or we shut down the government. That’ll happen Sept. 30, so let’s see how that politics plays out,” Manchin told West Virginia MetroNews this week. The bill would need the votes of at least 10 Republican senators — or more if any Democrats or independents refuse to support it — to overcome a filibuster.

     The leaked draft of the bill would shorten environmental reviews under NEPA and require President Biden to designate 25 energy projects of “strategic national importance,” among other provisions. NEPA is the National Environmental Policy Act, which requires federal agencies to assess the environmental effects of their proposed actions. The bill would expedite not only fossil fuel projects such as natural gas pipelines but also the transmission lines needed to carry clean electricity.

— Argentina to continue 12.5% biodiesel blend to avoid fuel imports. Argentina will maintain its biodiesel blend rate of 12.5% as it seeks to head off the need to use foreign exchange to import fuel. "We are convinced that we must bet on biofuels, which allow us to save foreign exchange (reserves),” Energy Minister Flavia Royon said on Twitter. The country increased the biodiesel blend from 5% to 12.5% in June.
 

— Whole Foods is under fire after a new class action lawsuit claims that the 300-store chain that champions natural food is peddling meat containing antibiotics while telling shoppers it does not. Nonprofit Farm Forward and startup FoodID claim they tested food samples that showed more than 40% of involved feedyards had at least one case of an animal testing positive for the drugs. Link to more via Forbes.

— Summary:

• Global Covid-19 cases at 598,649,723 with 6,462,052 deaths.
• U.S. case count is at 93,903,947 with 1,042,398 deaths.
• Johns Hopkins University Coronavirus Resource Center says there have been 607,588,353 doses administered, 223,684,995 have been fully vaccinated, or 67.89% of the U.S. population.

— The U.S. appears to be closer to an early September rollout of its updated Covid-19 boosters from Pfizer-BioNTech and Moderna targeting the Omicron subvariants BA. 4 and BA. 5, which now make up nearly all U.S. cases. The Centers for Disease Control and Prevention has scheduled a two-day meeting of its outside vaccines advisors for Sept. 1 and 2, one of the final steps in the approval process. A CDC spokesperson said the committee will discuss Covid-19 boosters.

— Sabato’s Crystal Ball made three race ratings changes: Rep.-elect Pat Ryan’s new New York district in November moved from toss-up to leaning Democratic, Marc Molinaro’s new New York district in November moved from leaning Republican to toss-up, and the Ohio Senate race between J.D. Vance and Democratic Rep. Tim Ryan moved from likely Republican to leaning Republican.

— The Cook Political Report’s Amy Walter, Jessica Taylor and Dave Wasserman revised their predictions for the House: They now project Republicans to gain 10 to 20 seats. In May, their House outlook was a GOP gain of 20-35 seats. House editor Dave Wasserman said on Twitter that it is “not out of the question” for Democrats to maintain control of the chamber.

— A Pew poll shows that despite anemic ratings for Biden, Republicans have no advantage in overall support for Congress: 44% of registered voters said they’d support the Democratic candidate and 42% were in favor of the Republican candidate.

— Twitter’s whistle-blower will head to Capitol Hill. Peiter Zatko, Twitter’s former security chief, will testify before the Senate Judiciary Committee about his claims that the company failed to protect users’ data. Twitter’s CEO, Parag Agrawal, pushed back against the accusations yesterday in a meeting with employees.

— The Internal Revenue Service will waive penalties for Americans who filed their 2019 or 2020 tax returns late as the agency struggles under the weight of a Covid-induced backlog. Additionally, nearly 1.6 million people who already forked over failure to file penalties will receive refunds, totaling more than $1.2 billion.