Trump trade officials out in force today as some push for more meetings with China
— Senate schedules vote on Monday to begin debate of its farm bill version. Amid wide expectations that the Senate will have the votes to approve its version of the farm bill, debate looks like it will begin Monday. Around 6 p.m. ET Monday, the Senate will hold a procedural vote on the motion to proceed to the legislation, which would pave the way for debate.
Senate Majority Leader Mitch McConnell (R., Ky.) said this year that Republicans “are obviously stronger in rural and small town American than we are in the big cities and the coast, so for us not to produce a farm bill would be a negative.”
We finally have a Congressional Budget Office (CBO) score for the Senate farm bill (link). The score shows some interesting differences with the just-passed House version that squeaked by via a 213-211 vote, with no Democrats voting for the measure. (Link for details.) Twenty House Republicans joined 191 Democrats in opposition and all 213 votes in favor came from Republicans. Eight Freedom Caucus members flipped their votes from last month and voted in favor.
While the Senate farm bill holds food stamps (SNAP) with nary a cut, the measure cuts Title I and II by a combined $397 million. House Ag Ranking Member Collin Peterson (D-Minn.) has stated he will side with the Senate once the topic gets to a House-Senate conference, citing major disagreements with the expanded worker requirements for food stamps in the House bill. But Peterson also complained about Title I spending in the House measure, noting it didn't do enough for farmers. The House bill he and every other Democrat voted against had a combined increase of $32 million to Title I and Title II. While that is not much, it is not a $397 million decrease. Sen. Chuck Grassley (R-Iowa) could bring the Senate funding down further if he succeeds with at least one of his likely amendments. But, Sens. John Thune (R-S.D.) and Sherrod Brown (D-Ohio) keep pushing Senate Ag Chairman Pat Roberts (R-Kan.) and Stabenow to support their Ag Risk Coverage (ARC) amendment that would increase funding for that safety net program at the expense of another, the Price Loss Coverage (PLC) program. Roberts so far has not supported the proposal, wanting to keep regional divides out of the Senate measure.
More details on Senate farm bill Title I: The dairy industry would see an additional $200 million in support over a decade, as would row crop farmers participating in ARC. But as noted, overall spending on the commodity title is lower, primarily due to the elimination of “economic adjustment assistance” for the cotton industry and a proposal to reduce the means test that determines eligibility for crop subsidies from $900,000 to $700,000 in adjusted gross income.
More details on Senate farm bill's food stamp language. States would be required to use a national database to prevent SNAP participants from receiving benefits from more than one state at a time — reducing spending by an estimated $588 million over a decade. But increasing a grant program that funds incentives to food stamp recipients who purchase fruits and vegetables would see a $400 million bump.
But other differences between the House and Senate farm bills are instructive to note. The Senate version clearly impacts the Rural Electric Co-ops, cutting into them $2.35 billion. That likely helped Senate Ag Ranking Member Debbie Stabenow (D-Mich.) get increased funding, and a permanent authorization and a new budget baseline for Organic Ag Research & Extension. There is also a baseline for “local agriculture market program” and one for “farming opportunities and outreach training.” Those three programs alone cost $1.5 billion. Link to CBO score of proposed Senate farm bill.
House Ag Chairman Mike Conaway (R-Kan.) commented on how he thinks Peterson will approach negotiations, saying: “My guess is Collin will weigh in on behalf of the production of agriculture in the way he has always done.” Conaway added that he thinks Democrats also have some provisions in the bill they’ll want to protect.
— President Trump, Speaker Ryan comment on expanded worker requirement for food stamps via House farm bill passage. President Trump in a tweet said, “So happy to see work requirements included. Big win for farmers.”
House Speaker Paul Ryan (R-Wis.) touted the provision as a way to “close the skills gap and get more people into the workforce and onto the ladder of opportunity.”
The Trump, Ryan comments signal this will be a major issue when the farm bill gets to conference, and is why some veteran farm bill watchers think a final vote on a farm bill may not take place until after November elections.
House Ag Chairman Mike Conaway (R-Texas) said stricter work requirements will make it into any conference report. “We will have stronger work requirements in the conference report than I guess what might be in the Senate bill,” he said, arguing that it’s speculation to suggest the Senate won’t go there.
— Trade policy updates:
The European Union today imposed tariffs on U.S. products, via penalties on $3.2 billion of American products that target President Trump’s political base. EU Trade Commissioner Cecilia Malmstrom said the bloc was "left with no other choice" after the "unilateral and unjustified decision of the U.S." The new list of European tariffs focuses on products that tend to be manufactured in Republican strongholds: whiskey and playing cards from Kentucky, recreational boats from Florida and rice from Arkansas. For more details, link to Associated Press item. Link to New York Times article.
Canada to announce tariffs on U.S. on June 30, implement them July 1. Canada said its retaliatory tariffs against U.S. products —25% on steel and 10% on an assortment of food and other items — would take effect the day after it announces its final list on June 30. It chose targets “with a view to mitigating potential impacts on Canadian businesses, families and consumers” where alternative products are available, said Jack Aubry, a spokesman for Canada’s finance department.
Commerce Secretary Wilbur Ross disputed concerns raised by Federal Reserve Chairman Jerome Powell and others that U.S. companies are becoming so anxious about the prospect of a trade war that they’re postponing investment and hiring decisions. “Anyone who thinks the economy is being wrecked doesn’t know what they’re talking about,” Ross said in a Bloomberg Television interview yesterday. News reports on the Trump administration have been negative and played up the troubles smaller companies are encountering with tariffs, he said.
Some White House officials are trying to restart talks with China to avoid a trade war before U.S. tariffs on Chinese products take effect July 6, reports note. Bloomberg reported that staff of the National Economic Council have contacted former U.S. government officials and China experts in recent days to gauge chances for high-level talks in the next two weeks. One idea NEC staff floated is inviting Chinese Vice President Wang Qishan before the tariff deadline, the report noted.
We could hear some updated trade policy comments from Trump administration officials today. Energy Sec. Rick Perry, Sec. of State Mike Pompeo, and Commerce Sec. Wilbur Ross are among speakers at the SelectUSA Investment Summit.
The Commerce Department aims to wrap up its investigation into whether imports of automobiles and auto parts pose a risk to national security by late July or August, Secretary Wilbur Ross said Thursday. Ross launched the investigation on May 23 at President Donald Trump’s request under the same legal authority that was used to slap tariffs on steel and aluminum imports. Commerce would then have a narrow timeframe to draw up its report and recommendations before November — given the investigation was launched 167 days before the elections. Under Section 232, any inquiry can take up to 270 days, with another 90 days for the president to decide what, if any, action to take. Meanwhile, Commerce is extending the comment period to June 29, a week after the initial deadline. Rebuttals to any comments are due July 13. A hearing on the investigation will take place July 19-20.
— Will RFS/RVOs announcement be made today, or delayed? News services again differ on this topic. EPA Administrator Scott Pruitt and USDA Secretary Sonny Perdue were expected to make the announcement from a farm in Missouri. So it still could be on. But a Reuters writer tweeted, “Looks like the planned RVO announcement in Missouri is cancelled, along with the public event by Pruitt/Perdue..final decision on reallocation to be made by WH.”
We should know the fate soon because pre-announcements via leaks regarding the RFS are the rule. The previously planned but perhaps delayed joint appearance and statement from Pruitt/Perdue signal how they wanted to show unison on this contentious issue. As for oil industry pressure on the possible announcement, such pressure should have been easily assumed, especially with Pruitt's close ties to the industry.
Some possible details, according to the leaks: Refiners would have to blend 19.88 billion gallons of biofuels in 2019, a 3.1% increase over the 2018 requirement of 19.29 billion gallons. That would include a mandate for 4.88 billion gallons of advanced biofuels (which includes biodiesel; advanced was set at 4.29 billion gallons in 2018). The proposal implies a 15 billion-gallon target for conventional renewable fuels, such as corn-based ethanol — the same as required this year. Cellulosic renewable fuel targets would be 381 million gallons. The target for biomass-based diesel in 2020 could be proposed at 2.43 billion gallons. Others signal the biodiesel level for 2020 would remain at the 2018 and 2019 marks of 2.1 billion gallons.
Meanwhile, some 1.29 billion renewable identification numbers (RINs) were generated in May, up from 1.24 billion in April, while 342 million biodiesel RINs were generated in May versus 314 million in April.
— House GOP leaders delay vote on compromise immigration bill to next week. The decision was made Thursday after House Republicans met behind closed doors to address members’ concerns. Some conservatives complained that the compromise omitted a requirement that employers use the E-Verify system to check workers’ immigration status, while others lawmakers wanted reassurances on how the legislation addressed young immigrants brought to the country illegally as children, often called Dreamers. A provision in the compromise bill would also end the practice of separating adults and children crossing the border by detaining them together, allocating money for family detention facilities. The compromise bill would appropriate $23.4 billion for border security, including a wall and physical barriers along the southern border, and provide six years of renewable legal status to Dreamers. It would also end the diversity-visa lottery program and cut the family-based visa program.
GOP leaders noted the compromise bill meets President Donald Trump’s demands for an immigration overhaul, and he has said he supports the bill.
A more conservative immigration bill was defeated Thursday, with 231 opposed and 193 in favor.
No Democrats are expected to support the compromise bill. Minority Leader Nancy Pelosi (D-Calif.) rejected labeling the more moderate bill a “compromise,” saying its provisions on Dreamers and on the “zero tolerance” policy of charging adult illegal immigrants were too harsh for her party to accept.
President Donald Trump said today that congressional Republicans should “stop wasting their time” on immigration until more Republicans are elected to Congress.
Meanwhile, Senate Republicans say they still need legislation to address the separation of families at the border, despite the executive order the president signed on Wednesday to halt the practice. A bipartisan “Gang of Four” will meet next week to begin negotiations. The group includes Sens. Ted Cruz (R-Texas), Thom Tillis (R-N.C.), Dianne Feinstein (D-Calif.) and Dick Durbin (D-Ill.).
— Other items of note:
Top Trump adviser John Bolton to visit Russia: Kremlin. U.S. national security adviser John Bolton is coming to Russia, said the Kremlin, amid growing speculation about a coming summit between Presidents Donald Trump and Vladimir Putin. “This trip will indeed happen,” Putin’s spokesman Dmitry Peskov was quoted as saying by Russia’s state media Thursday. Peskov declined to provide further details or potential dates. The White House confirmed Bolton's trip. Russian media have reported that a Trump-Putin meeting may take place in Vienna in July.
President Trump is pushing agency reorganization. But there is single-digit chances at best that Congress would approve the initiative. So, if you are having a busy day, skip reading when this topic comes up. Link for details if you have nothing else better to do.
Biofuels hearing today. The House Energy and Commerce Subcommittee on the Environment is holding a hearing to examine advanced biofuels under the Renewable Fuel Standard (RFS). “While conventional, corn ethanol commands much of the debate around the RFS, we cannot forget other parts of the program as we explore potential reforms to make the RFS better reflect our evolving transportation fuel needs,” Chairman John Shimkus (R-Ill.) said in a statement.
Immigration issue in eight charts. Fewer overall border crossings, but growing caseload leads to massive backlog in courts. Link to Wall Street Journal article.
Life after Monsanto. In an exit interview with the Wall Street Journal, former CEO Hugh Grant discusses his future, the promise of innovation in agriculture and the combination of disparate corporate cultures. Link.
Cotton AWP falls. The Adjusted World Price for cotton dropped to 78.23 cents per pound, effective today, down sharply from the prior level of 82.99 cents per pound. The drop reflected the recent plummet in cotton prices. USDA also announced it was establishing Special Upland Cotton Import Quota #9 June 28 for 62,264 bales of upland cotton to be purchased not later than September 25 and entered into the U.S. not later than Dec. 24. The quota is equivalent to one week's consumption of cotton by domestic mills at the seasonally adjusted average rate for the period from February through April of 2018.
ObamaCare premiums poised to rise 15% in 2019. Early ObamaCare premium filings for 2019 appear to be about 15% higher than 2018 rates. While this would be the third year in a row of double-digit increases in the Affordable Care Act/ObamaCare exchanges, there could be increased competition and plan choices in many exchanges in 2019, according to an early report (link), released yesterday by health-care consultant Avalere Health, on 2019 rates.
— Markets. The Dow on Thursday fell 196.10 points, 0.80%, at 24,461.70. The Nasdaq lost 68.56 points, 0.88%, at 7.812.95. The S&P 500 was down 17.56 points, 0.63%, at 2,749.76.
Big banks cleared the first hurdle of this year’s U.S. stress tests as the Federal Reserve found all 35 lenders examined could withstand a severe economic downturn. The results announced Thursday mark the third straight year every bank exceeded the Fed’s minimum capital demands. The Fed increased the difficulty of the test this year as the broader economic environment improves. Variables included the U.S. unemployment rate rising by almost 6 percentage points to 10%, accompanied by a steepening Treasury yield curve.
States have the authority to make online retailers collect sales tax, according to a U.S. Supreme Court ruling. "Big victory for fairness and for our country," President Trump wrote on Twitter. "Great victory for consumers and retailers." The 5-4 decision opens the door to a new revenue stream to fill state coffers. Online retailers previously had around an 8% price advantage prior to the Supreme Court ruling. Studies cited by the court suggest that without that authority states might have been losing up to $33.9 billion a year in uncollected sales taxes. The ruling is a big win for brick-and-mortar stores, which have had to compete with low-priced online rivals for more than two decades. Link to New York Times article.
UPDATED... The OPEC cartel and other oil producers, led by Russia, are meeting in Vienna today and Saturday to discuss a potential production increase. Late word is that Saudi Arabia struck a deal to raise OPEC production. Ministersended a contentious gathering with a loose promise to boost output by about 600,000 barrels a day. That was far less than the one million barrels many predicted and oil prices rose by the biggest amount in nearly two years.