USDA Ag Outlook Forum to Provide First Glimpse of 2024 Supply & Demand

Aid for Ukraine, Israel | Vilsack to testify | 2022 Ag Census | CPI report | House special election

Washington Focus

Focus this week: A House Ag panel hearing Wednesday with USDA Secretary Tom Vilsack testifying, a Tuesday release of 2022 Census of Ag results, and USDA’s Ag Outlook Forum on Thursday and Friday, with the department on Wednesday releasing its agricultural projections to 2033.

— When Vilsack appears Wednesday before the House Ag Committee, panel members have a host of questions they should ask him, including:

Plunging farm income forecasts by USDA. Vilsack last week tried to put the most positive spin on the numbers (down $40 billion in 2024 from 2023 on top of a $26 billion dive in 2023 from 2022). Vilsack stressed the very good farm income years prior to the dramatic downturn.
Vilsack’s suggestion of tapping the CCC, the Commodity Credit Corporation Charter Act, for farm income support, perhaps as part of the new farm bill funding issues.
USDA’s disastrous implementation of the latest ERP payments, where USDA focused on “equity” versus production agriculture.
Various U.S. ag trade issues, including: (1) The ongoing GMO corn dispute with Mexico, (2) the dairy issue with Canada, (3) the continued ag trade deficit after years of ag trade surpluses and the inability of the Biden administration to ink new trade agreements with the outlook for some commodities of increasing carryover levels (especially corn).
An update on Vilsack’s push to expand meat processing facilities, at a time when cattle numbers are the lowest in 73 years.
The March decision by the Treasury Dept. as to whether corn for ethanol will qualify as a feedstock for the Sustainable Aviation Fuel (SAF) tax incentives.

— GOP Senators defy Trump, advance $95 billion foreign aid bill. Despite Donald Trump's opposition, a significant number of Republican senators defied him by supporting a bill to provide $95 billion in foreign aid to Ukraine, Israel, and Taiwan. The vote, with a decisive 67-27 outcome, indicates bipartisan support for the measure. Some 18 Republicans joined nearly all Democrats in voting for the aid.

Absent a time agreement, the next vote will take place Monday evening. There reportedly is still no agreement on amendment votes

Trump had spent the weekend lobbying senators against passing the aid without conditions. However, more than a dozen Republicans chose to move forward with the bill, disregarding his stance. The legislation aims to provide aid to key allies but does not include provisions related to border security, a sticking point for some GOP members.

The package includes $60 billion for Ukraine, $14 billion in security assistance for Israel, $9 billion in humanitarian assistance for Gaza, the West Bank and Ukraine, and $4.8 billion to support allies in the Indo-Pacific. It was stripped of border provisions last week after conservatives objected to a bipartisan border deal.

Outlook: Its ultimate passage is not guaranteed. Negotiations are ongoing, particularly concerning border-related amendments demanded by Republicans. The outcome of these negotiations will determine the fate of the foreign aid bill.

— Democrats are facing a crisis following a damning special counsel report on President Biden's handling of classified documents and his cognitive state. Some Democrats, including prominent strategists like James Carville and Paul Begala, are openly expressing concern and describing the situation as dire. Polls indicate Trump would be favored if the election were held today, with concerns about Biden's age and mental acuity looming large among voters. Despite efforts by Biden's allies to downplay the report and defend his capabilities, the issue persists, with experts warning that Biden's recent press conference only exacerbated the situation. As panic rises among Democrats, there's a scramble to find effective strategies to address the challenges ahead of the upcoming election.

Former President Trump addressed the damning special counsel report on President Biden's handling of classified documents during a campaign rally in Conway, South Carolina. Trump criticized Biden's exoneration despite evidence, citing doubts about Biden's mental acuity. He called for accountability and suggested Biden's mental state makes him unfit for office. Congressional Republicans are considering invoking the 25th Amendment.

— Ineffective House last year. Here’s one the reasons why: House GOP had lowest win rate on ‘party unity’ votes since 1982. Republicans last year were the least unified party bloc on legislation in more than four decades, CQ Roll Call’s annual Vote Studies analysis of congressional data has found. The data show Republicans had only a 63.7% success rate on “party unity votes” or roll calls on bills, amendments and resolutions in which majorities of the two parties were on opposite sides of roll call votes. The metric ignores votes where both parties were overwhelmingly for or against a bill to identify cases where a member’s vote had the most potential to tip the scales one way or another.

The last time a majority party lost more unity votes was when Democrats presided in 1982, the second year of President Ronald Reagan’s first term, and prevailed just 63.5% of the time.

— New York’s 3rd District House race is up on Feb. 13. Tom Suozzi is the Democratic nominee and Mazi Pilip is the GOP candidate for the special election, where 15 months ago voters sent George Santos to Congress but was forced to leave the spot on a host of infractions (Santos was expelled Dec. 1). House Republicans hold just a five-seat majority, but between resignations and health-related absences, the GOP’s working majority is often just one or two votes.

The race has attracted millions of dollars in TV ad spending from both parties, $9.8 million through Feb. 1 per AdImpact, with several million more likely.

Outlook: Amy Walter of the Cook Political Report, says, “On paper, the Long Island-based 3rd District has a significant Democratic lean. The district has a Cook PVI of D+2, and President Joe Biden carried it by eight points in 2020. In other words, it’s the kind of place where abortion rights and anti-MAGA messaging should have serious traction.” But she cautions that the district also sits in a media market “awash with stories about how the crush of migrants is overwhelming New York City.” Pilip, an Ethiopian-born former member of the Israeli Defense Forces, mother of seven, and a registered Democrat, ”is not easy to caricature as a MAGA acolyte. This is why Democrats are focusing their attacks on her hesitancy to talk to the press, her reluctance to debate, and her lack of specifics on policy, as a way to suggest that Pilip is untrustworthy,” Walter adds. David Wasserman of the Cook Political Report said earlier this year that, “An additional GOP House vote added in mid-February probably isn't going to help new Speaker Mike Johnson (R-La.) avert any crises. But if Democrats can't flip a Biden +8 seat left vacant after Santos' expulsion, how can they make the case they're poised to take back the House in 2024?”

Bottom line: The Cook Political Report puts the race as “Toss Up.”

— With former Gov. Larry Hogan's (R) entrance in the Maryland Senate race, the Cook Political Report and Crystal Ball are shifting the race from Solid D to Likely D. “But it remains an uphill climb for the GOP in a state that last elected a Republican senator in 1980,” the political service says. His decision ends the prospect that he might run for president on the No Labels third-party presidential ticket and also significantly alters the odds in Maryland’s open Senate race.

Of note: Democrats must defend 23 seats in November — three in red states and five more in swing states — compared to just 11 for Republicans. Solidly blue Maryland was supposed to be a sure thing. It isn’t any longer. It also means the Democratic Party will have to spend more money on this race than they previously expected.

— Rep. Mike Gallagher (R-Wisc.), 39, announced Saturday that he will not seek re-election this fall after four terms in office. Gallagher, chair of the Select Committee on the Chinese Communist Party, released a statement via social media where he said when he ran for office eight years ago, he “promised to treat my time in office as a high-intensity deployment.” Gallagher was one of three Republican members in the House who went against their party last week, voting against the impeachment of Homeland Security Secretary Alejandro Mayorkas and tanking the bill. He refused to reveal his stance against the impeachment all day but ultimately cast his vote against the effort on Tuesday.

He had previously ruled out a run for the U.S. Senate, saying he preferred to stay in the House, where he felt his work as a committee chair would make a lasting impact. Gallagher has consistently outperformed former GOP President Donald Trump.

Gallagher joins a growing list of GOP and Democratic members in the House who are not seeking re-election. His decision to leave puts the number of House lawmakers who won’t be part of the next Congress at 49, based on a tally maintained by the House press gallery (link). That is well above the historical average of about 35 per Congress during the post-World War II period through 2018, based on statistics maintained by the Brookings Institution.

Outlook: According to the Cook Political Report with Amy Walter, his district is a solidly Republican district.

— The entry of Rep. Matt Rosendale (R-Mont.) into Montana’s Senate race is stirring up turmoil within the Republican Party, setting the stage for a contentious primary that could impact the party's chances in the general election. Rosendale, a member of the conservative House Freedom Caucus, has thrown his hat into the ring alongside businessman Tim Sheehy, who is viewed by many party leaders as the stronger candidate to challenge Democratic incumbent Sen. Jon Tester (D-Mont.).

Rosendale's decision to enter the race has divided Republicans, prompting swift support for Sheehy from figures like former President Donald Trump and South Dakota Gov. Kristi Noem. However, Rosendale remains steadfast, positioning himself as the true fighter aligned with Trump's agenda. The endorsement from Trump and the subsequent backlash against House Speaker Mike Johnson (R-La.), who initially planned to endorse Rosendale, highlights the internal strife within the GOP.

The primary battle between Rosendale and Sheehy is expected to be bitter, reflecting broader ideological divisions within the party. Rosendale's entry complicates Republican efforts to secure victory in a crucial Senate race that could determine control of the chamber. Despite being seen as an underdog, Rosendale's strong support within the Montana Republican base presents a significant challenge to Sheehy's establishment-backed candidacy. Rosendale supporters say that with Trump the likely GOP presidential candidate on the ticket (he won the state by around 16 points), this would help Rosendale beat Tester this time when he could not do that in 2018.

The Montana Democratic Party sees the GOP primary as an opportunity to weaken their opponents, recognizing the potential for division within Republican ranks. While some analysts believe Rosendale's candidacy may energize Republican donors and volunteers, others view it as a setback that could drain resources better spent in the general election.

— Donald Trump recently made alarming remarks suggesting that if NATO allies fail to meet defense spending targets, he would allow Russia to act freely against them. During a campaign rally, Trump recounted a conversation with a NATO member regarding defending against a Russian attack, to which he purportedly responded that he wouldn't protect them and would encourage Russia to act as it wishes unless they pay their dues. These statements raise concerns about the future of NATO under Trump's potential re-election, especially amid heightened tensions with Russia following its conflict with Ukraine.

NATO Secretary-General Jens Stoltenberg countered Trump's assertions, affirming the alliance's commitment to mutual defense. Trump's criticism of NATO and warm relations with Russian President Vladimir Putin have long been noted. His rhetoric suggests a willingness to jeopardize the core principle of collective defense, which has historically underpinned NATO.

Stoltenberg has urged NATO members to meet defense spending targets, emphasizing the importance of unity within the alliance. Criticism of Trump's remarks has come from various quarters, including Poland's defense minister and the president of the European Council, who labeled them as serving Putin's interests and undermining global security.

Trump's comments reflect his ongoing campaign strategy, characterized by divisive rhetoric and attacks on opponents, both within and outside his party. His targeting of Nikki Haley's husband, a military serviceman deployed overseas, has drawn further criticism. Haley herself condemned Trump's remarks, accusing him of favoring Russia over U.S. allies. She emphasized the importance of NATO while advocating for more diplomatic ways to encourage allies to meet their commitments.

The White House responded to the backlash, calling Trump's comments "appalling and unhinged" and emphasizing the importance of American national security and global stability. Trump's re-election bid faces challenges, including concerns about his age and mental fitness raised in a recent report on his handling of classified documents.

Monday, Feb. 12:

President Joe Biden hosts Jordan’s King Abdullah at the White House.

Tuesday, Feb. 13:

USDA releases the 2022 Census of Agriculture.
National Economists Club luncheon discussion with Mark Zandi, chief economist at Moody's Analytics, on the economic outlook for the year.

Wednesday, Feb. 14:

House Ag Committee hearing with USDA Secretary Tom Vilsack.
House Small Business Committee hearing, “Burdensome Regulations: Examining the Impact of EPA Regulations on Main Street.”
USDA releases Agricultural Projections to 2033.
Economic outlook. House Budget Committee hearing on "The Congressional Budget Office's Budget and Economic Outlook." CBO Director Phillip Swagel testifies.
Economic policy conference. The National Association for Business Economics (NABE) holds its 40th annual Economic Policy Conference, with the theme "Navigating Geopolitical Turbulence and Domestic Uncertainty." Runs through Friday.

Thursday, Feb. 15:

USDA Ag Outlook Forum

Friday, Feb. 16:

USDA Ag Outlook Forum
Economic policy conference. Final day of the National Association for Business Economics (NABE) 40th annual Economic Policy Conference, with the theme "Navigating Geopolitical Turbulence and Domestic Uncertainty." Congressional Budget Office Director Phillip Swagel delivers remarks on "US Budget and Economic Outlook."

Economic Reports and Events for the Week

Investors face another test on Tuesday with the release of Consumer Price Index data, which could offer clues on the Fed’s next move on interest rates. Other economic releases of note include the retail sales report, the Philadelphia Fed Index update, the Industrial Production report, and the latest University of Michigan consumer sentiment survey.

Some 61 names in the S&P 500 are set to report earnings in the week ahead, including gig economy stocks Lyft, Instacart, and DoorDash. Companies such as AutoNation, Kraft Heinz, Hasbro and Coca-Cola will also shed light on the state of the U.S. consumer.

Monday, Feb. 12

U.S. Treasury Department is scheduled to report the federal budget data for January. Forecasters see a $21.0 billion deficit in January that would compare with a deficit of $129.4 billion in December this year and a deficit of $38.8 billion January a year-ago. January is the fourth month of the government's fiscal year.
Federal Reserve Bank of Minneapolis President Neel Kashkari participates in a conversation hosted by the Economic Club of Minnesota in Golden Valley, Minnesota.

Tuesday, Feb. 13

Consumer Price Index: Core prices in January are expected to hold steady for a third month in a row at a monthly increase of 0.3%. Overall prices are expected to rise 0.2% after increasing 0.3% in December which, like the month's core result, was also higher than expected. Annual rates, which in December were 3.4% overall and 3.9% for the core, are expected to slow to 3.0% and 3.7% respectively.
NFIB Small Business Optimism: February's consensus is 92.4 versus 91.9 in January which, benefiting from gains in expectations, was the best reading since July.

Wednesday, Feb. 14

MBA Mortgage Applications
Federal Reserve: Fed Vice Chair for Supervision Michael Barr to speak on Monetary Policy and Bank Regulation at the 40th Annual National Association for Business Economics.
Federal Reserve: Chicago Fed President Austan Goolsbee scheduled to speak.

Thursday, Feb. 15

Jobless claims for the Feb. 8 week are expected to come in at 219,000 versus 218,000 in the prior week.
Retail Sales: January sales are expected to fall 0.1% versus December's slightly better-than-expected 0.6% gain. December's ex-auto gain was 0.4% with January expected to rise 0.2%; January ex-auto ex-gas are expected to rise 0.3%.
Import & Export Prices: Import prices were unchanged in December with January's expectations at a 0.1% dip; export prices, which in December fell 0.9%, are expected to fall 0.2%.
NY Empire State Manufacturing Index: After January's deep and completely unexpected plunge to minus 43.7, the Empire State index in February is expected to rebound to minus 12.5. January's result was the lowest since May 2020 during the pandemic shutdown.
Philadelphia Fed manufacturing index in February is expected to improve marginally to minus 9.0 versus January's minus 10.6 which was only slightly weaker than expected but showed substantial contraction in both new and unfilled orders.
Industrial Production and Capacity Utilization: After a 0.1% rise in December, industrial production is expected to rise 0.2% in January. Manufacturing output is expected to fall 0.1% after, like the overall headline, edging 0.1% higher. Capacity utilization is expected to rise to 78.8% following 78.6% in December.
Business Inventories in December are expected to rise 0.4% following a 0.1% decline in November.
NAHB Housing Market Index: Forecasters expect the housing market index to rise further in February to 46 after rebounding a substantial 7 points in January to 44.
Fed Balance Sheet
Money Supply
Federal Reserve: Fed Governor Christopher Waller scheduled to speak on the dollar’s international role in the Bahamas. Atlanta Fed President Raphael Bostic scheduled to speak.

Friday, Feb. 16

Housing starts in January are expected to hold mostly steady at a 1.470 million annual rate versus December's 1.460 million that beat the consensus but nevertheless was down from the prior month's jump to 1.525 million. Permits, at 1.495 million in December and were also better than expected, are expected to rise to 1.510 million.
Producer Price Index: Producer prices in January are expected to rise 0.1% on the month versus a 0.1% decline in December. The annual rate in January is seen at 0.7% versus December's 1.0% rise which, like the monthly rate, was lower than expected. January's ex-food ex-energy rate is also seen up 0.% on the month and up 1.7% on the year.
Univ. of Michigan Consumer Sentiment, Preliminary: Consumer sentiment in the first indication for February is expected to rise 1 point to 80.0. Sentiment in the months of January and December rose 9.3 and 8.4 points for the greatest 2-month surge since the end of the 1991 recession.
Federal Reserve: Fed Vice Chair for Supervision Michael Barr to speak in New York City. San Francisco Fed President Mary Daly scheduled to speak.

Key USDA & international Ag & Energy Reports and Events

USDA data on ending stocks and the acreage outlook for key commodities are scheduled for Thursday. Malaysia will publish its monthly report on palm oil stockpiles, exports and output Tuesday, while the International Grains Council’s monthly report is also due during the week.

In the energy sector, Occidental, Eni and ONGC will report earnings during the week. The International Energy Agency holds a ministerial meeting, and its 50th anniversary celebration, in Paris. OPEC will publish its Monthly Oil Market Report on Tuesday, with the IEA following suit on Thursday

Monday, Feb. 12

Ag reports and events:

Export Inspections
Cotton and Wool Outlook Tables
Oil Crops Outlook
Feed Outlook
Rice Outlook
Wheat Outlook
North American Potatoes
Vegetables, Annual
Holiday: China, Japan, South Korea, Malaysia, Singapore, Taiwan, Vietnam, Hong Kong, Argentina, Brazil