The Week Ahead: June 19-25, 2017

Posted on 06/18/2017 6:29 PM

Budget | House elections | Trade policy | Trump visits Iowa | Perdue hosts Canada, Mexico in Savannah

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A defense spending markup, a Georgia House election, more details regarding President Donald Trump’s trade policy agenda and a Trump visit to Iowa are the key items on this week’s agenda.

Some agriculture/food policy cuts could be part of a GOP leadership budget proposal that could surfaced this week. If Republicans in the House concur, it could for the first time in years be able to pass spending bills without the help of Democrats. However, even if the House GOP plan gets approval, Senate Democrats would have leverage on the spending bills because Republicans lack the 60 votes required in that chamber to pass spending bills.

The budget plan presented by House Budget Committee Chairwoman Diane Black (R-Tenn.) would increase fiscal 2018 defense spending above the $603 billion level in President Donald Trump’s budget, while keeping non-defense spending close to the current level. In exchange, leaders would have to agree to specific budget reconciliation instructions that would compel authorizing committees to cut mandatory spending such as food stamps and welfare. GOP leadership wants "flexibility" for authorizing committees. Conservative lawmakers have proposed adding work requirements of 100 hours per month for able-bodied adults to food stamp and Medicaid programs while limiting waivers on existing work requirements under the Temporary Assistance for Needy Families programs. There would be generous treatment for those with children.

In legislative activity, the Senate will take up nominations while the House is expected to act on bills dealing with power lines, water storage and job subsidies. House Armed Services subcommittees plan markups of six sections of the fiscal 2018 defense authorization.

Several nomination hearings and potential votes are on tap. Senate leaders plan to begin moving some of President Trump's nominees to serve at the Treasury Department, the first since Secretary Steven Mnuchin was confirmed in February. The Senate Agriculture Committee plans a hearing Thursday on the nomination of Commodity Futures Trading Commissioner J. Christopher Giancarlo to be chairman of the commission. He is currently acting chairman.

On the trade policy front, U.S. Trade Representative (USTR) Robert Lighthizer will testify Wednesday before the Senate Finance Committee and Thursday before the House Ways and Means panel. While panel members will likely focus on upcoming NAFTA renegotiation issues, Lighthizer is expected to provide more details on the president’s trade agenda.

Chief agricultural negotiator at USTR. Last Friday, President Trump announced his intention to nominate Greg Doud, a former Senate Agriculture Committee staffer with farm bill experience, to serve as chief agricultural negotiator for the USTR Office. Doud is currently president of the Commodity Markets Council. The post was formerly held by Darci Vetter under the Obama administration. Doud previously worked for eight years as chief economist for the National Cattlemen’s Beef Association and worked for U.S. Wheat Associates and agricultural consultant World Perspectives.

China may make July announcement to buy record volume of U.S. soybeans. The U.S. Soybean Export Council says the Chinese Ministry of Commerce may make a commitment to buy a record volume of U.S. soybeans when its officials are in Iowa next month. Members of the ministry, a delegation due to sign an accord in Des Moines on July 13, have discussed the possibility with the council’s top representative in China, said spokeswoman Lisa Humphreys of the council. A record commitment would exceed the 13.4 million tonnes agreed to buy in February 2012, also at a ceremony in Des Moines. The delegation will also tour U.S. farms and port facilities in places including Seattle, while a U.S. agricultural-trade delegation will visit China in September, according to the council.

President Trump journeys to Cedar Rapids, Iowa, to focus on precision agriculture and the rural economy. USDA Secretary Sonny Perdue is expected to join the president, along with the U.S. Ambassador to China, former Iowa Gov. Terry Branstad. Also expected at the event is Iowa Agriculture Secretary Bill Northey, widely expected to be nominated as USDA’s Undersecretary for Farm and Conservation Programs.

USDA Secretary Perdue on Tuesday will host his counterparts from Canada and Mexico in Savannah, Georgia, as the three continues begin preparing for NAFTA 2.0 talks. They will tour the Georgia Ports Authority and later hold a news conference.

On the USDA subcabinet front, Perdue late Friday announced that Jason Hafemeister will transition from acting deputy undersecretary for farm and foreign agricultural services to acting deputy undersecretary for trade and foreign agricultural affairs. USDA Chief Economist Robert Johansson will now also be acting deputy undersecretary for farm production and conservation, and Forest Service official Dan Jiron will assume the role of acting deputy undersecretary for natural resources and environment. Perdue told lawmakers last week that due to delays in background checks and other vetting issues, he does not expect members of his subcabinet to be confirmed until after the August congressional recess.

Budget hearings make up the bulk of activity ahead, with hearings slated for the Food and Drug Administration, Federal Communications Commission, Interior Department, Energy Department, Office of Management and Budget, FBI and others.

The House Intelligence Committee will hold a hearing on Russian interference in the US elections so that has potential for issues to surface that could be viewed as impacting the administration/congressional agenda. The Senate Intelligence panel will look ahead to the 2018 and 2020 elections and the potential for Russian interference.

The House Agriculture Committee looks at agriculture research relative to the next farm bill with a joint hearing on rural broadband development scheduled. The House Ag panel on Saturday begins its farm bill listening sessions in Gainesville, Florida.

Georgia House election Tuesday. The most expensive House race in history concludes Tuesday. In the open 6th Congressional District, Republican Karen Handel, a former Georgia secretary of state, is running against Democrat Jon Ossoff, a documentary film producer and former House aide. While the district has been a GOP-leaning collection of Atlanta suburbs, Democratic presidential candidate Hillary Clinton came with just over a percent point of winning that district. One recent poll showed Ossoff ahead by three percentage points. The winner will succeed Republican Tom Price, Trump’s Health and Human Services secretary.

In other Tuesday elections, Republican Ralph Norman, a real-estate developer and former state legislator, is favored against Archie Parnell, a tax lawyer who used to work for Goldman Sachs. The GOP-leaning district was vacated by Republican Mick Mulvaney when he became Trump’s budget director. In Utah, Democrats and Republicans in the vacant 3rd District will hold conventions tomorrow that will set candidate fields for the Aug. 15 primary. The district, which Republican Jason Chaffetz will relinquish June 30, is overwhelmingly Republican. The special election is Dec. 7.

Two new House members are to be sworn in this week: Republican Greg Gianforte of Montana (to succeed President Trump’s new Interior Secretary Ryan Zinke, and Democrat Jimmy Gomez of California, who will succeed Xavier Becerra, who quit the House to become California’s attorney general, succeeding Kamala Harris when she was elected to the U.S. Senate.

EPA reportedly reevaluating proposed 2018 advanced biofuel mandate... Some oil industry raised concerns regarding advanced biodiesel mandates and were lobbying EPA to also lower cellulosic ethanol targets to better match production. This apparently led to a pullback announcement on Renewable Fuel Standard (RFS) volume requirements late last week, sources signal. The Office of Management and Budget reportedly had completed vetting the RFS proposal and initially authorized EPA to release proposed mandates. However, some sources speculate the delay could allow an announcement to coincide with President Donald Trump’s planned rally visit June 21 to Cedar Rapids, Iowa.

More updates on housing arrive in what is a relatively light economic update week. The key Existing Home Sales report arrives Wednesday on the heels of what was a disappointing run of housing updates during the prior week. Thursday's economic updates include Weekly Jobless Claims, FHFA House Price Index and Leading Indicators plus the Kansas City Fed Manufacturing update. The week wraps up Friday with the PMI Composite Flash reading and New Home Sales. Given the Fed's signal for another rate hike this year, the economic updates will have to start coming in stronger for markets to believe that the rate rise will take place – the CME FedWatch tool put odds well below 50 percent of any rate rise yet in 2017.

Several Fed speakers are on tap even if economic updates are not plentiful for the week. Main focus on comments from Fed officials this week will be more on timing and the prospect for a rate increase yet this year since markets are not believing that will be the case. And, the disappointing run of economic data will also be areas markets will want to see how Fed officials characterize the information relative to Fed plans. Up first is New York Fed's Dudley on Monday, a potentially key voice since he is always a voter on the Federal Open Market Committee (FOMC), along with Chicago Fed's Evans, also a current FOMC voter. Tuesday's Fed lineup includes Boston Fed's Rosengren (2019 voter) and current voter Dallas Fed's Kaplan. The week closes out with St Louis Fed's Bullard (2019 voter), Cleveland Fed's Mester (2018 voter) and Fed Governor Jerome Powell. On Sunday June 25, Dudley is also to deliver remarks in Switzerland. Traders also will be looking for any more definitive signs on the timing for the start of the Fed's effort to pare down their balance sheet after Fed Chairwoman Janet Yellen said if things unfold the way the Fed expects, it could start "relatively soon."

Weather is still the focal point which puts USDA's weekly update on condition ratings in the spotlight. The Monday Crop Progress report will be monitored to see if spring wheat condition ratings deteriorate even further after their big drop the prior week. Corn and soybean ratings remain key for markets. Monday's Grain Inspections report has been showing corn inspected for export at 1 million tonnes, so traders will watch to see if that remains the case. The pace of information picks up a bit to close out the week, with Thursday's schedule including the Weekly Export Sales report and Cold Storage data. The latter is monitored as a signal of demand for US beef and pork, important as we head into the summer grilling season. The Friday run of data includes the monthly Food Price Outlook and the Cattle on Feed update. Global weather prospects are also creeping into the market focus as there are starting to be some potential unfavorable conditions in areas around the globe for wheat.


NOTE: This column is copyrighted material; therefore reproduction or retransmission is prohibited under U.S. copyright laws.


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