Awaiting Federal Reserve’s Decision on Interest Rates and Strategy Ahead

Summers calls Biden economic doctrine ‘increasingly dangerous’

USDA daily export sales:

• 272,000 metric tons of soybeans to unknown destinations during 2023-2024 marketing year

• 229,000 metric tons of soybeans received in the reporting period for delivery to unknown destinations during 2023-2024 marketing year

Financial markets are awaiting the Federal Reserve’s decision on interest rates. The central bank is anticipated to raise borrowing costs by a quarter percentage point, to a 22-year high, with the announcement expected at 2 p.m. Eastern time. Futures markets peg a 98.9% likelihood of a quarter-percentage-point rate hike, taking the federal-funds rate to a range of 5.25% to 5.5%. Nevertheless, investors are most intrigued by future actions of the Federal Reserve: Futures markets currently predict more than a 50% chance that this will be the last interest rate rise for the year.

China’s economic forecast for 2023 has undergone a downward revision, decreasing from 5.5% to 5.2%, according to economists. More in China section.

The Senate on Tuesday night adopted an amendment to the National Defense Authorization Act 91-7 that prohibits entities from China, Russia, Iran and North Korea from buying U.S. farmland. More in Congress section.

An amendment to the House USDA/FDA bill proposed by Rep. Victoria Spartz (R-Ind.) to limit taxpayer dollars going to checkoff boards has sparked a dispute between her and four commodity trade groups. More about the battle royale in Congress section.

Summers calls Biden economic doctrine ‘increasingly dangerous.’ The former Treasury Dept. leader cites dangers of “manufacturing-centered economic nationalism.” He calls Biden’s moves appropriate but worries what will follow.

USDA’s first forecast for 2024 predicts a modest increase in food costs with an inflation rate of 0.9% for grocery store prices. If this prediction holds true, it would represent the lowest annual grocery inflation rate in the last five years. This could signal the end of the period marked by high food inflation that had been triggered by the pandemic. More in Food section.

A new report commissioned by Farm Journal Foundation explains how an accumulation of global crises, or “polycrisis,” resulting from events like the Covid-19 pandemic, the Russia/Ukraine war, and climate change, have disproportionately harmed small-scale farmers and residents of food-deficit countries. These crises have affected global food systems, impacting the availability of food, fertilizer, feed, fuel, and finance to producers. Details below.

The U.S. Federal Trade Commission (FTC) is reportedly gearing up for an antitrust case against Amazon.

Freight operators are bracing for a second straight year without a peak shipping season.

U.S. home prices post biggest annual decline in more than a decade. More in Markets section.

Major CRP changes mulled, but effort faces hurdles. House Republicans, particularly on the House Agriculture Committee, are debating possible major changes to the Conservation Reserve Program (CRP) as part of the upcoming farm bill reauthorization, Agri-Pulse reports. Details in Policy section.

Other countries are taking steps to deal with the subsidy war the U.S. fueled relative to the IRA/Climate Bill. More in Policy section.

Three farmer advocacy groups have written to the House Financial Services Committee protesting against claims from corporations, large agricultural groups and representatives from the Republican party, according to Politico. More in Energy & Climate Change section.

The Biden administration is inaugurating a new office, the Office of Pandemic Preparedness and Response Policy (OPPR), aimed at better preparing the U.S. for large-scale health threats. Details below.

Rice prices are surging in Asia, which have reached their highest peak in over three years due to a recent export ban in India, the leading rice exporter worldwide.

Congress section items:

• DHS Secretary Alejandro Mayorkas will face the House Judiciary Committee today for what will be a challenging hearing.
• The GOP-led House is struggling with government appropriation bills before the August recess, due to opposition from conservative members of the House Freedom Caucus.
• Checkoff battle in House.

• A dramatic climate impact may be taking place in the Antarctic: The region’s ice has failed to replenish in the midst of winter, creating a shocking “six sigma” event.

• It’s so hot, they’re growing mangoes in Italy. The problems farmers in the Mediterranean are facing offer a preview into the challenges of feeding a warmer planet. More in Markets section.

• Battles are erupting over water supplies between AI companies seeking more computing power and adjacent communities as drought spreads around the globe. Thames Water Ltd. is considering measures to reduce data centers’ water use.

Equities today: Asian and European stock markets were mostly lower in overnight trading. U.S. Dow opened down around 120 points. In Asia, Japan flat. Hong Kong -0.4%. China -0.3%. India +0.5%. In Europe, at midday, London -0.7%. Paris -1.9%. Frankfurt -0.9%. Earnings: Chipotle Mexican Grill, eBay, Mattel, Meta Platforms and ServiceNow are among the companies reporting earnings today.

Coca-Cola topped Wall Street’s expectations Wednesday morning as earnings and revenue were higher than projected. The company also raised its outlook. “The strength of our first half results and the resiliency of our business give us the confidence to raise our 2023 guidance,” CEO James Quincey said in a release.

U.S. equities yesterday: All three indices moved higher on Tuesday, with the Dow running its winning streak to 12 sessions. The Dow ended up 26.83 points, 0.08%, at 35,438.07. The Nasdaq gained 85.69 points, 0.61%, at 14,144.56. The S&P 500 rose 12.82 points, 0.28%, at 4,567.46.

The U.S. Federal Trade Commission (FTC) is reportedly gearing up for an antitrust case against Amazon, a leading online retailer and service provider. According to reports from Politico, as early as next month, the agency could disclose a comprehensive lawsuit with the primary goal of breaking up the tech giant. This latest development is seen as the most substantial move against Amazon under the leadership of Lina Khan, the chair of the FTC. Khan has gained significant acclaim in legal academic circles for her ideas on strategies to regulate the company.

Agriculture markets yesterday:

• Corn: December corn futures fell 3 cents to $5.65 1/4, closing nearer the session high.
• Soy complex: November soybeans fell 4 1/2 cents to $14.20, closing nearer the session high, while August meal rose $6.50 to $453.80. August soyoil rose 57 points to 72.56 cents.
• Wheat: December SRW wheat rose 3 1/4 cents to $7.80 3/4 today and nearer the session high. Prices hit a five-month high early on today. December HRW wheat fell 4 1/2 cents to $9.20 3/4, near mid-range and hit an eight-month high early on. December spring wheat rose 1 1/4 cents to $9.48 1/4.
• Cotton: December cotton rallied 191 points to 87.07 cents, marking the highest close since Aug. 31.
• Cattle: August live cattle futures fell 45 cents to $178.30, while deferred contracts saw steeper losses. August feeder cattle fell 2.5 cents to $243.225 as the complex closed largely flat.
• Hogs: The hog and pork complex is sustaining its summer rally, with nearby August futures adding another $1.55 to $101.65 Tuesday.
  

Ag markets today: Corn and wheat saw follow-through selling overnight despite a strong close yesterday. Soybean futures have traded on both sides of unchanged overnight. As of 7:30 a.m. ET, corn futures were trading about 7 cents lower, soybeans were steady to 3 cents higher, winter wheat futures were 11-18 cents lower and spring wheat was 5-7 cents lower. Front month crude oil futures were trading about a dollar lower while the U.S. dollar index was around 210 points lower.

Market quotes of note:

• Summers calls Bidenomics ‘increasingly dangerous.’ Former Treasury Secretary Larry Summers has expressed concerns about President Joe Biden’s economic policies, although he broadly supports them. He finds the administration’s emphasis on industrial policy and outbound investment limits problematic and labels the approach as nationalistic, even “increasingly dangerous.” Despite his endorsement of President Biden’s overall economic strategies, Summers is worried about the potential implications of these particular aspects.
  
• “The wheat market is about the Black Sea,” says grain trader and analyst Richard Crowe. “Russia wheat remains the cheapest, then Baltic wheat. The market is void of World trade right now unless it is being done on a gov’t-to-gov’t basis.”
  
• Freight operators are bracing for a second straight year without a peak shipping season. Forwarding giant Kuehne + Nagel International says it’s focused on holding down costs and rival DSV has also pared its workforce during the runup to the shipping period heading into the fall. Kuehne + Nagel CEO Stefan Paul put it bluntly in an earnings conference call, saying, “There’s no peak season to be expected in 2023.”
  

The Federal Reserve is expected to increase short-term interest rates rate to a range of 5.25% to 5.5% after its policy meeting today. The range is now 5% to 5.25%. This decision comes as a response to a strong labor market and continuous high inflation. The officials from the Fed have hinted at potentially implementing another rate hike before the year ends. However, many economists predict that this increase may be the end of the Fed’s tightening cycle. This series of rate increases, which started from a baseline of 0% in March 2022, has been the most severe in the U.S. in the past forty years. There’s growing evidence suggesting that while inflation and the job market remain strong, they are starting to slow down. Economists warn that if the Fed pushes too hard, it may cause more damage than benefits. he most decisive aspect will be the forward guidance issued by the Fed. It is believed that the initial post-meeting statement may not provide extensive clarity on the future situation. Therefore, the spotlight will be on the post-meeting press conference led by the Federal Reserve Chair, Jerome Powell.

Here is how a Bloomberg survey sizes up the influence of Fed players:

The number of Japanese citizens fell by 800,000 in 2022, the biggest annual decline since surveys began, new data showed. The country’s birth rate also plummeted to a record low last year. Yet the number of foreigners resident in Japan rose to a record of nearly 3 million. The government is drawing more foreign workers to the country and has made reversing the low birth rate a priority.

Eurozone lending slows. Bank lending to households in the Eurozone increased by 1.7% over the last year, the lowest growth rate since May 2016. The weakness can be attributed to the continued slowdown in demand for credit because of the policy tightening by the European Central Bank to tame inflation. Lending to companies grew by 3%, the slowest growth rate since November 2021.

Australian inflation drops below expectations. The Australian inflation rate dropped to 6.0% year-on-year in the second quarter of 2023, the lowest figure since the third quarter of 2022. Inflation was driven lower by the cost of goods despite services inflation accelerating, led by insurance costs rising 14.2%. The U.S. has also seen increased costs of insurance as it lags the overall inflation of goods seen in the last two years.

U.S. home prices post biggest annual decline in more than a decade. According to the S&P CoreLogic Case-Shiller National Home Price Index, home prices across the U.S. fell by 0.5% in May. This drop came after a 0.1% decrease in the previous month, making it the second consecutive monthly decrease. Factors such as high mortgage rates and still relatively high home prices are cited as reasons for potential buyers being deterred from making purchases. The scale of this annual decline is the most substantial observed since 2012.

Report: Global ‘polycrisis’ disproportionately hurts smallholders. A new report commissioned by Farm Journal Foundation explains how an accumulation of global crises, or “polycrisis,” resulting from events like the Covid-19 pandemic, the Russia/Ukraine war, and climate change, have disproportionately harmed small-scale farmers and residents of food-deficit countries. These crises have affected global food systems, impacting the availability of food, fertilizer, feed, fuel, and finance to producers.

Dr. Jessica Fanzo, the report’s author, emphasizes how these events have greatly impacted global food and nutrition security. Additionally, she highlights that these crises have pushed many already-struggling smallholder farmers further into difficulty.

The report also indicates that, as of mid-2022, about 258 million people worldwide are experiencing severe food insecurity, substantially more than pre-pandemic levels. Major contributing factors include the Russia-Ukraine war (both countries being key crop producers and fertilizer suppliers), global trade bottlenecks, and extreme weather events.

The report suggests that U.S. initiatives such as Feed the Future can play a crucial role in helping farmers and food systems in developing countries withstand such shocks, revealing the potential benefits to economic and national security. Advocating increased U.S. investment in international agricultural research and innovation, the report identifies six areas needing more research: climate change adaptation and mitigation, soil health and nutrient management, crop diversity and nutrition, access to markets and finance, supply chain infrastructure, and local capacity building.

Bottom line: The report stresses the importance of stepping up investment in agricultural R&D to ensure future shock resilience in global food systems, and highlights that such investments help both domestic and overseas farmers. To launch this report, Farm Journal Foundation is hosting a policy briefing and reception at 4 p.m. ET at the U.S. Senate Visitor Center, Room 201-00, in Washington, D.C. Link to full report. Link to executive summary.

Market perspectives:

• Outside markets: The U.S. dollar index was weaker, with a mixed tone in global foreign currencies versus the greenback. The yield on the 10-year U.S. Treasury note was slightly weaker, trading around 3.88%, with a mixed tone in global government bond yields. Crude oil futures were under pressure ahead of U.S. gov’t inventory data due later this morning, with US crude around $78.80 per barrel and Brent around $82.45 per barrel. Gold was higher and silver weaker, with gold around $1,973 per troy ounce and silver around $24.79 per troy ounce.

• Rice prices are surging in Asia, which have reached their highest peak in over three years due to a recent export ban in India, the leading rice exporter worldwide. This move has generated worries about the availability of this key food staple at a global scale. The Asian benchmark for Thai white rice, with 5% broken grains, has risen to $572 per ton, marking the highest price since April 2020, based on the data from the Thai Rice Exporters Association. This represents a significant 7% increase compared to the prices just two weeks prior.

• Farmers in the Mediterranean face the challenges of feeding a warmer planet. A Wall Street Journal article (link) discusses the impact of climate change on agriculture in the Mediterranean region. The region is experiencing difficulties with food production due to factors such as rising sea levels, prolonged dry periods, and extreme heat waves. These conditions are adversely affecting traditional crops, in areas spanning from the olive groves in Spain to the wheat fields of Algeria. Farm yields are diminishing, pushing farmers to think about transitioning to crops that can better withstand these harsh conditions.

Interestingly, some farmers are leveraging the rapidly changing climate to venture into unlikely produce for the region. In Southern Italy, for instance, farmers have begun to cultivate tropical fruits such as mangoes, which typically thrive in hotter climates. This indicates an adaptation to the new climatic realities and a shift in agricultural practices.

• NWS weather outlook: Excessive Rainfall and Severe Thunderstorms will impact portions of the Midwest today then the Northeast/Mid-Atlantic over the next couple of days... ...Heat wave overtakes Mid-Mississippi Valley and Midwest; record breaking heat continues in the Southwest... ...Critical Fire Weather area for extreme northeast California, far southeast Oregon and far northwest Nevada today.

Items in Pro Farmer’s First Thing Today include:

• Grains weaker overnight, steady beans
• USDA’s July 25 Cold Storage Report
• Pork prices mixed
• Packer margins in the red

— Competing factions of the Republican Party reached a rare consensus on U.S. aid to Ukraine. GOP Senators who have divergent views on military assistance to Ukraine unified in proposing the creation of a new office that would rigorously audit U.S. aid to Kyiv and provide regular updates to Congress. While a vote on this amendment is not guaranteed, there is optimism due to its inclusion in the Senate leadership’s list of potential floor amendments. The proposal could pass given the unusual unity within the GOP and the Democrats’ tentative support. The amendment would establish a $10 million office, employing roughly 30 staffers for full-time oversight of Ukraine aid. The president would choose the office’s leadership, which could be an existing inspector general or a new appointment. There might be a competing amendment from Sen. Rand Paul (R-Ky.) that proposes appointing John Sopko and his team currently overseeing Afghanistan Reconstruction to handle Ukraine oversight. Ukraine skeptics. However, arguing against increased oversight could be equally difficult.

— The U.S. announced a $400 million military aid package for Ukraine on Tuesday. The aid comprises U.S. Black Hornet surveillance drones, defense missiles, armored vehicles, munitions for Patriot air defense systems, National Advanced Surface-to-Air Missile Systems (NASMS), Stinger anti-aircraft systems, additional ammunition for High Mobility Artillery Rocket Systems (HIMARS), Stryker Armored Personnel Carriers, and other missiles and rockets. In total, this addition marks the 43rd package the U.S. has sent to Ukraine, totaling nearly $43 billion in aid since the beginning of the Russian invasion in 2022. In a statement, U.S. Secretary of State Antony Blinken drew attention to Russia’s continued attacks on Ukrainian ports and infrastructure following its withdrawal from the Black Sea Grain Initiative, which is causing civilian deaths and severe infrastructure damage.

— Russia has resumed sending oil to North Korea. Russia has started sending oil to the communist nation for the first time since 2020. Russia has been sending grains to North Korea for some time now. U.S. government officials suspect North Korea is sending back munitions as payment, though North Korean officials are denying the accusations.

— Lethal AI-empowered drones to transform warfare as Ukraine leads innovation in automated weapons to counter Russian invaders. Artificial intelligence is among numerous advancements in drone technology, including improvements in speed, flight range, payload capacity and other capabilities accelerating and democratizing the lethality of unmanned warfare — especially crucial for Ukraine’s outgunned military. But the technology poses new risks from terrorists, drug cartels and other nonstate actors. Link to more via the Washington Post.

— Major CRP changes mulled, but effort faces hurdles. House Republicans, particularly on the House Agriculture Committee, are debating possible major changes to the Conservation Reserve Program (CRP) as part of the upcoming farm bill reauthorization, Agri-Pulse reports. Key variations being considered include removing the program’s national acreage cap, providing Farm Service Agency (FSA) state offices with more decision-making power, and revising the Environmental Benefits Index used to review land proposed for CRP enrollment. Instead of an acreage cap, the revised CRP would operate under a funding limit that matches the current Congressional Budget Office’s cost projections. States would then have authority to define the acreage eligible for the General, Grasslands, and Continuous sign-ups within their jurisdictions.

Another key potential change is altering the rental rate structure, according to Agri-Pulse, is offering more for lands with poorer soils compared to ones with highly productive acreage. Strategies are also under examination to transition lands that have been part of the general sign-up (for extended periods like 30 years or more) into the grasslands sign-up. The latter usually pays less to the landowners than the CRP general sign-up.

The intended changes aim to transition CRP from being a “top-down” program to a “locally led” one, thus better targeting highly erodible or environmentally sensitive land. However, some stakeholders like former Ag Committee members and lobbyists are skeptical about this shift, fearing it might lead to certain states missing out on allocations or having the program be more susceptible to budget cuts at the Congressional level.

Rep. Frank Lucas (R-Okla.) feels altering CRP drastically could lead to states possibly exploiting the system to gain more funding, the article notes. But others, like Lynn Tjeerdsma, a former adviser for Sen. John Thune (R-S.D.), support the changes, arguing that more state control and flexibility might help better achieve their conservation goals. Still, the changes remain under discussion and haven’t been decided yet.

Our perspective: Thune’s support shows his more moderate/populist approach to policy, versus a more conservative angle by some other Republicans. It would be interesting to know the budget score on this and to check whether this is one of the “efficiency” gains the House Ag panel staff is working on to find more funding to spend elsewhere.

— Subsidy wars. The Biden administration is heavily investing in local manufacturing through subsidies, as part of significant actions such as the Inflation Reduction Act (IRA/Climate Bill) that was implemented last year. This approach to industrial policy has ignited a worldwide competition that is leading to tensions among alliances and putting considerable strain on financial budgets, according to Bloomberg (link). Notably, these policies are directing an unheard-of amount of public funds into privately-owned corporations, which has been drawing a lot of attention and debates about its effects.

Example: In Canada, a standoff over subsidies left Stellantis threatening to build its plant in the U.S. instead. The company, which owns the Chrysler and Jeep brands, said it needed a “level playing field” to bring down the cost of EVs and compete with other automakers getting IRA-sized money. And it was potentially eligible for U.S. tax credits worth almost 20 times what Canada was offering. Ottawa relented and agreed to an additional package worth up to C$15 billion, the largest in national history for a single factory.

— President Joe Biden put forward J. Todd Inman as his nominee for the National Transportation Safety Board (NTSB). Inman is being backed by the White House as a “transportation expert,” based on his track record in federal, state, and private realms. However, his previous tenure at the Transportation Department under Secretary Elaine Chao could spark enquiries. Notably, it was reported that Inman assisted with grant applications for Kentucky, the state that Secretary Chao’s husband, Sen. Mitch McConnell, a Republican, currently represents as the Senate Minority Leader.

— Holladay tapped for USDA CFO. Jon Holladay, who was the USDA’s chief financial officer during the Obama administration, was nominated by President Biden for a second stint in the job.

— China’s economic forecast for 2023 has undergone a downward revision, decreasing from 5.5% to 5.2%, according to economists. They also anticipate a further slowdown in growth in 2024, with GDP projected to drop to 4.8%. Elements such as U.S./China relations and the success of Beijing’s attempts to stimulate private businesses are divisive topics among these economists. However, there is growing apprehension considering the recent pledge by the government to intensify its stimulus package.

Morgan Stanley, one of the major global financial services firms, suggested that it’s vital for the Chinese authorities to act swiftly on their latest promises, particularly for the stock market to preserve the gains recorded yesterday. Investor confidence is currently volatile, and real, effective policy measures — notably those targeted at the real estate sector — will be crucial for keeping the rally going, says Laura Wang, a Morgan Stanley strategist.

China’s central bank’s new Governor, Pan Gongsheng, is stepping in with a commendable record of handling financial sector risks, including managing currency and regulating the real estate market. Considering the current economic slump, he’s expected to utilize his past experience to navigate and potentially alleviate the economy’s downturn.

— Hong Kong ups inspections of Japanese vegetables: report. In response to Japan receiving approval to release water from its damaged Fukushima nuclear power plant, Hong Kong is increasing its inspections of vegetable imports from Japan, as per Jiji news agency’s report. Prior to this decision, Hong Kong revealed it would prohibit seafood imports from particular Japanese prefectures if Japan proceeded with the water release plans. It appears that the release process is likely to commence this summer.

— Three farmer advocacy groups have written to the House Financial Services Committee protesting against claims from corporations, large agricultural groups and representatives from the Republican party, according to Politico. They argue against the notion that the Securities and Exchange Commission’s (SEC) proposed climate disclosure rule could critically harm small farms and ranches. The groups include Family Farm Defenders, Food & Water Watch, and the Institute for Agriculture and Trade Policy, along with the Union of Concerned Scientists. They have expressed their discontent over what they see as politicization of the proposal in a letter dispatched last Tuesday.

They argue that those involved in farming should not be used as political tools by a voracious agribusiness industry that aims to counter corporate disclosure requirements that they should already be observing.

Moreover, they insist that climate change is a significant risk to farmers, consumers, and the wider food system.

This differs from the stance of the American Farm Bureau Federation, which warns that the SEC’s proposed consideration of certain Scope 3 emissions in its disclosure plan could involve small farms that may lack the resources to monitor their emissions. However, the SEC has clarified that small businesses are not the intended target of the proposal, and that it is possible to estimate emissions within the supply chain.

Last week, the House Financial Services Committee hosted a hearing on SEC oversight.

— USDA expects food price inflation for 2023 to be slightly lower at 5.8% compared to the previous projection of 5.9%. The grocery store price inflation forecast has been significantly reduced by a whole percentage point to 4.9%. Food price inflation for 2024 is expected to considerably decrease compared to 2023, with an expected rise of 2.4%.

Restaurant prices are predicted to increase slightly less than before, now at 7.5% as compared to previous 7.7%. For 2024, a 6.1% rise in restaurant prices is anticipated.

Interestingly, some food categories are expected to experience price declines in 2024, including pork, eggs, and dairy products. Notably, egg prices have shown significant volatility, escalating by as much as 37.8% in February 2023, yet ultimately expected to only rise 2% over the year.

USDA’s initial forecasts often undergo revisions, as seen in the fluctuations in 2023 food price inflation predictions beginning from July 2022. This dynamic forecasting, which includes various inputs like energy, labor, and maintenance costs, particularly affects restaurant prices.

For 2024, USDA projects that food price inflation will be lower than that seen in 2023 and significantly lower than the rise seen in 2022, though these are initial forecasts and subject to changes as more data comes in. However, despite the reductions, consumers will continue to pay more than the 20-year average for all types of food, marking a four-year trend. The anticipated reductions have been tied to interest-rate increases initiated by the Fed.

— White House announces new pandemic response office. The Biden administration is inaugurating a new office, the Office of Pandemic Preparedness and Response Policy (OPPR), aimed at better preparing the U.S. for large-scale health threats. Announced via a White House statement, this initiative is part of President Biden’s commitment to enhance the country’s readiness for pandemics. The OPPR, which will be a permanent part of the Executive Office of the President, is tasked with leading and implementing measures to prepare for and respond to both known and emerging biological threats that could cause a pandemic or significant public health disruptions in the country. The new office will replace the existing Covid-19 Response Team and Mpox Team at the White House, and will work towards addressing potential public health threats and outbreaks from diseases like Covid-19, polio, RSV, avian and human influenza, and Mpox.

— Restrictions on purchases of U.S. farmland. The Senate on Tuesday easily cleared an amendment to the National Defense Authorization Act barring investors from China, Russia, Iran, and North Korea from purchasing U.S. farmland. The measure, approved with a 91-7 majority, also necessitates a review from the Committee on Foreign Investment in the U.S (CFIUS) on overseas land purchases exceeding $5 million or 320 acres from investors from any other country. The vote revealed bipartisan support, with only seven senators, six Democrats and one Republican, opposing it. The proposed measure further integrates the USDA into the CFIUS as an “ex officio” member. There’s also a provision for presidential discretion; investors can be exempt from these regulations if deemed crucial to U.S. national security interests. The bill won’t affect U.S. citizens or aliens lawfully admitted for permanent residence. The defense bill including the amendment must be reconciled with the House equivalent. Senate leaders believe the House would agree with preserving the farmland amendment due to similar concerns about protecting U.S. interests, especially given recent moves by the House Select Committee on the Chinese Communist Party to expand CFIUS jurisdiction over land purchases.

— DHS Secretary Alejandro Mayorkas will face the House Judiciary Committee today for what will be a challenging hearing. House Republicans accuse Mayorkas of contributing to a dire situation at the border. However, excerpts from Mayorkas’ testimony show that he will defend his border management approach, stating it’s effective even amidst a broken immigration system. He will share that unlawful entries at the southwest border have greatly decreased by over 50%, dating back to pre-Title 42 peak levels. Mayorkas attributes these improvements to President Biden’s administration, which he will say facilitated the largest expansion of legal, safe, and orderly paths for individuals seeking humanitarian relief. Simultaneously, the Biden administration, he will add, has been harsh on those resorting to smuggling organizations. Steps have been taken to increase Border Patrol Agent hiring for the first time in over ten years, and an active campaign targeting human smuggling networks has resulted in nearly 14,000 arrests of smugglers.

— The GOP-led House is struggling with government appropriation bills before the August recess, due to opposition from conservative members of the House Freedom Caucus. Six members have demanded a more conservative approach to the appropriations process as House leaders aim to pass the first two spending bills for the year, including the measure for USDA/FDA. Some, like Rep. Bob Good (R-Va.), have even suggested entertaining the possibility of a government shutdown.

The Freedom Caucus members are against padding top-line spending with old, redirected funds. They argue that this tactic inflates spending limits: while allocations for bills amount to $1.47 trillion (a figure aligned with conservative fiscal goals), an additional $115 billion has been offset from old funds. They insist on maintaining spending at the 2022 levels, without any rescissions or hidden manipulations. Their opposition complicates matters as conservatives have indicated they wouldn’t vote for any appropriation measures until they’ve reviewed all 12 bills. The draft texts of these bills have been released and have been approved at the subcommittee level, with 10 of them also marked up by the full committee.

There is also uncertainty around the markup of the final two bills: the Labor-HHS-Education and Commerce-Justice-Science bills. Senior appropriators suggest that it is unlikely these bills will see markup this week, as leaders try to ensure they have the necessary votes for passage in the House.

Senate appropriators are set to mark up their final four bills soon, covering several important domains.

— Checkoff battle in House. An amendment to the House USDA/FDA bill proposed by Rep. Victoria Spartz (R-Ind.) to limit taxpayer dollars going to checkoff boards has sparked a dispute between her and four commodity trade groups. The opposing parties (The National Cattlemen’s Beef Association, American Soybean Association, National Pork Producers Council, and National Milk Producers Federation) released a joint statement criticizing the amendment, which they label as needless given that no taxpayer dollars are used in checkoffs promotion activities. These are financed by mandatory farmer payments. They argue that Spartz’s amendment undermines programs vital to industry, like the Beef Checkoff, which supports nutritional and food safety research, boosts consumer demand, and keeps farms and ranches operational.

Spartz targeted Ethan Lane, NCBA Vice President of Government Affairs, suggesting he has a lack of understanding about the realities of farming and a vested interest in checkoff fees.

This debate comes at a time when commodity checkoffs are under close observation this Congress. The checkoffs are marketing boards specific to each commodity, towards which farmers are obligated to contribute.

The OFF Act, a bipartisan legislation aiming to intensify scrutiny of checkoffs, is also facing strong resistance from these trade groups because it would prohibit checkoffs from contracting any group lobbying on agricultural matters.

— Democratic lawmakers are proposing a new wealth tax that they believe could alleviate economic inequality, according to the New York Times’ DealBook. They intend to link this proposed tax to American household wealth, with a minimum 2% duty on wealth ranging from 1,000 to 10,000 times more than the current U.S. median household wealth of approximately $120,000.

Attempts to tax the wealth or income of America’s richest individuals have not been successful in Congress in the past. For example, President Biden’s proposed 25% tax on all wealth over $100 million was met with opposition from Republicans. Notwithstanding this resistance, public support for higher taxes on the extremely wealthy is present, even among some Republicans.

Despite the bipartisan backing, challenges to the wealth tax persist. A notable concern is a pending Supreme Court case due to be heard next term, which could potentially undercut the implementation of a wealth tax on the ultra-wealthy. The lawmakers proposing this bill believe they have a mandate from the public, who are frustrated at the disparity that allows wealthy individuals to pay less in taxes than many everyday workers.

— A federal judge struck down an immigration policy that prohibits asylum-seekers from entering the country unless they have an appointment at a port of entry or have applied for asylum in one of the countries they travelled through. The policy, which was implemented in May, has helped reduce the number of unauthorized crossings at the southern border. The ruling takes effect in two weeks.

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