Momentum Grows for Aid to Beleaguered Rice Growers

Another Fed rate hike is coming this Wed., but what follows?

Washington Focus

Kicking the spending can down the road, again. After having more than a year to reach consensus on a budget for fiscal year (FY) 2023, which began Oct. 1., lawmakers said they need “more time” to come to an agreement on sensitive issues. With the continuing resolution (CR) ending Dec. 16, that means, as expected, Congress will need another stopgap spending measure to work on spending issues ahead of a hopeful pre-Christmas adjournment of this Congress.

Some potentially very good news for rice growers. The odds are rising that Congress via a coming omnibus spending bill could include aid for rice growers who have faced surging inputs costs, especially fertilizer, while not experiencing the relatively high prices received by other growers, especially corn and soybeans.

An aid program of over $300 million is being discussed, with payments per planted acre of the 2022 crop of $110 to $130. Apparently, this would be separate from an expected extension of the Economic Relief Program for eligible 2022 crops and livestock.

Unknown is if financial aid will be provided rice millers.

Sources caution details can still change along with the fate of the aid package, but contacts on both sides of the political aisle signal support is rising for the assistance.

The Federal Reserve on Wednesday once again is expected to raise interest rates. But investors are hopeful that it will be a smaller increase than the last four hikes of 75 basis points. Most traders are betting on just a half-point increase. Federal funds futures on the Chicago Mercantile Exchange show an 80% probability of a half-point hike.

The central bank's key short-term interest rate, which sat at zero at the beginning of the year, is now at a range of 3.75% to 4%, with veteran analysts signaling a rate of over 5% at the end of 2023.

The closely watched Consumer Price Index (CPI) data for November comes out Tuesday, just a day before the Fed announcement. CPI rose 7.7% year-over-year through October. "Inflation has probably peaked but it may not come down as quickly as people want it to," said Kathy Jones, chief fixed income strategist for the Schwab Center for Financial Research. Many analysts are forecasting “sticky inflation” to linger.

Investors will focus on what the Fed says in its policy statement about rates and what Chair Powell talks about in his press conference. The Fed also will release its latest projections for gross domestic product growth, the job market and consumer prices. In September, the Fed's consensus forecasts called for GDP growth of 1.2% in 2023, an unemployment rate of 4.4% and an increase in personal consumption expenditures, the Fed's preferred measure or inflation, of 2.8%. It seems likely that the Fed will cut its GDP target and raise its expectations for the jobless rate and consumer prices.

The likelihood of a U.S. economic downturn is increasing, and the Fed's projections may reflect that. But the Fed is not expected to start cutting interest rates until 2024 at the earliest. That is why some analysts say it may be too late for the central bank to prevent a recession.

The Senate is expected to vote on the National Defense Authorization Act/WRDA this week after the House voted to pass the legislation Thursday. Sen. Joe Manchin (D-W.Va.) last week said he would seek a vote to add his newest permitting reform proposal — which now more closely resembles text from Senate Environment and Public Works ranking member Shelley Moore Capito (R-W.Va.) — to the measure as an amendment.

The NDAA is linked with the Water Resources Development Act (WRDA). The conferenced bill makes permanent a 2020 change in the cost-share formula for inland waterway construction projects to 35% from the general Treasury fund and 65% from the Inland Waterway Trust Fund. The new WRDA removes a provision that would sunset the 65-35 cost-share back to 50-50 in 10 years.

Sen. Hoven details priorities for next farm bill, efforts to improve cattle market transparency. During the North Dakota Farmers Union annual meeting, Sen. John Hoeven (R-N.D.) outlined his efforts as the lead Republican on the Senate Agriculture Appropriations Committee and a senior member of the Senate Agriculture Committee to:

Gather feedback from North Dakota farmers and ranchers as work begins on the next farm bill.
Establish a cattle contract library at the Agricultural Marketing Service (AMS) to improve transparency and competition in cattle markets.
Allow the year-round sale of E15.

Working on the next farm bill. Earlier this year, Hoeven hosted Sen. John Boozman (R-Ark.), ranking member of the Senate Agriculture Committee, in North Dakota for a discussion with local producers and commodity groups on the following priorities for the next farm bill:

Maintaining strong crop insurance, the primary risk management tool for many producers.
Improving the farm safety net, including the Agriculture Risk Coverage (ARC) and Price Loss Coverage (PLC) programs.
Strengthening livestock disaster programs, including the Livestock Indemnity Program (LIP), the Livestock Forage Program (LFP) and the Emergency Livestock Assistance Program (ELAP).
Cutting red-tape and ensuring programs are farmer-friendly.

FTX CEO John J. Ray III will testify Tuesday in a House Financial Services Committee hearing on the collapse of the company. Sam Bankman-Fried, the founder and former CEO of FTX, has also agreed to testify. The Senate Banking Committee will hear from expert witnesses regarding the FTX crash on Wednesday. In November, Bankman-Fried resigned as CEO of FTX after it and dozens of affiliated companies filed for bankruptcy in one of the most stunning corporate implosions ever.

House Financial Services Committee holds a semi-annual oversight hearing on the Consumer Financial Protection Bureau, scheduled for Wednesday.

Congress and spending. Allison Bawden, director of the U.S. Government Accountability Office, joins a panel of speakers at the Bipartisan Policy Center on Monday for an event, titled "Power of the Purse: Restoring Congress's Directed Spending Authority."

Broadband. The Senate Commerce, Science and Transportation Subcommittee on Communications, Media and Broadband is holding a hearing Tuesday on "ensuring solutions to meet America's broadband needs." The hearing will focus on current and past efforts by the public and private sectors to expand internet access to the millions of people who live in rural, tribal and low-income urban areas that lack affordable broadband options. Speakers scheduled include Michael Powell, president and chief executive of NCTA — The Internet & Television Association; Jonathan Spalter, president and CEO of USTelecom; and Angela Siefer, executive director of the National Digital Inclusion Alliance.

The U.S. power grid. The Hill and the Bipartisan Policy Center on Tuesday will host a panel titled "Risk to Resilience: Cyber and Climate Solutions Bolstering America's Power Grid." The panel will feature Reps. Jim Himes (D-Conn.), member of the Sustainable Energy and Environment Coalition, and Cathy McMorris Rodgers (R-Wash.), ranking member of the House Energy and Commerce Committee. Other speakers include Puesh Kumar, director of the Department of Energy's Office of Cybersecurity, Energy Security & Emergency Response, and Southern Co. Chief Executive Tom Fanning. While the panel is focused on cybersecurity and extreme weather threats, it's expected that last week's power plant attack in North Carolina will be discussed.

Other events of note this week include:

Monday, Dec. 12:

Climate-smart ag. USDA Secretary Tom Vilsack announces second round of Partnerships for Climate-Smart Commodities projects, Macon County, Alabama.
President Joe Biden and First Lady Jill Biden participate in a U.S. Marine Corps Toys for Tots event in Arlington, Virginia.
China and carbon neutral food system. Wilson Center's China Environment Forum virtual discussion on “Mapping China's Pathway to a Carbon-neutral Food System.”
U.S. utilities and climate risk. United States Energy Association webinar on “Climate Risk Management: Key Lessons from US Utilities.”
Congressional spending. Bipartisan Policy Center discussion on “Power of the Purse: Restoring Congress's Directed Spending Authority.”
Sustainable energy, economic systems. Institute for Policy Studies virtual discussion on “Getting from the Unsustainable Here to the Sustainable There,” focusing on the need to “rethink global economic and energy systems.”
War in Ukraine. Johns Hopkins University Paul H. Nitze School of Advanced International Studies virtual discussion on “Assessing the Ukraine War: What Analysts Got Right, What They Got Wrong, and What They Missed Altogether.”
Cyberattacks and infrastructure. Government Executive Media Group virtual discussion on “Implementing Agile Cyber Governance,” focusing on cyber-attacks on federal networks and critical infrastructure.
ESG. Bipartisan Policy Center virtual discussion on “Where Does the Environmental, Social, and Governance (ESG) Debate Go from Here?”
Semiconductors. Wilson Center's Kissinger Institute on China and the United States virtual discussion on “The Outlook for Strategic Competition in the Semiconductor Industry.”
FDIC nominations. Senate Banking, Housing and Urban Affairs Committee markup to vote on several nominations for posts at the Federal Deposit Insurance Corporation (FDIC).

Tuesday, Dec. 13:

Food as medicine. Senate Agriculture Food and Nutrition, Specialty Crops, Organics, and Research Subcommittee hearing on “Food as Medicine: Current Efforts and Potential Opportunities.”
Broadband. Senate Commerce, Science and Transportation Committee hearing, “Ensuring Solutions to Meet America’s Broadband Needs.”
Infrastructure law implementation. Senate Energy and Natural Resources Committee hearing on the Interior Department’s implementation of the Infrastructure and Jobs Act.
U.S./Africa leaders’ summit. State Department hosts 2022 U.S./Africa Leaders’ Summit through December 15, including U.S. Trade Representative Katherine Tai participating in an “African Growth and Opportunity Act (AGOA) Trade Ministerial.”
U.S./EU TTC. Atlantic Council virtual discussion on “Next Steps for the U.S./EU Trade and Technology Council (TTC).”
Russia sanctions. Commission on Security and Cooperation in virtual briefing on “No Safe Haven: Launching the U.S./Europe Coalition on Russia Sanctions.”
Crypto regs. Peterson Institute for International Economics virtual discussion on “Can Regulation Save Crypto?”
FTX collapse. House Financial Services Committee hearing on “Investigating the Collapse of FTX, Part I.”
CECC report on China human rights. Congressional-Executive Commission on China (CECC) hearing on “CECC at 20: Two Decades of Human Rights Abuse and Defense in China.”
Cyber risks to the power grid. The Hill hosts an event on “Risk to Resilience: Cyber and Climate Solutions Bolstering America's Power Grid.”
European climate policies. Washington Post Live virtual discussion on “Europe's Climate Policies and Energy Security,” as part of the This is Climate series.
U.S./China relations. Center for Strategic and International Studies (virtual first annual conference on “China at Home and Abroad: Opportunities and Fears.”
Climate and hydrogen. American Security Project virtual discussion on “Innovating Out of the Climate Crisis: Hydrogen.”
International development. House Foreign Affairs International Development, International Organizations and Global Corporate Social Impact Subcommittee hearing on “Modernizing International Development Assistance: Opportunities and Challenges.”
Small manufacturers. Senate Commerce, Science and Transportation Oceans, Fisheries, Climate Change, and Manufacturing Subcommittee hearing on “Promoting and Investing in Small American Manufacturers.”
U.S. border crisis. Heritage Foundation discussion on “The Illegal Immigration Industrial Complex: How Nonprofits and Corporations Are Facilitating the Border Crisis,” focusing on “the Biden administration's collaboration with nonprofit organizations and corporations to plan and carry out the largest border crisis in American history.”

Wednesday: Dec. 14:

President Joe Biden delivers remarks to the State Department’s U.S./Africa Leaders’ Summit that runs through Thursday.
Food+ Summit. Foreign Policy holds its Food+ 2022 summit focusing on the global food system.
China/India relations. Carnegie Endowment for International Peace virtual discussion on “Where Do China-India Relations Stand?”
Global climate change. Institute for Policy Studies virtual discussion on “Can the World Save the World? Global Governance and Climate Change.”
Trade and sustainable environment policies. House Ways and Means Trade Subcommittee hearing on “Promoting Sustainable Environmental Practices Through Trade Policy.”
CFPB report. House Financial Services Committee hearing on “Consumers First: Semi-Annual Report of the Consumer Financial Protection Bureau (CFPB).”
U.S./Korea cooperation on semiconductors. Wilson Center's Asia Program virtual discussion on “Building a More Resilient Semiconductor Supply Chain Through U.S./Republic of Korea Cooperation.”
FTX collapse. Senate Banking, Housing and Urban Affairs Committee hearing on “Crypto Crash: Why the FTX Bubble Burst and the Harm to Consumers.”
China Gulf cooperation. Middle East Institute virtual discussion on “Increased China/GCC (Gulf Cooperation Council) Relations: What is the U.S. To Do?”
SEC meeting. Securities and Exchange Commission teleconference to consider several amendments to U.S. securities rules.
U.S. alliances. McCain Institute virtual discussion on “Reaffirming America's Strategic Alliances,” with former Defense Secretary Mark Esper.
Winter electricity situation. United States Energy Association webinar on “Winter Electricity Stress, Load Shedding.”
Clean Air panel. Environmental Protection Agency holds a virtual meeting of the Clean Air Act Advisory Committee (CAAAC).
U.S./Mexico relations. Wilson Center's Mexico Institute virtual discussion on “200 Years of U.S./Mexico Bilateral Relations: An Ambassadorial Perspective.”
Covid lessons. House Oversight and Reform Coronavirus Crisis Subcommittee hearing on “Preparing for and Preventing the Next Public Health Emergency: Lessons Learned from the Coronavirus Crisis.”
U.S./Taiwan policy. Hudson Institute discussion on “Taiwan Policy in the New Congress.”

Thursday, Dec. 15:

Affordable food for older Americans. Senate Aging Committee hearing, “Setting the Table: Promoting Healthy and Affordable Food for Older Americans.”
U.S./Africa leaders’ summit. Final day of the State Department 2022 US-Africa Leaders Summit.
5G security. Brookings Institution discussion on “5G is Smart. Now Let's Make It Secure.”
U.S., Korea and EVs. Wilson Center's Asia Program virtual discussion on “Electric Vehicles (EVs) and Green Transport and the U.S./South Korea Partnership.”
CFPB report. Senate Banking, Housing and Urban Affairs Committee hearing on “The Consumer Financial Protection Bureau's Semi-Annual Report to Congress.”
Ukraine reconstruction. Brookings Institution virtual discussion on “Ukraine's Economy: Today's Challenges, Tomorrow's Needs, and Lessons from Past Reconstruction Efforts.”
Russia/Ukraine war. Carnegie Endowment for International Peace virtual discussion on “Is Russia/Ukraine a Forever War?”

Friday, Dec. 16:

Inflation and the U.S. economy. American Enterprise Institute for Public Policy Research virtual discussion on “Inflation, the Economy, and the Federal Reserve.”
Taiwan and international space. Atlantic Council virtual discussion on “Evaluating Taiwan's Quest for International Space.”

Economic Reports for the Week

Two of the biggest economic events remaining for 2022 hit this week, with the November CPI report and Federal Reserve meeting having the potential to set the tone for the remaining three weeks of the year if not beyond. Outside of Fed Chair Jerome Powell's speech, the summary of economic projections will be closely watched with the median forecast for 2023 forecast to move up by 50bp to 5.125%. What about 2024 and 2025? BofA thinks the dot plot will point to 100bp of cuts each in 2024 and 2025.

Monday, Dec. 12

Treasury Budget: Forecasters see a $200.0 billion deficit in November that would compare with a $191.3 billion deficit in November a year-ago and a deficit in October this year of $87.8 billion. November is the second month of the government's fiscal year.

Tuesday, Dec. 13

Bureau of Labor Statistics releases the consumer price index for November. Economists forecast that the CPI will show an increase of 7.3%, year over year, following a 7.7% jump in October. The core CPI, which excludes volatile food and energy prices, is expected to be up 6.1%, compared with 6.3% in October.
NFIB Small Business Optimism: The small business optimism index has been below the historical average of 98 for 10 months in a row, and deeply so in October at 91.3. November's consensus is 90.8.

Wednesday, Dec. 14

MBA Mortgage Applications
Federal Open Market Committee concludes its final two-day meeting of the year. “The time for moderating the pace of rate increases may come as soon as the December meeting,” Chairman Jerome Powell recently said. The Federal Reserve is on the record saying it wants to slow policy down and see how much prior rate hikes are slowing the inflation. After a run of 75-basis-point hikes, the Fed is expected to raise rates by 50 points. Fed Chair Powell will hold a presser so his comments will be closely followed.
Bureau of Labor Statistics releases its Export Price index, which is believed to have fallen 0.85% in November, after a 0.3% drop in October. Import prices are expected to be down 0.6%, after a 0.2% dip in October.

Thursday, Dec. 15

Jobless Claims for the December 10 week are expected to come in at 230,000, unchanged from the prior week.
Philadelphia Fed Index, a monthly measure of manufacturing activity, is released. Economists expect a negative 11.5 reading for December, compared with a negative 19.4 in November.
Census Bureau reports retail sales data for November. The consensus call is for consumer spending to be flat, month over month, while sales excluding autos are seen gaining 0.3%. Both figures rose 1.3% in October.
Federal Reserve releases November industrial production figures, which measure the output of factories, mines, and utilities. Expect a 0.10% seasonally adjusted rise, after a 0.10% drop in October. Manufacturing production is expected to be up 0.15%, in line with October’s increase. Capacity utilization is expected to be 79.8%, compared with 79.9% in October.
Empire State Manufacturing is expected to slip back into contraction in December, at minus 0.4 versus 4.5 in November that, however, belied contraction in orders and deep weakness in confidence.
Business Inventories in October are expected to rise 0.4% to match a 0.4% build in September.
European Central Bank begins its two-day policy meeting in Frankfurt.
Fed Balance Sheet
Money Supply

Friday, Dec. 16

IHS Markit Services and Manufacturing PMI — Preliminary: At 46.2 in November, the services PMI has been sinking deeper into contraction though expectations for December's flash is a little slower pace of contraction at 46.5. Manufacturing, at 47.7 in November, is expected little changed at 47.8.
Federal Reserve Bank of San Francisco President Mary Daly will speak at an American Enterprise Institute event, titled "Inflation, the Economy, and the Federal Reserve."

Key USDA & international Ag & Energy Reports and Events

Focus is on the weather outlook and crop developments for Argentina and Brazil.

Monday, Dec. 12

Ag reports and events:

Export Inspections
Season-Average Price Forecasts
Feed Grains Database
Wheat Data