House Deficit-Limit Vote This Week if Enough GOP Votes Can be Found

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Farm Journal
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Biden to announce bid for re-election | Key U.S. economic reports | Farm bill update


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Washington Focus


 

A likely Biden re-election campaign announcement, a House vote on the GOP’s debt-limit plans and some key economic reports ahead of the May 2-3 FOMC meeting are the highlights of the week ahead.  

President Joe Biden is expected to formally announce his bid for a second term Tuesday with the release of a campaign-style video that would coincide with the anniversary of his campaign announcement in 2019. Timing could still change, pending unforeseen events, but a decision has been reached that it is “no longer helpful or necessary to not just say the obvious: He’s running,” a senior Democratic official said.

The debt limit/budget debate was the main focus of Sunday news shows. A big development came when respected Sen. Amy Klobuchar (D-Minn.) said that President Biden and Speaker Kevin McCarthy (R-Calif.) should negotiate on the budget and not hold Americans’ mortgages “hostage.”

     “You should negotiate on the budget,” she told CNN’s Dana Bash on State of the Union. “That is the place to negotiate, and they should start those negotiations now, not using the American people and their mortgages as hostage because right now, we’ve got to simply make clear we’re gonna avoid default and get this behind us. We pay our bills.”

     Klobuchar said that the “main goal” is to ensure the United States does not default on its debts.

     She also said the repercussions would be “huge” if they went along with McCarthy’s current plan for the budget. “If you go forward as McCarthy wants, what will happen? You will literally see interest rates go up for mortgages, for loans. You’re gonna see the stock market plummet again that we can’t afford,” the senator said. “We have just come out of this pandemic and our economy is strong. Unemployment is low. We don’t want to go the wrong way.”

     McCarthy introduced a budget plan to his Republican colleagues last week that would raise the debt ceiling by around $1.5 trillion or through March 31, 2024, whichever comes first, but also return federal spending to 2022 levels and cap growth at 1% annually. “So my proposal is debate this step,” Klobuchar said on Sunday. “That is a place to debate this,” she added. “Don’t let it default.”

     The GOP plan would save $4.5 trillion through several spending reductions, including cutting non-defense, non-mandatory spending to fiscal 2022 levels and as. Noted, capping growth at 1% a year.

Next up in debt-limit debate: House vote on McCarthy package Wednesday. The proposal, the Limit, Save, Grow Act, will likely be shunned by all House Democrats for several reasons, including a GOP push to raise age limits for work requirements to receive food stamps. SNAP is now the third rail of farm and food programs ­— do-not-touch SNAP.

     Upshot: McCarthy can lose only four Republican votes as they control the chamber 222-213.

     Note: The vote timeline can slip if GOP House leadership thinks the votes are shy.

     McCarthy in a Saturday tweet said he is “worried” about how President Biden “is handling the debt ceiling. By ignoring it, he is walking us in to the first default in our nation’s history. We have a responsibility to act for future generations — before it’s too late.”

     Farm-state Republicans could be the deciding factor on whether McCarthy can garner enough GOP votes. Why? The McCarthy package includes key provisions that gut some favorite programs of biofuel proponents and could cause re-election problems for Republicans in some districts in 2024 races. Specifically:

  • Phases out a tax credit for carbon sequestration by shortening period a qualified facility is constructed and increasing the carbon capture requirement for the facility (Sec. 225).
  • Repeals a biodiesel and renewable diesel tax credit (Sec. 227).
  • Repeals an advanced biofuel tax credit (Sec. 228).
  • Repeals a sustainable aviation fuel (SAF) tax credit (Sec. 229).
  • Repeals the clean fuel production credit (Sec. 244).

    
     Comments: The first three provisions are tax credits that were extended as part of the Inflation Reduction Act (IRA), while the last two are new tax credits implemented as part of that legislation. GOP leaders say all Republicans voted against the IRA. But farm-state Republicans knew the Democratic votes were there for the IRA. Once incentives/subsidies are granted, history shows they are quite difficult to vote down. It will be interesting to see how McCarthy and other GOP leadership dance around this conundrum. While biofuel industry stakeholders have made industry commitments in part based on the IRA, GOP officials know that even if the House package gets enough votes, it is dead-on-arrival in the Senate.

Farm bill hearings and other events continue this week, but last week saw some developments (or lack of them) regarding the topic.

     Former House Ag Chairman Collin Peterson (D-Minn.) was on AgriTalk (link) on Friday. Here is what the farm policy veteran had to say on several topics:

  • Predicted a one-year farm bill extension, adding if there is no agreement by both congressional chambers next year, another one-year extension is likely unless corn, soybean and other commodity prices crash. He specifically said down to $3 corn and $9 soybeans.
  • Noted “two commodities that need a new farm bill are peanuts and rice.”
  • Acknowledged there are problems weaving prior ad hoc disaster aid funding into crop insurance, stressing that could actually negatively impact crop insurance programs. He sees lawmakers again going the ad hoc disaster approach if needed, in part because such funding is “off budget” but “it shouldn’t be.” He said there is “always a push” by some lawmakers for disaster aid.
  • He discounted an effort by a least one populist GOP senator to base farm program payments on actual plantings rather than base acres. “I tried that years ago and it didn’t work out,” he said.
     

     Note: There also has been some new farm bill chatter about updating base acres on a voluntary but not mandatory basis. That usually comes from the soybean sector who was late to the game in base acres and are trying to catch up with the gap between base acres and actual plantings.

     Farm bill hearings and other related events this week include:

  • Monday: House Ag Committee listening session, Newberry, Florida.
  • Tuesday: American Enterprise Institute forum, “The 2023 Farm Bill: Rational Commodity Price and Income Support Programs.”
  • Wednesday: House Ag subcommittee hearing on the farm bill commodity programs.
  • Wednesday. Path to approving the farm bill. Environmental and Energy Study Institute virtual briefing "The Process and Path Forward for Passing a Bipartisan Farm Bill."
     

Hearings of note:

  • Commerce Secretary Gina Raimondo will testify in a budget hearing before the Senate Appropriations Committee on Wednesday.
  • The chief executives of Experian PLC, TransUnion and Equifax Inc. will testify before the Senate Banking Committee in a Thursday oversight hearing on credit reporting agencies.
  • Internal Revenue Service Commissioner Daniel Werfel will testify before the House Ways and Means Committee on Thursday in a "Hearing on Accountability and Transparency."
     

Other events of note:

  • Ag journalists. North American Agricultural Journalists annual meeting, Monday through Tuesday.
  • USAID. Senate Foreign Relations Committee hearing with U.S. Agency for International Development (USAID) Administrator Samantha Power.
  • Energy/water appropriations. Senate Energy-Water Appropriations Subcommittee hearing on the Army Corps of Engineers and Bureau of Reclamation.
  • Biden administration green policies. House Energy and Commerce Environment, Manufacturing, and Critical Materials Subcommittee hearing on "Exposing the Environmental, Human Rights, and National Security Risks of the Biden Administration's Rush to Green Policies."
  • Banks. Sarah Bloom Raskin, distinguished professor at Duke Law School and former deputy secretary of the Treasury Department, will join the Peterson Institute for International Economics on Wednesday for an event titled, "U.S. bank supervision and deposit insurance after the collapse of Silicon Valley Bank."
  • Offshore wind expansion. Reuters on Wednesday will host "The Future of U.S. Offshore Wind Expansion: What Comes Next?" featuring the Department of Energy's offshore wind lead, Jocelyn Brown-Saracino.
  • Markets and clean energy. American Council on Renewable Energy virtual discussion on "Markets Can Power the Clean Energy Transition: Recommended Reforms for PJM and MISO's (PJM Interconnection and Midcontinent Independent System Operator) Energy and Ancillary Service Markets."
  • Lower carbon transportation. The Financial Times on Wednesday will host "Lower Carbon Transport: The Role of Renewable Gasoline" featuring Andy Walz, president of Chevron Corp.'s Americas Products, and Gill Pratt, chief executive officer at the Toyota Research Institute. We noted last week that Chevron and Exxon Mobil Corp. are both testing renewable gasoline blends in a partnership with Toyota Motor Corp., which could mean the gasoline market will stick around for longer even amid a surge in EV adoption. Walz recently said there "has to be alternatives" for light-duty vehicles, adding that "electrification is not the only answer." It could be years before the renewable gasoline hits the market, though, but it will be interesting to see what policies the companies push for to incentivize the alternative fuel's adoption.
     

Nominations.

     Labor Secretary nominee vote. The Senate Health, Education, Labor & Pensions Committee on Wednesday will consider the nomination of Julie Su to serve as Labor secretary.

     EPA nominations. Senate Environment and Public Works Committee on Wednesday will vote on the nominations of David Uhlmann to be assistant administrator for enforcement and compliance assurance at the Environmental Protection Agency; and Joseph Goffman to be an assistant administrator for the Environmental Protection Agency Office of Air and Radiation.

On the regulatory front, the Biden administration plans to roll out aggressive new rules to regulate planet-warming pollution from natural gas power plants, a move that is widely expected to face legal challenges.

     Stephen Goss, chief actuary at the Social Security Administration, and Sen. Bill Cassidy (R-La.) join the Bipartisan Policy Center and the Funding Our Future coalition Tuesday to discuss the legislative landscape around social security.

     Consumer Financial Protection Bureau Director Rohit Chopra will speak at a field hearing Wednesday at the Brooklyn Law School, examining "zombie" home mortgages.

     Water rights and ag. Farm Foundation virtual forum on "Water Rights and Policy in Agriculture Today."

     Digital assets. On Thursday, a House Ag subcommittee holds a hearing on gaps in regulation of digital assets.

On the international front, U.S. gov’t personnel and their families have been evacuated from Sudan because of heavy fighting between rival military factions, and Secretary of State Antony Blinken said that operations at the U.S. Embassy in Khartoum have been “temporarily suspended." President Biden said: "We are temporarily suspending operations at the U.S. Embassy in Sudan." An estimated 16,000 private U.S. citizens are registered with the U.S. Embassy in Khartoum as being in Sudan.

     On Thursday, South Korea President Yoon Suk Yeol addresses a joint meeting of Congress. President Biden earlier in the week hosts his South Korean counterpart Yoon Suk Yeol for a state visit to Washington. The Financial Times on Sunday reported that the White House has asked South Korea to urge its chipmakers not to fill any market gap in China if Beijing bans Idaho-based Micron from selling chips, as it tries to rally allies to counter Chinese economic influence.

     Meanwhile, Moscow may retaliate if the U.S. and other allies proceed with an outright ban on most exports to Russia by withdrawing from the U.N.-brokered deal for Ukrainian grain shipments, said Dmitry Medvedev, deputy chair of Russia’s Security Council.

 


Key Economic Reports and Other Events for the Week



Economic releases of note include consumer confidence and new home sales on April 25, durable goods orders on April 26, the GDP Q1 report on Thursday and the closely watched Personal Consumption Index and the Employment Cost Index on April 28 — we have a backgrounder on the different reports below. Federal Reserve members may be out on the speaking circuit on Monday before the blackout period begins in advance of the FOMC meeting on May 2-3.

Monday, April 24

  • Chicago Fed National Activity Index
  • Dallas Fed Manufacturing Survey
  • National Association for Business Economics virtual discussion on the results of the NABE April 2023 Business Conditions Survey.
  • Earnings: Ameriprise Financial AMP, Brown & Brown, Cadence Design Systems, Coca-Cola, and First Republic Bank release earnings. 
     

Tuesday, April 25

  • S&P CoreLogic releases its Case-Shiller National Home Price Index for February. Expectations are for home prices to be flat year over year. Early 2012 was the last time the index didn’t show an annual increase.
  • FHFA House Price Index
  • Conference Board releases its Consumer Confidence Index for April. Consensus estimate is for a 104.1 reading, roughly even with the March data.
  • New Home Sales: The Census Bureau reports residential sales data for March. Economists forecast a seasonally adjusted annual rate of 632,000 new single-family homes sold, slightly fewer than in February.
  • Richmond Fed Manufacturing Index  
  • Earnings: 3M, Alphabet, Biogen, Chubb CB, Danaher, Dow, General Electric, General Motors, Halliburton, Kimberly-Clark, McDonald’s, Microsoft, Moody’s, MSCI, NextEra Energy, PepsiCo, Raytheon Technologies, Texas Instruments, United Parcel Service, Verizon Communications, and Visa report quarterly results.
     

Wednesday, April 26

  • MBA Mortgage Applications
  • Census Bureau releases the durable goods report for March. New orders for manufactured durable goods are expected to increase 0.7% month over month to a seasonally adjusted $270 billion.
  • International Trade in Goods [Advance]: The U.S. goods deficit (Census basis) is expected to narrow by $2.0 billion to $90.0 billion in March after widening by $0.7 billion in February to $92.0 billion.
  • Retail Inventories (Advance)
  • Wholesale Inventories (Advance): Wholesale inventories are expected to increase 0.2 percent in the advance report for March that would follow a 0.1 percent build in February.
  • State Street Investor Confidence Index
  • Earnings: American Tower, Automatic Data Processing, Boeing, Boston Scientific, CME Group, eBay, Edwards Lifesciences, General Dynamics, Humana, Meta Platforms, Norfolk Southern, Old Dominion Freight Line, Pioneer Natural Resources, ServiceNow, and Thermo Fisher Scientific announce earnings.
     

Thursday, April 27

  • Jobless Claims: Having steadily risen, jobless claims for the April 22 week are expected to come in at 249,000 versus 245,000 in the prior week.
  • GDP: Bureau of Economic Analysis releases its preliminary estimate of first-quarter gross domestic product growth. The consensus call is for GDP to have grown at a seasonally adjusted annual rate of 1.8%, following a 2.6% increase in the fourth quarter, and 2.1% for all of 2022.
  • Pending home sales in March are expected to rise a further 0.4 percent after climbing 0.8 percent in February that followed January's sharp 8.1 percent surge.
  • Kansas City Fed Manufacturing Index
  • Fed Balance Sheet
  • Money Supply  
  • Earnings: AbbVie ABBV, Altria Group, Amazon.com, Amgen AMGN, Bristol Myers Squibb, Capital One Financial, Capital One Financial Corp., Caterpillar, Comcast, Eli Lilly, Gilead Sciences, Hershey, Honeywell International, Intel, International Paper, Mastercard, Merck, Mondelez International, Newmont, Northrop Grumman, S&P Global, and T-Mobile U.S. hold conference calls to discuss quarterly results.
     

Friday, April 28

  • BEA reports personal income and outlays for March. Income is forecast to increase 0.2% month over month, while spending is seen declining 0.1%. This compares with gains of 0.3% and 0.2%, respectively, in February. The core personal-consumption expenditures price index is expected to increase 4.5% from a year earlier, one-tenth of a percentage point less than previously.
  • BEA releases its Personal Consumption Expenditures (PCE) price index — the Federal Reserve’s preferred inflation gauge — for December. (See related item below for background information on this report.)
  • Employment Cost Index: Swollen gains of 1% and more over the last six quarters have been signaling substantial wage-push pressures. Forecasters see employment costs rising another 1.0% in the first quarter to match the fourth-quarter increase. (See background information for details about the report.)
  • The Chicago PMI is expected to edge lower in April to an even more depressed 43.5 versus 43.8 in March which was the seventh straight month of contraction.
  • Consumer sentiment is expected to end April at 63.5, below March's 62.0 and unchanged from April's mid-month flash.
  • Earnings: Charter Communications, Chevron, Colgate-Palmolive, and Exxon Mobil release earnings.
     

The Personal Consumption Expenditures (PCE) Price Index is a measure of the average change in prices for all goods and services purchased by consumers in the U.S. economy over time. It is an important indicator of inflation and is used by economists, policymakers, and analysts to track changes in the cost of living and to monitor the overall health of the economy.

     The PCE Price Index is calculated by the Bureau of Economic Analysis (BEA), and it is a part of the National Income and Product Accounts (NIPA). The PCE Price Index is considered an alternative to the more widely known Consumer Price Index (CPI), which is calculated by the Bureau of Labor Statistics (BLS).

     The PCE Price Index differs from the CPI in a few key ways. Firstly, the PCE Price Index has a broader scope than the CPI, as it includes not only out-of-pocket expenses made by consumers but also expenditures made on their behalf by businesses, government, and other entities. Secondly, the PCE Price Index employs a different weighting system and formula for its basket of goods and services, which leads to changes in its relative importance over time as consumption patterns shift.

     One notable version of the PCE Price Index is the "core" PCE Price Index, which excludes volatile food and energy prices to provide a more stable and consistent measure of underlying inflation trends. This "core" index is particularly important for monetary policymakers, such as the Federal Reserve, as it helps them make more informed decisions about setting interest rates and controlling inflation.

     The Employment Cost Index (ECI) measure different aspects of the economy and serve different purposes. The ECI is a quarterly measure of the changes in the costs of labor for businesses in the U.S.. It is calculated by the Bureau of Labor Statistics (BLS) and captures changes in wages, salaries, and employee benefits. The ECI is used to assess trends in labor costs, which can be an important factor in understanding the overall cost structure for businesses and the potential for wage-driven inflation.

     The ECI focuses on the following components:

  • Wages and salaries: This includes hourly wages, overtime pay, and other forms of cash compensation.
  • Benefits: This includes both legally required benefits (such as Social Security and unemployment insurance) and voluntary benefits (such as health insurance, retirement plans, and paid leave).
     

     In summary, the ECI focuses on the cost of labor for businesses, while the PCE Price Index measures the overall change in prices for goods and services purchased by consumers. Both indicators are important for understanding different aspects of an economy, but they serve different purposes and should not be used interchangeably.
 


Key USDA & international Ag & Energy Reports and Events 



This is the time of year when weather patterns determine planting progress or lack of it for major U.S. crops. Meanwhile, this week brings updates for Brazil’s crop and Stats Canada releases seeded area data. On Tuesday we get another USDA update on food prices.

Monday, April 24

     Ag reports and events:

  • Export Inspections
  • Crop Progress
  • Raw-Fiber Equivalents of U.S. Textile Trade Data
  • MARS monthly report on EU crop conditions
  • Cane crush and sugar production data by Brazil’s Unica (tentative)
  • Holiday: Malaysia, Indonesia, Pakistan
     

Energy reports and events:

  • North Sea platform workers due to strike
  • BNEF Summit, New York; runs through Tuesday
  • Holiday: Indonesia, Malaysia, Oman, Iraq, Kuwait, Nigeria, Qatar, Saudi Arabia, Egypt
     

Tuesday, April 25

     Ag reports and events:

  • Food Price Outlook
  • Cold Storage
  • Poultry Slaughter
  • Malaysia’s April 1-25 palm oil export data
  • Argus Biofuels & Feedstocks Asia Conference, Singapore, day 1
  • Commodity Trading Week conference, London, day 1
  • Holiday: Australia, New Zealand, Pakistan, Indonesia
     

     Energy reports and events:

  • API weekly U.S. oil inventory report
     

Wednesday, April 26

     Ag reports and events:

  • Broiler Hatchery
  • Dairy Products, Annual
  • Peanut Stocks and Processing
  • Euro Grain Hub Exchange & Forum, Bucharest, Romania, day 1
  • Argus Biofuels & Feedstocks Asia Conference, Singapore, day 2
  • Commodity Trading Week conference, London, day 2
  • StatsCanada to release seeded area data for wheat, barley, canola and soybeans
  • Brazil’s Conab to publish cane, sugar and ethanol production data
     

     Energy reports and events:

  • EIA weekly U.S. oil inventory report
  • U.S. weekly ethanol inventories
  • Genscape weekly crude inventory report for Europe’s ARA region
     

Thursday, April 27

     Ag reports and events:

  • Weekly Export Sales
  • Livestock and Meat Domestic Data
  • Vegetable and Pulses Outlook
  • Meat Animals, PDI
  • Milk, PDI
  • Poultry, Production and Value
  • Euro Grain Hub Exchange & Forum, Bucharest, day 2
  • Port of Rouen data on French grain exports
  • Argus Biofuels & Feedstocks Asia Conference, Singapore, day 3
     

     Energy reports and events:

  • EIA natural gas storage change
  • Russian weekly refinery outage data from ministry
  • Insights Global weekly oil product inventories in Europe’s ARA region
  • Euro Grain Hub Exchange & Forum, Bucharest, day 3
  • FranceAgriMer’s weekly crop condition report
     

Friday, April 28

     Ag reports and events:

  • CFTC Commitments of Traders report
  • Peanut Prices
  • Agricultural Prices
  • Egg Products
     

     Energy reports and events:

  • Baker Hughes weekly U.S. oil/gas rig counts

 

 

KEY LINKS


WASDE | Crop Production | USDA weekly reports | Crop Progress | Food prices | Farm income | Export Sales weekly | ERP dashboard | California phase-out of gas-powered vehicles | RFS | IRA: Biofuels | IRA: Ag | Student loan forgiveness | Russia/Ukraine war, lessons learned | Russia/Ukraine war timeline | Election predictions: Split-ticket | Congress to-do list | SCOTUS on WOTUS  | SCOTUS on Prop 12 | New farm bill primer | China outlook Omnibus spending package | Gov’t payments to farmers by program | Farmer working capital | USDA ag outlook forum |


 

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