MALANGA: ECONOMY NOT WELL POSITIONED FOR PROLONGED DEBT TALKS... Dr. Vince Malanga, president of LaSalle Economics, Inc., says an economy can within a lot of abuse if it's on solid footing, but unfortunately, he says the current state of the economy is "not yet comfortably positioned." He says while budget and debt ceiling issues aren't unexpected, they are harming economic activity in the short-term and possibly consumer and business confidence in the longer-term.
Malanga believes due of the ongoing budget standoff in Washington, growth has been shaved by around 0.5% from what it otherwise would have been. "The economy did not end the third quarter on an upbeat note either," he adds. "Private surveys suggest employment and income growth remained tepid in September. Mortgage demand showed no sign of a rebound in response to the recent down tick in interest rates. And consumer spending for both durables and nondurables was soft."
"We continue to think nominal growth is most likely to remain in its 2.5% to 3% growth mode through next year. And in such an environment the Federal Reserve's incoming chairperson may wonder what more could be done to stimulate growth," he adds.
OPTIMISM REGARDING REID/MCCONNELL FISCAL NEGOTIATIONS... The stock market responded positively to expressions of optimism from both Senate Majority Leader Harry Reid (D-Nev.) and Senate Republican Leader Mitch McConnell (Ky.) regarding recent negotiations to end the government shutdown and avoid a debt ceiling default. Politico reports Reid privately offered McConnell a deal that would reopen the government through mid- to late-December, extend the debt ceiling for six to nine months and set the stage for broad negotiations with the House regarding sequestration cuts and other deficit issues.
Congressional leaders Reid, McConnell, House Speaker John Boehner (R-Ohio) and House Minority Leader Nancy Pelosi (D-Calif.) were slated to meet with President Barack Obama and Vice President Joe Biden at 2:00 p.m., CT today, but the White House postponed the meeting to allow the senators more time to hash out a possible new deal.
HOUSE REJECTS NONBINDING RESOLUTIONS ON SUGAR, SNAP... Before naming conferees, the House held two votes on positions the House should take in the talks -- and rejected both. The House voted to reject a motion that would have put the House on record as urging its conferees to support the repeal of sugar tariff language that Rep. Joseph Pitts (R-Pa.) said has resulted in higher prices for consumers and large profits for big sugar producers. The House also rejected a motion from Ranking Member Collin Peterson (D-Minn.) to instruct conferees to accept the Senate provisions calling for a five-year reauthorization of the Supplemental Nutrition Assistance Program (SNAP) and other nutrition programs. The House approach is a three-year rewrite of SNAP and a five-year reauthorization for other programs.
HOUSE ACCEPTS NONBINDING MEANS TESTING RESOLUTION... The House did accept one nonbinding resolution on Friday pushed by Budget Chairman Paul Ryan (D-Wis.) that calls for means-testing for federal subsidies of crop insurance premiums for farmers. Ryan's proposal is similar to Senate farm bill language that would reduce the federal share of crop insurance premiums by 15 percentage points for farmers with adjusted gross income of more than $750,000. The Senate language would require USDA to determine if such action would undermine the crop insurance program before any reduction could occur.
House Ag Committee Chairman Frank Lucas (R-Okla.) told the House Rules Committee on Friday that he continues to oppose such restrictions because it could drive larger farmers out of the program, shrinking the pool of participants who share the risks. Ryan, however, said the federal government should not be in the business of aiding wealthy farm operations.
LIGHTER-THAN-EXPECTED RAINS FOR HEART OF CORN BELT... The weekend featured lighter-than-expected rains across the heat of the Corn Belt, allowing harvest to continue, but heavy rains across the Upper Midwest have stalled harvest activity. Meteorologist Gail Martell of MartellCropProjections.com says drought remains a major concern for Iowa, Illinois, southern Minnesota, western Wisconsin and Missouri, where 4 to 8 inches of precip are needed to replenish soil moisture.
Because of the government shutdown, USDA's progress data once again will not be released ( it would have been delayed until Tuesday because of Columbus Day). According to a survey conducted by Reuters, traders estimate around 30% of the nation's corn was harvested as of Sunday, with about 45% of the soybean harvest complete.
Martell says this week's forecast is wet for the Upper Midwest, with rains also expected in HRW wheat areas. Click here for related maps.