The Week Ahead: April 11-17, 2016

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The House returns from its two-week Easter recess to join the Senate with Fiscal Year 2017 markups and hearings, and several agricultural policy hearings on tap on ag financial pressures and the impact of energy production on the rural economy. USDA on Tuesday will issue updated supply and demand projections.

House members may take up several regulatory bills – measures that would bar the federal government from regulating consumer broadband Internet rates; bring the Financial Stability Oversight Council and Treasury Department’s Office of Financial Research under the congressional appropriations process; and allow banks and thrifts with assets of less than $5 billion to incur higher amounts of debt when acquiring another firm.

The House may also seek consensus on legislation to deal with Puerto Rico’s $70 debt crisis. The House Natural Resources Committee plans a Wednesday hearing on the measure.

The House Ag Appropriations Subcommittee on Wednesday will mark up its FY 2017 funding bill. Last year’s $1.1 trillion omnibus spending bill repealed country of origin labeling for beef and pork products, but did not create a national standard for labeling food made from genetically modified organisms, as some had wanted. That topic awaits Senate action with Ag panel leaders continuing to negotiate. Details of the 2017 agriculture appropriations bill have not been released. Last year saw attempts to alter crop insurance funding, but that approach is not likely this year after the battle over the issue last year saw GOP leaders having to back down from the attempt. The Crop Insurance and Reinsurance Bureau (CIRB) is holding its 2016 spring policy conference and fly-in April 11–13. Members will get a policy update from the bureau and then hit Capitol Hill, where they will probably press members to resist cuts to crop insurance during the upcoming budget process.

Ag financial pressures. The House Agriculture Committee’s Subcommittee on General Farm Commodities and Risk Management will hold a hearing Thursday on financial pressures on the farm economy, while the full Agriculture Committee is scheduled to hold a hearing Wednesday on the impact of oil and gas production on the rural economy.

In the Senate, the focus will be on a bill to reauthorize Federal Aviation Administration (FAA) operations and revenue-collection authority through Sept. 30, 2017. Democrats are expected to keep pressing for inclusion of renewable energy tax credits. Senate Finance Chairman Orrin Hatch (R-Utah) said that a deal to add the credits was “pretty well done.” Democrats said Republicans promised the energy breaks would be acted on after they were left off last year’s omnibus spending bill. The credits, which expire at the end of the year, would cost $1.4 billion over a decade. The tax package would extend the Investment Tax Credit for geothermal, fuel cells, small wind and other renewable technologies.

CFTC reauthorization. In the Senate, the Agriculture Committee on Thursday will mark up legislation reauthorizing the Commodity Futures Trading Commission (CFTC). The bill could impact how the agency uses its Dodd-Frank authority. The House passed its reauthorization bill with changes in June 2015, but many observes think the Senate will take a more conservative approach relative to key changes.

Supreme Court nominee Merrick Garland will hold a breakfast session Tuesday with Senate Judiciary Committee Chairman Chuck Grassley (R-Iowa), who is up for re-election this year and is facing home-state criticism over his refusal to schedule a hearing for Garland. Grassley on Apr. 7 decried Obama administration pressure to confirm Garland and reiterated his stance that voters “deserve to be heard” in November on the next justice to replace the late Antonin Scalia.

Senate appropriators may begin markups on several spending bills, perhaps including the Military Construction-VA spending measure even though there is not a House vehicle available allowing it on the floor quickly.

Senate Budget Committee Chairman Mike Enzi (R-Wyo.) said he sees momentum building for his proposal to switch to a two-year budget process and has scheduled a Wednesday hearing on the issue. He is drafting legislation that he said would address unauthorized appropriations and federal government auditing standards. The House Rules Committee plans a subcommittee hearing on unauthorized appropriations.

Fixed-income markets is the topic of one of the hearings this week. Federal Reserve Governor Jerome Powell and Antonio Weiss, the counselor to the secretary of the Treasury, are scheduled to testify Thursday before the Senate Banking, Housing and Urban Affairs Securities, Insurance and Investment Subcommittee about fixed-income markets.

Tax overhaul. House Ways and Means Committee plans to hear from members Wednesday about their tax-overhaul proposals. This is the second member day the committee has held on the subject.

Tariffs. The Ways and Means Trade Subcommittee plans a hearing Thursday on using tax cuts to help manufacturers compete in the global market.

On the economic front, updates on consumer activity, inflation and other areas will be a focus for the week ahead. The data flow is concentrated in the Tuesday-Friday period, with Tuesday seeing the release of Import & Export Prices and the Treasury Budget update, followed by Wednesday data on Retail Sales, PPI-FD, Business Inventories and the Atlanta Fed update. Thursday’s reports include the CPI data and weekly jobless claims followed by Friday releases including the Empire State manufacturing update, Industrial Production and Consumer Sentiment. The CPI and PPI data will get considerable attention as those provide the inflation data for March and are components in the gauge the Fed uses to monitor inflation. Consumer activity in stores will also be important, with that being one of the key sources of US economic growth. China data releases could also prove market-sensitive, particularly if they are followed up by or prompt expectations for more Chinese government action to shore up their economy.

There are several Fed speakers on tap, with Monday seeing remarks from Dallas Fed’s Rob Kaplan (2017 voter), followed by a “trio” on Tuesday – Philadelphia Fed’s Patrick Harker (2017 voter), San Francisco Fed’s John Williams and Atlanta Fed’s Dennis Lockhart (both 2018 voters). Thursday will see Lockhart on the schedule again along with Fed Gov. Jerome Powell, the only FOMC voter on the schedule. And the week closes out with Chicago Fed’s Charles Evans (2017 voter). After the FOMC meeting minutes and subsequent comments by Fed Chairwoman Janet Yellen and others, remarks that run contrary to the theme of “gradual” interest rate increases could be of note. Plus, on Wednesday, we arrive at the two-weeks-to-go period for the next FOMC session. That means release of the Fed’s Beige Book which will be watched for any signs the issues the Fed expressed concern about in March are still present in the anecdotal recap of conditions in the 12 Fed bank districts.

US agriculture will again be watching Monday’s Crop Progress report to see if expanding dryness in the Plains is impacting winter wheat ratings. The cold snap in the outlook for April 9-10 could be mentioned in the state reports that come out, but it would likely be a brief mention at this point. But the real attention for the week will come on Tuesday when USDA releases the monthly Crop Production and Supply/Demand reports. The latter is the main focus and there are expected to be few changes there compared to the data in March. This is the final month where the 2015/16 marketing year will be the main focus as the 2016/17 prospects take center stage with the first release in May. Weather conditions remain a factor as well as the Weekly Export Sales report on Thursday morning for traders to mull. Foreign weather and trade developments also have potential to impact markets, but domestic weather and how that will impact corn and soybeans will be a constant discussion point for traders.

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