The Week Ahead: December 5-11, 2016

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

Attention in Washington remains on compiling the Trump administration and staffing the various Cabinet posts, while lawmakers will focus on a short-gap spending measure taking funding into March 2017 or perhaps into April.

Agricultural interests continue to discuss the myriad of possible USDA candidates. But as with some of the other positions already selected by Trump, it still could be someone that no one has on their radar screen at this point. President-elect Donald Trump will announce more Cabinet appointments during the week.

CR and WRDA on tap. House Majority Leader Kevin McCarthy (R-Calif.) said the new continuing resolution (CR) to cover the government and the rewrite of the Water Resources Development Act (WRDA) are likely to be the last items passed by this Congress, with the session and Congress beginning January 3. A current CR expires December 9. McCarthy said lawmakers will stay longer if necessary to finish the job. The two bills now are linked because both are seen as critical to delivering promised funds to help deal with the drinking water crisis in Flint, Michigan. “[W]e will not leave until we get a continuing resolution done and get WRDA done and I believe we can,” McCarthy said. “The prior work that we have done working together, and knowing where both are right now, we can finish this up and be done on time.”

Regarding WRDA, 25 Senate members asked leaders of both chambers Friday not to remove a “Buy America” provision that would require US-made iron and steel be used in the $9 billion worth of infrastructure projects authorized in the bill. The letter writers — 24 Democrats and Ohio Republican Rob Portman — said they were concerned that conference negotiators had removed the provision from the water resources measure. The provision was included in the Senate bill (S 2848) but not in the House-passed version (HR 5303). The issue could be delaying completion of a conference report. “American tax dollars shouldn’t be spent on Chinese steel,” Sen. Sherrod Brown, D-Ohio, said in a statement. “American infrastructure should be built with American products that support American jobs.” Besides the bill’s traditional focus on authorization for Army Corps of Engineers work on locks, dams, ports, environmental restoration and natural disaster mitigation projects, both chambers included a Flint aid package.

On the hearing side, there will be session on self-driving cars, unconventional monetary policy, USDA catfish inspections, short-term financing issues and regulations along with challenges ahead for the U.S. State Department and U.S. Agency for International Development. The House Agriculture Committee will look at the challenges facing the 1890 land grain universities.

On the trade policy front, Treasury Undersecretary for International Affairs Nathan Sheets heads to Beijing to attend the U.S.-China Joint Economic Committee meetings December 5-6. In a release, Treasury said Sheets “will discuss a range of bilateral and multilateral economic and financial issues.” Sheets’s trip comes as the Obama administration winds down and President-elect Donald Trump’s team prepares to step into the White House. Trump already has pledged to label China a currency manipulator, bring trade complaints against the nation and impose tariffs if it does not halt what he sees as unfair trading practices.

U.S.-Canada talks. Vice President Joe Biden will travel to Ottawa December 8-9 for meetings with Canadian Prime Minister Justin Trudeau. “I look forward to meeting with Vice President Biden and discussing the strength of our two countries’ relationship. Canada has no closer friend, partner, and ally than the U.S., and our relationship with our neighbor to the south is critical to citizens on both sides of the border,” Trudeau said in a statement. Canada is the U.S.’s top trading partner. The two countries are clashing on softwood lumber trade with a U.S. coalition of producers seeking duties on imports from Canada.

Updates on trade, services and consumer attitudes will be the key economic updates. The week opens with Monday releases on PMI Services and ISM Non-Manufacturing indices and the Labor Market Conditions Index, with Tuesday reports on International Trade, Productivity & Costs and Factory Orders. The Wednesday release will be on Consumer Credit with the Weekly Jobless Claims update on Thursday. And the week closes out with Consumer Sentiment and Wholesale Trade. The usual process of winnowing through each economic release to see how it might impact the December 13-14 Fed meeting decision, though most indications at this stage are it would take a major shock to counter expectations that the Fed will increase short-term rates at that meeting. Foreign updates will be of note, potentially from China, but most of the attention will remain on the U.S. economic front.

The Fed speaker list is short as the one-week-to-go blackout period ahead of the Federal Open Market Committee (FOMC) meeting December 13-14 arrives on Tuesday. So, Fed watchers will be left with comments to mull Monday from New York Fed President Dudley (always a voter), Chicago Fed President Evans (2017 voter) and St Louis Fed President Bullard (current voter). Odds are they may not shift their views much from where they have been leading up to this point – mostly favoring a gradual rate-rise path ahead. Traders will also note the coming decision by the European Central Bank on interest rates Thursday, but odds are that won’t provide a surprise to markets.

Agricultural-market focus will be on Friday when USDA will release its monthly Crop Production report. That will only feature an update on U.S. cotton production and no changes for corn, soybeans or wheat on the output side. That will leave traders focused on the Supply/Demand report also out Friday for adjustments to the U.S. and global balance sheets. Production prospects for foreign countries will also be of note in the Friday USDA update. But before that, Tuesday will feature production forecasts from both Canada and Australia. The main attention there will be on how big the Australian wheat crop will be and for Canada, attention will be on how hard it had been to get some of this year’s production in the bin, oats in particular. U.S. weather remains a watch point, though the focus is mostly on the Southern Plains and wheat. But with the final condition ratings for 2016 in the books, traders must wait a few more weeks for any rating updates.

Other USDA data due on the week include the Grain Inspections figures on Monday, U,S, Ag Trade Data on Tuesday along with the Weekly Export Sales report on Thursday. Key there will be whether U.S. soybean sales start slowing as many expect they will.

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