The Week Ahead: March 27-April 2, 2017

Tax policy | New farm bill | Supreme Court | USDA reports

Health-reform, or more accurately the lack of it, could still be a backdrop in Washington in the week ahead, but it will mostly be a backdrop that could color the outlook for other issues.

Treasury Secretary Steve Mnuchin was talking up the potential for tax reform plans to come soon, so that will be a watch point ahead.

For agriculture interests, the House continues its new farm bill work, with House Agriculture subcommittees having a “part one” hearing on commodity policy along with ones on the Supplemental Nutrition Assistance Program (SNAP) policy and the Farm Credit System.

Other hearings on the schedule include sessions looking at Federal Reserve transparency, banking lending, the Volcker rule and energy tax impacts on consumers.

The Senate’s attention will be on nominations at the committee level, including potential votes on Neil Gorsuch to serve on the Supreme Court despite a promised Democratic filibuster when the nomination hits the Senate floor, and on Alexander Acosta to be Labor Secretary. Other committee action will focus on financial companies fostering economic growth, Iran and the US-Mexico relationship.

Key economic data the final week of March include an update on the US economy, inflation and readings on consumer attitudes. Today opens with the Dallas Fed Manufacturing Index, followed by Tuesday releases that include International Trade in Goods, S&P Corelogic Case-Shiller HPI, Consumer Confidence and the Richmond Fed Manufacturing Index. The lone update Wednesday is the Pending Home Sales Index which will be watched for signals on home sales ahead. Thursday releases include the final update on GDP for the fourth quarter of 2016 along with the Weekly Jobless Claims. The week closes out with Personal Income and Outlays, Chicago PMI and Consumer Sentiment on Friday. Attention will continue on how these indicators mesh with expectations on future Fed rate increases.

Fed speakers are on the schedule every day in the week ahead, starting with a pair of current voters on the Federal Open Market Committee (FOMC) – Chicago Fed’s Evans and Dallas Fed’s Kaplan. Tuesday remarks are due from KC Fed’s George (2019 voter) and Kaplan, followed by Wednesday remarks from Evans, Boston Fed’s Rosengren (2019 voter) and San Francisco’s Williams (2018 voter). Williams is on the schedule again Thursday along with Kaplan and Cleveland Fed’s Mester (2018 voter). The week closes out with Minneapolis Fed’s Kashkari (2017 voter) and St Louis Fed’s Bullard (2019 voter). Views from these officials still could get market attention, but only if they vary a great deal from current expectations for Fed policy or their “known” stances on monetary policy. And, other events could also overshadow their appearances.

Friday will be the big day for agriculture as USDA will come with the key Prospective Plantings report which is expected to show fewer corn and more soybean acres compared to 2016. The levels signaled by farmers – which still could change before planters are done rolling this spring – will be the next acreage “marker” for traders. The quarterly Grain Stocks data is also out, but the acreage intentions figures will likely be the bigger focal point. Weather will stay in market cross-hairs for Plains HRW wheat areas, especially on whether forecast rains materialize or not. Colorado gets added into the mix on winter wheat ratings but the national-level figures won’t come until the following week. Demand will still be a factor, keeping both the Grain Inspections data today and Weekly Export Sales report Thursday as attention points for traders. Livestock traders will also pay close attention to the quarterly Hogs & Pigs report to get a reading on future pork supplies.

On the trade policy front, US and Mexican officials will discuss a lingering dispute on sugar trade. The Commerce Department recently extended to May 1 from April 4 the final decision date for its review of suspension agreements for US imports of sugar from Mexico. The suspension pacts settled dumping and subsidy cases filed by US producers targeting Mexican sugar imports. If the matter is not settled, duties eventually could kick in on sugar imports from Mexico.

Canada’s Minister of Infrastructure Amarjeet Sohi will be in Washington this week. “Both the United States and our country have a great emphasis on building infrastructure to grow our economy and create opportunities for workers on both sides of the border,” he has said. Canada, however, is adamantly opposed to US Buy American and Buy America policies, which President Donald Trump backs. Procurement policies are expected to loom large in NAFTA renegotiations with Canada and Mexico.

UK Prime Minister Theresa May on March 29 is filing papers to trigger the start of two years of negotiations with the EU on the UK’s exit. The negotiations are expected to set new rules for how the UK will conduct its trade relationship with the remaining 27 EU members. Actual discussions with the UK will not begin until ministers from the 27 nations officially approve more detailed negotiation directives to be drawn up by the Brussels-based European Commission. The UK will not be able to enter into trade agreements with other countries until it leaves the EU. The Trump administration has expressed interest in a trade pact with the UK. Meanwhile, a UK parliamentary committee is looking into the potential for a future bilateral trade agreement with the U.S. once Britain formally leaves the European Union.

The International Trade Committee March 29 will examine the opportunities and challenges of any future agreement before making formal recommendations on how the UK should approach trade relations with the US. The panel will seek information on: what impact such a pact could have on sectors of the British economy; how an agreement should approach public procurement; should the services market be opened up and what type of dispute-resolution scheme should be adopted. Since the US is Britain’s single largest trading partner, the UK is reviewing the potential of a trans-Atlantic bilateral deal, which it may pursue once it has formally exited the EU.