The Week Ahead: May 16-22, 2016

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The attention in Congress continues on the annual spending bills. Work on the defense authorization bill could start in the House while a House Ag subcommittee will take a look at the impact of regulations on the farm economy and then will look at contribution of veterans to food security. EPA employee activities will be looked at while the Senate Ag Committee takes a look at the Farm Credit System and the impacts from the current agricultural economic climate.

Ag agenda in Washington for the coming week. The Senate Ag Appropriations Subcommittee will markup its Fiscal Year 2017 Ag spending measure May 17, with the full panel markup May 19. The Senate probably will combine the Ag-FDA and Commerce-Justice-Science spending bills for floor consideration.

Several amendments are likely, including one to block USDA’s GIPSA from finalizing a rule governing contract farmers and processors who buy their livestock. The House Appropriations Committee approved a similar amendment when it advanced its $21.3 billion agriculture funding bill in April. Another likely rider is keeping USDA from finalizing a proposed rule expanding food stocking requirements for retailers participating in the Supplemental Nutrition Assistance Program/food stamps. Other possibilities include blocking the FDA from issuing sodium intake guidance. Action is still awaited in the Senate on a bill to preempt Vermont’s GMO food labeling bill, slated to be implemented July 1.

GMO report. The National Academy of Sciences plans to release a report titled “Genetically Engineered Crops: Experiences and Prospects” on May 17.

Several ag-related hearings are on tap, with the House Ag panel holding a hearing May 18 on how veterans contribute to national food security. The panel’s Subcommittee on Conservation and Forestry will hold a hearing May 17 on the impact of environmental regulations and voluntary conservation solutions. The Senate Ag Committee on May 19 will hold a hearing on the Farm Credit System.

On the trade policy front, the International Trade Commission this week is due to release its report on the impact of the Trans-Pacific Partnership (TPP) on the US economy. On May 16, the US and Cuba will hold the third bilateral commission in Havana, which is expected to build on progress achieved so far in normalizing relations between the two nations. The meeting will review progress on shared priorities since the bilateral commission last met in November 2015, including what was achieved during President Barack Obama’s March trip to Cuba, the State Department said. State Department Counselor Kristie Kenney will lead the US delegation. Deputy Assistant Secretary John Creamer will also attend for the US. Josefina Vidal, the Cuban Foreign Ministry’s director general for US Affairs, will lead the Cuban side.

On the trade enforcement front, the Commerce Dept. May 17 will announce its final determinations in the antidumping and countervailing duty investigations of imports of certain cold-rolled steel flat products from China and its antidumping duty investigation of imports from Japan. President Obama declared that the coming week will be World Trade Week.

Economic updates for the week include inflation, housing and manufacturing reports. The week opens with the Empire State manufacturing index and Housing Market Index on Monday, followed by CPI, Housing Starts and Industrial Production on Tuesday. The Atlanta Fed inflation expectations update arrives on Wednesday followed by Thursday releases that include weekly jobless claims, Philadelphia Fed and Chicago Fed updates. The week closes out with the Existing Home Sales report. Any Chinese economic updates could garner market attention while traders will continue to asses all the incoming economic updates relative to how they could impact Fed policy decisions.

There are a few Fed officials on the schedule, though none of those on the schedule thus far are voters in 2016. Monday has 2017 voter Minneapolis Fed’s Kashkari on the schedule followed by Tuesday appearances by San Francisco Fed’s Williams (2018 voter) and Dallas Fed’s Kaplan (2017 voter). Key focus for their remarks will be on the prospects for rate increases yet in 2016. However, some in the marketplace are more or less discounting the views of the Fed District bank presidents and instead are wanting to hear the views from key Fed officials like Chairwoman Janet Yellen, Vice Chair Fischer and NY Fed’s Dudley.

Weather remains the focal point now that the first USDA 2016/17 outlook is out, as traders try to gauge corn and soybean planting progress for the week ended May 15. USDA economists will release the Livestock, Dairy & Poultry Outlook report with Thursday releases on Weekly Export Sales and Farm Labor. The week wraps up with the monthly USDA Cattle on Feed report on Friday. The weather situation in the US looms large as does the situation in areas like South America. The strike situation at Argentina’s Rosario port was resolved late Friday with the government agreeing to 15 days of wage talks with the union. The Brazil situation could provide some support if it starts impacting the country’s currency.

On the election front, Tuesday brings primaries in Kentucky, Idaho, and Oregon. In Kentucky, the winner of a four-candidate Republican primary in the western 1st District will be strongly favored to succeed retiring Republican Rep. Ed Whitfield, a senior member of the Energy and Commerce Committee. The best-known candidate is James Comer, a former state agriculture commissioner and legislator who narrowly lost the 2015 Republican governor’s primary. The field also includes Mike Pape, who was Whitfield’s longtime district director. Kentucky Democrats will choose an opponent for GOP Senator Rand Paul.

Key hearings this week include corporate taxes, health care, oil and gas leasing and the Federal Reserve. Details:

Corporate taxes. The Senate Finance Committee plans a hearing Tuesday on changes to dividend taxes. One approach to eliminating a double tax on corporate earnings – taxing corporate incomes as well as shareholder dividends – is allowing a dividends paid deduction. Under current law, corporations generally do not get a deduction for dividends paid to shareholders, but they do get an interest expense deduction for interest paid on corporate debt.

Health care. The House Ways and Means Health Subcommittee plans a hearing Tuesday where members will be able to share their proposals for health care tax changes.

Oil and gas leasing. The Senate Energy and Natural Resources Committee plans a hearing Thursday on the Obama Administration’s proposal for selling offshore drilling rights between 2017 and 2022. The administration excluded offshore drilling along the East Coast, an approach that inflicts more pain on an oil industry that’s already battered by falling prices and dropping demand.

Federal Reserve. The House Financial Services Monetary Policy and Trade Subcommittee plans a hearing Tuesday on the Federal Reserve’s balance sheet, and interest on reserves. Meanwhile, the Capital Markets and Government Sponsored Enterprises Subcommittee plans a hearing Tuesday on capital formation and regulatory authority.

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