The Week Ahead: May 22-28, 2017

Budget cuts ahead | CBO health-care estimates | Branstad Senate vote

Mandatory budget cuts including agriculture subsidies are likely to be proposed this week via President Donald Trump’s Fiscal Year 2018 budget proposals and, more importantly, by the House Budget Committee.

The Trump administration will unveil their Fiscal 2018 budget plan and that will set the congressional hearing process in motion on that front in both the House and Senate. The Budget Committees will take the first run and the various Appropriations subcommittees will start poring over the details, including several hearings in which the key witnesses will be Trump Cabinet officials.

Other matters coming up on the hearing front include EPA rulemaking, Russia, international trade, IRS oversight, Iran, atomic energy and more.

The House will take up a measure easing permit requirements for pesticide usage. The Reducing Regulatory Burdens Act would reverse a 2009 appellate court ruling in a case involving the National Cotton Council that forced the Environmental Protection Agency to require pesticide applicators to get permits to spray in or near “navigable waters” as defined in the Clean Water Act. The key hurdle on the topic will be in the Senate because similar efforts to reverse the 2009 court decision have died in the upper chamber.

On Wednesday, the Congressional Budget Office releases its analysis of the House-passed health-care reform bill. The CBO report will include estimates of how many people would lose insurance coverage under the measure.

The Senate late today is expected to approve Iowa GOP Governor Terry Branstad as the U.S. Ambassador to China.

The Senate Agriculture Committee will take their look at the US rural economy, providing another update on how farmers are doing as Congress works on writing the next US farm bill.

Important economic updates are due in the week ahead, including more information on housing, trade and the US economy. The week opens with the Chicago Fed National Activity Index on Monday, followed by New Home Sales and the Richmond Fed Manufacturing Index on Tuesday. The FHFA House Price Index, PMI Composite Flash reading and Existing Home Sales figures will be released Wednesday with Thursday updates including International Trade in Goods, Weekly Jobless Claims and the Kansas City Fed Manufacturing Index. The week closes out with Durable Goods Orders, the second reading on first quarter GDP and Consumer Sentiment. The GDP reading will be closely watched as the first reading was clearly a disappointing one at 0.7 percent. Traders will also monitor whether the sales of existing homes shift from prior levels and show more-consistent strength.

If traders have been missing comments from Fed officials, the week ahead will whet their appetite with one of the busiest weeks in a while. Monday’s packed schedule includes two appearances by Minneapolis Fed’s Kashkari (2017 voter), along with Philadelphia Fed’s Harker (2017 voter), Chicago Fed’s Evans (2017 voter) and two appearances by Fed Governor Brainard. Tuesday’s schedule includes both Kashkari and Harker with Kashkari also to appear Wednesday along with Dallas Fed’s Kaplan (2017 voter). Brainard, Kaplan and St Louis Fed’s Bullard (2019 voter) are all scheduled to speak Thursday, with San Francisco Fed’s Williams (2018 voter) on tap Sunday May 28. And if that schedule is not enough, minutes from the May 2-3 Federal Open Market Committee (FOMC) meeting will be released Wednesday. Attention there will continue on the Fed’s balance sheet, the potential for a June rate increase and any other nuances that traders have not heard from Fed officials. With the June FOMC session ahead, the views of current voters will be of great interest.

Weather is becoming a bigger focus as traders view the window as getting narrower and narrower for the corn planting window in some areas. And with wet conditions in the outlook, their concerns could grow. But that reaction could be tempered some if the Crop Progress report Monday shows that corn planting at least kept up with the average pace the past week. USDA also will issue its Cold Storage update where attention will be on the level of pork and beef supplies given indications that demand has been solid.

Demand news via the weekly updates on Grain Inspections and Weekly Export Sales will stay in focus as the wheat marketing year winds down. Other releases of note will be the Food Price Update and US Agricultural Trade Update, both released on Thursday. The week closes with the monthly Cattle on Feed report arriving on Friday afternoon. Plus, late-week activity will be interesting as traders get set to set their positions ahead of the Memorial Day holiday weekend.