Focus on Fed Chair Powell’s Appearance Before House Panel

Super Tuesday | Sinema opts out | Estate tax | SEC climate-risk disclosure rule | Kerry exits | Trump & Iowa

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March 06, 2024 04:06 AM

Modified report today as I am en route to Peoria, Illinois, for a
speaking event at the Strom Family Farms.

— Equities on Tuesday: All three major indices finished with losses ahead of the first day of two days of congressional testimony by Fed Chairman Jerome Powell set for Wednesday and Thursday. Stocks never could break into positive territory during the session. The Dow fell 404.64 points, 1.04%, at 38,585.19. The Nasdaq fell 267.92 points, 1.65%, at 15,939.59. The S&P 500 was down 52.30 points, 1.02%, at 5,078.65.

— Ag markets on Tuesday:

Corn: May corn futures fell 3 3/4 cents to $4.26 1/4 and nearer the session low.
Soy complex: May soybeans fell 6 cents to $11.49, while may soymeal fell $3.60 to $329.90. Each closed near the session low. May soyoil fell 14 points to 45.04 cents, notching a mid-range close.
Wheat: May SRW futures fell 13 cents to $5.51, settling nearer session lows. May HRW futures slipped 11 cents to $5.69 1/4. May spring wheat fell 4 cents to $6.55 1/2.
Cotton: May cotton fell 34 cents to 94.24 cents, the lowest close since Feb. 23.
Cattle: April live cattle futures rallied $1.325 to $188.00 and settled nearer session highs. March feeder futures rallied 75 cents to $252.30.
Hogs: April lean hogs fell $1.10 to $85.175, nearer the session low and hit a two-week low.

— How you define volatility: Bitcoin rose to a record above $69,000 then quickly tumbled 12%.

— Super Tuesday: Close to a third of the U.S. held nominating contests Tuesday. Republicans voted in 15 states, while Democrats held primaries and caucuses in 15 states, which Biden won except American Samoa. Trump appears to have won all the states by significant margins but one, Vermont, where Nikki Haley won.

— In California, Adam Schiff (D) and Steve Garvey (R) advance as Katie Porter fades. The setup ensures what’s expected to be an easy run for Schiff to the U.S. Senate from California.

— In Congress, the House today will vote on and very likely pass the first package of fiscal year 2024 spending measures. The Senate will move on the matter before the midnight Friday deadline.

— New farm bill: Looks like the House will issue their version of a farm bill after the Easter recess (Chairman’s Mark). That squares with prior signals that it would come following congressional completion of FY 2024 spending measures. The timeline gets murkier in the Senate, where positions by Ag panel Chair Debbie Stabenow (D-Mich.) and other Democrats make funding and policy compromises nearly impossible to bridge. It will be interesting to see if the House releases a budget score on their eventual proposals.

— China’s central bank governor says there’s room to cut banks’ reserve requirements. This is part of Beijing’s broader economic policy “adjustments” so the economy can hit its growth target of around 5% for the year, while adhering to a 3% fiscal deficit. Plans to issue “ultra-long” special bonds for major projects will also help meet that target. Pan Gongsheng, governor of the People’s Bank of China, made these comments on Wednesday as part of a joint press conference with other key leaders of the country’s economy and financial sector on the sidelines of this year’s annual parliamentary meetings.

— Arizona Sen. Kyrsten Sinema, an independent, says she is not running for re-election. “I believe in my approach,” Sinema, a marathoner and triathlete said in a video posted to X. “But, it’s not what America wants right now. I love Arizona and I am so proud of what we’ve delivered. Because I choose civility, understanding, listening, working together to get stuff done, I will leave the Senate at the end of this year.”

Other comments: “Despite modernizing our infrastructure, ensuring clean water, delivering good jobs and safer communities, Americans still choose to retreat farther to their partisan corners,” Sinema said. “These solutions are considered failures, either because they’re too much or not nearly enough.”

The race for the Senate in Arizona will now likely be between Kari Lake, a far-right conservative, and Rep. Ruben Gallego (D-Ariz.), a Harvard graduate and former Marine who has served in the House since 2015.

During her five years in office, Sinema built a major campaign bank account pegged at $10.6 million on Dec. 31, 2023, but her quarterly fundraising was outpaced by Gallego and Lake. Sinema left the Democratic Party in 2022. She was the first Democrat to win a Senate seat in Arizona in 30 years (in 2018). She started out in politics affiliated with the Green Party before becoming a Democrat. She made her mark in several major legislative battles related to infrastructure, guns and same-sex marriage protections. She was most recently involved in bipartisan efforts to secure the southern U.S. border. Sen. Joe Manchin (D-W.Va.) and Sinema were the deciding votes to keep the legislative filibuster unchanged.

Impact: Some Democratic strategists said they believed her run could have hurt Gallego’s bid, empowering the Trump-endorsed Lake. “An open seat in Arizona creates a unique opportunity for Republicans to build a lasting Senate majority this November. With recent polling showing Sinema pulling far more Republican voters than Democrat voters, her decision to retire improves Lake’s opportunity to flip this seat,” said Sen. Steve Daines (R-Mont.), who runs the Senate GOP’s campaign arm. Since Sinema won her seat in 2018, Sen. Mark Kelly (D-Ariz.) has won two Senate races and Lake lost a gubernatorial bid in 2022 to Democrat Katie Hobbs.

Here’s some comments about the likely Arizona contest from Cook Political Report with Amy Walter Senate analyst Jessica Taylor: “This race will come down to which candidate can win the most independent voters — the state’s largest voting bloc. In 2022, Kelly beat GOP nominee Blake Masters, another candidate with plenty of baggage, by 16 points among independents, while also capturing 9% of Republicans, according to exit polls. In 2020, a closer contest against more moderate appointed Sen. Martha McSally (who lost to Sinema in 2018 and had to move to the right in a primary), Kelly won independents by 10 points and captured 11% of Republicans, while Biden won independents by nine points and carried 9% of Republicans. Lake could have a tough time keeping the GOP coalition together, given her high residual negatives, but Gallego may not have the same cross-party appeal as Kelly and Hobbs. In the 2022 race for governor, Hobbs won independents by seven points over Lake, per the exit polls, and also got 9% of Republicans.”

— 2017 Tax Act temporarily raises estate tax exemption, impacting farm estates. The 2017 Tax Cuts and Jobs Act (TCJA) introduced significant changes to Federal individual income and estate tax policies, including a temporary increase in the estate tax exemption amount from $5.49 million to $11.18 million in 2018. This increase is scheduled to revert to pre-TCJA levels, adjusted for inflation, by the end of 2025, lowering the exemption to $6.98 million per deceased person in 2026. The portability provision allows the surviving spouse to utilize any unused portion of the deceased spouse’s exemption.

According to researchers at USDA’s Economic Research Service (ERS), the expiring increased exemption would reach $13.95 million per person at the time of expiration. Consequently, the percentage of farm operator estates subject to taxation is expected to rise from 0.3 to 1.0 in 2026, increasing the number of taxed estates from 120 to 424 out of an estimated 40,883 estates.

Large farms with gross cash farm income between $1 million and $5 million would see the largest increase in the share of estates owing estate tax, rising from 2.8% to 7.3%. If the provision were to expire, total Federal estate taxes for farm estates are projected to more than double to $1.2 billion.

— U.S. Securities and Exchange Commission (SEC) is poised to finalize its climate-risk disclosure rule, but it arrives late in a landscape already transformed by California laws, EU regulations, and International Sustainability Standards Board rules. Many companies facing SEC reporting already contend with extensive requirements from these other sources. While the SEC’s greenhouse gas emission disclosure requirements are expected to be significantly reduced from the original proposal, uncertainties remain regarding implementation timelines and thresholds for financial disclosures related to extreme weather events and climate impacts.

The absence of Scope 3 reporting requirements in the SEC rule would shift focus to California laws currently facing legal challenges. Expectations are widespread for disappointment with the SEC’s final rule, despite anticipated rollbacks that would benefit groups like the U.S. Chamber of Commerce and American Farm Bureau Federation.

Nonetheless, the SEC’s move signals alignment with global climate disclosure standards, reflecting a broader shift toward treating climate data as rigorously as financial data. This signifies increased seriousness for CEOs, CFOs, and board members of U.S. public companies regarding climate disclosure.

Wednesday’s vote marks the start of an anticipated battle, with litigation likely from business organizations, conservative attorneys general, and environmental groups. Republicans in Congress are also preparing efforts to nullify the rule through a Congressional Review Act resolution.

Link to a New York Times article explaining “how the new climate bill got watered down.”

— Top climate diplomat Kerry steps down today (March 6). John Kerry, the 80-year-old political figure known for his varied roles, including as President Joe Biden’s top climate diplomat, will step down from his position today. This decision comes amid concerns about the upcoming November election, particularly regarding the potential return of Donald Trump to the White House, which Kerry fears could undermine the progress achieved under Biden, reminiscent of Trump’s previous withdrawal from the Paris climate agreement.

Expressing the need for tangible action on climate change, Kerry emphasized the significance of this issue in the upcoming election. While Kerry’s future plans are murky, he has stated that his next endeavor will not involve government work but will instead focus on facilitating faster action among major polluting countries and effective transitions toward clean energy.

Kerry acknowledged that his departure is occurring two years later than initially intended, as he had initially planned to serve for only a year. However, recognizing the unfinished tasks, he extended his tenure to address outstanding issues.

— Ukrainian Magura V5 drones attacked the Russian navy’s Sergei Kotov patrol ship near the Kerch Bridge Monday evening and into Tuesday morning, allegedly sinking the 300-foot vessel off the coast of occupied Ukrainian Crimea, according to Ukraine’s military intelligence agency, which released a two-minute video of the purported incident on social media Tuesday. About two dozen Russian naval vessels have been damaged or destroyed by Ukraine since Moscow’s full-scale invasion began two years ago.

— The European Union wants to shift into a “war economy mode” with greater cooperation to purchase and produce weapons. As currently drawn up, the plans involve some $1.6 billion in funding and include “a European version of the U.S. Foreign Military Sales scheme, under which the United States helps other governments to buy from U.S. arms companies,” Reuters reported. “In the current geopolitical context, Europe must take greater responsibility for its own security, regardless of the outcome of our allies’ elections every four years,” the plan’s chief architect, industry commissioner Thierry Breton, said Monday in an indirect reference to upcoming U.S. elections. The plans are a direct “response to Russia’s aggression against Ukraine,” and involve “incentivizing joint procurement, establishing security of supply measures, and enhancing access to finance,” EU foreign policy chief Josep Borrel said Tuesday.

— Robert F. Kennedy Jr. is fueling speculation that he could join the Libertarian Party’s presidential ticket as he seeks to qualify in more states heading into November. Link to more from The Hill.

— House Speaker Mike Johnson (R-La.) will host the parents of Evan Gershkovich, the Wall Street Journal reporter imprisoned in Russia, as his guests to the State of the Union address on March 7, he announced Tuesday. “The U.S. must always stand for freedom of the press, especially in places where it is under assault,” the speaker said in a post on X.

— Republican presidential candidate Donald Trump would nearly double his margin of victory in Iowa over incumbent Democratic President Joe Biden if a rematch of their 2020 contest were held now, a new Des Moines Register/Mediacom Iowa Poll shows. In an early test of the expected matchup, Trump leads Biden by 15 percentage points among likely voters, 48% to 33%. Another 15% of poll respondents would vote for “someone else,” 1% would not vote and 2% are not sure.

— The adoption of heat pumps in Maine has surged, despite its status as the state with the highest percentage of households using heating oil. A New York Times article (link) says this rapid adoption is attributed to various factors, including state rebates, federal incentives, and a growing number of vendors and installers. Heat pumps, which extract heat from the outside air and can operate even in subzero temperatures, are increasingly replacing traditional heating methods. Maine leads the nation in the adoption of heat pumps, with the state meeting its goal of installing 100,000 units two years ahead of schedule. The state aims to install an additional 175,000 units by 2027. State rebates significantly reduce the cost of installation for homeowners, making the switch from oil heating more financially viable. Moreover, the efficiency and reliability of heat pumps, along with their environmental benefits, contribute to their popularity.

— A man who was trying to bring refrigerants across the border from Mexico has become the first person in the U.S. charged with illegally smuggling greenhouse gases, according to the Associated Press (link).

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