House Out, Senate in for Holiday-Shortened Week

Fed watch | Xi and Taiwan | FY 2025 House spending bills | Bird flu | Election polls

•

June 16, 2024 08:37 PM

Fed watch | Xi and Taiwan | FY 2025 House spending bills | Bird flu | Election polls

Washington Focus

The House is out this week for a weeklong recess.

The Senate is in session, but due to a federal holiday Wednesday, the chamber may only be in session Monday and Tuesday.

U.S. gov’t offices and markets will be closed on Wednesday in observance of Juneteenth.

— House appropriators are progressing with their fiscal year (FY) 2025 spending bills, advancing five bills out of the full committee and another out of the subcommittee last week. The bills for Defense, Financial Services-General Government, Homeland Security, Legislative Branch, and State-Foreign Operations were approved along party lines, with Democrats opposing Republican policy riders on issues like abortion, diversity, and immigration.

The Agriculture-FDA spending bill was also released and approved in the subcommittee, amid disputes over low-income food aid and other provisions.

Leaders plan to hold floor votes on the Defense, Homeland Security, and State-Foreign Operations bills when the House returns from recess the week of June 24.

Appropriators aim to complete committee work on the remaining fiscal 2025 spending bills by July 10, which includes bills for Agriculture-FDA, Commerce-Justice-Science, Energy and Water, Interior-Environment, Labor-HHS-Education, and Transportation-HUD.

— House Speaker Mike Johnson (R-La.) said he will move in federal court to enforce a subpoena against Attorney General Merrick Garland to obtain audio recordings of President Joe Biden, after the Justice Department declined to act on the House’s contempt referral.

— Departing Boeing CEO Dave Calhoun is scheduled to testify Tuesday before a Senate panel following a whistleblower’s allegations that the company has been “putting out defective airplanes.” Boeing has faced intense scrutiny since two fatal crashes of its 737 Max aircraft in 2018 and 2019, which resulted in the deaths of 346 people. Additionally, a door plug blew out of an Alaska Airlines 737 Max in January, prompting the FAA to audit Boeing’s procedures and uncover numerous “non-compliance issues.” Calhoun has announced his intention to leave Boeing by the end of the year. The company was also in the news recently when the FAA began investigating a rare and unsafe back-and-forth roll of a 737 Max 8 during a flight in May.

— Senate farm bill update. Senate Ag Ranking Member John Boozman (R-Ark.) has emphasized the need for a complete overhaul of the farm bill, acknowledging that simply updating the 2018 Farm Bill is insufficient given the significant changes in the world since then. Speaking to the Arkansas Democrat-Gazette (link), Boozman stressed the importance of modernizing the legislation to meet current challenges. Boozman has prioritized reinforcing the agricultural focus of the farm bill.

Boozman aims to build momentum for passing a five-year farm bill and ending the cycle of one-year extensions.

Boozman’s farm bill framework proposes several changes, including a 15% average increase in statutory reference prices used in federal commodity programs and a new risk management tool for poultry growers in cases of disrupting weather events and other risks unique to poultry farming (some Senate Ag staff is negotiating with USDA’s Risk Management Agency about this tool).

SNAP a focus. Arkansas, where agriculture represents a significant portion of the economy, is closely watching the developments. Approximately 125,000 Arkansas households receive SNAP benefits.

Boozman’s plan does not alter the eligibility structure for SNAP but proposes changes to the amount recipients can receive, emphasizing that any adjustments should be cost-neutral. This contrasts with the 2018 Farm Bill, which allowed the USDA to adjust SNAP benefits through the Thrifty Food Plan. The Senate Republican framework and the House bill propose eliminating this executive authority.

The Congressional Budget Office’s farm bill baseline is $1.51 trillion the next 10 years. The package’s nutrition title —which includes SNAP/food stamps — accounts for 81.9% of this baseline. But SNAP overpayments have also become an issue.

Senate and House Republicans also plan to reallocate funds from the Inflation Reduction Act for conservation programs, a move supported by Boozman. However, Democratic leaders have criticized the GOP’s approach to the Thrifty Food Plan and questioned the viability of passing the farm bill with such provisions.

— G7 leaders concluded their summit in Italy with a warning to China that they will continue to target actors that “materially support Russia’s war machine”. They called on the superpower to “step up efforts to promote international peace and security”. Leaders also expressed concern at China’s “non-market policies.” In a wide-ranging final statement, the G7 warned Iran against advancing its nuclear program and gave its full support to the U.S. peace plan for Palestine.

Late news: A Chinese vessel collided with a Philippine supply ship in the South China Sea on Monday morning, according to a statement from China’s coastguard.

— U.S. secures nearly one-third of global investments post-Covid despite calls for dollar diversification. Despite global calls to diversify away from the dollar, the U.S. has secured nearly one-third of all cross-border investments since the onset of Covid-19. An International Monetary Fund (IMF) analysis shows that the share of global flows into the U.S. has increased since 2020, contrary to expectations of a decline. This increase is attributed to a surge in U.S. interest rates, making the country more attractive to overseas investors, and substantial foreign direct investment (FDI) driven by incentives under President Joe Biden’s initiatives to boost renewable energy and semiconductor production.

Before the pandemic, the U.S.’ average share of global investments was 18%, but it has since risen significantly. This trend marks a shift from pre-pandemic patterns when emerging markets, including China, attracted substantial capital. China’s share of global inflows has more than halved since the pandemic began, leading President Xi Jinping to implement reforms to revive foreign investor interest.

Meanwhile, the U.S. has benefitted from a strong economic expansion, with the World Bank raising its growth forecast for 2024 based on U.S. performance. The IMF data shows the U.S. received net inflows amounting to 1.5% of its GDP over the 2021-23 period. In contrast, emerging markets experienced a net outflow of capital, with gross FDI to these regions at its lowest since the early 2000s.

— USDA announced a $50 million grant to support farm workers and agricultural employees across the country. This funding, awarded through the Farm Labor Stabilization and Protection Pilot (FLSP) Program, will benefit 141 recipients in 40 states and Puerto Rico, reaching 177 unique agricultural operations and over 11,000 workers. The grants aim to address labor challenges, enhance protections for farmworkers, and expand legal migration pathways for agricultural labor.

The awarded amounts range from $25,000 to $1.2 million, primarily supporting small and mid-sized farms to help them hire and retain necessary workers. USDA Secretary Tom Vilsack emphasized that these awards will contribute to building a stronger, more resilient food supply chain by improving working conditions and quality of life for farmworkers, both domestic and international.

The grants are part of a broader initiative stemming from the Biden administration’s June 2022 proclamation, the Los Angeles Declaration on Migration and Protection. This initiative involves collaboration with countries such as Brazil, Canada, Chile, Colombia, Ecuador, Guatemala, Panama, and Peru to create safe, orderly, and humane migration conditions.

Background. Announced in September 2023, the FLSP program was developed with input from immigration, labor, and agricultural stakeholders, and it addresses workforce needs, promotes safe working environments, and supports lawful migration pathways. About 60 percent of awardees utilizing the H-2A visa program plan to recruit workers from Northern Central America.

Additional benefits of the program include better pay, time off, management training opportunities, driver’s license training, English classes, recreation spaces in housing facilities, and ethical recruitment practices.

— The Iowa Department of Agriculture reported another dairy herd infected with highly pathogenic avian influenza in Iowa, making a total of six herds affected. The latest outbreak was discovered in a herd of 520 cows in Sioux County, the fourth such outbreak in this county. Previously, a herd of 3,000 dairy cows in Plymouth County and 1,000 cows in Sioux County were reported infected, along with a herd of 1,700 cows earlier in the week and a 250-cow herd on June 7. The first case in Iowa was reported on June 5 in a 4,500-cow herd in O’Brien County.

Dairy cows infected with H5N1 typically recover with supportive care, though they may experience decreased appetite and milk production. However, the virus is fatal to birds, necessitating the culling of all poultry in infected flocks to prevent spread. The virus, likely carried by migrating wild birds, has been reported in 11 states since its first detection in dairy cows in March. USDA has suggested that the spread between states is more likely linked to wild birds rather than cattle movement, although shared equipment and workers on infected farms have also been implicated.

In response to the outbreaks, the Iowa Department of Agriculture has urged poultry producers and dairy farmers to enhance their biosecurity measures. Iowa, the nation’s largest egg producer and seventh-largest turkey producer, has experienced 53 outbreaks affecting both commercial and backyard flocks since 2022, resulting in the death of about 23.3 million birds.

Three U.S. dairy workers have been diagnosed with mild cases of bird flu, and Mexico recently reported the first human bird flu death in the current wave of infections. Federal officials assure that the U.S. food supply remains safe, as only milk from healthy animals is allowed in the food chain and most milk is pasteurized to eliminate harmful bacteria and viruses. However, they have advised against drinking raw milk due to potential exposure to the virus. Iowa is one of about 30 states that permit raw milk sales.

Iowa Agriculture Secretary Mike Naig has requested federal aid for affected poultry and dairy farms, including compensation for culled dairy cattle, loss of dairy production, and updated indemnity tables for poultry to reflect fair market values of impacted birds and eggs.

— Summary of bird flu spread across the U.S. A USA Today article (link) lists some of the key events in the transmission and spread of the virus. Here is an abbreviated summary, with more details in the article:

Origins and early spread

History: Avian influenza, first described in Italy in 1878 as “fowl plague,” has a long history.
Recent strain: The current H5N1 strain emerged among poultry and wild birds in Europe in fall 2020, spreading to multiple continents.
Impact: Declared the largest avian flu epidemic in Europe by October 2022, causing deaths of millions of birds and some mammals.=

Key events

May - July 2021: Detected in wild foxes in the Netherlands and seabirds in Scotland.
November - December 2021: First detected in North America, with cases in Canada and the U.S.
January - February 2022: Detected in a human in England and U.S. poultry. Sea lions in Peru also affected.
April - September 2022: First U.S. human case in a Colorado farm worker. Bald eagle die-off and mammal infections reported. Zoos began moving birds indoors.
Fall 2022: Virus spreads to various mammals, including bears and mountain lions. Human cases reported in Spain.
2023: Over 50 million chickens affected in the U.S. Study shows bald eagles significantly impacted. First detections in polar regions, including polar bears.
March - April 2024: Virus found in juvenile goats and dairy cows. First cow-to-human transmission reported in Texas.
May 2024: New human cases in dairy farm workers in the U.S., including one with respiratory symptoms.

Impacts and concerns

Economic impact: Significant increase in egg prices due to mass euthanization of infected poultry.
Wildlife: Significant die-offs among various bird species, including endangered California condors.
Human health: While currently low, the risk of human infection could increase as the virus evolves.

— A shortage of bird flu tests in the U.S. could obscure a potential future pandemic. Currently, only the Centers for Disease Control and Prevention (CDC) is authorized to test for the H5N1 virus, which is prevalent in birds and some U.S. cow herds, and the tests are limited to livestock workers. Although three human cases have been identified, researchers believe this number is significantly underestimated. Scientists are concerned that the U.S. Food and Drug Administration might repeat its slow testing response from the early days of COVID-19, when only CDC tests, which were ineffective, were allowed for several months.

— Iowa Poll to show where voters stand on Biden, Kennedy and Trump, plus his felony conviction. The Iowa Poll, a Des Moines Register exclusive since 1943, is a closely watched indicator of candidate strength during election cycles, as well as Iowans’ opinions on other important issues. Which candidate do Iowans favor in a rematch between President Joe Biden and former President Donald Trump? Does Trump’s recent felony conviction for falsifying business records affect Iowans’ support for him? And how do they think Biden is handling a host of serious issues affecting America such as inflation, abortion, immigration and the Israel-Hamas war in Gaza? The answers to those and many other questions heading into the fall general election will be revealed in a new Des Moines Register/Mediacom Iowa Poll. The initial results from the June Iowa Poll will be published online first thing Monday morning at DesMoinesRegister.com.

Meanwhile, USA Today released new surveys of Black voters in Michigan and Pennsylvania, revealing significant skepticism towards both major presidential candidates, with particularly negative implications for Joe Biden. Biden’s support among this crucial demographic has dropped by 20 points or more compared to his 2020 performance. Donald Trump has seen a modest increase in support in both states, which could be significant in a close race. Additionally, Robert F. Kennedy Jr. and Cornel West are emerging as notable factors in the political landscape.

— On Monday, House Speaker Mike Johnson (R-La.) and other senior party figures will meet former president Donald Trump at his Mar-a-Lago residence in Florida.

Other Events & Hearings

Monday, June 17

Federal Reserve. Fed Governor Lisa Cook delivers remarks at event in Chicago. Philadelphia Fed President Patrick Harker scheduled to speak.
USDA Sec. Tom Vilsack, Rep. Yadira Caraveo (D-Colo.) and Colorado Ag Commissioner Kate Greenberg in Fort Collins, Colo., on an Investing in America announcement to Power Clean Energy rural Colorado.
EV issues. Energy Department virtual meeting of the Electric Vehicle Working Group for a report out and discussion by each of the three subcommittees: Medium/Heavy-Duty Adoption, Grid Integration, and Charging Network.
Israel/Hamas war. Carnegie Endowment for International Peace (CEIP) holds a virtual discussion on “How Does the Israel-Hamas War End?
European Parliament elections. Center for Strategic and International Studies virtual discussion on “Unpacking the European Parliament Election Results.”
U.S. and China situation. The Council on Foreign Relations discussion on “Lost Decade: The U.S. Pivot to Asia and the Rise of Chinese Power.”
Supply chains. Politics and Prose Bookstore holds a discussion on “How the World Ran Out of Everything: Inside the Global Supply Chain.”
Balanced budget. The Hill virtual discussion on “Balancing the Federal Budget.”

Tuesday, June 18

Federal Reserve. Fed Governor Adriana Kugler delivers remarks on The Economic Outlook and Monetary Policy. Richmond Fed President Thomas Barkin scheduled to speak.
Foods, beverages, and supplements. American Bar Association Litigation Section 12th Annual Food, Beverage & Supplements Workshop.
Supply chain vulnerabilities. Peterson Institute for International Economics virtual discussion on “Just in Time? Fixing Supply Chain Vulnerabilities.”
Covid 19 origins. Senate Homeland Security and Governmental Affairs Committee hearing on “Origins of Covid-19: An Examination of Available Evidence.”
U.S./Africa trade and investment. Wilson Center’s Africa Program and the Washington International Trade Association forum on “Road to AGOA (African Growth and Opportunity Act) Reauthorization: The Future of U.S./Africa Trade and Investment.”
Boeing. Senate Homeland Security and Governmental Affairs Investigations Subcommittee hearing on Boeing’s broken safety culture.

Wednesday, June 19

Juneteenth. U.S. gov’t offices and markets are closed in observance of Juneteenth. Several events will be held in and around Washington, DC.

Thursday, June 20

Federal Reserve. Richmond Fed President Thomas Barkin scheduled to speak.
Global economy. Brookings Institution holds a virtual discussion on “State of the global economy: Are the clouds clearing at last?”
Nuclear weapons. Center for Strategic and International Studies discussion on “Nuclear Weapons and Foreign Policy.”
U.S. Supreme Court. New York University’s Brennan Center for Justice virtual discussion on “A Politicized Supreme Court is Remaking America.”
U.S./Mexico relations. Women’s Foreign Policy Group discussion on “Navigating the Future of U.S./Mexico Relations.”

Friday, June 21

Doing business with USDA. Government Executive Media Group Power Breakfast discussion on “Doing Business with USDA,” focusing on emerging technologies, particularly artificial intelligence.
AUKUS. Center for a New American Security (virtual discussion on “AUKUS: Taking Stock and Looking Forward.”

Economic Reports and Events for the Week

Traders will receive readings on U.S. retail sales and industrial production in May. Market participants following monetary policy will also hear from several Federal Reserve speakers, including Governors Lisa Cook and Adriana Kugler, after the central bank’s latest rate decision and updated dot plot last Wednesday.

Earnings: Homebuilders Lennar and KB Home release their latest results on Monday and Tuesday, respectively. Accenture, Darden Restaurants, and Kroger report on Thursday, then CarMax on Friday.

Monday, June 17

Empire State Manufacturing
China: People’s Bank of China medium-term lending facility (MLF) rate announcement. Also, May industrial output, retail sales and house price index data.

Tuesday, June 18

Retail Sales likely rose 0.2% in May, after remaining flat in April. Retail sales, excluding autos, is expected to rise 0.2% in May, after a similar gain in the month before.
Industrial Production: Industrial production data is set to rise 0.3% in May after remaining unchanged in April. Capacity utilization likely came in at 78.5% in May, compared to 78.4% in April.
Business Inventories likely added 0.3% in April, after falling 0.1% in the previous month.

Wednesday, June 19

MBA Mortgage Applications
Housing Market Index

Thursday, June 20

Jobless Claims: The Labor Department is expected to report that initial jobless claims for the week ending June 15 fell by 4,000 to 238,000.
Housing Starts: The Commerce Department’s Census Bureau will report that housing starts likely rose to a seasonally adjusted annual rate of 1.370 million units in May from 1.360 million units recorded in the previous month. Building permits are expected to remain unchanged at 1.440 million units in May.
Philadelphia Fed Manufacturing
Current Account
Atlanta Fed Business Inflation Expectations
Fed Balance Sheet
Money Supply
Both the Bank of England and the Swiss National Bank will announce monetary-policy decisions. The SNB is expected to follow up a March cut with a second quarter-point decrease. The BoE is forecast to hold its benchmark rate target steady.
China: loan prime rate (LPR) announcement.

Friday, June 21

PMI Composite Flash: S&P Global is due to report flash PMIs for June. The flash manufacturing PMI reading is expected to be 50.9, compared to 51.3 in the previous month. The flash services PMI likely came in at 53.4, compared to 54.8 in the previous month.
Leading Indicators
Existing Home Sales likely fell to a seasonally adjusted annual rate of 4.10 million units in May from 4.14 million units in April.

Key USDA & international Ag & Energy Reports and Events

With Wednesday’s U.S. gov’t holiday, USDA’s weekly Export Sales Report will be released Friday.

In the energy sector, the Energy Institute publishes its statistical review of world energy on Thursday; energy-related conferences will be held in London and New York.

Monday, June 17

Ag reports and events: