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Paragon Commentary

Futures File: USDA Budget & Housing Up

Mar 17, 2017

Stormy Outlook for USDA

Under President Trump’s budget proposal for 2018, the USDA would see a sharp 21% decrease in funding. This news was initially met with trepidation by rural communities, but the plan is unlikely to have as severe an impact as the topline number might suggest.

The proposal only impacts the USDA’s discretionary budget, which is less than one-fifth of the USDA’s overall budget, leaving major programs like crop insurance and food stamps largely untouched.

However, the proposal does include cuts that could hurt rural communities. Most importantly, budgets for county-level USDA offices will be cut, as will funding for other services, including statistical gathering, the Water and Wastewater loan and grant program, and the Rural Business and Cooperative Service.

The USDA is not the only department to see funding curtailed, as the proposal will make cuts to 19 agencies in all, including budget slashes of over 20% to the State Department, Labor Department, and the EPA. These savings will then be shifted to three departments: Veterans Affairs, Homeland Security, and Defense.

The White House’s proposal would need to be adopted by Congress, leaving opportunities for ag-focused Congress members to lobby for changes.


New Homes, New Commodities Rally?

The U.S. housing market is showing continued strength, with single-family home construction reaching a seasonally-adjusted ten-year high last month. Housing is a major sector within the U.S. economy, and rising activity could give a boost to construction-related commodities like steel, copper, and lumber.

U.S. steel prices are approaching the highest price in almost three years, while lumber futures are near a four-year high at $363 per thousand board feet. Lumber has also been benefitting from concerns about Canadian lumber supplies.

Meanwhile, copper futures are near a two-year high, trading Friday for $2.67 per pound. Copper is an essential component in electrical, heating, cooling, and plumbing systems, making it especially reactive to construction demand.

Furthermore, if President Trump’s plans for renewed infrastructure spending come to fruition, these markets could benefit as massive road, bridge, and port construction projects increase demand for raw materials.

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