Good morning!
Grains pressured by tariffs threat... Corn and soybeans extended Thursday’s corrective declines overnight, while wheat pulled back from gains earlier in the week. As of 6:30 a.m. CT, corn futures are trading 4 to 8 cents lower, soybeans are 5 to 6 cents lower, winter wheat markets are 9 to 11 cents lower and spring wheat is 5 to 7 cents lower. The U.S. dollar index is around 450 points higher and front-month crude oil futures are trading just below unchanged. Gold futures rose to an all-time high amid safe-haven buying.
Trump moves forward with 25% tariffs on Canada, Mexico... President Donald Trump announced that his administration will impose 25% tariffs on imports from Canada and Mexico starting Feb. 1, citing concerns over trade deficits, illegal immigration and the fentanyl crisis. He suggested the tariff rate could rise further. The move has triggered warnings of economic fallout, with both Canada and Mexico vowing to respond with retaliatory measures. This signals a potentially disruptive turn in North American trade relations, threatening key industries like automotive and energy. Trump also reiterated plans to impose tariffs on China over its alleged role in fentanyl trafficking and suggested additional sectoral tariffs on industries such as pharmaceuticals, semiconductor chips and steel.
Trump aides scramble for last-minute tariff deal with Canada, Mexico... President Trump’s advisers are exploring ways to avoid sweeping 25% tariffs on imports from Canada and Mexico, despite his repeated threats to implement them by Saturday. Ongoing negotiations suggest a possible shift toward targeted measures, particularly affecting steel and aluminum, while oil may receive exemptions. Business groups and labor unions are lobbying against broad tariffs, warning of supply chain disruptions. Of note: The administration could announce new tariffs by Saturday, but with a grace period before they are implemented, allowing negotiations to continue.
Goldman says commodities reflect U.S. tariff risk... Commodity markets are pricing in elevated odds Trump’s sanctions against Canadian imports will include raw materials like oil, according to Goldman Sachs Group Inc., which warned of higher gasoline prices in the Midwest if penalties cover crude flows. Differences in regional pricing for commodities including crude, copper and aluminum signal an 85% probability of a 10% tariff being applied, analysts including Samantha Dart and Daan Struyven said in a note. Lower probabilities were linked with higher eventual tariffs, they added. Canada is the biggest foreign supplier of crude to the U.S., with Midwest refiners dependent on those shipments.
Economic fallout from Trump tariffs... Key impacts from 25% tariffs on Mexican and Canadian goods include potential inflation spikes, auto-industry turmoil and pricier groceries, particularly fresh produce from Mexico. The tariffs may also drive up energy prices, disrupt supply chains and spark legal battles. The U.S. ag sector frets lost trade markets, particularly corn and pork exports to Mexico, and a spike in fertilizer prices as Canada is a big source of fertilizer inputs. The Peterson Institute for International Economics found a tariff of 25% against Mexico and Canada would shave around $200 billion off real U.S. gross domestic product by the end of the Trump administration. An extra 10% tariff on goods from China would lower real GDP by $55 billion over the next four years.
Trump repeats tariffs threat to dissuade BRICS nations from replacing U.S. dollar... President Trump on Thursday warned off BRICS member countries from replacing the U.S. dollar as a reserve currency by repeating a 100%-tariffs threat he had made weeks after winning the November presidential elections. The BRICS group, led by Brazil, Russia, India, China and South Africa does not have a common currency, but long-running discussions on the subject have gained some momentum in recent years. The dollar’s dominance has strengthened of late, thanks to the strong U.S. economy, tighter monetary policy and heightened geopolitical risks, even as economic fragmentation has boosted a push by BRICS countries to shift away from the dollar into other currencies.
February weather may have ‘significant adverse impact’ on India’s wheat crop... India will likely experience below-normal rainfall in February and it could have a “significant adverse impact” on the wheat crop, which is at the flowering and filling stage, India Meteorological Department (IMD) Director-General Mrutunjay Mohapatra said. Rainfall in February will be below-normal in many areas the country aside from western Gujarat, southern Tamil Nadu, south-west Madhya Pradesh, he said. February will also experience above-normal temperatures in most parts of the country except central-western parts and the southern peninsula.
India extends derivatives trading ban on some grains, food items... India’s markets regulator on Friday extended the suspension in trading of derivative contracts of some grains and food items until the end of March. The grains and edible items included in Friday’s directive were paddy rice, wheat, chickpeas (chana), mustard seeds, soybeans, crude palm oil and moong.
India’s sugar output to fall nearly 15%... India’s sugar output in the 2024-25 marketing year ending in September may fall to 27.27 MMT, down 14.7% from a year ago, as mills are likely to divert more sugar for ethanol production, the Indian Sugar and Bio Energy Manufacturers Association said. Mills are likely to divert 3.75 MMT of sugar for ethanol production in the current season, up from the last year’s 2.15 MMT, the group noted.
BNSF increases shuttle reload incentives to boost efficiency... BNSF Railway (BNSF) will increase its shuttle reload incentive payments from $200 to $500 per car, effective Feb. 1. Customers must unload and reload a shuttle train within 38 hours of arrival to qualify, improving efficiency by reducing empty train movement. One beneficiary is Archer-Daniel-Midland Company’s (ADM) facility in Mendota, Illinois, which boasts 4 million bushels of grain storage and a flour milling capacity of 30,000 hundredweight per day. The facility, designed to optimize grain movement, can receive wheat shipments and quickly reload trains with corn for feedlots in the Plains.
Senate advances key nominations, two face uncertain paths... The Senate moved to end debate on former Rep. Doug Collins for VA secretary and Chris Wright for Energy secretary, setting up confirmation votes in the coming days. Wright is expected to be confirmed on Monday, along with procedural votes on Russell Vought for Office of Management and Budget (OMB) director and Pam Bondi for attorney general. Majority Leader John Thune (R-S.D.) also set up Scott Turner’s nomination as HUD secretary. With Rep. Elise Stefanik’s (R-N.Y.) expected confirmation next week to be United Nations ambassador, House Republicans will only have a one-vote margin until early April. Meanwhile, Robert F. Kennedy Jr., nominated for HHS Secretary, faced a second day of scrutiny, with Senate Health Committee Chair Bill Cassidy (R-La.) admitting he was “struggling” to support him. Tulsi Gabbard, Trump’s pick for Director of National Intelligence, faced bipartisan grilling over her stance on Russia, Edward Snowden and surveillance policies.
Cattle Inventory Report out this afternoon... USDA’s Cattle Inventory Report this afternoon is expected to show the total U.S. cattle herd at 86.373 million head as of Jan. 1, down 0.9% from year-ago. The beef cow herd is expected to decline another 0.7%. The 2024 calf crop is expected to shrink another 1.5% to 33.089 million head, which would be the smallest since 1940. Analysts expect beef replacement heifers to rise 1.3%, a sign herd rebuilding has begun.
Cattle futures correct... Cattle futures corrected the heavily overbought conditions with the past two days of sharp losses. With today being the final day of the month, funds heavily long the market and key USDA report data coming out this afternoon, additional corrective selling is possible – if not probable. While futures are signaling a potential major top, the cash market remains well supported.
Cash hog index continues to rise... The CME lean hog index is up another 47 cents to $83.06 as of Jan. 29, extending the three-week runup from the seasonal low. February lean hogs finished Thursday at a $1.315 premium to the index, signaling traders anticipate more cash strength over the next two weeks.
Overnight demand news... Exporters reported no tenders or sales.
See ‘Policy Updates’ for late-breaking morning news updates... For updates to items in “First Thing Today” or any late-breaking morning news stories, check “Policy Updates” on www.profarmer.com.
Today’s reports
- 2:00 p.m. Peanut Prices — NASS
- 2:00 p.m. Agricultural Prices — NASS
- 2:00 p.m. Cattle — NASS
- 2:00 p.m. Sheep and Goats — NASS
- 2:30 p.m. Commitments of Traders — CFTC