Good morning!
Grains lower to open the week... Corn, soybeans and wheat faced followthrough selling to Friday’s losses during the overnight session. As of 6:30 a.m. CT, corn futures are trading 3 to 5 cents lower, soybeans are 7 to 8 cents lower and wheat futures are 1 to 3 cents lower. The U.S. dollar index is nearly 300 points lower and front-month crude oil futures are about 35 cents lower.
AgRural cuts Brazilian soybean production forecast... AgRural lowered its Brazilian soybean production forecast by 500,000 MT to 171 MMT due to cuts in Mato Grosso do Sul, Paraná and Rio Grande do Sul. The firm increased its soybean production forecast for Mato Grosso, despite the threat of crop quality concerns if rains persist into February. As of last Thursday, AgRural estimated Brazil’s soybean harvest at 3.9%, behind 10.8% on this date last year and the slowest since 2020-21. Safrinha corn planting stood at 2.2%, behind 11.4% at this time last year.
Scattered rains across South America... All of Argentina is advertised to get rain over the next two weeks, though amounts in the south and east-central this week will be a little too light and sporadic for some areas. Reduced rains across central Brazil should allow for improved soybean harvest progress and safrinha corn planting, though both are likely to remain delayed.
Trump suspends tariffs on Colombia following rapid diplomatic resolution... On Sunday, President Donald Trump announced sweeping retaliatory measures against Colombia, citing its refusal to allow U.S. deportation flights to land. The measures included: A 25% emergency tariff on Colombian imports, with plans to raise it to 50% within a week, travel bans and visa cancellations targeting Colombian officials and their supporters and enhanced inspections of Colombian nationals and cargo entering the United States. Within hours, the dispute was resolved, was Colombia agreed to accept deported migrants “without limitation or delay.” As of today, the tariffs remain shelved, while other restrictions stay in place pending fulfillment of Colombia’s commitments. Trump’s move to quickly threaten tariffs on billions of dollars in trade with Colombia served as a reminder of his eagerness to use economic tools to achieve geopolitical goals. But his rapid U-turn also illustrated why Trump faces questions about his willingness to make good on his threats. Meanwhile, China pledged to accept the return of undocumented Chinese citizens in the U.S., after Trump threatened to hit Colombia with tariffs for refusing to take back deported migrants.
USTR launches review of U.S./China trade agreement and foreign trade practices... The Office of the US Trade Representative (USTR) announced a review of the “Economic and Trade Agreement Between the Government of the United States of America and the Government of the People’s Republic of China (PRC).” The review aims to assess whether China is fulfilling its commitments under the Phase 1 trade deal. Additionally, USTR will evaluate foreign trade practices that could be deemed unfair, unreasonable or discriminatory, potentially burdening U.S. commerce. These reviews stem from President Trump’s Jan. 20 executive order, the “America First Trade Policy,” emphasizing protectionist trade measures.
Trump flip-flop on WHO coming?... Trump said Saturday he was weighing the possibility of rejoining the World Health Organization (WTO), just days after signing an executive order withdrawing the U.S. from the international group. Trump has bemoaned how the U.S. pays more than its fair share to the 194-nation group, contrasting the $500 million the U.S. doles out — compared to China, who he said pays just $39 million despite its much larger 1.4 billion population. The president has long ripped the organization for what he’s called a “failure to adopt urgently needed reforms,” and has described the U.S. financial contribution as “onerous.” This potential flip-flop is why some think Trump’s threats on tariffs are just that, threats. Trump’s nominee for Treasury Secretary, Scott Bessent, has tried to reassure Wall Street that the Trump’s tariff threats are merely a negotiating tactic.
The week ahead in Washington... The Senate this week will continue to focus on nomination hearings and floor votes on Trump administration nominees. President Donald Trump meets with Republican House members at the Trump National Doral Golf Club in Miami. The Fed holds its two-day monetary policy meeting Tuesday and Wednesday, with a pause to recent rate cuts expected. Commodity traders and the ag sector will be watching any new reports regarding Trump’s threatened tariffs. USDA’s Cattle Inventory Report is scheduled for Friday afternoon, highlighting the total number of cattle in the U.S. as of Jan. 1.
PBOC injects record liquidity, shuns RRR cut... China’s central bank injected a record amount of cash into the financial system via a new tool in January, delaying more high-profile policy easing as it prioritizes stabilizing the yuan. The People’s Bank of China (PBOC) conducted 1.7 trillion yuan ($234 billion) of so-called outright reverse repurchase agreements using three- and six-month contracts to keep liquidity ample, the biggest operation since officials started the program in October as part of an overhaul of their policy toolbox. PBOC suspended another new program it uses for liquidity management by halting its government bond purchases this month. Some economists had expected PBOC to act before the Lunar New Year holiday by opting to cut banks’ reserve requirement ratio (RRR).
China’s manufacturing activity unexpectedly contracts in January... China’s manufacturing activity unexpectedly contracted in January to the weakest level since August. The official purchasing managers index (PMI) contracted to 49.1 in January from 50.1 in December. The non-manufacturing PMI, which includes services and construction, slowed to 50.2 from 52.2 in December.
China’s industrial profits fall for a third straight year in 2024... China’s industrial profits grew 11% from year-ago in December following a 7.3% drop in November. However, earnings by industrial firms dropped 3.3% in 2024, extending the 2.3% decline the previous year and the third straight annual fall. Factory-gate prices declined for a second straight year, hurting corporate profits.
Bullish Cattle on Feed Report... USDA estimated there were 11.823 million head of cattle in large feedlots (1,000-plus head) as of Jan. 1, down 107,000 head (0.9%) from year-ago and 71,000 head less than analysts expected. The drop in feedlot supplies was driven by a 3.3% decline in the number of cattle placed in December, with that category coming in below the bottom end of pre-report expectations. Marketings increased 1.0% during December, modestly less than expected. The placements figure is fully bullish, especially for deferred live cattle futures. With that said, futures rallied sharply into the report, so some of the bullishness may already by worked in.
Frozen beef inventories neutral, pork stocks mildly negative... Beef stocks in USDA’s Cold Storage Report totaled 457.3 million lbs. at the end of December, up 16.6 million lbs. from November, which was slightly less than the five-year average increase of 18.3 million pounds. Frozen beef inventories declined 23.0 million lbs. (4.8%) from year-ago and stood 53.2 million lbs. (10.4%) below the five-year average. Pork stocks stood at 400.4 million lbs., up 9.3 million lbs. from November, more than the five-year average increase of 2.5 million lbs. for the month. Frozen beef inventories declined 27.0 million lbs. (6.3%) from last year and were 54.9 million lbs. (13.7%) below the five-year average.
Will cash cattle strength continue?... Official data from USDA later this morning is expected to confirm the cash cattle market strengthened for a tenth consecutive week and posted a record high for a fourth straight time. While packers are seemingly better positioned on near-term slaughter needs, feedlots remain current and have negotiating power.
Cash hog index inches up, pork cutout slips... The CME lean hog index inched up a penny to $81.29 as of Jan. 23, extending the rebound off the seasonal low for a tenth straight day. The pork cutout slipped 8 cents on Friday to $91.69 as losses in loins, butts, ribs and picnics offset gains in hams and bellies.
Weekend demand news... Bangladesh tendered to buy 50,000 MT of optional origin non-basmati parboiled rice.
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
- 10:00 a.m. Weekly Export Inspections — AMS
- 2:00 p.m. Peanut Stocks and Processing — NASS