News/Markets/Policy Updates: Jan. 31, 2025
Other topics include: (1) Trump nominees face uncertain path in Senate; (2) Schumer tells Punchbowl News Trump helped Dems find their voice; (3) Cattle Inventory report out this afternoon; (4) CME Group to launch micro-sized grain, oilseed futures in late February; (5) BNSF increases shuttle reload incentives to boost efficiency; (6) Cotton AWP moves higher; (7) February weather may have ‘significant adverse impact’ on India’s wheat crop; (8) India extends derivatives trading ban on some grains, food items; (9) India’s sugar output to fall nearly 15%; (10) USDA issues return-to-office guidance following presidential memorandum; (11) Oil prices edge higher amid tariff and OPEC+ uncertainty; (12) EU to let natural gas price cap expire; (13) Dairy Margin Coverage enrollment open; (14) Governors key to 2026 Senate battles; and (15) FDA approves new pain medication.
— 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 (see next item). 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. Meanwhile, Trump has also threatened 100% tariffs on BRICS nations if they attempt to challenge the U.S. dollar’s dominance in global trade. Of note: The administration could announce new tariffs by Saturday, but with a grace period before they are implemented, allowing negotiations to continue. — Trump set to announce 25% tariffs on Canada and Mexico starting Saturday, Feb. 1. President Trump confirmed Thursday that a 25% tariff on Canadian and Mexican goods will take effect this Saturday, stating, “We don’t need what they have.” The move, initially seen as a bargaining tactic, follows concerns over illegal immigration and drug imports. Link to our Thursday report. Tariffs could be issued using existing legal authorities instead of more novel approaches that officials had previously floated Trump hinted that petroleum imports “may or may not” be exempt, depending on pricing. He also accused Canada and Mexico of unfair trade practices, claiming the U.S. does not need their oil or lumber. The president indicated he would move forward with 10% import duties on China, but did not specify timing. The tariffs mark a major escalation in Trump’s trade policy, reminiscent of his first-term strategies to renegotiate NAFTA into the USMCA deal. The president also signaled potential tariffs on China over fentanyl smuggling, citing its role in the ongoing opioid crisis. But will Trump have a last-minute change? That is what some believe, especially after the twists and turns of Sunday’s trade kerfuffle with Colombia. Meanwhile, Reuters reported (link) that Tom Homan, the new U.S. border czar, is expected to meet with Canada’s top public safety official today, just hours before Trump has promised to level new tariffs on Canada unless it helps deal with the flow of migrants and fentanyl across the border. The meeting will offer Canada an opportunity to make a final pitch about its border efforts before Trump makes public his tariff decision. End around? Some companies were stockpiling goods in the U.S. ahead of any levies, but others are less equipped to do so, like agricultural exporters that ship perishable foods. Impact. 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. — Five key questions regarding tariff situation: — Trump’s 25% tariff deadline nears: Economic fallout looms. As President Trump’s proposed 25% tariffs on Mexican and Canadian goods approach their Saturday deadline, businesses are bracing for disruptions. The new tariffs, aimed at curbing unauthorized migration and drug imports, could also include a 10% levy on Chinese goods, intensifying trade tensions. (Link to WSJ article for details.) Key impacts include potential inflation spikes, auto-industry turmoil, and pricier groceries, particularly fresh produce from Mexico. Meanwhile, the U.S. steel industry backs the move, hoping for stronger domestic demand. The tariffs may also drive up energy prices, disrupt supply chains, and spark legal battles. The U.S. ag sector frets lost trade markets and a spike in fertilizer prices as Canada is a big source of fertilizer inputs. Bottom line: Uncertainty reigns as businesses scramble to adjust, with long-term economic repercussions hanging in the balance. Fuel makers across the U.S. Midwest, Rocky Mountains and Gulf Coast will bear the brunt of tariffs and restrictions proposed by Trump, possibly translating to higher prices at the pump for drivers, according to BloombergNEF. Canada has played the most pivotal role in supplying America, contributing about two-thirds of total crude imports in January-October 2024. — 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 (see previous item). — Senate advances key nominations. 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 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. The House and Senate are both out today. With Rep. Elise Stefanik’s (R-N.Y.) expected confirmation next week, House Republicans will only have a one-vote margin until early April. — Sheinbaum to address New World screwworm (NWS) and halted feeder cattle trade. Mexican President Claudia Sheinbaum announced that the country’s agriculture minister will join her Friday press briefing to discuss the halted exports of feeder cattle to the U.S., Reuters reported Thursday. The U.S. suspended imports in November 2024 following the confirmation of New World screwworm (NWS). While equine imports resumed with added safeguards on Jan. 21, former USDA Secretary Tom Vilsack, before leaving office on Jan. 20, urged Mexico to take further action to restore full trade. A U.S. industry source told us, “It has been strangely quiet on the NWS front. From what I understand, Mexico has not done enough to meet U.S. criteria. I am hearing that many of the cattle that would have come across last year now may not. They are already on feed, and it sounds like even if the border fully opens up, they will keep many of them there. There are a lot of Texas feeders with lots that have many empty pens. Many people say it should already be open, but Mexico (justifiably or not) is getting the blame for the delay.” — Vought’s OMB nomination advances amid Democratic boycott. Russ Vought is a step closer to leading the Office of Management and Budget (OMB) again, as the Senate Budget Committee voted 11-0 along party lines to advance his nomination. The vote, made up entirely of Republicans, followed a Democratic boycott of the meeting. Vought’s confirmation now moves to the Senate floor, possibly next week. — Burgum confirmed as Interior secretary, gains NSC seat. The Senate on Thursday confirmed former North Dakota Governor Doug Burgum as Secretary of the Interior in a 79-18 vote, positioning him to implement President Donald Trump’s energy agenda. Burgum, a strong advocate for expanded fossil fuel production, aims to open more public lands to oil, gas, and coal while dismantling offshore wind development. Per an executive order signed by Trump, Burgum will also receive a seat on the National Security Council (NSC). His confirmation faced opposition from environmental groups and some Senate Democrats concerned about his stance on conservation and renewable energy. However, his governing experience and business background contributed to bipartisan support. As Interior secretary, Burgum will lead a department that houses the Bureau of Land Management, Fish and Wildlife Service, National Park Service, Bureau of Indian Affairs and Bureau of Indian Education. As Interior secretary, Burgum has jurisdiction over clean energy permitting on federal lands and waters, a sector Trump has already moved to eliminate by halting leases for both onshore and offshore wind projects. Of note: Burgum won the support of 25 Democratic senators along with all Republicans on Thursday, making his the second most bipartisan Trump Cabinet vote so far after Secretary of State Marco Rubio’s. — Trump nominees face uncertain path in Senate. Two of President Trump’s nominees are encountering resistance in their confirmation processes. 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 (link to our report). Meanwhile, Tulsi Gabbard, Trump’s pick for Director of National Intelligence, faced bipartisan grilling over her stance on Russia, Edward Snowden, and surveillance policies. Gabbard’s refusal to label Snowden a traitor frustrated some senators, casting doubt on whether she has enough GOP backing to advance out of committee. — Schumer tells Punchbowl News Trump helped Dems find their voice. Senate Minority Leader Chuck Schumer (D-N.Y.) in an interview with Punchbowl News said that President Trump’s federal aid freeze handed Democrats a much-needed lifeline. “We started Jan. 20 really down in the dumps,” he said. “Our constituency has really been given a lift by our example… We knew that [Trump] had really screwed up. And we just pounced.” |
| FINANCIAL MARKETS |
— Equities today: Asian and European shares were mixed overnight. European stocks are set for their biggest monthly gains in two years. Many China markets remained closed for the new year holiday. U.S. stock indexes are set to open higher. U.S. equity futures are modestly higher on more solid tech earnings and as markets are in a “show me” mode on tariff threats. The Sevens Report writes, “On tariffs, markets remain skeptical tariffs will be implemented against Canada and Mexico tomorrow and if they are, they’ll be largely ineffectual.” In Asia, Japan +0.2%. Hong Kong closed. China closed. India +1%. In Europe, at midday, London +0.4%. Paris +0.5%. Frankfurt +0.3%.
Equities yesterday: Continued talk by President Donald Trump about hitting Mexico and Canada with 25% tariffs on Feb. 1 pared gains in equity markets, but they still managed to come back into positive territory by the close. The Dow ended up 168.61 points, 0.38%, at 44,882.13. The Nasdaq gained 49.43 points, 0.25%, at 19,681.75. The S&P 500 rose 31.86 points, 0.53%, at 6,071.17.
Of note: The S&P 500 is up more than 3% since the start of the year, and is 23% higher than it was 12 months ago.
— Gold rose to a record as investors flocked to safety after Trump reiterated threats to impose tariffs on America’s neighbors. Bullion briefly topped $2,800 an ounce.
| AG MARKETS |
— Ag markets today:
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 7:30 a.m. ET, corn futures were trading 4 to 8 cents lower, soybeans were 5 to 6 cents lower, winter wheat markets were 9 to 11 cents lower and spring wheat was 5 to 7 cents lower. The U.S. dollar index was around 450 points higher and front-month crude oil futures were trading just below unchanged. Gold futures rose to an all-time high amid safe haven buying.
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.
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.
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.
— CME Group to launch micro-sized grain, oilseed futures in late February. CME Group announced it will launch a suite of micro grain and oilseed futures contracts on Feb. 24, pending regulatory review. These contracts will be cash-settled and one-tenth the size of CME’s corn, wheat, soybean, soybean oil and soybean meal futures.
— 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, IL, 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 Great Plains.
— Cotton AWP moves higher. The Adjusted World Price (AWP) for cotton increased to 54.02 cents per pound, effective today (Jan. 31), up from 53.71 cents per pound the prior week, the first increase after three weeks of declines.
— 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.
— Agriculture markets yesterday:
• Corn: March corn fell 6 3/4 cents to $4.90 1/4, marking a low-range close.
• Soy complex: March soybean futures fell 16 1/2 cents to $10.44 and closed nearer session lows. March meal futures plunged $5.10 to $304.70. March bean oil closed a tick higher at 44.98 cents.
• Wheat: March SRW wheat rose 4 cents to $5.66 1/2, nearer the daily high and hit a nine-week high. March HRW wheat firmed 8 cents to $5.88 1/4, nearer the daily high and hit a 10-week high. March spring wheat futures climbed 6 1/2 cents to $6.20 1/4.
• Cotton: March cotton futures sunk 39 points before settling at 66.27 cents, nearer the daily low.
• Cattle: April live cattle fell $3.45 to $201.50, nearer the session low. March feeder cattle fell $2.075 to $273.20, nearer the session low.
• Hogs: Futures remained strong Thursday, with the nearby February contract rising 47.5 cents to $84.375 and most-active April climbing 60 cents to $91.925.
| USDA RETURN TO WORK |
— USDA issues return-to-office guidance following presidential memorandum. USDA has released new guidelines for the return of personnel to in-person work, aligning with President Trump’s directive. Link to USDA memo. Key details:
- Timeline: Senior staff return by Feb. 3, managers by Feb. 10, and telework employees by Feb. 18, with some exceptions.
- Policy changes: Telework policies will be revised, requiring most employees to work full-time in-office unless exempted for medical or other compelling reasons.
- Exemptions & flexibility: Agency heads can grant exemptions based on workspace availability, labor agreements, and reasonable accommodation regulations.
- Implementation: Leadership will provide phased return guidelines, with telework policies updated across the department.
- Considerations: The policy may be influenced by potential budget constraints for office leasing.
This shift marks a significant departure from previous flexible telework policies, as USDA seeks to balance operational needs with workforce considerations.
| ENERGY MARKETS & POLICY |
— Oil prices edge higher amid tariff and OPEC+ uncertainty. Oil prices saw modest gains Thursday as markets weighed impending U.S. tariffs on Canadian and Mexican crude. Brent crude rose 0.4% to $76.87 per barrel, while U.S. crude inched up 0.2% to $72.73. With Trump’s 25% tariff threat nearing, aimed at curbing fentanyl shipments, analysts believe much of the risk is already priced in.
Meanwhile, U.S. crude inventories climbed by 3.5 million barrels due to weaker demand from winter storms. On the supply side, U.S. sanctions on Russia are tightening exports, with shipments from western ports expected to drop 8% in February.
Focus is now on the Feb. 3 OPEC+ meeting, where members will discuss Trump’s push for increased U.S. oil output. While tensions persist, analysts downplay the likelihood of a full-scale price war, warning of potential market instability.
— EU to let natural gas price cap expire. The European Union will allow its natural gas price cap to expire, originally introduced in 2022 to counter soaring prices amid reduced Russian supplies. The cap, set to trigger at 180 euros ($186.79) per megawatt hour (MWh), was never activated. While recent Dutch TTF hub prices reached 52 euros per MWh, they remain far below 2022 peaks. The European Commission stated that the decision reflects improved energy security, with ample gas storage and diversified suppliers reducing reliance on Russia.
| DAIRY POLICY |
— Dairy Margin Coverage enrollment open. The registration and election period for the 2025 Dairy Margin Coverage (DMC) program opened on Jan. 29 and runs through March 31. Coverage is retroactive to Jan. 1, using the adjusted base production history from 2024. The DMC program was extended under the temporary spending measure that continued the 2018 Farm Bill.
| POLITICS & ELECTIONS |
— Governors key to 2026 Senate battles. The 2026 Senate map is shaping up to be heavily influenced by governors, with several eyeing potential runs in key swing states. Republicans hope to recruit Georgia Gov. Brian Kemp to challenge Sen. Jon Ossoff, while Democrats push North Carolina Gov. Roy Cooper to take on Sen. Thom Tillis. In deep-red states, Democratic governors like Andy Beshear (Ky.) and Laura Kelly (Kan.) are seen as potential challengers. Meanwhile, Virginia’s Glenn Youngkin could target Sen. Mark Warner. While some former governors have struggled in Senate bids, others have found success — making these races ones to watch.
| HEALTH |
— FDA approves new pain medication. The FDA approved suzetrigine (Journavx), the first new type of pain medication in 25 years. This non-opioid drug, taken every 12 hours after an initial dose, blocks pain-signaling nerves rather than dulling pain in the brain. With 80 million pain prescriptions filled annually, nearly half for opioids, suzetrigine offers a potential alternative without the risk of addiction.
| WEATHER |
— NWS outlook: Precipitation returns to the West Coast, with atmospheric river activity expected to bring heavy rain and flooding concerns to portions of central and northern California... ...Much needed rainfall expected across the Upper Tennessee Valley, Southern Appalachians and Mid-Atlantic, with light wintry precipitation expected for New England... ...Above average temperatures are expected across large sections of the country going into the weekend with exception to the Northwest and the Northeast where temperatures will be trending gradually below normal.
| KEY DATES IN JANUARY |
31: Employers and financial institutions should send out W-2 and 1099 tax forms
31: USDA Cattle
| LINKS |
Economic aid for farmers | Disaster aid for farmers | Farm Bureau summary of aid/disaster/farm bill extension | 45Z tax incentive program | Poultry and swine line speeds | U.S./China Phase 1 agreement | WASDE | Crop Production | USDA weekly reports | Crop Progress | Food prices | Farm income | Export Sales weekly | ERP dashboard | RFS | IRA: Biofuels | IRA: Ag | SCOTUS on WOTUS | SCOTUS on Prop 12 pork | Gov’t payments to farmers by program | Farmer working capital | USDA Ag Outlook Forum |