News/Markets/Policy Updates: Jan. 27, 2025
Other topics in today’s dispatch include: (1) A Trump flip-flop coming on WHO? (2) House Dems condemn Trump’s late-night purge of inspectors general as unlawful; (3) Trump orders review of FEMA amid concerns of political bias; (4) Big week for Trump’s Cabinet picks and the Fed; (5) World Bank President Banga urges caution on Trump policies; (6) Earnings season picks up this week; (7) Trump claims progress on TikTok sale; (8) Fed policy and political influence: A Malanga critique; (9) U.S. rice tender to Colombia: January 2025 TRQ tranche; (10) Bullish Cattle on Feed report; (11) Farm bill and budget reconciliation: Opportunities and limitations; (12) AFBF president highlights achievements and challenges at 106th annual meeting; (13) USTR launches review of U.S./China trade agreement and foreign trade practices; (14) Trump in Nevada reiterates pledge to eliminate taxes on tips; (15) Brazil expects temporary suspension of soybean exports to China; (16) China’s manufacturing activity unexpectedly contracts in January; (17) China’s industrial profits fall for a third straight year in 2024; (18) USDA issues food price update; and (19) Immigration crackdown under Trump administration.
— Trump suspends tariffs on Colombia following rapid diplomatic resolution. On Sunday, Jan. 26, President Trump announced sweeping retaliatory measures against Colombia, citing its refusal to allow U.S. deportation flights to land. The measures included: Colombia responded to Trump’s initial actions by announcing similar tariffs on U.S. products. Within hours, the dispute was resolved, with the White House claiming victory. Key developments included: As of today, Jan. 27, the tariffs remain shelved but not enacted, while other restrictions stay in place pending fulfillment of Colombia’s commitments. Trade in goods between the U.S. and Colombia was worth $33.5 billion in the first 11 months of 2024, according to U.S. trade data. The U.S. had a billion-dollar trade surplus with Colombia in that time. Of note: Trump’s move to quickly threaten tariffs on billions of dollars in trade in oil, cut flowers, coffee and more 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, the U.S. and El Salvador are working on an asylum agreement that would allow U.S. officials to deport non-Salvadoran migrants to the Central American nation. — Trump administration eyes tariffs on Mexico and Canada amid trade talks. Momentum is building among President Trump’s advisers to impose a 25% import tariff on goods from Mexico and Canada as early as Feb. 1, the Wall Street Journal reports. This move defies expectations in Washington and on Wall Street, where analysts had anticipated Trump might soften his stance in exchange for concessions. The proposed tariffs are intended to pressure the two countries into negotiating on migration, drug smuggling, and reforms to the U.S.-Mexico-Canada Free Trade Agreement (USMCA). The strategy reflects Trump’s preference for using tariffs as a tool to secure compliance with U.S. demands, as seen in a recent, albeit reversed, threat against Colombia. While both Canada and Mexico have made overtures to address U.S. concerns, Trump’s administration remains unsatisfied. Canadian officials have prepared a list of retaliatory measures and expressed frustration over unclear demands and limited communication. Mexico, meanwhile, has stepped up efforts to curb migration and drug trafficking but faces similar obstacles in negotiating directly with Trump’s yet-to-be-confirmed economic team. If enacted, the tariffs could disrupt key industries, particularly the ag sector and automotive manufacturing, where supply chains depend on cross-border collaboration. Critics warn of potential economic fallout, including higher consumer prices and a possible recession in Canada. Despite these risks, Trump’s advisers, including Commerce Secretary nominee Howard Lutnick, advocate for a “tariffs-first” approach to bring trade partners to the table. Observers now await Feb. 1 to see whether the tariff threats materialize, potentially triggering a new trade war on the continent. Some feel Feb. 1 will be too early for any serious tariffs action. Reasons: Trump wants his top trade officials (Commerce Secretary, U.S. Trade Representative, Treasury Secretary, etc.) at their desks. That may take beyond Feb. 1, depending on Senate confirmations. Also, Trump’s 23 trade executive orders assigned a review of prior trade agreements, trade deficits, practices, etc., with an April 1 deadline. One task involves the White House Office of Management and Budget assessing how foreign government subsidies impact U.S. procurement, with that report due by April 30. — A Trump flip-flop coming? President Trump said Saturday he was weighing the possibility of rejoining the World Health Organization, just days after signing an executive order withdrawing the United States from the international group. “Maybe we would consider doing it again, I don’t know, they have to clean it up a bit,” the president said at a a rally at Las Vegas’ Circa Resort & Casino. Trump threw out the idea while bemoaning 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.” Of note: 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. “My general view is that at the end of the day, he’s a free trader,” Bessent told the Financial Times last fall. “It’s escalate to de-escalate.” — House Democrats condemn Trump’s late-night purge of inspectors general as unlawful. In a follow-up to our weekend report on this topic, House Democratic Ranking Members, led by Ag Committee Ranking Member Angie Craig (D-Minn.), have strongly rebuked President Donald Trump for his late-night dismissal of at least 12 independent inspectors general. The group called the move unlawful, asserting it violates federal laws designed to protect the impartiality and independence of government watchdogs. In a joint letter (link) to the president, the Ranking Members expressed “grave concern” over the removal, citing a lack of notice to Congress and absence of any “substantive rationale” required by law. They accused Trump of undermining democracy, increasing government waste, and jeopardizing national safety. Inspectors general are tasked with identifying waste, fraud, and abuse in federal agencies, operating independently of political interference. The Ranking Members called the president’s actions a direct attack on these principles and urged immediate compliance with the law to protect the integrity of the federal government. Trump tried to defend his firing. “It’s a very common thing to do,” Trump told reporters on Air Force One as he returned to Florida following a tour of disaster areas and a Las Vegas rally. Trump added that “some people thought” the other inspectors’ work wasn’t satisfactory. Asked if he planned to put loyalists in those roles, Trump said “not my people, they’re not my people. I don’t know anybody that would do that. But we’ll put people in there that will be very good.” The watchdogs at Homeland Security and Justice were the only Cabinet-level inspectors general spared. Of note: A dismissal requires Congress to receive 30 days’ notice of any intent to fire a Senate-confirmed inspector general. — Trump orders review of FEMA amid concerns of political bias. President Donald Trump issued an executive order on Sunday to establish a review council to evaluate the Federal Emergency Management Agency (FEMA). The council is tasked with holding its first meeting within 90 days and submitting a report to the president within 180 days thereafter. The order cites “serious concerns” about potential political bias at FEMA and allegations that agency funds were used to support incoming migrants. Trump has also raised the possibility of terminating FEMA, fueling speculation about the agency’s future. — Big week for Trump’s Cabinet picks and the Fed. The Senate is set to approve Scott Bessent as Treasury secretary today, while confirmation hearings for Howard Lutnick (commerce secretary) and Robert F. Kennedy Jr. (health secretary) are scheduled for Wednesday. That same day, the Federal Reserve will announce its interest rate decision, with Wall Street anticipating rates will remain steady amid inflation concerns. Next up is Sean Duffy, the nominee for transportation secretary. He’ll be confirmed by Tuesday afternoon. Kash Patel, the FBI director nominee, and former Rep. Tulsi Gabbard, Trump’s pick for director of national intelligence, have their confirmation hearings on Thursday morning before the Judiciary and Intelligence committees respectively. Link for details via The Week Ahead which we released on Saturday. — World Bank President Banga urges caution on Trump policies. World Bank President Ajay Banga advised countries to exercise patience in responding to potential actions from the Trump administration. Speaking to Reuters at the Mission 300 Africa Energy Summit, Banga emphasized the importance of understanding actual policies before reacting. “My only advice to everyone is don’t be in too much of a hurry to respond or judge,” Banga said, noting his past dealings with Trump. Describing the former president as “practical,” Banga highlighted Trump’s grasp of numbers, leverage, and advantage, urging leaders to approach him with clear explanations of their contributions. Banga also confirmed that the Trump administration’s foreign assistance freeze has “not yet” impacted World Bank operations. |
| FINANCIAL MARKETS |
— Equities today: Asian and European shares were mostly lower overnight. U.S. Dow opened around 350 points lower while the Nasdaq plunged just over 700 points. Tech stocks are extremely weak on news that a Chinese AI company “DeepSeek” has produced cutting edge AI with minimal costs and no next-gen chips, and this is seriously undermining AI enthusiasm. Shares in Nvidia, the chipmaker whose processors help train and run A.I. software, are down 11% in premarket trading. Those in Constellation Energy, a utility betting heavily on powering A.I. data centers, are down nearly 13%. Geo-politically, Trump threatened Columbia with tariffs over the weekend and while they ultimately weren’t implemented (see item above), it’s a reminder that trade volatility is back. In Asia, Japan -0.9%. Hong Kong +0.7%. China -0.1%. India -1.1%. In Europe, at midday, London -0.2%. Paris -0.9%. Frankfurt -1.1%.
Equities Friday and for the week: Despite finishing lower Friday, all three major indices notched gains for the week with the Dow rising 2.2% and the Nasdaq and S&P 500 both up 1.7%. On Friday, the Dow fell 140.82 points, 0.32%, at 44,424.25. The Nasdaq lost 99.38 points, 0.50%, at 19,954.30. The S&P 500 was down 17.47 points, 0.29%, at 6,101.24.
— The earnings season picks up this week. Four of the Magnificent Seven companies are scheduled to report: Microsoft, Facebook-parent Meta Platforms (META) and Tesla on Wednesday, followed by Apple on Thursday. Other major names that will be reporting include Boeing, Starbucks, IBM, Visa, Caterpillar, and Intel.
— Trump claims progress on TikTok sale. President Donald Trump announced he is in discussions with several potential buyers to acquire TikTok from its Chinese parent company, ByteDance. He indicated that a decision on the deal could be reached within the next 30 days. The proposed sale aims to address concerns over data security and ownership of the popular video app.
— Fed policy and political influence: A critique by Dr. Vince Malanga. Malanga, president of LaSalle Economics, criticizes the Federal Reserve’s claims of being non-political, pointing to recent actions that suggest otherwise. He highlights:
- Federal Reserve actions in election season: Despite previously avoiding fiscal commentary, the Fed cut rates three times in late 2024 during the election period. It shifted its stance, citing political factors like Trump-era tax cuts, deregulation, and tariffs.
- Potential chairmanship politics: Fed Governor Christopher Waller, a known hawk, has signaled more rate cuts in 2025, potentially positioning himself for the Chair role as the current term for Jerome Powell ends in May 2026.
- Inflation and energy prices: Malanga aligns with Waller’s view that inflation may resume its downtrend by spring 2025, driven by energy price weakness. However, he warns that weather disruptions and geopolitical factors could influence outcomes.
- Bond market and fiscal challenges: Long-term interest rates, Malanga argues, hinge less on monetary policy and more on expectations of unchecked deficits and debt. He suggests that fiscal reforms, like controlling government spending, are critical to stabilizing the bond market.
- Risks of fiscal drag: Malanga warns that while reforms may address excessive spending, they risk economic slowdown, especially given the affordability crisis in housing and construction. He urges the Fed to prioritize liquidity to counter potential fiscal drag but expresses concern that political distractions may delay necessary actions.
| AG MARKETS |
— Ag markets today:
Grains lower to open the week. Corn, soybeans and wheat faced followthrough selling to Friday’s losses during the overnight session. As of 7:30 a.m. ET, corn futures were trading 3 to 5 cents lower, soybeans were 7 to 8 cents lower and wheat futures were 1 to 3 cents lower. The U.S. dollar index was nearly 300 points lower and front-month crude oil futures were about 35 cents lower.
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.
— 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.
— Ag trade: Bangladesh tendered to buy 50,000 MT of optional origin non-basmati parboiled rice.
— USDA daily export sale: • 139,000 MT corn to Mexico for 2024-25.
— U.S. rice tender to Colombia: January 2025 TRQ tranche. A tender has been announced to sell U.S. rice to Colombia under a tariff-rate quota (TRQ) established by the U.S./Colombia Trade Promotion Agreement (TPA).
• Quantity Available: 98,040 metric tons (milled rice equivalent)
• Duty: Zero (within quota)
• Shipping period: Feb. 1 to June 30
• Minimum bid price: $30 per metric ton
• Submission deadline: Monday, Jan. 27, from 9:00 A.M. to 5:00 P.M. EST
• Submission method: Email bids to col-rice@trqservices.com
• Eligibility and requirements: The bid is open to U.S.-based individuals or entities. Bids must include performance security. The COL-RICE Administrator ensures confidentiality during the auction but will release some details afterward.
Background: The TRQ, implemented in 2012, began with a duty-free allowance of 79,000 tons of U.S. rice, increasing annually by 4.5%. Challenges such as increased Colombian rice production, lower domestic prices, and competition from South America led to the first underfilled TRQ in 2021. Despite this, the system remains a valuable channel for U.S. exporters.
— Agriculture markets Friday and for the week:
• Corn: March corn futures fell 3 1/4 cents to $4.86 1/2 and closed at mid-range. That marked a 1 1/4 cent gain on the week.
• Soy complex: March soybeans fell 9 3/4 cents to $10.55 3/4, but still gained 21 3/4 cents on the week. March soymeal edged $10.40 lower to $304.90 and still managed to notch a $7.70 weekly gain. March soyoil rose 18 points to 45.22 cents but gave up 47 points on the week.
• Wheat: March SRW wheat futures fell 10 cents to $5.44, nearer the session low, and on the week up 5 1/4 cents. March HRW futures were down 11 1/4 cents to $5.59 1/2, nearer the daily low and for the week up 11 cents. March spring wheat futures fell 9 1/4 cents to $5.95 1/4 but rose 11 3/4 cents on the week.
• Cotton: March cotton climbed 14 points to 67.61 cents, marking a one-point weekly loss.
• Cattle: April live cattle futures gained $2.30 to $203.025, nearer the daily high and set a contract high. For the week, April live cattle rose $5.525. February live cattle set a record high close, basis nearby futures, up $3.675 at $204.775. March feeder cattle futures also set a new contract high, up $2.50 at $276.575 and for the week rose $8.525. Expiring January feeder cattle futures today set a record-high close, up $1.625 at $278.70.
• Hogs: Hog futures followed the cattle and feeder complex higher Friday, with nearby February rising 17.5 cents to $82.30. Most-active April futures rose $1.00 to $88.20. That represented a weekly decline of 12.5 cents.
| FARM POLICY |
— Farm bill and budget reconciliation: Opportunities and limitations. A new farm bill might become part of a budget reconciliation measure, though it is unlikely to encompass all typical provisions. Budget reconciliation is a legislative process that allows for expedited changes to spending, revenue, and the debt limit. Key factors:
- Partial inclusion: Only budget-related components qualify for reconciliation.
- Eligible components: Potential inclusions are SNAP funding, crop insurance, farm payments, and tax adjustments.
- Conservation focus: The reconciliation process could be used to address the conservation funding provided by the Inflation Reduction Act, potentially making those allocations permanent within the farm bill structure.
- Byrd Rule limitations: Provisions must comply with the Byrd rule, which excludes non-budgetary elements.
— AFBF president highlights achievements and challenges at 106th annual meeting. American Farm Bureau Federation (AFBF) President Zippy Duvall underscored the importance of member engagement and outlined key policy priorities during the organization’s 106th annual meeting. Central to the discussions were legislative achievements that provided critical support to farmers and ranchers, alongside pressing challenges in the agricultural sector.
Disaster aid and economic assistance. The American Relief Act of 2025, passed at the end of 2024, delivered significant support for agriculture:
- $21 billion in disaster aid for losses from 2023-2024 natural disasters.
- $10 billion in economic assistance for corn, soy, and wheat farmers, aimed at addressing:
- Declining crop prices since 2022.
- Persistently high input costs.
- Weather-related disasters.
USDA is required to distribute the economic assistance within 90 days of enactment (which means no later than March 21), using a per-acre formula, with individual payment caps between $125,000 and $250,000 based on farm-derived income.
Farm bill extension. The one-year extension of the 2018 Farm Bill was another major milestone, ensuring:
- Continuity for vital agricultural programs.
- Additional time (until September 30, 2025) for Congress to pass a comprehensive new farm bill.
Duvall addressed critical ongoing issues, including:
- Modernizing the farm bill for long-term stability.
- Tackling labor shortages and immigration reform.
- Expanding international market access for U.S. agricultural products.
- Improving rural infrastructure, particularly broadband access.
| ENERGY MARKETS & POLICY |
— Oil prices dip amid OPEC pressure and U.S. sanctions. Oil prices edged higher on Friday but ended the week with losses, breaking a four-week streak of gains. Brent crude rose 21 cents, 0.27%, to $78.50 per barrel, while WTI increased 4 cents, 0.05%, to $74.66. However, Brent fell 2.8% for the week, and WTI dropped 4.1%.
President Trump renewed calls for OPEC to lower oil prices to financially pressure Russia and expedite an end to the Ukraine war. Analysts, however, noted U.S. sanctions on Russia and Iran might counteract these efforts. Trump also declared a national energy emergency to boost U.S. oil and gas production, raising concerns about oversupply.
Meanwhile, global trade tensions, including Trump’s tariff threats on key trading partners, have fueled market caution and weakened demand forecasts. Despite declining U.S. crude inventories and Chevron’s Tengiz expansion, concerns over oversupply and muted Chinese demand persist. Brent and WTI are expected to remain in the $76.50-$78 range near term.
| TRADE POLICY |
— 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, the USTR will evaluate foreign trade practices that could be deemed unfair, unreasonable, or discriminatory, potentially burdening U.S. commerce. These reviews stem from President Donald Trump’s Jan. 20 executive order, the “America First Trade Policy,” emphasizing protectionist trade measures.
| TAX POLICY |
— Trump in Nevada reiterates pledge to eliminate taxes on tips; hospitality workers cheered as tax proposal aims to boost industry. At a rally in Las Vegas, President Donald Trump reaffirmed his commitment to eliminate taxes on tipped income, a move aimed at supporting the hospitality industry central to Nevada’s economy. Trump framed the pledge as part of a broader tax reform agenda that includes cutting corporate taxes, exempting overtime pay from taxation, and renewing key provisions of his 2017 tax package.
The proposal could benefit over 6 million hospitality workers, but critics warn it may incentivize shifts from wages to tips, potentially impacting low-income workers’ eligibility for other tax benefits. With narrow Republican control in Congress, Trump hopes to use reconciliation to advance the costly measures, which are projected to add trillions to the deficit.
The rally marked the conclusion of Trump’s first major trip of his second term, which included visits to disaster-stricken areas in North Carolina and California.
Of note: $3,138 was the average tax refund last year, according to the IRS.
| CHINA |
— Brazil expects temporary suspension of soybean exports to China. Brazil anticipates that China’s suspension of soybean imports from five companies due to plant health concerns will last about two months, according to Luis Rua, commerce and international relations secretary at the Agriculture Ministry. The suspension, enacted on Jan. 8 and 14, followed reports that some soybean shipments did not meet Chinese import standards. Brazil is investigating the matter and will provide clarifications to China, noting that only a small number of cargoes were affected. The suspended companies include global traders Cargill, ADM, and Olam, as well as Brazilian firms C.Vale and Terra Roxa. Despite the suspension, over 1,700 Brazilian entities remain authorized to export soybeans to China.
— 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.
| FOOD & FOOD INDUSTRY |
— USDA’s January 2025 Food Price Outlook summarizes recent trends in food prices based on Consumer Price Index (CPI) and Producer Price Index (PPI) data through December 2024. While food price inflation has slowed overall, key sectors like eggs and beef remain volatile due to supply chain and input cost pressures. Link to our special report.
| BORDER, IMMIGRATION, DEPORTATION & LABOR |
— Immigration crackdown under Trump administration. The Trump administration has intensified efforts to fulfill a campaign promise of targeting undocumented immigrants. Nearly 1,000 arrests have been reported across the United States as part of an immigration enforcement blitz led by ICE. Enhanced operations have been conducted in cities such as Chicago, Atlanta, Los Angeles, Austin, and parts of Colorado, with further actions anticipated this week.
Of note: Tom Homan, President Trump’s “border czar,” outlined that the Trump administration is implementing what they claim will be the largest deportation operation in U.S. history. He emphasized that their approach is prioritizing public safety and national security threats, but the scope of enforcement will expand over time. Homan acknowledged that not every undocumented immigrant will be removed, citing financial constraints. He stated, “I’m being realistic. We can do what we can with the money we have.”
Homan emphasized that success cannot be measured solely by the total number of deportations. Instead, he defined success in terms of:
- Removing public safety threats from the streets
- Deporting national security threats
- Reducing crime rates associated with undocumented immigrants
Bottom line: Homan stated, “Every public safety threat removed from this country is success. Every national security threat we find and remove from the country is a success.”
| WEATHER |
— NWS outlook: Heavy rain and localized flash flood risk continues for portions of southern California today... ...Elevated fire weather concerns for portions of Arizona and New Mexico today... ...Heavy rain possible across the southern Plains on Wednesday.
| KEY DATES IN JANUARY |
27: First day IRS will begin accepting 2024 federal tax returns
28: Florida’s 1st and 6th special primaries
28-29: Federal Open Market Committee meets
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 |