News/Markets/Policy Updates: Jan. 28, 2025
Modified format today as I am in Columbus, Ohio, speaking at the PACI winter meeting (Joanie Grimes). Next stop: Michigan. — Equities: Asian and European shares were mixed overnight. U.S. stock indexes are set to open narrowly mixed. Stocks In Asia, Japan -1.4%. Hong Kong +0.1%. China closed. India +0.7%. In Europe, at midday, London +0.6%. Paris +0.4%. Frankfurt +0.6%. Equities on Monday: The Dow managed to finish the day higher, but the tech-heavy Nasdaq dropped more than 3%. The Dow rose 289.33 points, 0.65%, at 44,173.58. The S&P 500 lost 88.96 points, 1.46%, at 6,012.28. The Nasdaq dropped 612.47 points, 3.07%, at 19,341.83. — Smithfield raises $522 million in IPO. Smithfield Foods Inc.’s initial public offering raised $522 million, with shares pricing below the marketed range. The world’s largest pork producer and an indirectly owned subsidiary of Hong Kong-listed WH Group Ltd., sold about 26 million shares for $20 each, according to a statement. Smithfield and its owner offered 17.4 million shares each for $23 to $27 apiece, a previous filing showed. WH Group, which acquired Smithfield more than a decade ago, will maintain control of the company after the listing. — Oil prices slide to two-week low amid AI disruption and geopolitical pressure. Oil prices dropped about 2% on Monday, hitting a two-week low as concerns over energy demand and geopolitical factors weighed on markets. Brent crude fell $1.42 (1.8%) to $77.08 per barrel, while U.S. WTI dropped $1.49 (2.0%) to $73.17. The decline was partly triggered by Chinese startup DeepSeek’s energy-efficient AI model, raising doubts about long-term energy demand forecasts for data centers. DeepSeek’s AI Assistant overtaking ChatGPT as the U.S.’ top-rated app added to investor skepticism. Weak Chinese manufacturing data and President Trump’s calls for OPEC to lower prices further pressured markets, alongside his tariff threats against China, Canada, and Mexico. The U.S.’ reversal of planned sanctions on Colombian oil exports also contributed to the bearish sentiment. Combined with OPEC+ production increases and weaker demand signals, the outlook for oil markets remains uncertain. — Ag markets today: Grains mildly rebounding early this morning. After facing followthrough selling earlier in the overnight session, corn, soybeans and wheat are modestly firmer and trading near session highs this morning. As of 7:30 a.m. ET, corn futures were trading mostly 2 cents higher, soybeans were 2 to 3 cents higher and wheat futures were 1 to 3 cents higher. The U.S. dollar index was around 650 points higher, and front-month crude oil futures were about 60 cents higher. Historic cash cattle surge continues. Cash cattle averaged a record 209.19 last week, up $5.52 from the previous week and the tenth straight weekly gain. Cattle futures surged to an all-time high on support from the cash strength and last Friday’s bullish Cattle on Feed Report. But amid heavily overbought conditions, futures finished higher but well off their session highs on Monday, a potential sign the market may be ready for a pause after the historic run. Pork cutout jumps to highest this year. The pork cutout firmed $1.47 to $93.16 on Monday, the highest since Dec. 30, led by strong gains in butts, ribs and loins. Wholesale pork prices have been strong enough to keep packer margins in the black, which is helping support the cash market’s move off the seasonal lows. — Ag trade: Tunisia tendered to buy 100,000 MT of soft milling wheat and 100,000 MT of durum wheat — all optional origin. — Thailand’s rice exports set to decline in 2025. Thailand expects its rice exports to fall to 7.5 million metric tons (MMT) in 2025, a 24% drop from 2024’s 9.95 MMT Commerce Ministry official Arada Fuangtong attributed the decline to India’s resumed rice exports and increased competition from other countries. Easing drought conditions have boosted yields, while demand from major importers, such as Indonesia, has moderated. — CPKC avoids strike with tentative agreement as Canadian National faces labor threats. Canadian Pacific Kansas City (CPKC) reached a tentative four-year collective bargaining agreement with Unifor, covering 1,200 employees and averting a potential strike set for January 29. The deal follows a strike authorization vote by most Unifor members, representing mechanics, laborers, and other support staff. Details of the agreement will be disclosed after ratification. Meanwhile, the International Brotherhood of Electrical Workers has issued a 72-hour strike notice against Canadian National Railway, though the company claims operations will remain unaffected. This development comes as Canadian National recently ratified a similar four-year agreement with Unifor, providing 3% annual wage increases for over 3,000 workers. — House Republicans face challenges in advancing Trump’s agenda. Today, House Republicans convene in the Donald J. Trump Grand Ballroom in Doral, Florida, for an all-day policy retreat. The gathering is centered on solidifying the future of President Donald Trump’s agenda, featuring discussions with GOP leaders, Budget Chair Jodey Arrington (R-Texas), and breakout sessions on crafting a reconciliation package. Vice President JD Vance will also address attendees. Key challenges loom: · Tight timelines: Speaker Mike Johnson (R-La.) has 27 days to meet a Feb. 24 deadline for passing a budget resolution. Crafting the subsequent reconciliation package on complex issues like taxes and immigration will likely push the timeline even further. Of note: Republicans must also address pressing issues like the debt limit and government funding while managing internal divisions and Trump’s evolving demands. — White House halts federal grants, sparking uncertainty nationwide. The White House budget office issued a directive (link) to pause all federal grants and loans, according to a leaked memo from the Office of Management and Budget (OMB). This unprecedented action could place trillions of dollars on hold and has sown confusion among federal agencies, nonprofits, and state governments. The memo, signed by acting OMB director Matthew J. Vaeth, instructs agencies to halt financial disbursements and reassess their alignment with President Trump’s executive orders targeting diversity, clean energy initiatives, and other programs. Of note: The memo specifies that Social Security, Medicare and “payments to individuals” will not be affected (that means the $10 billion in farmer financial aid will not be impacted), but appears to leave all other federal pay-outs in jeopardy — including grants and loans issued to research bodies, charities, universities and community projects. The order impacts a wide array of funding, including foreign aid and university grants. Vaeth said all federal grants and loans which “may be implicated” must be suspended by today’s 5 p.m. ET cut-off while reviews are undertaken. Officials then have until Feb. 10 to prepare reports for the OMB to consider. By Feb. 10, the OMB will likely be run by Trump’s incoming nominee for director, Russ Vought. Experts warn the freeze could have profound implications, creating financial uncertainty for grantees reliant on these funds. Critics, including Senate Minority Leader Chuck Schumer (D-N.Y.), have decried the move as a breach of congressional authority. Budget analysts are questioning its legality, noting the administration’s need to clarify which budget accounts are affected. The move signals a potential shift toward greater executive control over federal spending, a development that could reshape longstanding budget norms and funding mechanisms. — Trump’s immigration crackdown escalates. President Trump has swiftly increased arrests and deportations since resuming office. According to the Washington Examiner, over 2,400 undocumented immigrants were arrested in his first week, while Fox News reports daily border crossings fell below 600 by Sunday. However, Trump’s vow to target serious criminals is under scrutiny — on Sunday alone, nearly 1,200 arrests were made, with almost half involving individuals whose only offense was illegal entry. — Senate confirms historic Treasury Secretary; Transportation vote on deck. The Senate confirmed Scott Bessent as Treasury Secretary in a 68-29 vote, with support from 16 Democrats and independents. Bessent becomes the highest-ranking openly LGBTQ official in U.S. history and is set to play a key role in upcoming tax and trade debates. Meanwhile, Sean Duffy is poised for confirmation as Transportation Secretary in a vote at noon ET today, following a unanimous procedural vote (97-0) yesterday. — Treasury Sec. Scott Bessent wants to impose a universal tariff on imports that would start at 2.5% and rise gradually. But speaking hours after Bessent’s confirmation hearing, President Trump said he wanted “much, much bigger” tariffs. “I have it in my mind what it’s going to be… I won’t be setting it yet, but it’ll be enough to protect our country,” Trump added. “As tariffs on other countries go up, taxes on American workers and businesses will come down and massive numbers of jobs and factories will come home,” Trump said. “Remember, again, the word ‘tariff.’ We’re going to protect our people and our businesses, and we’re going to protect our country, with tariffs,” he added. Trump also said he’d impose tariffs on steel, aluminum, copper, computer chips, semiconductors, and pharmaceuticals in the “very near future” to bring production back to the U.S. The president previously said he’d announce tariffs of up to 25% on imports from Canada and Mexico by Feb. 1, and over the weekend, used the tariff threat as a bargaining chip to force Colombia to accept illegal migrants deported from the U.S. — President Trump remarked that DeepSeek’s AI model should serve as a “wake-up call” for American tech companies. On Monday, global stock markets slumped as investors reacted to the perceived threat posed by the Chinese firm’s technology to Western competitors. Sam Altman, founder of OpenAI, acknowledged DeepSeek’s low-cost AI model as “impressive” but expressed confidence that his company would “deliver much better models.” — Trump pushes for permanent energy policies through budget bill. President Donald Trump aims to solidify his energy policies by leveraging the budget reconciliation process, he told House GOP lawmakers on Monday at his Doral resort in Miami. Highlighting his declaration of a national energy emergency, Trump emphasized his commitment to “drill baby drill” and pledged to make these policies permanent through legislative means. Besides boosting oil and gas production, Trump’s agenda includes extending his signature tax cuts, signaling a focus on energy independence and economic growth. Meanwhile, a coalition of 161 organizations has urged Congress to preserve the 45Q tax credit, a vital incentive for carbon sequestration and management technologies. The Carbon Capture Coalition highlighted the credit’s role in reducing foreign energy reliance and maintaining domestic energy production. As House Republicans consider a budget reconciliation bill, many have expressed support for maintaining 45Q while opposing other clean energy tax incentives. — Trump pressured to postpone ethanol policy shift amid infrastructure concerns. President Trump faces calls to delay a gasoline policy change designed to boost corn-based ethanol sales until spring 2026. In a Jan. 24 letter to EPA reported by Bloomberg, DeWine said that while he backs legislation to allow year-round sales of E15 and remove a state-by-state approach, he warned that since such legislation has not been approved, “we have continued to hear concerns from Ohio’s petroleum industry about their ability to install the necessary infrastructure to comply” with the shift that was to take place for the summer 2025 driving season. Of note: DeWine was one of the eight governors who petitioned the agency in 2022 to make the exception that EPA last year decided would not take place until 2025. To sell E15, gasoline retailers need to have separate storage and fuel dispensing units for the fuel which appears to be what DeWine’s concern is focusing on. The 2022 EPA rule, which removes a volatility exemption for E10 in eight Midwestern states, requires new fueling infrastructure, prompting oil industry warnings of increased costs and potential disruptions. DeWine supports federal legislation to streamline the process but highlighted continued challenges in meeting the current summer deadline. This request marks an early test of Trump’s stance on biofuel policy, as ethanol advocates criticize the pace of the transition. — Texas Republican proposes repeal of Clean Fuels Production Credit (45Z). Rep. Beth Van Duyne (R-Texas) introduced HR 549, a bill to repeal the Clean Fuels Production Credit (45Z) established under the Inflation Reduction Act (IRA/Climate Act). The credit, which took effect on Jan. 1, incentivizes low-carbon biofuel production and supports climate-smart agricultural practices. While Van Duyne’s legislation lacks co-sponsors, its introduction marks a challenge to a program that has seen general Republican support. The Treasury Department recently issued preliminary guidance on 45Z, and USDA unveiled interim rules for climate-smart farming practices aimed at improving carbon intensity scores for crops used in biofuels. The Trump administration is set to finalize both the 45Z program details and related agricultural practices. Van Duyne chairs the Small Business Subcommittee on Economic Growth and serves on multiple Ways and Means subcommittees. Her bill seeks to retroactively end the 45Z credit. — Rep. Craig opens contentious equity/regional issue farm bill debate. Rep. Angie Craig (D-Minn.), the new top Democrat on the House Ag Committee, is calling for adjustments to reference prices proposed in last year’s farm bill draft. Her advocacy stems from concerns over what she says are the uneven distribution of farm bill benefits across U.S. regions. Craig noted that Midwest producers felt overlooked in the previous proposal, which featured major reference price increases for southern commodities. These adjustments, heavily favoring southern states, were a key feature of the House Republican bill. Reality check: What is so bizarre is that former Senate Ag Chairwoman Debbie Stabenow (D-Mich.) last year offered a 5% increase in reference prices for rice, peanuts, and cotton and no increase for all other crops and House Ag Chairman GT Thompson (R-Pa.) offered an increase for all crops based on costs (which all farm groups endorsed). Says one farm policy analyst: “The Democrats keep hanging on this idea that the Stabenow proposal is better for northern crops. Delusional.” As for Craig’s equity argument, some analysts wonder how corn and soybeans stack up with other farm program commodities when you include the mandated use of those crops in the Renewable Fuel Standard (RFS) program. Meanwhile, Craig also said that the votes will not be there for a new farm bill in 2025 if Republicans cut food stamp (SNAP) funding and/or eligibility. However, if portions of a new farm bill (a boost in reference prices, conservation funding and SNAP changes) are included in the forthcoming GOP-led budget reconciliation measure, House and Senate Republicans could pass the budget measure without any Democratic votes (although a hurdle with slim GOP majorities in each chamber). — Mexico proposes constitutional ban on GM corn cultivation. President Claudia Sheinbaum of Mexico has proposed a constitutional amendment to ban the cultivation of genetically modified (GM) corn in the country. This move is a significant development in Mexico’s ongoing efforts to protect its native corn varieties and food sovereignty. Constitutional changes: Seeks to amend Articles 4 and 27 of the Mexican Constitution. Mandates GM-free corn cultivation. Defines corn as a “national identity element” in the Constitution. Expands beyond previous restrictions on imports and use to outright ban cultivation. Legislative path: Sent to the Chamber of Deputies, requiring a two-thirds majority in both houses for approval. Of note: A December 2024 USMCA trade panel ruling found Mexico’s GM corn ban violated trade agreements. The latest initiative has strong backing from the Morena party. It aligns with Sheinbaum’s goals to safeguard biodiversity and native corn. It will likely strain relations with the U.S., which argues the ban lacks scientific grounding and harms its corn industry. It raises questions about balancing food sovereignty with USMCA compliance. — U.S. Appeals Court upholds ruling in AGCO’s favor in Deere patent case. The U.S. Court of Appeals for the Federal Circuit has upheld a 2022 lower court ruling that AGCO Corporation did not infringe on two Deere & Company patents related to high-speed agricultural planting technology. Patents in question: U.S. Patent Nos. 8,813,663 and 9,699,955, covering seed delivery systems. The Federal Circuit affirmed the lower court’s rulings, including: Analysts say this decision is a major win for AGCO, allowing it to continue marketing its SpeedTube-vSet2 systems without infringement concerns. For Deere, the ruling marks a setback in protecting its intellectual property amid a competitive agricultural tech market. The case underscores the high stakes of patent enforcement in rapidly evolving fields like high-speed planting systems and highlights the critical importance of precise patent claims. — U.S./China economic panel launches first 2025 review hearing. The U.S./China Economic and Security Review Commission scheduled a public hearing for Feb. 6 to gather input on China’s “Made in China 2025" industrial policy. The session, titled “Made in China 2025 —Who is Winning?”, will focus on technological advancements in biotechnology, biomanufacturing, aerospace, and autonomous robotics. This marks the Commission’s first hearing as part of its 2025 reporting cycle. — U.S. explores measures against China’s growing influence in Panama. The U.S. is considering options to address China’s expanding presence in Panama, with Federal Maritime Commission (FMC) Chair Louis E. Sola set to testify before the Senate Commerce Committee. In written remarks obtained by Reuters, Sola emphasized the need to support American businesses in Panama and ensure Chinese companies do not monopolize contracts. President Donald Trump has previously pledged to “take back the Panama Canal” without outlining specifics. The canal, a vital route for over 40% of U.S. container traffic valued at $270 billion annually, is managed by the Panama Canal Authority, whose independence Sola stressed must be protected. — NWS weather: Locally heavy snow and snow squalls possible for the Great Lakes and Northeast through Wednesday... ...Flooding rain and severe thunderstorms possible from the southern Plains to the Mid/Lower Mississippi Valley Wednesday into Thursday... ...Well above average temperatures expected across much of the Central and Eastern U.S., while below average temperatures linger in southern California and the Southwest. KEY DATES IN JANUARY 28: Florida’s 1st and 6th special primaries |
