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Livestock producers: Extend soymeal coverage... March soymeal futures fell to $300.10 intraday before bouncing. While short-term technicals suggest more near-term price pressure is possible, the $300.00 level has been a historical value level. We advise livestock producers to extend soymeal coverage another three weeks in the cash market through mid-February. Be prepared to further extend coverage if futures face more near-term price pressure.
Sources: U.S. to restart Mexican cattle imports later this month... Sources tell us the Mexican border is expected to be reopened for feeder cattle imports the week of Jan. 20. Imports will be slow at first given the need to implement and test new protocols. Live animal movements are expected to resume fully sometime after the initial reopening.
USDA’s Animal and Plant Health Inspection Service (APHIS) suspended imports of live cattle and bison from Mexico on Nov. 22, 2024, following the detection of New World screwworm (NWS) along Mexico’s southern border. This pest can have a significant negative impact on cattle health, and U.S. authorities have been working to develop protocols to screen animals coming into the country.
Several factors are influencing the timeline and pace of reopening:
- Facility inspections: Both countries have agreed on protocols, but implementation requires facility inspections and approvals.
- Quarantine period: There will be a seven-day quarantine after animal checks.
- Port readiness: The most important port to get moving again is Santa Teresa, New Mexico.
U.S. posts another ag trade deficit in November... U.S. ag exports totaled $17.39 billion in November against imports of $18.51 billion, resulting in a monthly trade deficit of $1.12 billion. This marked the 13th month of the past 14 with an ag trade deficit. Two months into fiscal year (FY) 2025, cumulative exports stood at $33.41 billion, while imports totaled $37.02 billion for a deficit of $3.61 billion. USDA forecasts ag exports in FY 2025 at $170.0 billion and imports at a record $215.5 billion. That would leave the U.S. with a record ag trade deficit of $45.5 billion, up from $31.8 billion in FY 2024.
Farmer sentiment drifts lower in December... Farmer sentiment drifted lower in December as the Purdue University/CME Group Ag Economy Barometer fell nine points to 136, though that was 22 points (19.3%) above year-ago. The Index of Current Conditions declined 13 points, while the Index of Future Expectations dropped eight points.
The survey noted, “Farmer sentiment weakened in December, with concerns about the current situation on their farms and U.S. agriculture as the primary driver behind the sentiment decline. Although expectations for the future also weakened in December compared to November, it was clear that U.S. producers continued to be markedly more optimistic about the future than they were as recently as September. Expectations among farmers for more favorable regulatory, estate tax and income tax policies over the next several years explain much of the optimism about the future. However, the possibility that a “trade war” could break out that has a negative impact on U.S. agricultural exports is a rising concern among farmers, with more farmers expressing concerns about agricultural trade in December than in November.”
Click here to view the full survey results.
Ripple effect of tariff uncertainty on the global economy... The uncertainty surrounding potential U.S. tariffs is already exerting significant pressure on the global economy, according to a Bloomberg Economics model. Even before new tariffs are implemented, this uncertainty is impacting stock markets, trade and production.
Economic impact of tariff uncertainty
- Stock market pressure: Global stock prices are expected to decline as investors react to fears about trade tensions affecting corporate profits and economic growth.
- Trade disruption: Businesses face a challenging environment for international transactions, with hesitation stemming from the unpredictable trade landscape.
- Production slowdown: A cautious approach to investment and expansion could lead to reduced global production soon.
Broader economic context
- Trump’s tariff stance: President-elect Donald Trump has reinforced his commitment to a broad tariff policy, contradicting earlier reports of a potential scaling back, heightening market concerns.
- Historical context: Past tariffs imposed during Trump’s first term negatively impacted the U.S. economy, as noted by the Federal Reserve Bank of New York.
- Weaponizing uncertainty: Adam Posen of the Peterson Institute for International Economics describes the strategy as “weaponizing uncertainty,” potentially amplifying the economic strain.
- Global growth risks: A UBS study warns that extreme tariff scenarios, such as a 60% tariff on Chinese exports, could significantly harm global growth, particularly for China.
Bottom line: This analysis highlights how trade policy uncertainty alone can create tangible economic effects, including market volatility and cautious behavior across sectors. With potential U.S. trade policy shifts looming, the global economy is bracing for continued challenges.
Trump to meet Senate Republicans amid policy strategy debate... President-elect Donald Trump’s meeting with Senate Republicans on Wednesday highlights the GOP’s challenge in aligning priorities as they prepare for significant policy decisions. Senate Republicans are divided over whether to package Trump’s sweeping legislative goals into one comprehensive bill or split them into two separate packages, addressing border security and tax legislation independently. Trump, while initially advocating for a single “beautiful bill,” has shown flexibility, suggesting in a recent Hugh Hewitt interview he is open to either approach.
The meeting, hosted by Sen. Shelley Moore Capito (R-W.Va.), is a standing invitation for Trump to engage with Senate GOP leadership. The timing coincides with Trump’s visit to Washington for President Jimmy Carter’s funeral.
Trump is also set to meet with House Republicans at Mar-a-Lago this week, including Freedom Caucus members and key committee chairs, as both chambers weigh their strategies.
Trump vows to reverse Biden’s offshore drilling ban... President-elect Donald Trump pledged to swiftly overturn President Joe Biden’s recent move to ban oil and gas drilling along most of the U.S. coast. In an interview with radio host Hugh Hewitt, Trump criticized the policy, which Biden announced just two weeks before leaving office, and vowed to undo it “immediately” upon taking office later this month. However, reversing the ban may require congressional action.
Barr resigns as Fed Vice Chair for Supervision... Michael S. Barr, an Elizabeth Warren protégé, will resign as Fed Vice Chair for Supervision by Feb. 28, but remain a Federal Reserve Board governor until 2032. His continued service avoids immediate disruption during the transition. Barr’s resignation pre-empts a potential legal clash with the incoming Trump administration, which had been speculated to seek his removal or demotion. He cited the risk of a dispute over his role becoming a distraction and emphasized his effectiveness in serving the public from his position as governor. Trump’s presidency is expected to usher in a more lenient regulatory approach, reminiscent of his first term’s banking policies.
Impacts: The Fed will delay major rulemakings, including Basel III reforms, until a new Vice Chair for Supervision is confirmed.
Fed Governor Michelle Bowman, a critic of stricter bank regulations, is a leading candidate for the role. She has been the sole dissenting voice on the Fed Board when it comes to decisions on interest rates and bank capital rules. Bowman in November criticized what she saw as the board’s too-steep rate cut decision ahead of a presidential election and has cautioned against heavier bank regulation, including the proposed Basel III “endgame” reforms that would raise capital requirements for the biggest U.S. lenders. Bowman is scheduled to speak on monetary policy and “lessons for banking regulation” on Thursday.
China’s central bank buys more gold despite elevated prices... The People’s Bank of China (PBOC) increased its gold reserves for the second consecutive month in December, signaling a renewed interest in diversifying its holdings. PBOC raised its bullion holdings to 73.29 million fine troy ounces from 72.96 million in November, following a six-month pause earlier in the year.
This purchase underscores PBOC’s strategy to expand its reserves despite gold’s near-record prices, bolstered by global central bank demand and U.S. monetary easing. However, the rally slowed after Donald Trump’s U.S. election victory strengthened the dollar. Goldman Sachs recently revised its projection for gold reaching $3,000 an ounce, citing fewer expected Federal Reserve rate cuts in 2025.
FDA issues draft guidance on labeling plant-based alternatives to animal-derived foods... FDA released a draft guidance titled “Labeling of Plant-Based Alternatives to Animal-Derived Foods,” providing recommendations for naming and labeling plant-based foods marketed as alternatives to animal-derived products. The guidance covers products such as plant-based alternatives to eggs, seafood, poultry, meat and dairy (excluding plant-based milk alternatives), all under FDA jurisdiction.
The agency invites public comments on the information collection by March 10 and on the draft guidance itself by May 7. This draft guidance, initiated under the Trump administration, remains subject to finalization, with potential changes still uncertain.
FDA finalizes guidance on animal food ingredients... FDA released its final guidance on the “Animal Food Ingredient Consultation (AFIC)” process, published in the Federal Register. This guidance offers an alternative pathway for industry engagement with FDA on animal food ingredients, following the expiration of the Memorandum of Understanding (MOU) with the Association of American Feed Control Officials (AAFCO) on Oct. 1, 2024.
The AFIC process replaces elements of the AAFCO ingredient definition process and outlines how companies can consult with FDA on new animal food ingredients. After a draft release on Aug. 9, 2024, and a 30-day comment period, FDA clarified several points, including the inclusion of proposed ingredient names in consultations and the removal of a recommendation for environmental risk statements.
As a Level 1 guidance, it reflects the FDA’s current thinking on animal food ingredient regulation.