AM Comments February 3 2025
Good morning. Tariffs tariffs tariffs. That is the word that likely dominates headlines and newswires this week, as President Trump has gone ahead with the implementation of across-the-board 25% trade duties on most goods coming from Canada and Mexico, and also additional 10% tariffs on goods coming from China. Though widely expected, the news sent the US$ index soaring against most other global currencies last night, which in-turn has helped to pressure the ag space to start Monday morning trade. Corn futures are trading 4-7 cents lower, soybean futures are trading 1-2 cents lower, and the Chicago wheat market is down 1-2 cents also. Products are mixed, soybean meal is down $4-5/ton, and soybean oil is up 1.10-1.20. All five of the previously mentioned markets had gap opens - lower in the case of corn, beans, what, and meal, and higher in the case of bean oil. Outside markets are mixed, crude oil futures are up around $1.60/bbl, the Dow Jones index is down 600 points and the US$ index is up 70-80 points. The S&P500 is down 100 points and the NASDAQ is down 400 points. Here too, all of the markets mentioned had gap openings to start Sunday trade last night. Also of note, coffee made new contract highs again overnight, while cotton again made new contract lows.
Today's Reports: Weekly Export Inspections; USDA Monthly Fats & Oils; USDA Monthly Grain Crushing
- Starting with the end of last week, Friday afternoon's CFTC commitment of traders report showed that as of Tuesday, January 28th, managed money traders were net-long 350,721 contracts of corn (+39,044 on the week), net-long 56,496 contracts of soybeans (+16,166), and net-short 110,782 contracts of Chicago wheat (-18,990). This is the largest net-long the funds have been in corn since May of 2022.
- In soy products, managed money traders were seen net-short 52,291 contracts of soybean meal (+8,943 on the week) and net-long 39,768 contracts of soybean oil (+15,554). This is the smallest the fund's net-short in meal has been since the week of November 12th last year.
- Also from last week, Friday's bi-annual cattle report from the USDA showed the US cattle herd as of January 1 at 86.7 mil head, which was down 0.6% from last year and the lowest recorded figure since 1951. Cows and heifers that have calved were down 0.4% on the year to 37.2 mil head.
- Of note in the weekend tariff happenings, Canadian oil products were excluded from the blanket 25% tax and were instead charged at just a 10% rate, in an effort to keep energy prices stable. Also of note, the measures don't officially go into effect until 12:01am eastern tonight (Tuesday), meaning time exists for a last minute agreement to drastically change the current outlook; Trump said yesterday he would be speaking to the Presidents of both Canada and Mexico today.
- On the retaliatory side, Canadian Prime Minster Trudeau said his country would impose 25% tariffs against roughly $106 bil USD worth of goods coming from the US, while Mexican President Sheinbaum has pledged retaliation, but has not gone so far as to give any specific details. China is allegedly preparing a proposal for negotiation, though some news outlets are reporting Beijing would be filing a dispute with the WTO.
- Speaking from his Florida residence on Sunday, Trump also mentioned that the European Union would be the next group in line for potential tariffs, which is a new development from what was seen last week; EU leaders meeting in Brussels on Monday said such a move would prompt retaliation from them as well, but also urged for reason and negotiation.
- In non-tariff news over the weekend, private ag consultancy Safras y Mercado says that as of January 31st, 7.6% of Brazil's soybean harvest had been completed; this compares to 15.7% complete last year and the five-year average of 11.8%. In top producer Mato Grosso, harvest was seen at 12.2% complete, compared to 39.4% last year and 25.3% on average.
- In Argentina, official export data shows grain export sales in the month of January grew by more than 35% compared to the same month last year, and were also up more than 5% compared to the December figure. Though the measure was not announced until mid-month, it is expected that the government's tax reduction was part of the reason for the increase. Officials say the arrival of wheat and barley for export also helped boost sales.
- USDA shows federally inspected pork production in the week ending February 1st totaled 563 mil lbs, which was up more than 4% from the week prior; beef production in the week was seen at 526 mil lbs, which was up just 0.2% from last week. YTD pork production through January is down 7.2% from last year, and beef production is down 4.7%.
- Unrelated to tariffs, the USDA announced over the weekend that imports of Mexican cattle would be allowed to resume 'in the next several days', with additional pre-export inspection safeguards set up to keep NWS (new world screwworm) out of the US.
- Oil futures are trading higher this morning in part due to the tariff announcements, but also in part due to news that Ukraine had struck multiple energy facilities with dozens of drones overnight.
- Weekend weather in South America was largely as expected, with the bulk of Argentina on the dry side and the bulk of Brazil continuing to see unwanted showers; far southern/southeastern Argentina did pick up around an inch of precip, which was better than expected.
- Forecast for this week shows additional rains to the south for another few days, but continues to be generally dry for the bulk of Argentina's growing regions otherwise; rains will begin to be spottier in Brazil going through this week, with a much drier pattern still forecast in the week two outlook beyond this weekend. Week two precip maps are also continuing to show a shift to more normal rainfall in Argentina, which is a good sign coming out of the weekend. This mid-month pattern shift will be the market focus on the weather front this week.