first look for 2/2

U.S. President Trump warned that the United States would respond very substantially if Canada proceeds with a trade agreement with China. He said the U.S. does not want China to “take over” Canada, arguing that the type of deal under discussion could lead to excessive Chinese influence. The comments highlight growing U.S. concern over China’s economic presence in North America and signal potential retaliation if Canada deepens trade ties with Beijing.

The U.S. cattle herd fell to 86.2 million head as of January 1, the smallest inventory since 1951, underscoring how prolonged drought, high costs, labor constraints, and capital discipline have driven years of liquidation at the cow-calf level, with beef cow numbers especially tight and meaningful rebuilding unlikely before 2027–28 even if heifer retention improves. While some of this supply tightness is being masked in the short term by longer days on feed and near-record carcass weights—supported by better genetics, nutrition, and a relatively mild winter—those factors only smooth near-term production and cannot offset a shrinking herd indefinitely. Biological limits eventually cap weights, and pushing cattle heavier today effectively pulls future supply forward. As a result, beef supplies remain structurally tight, supporting live and feeder cattle prices, keeping calf and replacement female values elevated, increasing sensitivity to demand shocks, and contributing to ongoing packer margin volatility.

China’s January PMI data highlight a clear divergence between official and private-sector readings. The official Manufacturing PMI fell to 49.3, below expectations and back into contraction, while the Non-Manufacturing PMI dropped to 49.4 and the Composite PMI declined to 49.8, indicating broad-based weakness across industry and services following year-end momentum. In contrast, the RatingDog Manufacturing PMI rose to 50.3, slightly above expectations and the prior month, signaling marginal expansion among private, smaller, and more export-oriented manufacturers. Taken together, the data suggest that while headline economic activity remains under pressure, particularly in state-heavy and domestic-facing sectors, there are tentative signs of stabilization at the margin within parts of the private manufacturing economy.

An EU industry association said China has proposed final anti-subsidy duties on EU dairy products at significantly lower levels than initially indicated. The final tariffs would rise to a maximum of 11.7%, sharply reduced from provisional duties that reached as high as 42.7%. The move suggests some de-escalation in trade tensions and a willingness by China to moderate its stance compared with earlier, more punitive proposals.

Eight OPEC+ members agreed on Sunday to maintain the pause in planned oil output increases for March, extending supply restraint amid ongoing uncertainty around global demand and price volatility. The decision reflects a continued preference for market stability over near-term volume gains as producers assess macroeconomic conditions, geopolitical risks, and recent swings in energy prices.

CME Group raised margin requirements for gold and silver futures on Friday following a historic selloff in precious metals. Comex gold futures margins will increase to 8% from 6% of the contract value for non-heightened risk accounts and to 8.8% from 6.6% for heightened risk profiles. Silver margins saw an even sharper move, rising to 15% from 11% for non-heightened risk profiles and to 16.5% from 12.1% for heightened risk accounts. The changes reflect CME’s response to elevated volatility and are likely to further curb speculative positioning in the near term by increasing capital requirements for traders.

U.S. officials have indicated that a meeting between the United States and Iran could take place in Turkey this week, with Ankara potentially serving as the host and mediator for talks aimed at de-escalating tensions and exploring a diplomatic path forward, particularly around Iran’s nuclear program. The reports come amid broader regional diplomatic efforts involving countries such as Turkey, Qatar, and Egypt, even as both sides maintain significant distrust and have backed up their rhetoric with military deployments and strategic warnings. 

 

China’s president Xi Jinping has called for the renminbi to achieve global reserve currency status, highlighting Beijing’s ambition to expand the yuan’s role in international trade, investment, and financial markets while reducing reliance on the U.S. dollar. However, this aspiration runs headlong into structural constraints. China continues to self-classify as an “emerging market” at the WTO, and more importantly, its financial system lacks key reserve-currency prerequisites: full capital account openness, deep and freely accessible bond markets, strong rule of law, and consistent policy transparency. Until confidence improves around capital controls, institutional independence, and governance predictability, the renminbi’s use will remain largely transactional rather than a true store of global reserves. In that sense, China has a long road ahead before its currency can credibly function as a global reserve asset.

India’s latest annual budget signals a balancing act between growth and discipline. The government raised its infrastructure capital spending target by about 9% to INR 12.2 trillion, while also pushing to strengthen domestic manufacturing in strategic areas such as rare earths and semiconductors and offering a tax holiday through 2047 for foreign cloud companies investing in data centers. At the same time, the budget strongly emphasizes fiscal restraint, with a goal of reducing the debt-to-GDP ratio to around 50% from 56% by 2030/31 and trimming the fiscal deficit to 4.3% of GDP. To help support revenues and curb speculation, authorities also proposed an increase in the Securities Transaction Tax on futures and options trading. Overall, the budget aims to support long-term industrial and infrastructure growth without abandoning a clear path toward fiscal consolidation.

South Korea’s industry minister Kim said the government will accelerate the implementation of investment-related legislation after returning from talks with the United States, noting that the discussions helped clear up misunderstandings around tariffs. The comments suggest improved clarity in U.S.–South Korea trade relations and point to a push to move more quickly on investment measures now that policy uncertainty has eased.

Fed officials continued to emphasize patience on monetary policy. Musalem said further interest rate cuts are not advisable, arguing that policy is now neutral and the economy does not need additional stimulus, with risks broadly balanced and rate cuts only appropriate if the labor market weakens or inflation falls further. Separately, Bowman said she supports a pause as inflation remains elevated, noting that downside risks to the labor market have not diminished and policy is still modestly restrictive. She added the Fed should avoid signaling that the current stance will be held for an extended period and reiterated that she projected three rate cuts in 2026 in the December SEP.

 

U.S. President Trump said his Fed Chair nominee Kevin Warsh may receive support from Democrats and expressed hope that Warsh will lower interest rates. Trump added that Warsh did not commit to cutting rates but said he would likely discuss rate cuts with him, while also stating that Warsh would make any decision to cut rates independently and without White House pressure.

 

Disney and Tyson report earning today. 

 

Japanese PM Sanae Takaichi said in a speech on Saturday that the yen’s recent depreciation has supported exporters and increased returns from the government’s foreign exchange fund, but she did not address concerns about the impact on consumer prices. On Sunday, she attempted to clarify that her comments were meant to stress the importance of building an economic structure that can withstand currency fluctuations, rather than to promote the advantages of a weaker yen.

 

Bitcoin briefly dipped to just under $75,000 before stabilizing and establishing a near-term floor.

 

Outside Markets	Price	Change	% Change
Dow	48,889	(119.00)	-0.24
Crude	62.03	(3.18)	-4.88
US Dollar	96.9350	0.076	0.08
Gold	4,723.59	(170.640)	-3.49
US 2/10 Swap	69.7280	(1.1690)	-
VIX	19.08	1.64	-
CBOT Ags Volume & Open Interest
	Previous Volume	Change in OI	Options Volume	Change in Options OI
Corn	397,019	(3,824)	35,216	6,729
SRW	168,456	(8,280)	15,506	3,284
HRW	84,713	(1,333)	-	2,116
Soybeans	286,239	1,392	53,225	15,800
Meal	149,164	1,535	14,943	3,732
Oil	160,018	3,381	24,580	1,022
Feeders	28,405	391	4,439	(41,115)
Live Cattle	86,980	(243)	39,113	4,414
Hogs	58,142	2,647	18,549	2,794

 

Overnight options activity 

Corn

S 300 h 420 straddles 12 3/8 vs 426 1/2

B 500 h4 20 p 3 ¼ to 3 3/8 

 

Beans

S 200 n 1080 c 40

S 200 h 1050 c 19

S 200 k 1080 c 28

B 200 h 1040 p 5 ½ to 5 7/8 

S 750 k 1070/1050 ps 9 to 8 5/8 

B 750 k 1050/1070 cs 10 7/8 to 11 1/4

B 100 k 1100 c 16 1/8 

B 300 k 1080/1060 ps 10 1/2

S 300 k 1060/1080 cs 9 3/8 

 

Bean oil

S 500 h 57/60 cs .150 to .145 vs 5300

S 100 j 57/60 cs .540

B 250 h 52 p .850

 

Kc wheat

B 150 h 520 p  5 1/4

 

Open interest changes

Corn

March 430 call buy was new....march 420 put sale was closing.

 

Beans 

March 1040 put sale, march 1050 put buy and march 1060 put buys were new

 

Soymeal

March 300 call sale was closing

 

Bean oil

March 56 call sale was closing

 

Wheat

April 500 put buy was new

 

Lean hogs 

Oct 88 call buy was closing

 

Live cattle 

April 225 put sale and feb 240 call buys were closing

 

Cvol

Ags 17.93% up .67%

Corn 15.53% up .07%

Beans 13.67% up .08%

Soymeal 19.33% down 1.09%

Bean oil 26.90% down .07%

Wheat 24.68% down .03%

Feeder cattle 19.25% up 2.02%

Live cattle 17.12% up 1.71%

Lean hogs 20.45% up .21%

Class 3 milk 22.96% up 3.09% (6 month high)

 

corn

beans

soymeal

bean oil

wheat

kc wheat

miax wheat

oats

rough rice

crush

feeder cattle 

live cattle

lean hogs

 

sources:

news bloomberg

options data globex

charts bloomberg