Grains are mixed early Tuesday with livestock higher.
Randy Martinson, Martinson Ag, says market reaction has been muted to talk of possible tariffs.
Late Monday, Trump said he would impose a 25% tax on all products entering the country from Canada and Mexico, and an additional 10% tariff on goods from China, as one of his first executive orders.
This has resulted in Mexico’s president talking about retaliation.
Martinson thinks the lack of negative reaction is tied to the market anticipating front loading of product and a pick up in demand.
This will be most noted in corn, wheat and pork ahead of any tariffs with Mexico as they are the top customer for the U.S. in those categories.
In fact, he says Mexico has been front loading purchases of corn and pork the last few weeks in anticipation of the tariff rate increases.
That has also been true of China regarding soybeans and talk continues to circulate that they have made additional purchases of soybeans.
Wheat futures are also adding war premium back in with Black Sea tensions reigniting and despite a 5% improvement in winter wheat ratings.
Today will be the last regular trading session ahead of the holiday and Wednesday and Friday will see lower volume and liquidity.
Plus, Martinson says it is end of the month on Friday, which coincides with first notice day which could mean some volatile moves the rest of the week as farmers need to exit long December positions in corn and wheat.
For basis fixed contracts he says farmers are faced with the decision of cashing out or rolling but the deferred contracts are a higher price which means farmers have to pay the difference.
Cattle futures are higher with feeder cattle leading and making new highs for the move.
The buying is in reaction to restrictions on imports of Mexican feeder cattle due to a case of New World Screwworm.
Martinson says supplies of feeder cattle are already tight and it sounds like this could last at least a month or longer.
The U.S. imports from 1.1 to 1.5 million head of feeder cattle from Mexico or 5% of the total U.S. feedlot placements and October and November are the peak season for imports.
This means it will have an impact and could continue to push prices higher depending on how long it lasts.
Lean hog futures are making new contract highs in the back months as demand has been strong and despite tariff talk.
Again, Martinson says Mexico, which is the top pork customer of the U.S., has been front loading purchases and he anticipates more which is likely supporting prices.
