Farmer Sentiment Slides to Start 2026 as Financial and Trade Concerns Intensify
Soyoil gains on U.S./India trade accord | Ethanol demand tightens Brazil’s export supply
| LINKS |
Link: Video: Wiesemeyer’s Perspectives, Feb. 1
Link: Audio: Wiesemeyer’s Perspectives, Feb. 1
| Updates: Policy/News/Markets, Feb. 3, 2026 |
| UP FRONT |
TOP STORIES
— Shutdown to end, but DHS showdown looms
Congress is poised to end a three-day shutdown, but DHS funding is only extended to Feb. 13, setting up a sharper fight over immigration enforcement and ICE reforms just before recess.
— EPA clarifies right-to-repair under Clean Air Act
EPA guidance confirms farmers and independent shops can temporarily override emissions systems for repairs, reinforcing right-to-repair without weakening emissions standards.
— Trump launches rare earth strategic reserve
The administration unveils “Project Vault,” a nearly $12 billion plan to stockpile critical minerals and counter China’s dominance in rare earth supply chains.
— Trump announces trade deal with India
Trump says tariffs on Indian goods will drop to 18% in exchange for market access and an end to India’s Russian oil purchases, though formal implementation details remain unclear.
— Japan to unveil three U.S. investment deals
Tokyo plans to announce new U.S. investments after elections, advancing its $550 billion pledge and deepening bilateral industrial ties.
— Cornyn presses USTR on Mexico water deliveries
Sen. Cornyn urges USTR to use the USMCA review to enforce Mexico’s 1944 Water Treaty obligations amid ongoing shortfalls harming South Texas agriculture.
FINANCIAL MARKETS
— Equities today
U.S. stocks open higher on strong tech earnings and shutdown optimism; global markets rebound modestly after recent losses.
— Equities yesterday
Major U.S. indexes posted solid gains Monday, led by the Dow, as risk sentiment improved.
— Jobs data delayed by shutdown
January jobs report and other labor data are postponed until the government funding lapse fully ends, adding near-term uncertainty for markets.
— ADM flags biofuel policy delays
ADM warns profit will miss expectations as delayed blending quotas weigh on soybean oil demand, crush margins, and investment decisions.
— Farmer sentiment slides to start 2026
The Purdue/CME Ag Economy Barometer shows a sharp drop in confidence, rising debt stress, and growing concern over exports and long-term prospects.
— Bostic warns Warsh faces uphill climb
Atlanta Fed President Raphael Bostic says Kevin Warsh would need broad internal consensus — not authority — to push the Fed toward rate cuts.
— Manufacturing’s golden age hits a wall
Tariffs, high input costs, and tight financing are slowing factory hiring despite longer-term reshoring ambitions.
AG MARKETS
— Soy oil jumps on India deal hopes
Soybean oil futures rally on optimism over India trade access, though traders caution structural limits could cap gains.
— Agriculture markets yesterday
Grains mostly lower, livestock higher, with soy oil down on the day despite trade-related optimism.
ENERGY MARKETS & POLICY
— Tuesday: Oil prices stabilize
Crude steadies after a sharp selloff as traders balance Iran talks, OPEC+ supply signals, and currency pressures.
— Monday: Oil prices tumble
Prices fall more than $3 a barrel as geopolitical risk premiums unwind on renewed U.S.–Iran diplomacy.
— Ethanol demand tightens Brazil’s export supply
Strong domestic use and higher blending mandates limit Brazil’s ethanol exports despite steady global demand.
TRADE POLICY
— China lowers final dairy tariffs on EU
Beijing cuts proposed dairy duties from provisional levels, but Brussels warns the measures remain unjustified retaliation.
— Asia deepens hold on Brazil trade
Asian nations, led by China, expand dominance in Brazil’s imports and exports as Trump-era trade shifts reshape global flows.
POLITICS & ELECTIONS
— Democratic bounce meets primary turbulence
Charlie Cook says special-election wins hint at recovery, but volatile primaries could make 2026 unusually disruptive.
WEATHER
— NWS outlook
Wintry precipitation spreads from the Ohio Valley to the Mid-Atlantic, cold moderates in Florida, and warmth builds in the northern High Plains.
| TOP STORIES — Shutdown to end, but DHS showdown loomsThree-day lapse likely resolved today, setting up a sharper immigration funding fight ahead of a Feb. 13 deadline The partial government shutdown — now three days old — is expected to end later today as the House moves to pass legislation funding most federal agencies through Sept. 30. But the resolution sets up another, more volatile funding cliff centered on immigration enforcement just days away. Later today, the House is expected to vote to fund the Pentagon, State Department, Health and Human Services, Transportation, and other agencies through the end of the fiscal year. The exception is the Department of Homeland Security, which would receive only a short extension until Feb. 13 while the White House and congressional Democrats negotiate possible new limits on ICE and CBP operations. There is growing skepticism on Capitol Hill that a deal will materialize, leaving DHS funding vulnerable again — potentially for the rest of FY 2026. President Donald Trump intervened to persuade Reps. Anna Paulina Luna (R-Fla.) and Tim Burchett (R-Tenn.) to drop their opposition to the funding rule. The two had threatened to block the process unless Speaker Mike Johnson (R-La.) attached a voter ID bill — the SAVE Act — to the package, a move Trump made clear was not happening. With Luna’s objection cleared, House leaders expect to pass the rule and the five underlying FY 2026 funding bills with a simple majority, likely with dozens of Democratic votes. But attention is already shifting to the next fight: DHS funding expires again in just 10 days, right before the Presidents Day recess. Many Democrats note DHS received tens of billions of dollars under last year’s GOP-backed One Big Beautiful Bill and can continue operating without immediate new funding. The core problem is that the two sides remain far apart on ICE reforms. Senate Majority Leader John Thune (R-S.D.) said only “preliminary conversations” have taken place, with negotiations largely left to the White House and Senate Minority Leader Chuck Schumer (D-N.Y.). Even if an agreement emerged quickly, leaders acknowledge the timeline would make passage before Feb. 13 difficult, raising the likelihood of yet another short-term DHS funding patch. Bottom Line: The shutdown may be ending, but the more consequential fight — over immigration enforcement, DHS funding, and the leverage each side is willing to use — is just beginning. — EPA clarifies right-to-repair under Clean Air ActGuidance affirms farmers and independent shops can make timely equipment repairs without violating emissions law The Trump administration moved to reinforce right-to-repair protections for agricultural producers, with the Environmental Protection Agency issuing guidance Monday clarifying that the Clean Air Act (CAA) supports — rather than restricts — Americans’ ability to repair their own equipment. The EPA said manufacturers of off-road vehicles, including tractors, can no longer cite the CAA to justify limiting access to repair tools or software. The clarification is aimed at ensuring farmers can make repairs themselves or use independent repair shops to carry out “timely and affordable repairs” that are essential for planting, harvesting, and day-to-day operations. Under the guidance, the CAA does not prohibit temporary alterations to emissions control systems when they are necessary to complete a repair, so long as those systems are restored to their original state afterward. The agency emphasized the move does not change the law or weaken emissions standards, but instead spells out what the statute already allows — temporary overrides strictly for the purpose of repair to restore proper functionality. The clarification applies to all non-road diesel engines equipped with advanced emissions technologies, including selective catalytic reduction systems, inducement systems, and Diesel Exhaust Fluid (DEF) components. The issue has been a longstanding flashpoint for farmers and independent repair shops, who have argued that restricted access to diagnostic tools and software has driven up costs and caused critical delays during peak seasons. EPA officials signaled that additional guidance related to DEF systems in heavy-duty diesel equipment and vehicles is expected soon and that could come today. — Trump launches rare earth strategic reserve“Project Vault” aims to blunt China’s dominance and shore up U.S. critical minerals supply chains The Trump administration is moving ahead with a nearly $12 billion plan to create a strategic reserve of rare earth elements and critical minerals, seeking to reduce U.S. reliance on China and counter Beijing’s leverage in trade talks. The White House confirmed the launch of “Project Vault,” initially backed by a $10 billion loan from the U.S. Export-Import Bank and about $1.67 billion in private capital. Donald Trump said the effort builds on steps his administration has taken to secure domestic access to minerals essential for defense, energy, autos, and advanced manufacturing. The reserve would function similarly to the Strategic Petroleum Reserve, stockpiling materials such as gallium, cobalt, and rare earths used in electronics, batteries, and jet engines. The move follows Chinese export curbs that exposed U.S. supply chain vulnerabilities, with China controlling the bulk of global rare earth mining and processing. Markets welcomed the announcement, with shares of U.S. rare earth companies jumping on expectations of stronger domestic demand and government-backed financing. Critics, including the Wall Street Journal editorial board, caution that direct government stakes in companies could politicize investment decisions. Of note: Secretary of State Marco Rubio has invited delegations from 50 countries to an event at the State Dept. on Wednesday aimed at advancing collective efforts to strengthen and diversify critical mineral supply chains. He will be joined by Vice President JD Vance and White House advisor David Copley. — Trump announces trade deal with India, easing tariffs and targeting Russian oilAgreement promises lower duties and major U.S. export purchases, but details and implementation remain unclear Donald Trump on Monday touted a new trade arrangement with India that would roll back some U.S. tariffs on Indian goods in exchange for India lowering its own trade barriers and halting purchases of Russian oil. The deal would reduce the U.S. tariff rate on Indian products to 18%, helping defuse trade tensions that had escalated over the past year and reinforcing Trump’s close relationship with Indian Prime Minister Narendra Modi. Some details: Trump said he would cut the base U.S. levy on Indian goods from 25% to 18% and remove an additional punitive 25% duty imposed over India’s purchases of Russian crude. Trump also claimed India would reduce its tariff and non-tariff barriers on U.S. goods to zero and commit to buying more than $500 billion worth of U.S. energy, technology, agricultural, coal, and other products. Modi confirmed the 18% tariff rate on Indian-made products and praised the announcement as beneficial for both countries. Agricultural goods may be key — it’s a critical sector for India and had been a sticking point in earlier negotiations. However, questions remain about implementation. While Trump said the changes would take effect immediately, no formal text of the agreement has been released. As of late Monday, the White House had not issued a presidential proclamation or Federal Register notice required to make the tariff changes official, and Indian ministries had not responded to requests for comment. India’s pledge to stop buying Russian oil could be difficult to fulfill, as the country imports roughly 1.5 million barrels per day from Russia, accounting for more than a third of its total oil imports. Trump did not specify how quickly India would ramp up purchases of U.S. goods and the announcement comes shortly after India finalized a separate trade deal with the European Union expanding market access on both sides. — Japan to unveil three U.S. investment deals after electionsMoves would advance Tokyo’s $550 billion U.S. investment pledge as trade and industrial ties deepen The Financial Times reports that Japan plans to announce three major investment deals in the U.S. shortly after national elections scheduled for next week, marking an early tranche of Tokyo’s $550 billion commitment to expand its U.S. economic footprint. According to the report, the deals are expected to span strategic sectors tied to manufacturing, energy, and advanced technology, aligning with Washington’s push to onshore supply chains and bolster domestic industrial capacity. Japanese officials have framed the post-election timing to ensure political continuity at home before making high-profile overseas commitments. The forthcoming announcements would underscore Japan’s role as one of the largest foreign investors in the U.S. economy, while also reinforcing bilateral cooperation at a time of heightened competition with China over critical technologies and global production networks. — Cornyn presses USTR to enforce Mexico water obligations in USMCA reviewTexas senator urges trade leverage to ensure compliance with 1944 Water Treaty after years of shortfalls Sen. John Cornyn (R-Texas) is calling on U.S. Trade Representative Jamieson Greer to make Mexico’s failure to meet its water-delivery obligations a formal issue in the upcoming U.S.–Mexico–Canada Agreement review, arguing the shortfall has caused significant damage to South Texas agriculture. In a Jan. 28 letter (link), Cornyn — who chairs the Senate Finance trade subcommittee — said Mexico’s noncompliance with the 1944 Water Treaty during the most recent five-year cycle has hurt producers across the Rio Grande Valley, which includes more than 500,000 acres of irrigated farmland. Cornyn urged USTR to raise the issue during the USMCA review and explore enforcement mechanisms to ensure Mexico delivers the water it owes annually to the U.S. Cornyn credited President Trump with elevating the issue, noting that Mexico only began increasing deliveries in 2025 after Trump threatened new tariffs. USDA said in December that the two countries reached an understanding for Mexico to meet current obligations and repay its deficit, but the State Dept. later reported Mexico still owed roughly 865,000 acre-feet for the 2020–2025 cycle. International Boundary and Water Commission data show deliveries rose sharply in 2025, though not enough to erase the accumulated shortfall. Cornyn argued that progress came “only because of President Trump’s leadership.” The push is part of a broader Texas effort to add enforcement teeth to the treaty. Reps. Monica De La Cruz (R-Texas) and Henry Cuellar (D-Texas) introduced legislation in December to impose restrictions on Mexico if it fails to deliver required water, with Cornyn and Sen. Ted Cruz (R-Texas) sponsoring a Senate companion. Supporters say chronic water shortages have devastated South Texas farms, including contributing to the closure of the state’s last sugar mill, and argue the USMCA review offers a critical opportunity to apply pressure. |
| FINANCIAL MARKETS |
—Equities today: U.S. Dow opened around 100 points higher, with tech leading after Palantir and Samsung both posted very strong Q4 earnings results while a stabilizing precious metals market and optimism Congress will pass a spending bill are bolstering sentiment. Global stocks rose after a three-day decline, with investor confidence picking up after gold recovered some lost ground. In Asia, Japan +3.9%. Hong Kong +0.2%. China +1.3%. India +2.5%. In Europe, at midday, London -0.4%. Paris -0.2%. Frankfurt +0.2%.
—Equities yesterday:
| Equity Index | Closing Price Feb. 2 | Point Difference from Jan. 30 | % Difference from Jan. 30 |
| Dow | 49,407.66 | +515.19 | +1.05% |
| Nasdaq | 23,592.11 | +130.29 | +0.56% |
| S&P 500 | 6,976.44 | +37.41 | +0.54% |
—Jobs data on hold as shutdown disrupts federal reporting
January employment report, other key labor-market releases to be postponed until funding lapse ends
Friday’s closely watched January jobs report will not be released as scheduled because of the ongoing partial government shutdown, according to a spokeswoman for the Bureau of Labor Statistics.
The delay removes a major near-term data point for markets and policymakers assessing labor-market momentum early in 2026. The report had been set for release Friday, but BLS officials said publication will now wait until the shutdown is resolved.
Other labor-market data are also being pushed back. Bloomberg reported that releases scheduled for later this week — including December’s Job Openings and Labor Turnover Survey (JOLTS) and the Metropolitan Area Employment and Unemployment report — will likewise be rescheduled.
According to the BLS, the postponed reports will be published once the partial shutdown ends, though no revised dates have been announced. The Wall Street Journal first reported the delay in the January jobs report.
The interruption adds another layer of uncertainty for investors and policymakers already navigating heightened volatility and shutdown-related disruptions across the federal government.
—ADM flags biofuel policy delays as profit outlook misses expectations
Deferred U.S. blending quotas weigh on crush margins, soybean oil demand, and capital decisions
Archer-Daniels-Midland warned Tuesday that its current-year adjusted profit will come in below Wall Street expectations, citing prolonged uncertainty around U.S. biofuel policy and flat crush margins. The outlook sent ADM shares down about 4.6% in premarket trading.
The company said repeated delays in finalizing renewable fuel blending requirements — now expected by early March — have forced biofuel producers and processors to defer deals and investment decisions that shape output and margins. Reuters previously reported that the Trump administration plans to finalize 2026 blending quotas close to its initial proposal, while abandoning a plan to penalize imports of renewable fuels and feedstocks. The rule had originally been expected in late October 2025.
The policy limbo has slowed demand for key feedstocks, particularly soybean oil produced at ADM’s processing plants. As a result, operating profit in ADM’s agricultural services and oilseeds segment — its largest business — fell 31% in the most recent quarter to $444 million.
Looking ahead, ADM forecast 2026 adjusted earnings of $3.60 to $4.25 per share. The midpoint of that range falls below analysts’ average estimate of $4.24, according to LSEG data, underscoring how regulatory delays are continuing to ripple through the biofuels supply chain and earnings outlook.
—Farmer sentiment slides to start 2026 as financial and trade concerns intensify
Ag Economy Barometer shows sharp drop in confidence, rising debt pressure, and growing unease over exports and longer-term outlook
Farmer confidence deteriorated sharply at the start of 2026, according to the January Purdue University/CME Group Ag Economy Barometer, underscoring mounting anxiety over farm finances, export competitiveness, and the broader direction of the U.S. economy. The headline barometer index fell to 113 in January from 136 in December, with both current conditions and future expectations registering steep monthly declines.
The pullback was broad-based. The index measuring current conditions dropped 19 points, while future expectations slid 25 points, reflecting a pronounced shift toward pessimism. The sharpest deterioration came from producers’ views on the next five years for U.S. agriculture, which fell to its lowest level since September 2024. At the same time, concerns about agricultural exports intensified, particularly around soybeans.
Financial stress is becoming more visible on the farm balance sheet. Half of respondents said their operations were worse off than a year ago, and 30% expect weaker financial performance over the next 12 months. The Farm Capital Investment Index dropped to 47 — its lowest reading since October 2024 — with just 4% planning to increase machinery purchases. Expectations for larger operating loans also rose, with more producers citing unpaid operating debt carried over from prior years as a driver of higher borrowing needs.
Export anxiety, especially tied to global competition, is a growing theme. Sixteen percent of producers now expect U.S. agricultural exports to decline over the next five years, more than triple the share seen in December. Among corn and soybean growers, concerns are particularly acute: more than four in five said they are worried about the competitiveness of U.S. soybean exports relative to Brazil, with nearly half saying they are “very concerned.”
Land values remain a relative bright spot — but even there, cracks are forming. Short-term farmland value expectations held steady, while optimism about long-term values eased from record highs, with interest rates, net farm income, and alternative investments weighing on outlooks. Meanwhile, most producers expect payments from the Farmer Bridge Assistance Program to be used to pay down debt or bolster working capital rather than expand investment.
The broader mood shift is also showing up in attitudes about the country’s direction. The share of producers who believe the U.S. is headed in the “right direction” fell to 62% in January from 75% in December. Taken together, the January survey paints a picture of farmers entering 2026 with heightened caution, tighter financial conditions, and growing concern about trade and longer-term economic prospects.
—Bostic warns Warsh faces uphill climb to shift Fed toward rate cuts
Atlanta Fed president says consensus-building — not authority — will determine policy direction
Atlanta Federal Reserve President Raphael Bostic said Monday that Kevin Warsh, President Donald Trump’s nominee to lead the Federal Reserve, would face a difficult task persuading policymakers to lower interest rates. Bostic spoke at an event in Atlanta.
Bostic stressed that any Fed chair seeking to redirect policy must first earn the trust and support of fellow officials. “If you want to have policy enacted or go in a direction that you want, you’ve got to convince them to go along,” Bostic said, adding that building credibility and relationships within the Fed “doesn’t happen overnight.”
Bostic, whose term as Atlanta Fed president ends later this month, said the strength of the U.S. economy argues against cutting rates — a view he noted is shared by several policymakers. At their Jan. 28 meeting, members of the Federal Open Market Committee voted 10–2 to keep interest rates unchanged. Bostic is currently an alternate voter on the committee and was a voting member in 2024.
Current Fed Chair Jerome Powell and other officials have repeatedly emphasized that meaningful policy shifts require a compelling case that can win broad internal support — something, Bostic suggested, proponents of near-term rate cuts have yet to achieve.
—Manufacturing’s golden age hits a wall
Tariffs, higher costs, and tight financing blunt Trump’s reshoring push — at least for now
The manufacturing boom President Donald Trump promised as a new Golden Age for American industry is, for the moment, moving in reverse. After years of heavy economic intervention under both the Trump and Joe Biden administrations, fewer Americans are working in manufacturing today than at any point since the pandemic-era shock, according to recent labor data.
In the long run, tariffs could still deliver on their stated goal: shielding U.S. producers from lower-cost overseas competition and nudging investment back onshore. Many economists also argue that a mix of lower interest rates and regulatory relief could eventually revive factory hiring by easing financing constraints and accelerating project approvals.
But in the near term, tariffs are cutting the other way. Duties on imported inputs have raised costs for manufacturers that rely on foreign materials and components — a reality across autos, machinery, electronics, and industrial equipment. Companies buying parts from abroad are being forced to raise prices, absorb margin pressure, or scramble to reconfigure supply chains, often at significant expense.
That cost squeeze is colliding with still-elevated borrowing costs and cautious capital spending, slowing hiring even at firms that support the broader reshoring agenda. The result is a manufacturing sector caught between policy ambition and operational reality — with the promised gains more visible on balance sheets and planning decks than on factory payrolls, at least for now.
| AG MARKETS |
—Soy oil jumps on India trade deal hopes, but details remain thin
Trump/Modi agreement sparks optimism for U.S. soybean oil demand, even as structural limits persist
U.S. soybean oil futures climbed more than 2% Tuesday after President Donald Trump unexpectedly announced a trade deal with India, fueling early optimism that improved market access could lift U.S. ag exports to the world’s most populous nation. The news — later confirmed by Indian Prime Minister Narendra Modi — widened soybean oil’s premium over Malaysian palm oil to the highest level in more than a week.
India is largely self-sufficient in most staple crops but remains the world’s biggest importer of vegetable oils, bringing in more than 16 million tons annually, according to USDA data. Traders see soybean oil as a potential beneficiary if the agreement shifts India’s import mix away from palm oil, though details of the pact are scarce. Trump said India agreed to buy over $500 billion of U.S. products, including agriculture, without providing a breakdown.
Agriculture had been a sticking point in negotiations as New Delhi sought to shield domestic farmers and maintain restrictions around genetically modified crops. Market participants told Bloomberg that palm oil’s entrenched supply chains and price advantages could cap soy oil’s gains, even with better access.
—Agriculture markets yesterday:
| Commodity | Contract Month | Close Feb. 2 | Change from Jan. 30 |
| Corn | March | $4.25 3/4 | -2 1/2 cents |
| Soybeans | March | $10.60 1/4 | -4 cents |
| Soybean Meal | March | $294.50 | +$0.90 |
| Soybean Oil | March | 53.20 cents | -31 points |
| SRW Wheat | March | $5.27 3/4 | -10 1/4 cents |
| HRW Wheat | March | $5.35 1/4 | -9 1/2 cents |
| Spring Wheat | March | $5.71 1/2 | -6 3/4 cents |
| Cotton | March | 62.67 cents | -50 points |
| Live Cattle | April | $239.525 | +$2.725 |
| Feeder Cattle | March | $366.35 | +$6.075 |
| Lean Hogs | April | $96.625 | +$1.475 |
| ENERGY MARKETS & POLICY |
—Tuesday: Oil prices stabilize after sharp selloff as traders weigh Iran talks and supply outlook
Crude steadies near one-week lows as easing U.S./Iran tensions and OPEC+ supply signals offset currency and trade pressures
Oil prices steadied Tuesday after tumbling more than 4% a day earlier, with traders balancing signs of a potential de-escalation between the United States and Iran against a broadly balanced global supply outlook.
Brent crude edged up 7 cents to $66.37 a barrel, while U.S. West Texas Intermediate rose 13 cents to $62.27. Both benchmarks earlier touched their lowest levels in a week following Monday’s selloff.
Russia’s Deputy Prime Minister Alexander Novak said the oil market is currently balanced and demand should pick up in March and April. He also noted that OPEC+ plans to keep output unchanged for March, and that Russia has ample fuel supplies, even running a surplus.
Prices had slumped after President Donald Trump said Iran was “seriously talking” with Washington, signaling reduced geopolitical risk tied to the OPEC member. Officials from both countries told Reuters they expect nuclear talks to resume Friday in Turkey, though Trump warned of consequences if negotiations fail. Iranian President Masoud Pezeshkian said talks could proceed so long as threats and “unreasonable expectations” are avoided.
Analysts said recent volatility reflects a geopolitical risk premium driven by shifting U.S. foreign policy signals. A stronger U.S. dollar — hovering near a one-week high — also weighed on prices by dampening demand for dollar-denominated crude.
Additional pressure came from trade developments. Trump announced a deal with India that cuts U.S. tariffs in exchange for India halting Russian oil purchases and lowering trade barriers, following a call with Prime Minister Narendra Modi. ING analysts warned the move could increase volumes of Russian oil floating at sea, while others noted rapid shifts in financial flows have amplified price swings after traders quickly unwound large short positions built earlier this year.
—Monday: Oil prices tumble as U.S./Iran talks revive, geopolitical premium unwinds
Trump signals de-escalation, dollar strength and softer weather add to crude’s sharp pullback
Oil prices slid more than $3 a barrel Monday after Donald Trump said Iran was “seriously talking” with Washington, easing fears of a near-term confrontation that had driven a sizable geopolitical premium into crude markets.
Brent crude fell 4.4% to settle at $66.30 a barrel, while U.S. West Texas Intermediate dropped 4.7% to $62.14.
The selloff accelerated after officials confirmed the U.S. and Iran will resume nuclear talks on Friday, reinforcing expectations of de-escalation. Those hopes undercut the risk premium that had supported prices through much of January, when Trump repeatedly warned of intervention if Iran failed to strike a nuclear deal or continued its domestic crackdown.
Macro factors added pressure. The U.S. dollar strengthened after Trump nominated Kevin Warsh as the next Federal Reserve chair, making dollar-priced oil more expensive for non-U.S. buyers. Meanwhile, forecasts for milder U.S. weather weighed on energy demand, with diesel futures — heavily used for heating and power — sliding more than 6%.
Analysts said the fade in Middle East risk and winter weather concerns is shifting focus back to fundamentals, including a likely buildup in global inventories later this year. That view was reinforced after OPEC+ agreed to keep production unchanged for March, maintaining its decision to freeze planned output increases into early 2026 amid seasonally weaker demand.
—Ethanol demand tightens Brazil’s export supply
Domestic biofuel use and strong sugar revenues reshape the production mix heading into 2026
Brazil’s ethanol exports fell in 2025 despite steady global demand, as robust domestic consumption and shrinking inventories limited exportable supplies. Shipments totaled about 1.7 billion liters, down 9% from 2024, with export revenues slipping 8% to roughly $977 million. The decline reflects constrained supply rather than weaker overseas interest.
Domestic use continues to dominate Brazil’s ethanol balance. Internal consumption reached roughly 19 billion liters of hydrated ethanol and 13 billion liters of anhydrous ethanol in 2025. A higher mandatory gasoline blend — rising from 27% to 30% in August — is expected to absorb an additional 1 billion liters annually, further tightening availability. At the same time, ethanol stocks in the Center-South region dropped nearly 20% year over year, according to União da Indústria de Cana-de-Açúcar e Bioenergia, while total ethanol output declined about 5%.
South Korea remained Brazil’s largest ethanol buyer in 2025, followed by the United States and the Netherlands. Analysts at Safras & Mercado expect that ranking to shift in 2026, with European demand gaining share as U.S. policy leans toward favoring domestic biofuels. Even with growing corn-based ethanol production, sugarcane still accounts for more than 80% of Brazil’s biofuel output, leaving limited scope for a sharp export rebound. Exports next year are forecast to edge only slightly higher, to about 1.75 billion liters.
Sugar, meanwhile, continues to underpin mill cash flow. Annual exports of 30–33 million tonnes far exceed domestic consumption, helping offset tighter ethanol margins abroad. With ethanol prices more attractive at home, mills are expected to tilt the production mix modestly toward biofuel next season, even as sugar prices are projected to fall into the mid-teens (cents per pound) through 2026.
| TRADE POLICY |
—China lowers final dairy tariff levels on EU imports, but trade tensions persist
Beijing’s anti-subsidy duties ease from provisional rates, though Brussels warns measures remain unjustified
The European Commission said it has received China’s final calculations for proposed anti-subsidy duties on European Union dairy products, with an effective date of Feb. 21. The duties — set by China’s Ministry of Commerce of the People’s Republic of China — are expected to range from 7.4% to 11.4%, according to reports, significantly lower than the provisional tariffs of 21.9% to 42.7% announced in December.
However, the Commission said it is still reviewing the notification and declined to comment substantively, noting that the measures are not yet formally final. Brussels reiterated its objections, saying the proposed duties are based on “questionable allegations and insufficient evidence,” and therefore unjustified.
The dairy tariffs are widely viewed as a retaliatory move following the EU’s decision to impose duties on Chinese electric vehicle imports. While the reduced tariff levels soften the immediate blow compared with earlier estimates, they are still expected to weigh on EU dairy exports into the Chinese market and underscore ongoing trade frictions between Brussels and Beijing.
—Asia deepens hold on Brazil trade as Trump policies rewire global flows
Post-pandemic surge in Asian imports — led by China — reshapes Brazil’s trade balance, while U.S. tariffs and EU uncertainty cloud the outlook
Asia has significantly expanded its footprint in Brazil’s trade since the pandemic, capitalizing on policy shifts under Donald Trump that pushed China and other Asian economies to seek new markets. Economists say the result has been a deepening — and increasingly structural — trade relationship between Brazil and Asia, while other regions steadily lose ground.
Asia’s share of Brazilian imports climbed to 38.9% in 2025, up from 33.6% in 2019. That 5.3-percentage-point gain contrasts with declines elsewhere: North America fell 3.3 points, South America dropped 1.8 points (including a 1.3-point slide for Mercosur), and the European Union slipped 0.9 point. Only Central America and the Caribbean posted a modest gain.
The shift reflects both scale and speed. Brazil’s total imports rose 50.8% between 2019 and 2025, while imports from Asia jumped 74.4%. China led decisively, with shipments nearly doubling (up 96.9%) to $70.9 billion. India ranked second among Asian suppliers, with imports surging 84.1% to $8.35 billion, overtaking South Korea and Japan.
On the export side, changes were more muted but still notable. Asia absorbed 43.1% of Brazilian exports in 2025, up 0.9 point from 2019. Exports to Africa and the EU edged higher, while shipments to North America fell 2.1 points, weighed down by U.S. tariff hikes.
Strategic uncertainty ahead. Analysts warn the durability of these patterns will hinge on geopolitics. A long-anticipated EU/Mercosur trade deal signed in mid-January was quickly sent for legal review by the European Parliament — a process that could stretch two years — even as the EU moved ahead with a separate agreement with India. Economists say that sequencing could sap momentum behind the South American pact.
Volatily. Trump’s tariff agenda and what some economists dub the “Donroe Doctrine” — a spheres-of-influence approach to trade and security — are adding volatility. Brazil’s exporters benefited in 2025 as China ramped up soybean purchases, but analysts caution that renewed U.S./China deals could swing demand back toward American suppliers.
China’s expanding role — beyond commodities. The composition of trade is also changing. Brazil saw a sharp rise in Asian durable-goods imports in 2025 — appliances, electronics, and a growing inflow of Chinese electric vehicles. Chinese exporters, hit by shrinking U.S. sales, redirected output elsewhere and still posted overall export growth and a record surplus.
Economists argue this is part of a longer arc. China now sits atop the value chain for many manufactured goods Brazil imports, while Chinese investment in Brazil — from infrastructure to agribusiness — has intensified the linkage. Notably, 79% of Brazil’s soybean exports went to China in 2025, reinforcing the commodity backbone of the relationship.
Some Chinese investments are now being structured to use Brazil as an export platform for durable goods into Latin America and potentially Africa — a sign, analysts say, that Asia’s role in Brazil’s trade is no longer just cyclical, but strategic.
Bottom Line: Trump-era trade policies accelerated Asia’s advance into Brazil’s market, with China at the center. Whether Brazil can turn that dependence into leverage — through diversification and new trade agreements — remains the open question.
| POLITICS & ELECTIONS |
—Democratic bounce meets primary turbulence
Charlie Cook says special-election gains hint at recovery — but volatile primaries could reshape 2026 in unpredictable ways
Writing in National Journal, Charlie Cook argues Democrats may finally be shaking off the aftershocks of the 2024 presidential loss — though the road to November 2026 remains anything but smooth.
Cook points to a striking data point out of Texas: a Democrat won a state Senate special election by 14 points in a district that President Trump carried by 17 points in 2024. Given the outsized population of Texas state Senate districts — larger on average than U.S. House seats — the result has energized Democrats hungry for signs of momentum. Still, Cook cautions against over-reading special elections, noting similar optimism ahead of November 2024 ultimately fell flat at the presidential level.
With the first 2026 primaries beginning March 3 in Arkansas, North Carolina, and Texas, Cook shifts focus to what may be the cycle’s real wild card: intraparty fights. While most primaries in deep-red or deep-blue territory won’t alter November outcomes, contests in purple — and even light-red or light-blue — states can be decisive, particularly when nominees are poorly matched to the broader electorate.
Cook highlights unusually serious primary threats facing sitting governors, citing reporting from Abby Turner. In Rhode Island, Gov. Dan McKee faces a rematch against former CVS and Hudson’s Bay executive Helena Foulkes, whom he narrowly beat in 2022. In South Dakota, Gov. Larry Rhoden is under pressure from Rep. Dusty Johnson, House Speaker Jon Hansen, and conservative activist Toby Doeden. If either governor falls, it would be historically notable — only six sitting governors have lost renomination since 2000.
The instability extends to the Senate. In Texas, Sen. John Cornyn trails Attorney General Ken Paxton in GOP primary polling, while in Louisiana, Sen. Bill Cassidy faces Rep. Julia Letlow. Cook frames these races as part generational revolt, part ideological clash — particularly the Trump/MAGA wing challenging establishment Republicans.
Looking back, Cook notes that only seven incumbent senators have lost primaries since 2000, with a few famous exceptions and reversals, including Joe Lieberman, Lisa Murkowski, and Arlen Specter. The most recent case, Luther Strange, followed a familiar pattern: appointment, primary defeat, and general-election fallout.
Cook’s bottom line: none of this guarantees a particular November outcome. But if even three sitting governors or senators lose renomination this year, 2026 would rival 2010 as one of the most disruptive primary cycles of the past quarter-century — a reminder that party recoveries are rarely linear, and often messy.
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