Plains People Trading & Consulting

Submitted by: Seraphina Gold “The Queen of Odds”

U.S. Federal Reserve

• Rate cut: The Federal Reserve’s Federal Open Market Committee (FOMC) lowered the federal funds rate by 25 basis points, moving it from 3.75–4.00% down to 3.50–3.75%—marking the third consecutive cut since September 2025. [cbsnews.com], [wsj.com]
• Split vote: The decision passed by a 9–3 margin, with three dissenting votes—two regional presidents (Chicago’s Goolsbee and Kansas City’s Schmid) who preferred no cut, and Governor Stephen Miran, who pushed for a larger 50bps reduction. [thehill.com], [cnbc.com]
• Forward guidance: The Fed highlighted that future rate cuts will depend on incoming economic data, indicating a cautious approach. The “dot plot” projects just one more cut in 2026. [cbsnews.com], [cnbc.com]
• Balance sheet actions: Alongside the rate cut announcement, the Fed said it will resume Treasury bill purchases, starting with $40 billion on Friday, in an effort to support liquidity. [cnbc.com], [cnbc.com]
• Powell’s message: Chair Jerome Powell described the decision as a “close call,” emphasizing a balancing act between supporting employment and managing inflation, and noting there’s “no risk‑free path” ahead. [cnbc.com], [usnews.com]

Reduced Financing Costs for Feedlot Loans

• Lower interest expenses on operating and feeder cattle loans
  — Feedlot operations often rely on variable-rate debt for purchasing feeder cattle and financing feedlot inventories. With rate cuts, variable loan rates will drop, reducing interest costs per animal.
  — In recent high-rate environments, average feeder cattle loan interest reached ~9%. Even a moderate cut of 100 bps could produce meaningful savings on large-scale feedlot borrowing. [kansascityfed.org], [utbeef.tennessee.edu] [terrainag.com], [kansascityfed.org]

🥩 Margin Relief During Tight Profitability

• Eases pressure on already squeezed feedlot margins
  — High interest expenses have been contributing to negative margins in feedlots as cattle prices haven’t kept pace.
  — Reduced funding costs provide direct relief, especially if feed prices remain stable, potentially returning operations to breakeven or profitability. [kansascityfed.org], [utbeef.tennessee.edu]

💵 Input & Capital Costs: A Mixed Picture

• Short-term operating costs ease, but capital costs may trend differently
  — Rate cuts lower costs of short-term credit for variable operations and livestock.
  — However, long-term loans (e.g., for land acquisition, feedlot expansion, or equipment) may remain expensive, as bond markets price in inflation and maintain higher long-term yields.
  — Feedlots bracing for infrastructure investment could still face high borrowing costs. [agrolatam.com], [conterraag.com]

🌍 Weaker Dollar → Boost to Exports

• Potential rise in beef exports can support feedlot demand
  — Rate cuts often weaken the U.S. dollar, making U.S. agricultural exports more competitive on the world stage.
  — Stronger demand abroad could bolster domestic cattle prices and feedlot fill rates. [agweb.com]

Bottom Line for Feedlots into 2026

Short-term: Reduced interest rates offer tangible savings on working capital, improving cash flow and easing margin pressures amid tight feedlot economics.
Strategic/Cautious: Long-term borrowing remains risk-laden. Feedlot operators should continue conservatively evaluating expansion or capital investment decisions.
Tailwind: Potential for stronger export-driven cattle demand, further aiding feedlot market conditions.