Confusion abounds

Published on: 11:42AM Dec 13, 2019

Confusion would appear to be the name of the game this morning as we have been receiving conflicting reports as to the details of the Phase One agreement between the United States and China.  These were the comments that I initially had written this morning;

Now, this is a quid pro quo that one can get behind.  While there is nothing technically “official” as of yet, sources from the White House tell us that President Trump has agreed in principle to Phase One of a U.S./Chines trade package.  Reportedly, China will purchase $50 billion of agricultural goods from us (the U.S. demand), and in turn, we will be rolling back the existing tariffs and canceling the new tariffs that were set to go into effect this weekend (China demand).  Supposedly, some of the rollbacks will be announced as early as today. As I have pointed out previously, when the $50 billion number has been bantered about, that would be nearly double the most China has ever purchased in the past, and I have already heard rumors that this would include all commodities, i.e., energies. Still, regardless, for 2020, at least, for other global suppliers, our improved fortunes are their losses.  I guess Friday the 13th misfortune is living up to that reputation for others this time. 

Hold the press though as President Trump sent out a tweet that those details as reported by the Wall Street Journal (and you know what and unreliable rag they are) were incorrect, and that the existing tariffs will remain in place and it is only the tariff hike that was scheduled to go into place this weekend that will now be suspended.  The most recent update I have read, which will undoubtedly be outdated by the time you read this, has the Chinese Vice Commerce Minister stating that the U.S. will continue to follow up on its promise to cancel tariffs on a phased basis and that they have agreed to increase the imports of U.S. agricultural, energy, pharmaceutical, and financial goods.  Confused yet?  You are not alone.  We might as well set all of this aside until Monday morning, and possibly the we will have separated the wheat from the chaff (I am not insinuating there is any wheat in this deal) has settled, and we will have something concrete to trade with.

When news or rumors of all of this began to leak yesterday, it certainly caught markets off guard, not to mention leaning to the short side, and we witnessed an excellent recovery.  If the exchange were to close right now, for the week, March corn would be up 3-cents and nearly 10-cents above the low of the week, March wheat would be 5-cents higher, and 13-cents off the low and January beans would be 15-cents higher and at the peak today reached the highest point in three weeks.  Of course, if we fail to hold these gains for the close, it will have been all for naught.

Quite possibly though, the most interesting action this week may be in the U.S. Dollar and in commodity indexes.  The dollar has recovered some now this morning but is still acting weary and at one point, traded to the lowest mark since Mid-July.  Looking at the CRB Index, though, we find that this breadbasket of commodities has reached up to challenge the highs of the year and have indicators pointed higher.  Could it be that commodity bulls will get to enjoy turkey for Christmas after all? Keep that on your wish list.