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Market Assessment of Prospects for Resolution of the US-China Trade Dispute by September 2020

Summary:
Going from August 22rd to 23rd,  front month futures dropped 12-6; the August 2020 futures price (which are an unbiased predictor of one year ahead spot prices) was down 8-4. Hence, farmers should prepare for a long, tough, period of self-inflicted (by the administration) damage. Source: Barchart.com, accessed 8/24/2019. Given no real market moving agricultural news — aside from Mr. Trumps tweets tit-for-tat response to the Chinese tariff retaliation — we can ascribe about 2/3 of the current drop to long term impact on US soybean prices. In other words, the market sees little prospect for a swift and positive resolution to the current US-China trade dispute. The blip continues!

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Going from August 22rd to 23rd,  front month futures dropped 12-6; the August 2020 futures price (which are an unbiased predictor of one year ahead spot prices) was down 8-4. Hence, farmers should prepare for a long, tough, period of self-inflicted (by the administration) damage.

Market Assessment of Prospects for Resolution of the US-China Trade Dispute by September 2020

Source: Barchart.com, accessed 8/24/2019.

Given no real market moving agricultural news — aside from Mr. Trumps tweets tit-for-tat response to the Chinese tariff retaliation — we can ascribe about 2/3 of the current drop to long term impact on US soybean prices.

In other words, the market sees little prospect for a swift and positive resolution to the current US-China trade dispute.

The blip continues!

Menzie Chinn
He is Professor of Public Affairs and Economics at the University of Wisconsin, Madison

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