Tuesday , August 20 2019
Home / Tag Archives: Commodities

Tag Archives: Commodities

A History of Trade Policy Retaliation: Soybeans Edition

As the date of the resolution of the US-China trade dispute drifts further and further — perhaps past the 2020 elections according to Mr. Trump — it behooves us to look at what soybean futures contracts for September 2019 indicated as of Trump’s announcement of Section 301 action against China ($10.30 bushel on 3/22/2018) vs $8.67 today (Sept. 2019 is the front month future for soybeans now). Source: Barchart.com, accessed 8/16/19 1:51pm Pacific. While some forces have driven down prices...

Read More »

Do Tariffs Matter? Soybean Edition

A year ago, there was some debate (e.g., S. Kopits) whether tariffs on US soybeans would have any impact on US soybean exports — that is since soybeans were highly substitutable, US soybean exports would be redistributed w/o an impact on prices. From Deutsche Bank today: As of July, year-to-date cumulative US exports of soybeans were down roughly 11.4 million metric tons compared to the same period last year but soybean exports to China were down around 17.4 million metric tons. DB Figure 2...

Read More »

Teaching Begins Early This Fall: News, Efficient Markets Hypothesis, Asset Prices

Figure 1: September 2019 corn futures, accessed 8/13/2019. Source: Barchart.com. Reader CoRev apparently cannot read an article on “event studies” and understand it. CoRev writes: Which small window and which news takes preference over this past year+? ” As usual, you have missed the point of the discussion, which are event studies, for which we look at a small window around arrival of news…” Continuing to act as if only a singular eventis the cause of the price changes defies Fama. He asks...

Read More »

SitRep from the Midwest

No end to “the blip“. From today’s Des Moines Register: Iowa farmer Lindsay Greiner no longer uses “dispute” to describe escalating trade tensions between the U.S. and China. “I’ve tried to avoid calling this a war, but that’s what it really is. It’s not going to be resolved anytime soon,” said Greiner, who raises corn, soybeans and pigs near Keota. China said this month it would no longer buy American farm goods, deepening concern that a new trade deal could take months, if not years, to...

Read More »

The Never-Ending Blip

On July 9, 2018, almost exactly a year ago, reader CoRev wrote: Those of us arguing against the constant anti-tariff, anti-Trump dialogs have noted this will probably be a price blip lasting until US/Chinese negotiations end. We are on record saying the prices will be back approaching last year’s harvest season prices. Yesterday, from Modern Farmer, “China Stops Buying US Agricultural Products Entirely: This is…very bad“: The latest escalation of the Trump-China trade war has led to an iron...

Read More »

Prospects for a Resolution to the US-Trade Dispute Inferred from Soybean Futures

Asset price movements around “news” regarding policy can illuminate the market’s assessment of the outlook for trade policy. Looking at a small window (say half hour) around an event can allow one to separate other factors (weather, other demand factors) from other. With that, let’s look at soybean futures (September 2019)… Figure 1: Graph accessed 8/7 8pm Central at barchart.com. No doubt some of the other fluctuations over the past month can be attributed to weather and market forecasts...

Read More »

The 16 Month-long Blip in Soybean Prices

On July 9, 2018, reader CoRev disparaged futures prices as accurate predictors of future spot prices for soybeans, writing: no one has denied the impact of tariffs on FUTURES prices. Those of us arguing against the constant anti-tariff, anti-Trump dialogs have noted this will probably be a price blip lasting until US/Chinese negotiations end. We are on record saying the prices will be back approaching last year’s harvest season prices. On 3/22, after Trump’s announcement of the Section 301...

Read More »

“Across-the-Board Tariffs on China with Retaliation and Federal Spending Create Over 1 Million Jobs in Five Years”

The Coalition for a Prosperous America publishes another study imbued with “secret sauce” structure…From the “working paper” (more akin to a press release): Specifically, we introduce the effects of Chinese retaliation with tariffs on US exports to China; we add the effects of the US Department of Agriculture’s (USDA) programs to support farmers and food processors negatively affected by Chinese retaliation; and, we add the impact of the US government spending the revenue generated by the...

Read More »

A Year-Long Blip

Figure 1: Soybean spot prices. Source: Macrotrends.com, accessed 7/23/2019.   Back on July 9th of last year, an reader wrote: Those of us arguing against the constant anti-tariff, anti-Trump dialogs have noted this will probably be a price blip lasting until US/Chinese negotiations end. We are on record saying the prices will be back approaching last year’s harvest season prices. Needless to say, prices are not back to where they were in Sept-Nov 2017. Instead, Brazil has siezed...

Read More »

The Course of the US-China Trade War, Viewed through the Lens of Soybeans

Or, hope died in August 2018… Figure 1: (Log) July 2019 soybean futures contract price minus spot price (blue). Source: ino.com and macrotrends.com, and author’s calculations. Red dashed line at 7/12/2018, one year before expiration of July 2019 futures contract. Dates from Dezan Shira and Assoc. Typically, the futures and spot should differ by cost of carry, but for soybean futures, but at the 3, 6 and 12 months horizons, the futures are an unbiased predictor of future spot rates (see...

Read More »