Monday , November 18 2019
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Tag Archives: Commodities

What Does It Mean to Say Futures Contracts Forecast?

Despite repeated explanations, some readers still don’t understand futures contracts and forecasting exercises. One point of Chinn-Coibion (2014) is that at the one year horizon, the best predictor of future soybean prices at a one year horizon is the futures contract expiring one year ahead. He writes: And yet ~$9.34 is NOT $8.72. Neither in July 2019 nor in October 2019 was it a correct estimate. However, the relevant comparison is November 2018 vs. November 2019. As November 2019...

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Soybeans: Victory Is Around the Corner

On July 9, 2018, about 14 months 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. Hah, hah, hah, hah! Time to look at prices relative to March 23, 2018, when Trump announced imposing Section 301 tariffs on Chinese goods… Source:...

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Memo from the Midwest: Industry and Agriculture under Trump

Well, over the past year, employment growth has been pretty lackluster in the Midwestern states that Trump was going to revive in terms of manufacturing … and in terms of agriculture… Source: BLS, August employment release. The national growth rate is 1.38%. Minnesota, Wisconsin, Michigan, Indiana, Ohio and Pennsylvania have experienced relatively slow (below mean) nonfarm payroll employment growth. It’s of interest to note that the top six soybean producing states are Iowa, Illinois,...

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Guest Contribution: “Oil Prices and the U.S. Economy: Evidence from the Stock Market”

Today, we’re fortunate to have Willem Thorbecke, Senior Fellow at Japan’s Research Institute of Economy, Trade and Industry (RIETI) as a guest contributor. The views expressed represent those of the author himself, and do not necessarily represent those of RIETI, or any other institutions the author is affiliated with. Last year Donald Trump tweeted “Oil prices are too high, OPEC is at it again. Not good!”   President Trump’s tweet reflects the conventional wisdom that higher oil prices...

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Winning! August Soybean Edition

From Bloomberg today: As confusion about the possibility of a trade deal between Washington and Beijing reigns, Chinese soybean buyers are taking no chances and are turning to U.S. rivals in South America to secure supplies for next year. Graph of Brazil premium speaks volumes: So despite Trump’s assertion the Chinese “want deal”, what some people characterize as a price “blip” continues.

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

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...

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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...

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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...

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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...

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