Com­mod­ity prices jump on China tar­iffs

The Oklahoman (Sunday) - - BUSINESS - Walt & Alex Bre­itinger www.parag­o­nin­vest­ments.com

Soy­bean prices fall to nine-year lows be­fore China tar­iffs be­gan.

Trade war be­gins, traders buy beans

Af­ter months of pos­tur­ing, the first can­non­balls in the trade war be­tween the U.S. and China were fired on Fri­day morn­ing, as each na­tion of­fi­cially im­posed $34 bil­lion in tar­iffs on one an­other’s ex­ports.

Pres­i­dent Trump in­di­cated that he will im­pose tar­iffs on an­other $16 bil­lion in im­ports next week, with the pos­si­bil­ity of ex­tend­ing the taxes to $500 bil­lion of Chi­nese im­ports.

For com­modi­ties traders, soy­beans are the most af­fected mar­ket, as China’s tar­iffs are di­rected against U.S. soy­beans. With the tar­iffs of­fi­cially in place, beans fell to $8.34 per bushel, the low­est level in nine years.

How­ever, op­ti­mistic traders bought beans on Fri­day morn­ing, cit­ing an adage, “the time to buy is when there’s blood in the streets.” Re­cent re­ports are sug­gest­ing that this year’s soy­bean crop is record large due to great weather, and the world’s big­gest buyer now has taxes in place against our soy­beans, lead­ing many to be­lieve that things can­not get much worse. As of mid­day Fri­day, soy had soared 30 cents (+3.5 per­cent) off the low.

U.S. econ­omy cruising along

Even af­ter the trade war with China of­fi­cially be­gan this week, stock mar­kets rose, a sign that U.S. com­pa­nies may weather the storm.

There is on­go­ing hope that U.S. tech com­pa­nies will ben­e­fit if Pres­i­dent Trump can ne­go­ti­ate a deal to bet­ter pro­tect Amer­i­can tech­nol­ogy in China, which is keep­ing the tech-heavy Nas­daq near all-time highs. There have also been in­di­ca­tions that trade ne­go­ti­a­tions with the Euro­pean Union have been work­ing, which may re­sult in more U.S. auto sales to Europe, a big boost to U.S. manufacturing.

Mean­while, the U.S. econ­omy con­tin­ues to steadily add jobs and un­em­ploy­ment re­mains low, keep­ing busi­ness op­ti­mism high and S&P 500 fu­tures trend­ing higher.

Metals melt lower

Gold and sil­ver prices con­tin­ued de­clin­ing this week, reach­ing a six­month low at $1,239 and $15.72 per ounce, re­spec­tively.

A strong econ­omy and ris­ing in­ter­est rates in the United States make hold­ing onto metals less ap­peal­ing, since they don’t pay in­ter­est, div­i­dends or rent, un­like other as­sets such as bonds, stocks or real es­tate. Th­ese fac­tors and in­creas­ing be­lief that the Fed­eral Re­serve will man­age in­fla­tion have di­min­ished demand for metals, knock­ing them to new lows on Wed­nes­day.

Longer-term, eco­nomic or po­lit­i­cal un­cer­tainty could give the metals a boost, as could bar­gain­hunt­ing buy­ers, who have swooped into the mar­kets in the past when gold falls to $1,200 or sil­ver drops to $15 per ounce.

Opin­ions are solely the writ­ers’. Walt & Alex Bre­itinger are com­mod­ity fu­tures bro­kers with Paragon In­vest­ments in Sil­ver Lake, Kansas. They can be reached at 800-411-3888 or www. parag­o­nin­vest­ments.com. This is not a so­lic­i­ta­tion of any or­der to buy or sell any mar­ket.

[PHOTO BY DANIEL ACKER, BLOOMBERG]

Soy­bean plants grow in a field near Tiskilwa, Illi­nois.

[PHOTO BY PA­TRI­CIA MON­TEIRO, BLOOMBERG]

Soy­beans sit in a con­tainer af­ter be­ing har­vested at a farm in Brazil.

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