Home 5 Ag Stories Speculators advised to “sit on sidelines” during trade spat

Speculators advised to “sit on sidelines” during trade spat

Source: Wikimedia Commons


President Trump last week announced plans to move forward with the proposed 25% tariff on $50 billion worth of Chinese goods. The news came after a meeting with Chinese officials – aimed to alleviate tensions.

The Xinhua News Agency cited Chinese officials saying, “If the U.S. rolls out trade measures, including tariffs, all the agreements reached in the negotiations won’t take effect.” Zaner Ag Hedge market strategist Brian Grossman expects more trade details to be revealed later this week.

“We did not hear much of anything about trade over the weekend. I would expect to find some more information about it very soon. We have the Trump-North Korea meeting coming on the 12th, so that could be some of the reason we have so much pressure on China right now – to make sure  they cooperate with North Korea. Other than that, it’s really going to be a game of politics,” Grossman said.

Grossman adds trade talks will have an impact on the futures market this week, atop of weather.

“Every headline is going to give us some kind of knee jerk reaction,” Grossman said. “We really need to pay attention to June and July weather in front of us. The weather outlooks are showing (us) we’re going to be relatively hot. Add in the weather problem China is having – their major corn growing areas on the dry side. Brazil (is) also very dry. The number two exporter is looking for a significant reduction. Safras & Mercado is at a 79 million metric tonnes compared to USDA’s 87 and the 97 they produced last year.”

Grossman previously encouraged sales above the $4 mark. However, he says it might be wise for speculators to “sit on the sidelines” until a resolution has been reached.

“For average speculators out there, they got to be getting nervous on this trade war on-and-off talk going. At some point, they may be more interested in just sitting off to the sidelines and just wait and see. Which unfortunately, we are also seeing hedge pressure coming in and without those speculative buyers to help offset it, we run into days like we’re seeing.