What’s Up (Down) With Agriculturals?

Dr. Sun Yat-Sen Classical Chinese Garden Vancouver, Canada

Friday morning, Benzinga interviewed me for their morning prep show (link at end of blog). If you listen in, you will get an update on the economic modern family and the charts. I also discussed the Chinese tariffs.

As one who follows the agricultural and soft commodities carefully, a couple of thoughts emerged from the recent activity. Interestingly, an article by Tyler Durden from zerohedge.com, came out simultaneously. We do not know one another, nor did I see the article before I spoke to Benzinga.

Perhaps the contemplative nature of the pond in Vancouver’s Chinese garden helped spark the forthcoming thoughts. Nonetheless, Durden and I drew similar conclusions. Furthermore, Bloomberg did a story about how China “Ratchets Up Stimulus, Cutting Reserve Ration to Lowest Level Since 2007.”

This move by China injects liquidity into their economy, partly to stave off the trade-war headwinds. How then, will you know for real that China is serious about negotiating tariff terms with the U.S?

Trump also addressed the tariffs and impact it has on the low agricultural prices by stating, “I gave the farmers US$16 billion, which makes them totally whole on China. That’s what China spends on a good year.”

Yet, has it helped the prices of corn, wheat, and soybeans?

In Durden’s article, he mentions GSG or the ETF that Goldman Sachs uses to track the commodity index.

Although heavily weighted in Treasury bills and US dollars, it also holds crude oil, natural gas, copper, wheat, corn, live cattle, gold, soybeans and lean hogs in its basket.

In the past, I have shown you DBA, an ETF of only agricultural commodities, and more recently USCI or the ETF that tracks the US Commodity Index.

Both remain weak with DBA making a new all-time low and USCI, which tried to clear its 50-DMA, winding up failing it by the end of the week.

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