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CBOT weekly outlook: Trading cautious on Phase One pact

CBOT
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MarketsFarm — Though China and the United States signed their Phase One trade deal on Wednesday, commodity markets remained “extremely cautious,” according to one analyst.

Prices were muted at midday following a signing ceremony at the White House, due to the lack of public details regarding the deal.

The market is “preparing for disappointment,” according to Steve Georgy, president of Allendale Inc. at McHenry, Ill., and prices won’t react until purchases of U.S. agriculture goods start happening.

U.S. President Donald Trump initially said the deal includes purchases of US$50 billion in agriculture goods.

“[When] we see that start to unfold, that is when the market will react,” said Georgy.

“Markets are extremely cautious because we’ve been here before and we’ve seen the disappointment.”

Georgy also said caution in markets is also due to a lack of confidence in how the U.S. will keep China accountable to these bold trade promises.

“How do we make them do what they say they’ll do?”

Commodity prices will likely remain on the defensive until concrete evidence of the deal materializes. Until then, market participants will continue to monitor South American growing conditions for signs of drought.

Last week, the world agriculture supply and demand estimates (WASDE) from the U.S. Department of Agriculture (USDA) predicted Brazilian soybean production to total a record-breaking 123 million tonnes.

“That will weigh on prices moving forward,” said Georgy.

— Marlo Glass reports for MarketsFarm, a Glacier FarmMedia division specializing in grain and commodity market analysis and reporting.

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