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G20 Osaka summit likely to influence market

Planting Progress Report, G20 summit, OPEC agreement and US interest rates are likely to influence market movement this week.

Bobby Coats, Professor

June 24, 2019

8 Min Read
President Trump will meet with Chinese President Xi Jinping during the 2019 G20 Osaka summit, which will be held on June 28 and 29 at the International Exhibition Center in Osaka.GettyImages

Market participants will be waiting on the outcome on a number of market influencers this week including the G20 Osaka summit, USDA’s NASS Planting Progress and Crop Conditions Report and the Acreage Report, the continued impact on U.S. interest rates and the U.S. dollar following last week’s U.S. Fed Reserve FOMC meeting, and the Organization of the Petroleum Exporting Countries (OPEC) along with other oil producing countries as they discuss an extension of the previous agreement.

President Trump will meet with Chinese President Xi Jinping during the 2019 G20 Osaka summit, which will be held on June 28 and 29 at the International Exhibition Center in Osaka. It is not likely any significant agreement will be reached, but it is highly likely the world’s two key leaders will agree to continue working out their collective policy differences.

The outcome of the discussions between President Trump and President Xi will provide a near term global market tone for the World’s currency, bond, equity and commodity markets. And, for the U.S. agricultural sector the outcome will be one factor in defining near term price support or weakness for soybeans, corn, wheat, cotton, and other agricultural commodities.

I believe it is fair to say most Democrats and Republicans agree this week’s meeting between President Trump and President Xi will be about more than trade tensions. This meeting will address fiscal, monetary, trade and homeland policy issues generating friction between the two countries, i.e. China’s highly aggressive global predatory policies related to intellectual property (IP), technology, and innovation. The Chinese government openly discusses, especially in Asia their global supremacy objectives and timeline related to economic, technology, financial, and military supremacy.

In my opinion, progress will be made. No major trade deal will emerge from the meeting, policy disputes will continue to be negotiated, so one should expect the resolution of US-China policy disputes will be a long-term journey not a destination.

Will China agree to increase their buying of U.S. commodities? No one knows, so we wait for the culmination of this week’s meeting between President Trump and President Xi.

U.S. goods and services trade with China totaled an estimated $737.1 billion in 2018. Exports were $179.3 billion; imports were $557.9 billion. The U.S. goods and services trade deficit with China was $378.6 billion in 2018. Continue reading at this link.

USDA NASS Acreage Report

2019 field crop planted acreage is highly uncertain, so we wait on the June 28th USDA Acreage report. That said, the market has likely done a reasonably efficient job of pricing in near term 2019 acreage and production field crop expectations.

Market Outlook for the Week Beginning June 24, 2019

Corn: Final 2019 U.S. corn planted acreage is simply highly uncertain, if $4.70 per bushel is penetrated then a near term price move to $5.22 per bushel should be expected. Given the previous week’s price action this market likely needs a bullish acreage report and/or bullish outcome to the US-Chinese Trade talks the week of June 24, 2019 to push above $4.70 per bushel.

That said, producer efficiency in the face of massive weather obstacles, swine flu, global policy disputes and production competition, geopolitical uncertainties, and fundamentals continue weighing on corn prices, June 21, 2019 close $4.42 per bushel, Charts B14 to B17.

Wheat: Near term wheat prices remains a key function of corn prices. June 21, 2019 close $5.31 per bushel. One bullish wheat scenario would be corn pushing through the previously stated $4.70 per bushel and moving in the direction of $5.22 per bushel. Under this scenario wheat prices following the lead of corn prices could reach their July 2018 high of $5.93 per bushel. As ongoing market dynamics unfold we will adjust our price outlook expectations, Charts B25 to B28.

Soybeans: The June 21, 2019 close was $9.03 per bushel. Given soybeans 2018/19 USDA bearish balance sheet and current reasonably strong 2019 production expectations, though not as strong as earlier expected, soybeans prices likely will remain near term in a sideways trading range of $7.77 to $9.30 per bushel. Final planted soybean acreage remains uncertain as long as excessive rainfall continues in the major U.S. Eastern Midwest production region, Charts B10 to B13.

Long Grain Rice: June 28, 2019 USDA NASS Acreage Report will be all important to price strength or weakness, so we wait. Near term rice remains in a sideways trading range. The primary trading range presently is September $10.41 to $11.90 per cwt. or $4.69 to $5.36 per bushel, June 21, 2019 September close $11.64 per cwt. or $5.23 per bushel. USDA’s bearish U.S. and global fundamentals for the 2018/19 and 2019/20 marketing periods are weighing heavy on this market, so now we wait on the June 28, 2019 USDA NASS Acreage Report to provide near term acreage and production guidance, Charts B18 to B20.

Cotton: Price weakness remains problematic. Cotton prices need to hold above .64-cents the week of June 24, 2019 or serious price weakness could emerge, June 21, 2019 close .66-cents per pound. USDA’s June 28, 2019 Texas, Oklahoma, and Kansas cotton planted acreage by state may be supportive to bullish for cotton prices, given the region’s own set of weather related cotton planting and production challenges, Charts B21 to B24.

$WTIC Light Crude Oil: June 21, 2019 close $57.43 per barrel, trading range presently $48.43 to $58.13 per barrel, Charts B6 to B9.

Geopolitical dynamics coupled with possible supply disruptions make this market challenging for the world’s most talented analysts, so be highly respectful of price action.

$CRB Index: June 21, 2019 close 178.5. This index may touch 183 before returning to test its previous low at 168. The index still has a bearish bias.  

With global deflationary forces, remaining problematic; with many of the world’s commodities still surplus burdened; with the ongoing global realignment of the world’s currency, bond, equity, and commodity markets; and with a number of key global policy disputes, there simply remain limitations to this index’s near term upside, unless oil prices regain their upward advance, Charts B1 to B5.

Interest Rates: 10-Year U.S. Treasury Yield: Consolidating but downside bias remains. June 21, 2019 close 2.07 support at 2.00 and 1.87. Near term correction of the downside is warranted not required, Charts A1 to A4.

Given time the potential to revisit the July 2016 low of 1.43 is likely. The November 2018 high was 3.24. That said, global economic and geopolitical dynamics coupled with global government and central bank intervention will define the 10-Year U.S. Treasury Yield or interest rate.

U.S. Dollar Index: The U.S. Dollar Index broke-down, due to U.S. Fed accommodation and global dollar liquidity issues, Charts A5 to A8.

The dollar is currently at 95.72 on June 21, 2019. A lower dollar would be supportive of current U.S. economic activity and global economies in general.

Global Equity ETF-ACWI: This ETF is likely to continue trading in a sideways trading range of $71.00 to $75.00, breaking below $71.00 would provide potential downside to $67.00 or lower. The June 21, 2019 price was $73.74.  

Global equity market performance as measured by the All Country World Index ETF-ACWI, a broad range of international developed equity and emerging market companies, Chart A19B. Its previous all-time high was $75.94 in January 2018 and its near term low was in December 2018 at $60.92.

Emerging Markets ETF-EEM: This global emerging market ETF remains weak in a sideways trading range between $39.45 and $44.50, June 21, 2019 close $42.77. Global market rebalancing, ununiform global economic momentum, debt burdened emerging economies and global geopolitical uncertainties weigh on this market.

Emerging Markets ETF-EEM, Chart A20, made a high in January 2018 of $50.98, a low in October 2018 of $37.02.

S&P 500: June 21, 2019 S&P 500 at 2950. Big Picture the S&P 500 moves in a sideways to up range of 2800 to 3000. Current all-time high was 2964 on June 21, 2019 and recent December 2018 low was 2347. No reason not to expect a potentially broad sideways to up trading range, Chart A16.

Conservation video

Title:  Conservation Program Opportunities for Rice with Josh Hankins, Director of Grower Relations and Rice Stewardship Partnership for USA Rice, Thursday, June 20, 2019, 10 AM CST

Description: Great strides have been taken over the years to conserve our nation’s working ricelands with significant reductions in land, water, and energy use. As new conservation tools and programs emerge they present an opportunity to keep building on those accomplishments, but finding those opportunities is often the challenge. Also, learn about the USA Rice – Ducks Unlimited Rice Stewardship Partnership’s new opportunities for rice farmers.

Presenter: Josh Hankins is the Director of Grower Relations and Rice Stewardship Partnership for USA Rice. Josh is headquartered in Arkansas and leads efforts to deliver on-the-ground conservation initiatives, assisting rice producers with increased on-farm energy and nutrient use efficiencies, water and soil conservation and wildlife management. His efforts through public-private partnerships have helped bring in over $50 million of conservation funding to the rice farming industry.

Link to register:

No Crystal Ball

Since no one has a crystal ball or knows the future always consult an investment professional or professionals before making investment decisions. The world’s most talented speculators, investors and money managers are challenged by today’s global business environment.   

Bobby Coats is a professor and extension economist in the Department of Agricultural Economics and Agribusiness, University of Arkansas System, Division of Agriculture, Cooperative Extension Service. E-mail: [email protected].

Download Slide Show for charts and expanded details, Click Download Link




About the Author(s)

Bobby Coats

Professor, Department of Agricultural Economics and Agribusiness, University of Arkansas System, Division of Agriculture, Cooperative Extension Service

Bobby Coats is a professor in the Department of Agricultural Economics and Agribusiness, University of Arkansas System, Division of Agriculture, Cooperative Extension Service.

E-mail: [email protected].


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