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China awakens sleeping giant

Grain Harvest
Farmers may want to take some time away from fields in the coming months to attend farm bill listening sessions scheduled across the country.
Maintaining trade fairness coupled with economic security has become increasingly challenging in a slow growth global economy and strong-willed global leaders.

China President Xi’s accelerated timeline for achieving U.S. and global technological dominance by 2025 likely played a major role in the emergency of President Trump’s aggressive non-traditional A-B Trade Diplomacy (communicating directly with trade partners to develop bi-lateral agreements).

Maintaining trade fairness coupled with economic security has become increasingly challenging in a slow growth global economy and strong-willed global leaders.

Time is of the essence and normal diplomacy through diplomatic channels to achieve and maintain reasonably fair trade agreements have become highly inefficient and very time consuming, given today’s global economic and political setting.

See also: Trump threatens higher tariffs on China. China says it will fight back.

Why is trade diplomacy so challenging? Global growth is sluggish and maintaining global economic momentum requires ongoing, significant attention to detail or orchestrated stimulus-driven activities by global governments and central banks to achieve desired levels of growth around the world. 

Why is global growth so sluggish and anemic?

  • Addicted to Debt: All the world’s growing economies have growing levels of debt that cannot be sustained. Why? The world’s population has become increasingly addicted to big government or levels of governmental assistance, social and entitlement programs, etc.   
  • Deflation: These ongoing burgeoning debt levels around the world are putting an increasing deflationary drag on individual countries, regions and the global economy, requiring an array of global governmental and central bank stimulation activities to offset the deflationary forces.
  •  Historic Low Interest Rates: These growing and unsustainable debt levels globally ushered in an era of low to negative interest rates that reached 5,000-year lows.
  • Global Economy Too Weak for a Recession: A near term U.S., Chinese, or European Union recession would likely be dangerously socially, politically, and economically destabilizing for the world’s economies, so, near term, a recession is to be avoided at all costs.
  • Dependency on Financial Engineering: When a recession is not thinkable and maintaining economic momentum critically important, then globally governments and central banks have become increasingly dependent on elaborate financial engineering activities to avoid recessions or potential depression through low to negative interest rates, buying debt, printing money, other economic supportive or simulative activities, etc.  

Global growth will be maintained

The resolve of President Trump, Congress, and the U.S. Central Bank, along with their global counterparts, is far stronger than most imagine. Why? In today’s domestic and global economic setting, the economic consequences of anemic global growth include a global recession or worse. A recession would be devastating for the U.S. and the world’s global economies.

Weekly Outlook - Beginning July 30, 2018

  • Commodity Index, $CRB – A retest of support is underway  
  • Oil, $WTIC – Slowly losing price momentum, a cautious period  
  • S&P 500 – Remains bullish, approaching previous high  
  • Foreign Stock Markets – Varies by developed, developing, emerging, and frontier markets, but most markets appear to be preparing to regain bullish momentum.   
  •  Soybeans: Ending the week of July 30, 2018 above November $9.25 per bushel means strong consideration should be given to a potential bottom in place, while ending the week below Friday’s (July 27, 2018) close of $8.85 per bushel implies this market is possibly still in search of a bottom. Charts (B10-B13)
  • Corn: Appears to be regaining bullish momentum - Ending the week of July 30, 2018 at or above December $3.80 per bushel means strong consideration should be given to a potential bottom in place, while ending the week below $3.63 per bushel implies this market may still be in a bottoming process. Charts (B14-B17)
  • Wheat: Upside price momentum appears to have been regained. Moving from the current price level of September $5.30 per bushel to $5.60 per bushel and holding would be a strong bullish confirmation. Charts (B14-B17)
  • Long Grain Rice: Fundamentals are weighing heavy on this market. Bullish case: Finishing the week of July 30, 2018 and holding above $12.60 per cwt would be bullish. Next closing and holding above $13.16 opens the door for a price move to $14.50 to $15.00 dollars per cwt. Bearish case: Closing the week of July 30, 2018 below the July27, 2018 close of $12.00 per cwt. implies potential resumption of downside price action as the U.S. 2018 rice harvest is close to getting underway. (Chart B18-B20)
  •  Cotton: Remains Bullish. Key consideration: If cotton can remain above December 85 cents per pound this market has a bullish bias given today’s global economic setting. Charts (B21-B24)
  •  U.S. Dollar – Stimulus-driven global growth appears to be throttling up, which would likely give the dollar a bearish bias near term.  
  •  10-Year U.S. Treasury Yield – Stable sideways trading range this week

 UA Webinar: Trade disputes, farm trade relief and the farm bill

Dr. Patrick Westhoff, Director of the Food and Agricultural Policy Research Institute (FAPRI) at the University of Missouri–Columbia and a Professor in the MU Department of Agricultural and Applied Economics, will discuss trade disputes during an Aug. 2 webinar. As Congress considers a new farm bill, trade disputes have had a negative impact on prices for soybeans and other agricultural commodities and the Administration has announced plans to provide additional federal support to the farm sector. Westhoff will try to make sense of this quickly-changing situation and discuss possible implications for agricultural markets and farm program payments. The webinar is set for 3 P.M. Central Time. The link is Registration Link:

Rice Outlook Video: Rice Market Outlook: Larger supplies, increased exports, and higher ending stocks

Dr. Nathan Childs analyzes the current U.S. rice market forecasts for both the 2017/18 and 2018/19 market years, highlighting the impacts of the June NASS Acreage and Rice Stocks reports, as well as current and revised trade data. Despite expectations of larger U.S. exports in 2018/19, an almost 20 percent increase in production is projected to result in a 31 percent boost in U.S. rice ending stocks. In the global rice market, a slight decrease in global production is projected to result in a small decline in 2018/19 world ending stocks, with global trade in 2019 projected record high. Video Link:

 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]

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



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