Rumblings of trade issues with China. China and Japan arguing over a small group of islands. China in particular has had demonstrations and protests.protests were orderly in Beijing, with several hundred people circling in front of the Japanese Embassy demanding Chinese control over a small island group known as Senkaku in Japan and as Diaoyu in China. Protests were also reported in other cities, including Shanghai, Guangzhou and Qingdao.
At the end of the day, history had shown that sometimes its the random historical grievances which give rise to present day issue.
In any event, I can’t see how this has bullish ramifications for US/China trade relations.
The US has filed a grievance with the WTO and China has filed one against the USA. What would happen to US exports if a trade disagreement mushrooms into something more than just words in an election year?
As I write this, we have beans down 35 after being down 70 yesterday. That’s a buck in 24 hours. We are now 1.60 off the record highs we saw just 2 weeks ago.
It interesting that we’ve had a break after the final bullish cog was in place for commodities, that being QE3, where Mr. Bernanke announced that the Fed will buy $40Billion worth of mortgage backed securities every month, month after month, until the economy firms.
Academically, we were taught that this type of activity, in the end, produces inflation. Inflation, over the long haul, will make the price of commodities rise. Also, printing money like this de-values the US Dollar. This has the effect of making our products “cheaper” relatively for the rest of the world to buy. In effect, its a K=Mart blue light special on all US products. This includes our grain and livestock.
CZ has lost over a buck since posting its high at 8.49 back on JUNE 10th. CZ 7.18.. 6.78 and then 6.38 are my downside targets.
If the Chinese decide they will take a powder on buying our beans or corn for a while, in order to make a point…. The bottom could drop out here for grain prices. Could. At the end of the day, they have 1Billion people to feed and 300M hogs to feed.
Any protest may be short lived. But at the end of the day, if your biggest customer puts a way the check book, even for a while, its going to affect your bottom line.
Time will tell, but this looks interesting. Fundamentals have not changed, especially for beans.
A hard break here on geo political arguments may give us the opportunity to step in, back up the truck and buy beans for the next 18 months for a very reasonable risk/reward.
CER