Wheat Could Be Surprise Winner of the U.S.-China Trade Deal -
Comment of the Day

December 27 2019

Commentary by Eoin Treacy

Wheat Could Be Surprise Winner of the U.S.-China Trade Deal -

This article by Isis Almeida and Michael Hirtzer for Bloomberg may be of interest to subscribers. Here is a section:

“The potential that China could secure an additional 5 to 6 million tons of world wheat annually is underpinning Chicago Board of Trade wheat,” Chicago-based consultant AgResource Co. said in a report Thursday.

Wheat traders expect China will soon release the quota, according to AgResource, and prices are already reacting. On Friday, futures for March delivery rose as much as 2.2% to $5.61 a bushel in Chicago, the highest for a most-active contract since August 2018. Futures traded in Paris reached the highest since June.

If Chinese purchases were to reach the quota mark of 9.6-million metric tons, that would represent a big jump in demand. In the six years through 2017, buying has averaged less than 50% of the allotment.

Eoin Treacy's view

The partial agreement reached between the USA and China removes some uncertainty but holds out the prospect China will be a greater importer of commodities over coming years. That is helping to increase speculative interest in the commodity sector generally and not least because prices are quite low relative to their bull market peaks.

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