HALF-TA Deal Cut
On Aug. 27, President Trump announced that the United States and Mexico had reached an agreement on renegotiating NAFTA, the three-way deal signed in 1992 between Mexico, the U.S. and Canada.
This deal would reopen agricultural exports to Mexico, especially helping U.S. hog and dairy farmers who sell heavily to Mexican consumers. On the news, milk prices spurted to a nine-month high; almost one third of U.S. cheese exports are sold to Mexico.
Despite the progress between the U.S. and Mexico, Canada has not agreed to the new terms, setting up a complication for the future of NAFTA.
President Trump and Mexican President Enrique Pena Nieto had set a deadline of Friday night for Canada to join the new deal. This would allow the U.S. Senate to ratify the treaty before President Nieto is replaced by the left-leaning Mexican President-elect Andres Manuel Lopez Obrador.
Without Canada’s agreement, the deal is only half-done, which could force negotiations with a new Mexican leader, potentially spoiling the current agreement.
For U.S. dairy farmers, a trade deal is much needed, as the $12 billion bailout from the USDA has been a sour deal for them, with under 1 percent of the funding coming their way, which amounts to about a penny per gallon, about 10 percent of the losses they’ve suffered this year.
Gas Prices Rev Higher for Holiday
Ahead of the Labor Day holiday, gasoline prices are nearing the highest level since May. On Friday, September gasoline futures pushed over $2.15 per gallon. This price may sound cheap to drivers, but futures values don’t include taxes or other costs that show up in the price at the pump, meaning that Labor Day fill ups could be some of the most expensive of the summer.
To capture the higher fuel prices, U.S. refineries have been processing crude oil into gasoline and diesel fuel near a record-breaking pace, with over 98 percent of refinery capacity in use in recent weeks.
Gasoline is being kept high by rising crude oil prices, which are near a two-month high, trading Friday for $70 per barrel. Oil continues to rise as Iranian oil exports are falling as new U.S. sanctions hit the oil producer.
Opinions are solely the writers’. Walt & Alex Breitinger are commodity futures brokers with Paragon Investments in Silver Lake, KS.