Chinese Shopping for Food

As part of the pending trade deal between the U.S. and China, the Chinese are expected to go on a food-buying frenzy.

Reports out this week suggested that China could buy $20 billion dollars in U.S. agricultural exports in the first year, a return to the levels from 2017, before the trade war. Last year, Chinese purchases of major U.S. products plummeted under $15 billion as both countries imposed tariffs on one another.

If China goes on a shopping spree, that should help boost prices for major U.S. exports to China, like cotton, pork and soybeans, but supplies of many U.S. commodities are still unusually high after almost two years of tariff-reduced trade.

Major agricultural markets had a muted response to this week’s news, as many market watchers had been hoping for even bigger purchases.

As of midday Friday, soybeans for delivery in November traded for $9.31 per bushel, December lean hogs were worth 66 cents per pound and December cotton fetched 65 cents per pound.

Housing Lifts Lumber

A booming housing sector has been foundational to U.S. economic strength, which has sent lumber prices sky-high.

This week, futures topped $400 per thousand board feet for the first time since July. New home construction has been rising this year, which is helping hoist prices as builders need more lumber.

As the Federal Reserve lowered interest rates this year, mortgage rates fell, allowing would-be homeowners to borrow more at a lower cost, boosting demand for new housing. The Fed is expected to lower rates further in its effort to shore up the U.S. economy, a move that could keep lumber prices strong for the foreseeable future.

Oil Gushes Higher

Oil is back over $56 per barrel for the first time in almost a month, bringing cheer to U.S. oil producers, but hurting drivers as gasoline and diesel fuel rise at the pump.

The markets took off Wednesday after a U.S. government report showed a surprise drop in supplies of oil, gasoline and distillate fuels.

Reports that Saudi Arabia will be pushing OPEC members Iraq and Nigeria to comply with reducing output could help boost prices further as could the prediction of colder-than-usual temperatures in the northern half of the U.S., which will boost heating fuel demand.

Longer term, the ongoing threat of global unrest or military conflict, especially in the Middle East, looms as a threat to world supplies of crude, which could fuel a large rally at any moment.