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Tit-For-Tat Weekend


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Jerry Welch, Commodity Insite!
Call me at 406 -682 -5010
Ennis, Montana 59729

Follow me on twitter@commodityinsite


Below is my weekly newspaper column, Commodity Insite from September 6, a week ago. A great deal has unfolded over the past week and my ramblings may seem old and stale. Then again, that is often said about my writings and ramblings. Still, below is my weekly column from a week ago.

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September 6, 2019


Tit-For-Tat Weekend


The first Monday in September is Labor Day. Falling on a Monday it makes for what is known as Labor Day Weekend. However, I will remember this Labor Day as the, tit-for-tat weekend because of the fireworks that surfaced between the US and China that only intensified the trade war that is now more than 11/2 years old.


On Sunday, September 1, the US applied new tariffs of more than $100 billion of Chinese goods with another $200 billion of goods delayed to December 15. Immediately, China retaliated and as they promised, doing a tit-for-tat, placing new tariffs on some US goods such as soybeans and crude oil. Needless to say, most markets were not happy learning that the trade war with China escalated with both sides retaliating in kind with trade tariffs. It now seems the US and China are even further apart from striking a trade deal.


On Tuesday the first trading of the short week and in light of the, tit-for-tatfrom China, the Dow Jones fell 285 points. Also weighing on the Dow is the historical fact that September is the most bearish month of the year for stocks. In addition, a gauge of US manufacturing from the Institute for Supply Management (ISM) showed the sector experiencing its first decline since 2016. The report hinted that a recession in the US is lurking in the shadows due to the trade war.


However, Dow fell no deeper than Tuesday and quickly rallied more than 800 points. Again, the stock market easily catches a bid and is well supported while the US ag-markets, farmers and ranchers continue to suffer greatly because of the trade war. It has been that way since early 2018.


Also on Tuesday, the USDA showed US farm exports were cut once again for shipments of soybeans and corn. The USDA now estimates total agriculture exports will decline 6.2 percent, the lowest since 2016. More damning yet is the decline in exports places the US ag-trade surplus at $5.2 million, the smallest since 2006.


Unfortunately, for US wheat producers and prices it was worse yet. Wheat prices in Chicago fell to a 4 month low, wheat prices in Minneapolis slipped to a 91/2 year (yes, year) low and KC wheat prices fell to levels not seen since late 2005, 14 years ago. The wheat market is a disaster which does not bode well for soybeans or corn.


Later in the week, front month cattle futures fell to a new 3 year low while soybean and corn prices hit a 31/2 month low. The week was quite bearish most US ag-markets. So bearish, in fact, that the CRB index that is to commodities as the Dow Jones is to stocks fell to a 2 year low.


No doubt, the trade war with China has been weighing most heavily on US farmers and ranchers. But consider the following statement from Associated Press. The United States and China on Sunday put in place their latest tariff increases on each other's goods, potentially raising prices Americans pay for some clothes, shoes, sporting goods and other consumer items before the holiday shopping season. Now, America households are suffering as well.


And J.P. Morgan, the global investment bank stated that Trump tariffs will cost the average American household $1,000 a year. However, their study was done before Trump raised the September 1 and December 15 tariffs to 15% from 10% over the,tit-for-tat weekend. Thus the Trump tariffs will likely cost each American household more than $1,000 per household this calendar year.


Late in the week, it was announced that U.S. and Chinese envoys will meet in early October for more talks aimed at ending a tariff war that threatens global economic growth. Such talk is encouraging but I have also heard that sort of chatter for the past year and a half. At some point in time a deal must be struck between China and the US. A deal must be done!


I cannot recall a period with so much volatility with stocks, bonds and commodities as now being seen. Each day, most all markets are flying all over the place with the blame being placed on the trade war with China. How much longer such a scenario remains in place is anyones guess. But next year when the Labor Day Weekend rolls around I will be quick to remind everyone that in 2019, it was called the, tit-for-tat weekend.


Hopefully, the trade war will end sooner than later. My fingers are crossed.


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There has been so much noise and sheer volatility for the entire Big Four: stocks, bonds and currencies over the past week that it has been surreal. Prices and values everywhere are moving violently up and down based on news items and tweets. Trading is not for the faint of heart.


I shy from volatile markets. My lean is to find a trade that appears to be high in probability, limited in risk and offers great profit potential. At this point in time and in light of everything that has unfolded the past two weeks I favor one market above all others in terms of trading. If you are interested in learning about the one market I am focusing upon drop me a line at commodityinsite1@gmail.com. Or, call me at 406 579 7482.


There is no substitute for timely and accurate information.


The time is 7:38 a.m. Chicago on Friday, the 13th!

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About the author


Jerry Welch has been in the futures industry since the late 1970's and is a true veteran of the markets. He has been quoted often in Wall Street Journal and is author of Commodity Insite, one of the longest commodity futures newspaper columns in history. His weekly column has been published each week since the mid 1980's and is one of the most recognized names in the world of commodities.

Mr. Welch is also known widely as a, "so so" flyfisherman.  

His column is published by the Illinois Agri News in La Salle, Illinois, Cattle Today, in Fayette, Alabama as well as Consensus, in Kansas City, Kansas.

He can be contacted at 406.682.5010 for a view of his, "twice a day" market column that includes price forecasts and trading suggestions.

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