Markets Give, Take After Phase One News

Initially spurred to higher prices by news that the US and China had agreed to a Phase One trade pact, Friday’s commodity and equities markets lost some of their bullish enthusiasm by their closes.

The deal requires some reforms by China in the area of intellectual property, technology transfer, agriculture, financial services and currency and foreign exchange.

As usual, these kinds of announcements lack the details necessary for an accurate evaluation of the news, and “the devil is in the details,” so it’s prudent to sit back and wait for what the Chinese do.

The US Trade Representative’s office issued a statement announcing the partial trade deal with China, saying:  “The Phase One agreement also includes a commitment by China that it will make substantial additional purchases of US goods and services in the coming hears.  Importantly, the agreement establishes a strong dispute resolution system that ensures prompt and effective implementation and enforcement.”

For its part, the US agreed to drop plans to impose 15% tariffs on $160 billion in Chinese goods on Sunday.  However, this did not remove the 25% tariffs on $250 billion of other Chinese imports and 7.5% tariffs on an additional $120 billion of Chinese imports.

At least one market analyst thought the agreement will not yield the kind of movement on trade policies that is expected, but it’s not like the horse is dead, either.  Chinese purchases of US goods may skirt the line of compliance, and perceptions of just what is encompassed by the word “substantial” may also come into play.




Farm Bureau President, Zippy Duvall, said “China went from the second-largest market for US agricultural products to the fifth-largest since the trade war began.  Reopening the door to trade with China and others is key to helping farmers and ranchers get back on their feet.

“We are eager to learn the details of China’s commitment to purchase more agricultural products,” Duvall said.




The National Cattlemen’s Beef Association’s CEO, Collin Woodall, said, “While we wait to learn more about the details of the agreement, we are optimistic that this positive news will bring long lasting relief to farmers and ranchers who have been targeted with China’s retaliatory tariffs for many months.”




The National Pork Producers Council had not responded by the weekend, but the US Meat Export Federation said, “US pork and beef products have been subject to burdensome retaliatory duties in China since 2018, and this has made it very difficult for the US industry to capitalize on China’s rapidly growing need for high-quality proteins.  But long before retaliatory duties entered the picture, non-tariff barriers were a major, persistent obstacle for US exporters looking to expand their business in China.”




Cash cattle trading was reported last week at $118 to $120.50 per cwt on a live basis, with the higher prices coming on Friday, steady to up $1 from last week, and at $188 to $190 on a dressed basis, steady, with higher values also on Friday.

The USDA choice cutout Friday was up $0.64 per cwt at $216.29, while select was up $1.68 at $204.24.  The choice/select spread narrowed to $12.05 from $13.09 with 64 loads of fabricated product sold into the spot market.

Six steer contracts were tendered for delivery against the Dec live cattle contract on Friday.

The CME Feeder Cattle index for the seven days ended Thursday was $143.40 per cwt, up $0.09 from the previous day.  This compares with Friday’s Jan contract settlement of $145.67, up $3.12.