Commodities ahead of U.S-China meeting
The global economic problems is a serious issue, and the dispute among the world’s biggest economies is adding fuel to an already complicated situation. It is not surprising that hard and soft commodities are one of the first casualties when economic superpowers are unable to end their disagreement. The price of commodities, such as oil depends on various factors. However, the trade war between the U.S. and China has the potential to affect the oil prices in the long run. Soft commodities are also suffering as in case of soybeans, which is a bone of contention in this dispute.
Soybeans and trade war
Export of U.S. agricultural products to China used to be a profitable business. However, a trade war with China also affected agricultural products. One of the most serious issues in this dispute is the export of soybeans.
China imported a significant amount of this product during the last several years. The situation changed when the U.S. imposed tariffs on Chinese goods. As a retaliatory measure, China responded with imposing tariffs on soybeans. These tariffs made the U.S. soybeans less attractive to the Chinese companies as paying 25% extra is not in their best interests.
According to the customs data, China imported 614,805 tonnes of soybeans. It means that in comparison with May imports decreased by 37%. In May China bought 977,024 tonnes. This is a big problem for U.S. farmers because China is one of the most important export markets.
Several days ago U.S. agriculture secretary Sonny Perdue stated that China promised to buy 20 million tonnes of soybeans. However, he did not provide any details about this is going to happen. For instance, in 2018, the U.S. exported 16.6 million of soybeans to China. The exports fell by more than 16 million tonnes as in 2016; China imported 32.9 million tonnes of soybeans.
On Tuesday, U.S. Trade Representative Robert Lighthizer along with Treasury Secretary Steven Mnuchin will meet with China’s top negotiator Vice Premier Liu He. Ahead of this meeting, Chinese state media announced on Sunday that China imported several million tonnes of soybeans. Nevertheless, U.S. data is different from as China imported only 1.02 million tonnes of soybeans.
According to the U.S. Department of Agriculture from June 28 to July 18, only 1.02 million tonnes were sent to China. There is a big difference to the information provided by the Chinese state. They said that after the meeting of Donald Trump and Xi Jinping during the G-20 summit, the United States had shipped several million tonnes of soybeans.
Oil price update
Oil prices fell on Monday. The price of Brent oil decreased by 37 cents or 0.6% to $63.09 a barrel whereas in the last week prices increased by 1.6%. The price of another Benchmark West Texas Intermediate (WTI) also reduced by 20 cents or 0.4% to $56.00 a barrel. During the previous week, the price of WTI increased by 1%.
The two-day meeting in Shanghai is important because U.S. and Chinese officials will meet for the first time since May. Another problem is the regional tensions in the Middle East. In the case of a successful meeting in Shanghai and de-escalation in the Strait of Hormuz, commodities will gain from these decisions.
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