Markets occasionally confuse me. However, one part of a career in journalism/broadcasting that I really enjoy is calling people who can educate me on things I really don’t have much expertise in. The older I get, the more fun it is to learn (and try) new things, but I digress. I was working on an assignment with the National Association of Farm Broadcasting the other day and had to find out how the trade dispute between the U.S. and China is affecting commodity markets.
Well, here’s the thing. Commodity markets are not my area of expertise, so I called up Mike Zuzolo of Global Commodity Analytics and Consulting in Atchison, Kansas. He’s been in the markets for 2.5 decades so if you have a question, he’s the guy that can answer it.
As a farm broadcaster/editor, I was curious about how the China announcement that they wouldn’t be buying any American farm products right now was affecting the markets. Obviously, the effect wouldn’t be a positive one. However, as you’ll hear in the conversation, it could have been even worse.
And believe me, before we progress any further I need to stress that no one is saying things aren’t bad right now in the agricultural sector. I wanted to find out what the market reaction was to the announcement from China. Mike said the key reaction market reaction took place in the currency and stock markets.
“Quite frankly, Chad, I think this is maybe one of the few glimmers of good news, or potentially supportive news, for the commodity markets,” he said. “I think we’ve done a fairly good job in the markets of pricing in a good portion of the end result of these trade frictions turning into the beginnings of a trade war. It’s going to be playing out in the currency markets as we go forward.
“The net result is the commodity markets didn’t react as negatively as they could, simply because the strength of the U.S. dollar was dropping,” Zuzolo said. “When the dollar goes down, it makes our goods cheaper to export. At the same time when we had the news out of China, the gold market was making fresh, 6.5-year highs. That too is commodity supportive.”
Here’s the full conversation with Mike Zuzolo.