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Paragon Commentary

Futures File: Grains, NAFTA & Trade

Apr 28, 2017

Wintry Weather Threatens Corn, Wheat

Much of the corn and wheat belts received a blast of heavy rains or even snow this week, leaving planting equipment idle in the shed. The unusually wet weather makes fields too muddy to enter and could drown corn seeds even if the fields could get planted.

Meanwhile, the winter wheat crop is threatened by freezing temperatures that are descending across the Plains States, which could threaten the grain that will begin to be harvested next month. Fears of frost damage helped boost July Kansas City wheat futures near a two-week high at $4.39 per bushel on Friday.

 

Trump Embraces NAFTA

This week, President Trump reversed his stance on leaving the North American Free Trade Agreement (NAFTA), stating that the U.S. has no immediate plans to withdraw from the trade deal.

During his presidential campaign, and again last week, Trump threatened to leave the agreement in order to protect U.S. jobs and business. However, the withdrawal from NAFTA and implementation of tariffs could result in higher prices throughout the continent, most notably in agriculture, auto manufacturing, and textiles.

In phone calls on Wednesday with Mexican President Enrique Peña Nieto and Canadian Prime Minister Justin Trudeau, Trump decided to not leave the agreement but insisted that a “renegotiated deal” must be reached.

Beginning in 1994, NAFTA has become one of the world’s largest free trade zones, accounting for over $1.1 trillion in trade between the U.S., Mexico, and Canada.

 

Impact of Trade Deals Hits Home

Despite the plan to remain in NAFTA, President Trump made big waves this week in the lumber and milk markets as he began changing trade deals with Canada.

The administration has claimed that Canada is unfairly subsidizing its domestic milk and lumber production, which is hurting U.S. producers. As a result, the U.S. Commerce Department implemented a retaliatory tariff on Canadian lumber, and President Trump indicated similar measures could be put in place to support U.S. dairy farmers.

These actions would likely raise prices in the U.S., hurting consumers while helping domestic producers of the commodities.

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