Trade Deal Could Boost Exports

On Monday, leaders of 12 countries announced that they had reached a monumental trade agreement after nearly five years of negotiations. Known as the Trans-Pacific Partnership (TPP), the agreement will reduce or eliminate tariff barriers to trade between the US, Japan, Australia, Mexico, Canada, Malaysia, and a half-dozen other Pacific Rim countries. Altogether, these nations represent nearly 40% of the global economy.

For commodities traders, one of the biggest impacts is the slashing of tariffs on agricultural products like grains, beef, and ethanol, which could drastically increase US exports and, in turn, prices. The US Grains Council expects that grain exports could climb 11% if the deal is implemented. On the heels of the announcement, corn and wheat prices reached a two-month high.

Despite the elation among agricultural producers, the TPP still faces a tough road ahead in Congress, where some Republicans and Democrats have expressed opposition to the deal, putting pressure on the deal from both sides of the aisle.

USDA Updates Crops

The USDA released their monthly crop production report Friday which indicated larger corn production than had been expected. Corn fell briefly, but soybean and wheat prices climbed upward as stockpiles of those crops were smaller than anticipated.

The total size of the US corn crop was estimated by USDA at 13.56 billion bushels, the third largest on record. As of midday Friday, December corn futures traded for $3.91 per bushel.

Crude Spurts Higher

Crude oil prices gained nearly 10% this week, pushing over $50 per barrel for the first time since July. Prices have been climbing as the market adjusts to rising demand. Furthermore, the recent low prices have dampened new production, which could further restrict supplies in coming months.

Meanwhile, Russia has stepped up its military intervention in Syria, and there are reports that China could join forces with Russia as well. These forces are ostensibly supporting Syrian President Bashar al-Assad against ISIS, although some reports indicate that Russian forces are attacking moderate rebels that have been receiving support from the US and other Western allies.

To some, the three-way conflict is beginning to feel like it could develop into a Cold War-era proxy war between the US, China, and Russia, which could further destabilize the Middle East and shoot crude oil prices sharply higher than Friday's price of $50.25 per barrel.