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Trade tensions linked to decline in commodity prices – World Grain

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by Holly Demaree-Saddler

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Credit Suisse notes that agriculture fell 10.48%, led lower by soybeans.

NEW YORK, NEW YORK CITY, U.S. – Commodities fell in June as the production of agricultural commodities increased, while rising trade tensions among major economies threatened demand, according to Credit Suisse AG.

The Bloomberg Commodity Index Total Return performance was lower for the month, with 16 out of 22 Index constituents posting losses.

Nelson Louie Global head of Commodities for Credit Suisse Asset Management
Nelson Louie, Global head of Commodities for Credit Suisse Asset Management

“Trade tensions between the U.S. and its major trading partners increased in June. In retaliation to U.S. tariffs on $50 billion of Chinese goods, China announced reciprocal duties on American products, including several key agricultural commodities. In response, the U.S. administration threatened tariffs on an additional $200 billion of Chinese exports, further escalating trade tensions,” said Nelson Louie, Global head of Commodities for Credit Suisse Asset Management. “The European Union, Mexico, and Canada also released new counter measures to the U.S. tariffs, seeking to protect their domestic industries.  These duties may hamper economic growth.  In June, the industrial production readings for the U.S. and Eurozone came in below expectations. This may be concerning for the Eurozone as its industrial production readings have trended downward from the strong pace of growth witnessed in late 2017.”

Credit Suisse noted that agriculture declined 10.48%, led lower by soybeans, as the ongoing trade conflict between the U.S. and China continued to hurt the competitiveness of U.S. products. The U.S. Department of Agriculture also reported higher soybean production out of Brazil.

“Further tariffs between the U.S. and other major economies may disrupt the global supply chain and lead to higher inflation expectations, while businesses may delay spending plans due to uncertainty regarding the cost and availability of inputs for finished goods,” Louie said.

Credit Suisse’s Total Commodity Return Strategy is managed by a team with over 32 years of experience, and seeks to outperform the return of a commodities index, such as the Bloomberg Commodity Index Total Return or the S&P GSCI Total Return Index, using both a quantitative and qualitative commodity research process.

As of June 30, the Team managed approximately $9.6 billion in assets globally.