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G20 Meeting is 11/30-12/1

The G20 meeting is Friday and Saturday in Argentina.  The G20 is a group of leading economic nations who get together to address pressing economic issues.  During this meeting nations will get together who need to address specific issues just between them.  There are two of these discussions that are of particular note to our markets.

US / China Trade Negotiations

The US and China are currently talking “on all levels” about a trade ahead of the G20.  Their is a very interesting story from the South China Morning Post that thinks there will be a truce offered this weekend and if accepted the US and China will be able to start ironing out their differences.  This trade war doesn’t do the US or China any good. It is in the best interest of both parties to get something done.  If there is an announcement over the weekend about the US and China agreeing in principal to work out a trade deal in good faith, then the Sunday open should gap open for the CBOT contracts and probably energy and equities too.

I think soybeans and lean hogs will benefit most from US and Chinese trade relations going back to normal.  I like the Feb vs April Hogs and July vs Nov Soybean spreads if this deal gets done.

Feb vs April Lean Hogs

July vs Nov Soybeans

Saudi Arabia, Russia, and OPEC Production Cuts

Saudi Arabia and Russia will both be at the G20.  Dec 6 and 7 there is an OPEC meeting.  Saudi Arabia and Russia will most likely talk about potential crude oil production cuts at the G20 and if they agree on something it will be announced at the Dec OPEC meeting the following week.  It is probably in the best interest of these nations to limit production in the near term now that crude is down 30%!

The funds had been net long crude for years but now are relatively flat.  Money flow could sent crude lower or higher. If OPEC cuts and the US/China trade conflict gets resolved, you have to think that is bullish for crude.  If OPEC does not cut and the US/China can’t get a deal, crude probably makes the next leg lower.  I like the June vs Dec Crude futures spread to trade crude for the next couple of weeks.

June vs Dec Crude

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