Commodities Futures and Options Brokerage

Paragon Commentary

Futures File: NAFTA, Dairy & Gasoline

Aug 31, 2018

HALF-TA Deal Cut

On Monday, President Trump announced that the United States and Mexico had reached an agreement on renegotiating NAFTA, the three-way deal signed in 1992 between Mexico, the U.S. and Canada.

This deal would reopen agricultural exports to Mexico, especially helping U.S. hog and dairy farmers who sell heavily to Mexica consumers. On the news, milk prices spurted to a nine-month high; almost one third of U.S. cheese exports are sold to Mexico.

Despite the progress between the U.S. and Mexico, Canada has not agreed to the new terms, setting up a complication for the future of NAFTA.

President Trump and Mexican President Enrique Peña Nieto had set a deadline of Friday night for Canada to join the new deal. This would allow the U.S. Senate to ratify the treaty before President Nieto is replaced by the left-leaning Mexican President-elect Andrés Manuel López Obrador.

Without Canada’s agreement, the deal is only half-done, which could force negotiations with a new Mexican leader, potentially spoiling the current agreement.

For U.S. dairy farmers, a trade deal is much needed, as the $12 billion bailout from the USDA has been a sour deal for them, with under 1% of the funding coming their way, which amounts to about a penny per gallon, about 10% of the losses they’ve suffered this year.


Gas Prices Rev Higher for Holiday

Ahead of the Labor Day holiday, gasoline prices are nearing the highest level since May. On Friday, September gasoline futures pushed over $2.15 per gallon. This price may sound cheap to drivers, but futures values don’t include taxes or other costs that show up in the price at the pump, meaning that Labor Day fill ups could be some of the most expensive of the summer.

To capture the higher fuel prices, U.S. refineries have been processing crude oil into gasoline and diesel fuel near a record-breaking pace, with over 98% of refinery capacity in use in recent weeks.

Gasoline is being kept high by rising crude oil prices, which are near a two-month high, trading Friday for $70 per barrel. Oil continues to rise as Iranian oil exports are falling as new U.S. sanctions hit the oil producer.

1 (888) 452-8751

Paragon Investments, Inc.

Kansas • Missouri • Nebraska •
Indiana • Florida


DISCLAIMER: Past performance is not necessarily indicative of future results and the risk of loss does exist in futures trading. Trading commodity futures and options involves substantial risk of loss and may not be suitable for all investors. You should carefully consider whether trading is suitable for you in light of your circumstances, knowledge, and financial resources. Opinions, market data, and recommendations are subject to change at any time. This brief statement does not disclose all of the risks associated with trading commodities, futures, and options. For more information, see Disclaimer/Legal statements. The information contained on this Web site does not constitute a solicitation to buy or sell by Paragon Investments, Inc.. This Web site is not to be available to individuals in a jurisdiction where such availability would be contrary to local regulation or law. Paragon Investments, Inc. © 1997-2013 No Claim to Orig. U.S. Govt. Works.

© year Paragon Investments, Inc.