Chinese Slowdown Ahead?

April 13, 2012 09:48 PM


The tide could be changing for China.

For the first quarter, China's GDP was 8.1% below forecasts by analysts, who were expecting 8.3% growth pace. This marks the slowest GDP growth in three years.
The Bloated DragonGulke Group President Jerry Gulke says yes, 8.1% growth is lower than was expected, but still not anywhere near a complete slowdown of the Chinese economy.
"We would almost die for that kind of growth," he says. "We’re struggling along with 2 to 3% growth."
Yet, what could this decrease in growth mean for U.S. markets?
"There is reason to believe that the export program we’ve had to China perhaps peaked in February," he says. "If China is going to detract their economy, there goes the demand for hogs and stuff they buy from us."

One of Gulke’s columns for Top Producer magazine in 2011 was titled, "The 800-lb. Gorilla."

At that point, China consumed nearly 60% of the global soybean trade, and analysts were consistently underestimated Chinese demand.  
"It concerns me that one buyer commands such a high percentage of the world’s soybeans. When China acts, I feel the grip around my economic throat tightening."

Grain Market Movements

In addition to the news out of China this week, Gulke says the latest WASDE reports provided some new information to the markets.
"Carryover in corn was unchanged. Government says we’re going to feed more wheat." Gulke says if that happens, the tight stocks problem in grains will likely be solved.
He predicts more acres will shift out of corn into soybean, as the growing season progresses, due to favorable prices.  Gulke says with soybeans hovering around $13 to $14, more farmers around the world will grow them.
"Today’s soybean close is very close, if not the highest close in July soybeans we’ve had since June of 2008. So here we are with a four-year high in beans and corn is headed south to a degree, because we’re going to grow several more million acres of corn than last year."
Gulke says all of these factors are working to eliminate or help neutralize the tight stocks situation.
Listen to Gulke's full audio analysis:


For More Information

Read more market analysis of China's reduced GDP:
The Allendale Wake-Up Call: China News Shows Slowing Economy
Walsh Trading: Afternoon Grain Comments: Walsh Commercial Hedging 4/13/12
Check grain prices with AgWeb's Market Center.



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