The soaring dollar, the uncertainties of Britain’s decision to leave the European Union and favorable weather forecasts are all pushing markets down right now, according to Jerry Gulke, president of the Gulke Group in Chicago.
“Even before the Brexit vote, there were signs markets were waning a week ago and not responding to bullish forecast , so a lot of this started in earnest on Monday morning or even (a week ago Friday),” Gulke says. “Then all of a sudden the weather changed over the weekend,” forecasting timely rains.
Those weather shifts can dramatically impact the crop and the market at this time of year and after such a lengthy uptrend. “It’s a cat and mouse game, and it changes every three days, and you have to deal with that,” Gulke says.
Growers also have to keep an eye out for the production estimates that depend on those weather shifts. “With our acres and our carryover this year, whatever it is, we need a drought over a wide area” to push prices up, Gulke says, especially after this week's over 50-cent price market drop.
“We can hope—and hope lives eternal on the farm—that we get another weather blast higher and we get this heat to come back and then we get another shot at old highs again,” he says.
It could happen in August for soybeans, but when it comes to corn, Gulke admits he’s “skeptical.”
“We’ve lost nearly 90% of the gain in corn we’ve had since April,” he says. “In one week we lost what we gained in six.”
The Brexit decision is likely to create even more headwinds for U.S. producers and their products, from grain to meat, as the dollar strengthens against the pound, the euro, and other currencies.
“Everything we sell now to countries overseas just got more expensive to countries that may be looking at recessions,” Gulke says, adding: “It’s going to make it rough for us in agriculture because we just saw a big impact on Europe, a big market of ours. Canada's currency is probably going to drop because if you don’t have a good economy, you’re not going to use as much oil, so oil price drops further. It just creates a lot of uncertainty out there.”
Listen to his full comments here:
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