The corn and soybean markets tumbled this week. July corn dropped 15 to 17 cents for the week, and July soybeans were down 59 to 64 cents.
These lower prices ended a volatile week, which included USDA releasing its monthly World Agricultural Supply and Demand Estimates and Crop Production reports and President Donald Trump announcing tariffs on $50 billion in Chinese imports.
“We have totally lost our gain for the year in corn and soybeans,” says Jerry Gulke, president of the Gulke Group.
Take a look at the November soybean chart.
“I look at these big drops down on the graph, and we’ve dropped nearly vertically for the last 14 trading days in soybeans,” he says. “Going forward, we have to ask ourselves: Have we changed the way we have to market grain?”
This potential paradigm shift for the grain markets is strongly influenced by the uncertainty surrounding the U.S.’s trade agreements with China. Friday’s tariff announcement from Trump essentially creates a trade war between the two countries, as China’s response includes imposing duties with "equal scale, equal intensity" on imports from the U.S.
“It’s a personality thing now,” Gulke says of the political leaders involved. “And that’s difficult when logic is not used, and we’re in harm’s way.”
It’s clear now that China does not have to buy soybeans from the U.S., Gulke says.
Story Shifts from Supply to Demand
Gulke says his fear this year was U.S. farmers would grow too much of everything, which would send prices South.
“I didn’t expect we’d have excess stocks by losing demand or through a tariff situation,” he says.
As with most political issues, it will take a long time to for this issue to with China to be settled.
“But, we don’t have a long time in agriculture because we grow crops every 12 months,” Gulke says. “Now we’re about ready to harvest another one and we still haven’t disposed of the old one yet.”
There’s definitely more questions than answers about the future of corn and soybean prices.
Gulke encourages farmers to remain flexible and keep a close eye on weather forecasts over the next 30 days. You can find more analysis from him on Tuesday, June 19, in his next the “Rest of the Story” column. See it and previous columns at AgWeb.com/Gulke
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