Capitulating Grain Markets: Where to From Here?

June 15, 2018 08:19 PM
 
 

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. 

SoybeanChart-061518-GulkeGroup

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

 

Read More:

Rest of the Story: Discounting Fundamentals—One More Time

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Comments

 
Spell Check

Steve Exter
Lubbock, TX
6/16/2018 10:06 PM
 

  I agree with Keith. Trump is a moron and the farmers were too busy looking at their shoes to figure it out.

 
 
Tom Pyfferoen
Pine Island, MN
6/16/2018 08:42 AM
 

  As we watched the grain markets tank for past couple of weeks, I keep thinking of the phrase from Donald and Sonny Purdue that says " Farmers we've got your backs on this trade issue" what does that mean ? If we sold beans this week can I expect a check from uncle for $700 for every 1000 bushels we planned to market. This reminds of "80's when Jimmy Carter embargoed grain going into Russia because Russia invaded Afghanistan. I'm wondering is it with a check or a knife that "we've got your back". We prefer the market not government. Only time will tell.

 
 
Keith
Augusta, ME
6/16/2018 09:55 AM
 

  It's a shame that farm country couldn't see (and still can't for many) what Trump really is. They could have prevented all this had they seen the lunatic for what he truly is. He can't be trusted and is nothing more than a big walking lie! The good times that we're in now thanks to the solid foundation laid by the previous administration won't be enough and it's likely that tough times for most, not just farmers, are not too far off.

 
 

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