Crunch Time in Negotiations May Force an Agreement

May 19, 2018 04:00 AM
 
 

Grain markets continue to be buoyed by trade negotiations with China, as well as by weather conditions and planting progress.

As of May 13, 62% of the U.S. corn crop has been planted, which is on par with the five-year average. But, states such as Minnesota, North Dakota and South Dakota are 10 percentage points or more behind the average corn-planting pace. 

“The corn market is understanding there are some planting problems in certain areas,” says Jerry Gulke, president of the Gulke Group.

This is helping lift corn prices—hopefully to a new plateau.

“Corn probably needed more acres, but time ran out,” Gulke says. “I think this is the week that farmers will make a decision to switch crops. I don’t know where corn prices are going, but we know they aren’t going back to $3.50.”

For soybeans, 35% of the U.S. crop has been planted, which is above the five-year average of 26% planted by mid-May.

Chinese negotiations, as well as the Asian county’s buying patterns, are weighing on the soybean markets. This week, Bloomberg reported that China bought a record amount—850,000 metric tons—of soybeans from Russia. But, don’t let the headline mislead you, Gulke advises.

“If you haven’t bought any and buy three more—that’s a record,” he says. “It got the market a little nervous about the beans.”

Going forward, Gulke says a mutual trade agreement with China that narrows the trade deficit would be the best-case scenario for U.S. agriculture.

“We want China in a reciprocal agreement to buy more from us,” he says. “A rising tide lifts all ships. It would help them eventually. I think China is smart enough to understand that.”

This weekend trade negotiations will continue with China. Gulke will discuss any new developments in his “The Rest of the Story” column early next week. Read previous commentary at AgWeb.com/Gulke

 

Read more:

Rest of the Story: Has this Ship Sailed?

When Bad Things Happen After Good Reports

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