Jerry Gulke: Feb. 15 Is A Day of Reckoning for Phase One

11:42AM Feb 14, 2020
Jerry Gulke WMR
The phase one agreement between the U.S. and China takes effect now, setting officially in motion several provisions in the deal. 
( AgWeb )

The phase one agreement between the U.S. and China takes effect now, setting officially in motion several provisions in the deal. 

“Meanwhile, the U.S. will cut tariffs on $120 billion of Chinese goods in half, with China reciprocating on tariffs that were put in place in September on $75 billion of U.S. goods, including cars, crude oil and soybeans,” says Jerry Gulke, president of the Gulke Group. “There are now other actions that will unfold as part of the deal, including several requirements for issues covering trade to be addressed within 10 days or 30 days of the agreement taking effective relative to dairy, poultry and beef. “

The key now, Gulke says, is if China will exercise any of the phase one loopholes due to extenuating circumstances and not purchase U.S. goods.

“They have the ability to do that given the coronavirus implications,” he says. “However, one has to wonder how it is China can buy half a million tons of corn from Ukraine this week, as well as previously buying cargos of wheat from Ukraine.”

China made it clear, he says, they would continue to support their current and new trading partners, as well as live up to phase one agreement.

“For these reasons, the market is skeptical,” Gulke says. “If in fact China exercises the provisional delays inherent in the phase one agreement, it’s possible any benefits from it may be put off one or two quarters. There have been hints about this possibility.”

The bottom line, he says, is it may take longer than the market expected to see real progress come to fruition.

USDA Outlook Forum

Next week, USDA will hold its annual Agricultural Outlook Forum. During the two-day event, USDA will provide its first acreage and price outlook for 2020.

“It will be interesting to see what they say about the situation,” Gulke says. “USDA did offer some hints in their February round of reports, which came out earlier this week, of better soybean exports and a lower carryout, as well as good meat exports but in a backdrop of large meat supplies in the US. We’ll need further confirmation about that.” 

Technically Speaking by Jerry Gulke

The March soybean chart below shows graphically what the market is up against. After the collapse after the signing of phase one, the market doesn’t seem to be impressed with potential surprise buying forthcoming. The critical $9 level was violated but since made a valiant attempt to recover the day before Phase I kicks in on the 15th. All this in the midst of Brazilian harvest at 16% of what appears to be another record soybean crop. Any trend following analysis can be skewed by a mere the stopping of deterioration. I’d prefer a chart that has the appearance of urgency and short covering, which we have not seen yet. 

Tentative best describes price outlook in a backdrop where farmers are reluctant sellers both of on-farm and commercially stored grains. The March corn chart looks content with status quo until concrete evidence of positive phase one implementation.

(click to enlarge)


March 2020 soybeans


March 2020 corn

Do you have a plan in place? If you are confused by the facts, perhaps I can help?  

Good Marketing,
Jerry Gulke (; phone 707-365-0601 or email me at [email protected]

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