The winds of change swept through the grain markets this week. Everything from major trade talks between China and the U.S. to behind-average planting progress to severe weather in parts of the Midwest weighed on prices.
As of April 29, USDA reports 17% of the U.S. corn crop has been planted, which is behind the five-year average of 27% planted. Jerry Gulke, president of the Gulke Group, started planting on his farm in northern Illinois—until rains halted progress.
“We needed rain so badly,” he says. “I haven’t seen it this dry in northern Illinois for probably decades.”
While Gulke should be back in the field by Monday morning, farmers in other major grain-producing states have still not started. For example, corn planting progress—as of April 29—was at zero in Minnesota, North Dakota and South Dakota.
Gulke says it will be interesting to see what farmers, who haven’t started planting yet, do with their corn acres. Will they switch?
“We’ve proven that we can sometimes plant corn through the June 1 and still get 200 bu./acre,” he says. “But I’ve been around too long to think we won’t get caught one of these years. It just doesn’t seem like the perfect year and get above trend-line yields.”
Chinese Trade Talks Buoy Markets
The big headline grabber this week was the negotiations and trade talks taking place between the U.S. and China. Bunge alleged earlier this week that China had stopped purchasing soybeans from the U.S., Bloomberg reported. But, that and other information released from the trade talks has been questioned.
Regardless, the soybean market reacted. Soybean prices rallied on Thursday, but that price gain evaporated on Friday.
“With beans jumping like they did, it just shows how anxious some of the traders are to grasp news that this will be a short-term thing,” Gulke says. “There will be another news briefing at some point this weekend. I hate it when they do that on weekends. They can blindside a person.”
Looking at the Chinese negotiations, Gulke says it is important to not get swept up in the thinking that this Asian country must buy soybeans from the U.S.
“I mentioned it in the Rest of the Story earlier this week,” Gulke says. “To think China is ignorant about getting their back against the wall, would be a little naïve on our part. I think the market saw that Friday.”
The current political environment creates major challenges for grain marketing.
“It is very difficult to farm and manage risk in this political environment,” Gulke says. “It is not for the faint of heart to see beans up one day then down the next day hard.”
USDA Reports on the Horizon
On May 10, USDA will release its monthly Crop Production and World Agricultural Supply and Demand Estimates (WASDE) reports.
This will be the first report where USDA uses its current estimate of acres and applies its idea of yield, Gulke says. Don’t be surprised if the corn yield estimate is shaved due to planting delays in some states. Also, keep an eye on the demand side for corn and soybeans and well as the carryover.
Gulke will provide more ideas about the May 10 report in his “The Rest of the Story” column early next week. Find it at AgWeb.com/Gulke.