Up Again, Down Again: Market Reacts to On-and-Off Trade Talks

June 1, 2018 04:41 AM

Ahead of Memorial Day weekend, the grain markets showed strength and a bullish trend. But to start June, corn, soybean and wheat markets all ended lower for the week. The price gains that had been growing during the last two weeks as the trade framework with China was reached, have vanished. Half of the price gain in soybeans and wheat is gone, as well as all of the gain in corn. 

“A lot of market phycology is being flipped back and forth by what’s coming out of the White House,” says Jerry Gulke, president of the Gulke Group. “In the past, not a lot was said by the presidents. This is a different situation.”

The ongoing trade discussions with China has continued to pressure soybeans prices. The trade framework told Chinese buyers to source U.S. soybeans, and they have been doing that, Gulke says. The question is: How much will they buy of old-crop versus next year’s production? 

“With each passing export sales report, it confirms my concern that we won’t cut old-crop carryout as much; we may raise it,” Gulke says. “If we raise it 50 million bu.—which may be a stretch—that would be like producing an extra million acres of beans at 50 bu. per acre.”

The verdict is still out on China’s purchases of old-crop soybeans. We just don’t want to see USDA raise our ending stocks in soybeans much at all in the next report, Gulke says.

For corn, the price swings are just a product of this time of year. “We’ve had an excellent start for the crop,” Gulke says. “Plus, the long-term trend for corn is for a slow and steady growth in demand.”

Eye to the Sky

Weather will be the focus for the markets going forward, and Gulke is tracking weather forecasts from Drew Lerner, founder, president and senior agricultural meteorologist of World Weather, Inc.

“He hinted it will be wetter with normal temperatures in the Eastern Corn Belt,” Gulke says. “While the Western Corn Belt will be hotter and dryer.”

Luckily, these hot and dry periods shouldn’t be prolonged. 

“It’s all up to weather,” Gulke says. “It will be a volatile time ahead for the next six weeks. The best laid plans of mice and men go awry when Mother Nature doesn’t cooperate.”

On Monday, visit AgWeb.com/Gulke to read the next installment of Gulke’s commentary series titled, “The Rest of the Story.” 

Read More:
Rest of the Story: Technical Outlook
05/30/2018 03:26 PM
Markets seemed right for a correction after the 40 cent plus run-up in soybeans that began with good gains also in corn and big gains in wheat that began just eight trading days ago, says Jerry Gulke.

Jerry Gulke: The Trend Is Your Friend
05/26/2018 04:00 AM
“In spite of the volatility, we’re still in a bullish market,” says Jerry Gulke, president of Gulke Group.

Rest of the Story: China Framework Agreement
05/22/2018 11:35 AM
The thought that a rising tide raises all ships suggests that increasing trade should be palatable to Republicans and even the Kennedy Democrats (if there are any left) would agree.

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Spell Check

Harold Kallal
Jerseyville, IL
6/2/2018 12:17 PM

  Jerry can u explain how 79% of corn is rated g-ex when only 72% has emerged. what do they base this on?


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