After plunging for several weeks, corn and soybean prices bounced back this week. Could prices be headed in a positive direction?
For the week ending June 22, July and December corn prices each closed about 5 cents lower. But, that’s 10 to 15 cents or more off the bottom. Meanwhile, November soybean prices were down 12 cents for the week, but they were down 70 cents at one time on Tuesday.
“We rallied off the lows,” says Jerry Gulke, president of the Gulke Group. “It could have been a lot worse.”
Once again, trade disputes and tariffs stole headlines this week. With all of this global uncertainty, Gulke says you should keep your eye on a few key macro trends.
- What will China’s demand for soybeans be this year and next? Will they really come back to the United States and buy beans, even without a tariff or trade deal?
“I think there’s more and more evidence to suggest they really won’t buy as much,” Gulke says.
- Will China’s appetite for protein continue to increase?
“We've been so enamored by the insatiable appetite for Chinese protein, and we keep extrapolating 5% to 6% increase, year over year over a year,” Gulke says. “And that has proven true for a period of time. But these are not normal times.”
What if that stead increase in Chinese protein consumption shifts to a decrease?
- Does the U.S. government really have farmers’ back?
“We probably have already dropped $12 to $14 billion in gross farm income for corn, soybeans and wheat than just maybe 17 to 18 trading days ago,” Gulke says. “When you have my back, what are you going to do? Are you going to buy a grain and dump it into the ocean? Are you going to buy grain and give it to North Korea? Or you're going to give me a CCC loan? We've got to disappear that grain because anything less than that, you've got a surplus out there.”
Overall, Gulke says, he’s concerned that these agreements and questions will take a lot longer than we think to resolve.
Acreage Report Out June 29
On Friday, June 29, USDA will release its annual Acreage report. Be prepared for a surprise or two, Gulke says. Potential bombshells could be corn acres below 88 million or a lot more soybeans acres.
“I think the market is a kind of neutral and what they might expect,” Gulke says. “And my personal opinion is I don't think we're going to know until October.”
You can find more pre-report analysis from Gulke early next week, in his next the “Rest of the Story” column. See it and previous columns at AgWeb.com/Gulke