For the week, May corn was 7 higher, December corn gained 4 ¼, May soybeans plunged 46 cents, November soybeans fell 44 ¾, May soybean meal fell $10.40 per short ton, May soybean oil gained 68-points, May soft red winter wheat was ¾ higher, May hard red winter wheat gained 5 ¾, May hard red spring wheat was up 5 ¼.In the outside markets the DJIA fell 2,837 points, the S&P 500 lost 455 points and May crude oil plunged $7.26.
The majority of the commodity and outside markets were down sharply for the week in reaction to President Trump’s announced “reciprocal tariffs” and China’s retaliatory tariffs of 34% on all U.S. goods.
Jerry Gulke, president of the Gulke Group, says the move took the market by surprise as the tariffs were bigger than the trade anticipated and there were more countries included in the reciprocal tariff plan.
“I am not sure why the market was surprised as President Trump was pretty transparent that when he got elected this was what was going to happen,” he says.
Nevertheless, the stock market, energy sector and commodities like soybeans and livestock had a violent reaction and were down sharply for the week.
Soybeans are one of the markets that will be hit the hardest by another possible trade war with China, although it appears the administration sees the merit in “value added” as it relates to soybeans and bio-mass.
Gulke says, “We haven’t had any big flash sales, but on the weekly export sales, China has been buying soybeans from us.In some weeks they take 40% of all the soybean sales that we have. So, that will come to a halt.”
Plus, he thinks China may cancel some of the remaining soybean sales they have on the books that haven’t been shipped.
Gulke says the stock market took the news the hardest due to ideas tariffs will lead to massive changes in trade policy that could spark a global recession and stifle demand.
“I have said for a while, based on our studies that showed sell signals back in Dec and secondly the first week of February. the financial markets needed a reset, the tariffs just gave the market an excuse to finally correct,” he says.
He says it is concerning that monthly sell signals can last 18 months so April needs some bullish surprise for both the stock market and grains.
Two markets that were able to cut through the tariff noise and end higher for the week were wheat and corn.
Gulke says its partially because corn and wheat are two commodities that are USMCA compliant and are not subject to tariffs from Canada or Mexico under the agreement.
Yet, corn ended higher despite USDA projecting U.S. farmers intend plant 4.7 million more acres of corn this spring, printing an estimate of 95.3-million-acres.
He says the resilience in the corn market goes back to the strong demand, which he thinks is still being underestimated by USDA and all without China!
“Exports are running more than 24% ahead of last year and so I think USDA is going to need to eventually raise demand and lower old crop ending stocks down to around 1.41 billion bu.,” he explains.
If that happens, then the 95.3 million acres of corn farmers intend to plant will not be enough to satisfy the current demand, especially with any weather problems.
He points to the record rains and flooding taking place in the mid-South and Eastern Corn Belt and says some of those acres may not get replanted to corn, leaving the market short of supply.
“USDA is at 181 bu. on yield but if you use 179 bu. and the 95.3 million acres of corn, the carryout will only grow to around 1.6 billion bu.That is not enough for the market to be comfortable,” he says.
That means corn prices may have to go up to incentivize producers to plant all of the intended acres.
So, amidst a week of negative tariff news, corn seems to be the one bright spot for farmers.
For more information contact Jerry at info@gulkegroup.com.
