For the week, September corn was down 14 cents, December corn fell 14 ¼, August soybeans dropped 38 ¼, November soybeans plunged 36, December soybean meal was $9.60 lower, December bean oil plunged 249 points, September soft red winter wheat fell 42 ¾, September hard red winter wheat dropped 45, September hard red spring wheat lost 28 ½ and September canola was $29.25 lower.
The grain markets finally bounced on Friday after an ugly week of losses across the complex.
Jerry Gulke, president of the Gulke Group, says some in the market attributed the recovery to short covering but he thinks some significant trade developments played a role, as well as positioning ahead of the upcoming USDA reports.
U.S. and China Sign Framework Deal
Thursday evening the Trump administration announced a breakthrough on trade.
The U.S. and China signed a framework deal aimed at bringing rare-earth minerals and magnets to American manufacturers. In turn the U.S. will remove restrictions on ethane exports to China once the deliveries begin. Commerce Secretary Howard Lutnick said once the “rare-earths” are delivered, the U.S. will “take down our countermeasures.”
Agriculture was not part of the China framework, but Gulke thinks there may be a bigger trade announcement in the works as President Trump will be speaking at the Iowa State Fairgrounds on July 3.
“You don’t go to agriculture country to talk about the metals program that you’re trying to get from China,” he says.
Canada and U.S. Talks Terminated
President Trump on Friday also said the U.S. was terminating trade talks with Canada over tariffs on dairy products and what he called an egregious digital-services tax on U.S. tech companies set to go into effect Monday.
Gulke says the relationship between the two countries is strained and it looks like it may result in retaliatory tariffs including on Canadian canola.
Following the news canola prices dropped nearly $18, while bean oil prices held together.
Gulke says the reaction indicates to him that the bean oil market is viewing the development as positive because tariffs on Canadian canola imports will decrease competition against U.S. bean oil as a feedstock in biofuels production.
“And what does that do?” Gulke says, “It raises the price of our soybeans and other feedstocks that go into biofuels.”
Soybean prices rallied with the November contract scoring a key reversal, which Gulke thinks is significant.
EU and Ten Other Trade Deals Announced Soon
Gulke points out the grain markets may also be more hopeful on trade and improved demand for ag products.
E.U. officials say the Commission was presented a new trade deal from the U.S. The E.U. is considering lowering tariffs on U.S. imports to avoid a full-blown trade spat ahead of the July 9 deadline.
Commerce Secretary Lutnick also said President Trump is prepared to finalize a series of trade deals in the next two weeks including with India. Lutnick expects more than 10 trade deals to be announced before the middle of July.
USDA Report Positioning
The grain markets were also positioning ahead of the USDA Acreage and Quarterly Stocks Reports on Monday.
Gulke says he is expecting a surprise because the trade estimates are so close to the March intentions, but he doesn’t think the acreage shifts are that significant for the market because it’s more about yield now.
“You know, if you had a million more or a million less acres of corn that’s 180 million bushels.You drop bushels an acre you’ve covered that on corn. So, yield is going to be pretty important.Same thing in beans,” he explains.
Marketing Ahead of the Report
Last week Gulke reported his firm had made the rare decision to sell 100% of their new crop bushels based on a major technical signal that predicted this week’s sharp sell off in the grain markets.
“As of June 20, we had major signals that told us this thing’s not looking good. But you know, as we’ve talked about all spring, is that all this started really in February when we made highs for the year, actually in corn and beans and wheat. Then we went down so precipitously from Friday until yesterday that it was like a capitulation that something changed in the world and nothing really had changed yet,” he explains.
Gulke says after the major capitulation on Thursday they decided to lift 50% of these hedges and take profits.
“When you drop 50 cents in beans and 30 cents in corn, maybe 50 cents in wheat that’s big money,” he adds.
According to Gulke they lifted those hedges prior to the USDA reports and next week will start a new month and bring a new weather forecast.
“We haven’t seen July, and we need to see whether these guys that are still predicting that heat dome to come be right,” he says.
He says as a farmer he can now rest easier because he’s covered from a marketing standpoint.
For more information contact Jerry at info@gulkegroup.com.
