Jerry Gulke: Is the Government Influencing Price Discovery?
The grain markets featured lower prices this week. Corn prices were down 40¢ to 50¢, for the week ending June 3, and soybean prices were down 16¢ to 34¢. All wheat prices were down $1 for the week.
Strong planting progress helped tug those prices lower, says Jerry Gulke, president of the Gulke Group.
After a historically slow start, corn and soybean planting progress have both reached average paces. As of May 29, U.S. corn planting sits at 86% complete, according to USDA. That’s up from 72% planted a week ago and in line with the five-year average of 87% planted by late May.
For soybeans, 66% of the crop had been planted as of earlier week. That is only one percentage point behind the five-year average. Most states have pushed ahead of their five-year average planting pace.
“We had pretty good planting progress that makes this year not quite as bad as everybody thought it was going to be a month ago,” Gulke says. “A lot of the corn in Iowa, for instance, got planted after May 10, but it got planted pretty fast.”
New-crop soybean prices fell below the key level of $7 per bushel. Looking at these markets, he says, if you have nothing sold, you're really in anguish. But if you've got 40%, 50% or 60% sold or hedge using the futures you’re in pretty good shape if prices continue to drop.
“For your last 30% or so, you can hold for a weather market or for a demand surprise,” Gulke says.
Policy Issues Weigh on Markets
Beyond weather and production news, Gulke says the other influence on prices this week were from President Biden’s speech about inflation, fuel costs and Russia’s invasion of Ukraine.
Biden said: “The two challenges on the minds of most working families are prices at the pump and prices at the grocery store. Both of these challenges have been directly exacerbated by Putin’s war in Ukraine.”
In response to these challenges, Biden shared he led the world to coordinate the largest release of global oil reserves in history — 240 million barrels — to boost global supply and keep prices from rising even more. In addition, he directed the sale of gasoline using homegrown biofuels this summer. (Read Biden's full speech.)
Gulke says Biden’s plans to continue to support biofuels will help to suppress gasoline diesel at least somewhat.
“It doesn't look like he's going to do anything to hurt the ‘green’ emphasis for fuels,” he says.
Biden also shared Ukraine has 20 million tons of grain in storage right now that cannot be exported due to the war. He said he’s working with European partners to get more of the grain locked in Ukraine out into the world market, which could help bring down prices.
“By saying that he just pretty much slammed the door on the free market of wheat,” Gulke says. “Wheat prices were trying to get weed high enough to where you don't run out, but you quit using it. As we talked about for weeks it seems enough months about government getting into agriculture, they are into agriculture when it comes to food inflation.”
USDA Reports Next Week
On Friday, June 10, USDA will release its monthly Crop Production and World Agricultural Supply and Demand Estimates reports.
“We should hope that they don't change much because we don't want to see demand reduced, especially with June starting out on a negative note in prices,” Gulke says. “If they lower exports on anything that would not be good.”
USDA may not make any significant changes, he says, since it will release it Acreage and Grain Stocks reports on June 30. In the July round of reports, USDA tends to revise yields based on growing season developments.
Check the latest market prices in AgWeb's Commodity Markets Center.
Gulke Group 2022 Summer Conference: The conference is set for July 14-15, in Lombard, Ill., at the Embassy Suites. Guest presenters will include William Wilson from NDSU, Glen Buckley of NPK Fertilizer Advisory Service, Drew Lerner from Worldwide Weather, Roger Wallace (livestock economic outlook), Michael Drury of McVean on domestic and global economy, and Jerry Gulke on marketing strategies.
For more info contact Jamie at 707-365-0601 or info@gulkegroup.com
Jerry Gulke farms in Illinois and North Dakota. He is president of Gulke Group Advisory Services. Disclaimer: There is substantial risk of loss in trading futures or options, and each investor and trader must consider whether this is a suitable investment. There is no guarantee the advice we give will result in profitable trades. Past performance is not indicative of future results.
