Political Risk Trumps Grain Supply Surplus

Weekend Market Report with Jerry Gulke
( Farm Journal )

The grain markets posted another positive—and wild—week. Soybean prices lead the pack. On Thursday, Nov. 1, President Trump tweeted that he had a productive conversation with Chinese President Xi Jinping on trade.

“We talked about many subjects, with a heavy emphasis on Trade. Those discussions are moving along nicely with meetings being scheduled at the G-20 in Argentina,” Trump tweeted.

Following the tweet, soybean prices rallied 26¢ within 10 minutes. For the week, July soybeans closed around 23¢ higher.

The market moves this week exhibit a shift in market psychology, says Jerry Gulke, president of the Gulke Group.

“I always look at the end of one month and the beginning of another,” he says. “A month's worth of trading has an awful lot of information that is traded. In the fall, that’s supply-and-demand reports and yield increases or decreases. And, for the last nine months it’s been politics and the tariffs.”

Gulke says the elections on Tuesday, Nov. 6—and which party takes or continues control of Congress—will weigh on the markets.

During his long career, Gulke can’t remember a time when politics has weighed so heavily on the grain markets.

“Managing price risk is difficult in any normal circumstance but has been especially difficult since Jan. 1, as we’ve seen the effect of tariffs on agriculture,” he says.

Meanwhile, corn and soybean harvest continue across the country. Corn harvest has reached 63% complete, which aligns with the five-year average by late October. Soybean harvest is 72% complete, which is behind the five-year average of 81% by late October.

The consensus seems to be most farmers are storing their unsold soybeans, which is probably half the production.

“Just about everybody I talked to from North Dakota to Kansas is going to put beans in a bin, shoebox or bag and store it,” Gulke says. “That has an artificial way of tightening supplies unless something changes in the tariff situation.”

For corn, a positive story continues for prices.

“We're hearing an awful lot from southern Minnesota and northern Iowa that corn just wasn’t what they thought it was going to be because of wetness,” Gulke says. “That may be helping the market. Corn has always had a story because we’re going to carry over something less than 2 billion bu. It wouldn’t take much of a reduction in yield to make it even tighter yet this year or next for that matter if acres aren't increased more than 4 million acres.”


Read more analysis and commentary from Gulke:

Corn’s Ongoing Dilemma

Wheat, Corn Prices Move in the Right Direction While Soybeans Struggle

Grain Prices Succumb to Open Harvest Weather In Spite of USMCA

Trifecta of Factors Send Grain Prices Higher…But Will It Last?