Politics and trade wars conquered the headlines this week, as President Donald Trump set in motion tariffs on as much as $60 billion in Chinese imports to the U.S. and accused the Chinese of high-tech thievery.
China imports 65% of U.S. soybean exports, so a disruption in that market could create big problems for our country’s soybean growers.
While most grain prices were down for the week, they held their own considering all the negative news.
“It could have been a lot worse,” says Jerry Gulke, president of the Gulke Group. Corn and soybean prices both recovered at the end of the day on Friday.
“We rallied out of the depths of despair to close higher, in spite of the fact that all you heard about on the TV Friday was that agriculture is at the forefront of being hurt by trade retaliations,” Gulke says. “I don’t think China is going to retaliate on soybeans until they see those rows of beans growing in the United States—and we have a good crop. They are going to have a hard time sourcing their needs from just one country.” Psychology is an important part of price-discovery, and Chins aided by the news media is doing a good job of that currently.
A factor that’s helping bolster soybean prices is unfavorable weather in Argentina.
“Argentina is the largest soybean oil and meal exporter in the world,” he says. “When you get a tight crop there, it means they will not be able to ship as much oil or meal to their normal customers. So that means they can come to us and lock in their needs on the Board of Trade.”
As a result, soybean meal ended the week significantly higher.
All Eyes On Acreage
On March 29, USDA will release its annual Prospective Plantings report. Gulke is expecting acres to shift more toward soybeans versus corn. Marketing firms such as Allendale, FC Stone and Informa are predicting the same.
Even with so many early expectations pointing to higher soybean acres, prices have remained relatively strong. “The market is telling us: I don’t care how many beans you plant, it probably won’t be enough come March of next year,” Gulke says. If there is a surprise it could be that corn acres are lower and bean acres higher than estimated. Stocks as of March 1, reported on the 29th could have an equally important effect.
Corn prices are down from the $4 mark seen earlier this month, but are still showing energy. “In corn, the market is saying you can plant 90 million acres; the demand for corn is so strong that it probably won’t make a big difference in the long term,” Gulke says. “However you don’t turn a big negative ship around very quickly. But we’re starting to see that in corn and soybean meal.”
On Mondays, Gulke provides an in-depth market analysis with accompanying charts. Read his first installment of this new feature: The Rest of the Story: Global Demand or Lack Thereof
For next Monday’s edition, Gulke will discuss the current political climate’s effect on the grain markets, as well as provide technical analysis of corn, soybeans and soybean meal. To access Jerry’s comments see AgWeb.com/Gulke.
Contact Jerry directly at [email protected] or 707-365-0601.