Information Overload Leaves Grain Markets in Limbo


By Sara Schafer, Top Producer, Editor

via AgWeb - Feb 1, 2019


The last few days of January proved eventful for the grain markets. USDA announced when reports that were delayed by the 34-day government shutdown would be released.


“We’ve gone from a lack of information from the government to information overload, and that’s going to stretch to Feb. 22, which is shortly before they have their annual outlook forum,” says Jerry Gulke, president of Gulke Group.


Following the update from USDA, China announced plans to buy 5 million metric tons more of soybeans. Yet, for the week, corn prices closed a few pennies lower and soybeans closed 7¢ lower.


“On Thursday we had big reversals down in beans and corn, and then of course right after the market closed, they announced China would buy another 5 million metric tons,” Gulke says. “A lot of the analysts thought when this finally happened, we'd see a 40¢ to 50¢ move in beans. It felt like the markets were going to the moon, as volatile as they were, but it just didn’t turn out that way.”


Gulke points out China didn’t provide a timetable for this 5-million-metric-ton purchase of soybeans. As he wrote in his recent column for Top Producer, the U.S. did not have China’s back against a wall, and they did not have to come to the U.S. for their soybean needs. What will China do with an additional 5 million to 10 million metric tons of soybeans?


“If they are purchased for reserve to make President Donald Trump happy, then China acts like a central bank for soybeans, and U.S. stocks stay near 900 million bushels,” Gulke says. “If they put purchases on the market, demand assumptions rise to around 90 million to 95 million metric tons and the reduced usage rhetoric was a smoke screen. This is highly doubtful.”


Trump is trying to do is what he said he would do, Gulke says, in that he’s going to get them to buy the beans that they would have bought otherwise.


“I think they've accomplished that for last year. Now are they going to start buying in the fall again, so we’re back to normal? If they do nothing but put them in stock, we've done little, if anything, to manage the global supply-and-demand situation,” Gulke says...


more, including links, audio [8:33 min.]