Jerry Gulke: Government Intervention Back In Vogue


By Sara Schafer, Top Producer, Editor

via AgWeb - May 10, 2019


A trifecta of factors sent the grain markets lower this week. A series of tweets from President Donald Trump about imposing tariffs on China, poor export sales data and a bearish USDA report all drove prices lower. For the week ending May 10, December corn was down around 16˘, November soybeans were down 31˘ and July wheat was down 14˘.


“The most negative of the three forces was the tweets from the President,” says Jerry Gulke, president of the Gulke Group. “Happy anniversary, as it was nearly a year ago China imposed retaliatory tariffs.”


In the latest move, President Trump has enacted $325 billion additional tariffs on Chinese goods as of 12:01 a.m. Friday, May 10. Also on Twitter, Trump said the U.S. will use its money from the tariffs to buy American agricultural products “in larger amounts than China ever did” and send it to “poor & starving countries” for humanitarian aid. The president indicated potential purchases of $15 billion from farmers.


“Now China is saying there may be repercussions,” Gulke says. “Well, what more can they do to us? We have the price of corn down low and soybean prices down to below 10-year levels.”


Gulke was around when Nixon embargoed soybeans to U.S.-ally Japan and started the rush to open up Brazil’s ability to plant soybeans. He also saw Carter embargo grain to Russia and understood well the implications of removing Russia from most-favored-nation status.


“I used the FOR (farmer owned storage) as a profit center to stay afloat, while we tried to regain market share in that failed embargo which was passed by a unanimous vote by both political parties but later blamed for Agriculture’s problems for years,” Gulke says. “I managed then, and quite well in fact, the challenges politicians placed before us, thanks to government programs that helped mitigate the crisis.”


To add insult to injury, Gulke says, the latest export sales data show the U.S. is not competitive in the world for selling grain.


With the tariff news and poor export sales data, USDA’s World Agricultural Supply and Demand Estimates (WASDE) report on May 10 didn’t do significant damage, Gulke says.


“It mostly confirmed what we thought was going to happen,” he says. “The market probably had a lot of this discounted already.”


USDA didn’t change the 2019 corn yield expectation. USDA pegs the U.S. corn crop at 15.0 billion bu., with a national average yield of 176.0 bu. per acre. But that is based on a weather-adjusted trend assuming normal planting progress and summer growing season weather, estimated using the 1988-2018 time period.


“It looks like USDA kicked the can down the road because they don't even know what Trump's going to do tonight or China will do over the weekend,” Gulke says...


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