Some market-moving factors are positive for farmers (high yields), while others are bad news all the way around (possible reduction in the ethanol mandate).
The first full week without USDA reports is now behind us. Their void has left the grain markets in flux. "The absence of the crop report today really leaves things open to the hedgers to move the market around," says Jerry Gulke, president of the Gulke Group.
Overall, corn and soybean prices are headed south. "We posted new lows again in corn," Gulke says. "Even despite the fact that we have some rain in the forecast that could delay harvest."
November 2013 soybeans closed more than 20 cents lower on Friday.
Hear Gulke's full audio analysis:
Gulke finished up combining soybeans on his Illinois farm this week and had made a large dent in his corn acres. He was pleasantly surprised by his yields. The cool summer really helped us, he says. "We underestimated our corn yields by 20 bu. per acre."
Overall, Gulke believes many farmers and traders misjudged the size of the 2013 crops. "It is not a bad crop," he says. "For corn, there were yield expectations as low as 150 bu./acre, they are probably off by 10 bushels."
EPA also provided some downside potential to the corn markets this week. According to Bloomberg, EPA is considering a cut in the mandate on the use of corn-based ethanol in 2014. The agency would call for the use of 13 billion gallons, down from 13.8 billion gallons this year.
"This report is not formalized," Gulke says. "But, EPA theoretically dug a hole for us. The time they should have cut the EPA mandate for corn was when corn was $8 per bushel, not $4.50."
Gulke says this change wouldn’t take effect until 2014. "The crop we are going to grow next year will be looking at less demand for ethanol, but hopefully more demand for animal feed and exports."