Have the grain markets hit bottom? Jerry Gulke lays out a handful of reasons why the markets maybe still have some life in them.
On Friday, July 11, USDA released its monthly round of Crop Production and World Agricultural Supply and Demand Estimates reports. USDA’s forecast for ending stocks of corn was substantially higher than expected, and soybean stocks are mounting as well.
Following the reports, soybean futures extended declines, heading for the longest slump in 41 years. Corn prices fell to a four-year low.
Really there was nothing new in these reports, says Jerry Gulke, president of The Gulke Group. On June 30, USDA released its Acreage report, which revised planting intentions. That confirmed soybean acres for this year as historically high, as well as a large corn crop.
"The market’s job is to discount the future," Gulke says, which is why grain prices have been on a steady decline.
Hear Gulke's full audio analysis:
Even with all of this negative news, Gulke says there is still some hope for a price turnaround.
Weather always has the upper hand.
"We still have July and August to determine if we have a crop or not," Gulke says. USDA did not increase corn or soybean yields in the July reports, which could indicate the "perfect weather season" forecasters were predicting may not come true.
Additionally, the areas where soybean acres were added to this year have had some significant weather issues. "When you added another 2.5 million acres, it was in areas that probably don’t produced 60- or 70-bu. beans," he says. "I think it will be a stretch to produce 45.5 bu./acre nationwide on that many acres."