Weak export calls tempered positive economic news this week. China found a new source for corn and USDA lowered expectations.
The week leading up to Halloween was anything but a horror story for commodity markets. And while it was a fairly ho-hum week from a movement perspective, it may be more like a fairy tale that is setting up for the marketing year, says Jerry Gulke, president of The Gulke Group
Ending stocks for the last marketing year ended up over the psychologically-important 1 billion bu. And even with continued strong demand expected, and lowered yields for the 2011 crop, it looks like the end of this marketing year on September 30, 2012, should see about 800 million bu. corn carryover. Just like Goldilocks, says Gulke, not too much. Not too little.
"If there’s going to be tight stocks, we can look forward to it maybe by next summer we could see a repeat of last year. If demand comes back from livestock and if exports pick up, we maybe we get into a tight situation. But the way it looks now, you look ahead and what the government has shown us we’re still looking at about a 800 million bu. carryover. Tight stocks, but we’re not going to run out."
Until significant export news comes out, that feeling of comfort may not leave the market, Gulke says. In fact, week export news this week is what kept the markets in a relatively sideways trend, despite a stronger GDP growth for the U.S. than anybody expected and good news out of Europe involving their economy that should have moved the market higher.
"This is really the time of year you’d expect that people would load up on commodities because of harvest lows. The export numbers fell off a lot, with corn numbers being 81% less than the week before. If we get another bad report next Thursday, that’s two weeks in a row. Then it’s time to be concerned."
A big blow to export outlook came with news that China bought corn from Ukraine. Gulke says, though that this is not a reason for panic as China has also bought feed wheat and the fact that there is continued good worldwide demand.
"This is probably the best bullish week that we’ve ever had to take corn, soybeans and wheat higher in my opinion. But it just didn’t happen."