How Bullish Were the USDA Reports for the Corn Market?

For the week, May corn was 2¾ cents higher, December corn up 2½ cents, May soybeans were 1 cent lower, November soybeans lost ¾ cent, May soybean meal dropped $1.40 per short ton and May bean oil was up 31 points. May Chicago wheat gained 5½ cents, May Kansas City wheat fell 5¼ cents and May Minneapolis wheat fell 16. 

Corn closed 15 cents higher on March 28 in reaction to the USDA’s Prospective Plantings Report, which showed U.S. farmers intend to plant 90 million acres of corn, 4.6 million fewer than 2024. Quarterly stocks for corn came in at 8.35 billion bushels, which was 80 million bushels below trade estimates. 

So, just how bullish were these numbers for the corn market? 

Jerry Gulke, president of The Gulke Group, says he was surprised the corn acres came in that low. 

“However, the market was telling us don’t plant 6 million acres of corn. You don’t need it; you don’t want it. You’ve got to get that carryover down. I thought we’d never get there based on the early fall and the anhydrous that’s on, but the government told us something different and said we did do that. So, farmers are listening to market signals and profit and loss,” he says. 

Gulke says even though the quarterly stocks number for corn came in below the trade guess, he thinks it is more bullish than it looks on the surface due to hidden corn disappearance. 

“After fall harvest, we said we carried in about 1.7 billion bushels and then we grew a 15.1-billion-bushel crop, so this year we had 16.7 billion bushels of total supply,” he explains.

The kicker is last year on March 1 the U.S. had only 7.4 billion bushels of corn carryover verses 8.35 billion this year.

“So, we have 1 billion bushels more, but we should have had 1.7 billion more based upon our production,” Gulke adds.

That means through the first six months of the marketing year corn stocks are 700 million bushels fewer than that. 

“Somehow, we lost 700 million bushels and that tells us a couple of things. Some of that went into exports, maybe 300 million, but somewhere along the line we used more grain,  either in feed usage because corn was cheap or we overestimated last year’s crop,” he says. 

That is significant because Gulke says he doesn’t know anyone who believes the U.S. had an increase in corn yield as USDA said in the Jan. 12 report.

“That kind of sunk the market with the idea we were going to have a 3 billion bushels left over this next year, but suddenly we find out there’s a questionable disappearance somewhere,” he says.

That is a bullish scenario, according to Gulke. However, the proof will be in what USDA does for adjustments in the April WASDE. 

Technically, report day was a strong one for corn with key reversals, and now Gulke says the job of the corn market will be to hold on to these acres through price. 

Gulke says his firm had lifted their hedges or short positions in mid-February and went nearly unhedged going into the reports. 

“We had some short $4.80 calls way out in December for 23 or 24 cents and sold the carry in the market, which meant corn had to go over $5 before we were wrong,” he explains. 

That was better than being short the market, due to the risk, Gulke adds. 

In his most recent Top Producer article, Gulke also stated grains, but especially corn at three-year lows, had gotten too cheap relative to other sectors of the market such as the NASDAQ, which has been making new highs. He says the markets are “out of whack” and he expects some rebalancing or shifting of those dollars ahead, which could benefit commodities. 

For more information, contact Jerry at info@gulkegroup.com.