Corn and wheat enjoyed favorable market conditions this week as they continued riding on the Jan. 11 USDA reports, says Jerry Gulke, president of the Gulke Group.
"What we can say is the report was bullish, and it extended," Gulke says. "In other words, not just for a week, but now we’re extending the second week. And going into a three-day weekend, you would think this thing would set back more than it did. Sometimes you lose half of what you gained … . I think the market’s still concerned, in the grains at least, how are we going to curb demand and can we do it enough?"
Meanwhile, new numbers from Informa Economics show an increase in planted acres for corn.
"I think we have to remember that Informa does this stuff using some economic model," Gulke says. "They compare cost or return on investment or what’s the growth in beans versus corn, and the net profit, and as those fluctuate they have a tendency to change their acres. The USDA does the same thing."
The decision by Cargill to close a cattle processing plant in Texas had repercussions this week, as well.
"The cattle market and feeder cattle market does not look good," Gulke says. "It is a bad situation that says that if you buy feeder cattle here and you’re going to pay more for corn, you’re not going to make any money. And I think this week we lost about $40 worth of potential profit in live cattle … . So if it was bad, it got worse this week, and that’s what we’re trying to digest."
Listen to Gulke’s full audio analysis: