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April 9 USDA Reports: Next Price Mover?

15:02PM Apr 05, 2019

Jerry Gulke talks what is behind this week's market moves and how the April 9 USDA reports could affect prices.( AgWeb )

Last week, after UDSA’s annual Prospective Plantings and quarterly Grain Stocks reports, corn and soybean prices did a nosedive. Luckily, this week both commodities ended the week higher. Corn prices were 5¢ higher and soybean prices were 13¢ higher for the week. 

Despite the big jump, corn prices didn’t quite hit a 50% retracement.

“That tells me the situation in corn is a little more tenuous because of the stocks they found and the surprise in the acres,” says Jerry Gulke, president of the Gulke Group. “I think there were people out there who were long corn and short beans because everybody knew there was a story in corn.”

Moving forward, Gulke says, the key will be if the lows made in the collapse last Friday will hold. 

“If something comes to create a more negative slant to things and then that doesn't hold, you’ll take another leg lower,” he says. “It was encouraging to see a rally, but I would have liked to have seen a larger one.”

For soybeans, Gulke says, traders around the world are scratching their head wondering what in the world is holding up soybean prices? 

“Everybody now knows that we have 900 million bushels of soybeans in carryover, if China doesn't buy any more beans,” he says. “So, there's a lot of people scratching their heads because they can’t figure out why soybeans are still so high, based on the market fundamentals.”

On Tuesday, April 9, USDA will release its monthly Crop Production and World Agricultural Supply and Demand Estimates.

Gulke says USDA will take the information from the March 29 reports and plug those into the 2019/20 supply and demand balance sheet.

“They’ll have to do something with the 270 million bu. of corn that they found in the Stocks report,” he says. “What are you going to do with that? Are you going to lower ethanol usage? Lower feed usage? Or would you affect the export side of it and say going forward exports won’t be as good?”

For perspective, 1 million acres of corn could be lost to this spring’s flooding. It could have produced 170 bu. per acre on average and 170 million bu. total.  

“The nearly 270 million bu. that USDA found is equal to more than 1 million acres of production,” Gulke says. “You found that much without planting a seed. So, you could afford to lose 1 million to 2 million acres of corn and not bat an eye because it doesn’t affect the stocks situation. That’s a sad state of affairs, but that’s what happens when you tip the scales so far to one side.” 

Gulke will have his post-report analysis Tuesday in his Technically Speaking column. Read it and more at AgWeb.com/Gulke.

Jerry Gulke on Weekend Market Report April 5 2019