Corn and Soybeans Post Key Reversal Lower After October 12 USDA Report

October 12, 2016 02:04 PM
combine soybeans

That suggests downward pressure on prices for the near term

Downward pressure on corn prices is likely after the crop posted a key reversal Wednesday following the release of USDA’s Oct. 12 reports, says Jerry Gulke, president of the Gulke Group.

“Maybe we’ve reached the pinnacle on the demand side of this,” Gulke tells Farm Journal Radio host Jo Windmann. “A key reversal down is not good news. You don’t like to see the market close lower on a crop report day.”

Corn yields fell 1 bu. from the September estimate to a national average of 173.4 bu. per acre in USDA’s Crop Production report. U.S. production is down 36 million bushels from a month ago to 15.057 billion bushels.

Yet USDA reported huge exports, steady feed and  ethanol.  At the same time, the agency reported planted acres up 400,000 acres and harvested acres up just 200,000, suggesting about 200,000 of the acreage went toward silage for livestock or sustained weather damage.

“You may be close to setting record exports in corn,” Gulke says. “We knew we had them coming to us because of South America’s bad crop last year, and they aren’t going to have any exportable supplies until probably March or April, in that area.”

On the soybean side, yields rose 0.8 bu. from the September estimate to a record national average of 51.4 bu. per acre. Soybean production is up 68 million bushels from a month ago to 4.269 million bushels.

“Soybeans are hanging in there pretty well,” Gulke says. “You’re getting up to 395 million bushels of soybeans which, in the whole scheme of things [of] global usage, isn’t very much. But it’s 200 [million] bushels more than you would have liked to see to really get this market on fire from here.”

The U.S. seems to keep finding additional soybean production and buyers for about 2/3 of whatever new crop is discovered, Gulke says. Yet moving forward, it will be difficult to build on that growth simply because it’s unlikely demand can continue to grow, outstripping any further yield increases.

“We continue to see global demand for protein go up, and we’ve seen the benefits of that because we are the only storehouse [for soybeans] in the world, basically,” Gulke says. "This is in spite of the dollar now making new highs almost for the summer. We’ve broken out to the upside, and some people in the financial circles think we’re going higher because it looks like Trump doesn’t have  a snowball’s chance of getting in the White House, and that may be good for trade. There is a positive attitude about our dollar, which is not good for agriculture."

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Spell Check

Mark C. Daggy
Humboldt, IA
10/12/2016 10:46 PM

  The only reason prices are farmers are in a panic and selling. If everyone shut-off 100% of all sales and made grain buyer purchase on the spot market....with zero forward selling...prices would skyrocket. What farmer would not want $6 corn and $15 beans. We know 11 billion bushel corn crops give $8 corn. So why not cut production to 75% by not planting high test seed, cutting back on fertilizer, allowing soil to rest ever 7 years on a rotational basis and and doing on farm storage so access is eliminated to grain buyers. Create hunger in the market and keep it hungry.

Bloomer, WI
10/13/2016 08:42 AM

  Good luck on that, the dairy industry has said the same thing for years, a 2% surplus sets the price and keeps it at or below cost of production!!

Mark C. Daggy
Humboldt, IA
10/13/2016 10:00 AM

  In the early 1960s, my father would take me to NFO meetings where they dug a huge hole with a backhoe and dumped thousands of gallons of milk and shot 200 young heifers and put them in the hole for burial. Farmers must self control and pay little attention to their neighbor and the greed pushed by the masses. The masses want cheap food and could care less if farmers could pay their bills. Until we run things thru a central marketing entity, and the central marketing entity refuses to buy from farmers who fail to self-control, we will run from poor price cycles to poor price cycles. The masses play on a farmers greed to cause massive over production. Maybe it will take more 1980s to continue to squeeze out poorly managed farmers, until only the "lean and mean" survive. Waiting for the day as stated in Revelations, "When a quart of wheat.;..costs a days wages."