If the grain markets have nearly lulled you to sleep in the last few months, you’re not alone. Other than the big drop following the March 29 Prospective Plantings report, markets have made just incremental moves up or down.
For the week ending April 12, corn and soybean prices were both just a few cents down. This is despite excessive moisture and snow that’s slowing fieldwork and planting progress.
“The market is a proactive market and looks ahead,” says Jerry Gulke, president of Gulke Group. “It saw this weather system coming through the Midwest a few days ago. So, when it materializes, the markets say, ‘Now what? That's an old story.’”
Part of the new story is farmers in some areas are getting into the field and making planting progress. The other part of the story is there is plenty of old-crop grain in storage to provide a cushion. That was evident is the April 2019 World Agricultural Supply and Demand Estimates report from USDA, which published this week.
“USDA found more corn in the bin,” Gulke says. “Combine that with the Planting Intentions report, which showed that our intentions were to plant 1 million more acres than most people thought. On the surface, you say, ‘Well, farmers intended to plant corn, so odds are that when it dries up, they are somehow going to get that done.’”
Soybeans have a similar story, with excessive stocks and more than enough planned acres.
“It’s really up to weather again and government action to move prices,” Gulke says.
All of these factors equal grain markets with little volatility. “We aren't seeing a 20¢ or 30¢ move in beans or a dime in corn,” he says.
For farmers with snow on the ground and grain in the bin, it may be hard to sell grain, Gulke acknowledges. “I think that’s holding up the price of corn—the reluctance to sell.”
Soybeans have an interesting pattern playing out, Gulke says, something that hasn’t happened in years.
“We have a carry in that market,” he says. “Normally, the market didn’t pay us a dime to store past March or the first part of April because we had another crop coming in South America. Now they're paying us to store the large 900 million bu. carryover. Someone will get paid to hold that excess, either a commercial elevator or on-farm stored.”
Gulke says the longer these sideways and slightly lower markets last, the bigger the potential for a price explosion once factors change—be it up or down.
Find more analysis from Gulke and listen to audio commentary at AgWeb.com/Gulke
April 9 USDA Reports: Next Price Mover?
Jerry Gulke: Trade Deal or No Deal?
Jerry Gulke: USDA Shock and Awe
Check current market prices in AgWeb's Commodity Markets Center.