Gulke: 'Hoodwinked' Traders Await Real South America Crop Numbers

December 31, 2016 04:00 AM
 
Gulke: 'Hoodwinked' Traders Await Real South America Crop Numbers

Exports of U.S. corn and soybeans remain strong but are already priced into the market, says Jerry Gulke, president of the Gulke Group. The question now is whether crops in Brazil and Argentina are as good as billed.

Last year at this time, traders realized that market conditions can take an unexpected turn.

“We’re about $1.40 higher in soybeans than what we were last year at this time, a little bit lower in corn. That kind of smacks of the conclusion that the traders got caught last spring,” Gulke tells “Weekend Market Report” host Pam Fretwell on Friday, Dec. 30, 2016. “It’s been almost a year now when we had the start of that price rally because of Argentina. And I think they’ve known pretty well that just because it looks good in Brazil and it looks good in Argentina, ‘Yeah, been there last year at this time, and then I got hoodwinked and all of a sudden the production started to drop.’ Until we get that confirmed—and we’re probably not that far away—the market’s probably going to try to hold on here a little bit for the first week in January.”

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Look for more updates on South American weather and crop production in USDA’s Jan. 12 report, Gulke says. Soybean exports are at record highs, and corn exports are at near-record levels. That demand plus the potential for higher feed usage among cattle and hog producers could add an interesting element to the report.

Yet those factors suggest it will be difficult to push demand much higher if U.S. producers grow even more grain in 2017.

“That’s a distinct possibility in corn and soybeans,” Gulke says. “What do we do with that extra 30 million or 40 million bushels that we find in corn and 20 million or 30 million in soybeans? Can we get rid of it in demand, or do we have to put it to the bottom line?”

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