Soybean prices swung higher this week as USDA lowered production by about 1 bu. per acre from trade estimates that projected a higher yield and shrunk carryover to 420 million bushels. Yet another story is playing out in corn, where prices have refused to drop lower in recent weeks, says Jerry Gulke, president of the Gulke Group.
That suggests the market is watching South America for a possible weather hiccup.
“We’re not out of the woods there in South America yet,” says Gulke in an interview with “Weekend Market Report” host Pam Fretwell. He notes trading will resume Monday night after the Martin Luther King Jr. holiday and that the market will also be looking to see if heavy rains will wipe out “any chance of replanting in central Argentina.”
If that happens, commercial grain buyers might look to purchasing of U.S. grain as a substitute.
“People that buy soybeans for export probably are short-bought,” Gulke says. “In other words, they’re thinking they’re going to be able to buy them cheaper during harvest in South America. If they get a reason they believe that maybe these lows are in for the next month or so, then we may get some buying coming in.”
Meanwhile in Brazil, concerns persist about dry spots that could hurt corn and soybean yields.
“That’s the beauty about having a competition, I guess you’d call it. They produce about as many soybeans as we do, Gulke says of Brazil. “It’s got second crop Safrinha crop that’s of concern. A hiccup in another exporting country like that helps us. You could suggest that the market is saying, ‘I don’t know if we need to go any lower for now.’ I look at the recent lows that we had a week ago, which was prior to the week where you had a main report. Those lows are significant to me. That’s what we’ll be watching for to make any additional sales.”
Another takeaway from this week’s USDA report is that global demand for soybeans continues to be strong, keeping U.S. farmers’ desire to plant more soybean acres in 2017 on track.
“What we’ve done consistently for the last three years is underestimate global demand for soybeans, and it increases every year,” Gulke says. “While analysts are looking out their backdoor at the U.S. and the expected carryover, it is more important and accurate to compare it to the total global usage of soybeans.”