USDA's report was bullish in the sense that just about every trader was focused on the new crop, and it delivered surprises in old-crop corn usage, says Jerry Gulke of the Gulke Group. "Traders got caught up in this year's early planting and good crop progress and forgot we don't make a crop in June, we make it in July or August." USDA likely won't raise its new-crop yield until July or even August or September, when more is known, he adds.
Meanwhile, USDA increased 2009 corn usage by 135 million bushels. "That means we start the 2010 crop year with that much less. Assuming a 160-bu. average, that's like losing 750,000 to a million acres," Gulke notes. "And the Dakotas may have that much again that was left unplanted due to water and wet fields when the preventing-plantings date rolled around."
June 6 posted the low for corn so far, in the $3.50 area. "The market got ahead of itself," Gulke says. "Now it looks like we'll have carryover in the 1.6 billion area, not a lot but enough IF we have a good crop. It has become more important that we do make a crop similar to last year's."
The bean report was unremarkable. "Crushers are having trouble finding beans to crush, so basis is strong. I'm done with old crop and suggest if other producers still have some, the market wants them now," Gulke says. Likewise, he says, it's time to look at clearing bins of old-crop too.
"Wheat at $4.53 with a dollar basis means we will feed a lot, and if prices don't change, we won't plant a lot. So by this time next year, things may look different."
Looking at outside factors, including the stock market, world economy, currencies, etc., Gulke says, "It could be that things are beginning to turn around and after several months of mostly negative news, it may improve."
Finally, Gulke says to keep an eye on weather in China: USDA left its old-crop corn estimate at 145 million metric tons and 2010 at 166. "Hard to see how that will happen given it was planted late this year and now it's dry there."