The job of the market is to discover a price that aligns with supply and demand fundamentals. After the markets moving sideways for several months, both corn and soybeans showed nice price gains. But, the last few weeks have been hard on the grain markets.
“Corn has lost 30 cents in the last three weeks,” says Jerry Gulke, president of the Gulke Group.
As of June 3, USDA rates 78% of the U.S. corn crop as good or excellent. It’s a similar story for soybeans, with 75% of the nation’s crop rated good or excellent.
“Last year crop ratings were poor, but we still had a good crop,” he says. “Now we’re starting out with excellent crop ratings. There’s a chance—barring weather of course—that we could produce too much of everything. Now we are at a point where we need a drought. I hate it when it takes a crop problem to get prices higher, you want to see it come from demand.”
Soybeans prices are following a similar bullish trend. After flirting with $11 after USDA’s Jan. 12 Crop Production report, soybean prices are also significantly lower. July soybeans, which Gulke says are a good indicator of demand, closed at $9.69 on Friday, July 8.
“There was belief that China would have to come to us to buy soybeans,” he says. “Well, that didn’t happen. We lost the whole gain that we had from January.”
On Tuesday, June 12, USDA will release its monthly Crop Production and World Agricultural Supply and Demand Estimates reports. Gulke says USDA won’t change acres in this report, but could alter yields.
“For corn, we certainly don’t want to see the government come in here and raise our carryout for this year and next year,” he says.
For wheat, Gulke is not sure what USDA will say about yields. “Wheat prices have gone up nearly $1 since the middle of December, even with the worst fundamentals,” he says. “But now Eastern Europe having production problems. That story is not settled yet.”
Gulke will analyze the June 12 reports in this weekly “The Rest of the Story” column, which will be posted that afternoon following the report’s release.
“Let’s hope we get a positive reaction to a neutral or negative report.”
Read more at AgWeb.com/Gulke
USFR Weekly Recap- June 9-10, 2018
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