Jerry Gulke: Supply Side of the Equation Looks More Price Positive

03:16PM Oct 11, 2019
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Based on the weekly closes, Jerry Gulke, president of the Gulke Group, says the negative reaction to the USDA reports wasn’t warranted.
( AgWeb )

Corn prices sank following USDA’s monthly Crop Production and World Agricultural Supply and Demand Estimates reports, which were released on Oct. 10. Then prices turned around to end the week, with corn prices jumping 13¢ for the week ending Oct. 11. November soybeans were up a little over 18¢, as was December wheat.

Based on the weekly closes, Jerry Gulke, president of the Gulke Group, says the negative reaction to the USDA reports wasn’t warranted.

In the October reports, USDA pegged corn production at 13.779 billion bushels (pre-report estimates were calling for 13.684 billion bushels) with a national yield of 168.4 bu. per acre (pre-report estimate was 167.5 bu. per acre). 

For soybeans, USDA estimates production at 3.550 billion bushels, which was slightly less than pre-report estimates of 3.583 billion bushels. The national yield is at 46.9 bu. per acre, which was lower than the pre-report estimates of 47.3 bu. per acre.

“The increase in the yield for corn was a shock to a lot of traders; it was somewhat of a shock to me,” Gulke says. “I understand USDA did objective yield measurements where corn was mature, but on immature corn they still relied on the protocol of surveying some 10,000 producers for their expectations of a yet-to-be-determined yields, as well as applying again historical cob and pod weights.”

Farmers in the Midwest haven’t seen this immature of a corn crop for a long time, Gulke says, especially in states such as Illinois and Iowa. “In those places, we are normally half-done harvesting by now,” he says.

The bottom line from the reports, Gulke says, is production was actually lowered in corn, from last month. 

“That was the good news,” he says. “They did that by lowering harvested acres. NASS is likely seeing some problems out there, but just haven’t reflected them completely.”

NASS can continue to make changes. Gulke says this year, the November report will be more like a traditional October report, in terms of production information.

China and Crop Concerns

Soybeans closed at the highest level since June 18, Gulke points out. USDA’s predictions for a smaller crop played into this, as well as news that the U.S. and China reached a partial agreement in the trade war.

“Should details of the agreement concerning Ag be price positive, soybean prices may even gap higher  come Sunday night,” Gulke says.

Add in a widespread frost and, Gulke says, the markets could move back to conventional supply and demand to orchestrate traditional price discovery.  

“The water has really been muddied in that by tweets, tariffs and so forth,” Gulke says. “Maybe this gets us back on track again, and that would be a very good thing for agriculture. The devil is in the details, but at least we have a hurdle behind us.”
 

Read More

Jerry Gulke: A Crop in Waiting

Jerry Gulke: Market Potential Versus Reality

Jerry Gulke: Unraveling the Supply and Demand Picture

Jerry Gulke: Volatility = Profit Enhancement Opportunities

Find more written and audio commentary from Gulke at AgWeb.com/Gulke