The grain markets had many heavy forces at play this week. A USDA report, comments from President Donald Trump and a changing weather forecast all weighed on prices.
For the week ending July 10, December corn prices were down 9¢, November soybean prices were down 6.5¢ and September wheat prices were up 42.75¢.
This 2020/21 U.S. corn outlook calls for sharply lower supplies, reduced feed and residual use, increased food, seed, and industrial use, and lower ending stocks.
“We knew USDA would have to reduce corn production about 900 million bushels because of the 5-million-acre drop last week,” he says. “The carryout came out about what a lot of us expected—around that 2.6 million to 2.7-million-bushel area.”
Once again, USDA lowered the feed usage for next year. “It just seems like we have a mountain of meat supplies, but we seem to have to reduce the feed numbers,” he says.
USDA pegs 2019/20 corn exports at 1.77 million bushels. For 2020/21, exports are increased to 2.15 million bushels. “They have some pretty lofty demand numbers, and I’m afraid that may have to be adjusted down lower,” he says.
The season-average corn price received by producers is raised 15¢ to $3.35 per bushel.
U.S. soybean production is projected at 4.14 billion bushels, up 10 million on increased harvested area. With higher beginning stocks, 2020/21 soybean supplies are raised 45 million bushels. Soybean ending stocks for 2019/20 are projected at 620 million bushels, up 35 million from last month.
Gulke says the big takeaway for him was USDA increasing the Brazilian 2019/20 soybean crop by 2 million tons to 126 million.
“We've been hearing we can't compete with Brazil because of currency, but what happened here is the government finally admitting that crop is bigger and probably getting bigger,” he says. “That’s going to hurt us this year and next year.”
The U.S. season-average soybean price for 2020/21 is forecast at $8.50 per bushel, up 30¢ partly reflecting higher price expectations following the June Acreage report.
The boost in wheat prices this week was due to USDA’s updated 2020/21 global wheat outlook. It calls for smaller supplies, reduced consumption, lower exports, and decreased stocks. Supplies are reduced 2.9 million tons to 1,066 million as larger beginning stocks are more than offset by reduced production, primarily in the EU, United States, Morocco, and Russia.
President Trump Talks Phase 2
Aboard Air Force One, President Trump said on July 10 he is not currently thinking about negotiating a "Phase 2" trade deal with China as relations between Washington and Beijing sour over the coronavirus pandemic and other issues, according to Reuters.
The relationship with China has been severely damaged. They could have stopped the plague, they could have stopped it. They didn't stop it," Trump said.
“That didn't help agriculture,” Gulke says. “I'm not sure if those comments fully hit the market yet because if that was the case maybe beans would have been down 20¢.”
All Eyes Back on Weather
With the July USDA report in the rearview mirror, Gulke says the focus returns to the forecast.
“We're about two months away of weather deciding how big this crop is going to be,” he says. “We're in the right direction to set us up for a blockbuster crop in corn and beans both, if we were to turn this weather around and not see the 95- to 100-degree days.”
Sunday night is always an exciting time when you’re in a weather market, Gulke reminds.
Find more written and audio commentary from Gulke at AgWeb.com/Gulke
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Jerry Gulke farms in Illinois and North Dakota. He is president of Gulke Group. Disclaimer: There is substantial risk of loss in trading futures or options, and each investor and trader must consider whether this is a suitable investment. There is no guarantee the advice we give will result in profitable trades. Past performance is not indicative of future results.