Bull spreads in the corn market got too wide this week, says Jerry Gulke, president of The Gulke Group. This negative tone does not reflect a reversal in the market as corn continues to fight soybeans for more acres.
(Check out the AgWeb Markets Center Corn Spread Matrix.)
"We saw everything just short of the bull spread unraveling. We had July and May corn much higher than December (Click for corn markets). If the weather turns out that it looks like you may not get corn in the ground in time, they’ll reverse that spread. I think we saw some of that because Dec wasn’t down as much as the old crop."
Soybeans (click for soybean markets) have been the most surprising because of their drop. This was the area Gulke expected to not be impacted as much following the March 31 USDA Planting Intentions Report. "The spread between December corn and November soybeans is unbelievable. It’s at a record spread comparing gross to gross. I did my own spread and the difference is about $250/acre, favoring corn over soybeans."
Attention is now turning to weather, particularly in the Dakotas. It appears to Gulke that the market is trying to offer incentive to corn acres in Iowa, Illinois and Indiana, as continued wet weather and even snow late this week in the Dakotas is potentially threatening corn production.
Gulke admits it’s still early in the season. However, many of the areas that took prevented planting last year are likely looking at that option again this year.