Last week, grain exports appeared to be dropping like a rock, giving the trade reason to believe high prices were curbing demand significantly. This week’s WASDE report confirmed this.
But that quickly, China reentered the market for U.S. corn this week, and South Korea made a large purchase, as well. "I look at South Korea as an indicator. They like to feed wheat. When they prefer to buy corn, it’s interesting, because there is a lot of perception from USDA that they will feed wheat. So when they buy corn at these prices, it’s kind of interesting," says Jerry Gulke, president of The Gulke Group.
It appears now that some fo the things concerning Gulke in recent weeks are starting to come to fruition. The dollar has rebounded, making exports less attractive. Livestock prices have also gotten to levels where they are not profitable with current high-feed costs. "For the traders, the reason WASDE was negative, it confirmed for them again that demand is not increasing, it is decreasing. The government can only make these perceptions based on the date they do have. They didn’t have the series of export sales that were not large enough to meet export objectives, says Gulke.
"That’s what they saw happening and some of the ethanol data came in and that looked like they were going to be a little trim demand there a little bit."
Still, questions remain about the current crop year and how much corn the U.S. can produce. He expects to see 65% of the crop planted in Monday’s crop progress report, which will be significantly behind normal. "Where is that other 35% going to come from?"
Generally, it looks like soybeans could be losing ground to corn in many key production areas. However, those prices continue to struggle due to large supplies in South America.