Watch for Wednesday Acreage Surprise

June 28, 2010 12:23 PM

It has not been a good week, according to Jerry Gulke of the Gulke Group. "The market keeps flip-flopping from good to bad and back. Last week, I thought we had turned the corner to the upside because of China buying and talk of La Niña, but now this week, corn made a key reversal down—generally a negative signal." (He explains that is when the market takes out the previous day’s high, takes out the low and then closes down.)

If we don’t see a change in the weather, we could gap lower on Monday and that would be negative, Gulke adds.

"We are back to last fall’s lows. Last year at this time, we saw a record crop coming and thought we could fall back to $2.60, where this all started back in 2006. Now we are back in that mode of thinking again—if we make 170 bu. yields, we could have 2 billion-bushel carryover and prices will need to fall to levels where it will get used."

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It could also be that we are seeing spillover from other markets as double-dip recession fears grow, and, "because the corn market fell despite crude oil ending the week $2.50/barrel higher and the dollar dropping strongly, it appears the market is saying we have enough corn to meet all demands," Gulke says.

"Last year, new-crop supplies were sparse in September; this year, with early planting and rapid progress in the South, September supplies could be a lot higher and we could see that put in the lows. I would not be surprised to see December corn drop to $3.30 or possibly, $3."

Soybeans have been hanging in there better, Gulke notes. "They hit $9.48½ before they headed south." He notes that the Linn Group came out today with acreage estimates that show 300,000 acres less corn than the March Intentions report and 1.5 million fewer soybean acres.

"Some in the trade expect to see 750,000 acres more beans, so there’s a difference of perhaps a million acres. Next Wednesday’s Planted Acreage report could deliver a surprise," Gulke says. "But keep in mind that USDA’s survey was completed a week or two before Linn’s estimate and may not reflect some of the wet weather that caused growers to give up on planting—so it may be October before we really know what went into the ground."


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