For the week March corn gained 19 ¾¢, March soybeans rallied 33 ½¢, March soybean meal lost $10.30 per short ton, March soybean oil soared 565 points, March Soft Red Winter wheat was up 1 ½¢, March Hard Red Winter wheat added 12 ¾¢ and March Hard Red Spring wheat gained 5 ¾¢.
Part of the higher weekly close in corn came from the 15¢ rally on Friday in reaction to the bullish yield, production and ending stocks cuts in the USDA reports.
USDA lowered corn yield by 3.8 bu. to 179.3 bu. per acre and production by 275 million bushels. The agency also cut ending stocks nearly 200 million bushels to 1.54 billion.
Jerry Gulke, president of the Gulke Group, says it was not a surprise to him and could be attributed to the late season dryness and the dry crop moisture at harvest which lowered test weights and ultimately yield.
Gulke says as of Friday’s report, USDA has dropped corn ending stocks more than 1 billion bushels from their initial 2.636 billion bu. estimate as part of their 10-year baseline projections.
During the February 2024 Ag Outlook Forum the agency also projected corm carryout for 2024-25 at 2.532 billion bushels, assuming trend-line yield.
He says this overestimation served as a headwind for the corn market during the 2024 growing season and USDA did not come down on yield until the reports following harvest.
Gulke estimates this cost U.S. farmers over 50¢ a bushel as it drove corn prices too low relative to the fundamentals.
With the nearly 15-billion-bushel U.S. corn crop released in Friday’s report, that equates to an estimated $7.5 billion of potential losses for farmers.
“You can imagine what kind of price we would have had or how much higher the low end of the prices would have been had we had accurate estimates or projections or educated guesses if you want to call them,” he explains.
Gulke says, for him, this also calls into question USDA’s use of trend-line yields to estimate crop size in the future.
Despite that, the corn market has rallied more than $1 off the lows and got a big push out of Friday’s report.
Gulke says the paradigm shift started weeks ago and was much like trying to turn the Titanic, but it is reflected in the charts.
One year ago, he explains, the weekly continuation chart for corn looked quite different than it does now.
The outlook was price negative both technically and fundamentally according to Gulke.
Technically, March corn had broken $5.60 pointing the way to $4.40 and below. The actual low came Aug. 28, 2024 at $3.60 — $2 or about $400 per acre below $5.60. Fundamentally the market was pushed to contract lows by the forecast of record corn yields in the U.S.
He says USDA National Agricultural Statistics Service (NASS) continued to correct their dismal effort to predict the future, as they continued raising demand and lowered production gradually in nearly all of the subsequent monthly reports including the final report on Friday.
The result is the corn market ended on Friday at $4.70 on the March contract, and Gulke says a 1.54-billion-bushel carryout suggests the market should continue to move higher with a target of $5 in the cards.
For more information contact Jerry at info@gulkegroup.com.
