Despite lower crop estimates from Pro Farmer and continued talk of yield loss due to drought and heat, grains closed lower for the week. December corn ended 6½¢ lower, November soybeans lost 18½¢, with December soybean meal $15.40 lower and December soybean oil off 7 points. Wheat saw the biggest losses with new contract lows during the week in both Chicago and Minneapolis. For the week, December Chicago lost 26¼¢, December Kansas City was down 41 ¾ and December Minneapolis was 42¢ lower.
Jerry Gulke, president of the Gulke Group, says it was a disappointing week in corn and especially soybeans after the bullish news of the smaller crop and no meaningful change in the weather. He says when November soybeans got above $14 and December corn got close to $5 there were sellers, both speculators and farmers, in the market. Farmers are undersold on corn, and around $5 is about 40¢ off the summer lows, with November soybeans nearly $2 off the lows.
“There was a lot of selling, I think, on advice saying when we get to $5 again, you’ve got to get something covered,” Gulke says. “You have to buy a put, a sell, a call or just cash contact some.”
Gulke still believes the crop is getting smaller and the corn and soybean markets might have put in early harvest lows. He says the crop is shutting down and dying in some areas due to heat stress and dryness, which has been verified with early harvest results. Over and over he’s hearing from clients that “It’s not a bad crop, but it’s not as good as I thought.”
Gulke is pegging yield loss on corn: “I think a drop of 2% makes some sense on the whole crop. So, 2% of 173, which is last year’s yield, is 3.5 bushels. That puts it probably under 170. I think that would be friendly for a while.”
However, he says, he won’t be surprised if the final yield is around 166.
For soybeans, he thinks the yield is sub-50 bushels per acre: “We’re probably something more like 49 than we are 50.”
He thinks the lack of moisture in areas of the Corn Belt in August combined with the heat damaged the soybeans.
“You can hurt the bean crop being hot like this,” he says, adding the crop maturity has been pushed too far for even late-season rains to help yield numbers.
Will the September WASDE confirm the lower yields? Gulke says there’s a pretty good chance for a bullish supply shock. However, he doesn’t know if USDA will come down that far on yields and get too negative too fast.
“Nothing would surprise me,” he adds.
Gulke says his group prepared for the WASDE report by lifting corn hedges a few weeks ago and cash contracted soybeans when prices got to between $13.50 and $14. Now, they’ll wait for the WASDE, and if it doesn’t confirm lower yields, they will continue to wait for better prices.
