Higher yields reported in WASDE could quickly be erased depending on South American weather.
For the week December corn closed down 13 ¼ cents, January soybeans lost 4 1/4 cents, December soybean meal was up $7.30/short ton, December soybean oil gained 181 points. December Chicago wheat was 2 3/4 cents higher, December Kansas City wheat was 3 1/2 lower and December Minneapolis wheat was up 9 1/2.
USDA shocked the market on Thursday raising corn yield 1.9 bushels per acre and soybean .3 bushels per acre. Jerry Gulke, president of the Gulke Group, says the increase was unprecedented as historically when yield drops in the October WASDE report it continues that trend in the November. That increased corn production by 170 million bushels and soybeans by 25 million bushels. Gulke says fortunately USDA offset the higher corn supplies with a 125 million bushel increase in demand and left soybean demand unchanged.
The corn market reacted negatively and made a new low for the move and new low close in the December contract and was also lower for the week. Gulke says on a weekly chart there is some better news.
“We broke some support in December, but I watch the continuous chart and December did not take out the lowest levels right at $4.64 and change. It closed right at where September corn closed on September 1, which is first notice day and when elevators would switch to December,” he says.
On soybeans, Gulke says the 25 million bushel increase in carryout can easily be wiped out with the current weather issues potential cuts to South American production, plus increased export demand. This was a big week of soybean flash sales totaling 104.7 million bushel between China and unknown destinations.
“Even though USDA raised carryout from 220 to now 245 million bushels, that is a small carryover compared to the total global demand out there,” he says. “So, prices should be well supported until more is known about the total scope of the weather problems in Brazil and Argentina.”
Gulke says prior to the WASDE report they were short March $5 calls but lifted their hedges and took profits. They are keeping unsold corn in storage and will take advantage of the carry. On soybeans, says they took advantage of the recent $1.10 rally off the lows and sold another 20% to 25% of production on report day and are now 80% sold. Gulke says they are content to store the remainder of the soybean crop and either take advantage of the carry by selling calls or wait for a potentially bigger South American weather rally.
For more market information contact Jerry at info@gulkegroup.com.
