Grains ended higher for the week in a volatile market environment where traders were putting in both war and weather premiums. December corn ended 22½ cents higher, November soybeans were up 31 cents, with Chicago wheat climbing 36 cents, Kansas City 31 cents and Minneapolis 2 cents.
Wheat and corn led the rally to start the week with Russia pulling out of the Black Sea Grain Initiative and escalating the war with a series of air attacks on southern Ukraine export cities. Is there enough risk premium in the markets and will traders continue to trade headlines?
Jerry Gulke, president of the Gulke Group, says the volatility is likely to continue and could get worse if the fighting heats up to the point it becomes not just a Black Sea war but a global war.
“President Putin is a master manipulator of grain prices. If he needs higher prices for wheat, he does it through an export tax or uses war as a means, and we’re vulnerable to that,” Gulke says.
Marketing decisions will be difficult because farmers could market their new crop wheat at what appears to be a good price only to have the market rally $2 and lose out on $100 an acre, he adds.
The weather was also a bullish factor with hot and dry extended forecasts pushing the market early in the week. However, the 30-day outlook from the National Oceanic and Atmospheric Administration indicates August would turn cooler and wetter. As a result, markets did see some profit taking toward the end of the week.
Various market research firms have cut their yield projections for both corn and soybeans. Gulke says they’ve looked at historical research to make a comparison of 2023 to other similar drought years like 2012. At Gulke Group’s annual conference last week, agronomist Brian Hefty told them the rows are set early in the season on corn, but the depth of the kernel and the length of the ear are not set until July and August, so pollination and yield is still being determined. Gulke says they agreed with his assessment on corn and on soybeans.
“Soybeans have time. They are short but pod set is the most important, which comes in August,” Gulke says.
The question is: What will USDA do with yield in the August WASDE? The last two years the agency has not done field surveys or collected objective yield data until September. That means they will continue to lower yield in August based on crop ratings and weather.
Gulke says they looked back at past analog years, such as 2012, when USDA dropped corn yield more than 40 bu. between July and August. He says the early crop ratings were worse this year than in 2012, especially in key states such as Illinois. However, in 2012, crop conditions and weather deteriorated quickly in July and August, unlike this year when the Corn belt got some timely rains.
Gulke says the weather from here will determine yield for soybeans and corn.
“If we have good weather and grain fill on corn that could improve yields a couple bushels per acre,” he says. “However, if the weather stays hot and dry in the rest of July into September, USDA could cut a total of 7 bu. off yield.”
For soybeans, Gulke explains there are flowers and pods galore, but if it’s too dry, plants will abort pods.
“The jury is still out on that crop,” he says.
