For the week, July corn ended 16½¢ lower, December corn was down 5½, July soybeans slid 1¼, November soybeans lost 4½, July soybean meal fell $1.60 per short ton and July soybean oil dropped 38 points. July hard red winter wheat was down 9¾, July soft red winter wheat lost 2, but hard red spring wheat gained 4¾.
July corn ended 16½ lower for the week in a market that also saw unwinding of bull spreads, leaving many farmers asking if the old crop corn market has seen its high?
Jerry Gulke, president of the Gulke Group, says there are several factors that indicate to him the chance to rally old crop corn to $5 is over.
End Users See Lower Prices Ahead
He says end users can see lower prices ahead on the new crop December corn and don’t feel like the market is going to run out of corn, especially with the large increase in acres to 95.3 million nationally.
“If they don’t need it for 60 days, why would they pay 37¢ more than they’re going to pay in September? I think they’re smarter than that,” Gulke says. “That’s the kind of the talk overseas we’re getting, as well as from the commercial guys who says we know you’re not going to run out of corn no matter how tight you get. We’re going to be at 1 .4 billion bushels left over and pretty soon it’s all about getting the new corn purchased at a cheaper price.”
Corn Historically Tops in May
The corn market normally puts in a seasonal high in early May, often close to the WASDE report, which this year is on the 12th.
“If you go back the past three years, [the seasonal high] has been May 10 or May 12, the day before or day after the report. It seems like no matter how bullish [the report] is, or how friendly it might feel, the market sells into it, and this year we made the highs earlier,” Gulke explains.
USDA has raised exports and lowered ending stocks in the past two reports, and he thinks the odds are low for getting ending stocks much below the current 1.465 billion bushels for corn in May.
“The bottom line is we’ve got tight stocks. The government keeps lowering it, and last time they lowered ending stocks 100 million, not 125 like we thought. There’s probably some more left, but there’s only so far you can go,” he says.
As a result, Gulke’s clients had around 15% of their old crop inventory left to sell and they pulled the trigger this week.
New Crop Will Serve as an Anchor on Prices
New crop corn only lost 5½¢, but it will have a tough time rallying with the current planting pace and a more open weather window ahead. There have been some delays in parts of the Corn Belt due to too much rain, but other areas that are generally too dry saw benefits from the precipitation.
Gulke says if corn planting continues to progress at normal pace, or ahead, December corn will keep a lid on prices without a major weather problem.
“A lot of the weather prognosticators are talking a dry area this summer, so we’ll watch for that. The market will tell us when it’s getting nervous,” he adds. “I’m just not sure if we’re going to have more corn than we thought.”
Trade Deals Too Late to Support Old Crop Corn
News of trade deals being struck with customers such as the European Union continue to swirl in the market. On Friday, there were reports the U.S. and China were trying to set up talks to de-escalate the tariff war.
There might be some additional purchases of U.S. grains and oilseeds under these agreements, Gulke points out, but even sales made today can’t be delivered for 90 days and would likely be priced off the new crop December price.
For more information, contact Jerry at info@gulkegroup.com.
