Dry weather in South America, a brewing U.S. acreage battle and global unrest all took grain prices higher for the week.
March corn prices were up 20¢ and new-crop December corn prices were up 4.25¢, for the week ending Jan. 28. March soybean prices were up 56.50¢, and November soybean prices were up 34.75¢. March wheat prices were up 6.25¢.
After continued rumors, Jerry Gulke, president of the Gulke Group, says the markets are now trading reality in terms of the South American corn and soybean crops.
“Finally, we’re hearing discussions that the South American crop may or will not recover,” he says. “Now it feels like the analysts are in a race to the bottom for crop estimates.
For instance, crop Consultant Dr. Michael Cordonnier estimates Brazilian and Argentine corn production at 112 million metric tons (MMT) and 51 MMT, respectively. For soybeans, he estimates Brazilian and Argentine soybean production at 134 MMT and 43 MMT, respectively.
In mid-January, USDA’s estimates for corn production in Brazil was 115 MMT and 54 MMT for Argentina.
For soybeans, USDA’s current estimates include 139 MMT for Brazil and 46.5 MMT for Argentina.
Gulke’s sources estimate soybeans at 132 MMT for Brazil and 41.5 MMT for Argentina, with eventual targets collectively 2 MMT to 3 MMT lower provided normal weather.
“Adding in losses in Uruguay and Paraguay equals a total South American crop that suggests it could be 12 to 13 months before South America has a chance to relieve global concerns, even with increased acres in the US this season,” he says. If we add 5 million acres of soybeans in the U.S. and they yield 45 bu. per acre, that’s 225 million bushels. But we’ve likely already lost about 500 million bushels just out of Brazil. That boarders on the need to ration demand.”
In corn, Gulke has his eye on the strength of the March corn contract.
“That contract had the highest close in the last year and a half — near the all-time high for that contract,” he says. “You could have bought March futures when it came on the board at around $3.80 now it’s $6.40.”
These moves beg the question: Is there a paradigm shift coming in agriculture?
“It sure looks like it,” Gulke says. “We’re seeing strong demand for nearly all commodities. All the dominoes seem to be lined up for an acreage battle come spring. The question will evolve whether there will be enough acres in the U.S. In 2021 grains topped in May. A lot of water will flow under the price-discovery bridge this year if there is to be a repeat.”
Check the latest market prices in AgWeb’s Commodity Markets Center.
Get in Touch with Jerry
Do you have questions for Jerry? Contact him at info@gulkegroup.com or 312-896-2090 or GulkeGroup.com
Jerry Gulke farms in Illinois and North Dakota. He is president of Gulke Group. Disclaimer: There is substantial risk of loss in trading futures or options, and each investor and trader must consider whether this is a suitable investment. There is no guarantee the advice we give will result in profitable trades. Past performance is not indicative of future results.
