July started off with a bang in the grain markets, unfortunately it was a negative bang. December corn prices were down 63¢, for the week ending July 1, while November soybean prices were down 29¢. All wheat prices were down 90¢ to $1 or more.
“We are certainly seeing a different tone than what we saw in the first six months of the year,” says Jerry Gulke, president of Gulke Group. “What we seem to be seeing now is demand destruction versus demand reduction.”
The markets will be closed for three full days in honor of the Independence Day holiday. What will happen on Tuesday morning?
Gulke says the weekend weather will be key. Will it rain in dry areas?
“This party might not be over,” he says. “The only good thing about all this is that when the prices got so cheap, such as $6 corn, well it wasn’t that long ago I sold $7 corn $7.20 corn. So, if a person wasn’t well hedged and well covered, you’re looking at $5.80 or $6 corn. Are you going to sell it here? Probably not. You got a lot of time ahead. So that’s the decision making is easy. It’s easy to do nothing now.”
On June 30, USDA released its Acreage and Grain Stocks reports. Here are the key 2022 acreage numbers:
- Corn acres are estimated at 89.9 million, down 4% or 3.44 million from last year. This is up from the March estimate of 89.490 million acres and close to the pre-report trade average of 89.861 million. Compared with last year, planted acreage is expected to be down or unchanged in 35 of the 48 estimating states.
- Soybean acres are estimated at 88.3 million, up 1% from last year. This is down from March’s estimate of 90.955 million and below the pre-report trade average of 90.446 million. Compared with last year, planted acreage is up or unchanged in 24 of the 29 estimating States.
- Wheat planted area for 2022 is estimated at 47.1 million acres, up 1% from 2021. If realized, this represents the fifth lowest all-wheat planted area since records began in 1919. The 2022 winter wheat planted area, at 34 million acres, is up 1% from last year, but down 1% from the previous estimate.
- Cotton acres are estimated at 12.5 million, up 11% from last year.
“I was surprised that the soybean acres,” Gulke says. “They were below expectations, yet we had a collapse in soybean prices. So that means there must be something else going on out there.”
In July, NASS will collect updated 2022 acreage information for North Dakota, South Dakota and Minnesota due to planting delays. In the Acreage report, USDA estimates 4 million acres of corn and 15.8 million acres of soybeans were left to be planted, based on farmer responses collected from May 28 to June 16.
“Those acres are going to be important,” Gulke says.
The main takeaways from USDA’s June Grain Stocks report include:
- Total U.S. corn stocks up 6% from June 2021
- Soybean stocks up 26% compared to last year
- All wheat stocks down 22% from June 2021
The report, Gulke says, shows soybean stocks, for instance, in Iowa, Illinois and other places were greater this year and of June one than they were last year. The same for corn.
“It said there was more in farmer’s hands than last year, but all we’ve heard for the last few months is about high basis because buyers couldn’t find corn or soybeans,” he says. “What’s this all about, if farmers are holding the grain?”
With the negative tone now in the grain markets, Gulke says farmers are facing a significantly tougher profit picture.
“There’s still good money if I get 200 bu. corn and sell it at $6 that’s still $1,200 an acre, which exceeds my cost considerably,” he says. “So, it’s still a good year. But we do not want to be at a point at the bottom of the mountain looking up and wishing for higher prices. Let’s just hope everybody got half or two-thirds of their grain sold at a high price and now maybe we have to take them at a lower price. The key is to focus on gross income.”
Gulke Group 2022 Summer Conference: The conference is set for July 14-15, in Lombard, Ill., at the Embassy Suites. Guest presenters will include William Wilson from NDSU, Glen Buckley of NPK Fertilizer Advisory Service, Drew Lerner from Worldwide Weather, Roger Wallace (livestock economic outlook), Michael Drury of McVean on domestic and global economy, and Jerry Gulke on marketing strategies.
For more info contact Jamie at 707-365-0601 or info@gulkegroup.com
Jerry Gulke farms in Illinois and North Dakota. He is president of Gulke Group Advisory Services. 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.
