Jerry Gulke: New Year, New Paradigm for Grain Markets?
2022 started off with a bang in the corn and soybean markets.
March corn prices were up 13.25¢ and new-crop December corn prices were up 11.5¢, for the week ending Jan. 7.
March soybean prices were up 68.25¢, and new-crop November soybean prices were up 49.75¢. However, March wheat prices were down 10.25¢, and
Yet, all classes of wheat were down, with Minneapolis wheat down 56.25¢ July wheat prices were down 10.25¢.
“As so often it's all about weather,” says Jerry Gulke, president of the Gulke Group. “This time it is in South America. We knew it was dry down there in the southern part of Brazil and in Argentina and too wet in the northern part. On Tuesday, that news caught fire.”
Brazil-based consultancy AgRural slashed its Brazilian soybean crop estimate by 11.3 MMT to 133.4 MMT due to heat and drought in southern Brazil. It now forecasts Brazil’s soybean yield will be the lowest since 2015-16. AgRural says Paraná has been hit hardest, with drought spreading from western areas of the state in December.
The firm also cut its production forecasts for the Rio Grande do Sul, Santa Catarina and to a lesser extent Mato Grosso do Sul. AgRural says in the rest of the country, the crop is developing well and high yields are expected in Mato Grosso, where the first areas are already being harvested.
“We could be looking at a cut in soybean production in Argentina Brazil, Uruguay and Paraguay to the upwards of 500 million bushels,” Gulke says. “That's pretty significant — that equals about 8 million acres of U.S. soybean acres with a 50 bu. per acre average yield.”
The rapid turnaround in prices is almost unprecedented.
“This paradigm shift in the markets happened quicker than I can ever remember,” Gulke says. “It tells you that a lot of people were probably short this market going into next week’s USDA reports.”
On Jan. 12 USDA will release its monthly World Agricultural Supply and Demand Estimates, Crop Production and Annual Crop Production reports.
“It seems like everything I thought that the USDA had to come to reckon with is kind of out the window now,” Gulke says. “I was concerned that they may have to lower exports of corn, but they may have to increase exports.”
The good news, he says, is the current price support levels may carry into February, when crop insurance prices are set.
“We may see another year equally as profitable as the one we just finished.”
Check the latest market prices in AgWeb's Commodity Markets Center.
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.
