So often with big USDA reports, it’s not so much what the numbers say, but how the markets react to close out the week.
This week saw a pretty bearish reaction to the May World Agricultural Supply and Demand Estimates (WASDE) report. July corn prices were down 88.50¢ and July soybean prices were down 3.50¢, for the week ending May 14. July wheat prices were down 54.50¢.
“We were long overdue for a correction,” says Jerry Gulke, president of the Gulke Group. “The crop report didn’t lower this year’s corn carryout as much as the trade thought they should, and they actually increased carryover for 2021-22 (the crop that’s growing).”
Highlights of the May WASDE include:
Corn: Greater production and domestic use, lower exports, and increased ending stocks. The corn crop is projected at 15 billion bushels, up from last year on higher area and a return to trend yield. The national yield projection is 179.5 bu. per acre, and the projected farm price is $5.70 per bushel, which is up significantly from the $3.30 per bushel projected in May 2020.
“Everyone knows there is more corn planted out there because those phantom 4 million to 6 million acres went somewhere,” Gulke says. “So, we could be looking at 93 million acres of corn. With that, we could be near 2-million-bushel carryout again.”
Soybeans: Lower supplies, lower exports, higher crush and higher ending stocks compared with 2020/21. The soybean crop is projected at 4.4 billion bushels, up 270 million from last year on increased harvested area and trend yields. With lower beginning stocks, soybean supplies are projected down 3% from 2020/21. The national yield projection is 50.8 bu. per acre, and the projected farm price is $13.85 per bushel, compared with $8.20 in the same report last year.
The negative market reaction, Gulke says, is because the markets now know what planted acres will be this year. As he looks at the market moves this week, his takeaways are:
- May soybeans exceeded the 2008 high but could not sustain.
- May corn did not hit the 2008 high.
- May wheat got within $5 of 2008 highs.
“If there’s a market out there that may have some room to move it is wheat, because it can be used as a cheaper feed than corn,” Gulke says.
This week gave market volatility a new meaning, he says.
“A million-bushel corn producer saw profit drop $880,000 during the week,” Gulke says. “A lot of people who eat food everyday don’t understand the kind of volatility we face.”
Gulke says farmers must remain proactive and flexible in markets like these.
“For example, on my farm in the worst year I grew 100 bu. corn,” he says. “So, I can sell up to 100 bu. per acre. Then I can say, I sold corn for $6 out of the field. It could be $7, but if $6 is the worst I sold at, so be it.”
After cash sales, he recommends looking at futures and options to reduce your risk on what you haven’t committed.
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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.
