Jerry Gulke: What We Don’t Want to See in Wednesday’s USDA Report
December corn prices were up a little over 5¢ and November soybeans up 2¢ for the week ending Oct. 7. Wheat prices were up 15¢ to 40¢, depending on the contract.
“After last week's thumping in soybeans, you would expect some sort of a rally,” says Jerry Gulke, president of Gulke Group. “Had it not been for the rally on Friday, corn would have probably been lower.”
Listen in as Gulke discusses the technical price action for the week:
On Oct. 12, USDA will release its monthly Crop Production and World Agricultural Supply and Demand Estimate (WASDE) report. Gulke says this year’s report may be a bigger deal than in years past.
“As usual, it won’t be so much what the data says but how the market reacts to it,” he says. “The underlying feeling is the corn yield could come down a little bit. If it does come down a half to I bu., what will the government do with less production? We've gotten some hints over the past reports that they have a tendency to want to curb demand, whether it's a little bit in the feed, a little bit of ethanol and more so in the exports.”
So, Gulke says, this would give USDA a chance for the government to curb production a little bit. But how much will they cut the demand side to keep the table in balance?
“We're really way behind in our corn sales for this time of the year,” he says. “This is the time of the year where we should be shipping a lot of beans and corn. But we have barges backed up like crazy due to the low water levels. While we're losing that export potential, somebody else is taking it.”
For Wednesday’s report, Gulke says USDA could deliver a double whammy for farmers. That is if they increase the corn yield and decrease exports.
“We don't want to see an increase in carryout stocks, no matter how they come about doing it, especially if they do it by reducing demand,” he says. “If they have to reduce demand, regardless of what the yield is, and the carryover goes higher for next year then you've taken a lot of pressure off these markets as far as needing a higher price.”
Gulke says the ideal situation would be for USDA to drop both the corn and soybean national average yields by a little bit.
“We don't want to see an increase in yield, which would create longer-term problems for both grains,” he says.
Gulke is in the combine this week on his northern Illinois farm. So far, he has been happy with his soybean yields.
“We just started yesterday, but I'm thinking we're going to be 5 bu. to maybe 10 bu. per acre better than last year,” he says. “I think some of my fields at least are going to be the best we've ever produced.”
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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.
