Jerry Gulke: Will the USDA Report Meet Bullish Expectations?
The excitement in the grain markets continues. July corn prices were up 58.25¢ and July soybean prices were up 55.75¢, for the week ending May 7. July wheat prices were up 27.75¢.
Both corn and soybean futures prices hit eight-year and 8-1/2-year highs, respectively. Several factors continue to support these high prices, says Jerry Gulke, president of the Gulke Group.
The first is continued strong demand from China. USDA reported Chinese buyers bought 1.36 million tonnes of U.S. corn, matching their seventh biggest ever purchase of U.S. supplies of the grain.
Another big issue is weather problems in South America, as well as in the U.S. Gulke says some estimates show Brazil’s corn crop to be 400 million to 500 million bushels less than expectations from just three months ago.
“Based on their weather forecasts, it could get worse,” Gulke says.
The smaller South American crops combined with dry weather in some parts of the U.S. is raising global questions. Currently around 65% of the U.S. is experiencing some level of drought. Around 9% of the country facing exceptional drought conditions.
“At this point high prices could start curbing demand,” Gulke says.
On Wednesday, May 20, USDA will release its monthly Crop Production and World Agricultural Supply and Demand Estimates reports.
Based on all the information going into this report, Gulke says, many in the trade can’t help but think the report will be bullish.
“That's part of the reason the price of grain has been going straight up, because who wants to be short going in that report? That's a little red flag for me,” Gulke says. “It may be an opportunity for me to price some grain. I like to be 40% priced of my new crop as I’m planting, and I think I'll be there.”
Gulke says USDA could change exports and usage expectations, as high prices are making it expensive for end users to feed or crush grain. In addition, this report will be the first time USDA can update its new-crop yield expectations.
“NASS officials once told me their job is not to speculate. That's my job; I can speculate on what's going to happen,” he says. “Their job is to present and look at the facts. The facts right now are the crop is going in early, which usually means a better yield. So, they could raise the yield.”
Gulke encourages farmers to be ready for volatile markets next week.
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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.
