Grain markets closed mixed for the week with December corn down 5¢, November soybeans 34½¢ higher, December soybean meal gained $26, with soybean oil down 73 points. December Chicago wheat closed 17¼¢ lower, December Kansas City wheat was 3¾¢ higher, with December Minneapolis wheat down 16¾¢.
Soybeans built in a weather premium with this past week’s extreme heat, and that damage was confirmed in the field by crop scouts on the Pro Farmer Crop Tour. The corn was also stressed, which resulted in Pro Farmer lowering their yield and production estimates for both crops.
Jerry Gulke, president of the Gulke Group, says, “Pro Farmer was right on track.”
He expected the results based on his own field assessments coupled with the drought and heat stress echoed by neighbors and clients.
“I was surprised during media interviews how many of the scouts kept saying how shocked or surprised they were by what they were finding, including tip back and pollination problems in corn and lower pod counts on soybeans, with fewer three bean pods,” he explains.
Gulke says they were out of their hedges prior to the tour, and they were long the market with some cheap call options.
“We watch the charts for the technical signals because the only way you can really know what’s going on in the market is by looking at price direction and money flow,” he explains.
The extreme heat took a toll on his own farm, and he’s shocked at how fast conditions deteriorated, in a crop that was already stressed and turning brown. Gulke is also concerned the extended forecast for early September looks hot and dry, which means the crop won’t finish well. He hasn’t seen a late-season weather market like this since 1988.
Beyond weather, Gulke says the market will turn its attention to the September WASDE report. USDA will have 3,500-plus representatives out in the field taking samples to determine yield.
“They will probably do a better job of ascertaining what is out there in counting kernels, test weight and all that,” he says. “They now have Pro Farmer paving the way to what they say isn’t going to be so radically bad, so I think they’re going to have to lower it.”
Gulke says if the corn crop is around 5% smaller that takes the yield down to 171, even 170.
“Now all of the sudden you go from a 2.4-billion-bushel carryout to something less than 2 billion, maybe 1.9 and falling,” he explains.
For soybeans, if you use the Pro Farmer estimates, it takes carryout down to 160 million bushels. If USDA doesn’t lower demand, ending stocks could get at or below 100 million. That should mean higher prices next week and in the future, Gulke says.
“We don’t have a chart that tells you how high you have to go to discount that crop,” he adds.
