Corn and soybeans closed lower for the week with September and December corn both losing 6¢, August soybeans were down 14¢ and November was down 19¢. September Chicago wheat was up nearly 7¢, Minneapolis up 10¢ and Kansas City ended 4¢ lower.
Row crop futures started removing the weather premium at the tail end of the week with rain falling in portions of the Corn Belt and some extended forecast models looking cooler and wetter in the Midwest.
Is the pullback in corn and soybean prices justified? Jerry Gulke, president of the Gulke Group, believes it is because the weather pattern is gradually changing, and many areas are receiving more rain than predicted.
“The dry areas are getting smaller and wetter areas are getting wetter,” he says. “We’re eliminating those bad areas by getting some rain, or at least buying some time for us,” he says.
Gulke also believes the cooler evenings are helping mitigate some of the daytime heat and dryness stress.
In North Dakota this week, it’s been as warm as 93 degrees, but by morning, temperatures have cooled into the mid-60s, which is a huge help, he says.
“You just don’t know whether the corn crop can finish out without rain, but certainly the lack of heat and the cool nights, depending on where you live, certainly helped a lot this year,” Gulke says.
The bulls argue crop conditions are under a year ago for both corn and soybeans and the U.S. Drought Monitor showed a worsening drought again this week. Currently, 59% of corn areas are experiencing some level of drought, up 4% from a week ago, and 53% of the soybean acres are under drought, also up 3% from last week.
Does the market believe the crop is getting bigger or is it still getting smaller? Gulke says the trade is still trying to determine that.
“Most private analysts think the corn yield is between 173 and 177 bushels per acre. It’s certainly somewhere between 177, 176 to 173 bushels, which is what a lot of the private firms are saying,” he says.
Gulke is concerned about the August WASDE and the likelihood USDA could lower the corn yield but also drop demand.
“We are woefully behind on corn exports and that would keep the carryout above 2 billion,” he explains. “Once we start admitting to the fact our exports may not come back, in spite of prices being lower than last year, that’s almost as bad of news as getting a bigger crop.”
Globally, there is a little more concern about the size of the U.S. soybean crop as evidenced by the string of export sales this week, which totaled 66.5 million bushels, some booked by China.
However, Gulke says the U.S. is also behind on new crop soybeans exports and that’s why he believes the market didn’t rally this week on the news.
“We’re going to have to do a lot of selling in order to get up to where our exports have been projected to be,” he adds.
Gulke says the chart action is also signaling prices might be too high as November soybeans closed lower for the week and below the $14 level. Plus, corn has already completed a 62% retracement and is technically looking weaker, taking out key moving averages this week. Wheat, he says, is still holding “some” support or “Putin” premium with the uncertainty surrounding the escalation of the Black Sea war.
