For the week, December corn was down 3½ cents, January soybeans were up 32¼ cents, January soybean meal was up $5.50 per short ton and January soybean oil was down 235 points. December Chicago wheat was 3 cents lower, December Kansas City wheat was up a ½ cent, with December Minneapolis wheat up 1¼ cents.
Soybeans had a strong day on Friday, closing near the highs and above the 50-day moving average. The January contract also closed higher for the week by more than 32 cents. Jerry Gulke, president of the Gulke Group says, “Soybeans opened on the low and closed on the high. I haven’t seen that in a long time in soybeans, especially on a Friday.” He says the fund and technical buying was sparked by concerns about South American weather and crop prospects.
“This is a serious situation,’” according to Gulke. El Nino is re-intensifying, which he says might already be causing planting issues in Argentina and Brazil. Conditions are less than ideal in Brazil with too much rain in the south and dryness in central and northern soybean production areas.
In response, this week CONAB lowered their soybean production estimate for Brazil by nearly 2 million metric tons to 162 mmt. Crop consultant Dr. Michael Cordonnier also dropped his estimate 2 mmt to 160 mmt.
“If South American production drops just 3 million metric tons that is 100 million bushels and all of the sudden that makes the U.S. ending stocks at 220 million bushels look tight,” Gulke explains.
Gulke thinks the market is finally taking note of the fact there is no room for error on the global soybean balance sheet. Plus, he says its bullish that USDA left ending stocks for soybeans at 220 million bushels in the October WASDE while projecting a record soybean crop in Brazil and doubling Argentina’s production. He says USDA did not lower U.S. exports despite the fact that crop will compete with the U.S. in the export market.
Production issues in South American might also be catching the attention of export customers such as China. Market talk has continued to circulate that China is cancelling soybean orders from Brazil and shifting business to the United States for November through February delivery. Gulke says that might have prompted at least a portion of the rally on Friday. He’s watching for confirmation in additional flash sales on Monday or early next week.
On Friday, corn flirted with two-year lows and came within a quarter cent of the September low before reversing with soybeans and closing higher. Gulke says corn holding that support area was significant.
“I think that speaks well of corn. I don’t think it was just a follower of soybeans and there was value there for end users at that price level,” he explains.
However, if soybeans continue to rally on South American weather concerns, corn will need to follow to hold or buy acres, Gulke adds.
For more market information contact Jerry at info@gulkegroup.com.
