The March 31 reports from USDA provided the markets with a few surprises. Did they reset the tone for prices moving forward?
May corn were down 19¢ and December corn prices were up nearly 18¢, for the week ending April 1. May soybean prices were down $1.28 for the week and November soybean prices were down 90¢. Wheat prices were all down, led by May wheat prices dropping $1.18.
USDA’s Prospective Plantings calls for:
- Corn: 89.5 million, down 4% from 2021
- Soybeans: 91 million, up 4% from 2021
- All Wheat: 47.4 million, up 1% from 2021
- Cotton: 12.2 million, up 9% form 2021
Ahead of the report, analysts were predicting:
- 92 million for corn
- 88.7 million for soybeans
- 48 million for wheat
“If we have one surprise in one market, we probably have an automatic surprise in another one when it comes to corn and soybeans,” says Jerry Gulke, president of the Gulke Group. “The soybean number was above the average guest by quite a lot. It was actually above our number by at least 1 million acres.”
The lower-than-expected corn acres puts extra pressure on production for 2022, Gulke says. That is reflected in the difference between old- and new-crop prices.
“That old-crop versus new-crop inverse was huge and it came apart at the seams,” he says. “May corn that was so untouchable collapsed basically.”
By plugging the acreage estimates into a supply-and-demand outlook, Gulke says the pressure will be on livestock producers — specifically, if corn prices stay high due to any production shortfalls.
“The odds are pretty high that feed demand could drop,” he says.
In soybeans, Gulke says, the global marketplace was worried if farmers would be able to produce enough soybeans to meet the shortfall from South America.
“That still may be in question a little bit because what is the real number coming out of Argentina and Brazil? But now we have room to wiggle, and the market reflected that,” he says. “I don’t know how low soybean prices have to go, but I know they’re probably not going to go much higher because you just increased production significantly to where, all things being equal, we may be able to meet the global supply and have something left over.”
Gulke says the numbers released by USDA this week for acres could be the high-water mark for soybeans and the low-water mark for corn. “But we’ll see,” he says.
Last week Gulke shared his concern that governments across the globe could start to become more involved in global agriculture, as a way to cope with high prices.
“On Friday afternoon it was rumored the Biden administration was thinking of increasing the blend of ethanol in gasoline to lower demand for crude oil itself,” he says. “That looks like a turnabout in thinking during a period of global crisis.”
Allowing E-15 year-round, eliminating the summer restriction, was also rumored.
“Fertilizer costs remains an issue with talk of some kind of payment offsetting the increased costs if actually purchased thus helping produce a good crop,” he says. “Allowing haying and grazing is another action being tossed around. There has to be a sense of urgency to doing something that appears to relieve inflation or justify the cost. Time is running out to do something material.”
Check the latest market prices in AgWeb’s Commodity Markets Center.
Get in Touch with Jerry
Do you have questions for Jerry? Contact him at info@gulkegroup.com or 312-896-2090 or GulkeGroup.com
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.
