Jerry Gulke: Did the USDA Reports Create A New Paradigm Shift in Grain Prices?
The Jan. 12 USDA reports held positive surprises for grain prices. March corn prices were up 20¢, and March soybean prices were up 35¢ for the week ending Jan. 13. Wheat prices were flat to up 11¢.
Jerry Gulke, president of Gulke Group, says these were the highlights from the big round of reports:
- Production in both corn and soybeans was reduced through various means of acres and yield but demand was also reduced.
- Exports were down for both corn and soybeans.
- Ending stocks were not trimmed as much as they could have been.
“The surprise was the fact USDA did mess with the acres and yield,” Gulke says. “What you don't want to see is yield going up and demand going down, but what we saw was total production going down and a drop in demand.”
Gulke says the reports confirmed there has been demand reduction for U.S. grains.
“My suspicion is we've seen the lowest number in carryout stocks that we're going to see,” he says. “It was a shock to the market, with probably a lot of short covering.”
Corn prices did not close above new highs for the year, but soybeans did.
“Soybeans have been in a long uptrend and they held it,” Gulke says. “So, beans look impressive, but the market still isn’t excited about paying us over $6 for new-crop futures in corn.”
In terms of the global grain outlook, Gulke said these numbers caught his eye:
Grain and livestock markets trade normal hours today. All markets and government offices are closed Monday, Jan. 16, in observance of Martin Luther King Jr. Day. Gulke says focus during the three-day weekend will be on South American weather.
“Right now, the forecast is some rain is falling in Argentina or has fallen and more is expected to fall a week from now,” Gulke says. “If we come in Monday night and rains were better than expected or the forecast looks favorable, prices will probably back off.”
However, with soybeans posting new high closes, it could mean they could gap higher.
“The job of the market now is to determine at what price do we curb demand,” Gulke says. “The reports gave us good news. It looks like we’ll have another good year, unless there is a train wreck coming that we don't see.
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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.
