The grain markets sparked back to life this week. Could the trend continue for corn and soybean prices?
New- and old-crop corn prices were up around 30¢ for the week ending Aug. 12. September soybean prices were up 73¢ and November soybean prices were up 45¢. Wheat prices were up 30¢ to 40¢.
The Aug. 12 USDA reports point to corn production being down from 2021 and soybean production being up from last year.
Corn production is forecast at 14.4 billion bushels, down 5% from last year. The average corn yield is forecast at 175.4 bu. per acre, down 1.6 bu. from last year.
“Corn showed a very interesting response to the report, closing on the high of the week,” says Jerry Gulke, president of Gulke Group. “It wasn’t necessarily a surprise USDA lowered the yield, but everyone was wondering if they would take it down without actually walking fields.”
This market response, he says, shows there may be more upside risk than downside risk from this level for corn prices.
“As we often say, it’s not so much what the report says but how the market reacts,” Gulke says. “We’re really not much over $6. That doesn’t work too well considering uh the costs we have, so we need we need to get prices higher to meet cash flow needs. So far, so good. We’ve been on a tear here since the collapse in prices in July.”
For soybeans, production is forecast to increase 2% from 2021, forecast at 4.53 billion bushels. Yields are expected to average a record-high 51.9 bu. per acre, up 0.5 bu. from 2021. If realized, the forecasted yields in Arkansas, Illinois, Indiana, Maryland, Mississippi, Ohio, and Virginia will be record highs.
Now the question is if demand will match the current production estimate, Gulke says.
“China has hinted they will import about 10% less soybeans this year than last year,” he says. “Yet, the United States is expected increase exports and additional 20 mil-bu in the report Friday.
The focus will remain on U.S. production, Gulke says.
“We need to remember a 1 bu. swing in the national average yield for soybeans equals 88 million bushels,” he says. “With the carryout at 245 million bushels, if you subtract 88 million bushels, you end up with 157-million-bushel carryover. That means you can’t get unexpected demand because the supplies would be too tight. We’d barely have pipeline supplies.”
Overall, Gulke says, the grain markets have a positive fundamental and technical outlook.
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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.
