For the week July corn climbed 9 ½¢, and December corn was 9 ¼¢ higher. July soybeans were up 4¢, November soybeans ended 4 ¾¢ higher, July soybean meal lost 30¢ per short ton, with July soybean oil climbing 136 points. July Kansas City wheat gained 23¢, July Chicago wheat soared 41¢ and July Minneapolis wheat was up 5 ½¢.
Grain markets were all higher for the week and closed up on Friday after the May WASDE Report. Jerry Gulke, president of the Gulke Group, says in the report USDA finally rectified the old crop corn carryover figure trimming it by 100 million bushels with an increase in demand.
“They got a good start. They adjusted ethanol and exports. They didn’t do anything to feed and residual, but when you look at how much we’ve used in the first few months of the marketing year I think there’s room there to increase that as well,” Gulke says, adding he thinks USDA will need to continue to lower carryout.
Gulke flagged the 100 million bushels of corn disappearance after the USDA Quarterly Stocks at the end of March and suggested USDA had over reported the size of the U.S. crop. So, he says the cut lowered old crop ending stocks to 2.02 billion bushels, and he thinks that figure could be shaved even further.
That now becomes the carry in and extrapolating that into the 2024/25 balance sheet he says, “Even with acreage remaining the same and a 181-bu.-per-acre yield the new crop carryout is not more than 100 million bushels above this year at 2.1 billion bushels. That is a far cry from the bearish 2.5 to 3 billion bushels some were predicting earlier this year without a weather problem in the U.S. and a record crop in Brazil.”
He thinks that caught the market by surprise.
“It’s not so much about how bullish this report was but more about how negative it was not,” he adds.
The fact that USDA used a 181 bu.-per-acre estimate for yield also suggests even a 1-bu.-to-2-bu. cut could push ending stocks on new crop corn to under 2 billion bushels.
“Each bushel reduction with 82 million harvested acres equates to 80 million bushels,” Gulke says. “So, a 2 bu.-cut equals 160 million bushels, and now you’re down to 1.9 billion bushels.”
However, he says corn prices might be a bit high in respect to current supplies, closing in on $5.
USDA did not change the old crop ending stocks for soybeans, leaving those at 340 million. New crop came in at 445 million bushels, which is up 105 million from last year. He says this might suggest soybeans are too high currently trading above $12 for both old and new crop.
“Yes, it looks a bit concerning,” Gulke says, but he admits that it still has to do with what the weather does.
Especially since USDA lowered Brazil soybean production for the current market year by only 1 million metric tons to 154 mmt and projected a record 169 mmt soybean crop for the new marketing year.
Wheat production and ending stocks were close to expectations, Gulke says, at 1.86 billion and 766 million bushels respectively. However, the market has been rallying and made new highs for the move in all three exchanges on Friday.
“Maybe its fund short covering or the realization of the global weather issues,” Gulke says. “Wheat has a tendency to turn around and go straight up for no good reason at all, and you don’t hear or see the fundamental reason until the market top is in. It turned positive quite a while ago.”
Gulke says the rally Friday in wheat wasn’t about the WASDE but instead the market has had a keen eye on the global production numbers especially with reports of dryness and frost concerns in Russia.
“When global wheat competitors have a wheat problem we benefit from it,” he says.
USDA lowered new crop production in Russia by 3.5 million metric tons from last year.
For more information contact Jerry at info@gulkegroup.com.
