For the week March corn was up 8 ¼ cents, March soybeans gained 16 ¾, March soybean meal was $7.70 higher, March bean oil was up 30-points, March soft red winter wheat tacked on 10 ¾, March hard red winter wheat was 15 ¼ better while March hard red spring wheat lost 3 and March crude oil gained $2.05.
Grain markets ended higher this week heading into the biggest USDA data dump for the year, while crude oil also rallied despite news oil production in Venezuela would get a boost from United States intervention and the capture of former president Nicolás Maduro.
Grains Gear up For January USDA Reports
On Jan. 12 USDA releases the final crop production report of the year, plus the WASDE, quarterly stocks and winter wheat seedings. Average trade guesses indicate only minor adjustments in the balance sheets, which is not the history of those reports.
Jerry Gulke, president of the Gulke Group, says many farmers believe that corn and soybean yields need to be cut. “If the report is super bearish, a lot of people are going to be upset about that because there’s 98% of the farmers that think that yields have got to come down and come down hard on corn,” he says.
Farmer Bridge Assistance a Sign of Bearish Reports?
So, what are Gulke’s expectations for the reports?He says with President Trump’s goal of keeping food prices low that may dictate a bearish slant. “The last thing that he wants is for the price of corn to go up 30 to 40 cents and beans to go up $2, because of the report.”
However, Gulke thinks just the fact USDA is providing Farmer Bridge Assistance is a sign that the reports could be bearish.“I remember our Secretary of Agriculture wanted to delay giving these bridge payments, until we knew more about the harvest and what China would do on trade and how that would impact the market,” he says.
Gulke says would be naïve to think the Secretary of Agriculture doesn’t have the information at her disposal to help make decisions on assistance.“And if they got a hint that this crop is going to be tight and the corn yield is 180 not 186, that would be a game changer.So, you look at that and suddenly you’re passing out money that’s going to be sent to us farmers in the next 60 days.”
Gulke is skeptical of the report data with USDA losing more than 20,000 employees and, in the process, also losing key institutional knowledge.“I’ve talked to some people there and they say you if you think data was questionable before, you haven’t seen anything yet.”
Regardless of what the report might say, Gulke decided to protect against the risk through options.“You could buy at the money options puts or calls in corn for three to five cents. I mean, it’s been a while since I’ve been able to protect the upside and downside. And so, we did some of that. For beans we looked at options there as well. The cost was about 13 cents, but you sell 25% to 30% of new crop.”
What is the Strategy After the Reports?
The reports will dictate the market direction, but Gulke says he will be watching ending stocks.For corn, USDA needs to drop carryout below 2.0 billion bu. “However they do it, I’d like to see that come out 1.8 billion, 1.9 billion bu. so the surplus doesn’t’ get any worse.”If ending stocks do balloon, then he says the only hope for a corn rally is a weather problem like a drought.
For soybeans, Gulke says ending stocks are tight around 290 million bu. and prices are high enough where soybeans work for some farmers.“They work for me and so I am going to be planting more beans in 2026,” he explains.However, that’s not true for everyone.
Last year when the Gulke Group did their own survey of acres nearly every producer said they were going to raise corn acres.So, what about 2026?Gulke says, “I’m shocked at what we’re seeing. I think on March 31, we may be surprised at the corn acres that we do intend to plant. A large percentage of our guys put on fertilizer last fall already and are 85% to 90% done.”Plus, with the aid payments he thinks more producers will stay with the status quo. “And I don’t think the market’s going to like that if that happens.”
Energy Markets Provide Opportunity to Lock in Fuel Needs
Gulke was also watching the energy markets this week as it looked like crude oil would take another leg lower as Venezuela agreed to hand over up to 50 million barrels of crude oil to the U.S. with the sale being split between the two countries.
Gulke says he pays closer attention to the heating oil chart because it serves as a proxy for diesel fuel and he was looking for a place to lock in some supplies for his operation as prices are the lowest they have been in several years.He says heating oil broke through the October low and dropped four or five cents a gallon on Wednesday. Crude oil was also down that day, but the next session had a reversal higher and then extended gains on Friday.“Both markets not only recovered but put in bullish weekly key reversals and crude oil is back above the 50-day moving average,” he explains.
Why is that important for farmers?Gulke says the energy markets may have bottomed, so he recommends buying diesel fuel before prices rally further.“To me that looked like an excellent place for me to buy some spring needs for diesel fuel. We have a lot of costs we’re going to try to trim. If I can check that one off by buying it at $2.40 a gallon in smaller amounts. That’s 30 or 40 cents a gallon less than last fall and last spring.”
For more information contact Jerry at info@gulkegroup.com.
