For the week September corn was down 6 ¼ cents, December corn was 2 ½ cents lower, September soybeans lost 50 cents, November soybeans fell 45 ½ cents, September soybean meal dropped $8.30 per short ton, September soybean oil plunged 247 points, September Soft Red Winter wheat lost 12 ½ cents, September Hard Red Winter wheat fell 14 ¼ and September Hard Red Spring wheat gained 5 cents.
Corn and soybean futures saw more new lows on Friday and posted lower weekly closes again.
Jerry Gulke, president of the Gulke Group, says November soybeans closed below $9.60, a price level he did not expect to see this early in the season.
So how did prices get this low?
Some of the pressure has come from record yields at 53.2 bu. per acre and the swelling carryout in the Aug. 12 WASDE, with USDA increasing ending stocks to 560 million bushels.
“The market foretold that carryout and the charts showed prices could possibly hit $9.70 but that was two weeks ago. I thought it would take 30 days to do that,” he says.
Yet, Gulke says there have been other factors that have contributed to the bearish market, namely the rug being pulled out from under the U.S. biofuels market.
The California Air Resources Board (CARB) proposed significant changes to their Low Carbon Fuels Standard, which dealt another blow to soybean oil. The board is proposing a 20% cap on the amount of veg oils like soy and canola used for biofuels production, like Renewable Diesel.
This pushed soybean oil below 40 cents and according to Gulke follows a list of other failed biofuels policy moves by the Biden administration surrounding the low blending volumes for bio-mass based diesel in the Renewable Fuels Standard and the strict guidelines to comply with and receive tax credits for Sustainable Aviation Fuel under the 40B and 45Z programs.
Gulke also points to the use of used cooking oil (UCO) as a feedstock for biofuels production and the surge in imports of UCO that have taken market share away from soybean oil as another culprit.
He says farmers need to pressure lawmakers to look at changes in biofuels policy to restore fairness in the market.
The corn market has also seen pressure from record yield expectation in the August 12 WASDE at 183.1 bu. per acre.
However, there was at least some hopeful offsets as Gulke says yield wasn’t increased as much as some predicted.
“Remember it takes a good crop everywhere to get record yields, and if you’re talking 183 versus 176 last year, that’s a 7-bu. increase and quite a lift,” he adds.
He was also encouraged by the increase in corn demand in the report as USDA raised exports by 75 million bushels and that, combined with lower acreage by 700,000 acres, pulled ending stocks down about 25 million bushels from last month.
That leaves him somewhat hopeful that U.S. corn prices have reached a level they are competitive globally.
Gulke further explains when December corn got below long-term support of $4.50 he thinks that was low enough to finally stimulate demand.
Plus, he says, “At these low prices it’s hurting the Brazilian farmer as well, and he’s not selling at these prices either. Remember, prices will fall to the level that encourages demand or discourages planting.”
For more information contact Jerry at info@gulkegroup.com.
