Weekend Market Report

Jerry Gulke: Global Appetite for U.S. Grain Continue

Tue, 01 Aug 2023 21:07:40 GMT

The grain markets continue their steady march upward. March corn prices were up 34.25¢ and March soybean prices were up 41.75¢ for the week ending Jan. 15. March wheat up 37¢.

While those are impressive closes for the week, they only tell part of the story, says Jerry Gulke, president of the Gulke Group.

“We can get an idea of the momentum of the market by looking at how the markets close in relation to the ranges prices moved in a week,” he says. “For March corn, we had a range of 50¢ this week. That’s about $100 an acre for people that have old-crop corn to sell.”

For soybeans, he says, the range of prices this week was almost 80¢.

“The ranges look good,” Gulke says. “What you don’t want to see is a 50¢-per-bushel range in corn, for example, and we close at the low of the range for the week. That would indicate a problem.”

USDA Reports Send Prices Higher

On Jan. 12, USDA released its annual crop production report. Highlights include:

U.S. corn growers produced 14.2 billion bushels in 2020, up 4% from 2019. Corn yield in the U.S. is estimated at 172.0 bu. per acre, 4.5 bu. above the 2019 yield.
Soybean production for 2020 totaled 4.14 billion bushels, up 16% from 2019. The average soybean yield is estimated at 50.2 bu. per acre, 2.8 bushels above 2019.

In the Grain Stocks report, corn stored as of Dec. 1, 2020 was estimated to be down fractionally from Dec. 1, 2019. Soybean stocks were down 10% from a year earlier. Corn stored in all positions totaled 11.3 billion bushels, while soybeans totaled 2.93 billion bushels.

“The statistics we’ve received from NASS leave a lot to be desired,” Gulke says. “We’ve seen this over the last couple of years where all of a sudden we found we didn’t really have as much corn in stock or beans in stock. What would have been the price of grain if we would have known we didn’t have that supply out there?”

This week’s report show, Gulke says, there were less corn stocks going into Sept. 1. In addition, the national corn yield was nearly 4 bu. per acre lower.

“NASS says they did 10 times as many surveys for this January report than they did for previous reports,” Gulke says. “Well, 4 bu. per acre is over 300 million bushels, and that’s what caught the market by surprise. All of a sudden, we have carryover well under 1.6 billion bushels. That’s a huge difference when earlier this year we thought it could be around 2.2 billion bushels.”

U.S. Dollar Impact
Gulke has also been keeping an eye on the U.S. dollar. After moving lower for quite a while, it was higher this week.

“A lot of people will look at it and say well when the dollar is cheap that makes us more competitive. Then when the dollar goes up, we’re less competitive,” he says. “That’s true if you have too much of everything.”

But when you don’t have the stocks, it’s another matter so much of what it costs, especially for China, Gulke says. For buyers who are behind in purchases, a rising dollar can speed up global sales.

Can U.S. Farmers Still Hit a Record Corn Yield?

Fri, 13 May 2022 21:19:01 GMT

The week started out in a downward trend but ended on a high note.

July corn prices were down 4¢, and December corn prices were up 27¢ for the week ending May 13. July
soybean prices were up 24¢, and November soybean prices were up 27¢. All classes of wheat were up from 70¢ to more than $1.

USDA’s May 12 World Agricultural Supply and Demand Estimates (WASDE) report were a big market force this week, says Jamie Wasemiller, market analyst for Gulke Group and crop insurance agent with Silveus Insurance Group.

For 2022, USDA is projecting a national average corn yield of 177 bu. per acre. That is 4 bu. below the weather-adjusted trend presented at USDA’s Agricultural Outlook Forum in February.

“Remember that 177 bu. per acre equals last year and is still a record,” he says. “That yield will still be hard to attain.”

USDA’s forecast includes total U.S. corn use in 2022/23 to fall 2.5% on declines in domestic use and exports. Corn used for ethanol is unchanged relative to a year ago on expectations of flat U.S. motor gasoline consumption. Additionally, U.S. corn exports are forecast to decline 4% in 2022/23 as lower supplies and robust domestic demand limit prospects.

“On the corn side, that gave prices a little bit of support,” he says.

USDA’s soybean outlook calls for higher supplies, crush, exports and ending stocks compared with 2021/22. The soybean crop is projected at 4.64 billion bushels, up 5% from last year’s crop mainly on higher harvested area. Overall, USDA didn’t make many changes to the soybean numbers.

The bigger news was in the wheat market, Wasemiller says.

Winter wheat production is forecast at 1.17 billion bushels, down 8% from 2021. All wheat production for 2022/23 is projected at 1,729 million bushels, up 83 million from last year, as higher yields more than offset a slight decrease in harvested area.

Total 2022/23 domestic use is projected down 1% on lower feed and residual use more than offsetting higher food use. Exports are projected at 775 million bushels, down from revised 2021/22 exports and would be the lowest since 1971/72.

“That’s certainly caught the market’s attention,” he says. “Hopefully with what’s going on in Ukraine, maybe we’ll see increases on that export side.”

Globally, Wasmiller says, USDA showed weaker demand for corn and wheat.

“That’s certainly something that we want to keep an eye on,” he says.

Wasemiller is planting corn in Illinois. While progress is moving along well there, it is basically non-existent in his home state of North Dakota. His friends and relatives there have faced heavy precipitation this spring.

“They really have not turned a wheel there,” he says. “Something we need to keep an eye on in North Dakota and Minnesota is the changes that 2 million to 3 million acres of corn and/or spring wheat that we could see get changed to soybeans. With prices what they are this year, uh, planting these crops definitely looks better than claiming prevent plant on your insurance.”

Listen in as Wasemiller discusses CONAB production numbers for Brazil, crop insurance proposals and more:

Corn Yield Shocker: USDA Drops National Yield to 177

Check the latest market prices in AgWeb’s Commodity Markets Center .

Get in Touch with Jamie

Do you have questions for Jamie? Contact him at info@gulkegroup.com or 312-896-2090 or GulkeGroup.com

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.

The Two Ways to Look at the Ag Outlook Numbers

Fri, 19 Feb 2021 21:18:05 GMT

March corn prices were up 4.25¢ and March soybean prices were up 6.25¢ for the week ending Feb. 19. March wheat prices were down 16.25¢.

Unprecedented U.S. weather conditions, export numbers and USDA’s Ag Outlook Forum all weighed on prices this week, says Jamie Wasemiller, market analyst with Gulke Group .

“Globally we are seeing other countries now becoming more price competitive than the U.S., such as Argentina and Ukraine in corn, Brazil in soybeans and the Black Sea in wheat,” he says. “We are also hearing analysts discussing how the crops in South America might not be as bad as some had anticipated.”

This is likely more due to an increase in acres instead of yield, Wasemiller says.

“Weather premiums come and go and until we know more information about the South American crops the market will assume it should not get much worse,” he says. “Argentina’s forecast has changed to the drier, possibly helping soybeans move higher today, but they closed well off those highs. Also, the Chinese holiday likely slowed some business.”

During the Forum, USDA’s new chief economist, Seth Meyer, pointed out that the acreage picture largely hinges on weather, as it normally does. The first look at acreage shows 2021 planted acres as follows:

92 million acres of corn
90 million acres of soybeans
12 million acres of cotton

“The USDA gave pretty bullish numbers overall,” Wasemiller says. “In corn they stayed true to form on their yield projections posting a yield of 179.5 bu. per acre. We did have a yield of 176.6 in 2017/18 and 176.4 back in 2018/19 so let’s reach for the stars but that is a 7.5-bu. increase over last year and a 3.1-bu. increase from back in 2018/19.”

In soybeans, acres increased by 9% from last year.

“The big addition in acres and slight increase in yield and a minor reduction in exports increase the ending stock from last year by 0.6%,” Wasemiller says.

Wheat was the most interested, he says, with total supply was about the same due to a minor increase in acres and a minor decrease in yield. Exports were reduced by 6% resulting a 5.8% decrease in ending stock from last year and they are 15.9% lower than two years ago.

With this new round of information, Wasemiller says, the markets can look at this information two ways:

On the one hand we can say that the 2021/22 ending stock do not look much different than last year so we should expect to see the same sort of pricing opportunities as last year implying that current new crop futures should move higher to reflect a similar fundamental situation of last year.
On the other hand, we could say that although the fundamentals are still tight maybe prices did not need to get to the levels that we are or have recently been at suggesting a higher leg in prices may not be warranted unless we have issues with production or a surprise to the upside in demand.

“I do think these projections suggest that we need more global production in the pipeline, and we cannot afford issues here or abroad,” he says.

Planning for Crop Insurance

March 15 is the deadline for farmers to pick ARC or PLC for 2021. Wasemiller says current prices projections and fundamental news make it seems difficult to collect a payment using either program.

“ARC may give you the best chance of the two as it depends on both price and yield but I still think that PLC is the way to go mainly because it lets you also utilize the insurance product called SCO,” he says.

When comparing ARC to SCO, Wasemiller says these are the points to consider:

SCO covers 100% of your planted acres and ARC covers 85% of your base acres.
For many, planted acres are much higher than base acres so even if ARC paid out more per acre in total SCO would likely pay out more.
SCO is based on the Insurance Spring Price which with most crops is significantly higher than the farm programs prices.

“Every producer has different paraments that affect this decision and thankfully there are calculators out there to help with this process,” he says. “If you are a producer that buys 85% crop insurance or has PP issues than ARC or event ARC-IC might make sense.”

Also, he says, do not feel rushed to make your selection even if the FSA is knocking at your door — you have until March 15.

Another new opportunity farmers can explore this year is ECO.

“It is SCO’s big brother,” Wasemiller says. “ECO gives you the get coverage up to either 90% or 95% which is the first spring policy to let you do so. It is a policy that you buy in addition to your regular MPCI policy.”

The difference in ECO, he says, is it is based off county yields instead of individual yields.

“Based on how variable your county yields are really like the guarantees if provide you versus the cost,” he says. “ECO premiums do get high in some counties so you can either buy it at the 90% level, lower your MPCI coverage or lower the ECO liability. If you only want to protect against your individual yields but like the idea of higher coverage levels, then you will have to look at private product which are unsubsidized.”

Speaking from personal experience, Wasemiller says, they are still definitely worth considering. “There are many ways to incorporate them and still stick to your budget.”

Read More

Jerry Gulke: USDA Report Weighs Heavy on Grain Markets

Jerry Gulke: USDA’s Supply-And-Demand Dilemma

Jerry Gulke: Lessons Learned in 30 Years of Grain Marketing

Find more written and audio commentary from Gulke at AgWeb.com/Gulke

Check the latest market prices in AgWeb’s Commodity Markets Center .

Jerry Gulke farms in Illinois and North Dakota. He is president of Gulke Group. 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.

Jerry Gulke: Is A Major Acreage Switch in Our Future?

Wed, 11 Nov 2020 06:24:17 GMT

Commodity prices have dipped down to levels that haven’t been seen in more than a decade.

July corn down 7¢ for the week ending April 17, while July soybeans are down nearly 29¢. July wheat is down nearly 24¢. Just take a look at the downward path of July corn, since January 2018.

With prices at these subdued levels, could farmers switch their crop mixes this spring? It is likely, says Jerry Gulke, president of the Gulke Group .

“In our survey, 90% of the producers had all their inputs purchased for spring. We didn’t get a lot of anhydrous on in the fall, so I still think there’s some potential to shift some,” he says. “But I find it highly unlikely we’ll shift more than about 2.5 million acres out of corn into beans.”

USDA’s Prospective Plantings report showed the following estimates for 2020 acres:

Corn: 97 million acres, up 7.29 million acres or 8% from 2019
Soybeans: 83.5 million acres, up 10% over last year
Wheat: 44.7 million acres, down 1% from 2019
Cotton: 13.7 million acres, down less than 1% compared to last year

Gulke says the corn-to-soybean ratio suggests you’ll make money or lose less planting soybeans. “The last thing I saw suggested a $50 to $60 an acre advantage to soybeans versus corn.”

Some farmers in areas such as the Northern Plains could plant alfalfa or alternative crops versus corn, Gulke says.

“We really need to entice the farmers in the Norther Plains to do that,” he says. “We’re looking at that on our farm in North Dakota. Corn just doesn’t work when you have a negative 70¢ basis. When corn is $3.40, you’re looking at $2.70 per bushel. That just doesn’t work.”

Only 3% of the U.S. corn crop has been planted, per USDA, which tracks with the five-year average. With open weather, Gulke expects that number to jump.

“Farmers are ready to just plant a crop under normal conditions compared to last year,” he says. “I think next week is supposed to open some up in terms of weather, so I think we can get a lot done in a hurry.”

In addition to weather, Gulke says, any new type of government assistance program for farmers could influence crop decisions.

Find more written and audio commentary from Gulke at AgWeb.com/Gulke

Follow comprehensive COVID-19 and agriculture coverage at AgWeb.com/coronavirus .

Check the latest market prices in AgWeb’s Commodity Markets Center .

Jerry Gulke farms in Illinois and North Dakota. He is president of Gulke Group. 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.

Jerry Gulke: Is USDA Methodology Archaic?

Wed, 11 Nov 2020 06:20:19 GMT

Given the delays in planting and maturities and questions around final acreage, it was a stretch for the market to expect the October USDA report to meet our yield reduction expectations. It definitely didn’t happen for corn.

NASS did objective yield measurements where corn was mature. Where it wasn’t, they used the protocol of surveying some 10,000 producers for their yields expectations. Soybeans were more quantifiable, and yield was reduced.

I have a hard time believing this year’s national yield is only 8 bu. less for corn and 4 bu. less for soybeans from 2018.

I expect NASS to continue to lower total production with each monthly report cumulating in January 2020.

NASS will conduct further reviews as the crop matures and weather effects can be quantified.

USDA’s estimate of last year’s ending stocks of 2.45 billion bushels, which artificially depressed prices for at least nine months until corrected in the September stocks report, will not be present this year. Corn ending stocks are already nearly 500 million bushels lower than last year.

So Many Questions

Our lost profit potential would go a long way in improving cash flow. Or to pay for food, college educations, health care and debt retirement. If this were price forecasting by Goldman Sachs

or an equivalent, there would be congressional hearings. Yet a government agency avoids scrutiny.

Price discovery has changed materially. This has given rise to questioning even the CME and the futures industry. Perhaps it is time to question USDA and NASS and their methodology used in forecasting supply and demand. There is also a need to revise delivery points for grains, as basis has varied wildly, causing end users much concern.

Oh, for a return to the days of old when supply and demand was “the” influence in price discovery.

Find market insights, in-depth analysis and weekly audio reports from Jerry at
AgWeb.com/Gulke

Jerry Gulke farms in Illinois and North Dakota. He is president of Gulke Group. 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.

Jerry Gulke Talks Good News, Bad News in USDA Report

Wed, 11 Nov 2020 06:19:21 GMT

The Sept. 12 USDA reports created positive news for the corn and soybeans markets. The reports held both good news and bad news, says Jerry Gulke president of the Gulke Group.

USDA’s 2019/20 corn outlook calls for reduced production, lower corn used for ethanol and slightly higher ending stocks. That’s based on corn production for grain forecast at 13.8 billion bushels, down 1% from the previous forecast and down 4% from last year.

Based on conditions as of Sept. 1, yields are expected to average 168.2 bushels per harvested acre, down 1.3 bushels from the previous forecast and down 8.2 bushels from 2018. Area harvested for grain is forecast at 82.0 million acres, unchanged from the previous forecast but up less than 1% from 2018.

USDA’s 2019/20 soybean outlook includes lower soybean production and lower ending stocks. That’s based on soybean production for beans forecast at 3.63 billion bushels, down 1% from the previous forecast and down 20% from last year.

Based on conditions as of Sept. 1, yields are expected to average 47.9 bushels per harvested acre, down 0.6 bushel from the previous forecast and down 3.7 bushels from 2018. Area harvested for beans is forecast at 75.9 million acres, unchanged from the previous forecast but down 14% from 2018.

Following the reports’ release, corn prices were up around 5¢ and soybeans up around 25¢.

“The good news is they didn’t increase the carryout from last year as much as they could have,” he says. “And they did keep the carryout for 19/20 about unchanged.”

For these reports, USDA used objective yield and farm operator surveys, which were conducted between Aug. 24 and Sept. 6. The farm operator survey was conducted primarily by telephone with some use of mail, internet and personal interviews with 9,600 producers. These growers will continue to be surveyed throughout the growing season to provide indications of average yields.

“I’m still a little bit confused if they counted the ears or the stalks,” Gulke says. “Did they strip the years back and see little nubbins? Or was it only harvestable cobs?”

Overall, Gulke says the reports were good for the grain markets.

“We’ve got a report behind it now that didn’t increase production,” he says. “And now the rest is kind of up to China and Trump to give him a little boost. And if you go back to 2009, we had the same kind of scenario. It took all fall into January before we had harvest data from farmers that either prove or disprove that this crop is not near as good as anybody thinks.”

Read More

WASDE Lowers Corn Yield, Soy Stocks: Watch Live Analysis

Jerry Gulke: USDA Reports Create More Questions than Answers

Wed, 11 Nov 2020 06:18:00 GMT

Ahead of the Aug. 12 USDA reports , traders and farmers expected this round of information to provide clarity to the unprecedented 2019 corn and soybean crops. Yet, this year’s August reports, which included more information than ever before, mostly created more questions.

USDA pegs corn production for grain at 13.9 billion bushels. That’s based on a national average corn yield of 169.5 bushels per acre, 82.0 million harvested acres and 90 million planted acres.

Soybean production is forecast at 3.68 billion bushels. That’s based on a national average soybean yield of 48.5 bushels per acre, 75.9 million harvested acres and 76.7 million planted acres.

Traders prior to the report were predicting smaller yields, planted and harvested acres for corn. For soybeans, traders expected smaller yields and larger planted and harvested acres.

Following the release of the reports, corn prices sank by about 25¢ and soybean prices by 11¢. The price reaction was due to several surprises in the report, says Jerry Gulke, president of the Gulke Group.

A big factor in today’s report, Gulke explains, is the addition of the prevent plant (pp) numbers from USDA’s Farm Service Agency (FSA). As of now, the total prevent plant acres for 2019 sits at 19 million acres. Of that, 11.2 million are for corn and 4.3 million are for soybeans. This marks the most pp acres reported since FSA began releasing the report in 2007 and 17.49 million acres more than reported at this time last year.

“They said that it may take until October before they have all the reports in, which is ludicrous to me in this in this electronic day and age,” Gulke says. “But they have said there’s something like 11.2 million acres of pp in that 90 million acres number. That would imply, ‘Holy cow, you were going to plant 101 million acres of corn?’ But that’s not necessarily the case.”

Prevent plant decisions were based on which crops provide the most money, Gulke notes. Since FSA is still compiling data, the total pp acres are still uncertain.

“So, in a report that was supposed to answer all the questions, it gave us a lot more questions than answers,” he says. “It would be really interesting if things turned to be not as bad as they looked and all of a sudden, we erased that 25¢ movement corn.”

Gulke reminds farmers of a long-held mantra of the markets: It’s often not where the market trades, it is where it closes.

“I think we need more than one day’s activity and calculations to see what’s going on,” he says. “It may be more about where are we going to close this week, with respect to where we close last Friday. In the meantime, somewhere in the middle lies truth, I guess.”

Read More
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USDA: Corn, Soybean Production Down From 2018