USDA Report Weighs Heavy on Grain Markets

March corn prices were down 9¢ and March soybean prices were up 6¢ for the week ending Feb. 12. March wheat prices were down 3.25¢.

“The closes were rather sublime, considering where we were,” says Jerry Gulke, president of the Gulke Group. “Corn and soybean prices fell 50¢ to 70¢ from their highs. But we rallied from the depths of despair and still closed off the lows. It could have been better, but it could have been a heck of a lot worse.”

A big market mover for the week was the Feb. 9 USDA reports. Highlights include:

• Corn: The 2020/21 U.S. outlook is for higher exports and lower ending stocks. Exports are raised 50 million bushels, reflecting historically large corn purchases by China. U.S. corn ending stocks were lowered 50 million bushels from last month. The season-average corn price was raised 10¢ to $4.30 per bushel.
• Soybeans: T 2020/21 U.S. soybean outlook is for increased exports and lower ending stocks. Soybean exports are projected at 2.25 billion bushels, up 20 million from last month reflecting record marketing-year exports through January and a slow start to Brazil’s export season resulting from harvest delays. With crush unchanged, soybean ending stocks are reduced 20 million bushels to 120 million. The season-average soybean price was forecast at $11.15 per bushel, unchanged from last month.

The market believed USDA had to increase 2020/21 exports by at least 150 million bushels to match the record corn export sales to China. That didn’t happen, Gulke says.

“They only raised exports by 50 million, recognizing there was a need but not the need that the traders thought,” he says.

Now the questions, Gulke says, are: Why is China buying so much U.S. grain? Do they need it for strategic reserves? Are they trying to play nice with Biden? Is global demand as good as it looks?

“Just because Chinese buying doesn’t necessarily mean they need it,” he says.

Looking forward, Gulke says, prices are still pretty high – well above the prices seen in August. Plus, the spring crop insurance guarantees will likely remain high.

“If you want to spend the money at 85% coverage, it’s going to be pretty difficult to lose money for me this year,” he says. “The market is giving us that party by price and partly by insurance. The market is telling us to plant.”

Now, he says, prices are up to weather and production, as well as what Chinese demand.

AgWeb

Tags: corn, soybeans, US