Jerry Gulke: Can the Prospective Plantings Report Change the Market Tide?

The grain markets trended negative this week, minus old-crop corn, which jumped due to a Friday rally and ended 10¢ higher for the week ending March 24. In the last four weeks, corn and soybean prices have both sank:

"We ended last week speculating how much impact that the banking malaise would have on agriculture," says Jerry Gulke, president of Gulke Group. "It seemed to affect a lot of things, including agriculture. We’re going to see less demand. You just can't contract money supply, raise interest rates, reduce disposable income and expect demand to stay strong."

In looking at the grain price movements, Gulke says the four-week changes are telling.

"For the month, corn prices are down 35¢. At 200 bu. corn, that's $70 an acre," he says. "The $1 drop in soybeans is $50 an acre. When the market turned, it turned quickly."

For several months, Gulke has worried U.S. agriculture was facing demand reduction or demand destruction.

"This looks like a demand destruction compared to last year," he says.

In February, at its annual Agricultural Outlook Forum, USDA released estimates of 91 million acres of corn for 2023, which is up 2.7% from last year. The national average yield is forecast at 181.5 bu. per acre.

For soybeans, acres are projected at 87.5 million, which is flat with 2022. The national average soybean yield is forecast 52 bu. per acre.In next week's Prospective Plantings report, Gulke expects acreage numbers close to the ones released in February.

"A month ago, it looked like we could plan whatever we wanted and we’d make money," he says. "Well, the market sure kind of took care of that in a hurry."

Going forward, Gulke says, the market may not care if corn earns another million acres this year.

"It'll take a pretty good shock one way or the other in the acreage report to move the market," he says. "So, after the report, we're going to talk weather. It doesn't look like an early spring, but it doesn't look like a problematic growing season either. Now we have to a whole new ball game going forward based on what kind of weather we have."

Whatever the acres turn out to be, Gulke says, it will be in the May World Agricultural Supply and Demand Estimates (WASDE) that USDA plugs in the March 31 report.

"But 10 min after the report is out Friday, trades will have already plugged those numbers into their spreadsheets, as will I," he says.

As always, Gulke says, it will be more important to see how the markets react to the USDA numbers, not just what the numbers are.

This year the Gulke Group conference is set to take place at the Embassy Suite in Lombard, Ill., on March 30-31. Speakers include Drew Lerner (weather), Roger Wallace (livestock), Michael Drury (economy) Brian Phillips (European outlook) and Jerry Gulke (commodity outlook). Learn more and register at GulkeGroup.com or call Jamie @ 707-365-0601.

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 Advisory Services.

Learn more at 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.