Our country’s biggest crop ever is in the ground, but market expert Jerry Gulke says we could still come up short in corn. He provides analysis.
One of USDA’s biggest reports of the year was issued Friday. The June Acreage report showed U.S. farmers have more crops in the ground than ever before.
Here are the highlights:
- Corn planted area for all purposes in 2012 is estimated at 96.4 million acres, up 5% from last year and represents the highest planted acreage in the United States since 1937.
- Soybean planted area for 2012 is estimated at 76.1 million acres, up 1% from last year and is the third highest on record.
- All wheat planted area is estimated at 56.0 million acres, up 3% from 2011.
- All cotton planted area for 2012 is estimated at 12.6 million acres, 14% below last year.
Common economic principles would make you think that way more corn would push prices down. Yet, for the week, grain prices soared
. July and December corn jumped more than 80 cents, July and November soybeans 50 cents or more and July and December wheat increased 60 cents or more.
The reason: no rain.
Jerry Gulke, president of Gulke Group, says that if we’d had normal precipitation levels and 96.4 million acres of corn, the U.S. would be swimming in corn. But a lack of rain in the majority of the Corn Belt is continuing to bring down yield potential.
USDA’s forecasted national corn yield estimate still sits at 166 bu./acre, but Gulke believes most in the trade are already expecting lower.
"I think we’re probably at a 155 bu./acre for corn. That means we have a carryout of about 1.1 billion bushels. While we have a terrible drought, we have extra acres. Imagine what kind of situation we’d be in if we didn’t have all these acres."
The Weather Market Rules
Gulke says there’s almost a line from Des Moines to Bloomington to Columbus, where north of the line crops will be good and south of the line they may be dust.
"The rains are around in the north, but about every forecaster believes that they aren’t going to go south. If we could salvage the upper half, we could still get a good national corn yield average."
Gulke says regardless of the new USDA report information, we are back in a weather market. "I hate weather markets. For the guys that get the rains, they are going to get the crops and receive high prices."
The Potential Price Explosion
While more eyes stay focused on corn, Gulke also suggests keeping an eye on soybeans.
"Soybean acres came up significantly, however is you plug in a yield reduction by a bushel or two, you have a negative carryover. The biggest explosion could be in the soybean prices."
He says if dry, hot weather zaps soybean yields, he expects South America to to really turn on the bean planting.
No Drought Relief in Sight
In the Corn Belt, intensifying heat and dryness are elevating concern for corn and soybeans over the central Mississippi and Ohio Valleys, according to USDA's Joint Ag Weather Facility. As of June 26, approximately 49% of the nations’ corn and 50% of the soybeans are now under varying degrees drought.
USDA reports that extreme heat (100°F or greater) and gusty winds are rapidly depleting already-bleak soil moisture supplies and causing high levels of stress on reproductive corn, soybeans, and other summer crops across Missouri and southern portions of the Ohio Valley.
On the Plains, a weak frontal boundary is separating blistering heat (100-110°F, locally higher) across the southern half of the region from cooler conditions over the northern Plains.
In contrast, much-needed showers are falling in the western Corn Belt, where crop prospects remain generally favorable. Also, showers are developing along the front in Nebraska and South Dakota, but much more rain is needed for pastures and summer crops.
Listen to Gulke’s full audio analysis:
For More Information
How do your crops look? Submit your report to AgWeb Crop Comments.
Visit AgWeb’s Market Center.
Check your local forecast with AgWeb’s Pinpoint Weather.