USDA will finally have the chance to update its 2013 production estimates on Friday. How high will they come in?
There’s a saying that big crops get bigger, and that seems to be the case this year. While USDA was away for a few weeks in October, farmers across the country were hard at work harvesting this fall’s crops.
Even with planting delays and several dry months this summer, yields have came in much higher than expected. "This crop is much bigger to much, much bigger than most people were predicting," says Jerry Gulke, president of the Gulke Group.
Hear Gulke's full audio analysis:
The stage is set for record-breaking crops, of both corn and soybeans. "We planted a lot more acres in a lot more places than we have in the past," he says. Couple that with large yields, and we’re looking at a glut.
So, how big are we talking?
On Friday, Informa Economics raised its average corn yield estimate to 161.2 bu./acre (up from 158.8 bu./acre). That means the total corn production would come in at 14.223 billion bu. USDA’s last estimate (released in September) was 155.3 bu./acre, putting total production at 13.84 billion bu.
For soybeans, Informa estimates the average yield at 43.3 bu./acre (up from its previous estimate of 41.7 bu./acre), with total production pegged at 3.298 billion bu. USDA’s September estimates include an average yield of 41.2 bu./acre and total production of 3.15 billion bu.
Gulke says private estimates are ranging from 161 to 164 bu./acre for corn. "We’re using 162.3 bu./acre," he says. "But, we won’t probably really know the yield until the January reports."
Unfortunately, a huge corn crop means trouble for prices. Record yields, coupled with record acres are a huge task to overcome, Gulke says. "In order to right things now, we have to produce less and use more," he says.
The market’s reaction to this week’s export sales were an indicator of problems. Gulke says USDA reported corn export sales averaged 60 million bu. per week for the last three weeks. Bean sales were also high.
"The thought was you could come in here and buy grain without moving the markets, because there really wasn’t a reporting system," he says. "That’s pretty much what happened, but the problem was that we confirmed what we expected and it didn’t really move the market much. It does not look good when you have a fundamental move like that."
Corn and soybeans both closed lower on Friday.
Gulke is not expecting good price news in Friday’s Crop Production and World Agricultural Supply and Demand Estimates. "It is almost too late," he says. "We talked about the possibility of a V-bottom in the corn market. But, that was six weeks ago."
He says that if you have un-priced grain in the bin, you might as well wait it out. But, have a plan to make sales since there is significant downside risk in the corn market. For prices to rebound next year, Gulke says we have to get rid of the corn or not plant as much of it next year.
"We need to be thankful of the previous five years," he says. "Hopefully we can ride the waves on our retained earnings for a while. We’ve had some good times, and now we’ll have some lean times, but I think we’re pretty much prepared for that."
AgWeb will have full coverage of the Nov. 8 reports, following their 11 a.m. release.
Have a question for Jerry? Contact him at 815-721-4705 or email@example.com.
Gukle Group is holding a Technical Analysis Workshop on Dec. 5-6 in Chicago, Ill. Topics include: Introduction to Futures and Options, Technical Analysis made simple, Moving Averages, MACD, Trailing Stops, how to use fundamentals with Technicals and the current fundamental outlook. Contact firstname.lastname@example.org for more info or 707-365-0601
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