U.S. corn and soybeans are in higher demand than experts were predicting. With its April 9, World Agricultural Supply and Demand Estimates and Crop Production reports, USDA provided a surprising take on U.S. supply and global demand.
"We were expecting the situation to be much tighter than anybody thought," says Jerry Gulke, president of The Gulke Group. "But, it came in much tighter than even we thought."
Listen to Gulke's full audio analysis:
USDA increased project corn exports by 125 million bushels. For soybeans, imports are projected at a record 65 million bushels. Soybean exports for 2013/14 were increased 50 million bushels to 1.58 billion bushels.
"We’ve been hearing that a lot of beans have been coming into the U.S. from places like Argentina," Gulke says. "But there is also a lot coming across the border from Canada." He says current soybean prices will continue to attract imports from other countries.
Will the Supply Situation Change 2014 Acres?
In its annual Prospective Plantings reports, USDA laid out an overall theme of less corn and more soybeans. For 2014, USDA expects 91.7 million acres of corn (down 4% from 2013), 81.5 million acres of soybeans (up 6% from 2013), 55.8 million acres of all wheat (down 1% from 2013) and 11.1 million acres of cotton (up 7% from 2013).
"Conventional wisdom would indicate the recent price surges for corn would attract more acres," Gulke says. But, poor basis, lots of unpriced grain and transportation issues could deter farmers from switching plans.
North Dakota farmers are predicted to decrease corn acres by 900,000 million acres, the largest corn-acre decline of any state. But, Gulke doesn’t think these prices will entice the state’s farmers to plant more corn. "I think it will take more than $5 corn to buy back 1 million acres of corn," he says. "If you do that, what will you steal the acres from?"
He says that if on the 91.7 million acres of corn farmers have a 163. bu./acre national yield and stable demand, carryout would come in at 1.6 billion bushels. "This really puts the emphasis on planting the acres and getting high yields," he says. Yet, with fringe areas of the Corn Belt switching to other crops, the national yield may increase, if key Corn Belt states see advantageous weather.
"This report has a lot of implications," Gulke says. "We are right back to the weather market and we are going to learn a lot from this next year."
His advice is to watch how the market’s close today and at week’s end. "That will give us an indication how the rest of the people view this thing."
Complete Coverage of April 9 USDA Reports
Read AgWeb's full coverage of the April 9 reports, which include USDA's Crop Production and World Agricultural Supply and Demand Estimates (WASDE).