Planting progress has caught up and is nearing the finish line. Jerry Gulke explains what high yields mean for price direction.
After a slow start, corn planting is now back on track. As of May 25, USDA estimates 88% of the U.S. corn crop is in the ground, which matches the five-year average. Of that corn, 60% has emerged.
"I’d say probably 79% of this year’s corn crop was planted into good conditions and is growing pretty well," says Jerry Gulke, president of The Gulke Group. "We now have the heat coming at the right time, so odds are we’ll get an above-average yield," he says.
Hear Gulke's full audio analysis:
USDA’s current estimates for the 2014 national average yield is 165 bu./acre. "The perception of the marketplace is El Nino is here and we’ll have a normal year," Gulke says. "We could probably, finally, reach a 170-bu. national yield."
A national yield near 170 bu./acre would be a high-water mark for corn. Here’s a list of the final yield tally for the last few years:
- 2013: 158.8 bu./acre
- 2012: 123.4 bu./acre
- 2011: 147.2 bu./acre
- 2010: 152.8 bu./acre
- 2009: 164.7 bu./acre
- 2008: 153.9 bu./acre
- 2007: 150.7 bu./acre
How Much Corn is Too Much Corn?
Gulke says if you take a high national yield multiplied by the 91.7 million acres of corn USDA is predicting; you equal a sufficient amount of production. He says carryover would come in at 1.5 billion to 1.7 billion bu. next year, which is enough to meet all demands for feed, export, etc.
As a result, the corn market has been taking a hit in May. Take a look at the December 2014 Corn chart:
"We’ve gone down for five days, up for 1 day, but corn prices have leaped lower over time," Gulke says.
Even with corn planting progress at an average pace, Gulke says some acres may not get planted. "If the corn crop is 95% planted by Monday, about 5 million acres, nationwide, will still need to be planted to corn," he says. "Of that amount, I figured 2.7 million acres are in the states that are in jeopardy. Are we really going to plant those 5 million acres?"
Farmers in North Dakota, Michigan, Ohio and Pennsylvania still have 30% to 40% of their intended corn acres to plant. Most of the farmers in the Red River Valley are averse to using prevented planting, Gulke says. "My son-in-law farms in Minot, N.D. and he says prevent plant sounds good on paper, but you suffer for it." It can take several years to get the land to reproduce again, Gulke says.
Farmers, who have options, Gulke says, will likely switch those corn acres to soybeans, sunflowers or other crops. "We’re hearing a lot of seed corn company salesmen say they have had an unprecedented demand for soybeans and returns for corn," he says.
By Monday, Gulke says, we’ll have a pretty good handle on the corn planting situation.
Have a question for Jerry? Contact him at 815-721-4705 or email@example.com.
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