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Needed: Below-Average Crop in 2013

February 10, 2013
By: Sara Schafer, Farm Journal Media Business and Crops Editor
pile of corn

Export demand continues to wane, meaning that last thing the U.S. needs is a record or even average crop this year, says Jerry Gulke.

USDA’s February World Agricultural Supply and Demand Estimates continued the same story of previous months: exports have fallen off a cliff.

In the Feb. 8 reports, USDA cut another 50 million bu. from the export forecast, dropping it to 900 million bushels. Yet, this was somewhat offset by a 20 million bu. increase in food, see and industrial use. Ethanol usage stayed steady, as did feed usage.

Overall, Jerry Gulke, president of the Gulke Group, says this report shows the feed guy is not backing off, ethanol continues to be profitable on some levels. And, it paints a pretty export picture.

"In reality, if we grow 125 bu./acre on 99 million acres this year, we grow enough to meet last year’s supply," he says. "We have reduced demand so much, we can get a crop like last year and it won’t hurt us."

What would hurt us? Trend-line yields.

"Anything above 150 bu./acre national corn yield and we have surplus problem for corn," he says. "We do not need a bumper crop in Iowa, Illinois in Nebraska. We need a below-average crop to meet expected demand."

Gulke notes that USDA increased its estimate for wheat feeding. He says that is a sign the industry belivest corn stocks are tight enough other feed sources must be found. For now, that is making the wheat market hold steady.

In soybeans, Gulke says carryover was lowered a little, by 10 million bushels. The most important soybean data, he believes, is the size of the South American crop. Even with some weather problems in Argentina, South America is on target to produce a huge soybean crop.

"If we grow an average soybean crop in the U.S, combined with South America’s output, we’ll have 1 billion bushels more soybeans next fall. We’re not going to increase demand by that much, not even China can do that. So the market really slammed November beans."

Hear Gulke's full audio analysis:

See all of the data, coverage and analysis of today's WASDE and Crop Production reports.



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COMMENTS (17 Comments)

"Below-average crop in 2013..." is flawed. We'll be faced with a couple of possibilities: 1.) help for ransom by countries are just waiting for us to go hungry. 2.) There are countries with millions of starving hoards waiting for us to offer help with food. 3.) Where is the bio-fuel we were promised?
8:54 PM Feb 10th
I think the idea here is to take what he is saying about market trends and use it to figure out how to avoid making a large mistake.

The first thing I would look at is dropping my worst rented ground (least productive or furthest away or most expensive). Actually I might drop most of my rented ground, other than the stuff I want to keep long term, and sell any excess equipment

The next thing I would look at is using less fertilizer on marginal ground because it doesn't make as much of a difference; actually a guy might put some marginal ground in pasture or forage crops, get a nice rotation and lose less money per acre.

Third, I would not buy any new equipment this year because it is at record highs and crop prices are about to drop through the floor,

Forth a guy might consider making forage and buying some cows to winter in the old feedlot.

No body can turn on a dime in this business, but if you make a few changes on the right year you can avoid losing your shorts by not paying record rent, record prices for inputs, and record prices for equipment knowing every for every $10 you borrow you will have between$8-$9.75 to pay it back at the end of the year.

Then you pray for good conditions and a big crop on your homeplace, the widow next door's and so on, and thank God you decided not to rent from the absentee landlord on the other side of the county where everyone who ever farmed that worthless rock-patch has gone broke eventually.
7:02 PM Feb 10th
Jason - Richard, SK
Mr.Gulke, if what you say is true then we would expect you to lead by example. Put your money where your mouth is and let your land sit idle for awhile until the market says otherwise. Why grow a $4 dollar crop if it's not profitable anyway? Somehow I think your the type who will tell every other farmer to cut back while you attempt to grow a bumper crop for yourself.
3:22 PM Feb 10th
jsmith4130 - IL
This article shows how arrogant and greedy the grain farmers have become. Everyone who needs corn is going broke on less than $7 corn. Look back to 2009. Input prices will fall when the price of corn comes down. These people know you cant pay their high prices with cheaper corn. If you have to have $7 or more for corn, it wont matter if you plant it or not, no one can afford it!
11:38 AM Feb 10th
B1 - Rogers, TX
Jerry as Businessman Farmers need to lay out some production instead of planting 99 million and cutting there own throats. Do the math $4 versus $7 You can lay out 15% and pay rent on it and come out way better financially and have little expenses on the 15% But we will plant it all and then whine next 5 years because it wont cash flow at $4. Same ole Same ole!!!!
8:33 AM Feb 10th
I don't know what happened, when I wrote my last response, I put 250 plus hogs meaning the hogs were heavier than buyers would allow then and it came out 250 dollars. 250
8:11 AM Feb 10th
Thomas, some things have changed and will be hard to undo. Retailers can't stand to see farmers making tons of money and figure they should have a bigger piece of the pie. So all input costs have gone up as well as the rent. Around here, land prices have shot up dramatically and the rent has to follow. Even $300 is now possible. According to this website
$4.42 is break even price of production. There are items that can be reduced like labor and maybe the rent which at $258 might be high in places but low in others. farmers who have locked in input costs might get by cheaper but $4 corn will make a lot of farmers dependent on farm payments to make a profit.

Now if the fert & chem suppliers are willing to cut their prices back down to previous levels, it could be done. I think there is room for machinery manufacturers to cut prices, but do you really see that happening short term? Am I the only guy who thinks a half million is too much for a combine? That a sprayer could be built for less than they charge? All farmers would have been better off if corn and beans had not hit these high prices. In the long run, it's going to put some out of business.

Monopolies and price fixing are illegal so they must be only charging what they need to make a modest profit and there just isn't any room for price reductions in all areas of inputs. Our government is still protecting us from price gouging, right? Just think where we would be if they started allowing vertical integration with these big companies. LOL

I think we all feel for the livestock producers and wish there was an easy solution for all but I don't know what it is. We used to raise hogs until the packing houses cut our prices so low we couldn't afford to raise them. One farmer waited for prices to go up but then they wouldn't buy $250 hogs and he went from town to town trying to market them. Can't outfox them buyers.
7:58 AM Feb 10th
northeighty - MN
Dear farmer 123, I agree with your logic on not hoping for a dry year. I'm not sure though that Mr. Gulke was asking us to pray for another drought but rather he was simply using statistical evidence to tell us what may happen in the event of either a dry or more ample rain scenario.
I do strongly disagree, as I hope others reading your message do, with your use of an inappropriate word. As a farmer, you are insulting not only your intelligence but the rest of farmers as well if it is read by non-farmers. We don't need more city people bad mouthing us when so many legislative issues are on the table for us including the enviormental and anti- livestock groups. My suggestion is to clean up your poorly stated rhetoric into something that has a higher value for reading. As a farmer I would appreciate it as I would guess many other farmers would also. Thanking you in advance.
9:07 PM Feb 9th
Northeast Texas - brashear, TX
I will really " take with a grain of salt" any comments by the Gulke group from now on. This is truly an unbelievable analysis of the grain situation.
7:35 PM Feb 9th
Are you kidding? What kind of self-centered person are you? Thousands of people have lost their jobs, and some have lost their farms, because of three years of sub-par weather. Corn farmers can live with $4 prices, cattle, pig dairy and poultry producers are struggling to make ends meet. Eight poultry producers have taken bankruptcy since 2008. Our corn export customers this year will be able to buy less than half the volume of just a few years ago. For the first time in modern history, on a global scale family budgets are being squeezed by food costs. And to this you say "We need more?" You sound like an Iowa corn farmer or ethanol producer. Callous beyond belief! To heck with everything else, bring on $10 corn!
7:33 PM Feb 9th



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