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Terrifying Corn Supply/Demand Situation Unfolding

August 4, 2012
By: Sara Schafer, Farm Journal Media Business and Crops Editor
8 1 12 IL corn ears
This photo from a McHenry County, Ill., farmer was submitted to AgWeb’s Crop Comments. “Very sad,” he says.   

The 2012 drought is causing severe repercussions throughout the crop, livestock and energy industries.

 


The 2012 corn crop continues to shrink. Farmer and market expert Jerry Gulke says his own crop is nearly deteriorating in front of his eyes.

"I went out in my fields this week," says the president of the Gulke Group. "It was one of my fields that if you drove by it, you’d ask: what drought?"
 

He chose a random row and picked 10 cobs. The results weren’t pretty. Half of the cobs were only half-filled with kernels.
 

"If I get 70 bushels to the acre, I’ll be happy. There were enough stalks there for 200 bushels or more, until June’s weather hit."
 

The depressing yield situation Gulke is seeing in his fields, is common across the country. So common, that Informa Economics drastically chopped their corn yield estimate on Friday. Its corn yield projection is now 120.7 bu./acre. However, the firm's is expecting a final national average yield of 131 bu./acre.


"The market tried to trade Informa’s corn yield estimate on Friday. We were up about 21 cents in corn and closed above $8."
 

USDA Updates Yield Estimates

On Friday, Aug. 10, USDA will release its first survey-based estimates for corn and soybeans. Currently USDA’s national corn yield average is currently 146 bu./acre. If they drop it down to the mid-120s like Informa, Gulke says we have a demand nightmare on our hands.
 

He says reducing feed needs, ethanol use and exports down to make Informa’s 120 estimate pencil out looks like an almost impossible job.
 

Gulke says on a recent CNBC segment, it was reported it takes 3 lbs. of corn to put a 1 lb. of gain on a hog, 5 lbs. of corn to put 1 lb. on a cow and about five times as much to make a gallon of ethanol. "There’s going to be a real push out there to do something about ethanol."


The general public, Gulke believes, is not going to want to see meat and food prices increase, at the expense of ethanol.
 

"If we allow ethanol to kill the livestock market, then we’ll have to buy our demand back. It has some repercussions for quite awhile. I don’t know how we solve this in the short-run, but I think we need to keep the pipeline flowing for the animals."
 

Not the Year to Store Grain

Gulke says he expects most farmers to sell their grain immediately this year, as opposed to storing.

"I’m going to harvest corn about three weeks earlier this year. If corn is still $8 out of the field, they’ll probably get all of mine. If beans are still $16, I don’t think I want to take the chance on storing."
 

The Next Round of Market Information

Gulke says Friday is bound to be interesting and the entire globe will be watching for USDA’s estimates. AgWeb.com will have full coverage of the reports and a special early analysis piece with Gulke.

 

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.
 


 

See Comments


 
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COMMENTS (13 Comments)

dennis1
Just maybe it is about time for the people in this country
to realize that grocery shelves being full is a luxury, and
NOT a given right, either by God or the government.
10:08 PM Aug 5th
 
- Richland, MI
Is it really true that Jerry is the only one to think about the demand problem at this time? No politition is going to allow USDA to tell the American public how serious the food problem really is. Only those of us in the food chain can see the handwriting on the wall.
8:19 PM Aug 5th
 
TOM - KENNEWICK, WA
When a guy harvests his corn he should consider using a machine that leaves his cornstocks in a nice dry clean windrow so he can make big bales (4x4x8) of cornstock.

If you put one small bale of good alfalfa to each big bale corn stover or cornstocks and put it in a round feeder the cows can do good on it I am told.

If you can get it to dry and keep it clean it is great feed and then you can get your own cows so you can keep the numbers up as well as make a good move by buying low and selling high in the spring.

Or you could just sell the baled cornstalks, collect the money, and at the same time help keep the local livestock producers going so you can sell to him next year.
1:12 PM Aug 5th
 
digger - Fostoria, OH
Schafer and Gulke got their facts wrong. One bushel of corn produces 2.8 - 3 gallons of Ethanol plus the DDGs. Take Ethanol away and gas prices would shoot up and soybean meal would follow because it would have to replace the DDGs. In the end, what have we accomplished, but shoot ourselves in the foot.
1:10 PM Aug 5th
 
teakettleking - sumner, IL
The corn market is a zero sum game. There are three big users of corn: feed,ethanol, and exports. The higher prices will probably dry up the export market first. It's the most expendable, and the easiest to rebuild. Just let the free market work!
9:26 AM Aug 5th
 
teakettleking - sumner, IL
The corn market is a zero sum game. There are three big users of corn: feed,ethanol, and exports. The higher prices will probably dry up the export market first. It's the most expendable, and the easiest to rebuild. Just let the free market work!
9:26 AM Aug 5th
 
downunder - will
past propaganda debated that ethonol did not take food from the hungry. now the truth is clear.wake up america your goverment interference is worse than russia and look how poor they have ended up.
5:14 AM Aug 5th
 
PullMyFinger - Chappell, NE
As sensible people tried to point out from the beginning ethanol blended fuels must sell at a FAR cheaper price than regular fuel or else #1 no one will buy it and #2 clueless people will call for it's demise every time corn prices get close to the cost of production.
12:56 PM Aug 4th
 
ssmillertime - billings, MT
tell me if iam wrong but dont you get dried distillers grain as a by product of the ethanol plants , and dont you feed that to cattle it supposablly has more crude protein in it than just ground corn > so alot of the corn used for ethanol goes back to the feed industry !!! granted its not as much but it is not just going to ethanol , nobody ever reports that < they just say ethanol is driving feed cost up it just made another market for corn and we need it !
11:31 AM Aug 4th
 
kbarniak - Pavilion, NY
The ethanol plants are already beginning to shut down. I am tired of farmers saying that we need the government to do something. The ethanol subsidy is also gone, which is funny since I never heard farmers complain about the corn subsidy that kept corn cheap for decades. If there is less meat then the consumer will have to pay more. Cheap meat is not a right. Maybe they will learn that food does not come from the store after all.
10:17 AM Aug 4th
 



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