Bears Bump Bulls in Market Tug-of-War

August 16, 2013 11:00 PM
Bears Bump Bulls in Market Tug-of-War

Jerry Gulke provides analysis on this week’s reports and explains what it will take to get a bullish situation back in corn market.

USDA hit the market with a double whammy this week. On Monday, Aug. 12, USDA released its monthly Crop Production and World Agricultural Supply and Demand Estimates report, which included its first round of forecasts for yield. USDA surprised the trade by lowering yield projections for both corn and soybeans.

USDA pegs this year’s corn production at 13.8 billion bushels, up 28% from 2012. That sets a new record for U.S. corn production. The national average corn yield is forecast at 154.4 bu. per acre, a 2.1-bu. decrease from the July estimate. If this yield is reached, it will be the highest average yield since 2009.

For soybeans, USDA estimates total production at 3.26 billion bushels, up 8% from 2012. If realized, that would be the third largest production on record. Soybean yields are forecast to average 42.6 bu. per acre, only 3 bu. higher than this past year’s national average.

Jerry Gulke, president of the Gulke Group, says USDA and NASS acknowledged the impacts weather had on this year’s crops. "They basically said: You didn’t get your crop in on time, and you didn’t get rain in July," Gulke says. "So, based on 20 years of data, NASS doesn’t think farmers will get a record crop."

Gulke says USDA was optimistic about the size of this year’s crops in February, but have continually lowered those expectations as the year has progressed.

Regardless, there is still a huge corn crop in the ground. Gulke says even with lowering yield, along with export and feed and residual usage, the projected supply of corn at the end of next year is pegged at 1.8 billion bushels. "If you lower yields and still have 1.8 billion bushels left over, you’re in trouble," he says.

Hear Gulke's full audio analysis:


Prevented Planted Acres Top 7 million

Another big report this week was the Farm Service Agency’s acreage update. FSA shows 7.711 million acres as prevented planting for the 2013 crop season.

As of Aug. 1, 7.711 million acres have been reported to FSA as prevented planting for 2013. That’s a sharp rise from the 1.238 million acres the agency said were unplanted in 2012.

Here’s how corn, soybeans and wheat fit into that total number of prevented planting acres:

  • Corn: 3.411 million
  • Wheat: 1.743 million
  • Soybeans: 1.619 million

Gulke says the total number of prevented planting acres was higher than most thought.

Market Turn-Around?

Corn prices finished the week slightly higher and soybean prices showed a larger gain. But, Gulke says the market can’t hold the gains right now.

"We can’t get a bullish situation back in corn unless we have a frost/freeze by the middle of September," he says. "We need something else out there to help the bullish case."

For farmers who haven’t sold much grain this year, which is the majority, Gulke says they should ask themselves: What was it that made you think you shouldn’t do anything? Has something changed since then?

"We know a lot more now than what we knew, even a few months ago," he says. "It makes the decision to not do anything a little bit easier."

Gulke says there’s money to be made in holding your crop after harvest. "The market can’t use all the corn at once," he says. "It is going to say, ‘Please don’t sell it now, I’ll pay you more to sell it to me later.’"

A lot of farmers have empty grain bins, Gulke says, and will be able to store a lot of this year’s crops. "So we may see a pretty bare pipeline," he says. "I think we need to watch that and take advantage of it. But, you have to have a plan in mind to do it. You can’t just wait until June because by then, the carry might disappear."


Have a question for Jerry? Contact him at 815-721-4705 or


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