USDA’s Planting Intentions and Grain Stocks report have changed the focus from ample supplies to just enough and it’s sent the bulls running.
“The corn acreage figure is probably the highest number we’ll see,” says Jerry Gulke of the Gulke Group. “And we haven’t yet made the record yield USDA used.”
The 288 million bushel drop in grain stocks could be due to a one-year boost in feeding and ethanol use, Gulke notes. “It appears that my earlier conjecture that we might see 250 to 350 million bushels of higher use due to poor efficiency was correct. We are hearing from livestock producer clients that they are feeding more to get the same amount of gain. We may not see that with the 2010 crop if quality is better.
However, he adds, “China is likely to buy 3 million bushels net year, but it is having weather problems. If it buys more, we may find we don’t have enough corn.
“What this report means is that we need an additional 2 million to 2.5 million acres and good yields in 2011 just to maintain normal carryover,” Gulke says. “The market will have to ensure those acres through prices that offer us farmers incentive to plant.”
Livestock Feeders Need Risk ManagementLivestock feeders are fighting each other and ethanol plants for supply, Gulke notes. “Game changers like this bring home the need for risk management. If corn gets over $4, buyers definitely need to take action.”
Sound Soybean Yields Needed
Gulke isn’t so sure about future acreage numbers for soybeans. Because USDA’s survey was done June 1-15, farmers still intended to plant. Weather may or may not have negated those plans.
“We still have August to go,” he reminds. “If weather trims just 1 bu./acre, that’s a loss of 70 million bushels. With carryover expectations down to about the same as this year, we won’t see prices below the low $8s. And the market still needs to send the message to South America that we need a big crop there as well.
For Gulke’s updates to supply and demand based on the June 30 reports, visit www.gulkegroup.com and use the “more information” form or email Ashley@gulkegroup.coma>.