Corn Glut Keeps Bearish Storm Brewing

November 8, 2013 10:00 PM
Corn Glut Keeps Bearish Storm Brewing

Friday’s reports confirmed the U.S. corn and soybean crops are huge. Jerry Gulke provides his take on what that means for prices long-term.

After a prolonged lack of crop size and demand information, USDA provided the market with its updated Crop Production and World Agricultural Supply and Demand Estimates on Friday, Nov. 8.

Here are the highlights:

Corn: national average corn yield is 160.4 bu./acre, up from the September estimate of 155.3 bu./acre. Total production is 13.989 billion bu., which compares to September estimate of 13.843 billion bu. and 10.780 billion bu. in 2012. USDA puts harvested corn acres at 87.232 million, down 1.903 million acres from the September estimate.

Soybeans: national average soybean yield is 43.0 bu. per/acre, up from the September estimate of 41.2 bu./acre. Total production is 3.258 billion bu., which compares to September estimate of 3.149 billion bu. and 3.015 billion bu. in 2012. USDA puts harvested soybean acres at 75.688 million acres, down 690,000 acres from the September estimate.

"You have to understand we raised the yield and lowered the number of harvested acres," says Jerry Gulke, president of the Gulke Group. "So, that basically put corn production up about 150 million bushels." He says corn demand was also raised.

Demand for soybeans and soybean meal was also increased. "Beans are what they are, since they are all pretty much harvested (as of Nov. 3, USDA estimates 86% of the U.S. soybean crop has been harvested)," Gulke says.

Hear Gulke's full audio analysis:


When Too Much is a Bad Thing

Even though corn and soybean prices all closed higher on Friday, Gulke says Friday’s reports don’t show long-term price support.

"For the corn yield, anything over 155 bu./acre was too much," he says. "We talked about that months ago, back when we didn’t think we were going to get 150 and now we’re at 160."

"The only hope left for corn is that they really reduce acres in South America and we don’t plant as many acres or don’t get as good of yields next year," he says.

But, he says there is still a story in soybeans. "We grow about equal crops in the U.S. and in Brazil, so it puts pressure on Brazil to grow more beans," Gulke says. "There’s an incentive to increase beans and decrease corn. But, how that crop evolves out of there remains yet to be determined."

Going forward, Gulke expects to see a sideways trading range, with around a 40-cent spread. Now that farmers know their total yields and cost of production, he says they should try to capture any rallies. He points out that a 40-cent swing is $60 an acre, if you have 150-bu. corn.

Planning for 2014

The book has pretty much closed on the story of the 2013 crop, Gulke says. "Once we get the corn harvested and in the bin, you can’t kill it anymore," he says. "We’re very close to say we have 14 billion bushels."

Gulke says as farmers start penciling out their 2014 crop mix, they need to remember that next fall is not going to be like this fall, where the bins were empty and farmers could store so much. Also, he says farmers should determine their exact cost for carrying grain and factor that into their marketing plan.

He says while prices seem somewhat stable now, next year holds great downside risk.

"If we produce another crop that is 1 billion bu. in excess of what we need, then we are probably going to raise the carryover by another 500 million bushels," he says. "That’s when the realization comes in that there’s no sense in paying $4.25 for September corn in 2014, when we have another big crop coming."

In the meantime, Gulke says many producers are seeing really strong basis. "Take advantage of good basis and let them have it," he says. "There’s nothing telling us corn will go back to $5."


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

Coverage, Analysis of the Nov. 8 USDA Reports
See all of the report data, coverage and analysis of the Nov. 12 World Agricultural Supply and Demand Estimates and Crop Production reports.

See current market prices in AgWeb's Market Center

Submit your own yield reports to AgWeb’s Corn Harvest Map or AgWeb's Soybean Harvest Map.


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