After weeks of gnashing teeth and growing impatience across the Corn Belt, planters started rolling in earnest this week. Even as planting lags in the Eastern states of the major corn-producing regions, it appears this crop will get planted after all and some states will step up to produce more corn acres, even if North and South Dakota can’t come through with their original intentions to plant an additional 1.3 million corn acres this year, says Jerry Gulke, president of the Gulke Group.
Gulke, who took time from his own corn planting on Friday afternoon, says he has switched half of his planned soybean ground to corn this week. "I’ve heard of a lot of that in Nebraska and other areas. You can put any number you want at 200 bu. corn and 60 bu. soybeans, and it just works better. In my case, it’s worth at least $200/acre more net profit per acre for corn."
He still believes a loss of 400,000-500,000 acres of intended corn plantings in North and South Dakota is realistic. But that number can easily be made up in other states. In that case, the Dakotas will likely plant additional soybean acres, keeping an adequate supply of soybeans on hand for the next marketing year, as well.
Couple this planting progress with very weak export demand, and overall poor usage numbers, and the markets took a severe hit this week. Old crop corn tumbled nearly 70 cents for the week. New crop months didn’t fare as poorly, but December still dropped nearly 30 cents since last Friday’s close. Despite this, it may be too early to sign the death certificate of the bull market.
"We did this in 1996 when we were trying to rationalize the same thing. Back then we said there wasn’t a respectable hog that would eat $4.00/bu. corn. Yet it took us until June 30 to realize we hadn’t cut back as far as we had thought. If you take a look at the December corn chart from then, even at $4.00/bu. corn back then, we had a lot of volatility. We went down in May, and about mid-May it went higher. Then we went back down in June and it exploded into July because we really had to curb demand then."
In 1996, there was 70 cent drop and that "gave the end user another shot" at buying corn again. If that happens again, it remains to be seen.
Exports this week were lower, and it appears to Gulke that foreign customers are now looking to switch their use to the fall. As of now, you might be able to anticipate nearly 300 million fewer bushels used this marketing year. That doesn’t mean the market is going away, it’s just being diverted.
"I would look at what USDA says next week. They should lower yield expectations by two bu./acre, I think." That would result in a total production drop of 160-165 million bushels. Demand could very well follow suit, so in the end, it may not make any difference.