Gulke: Strong Demand Tempers Shock of Big USDA Yield Numbers

August 13, 2016 06:00 AM

As bearish as USDA's estimated 175.1 bpa corn yield sounds, Jerry Gulke says there's no need for growers to panic, given the strong demand numbers also released today.

Between higher exports and greater feed and residual usage, corn usage is expected to rise by 300 million bushels in the 2016/17 crop year, eating into this fall's  expected bumper harvest of 15.2 billion bushels. "Our demand went up," said Gulke, president of the Gulke Group in Chicago and a farmer in Illinois. "Had we not raised yield as much as we did, this would have been a very bullish report."

And the market agreed. Despite the release of potentially record-breaking yields and production, corn closed up just over a penny at $3.22 for September contracts and $3.33 for December contracts.

While those prices are below the cost of production, they also aren't as bad as they could be. Given the big crops expected, "we're not going to go very high, but we're probably not going to go much lower" either, Gulke said.

He added: "it's a minor victory if  we can close less than 20 cents lower in beans and less than 10 cents in corn" on a day when USDA released such high production estimates.

The veteran analyst and farmer did find cause for optimism in the soybean numbers, despite the record numbers of 48.9 bpa for yield and 4.06 billion bushels for production.

Soybeans "were down doing into the report," Gulke noted, and then USDA boosted the estimated yield. "They raised (the yield) over 2 bushels per acre," he said. "I didn't think they would do that this soon."

But like corn, soybeans seemed to shrug off the bearish figures, closing at prices just 2 to 3 cents lower, thanks to a modest carryover of 330 million soybeans for 16/17, despite this potentially massive crop.

"There is good and bad in everything, and the good news is that we are not doing anything to curb demand," said Gulke. "We talked a lot in April and May how the market was doing everything it could (in terms of rallying prices) to get us to plant every acre of soybeans we could."

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Spell Check

logan, IA
8/13/2016 09:40 AM

  So the market did everything it could to rally bean prices so we would plant more beans, and so we did and the market went down. And prices would be bullish for both corn and beans because we have more demand if we hadn't over produced? But we did so now they are under the cost of production. That is our reward for producing more?" Our farmers deserve praise not condemnation and their efficiency should be cause for gratitude not something for which they are penalized." J F K said this over 50 years ago, apparently, it still doesn't work that way.

Mark C. Daggy
Humboldt, IA
8/13/2016 11:31 AM

  Just don't sell, and in the future remember the ignorance of over production. Controlling greed should be the advice to the farming community. All grain farmers would make much more profit if they stopped pushing for more acres and more yield....and spent time controlling access to their grain. The Coops, who should serve the grain farmer, instead want inexpensive grain to sell to livestock conglomerates and ethanol plants. We need a selling window in which all corn sales are halted until corn hits $6, sell until corn drops below $5 and at that price shut off all corn sales and the price of corn resets to $6. If the expectation of all grain farmers is $6 to $5 per bushel for corn. The slogans of "feeding the world" and/or "being a great asset to the American masses" is total BS. The government programs and insurance guarantee over production and cheap food....accompanied by survival prices. Rural America is dying, and controlling access will fix this problem. Food costs need to triple in America to be on par with other developed countries like Germany and Japan. I am working to get into a bully pulpit, like the Corn Board and encourage controlled access to grains by decreasing production.

Cambridge, WI
8/13/2016 10:26 AM

  You can view the report in both a negative as well as positive context. I would prefer the latter as actual production will not be known until after harvest. We as producers can be thankful that what we produce is in great demand. What I thought was going to be a negative report at the start ended up being quite positive. Thanks to Jerry for his time and perspective on these markets as well. Wishing everyone a safe harvest season. May God bless the American farmer.