Feeling bearish and considering selling 2016 crop corn? Think again, says Jerry Gulke, because the outlook for grain prices looks very different after USDA's June 30 Acreage and Grain Stocks reports.
In corn, “we touched and closed on highs that we haven’t seen since a year ago,” said Gulke, president of the Gulke Group in Chicago and a farmer in Illinois, who says lower acreage, smaller than expected stocks, and trendline yields could cut into the supply.
“We could see carryover drop down—without any cut in demand of course--to under 1.4 billion. That’s a long way from the 1.9 (billion) that people are talking about and the horrendous stocks we thought we were going to have,” he said. “It makes it real interesting. Now you can’t afford going forward in July, August and September … to lose any more yield. (You also can’t) afford to find out that the government found even less acres out there.”
It suggests tightening supplies for this year—but particularly for 2016.
“If you plant the same acres we do this year and get the same yield that we’re going to get this year, carryover drops to 1.1 billion,” Gulke said. “Somewhere along the line, if you don’t get the price of corn higher than what it was since we made the decision to plant corn and if you don’t keep it above $4 or $4.18 or $4.25 in the 2016 crop, you could have a tight situation next year.”
Listen to Jerry Gulke’s full comments:
Such trends suggest to Gulke that farmers could see some price growth in corn in the months ahead.
“It tells you if you are really excited and really bearish and you want to start selling 2016, 2017 crop because we’re never going to get out from under this oversupply, you better think again because this whole fundamental situation changed on (June 30) and we do not know yet how this thing is going to play out,” he said. “But I do think that $3 cash corn is probably a figment of our imagination going forward. That’s the good news.”
Are you feeling bullish or bearish on grain prices these days? Let us know in the comments.