How the Market Trades is What Counts

March 28, 2015 05:58 AM
How the Market Trades is What Counts

Since USDA conducted its survey asking U.S. farmers their planting intentions, market signals already have changed, Jerry Gulke, President of The Gulke Group, points out. So it is outdated before it even is released. “We could say the corn market now is 15-16 cents higher than it was at the time of the survey, and that’s what’s going to be reflected in the survey,” he says. Even the June Planted Acreage will not reveal the final outcome; it is October before RMA and FSA have data from farmers in government crop insurance or farm programs. That said, it is how Tuesday’s report matches up with expectations—and how the market reacts to the numbers at 11:01—that count. 

Gulke points out that the CME issued its survey of traders, which and found the average estimate is 88.7 million acres for corn, down nearly 2 million from last year, and 85.9 million of soybeans, up more than 2 million. Those are the sorts of numbers most surveys of traders/analysts are showing. “If the farmer numbers come in a million different in one direction or the other, the market likely would respond,” he says. “If we came in at 87 million for corn, the market would be explosive.” And such a response could change the outcome. 

Weather can play a huge role but it looks like weather looks to be “pretty agreeable” for planting, he says. “In some of the northern states that had unplanted acreage, it should be in this year because it is drier. The eastern part of the Corn Belt has more time to plant. The South won’t want to plant corn late because it puts pollination into the summer heat; they’ll switch to something else,” Gulke adds.  

Input costs

“I’ve seen some numbers out of the Federal Reserve that said 13% of less-well funded farmers may have trouble getting the same size loans they had last year. That could push those farmers toward lower-input-cost crops. But a lot of farmers whose yields are above their APH will figure the yield potential will make up the apparent shortfall. I can’t pencil in 70 bu. beans, but I may be able to plug in 200 bu. corn. And those whose land is paid off can make money at much lower prices.”


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Spell Check

Western, NE
3/28/2015 09:34 AM

  Good report until the last sentence basically "those farmers that have their land paid for can plant whatever they want and will make money at it." That's a very, very bad assumption Gulke. In today's environment of high inputs and confiscatory property taxes, even land paid for will have a tough time breaking even let alone giving you a return above your cost of equity!


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