Are Corn Prices at a New Plateau?

07:00AM Jun 16, 2019
Corn Grain 5
Slow planting progress and poor growing conditions are sending corn and soybean prices higher.
( AgWeb )

Slow planting progress and poor growing conditions are sending corn and soybean prices higher. December corn was up nearly 30¢ and November soybeans jumped around 41¢ for the week ending June 14. 

“This weather market is one that we've not really had been privy to too much in the past—too much water,” says Jerry Gulke, president of the Gulke Group. “I know I never thought we'd see this widespread of a weather issue—all the way from South Dakota to Ohio. It's hard to get your head around just how bad it is.”

As a result, July corn broke above the May highs and is attempting a breakout above highs set a year ago.

“With a straight-up market like this, it really going to be difficult to pick the top,” Gulke says. “If you do, it's going to be sheer luck. I don't know if it's $5 or $6. It seems like a long time that we’ve been waiting for that $5.50 level that nobody thought we could ever see again. Yet cash corn is trading in some cases over $5 now because of the sense of urgency to get your hands on feed.”

Due to the unprecedented planting delays through June and likely prevent plant claims, USDA just updated its corn acreage and yield estimates for 2019. As of June 11, USDA shaved off 3 million corn acres, making the 2019 estimate 89.8 million. In addition, USDA lowered the national average corn yield to 166 bu./acre—a 10 bu. per acre drop from its original estimate. To round out the changes, USDA also dropped harvested acres from 85.4 million to 82.4 million.

“I think there was some tap dancing going on and USDA is probably going to have to lower this crop even more,” Gulke says. “I think if they lower the planted acres, then you have a reason to believe that maybe the yield would go up. But there's a lot of us out there think that even what's left up there that is growing, won't make 166 bu. an acre.”

Despite reporting just 60% of the soybean crop is planted as of June 9, USDA left soybean yields and acres the same in the June WASDE report.

“It was interesting that USDA didn't touch the 49 bu./acre yield that they projected for soybeans,” Gulke says. “Universities have charts that show that the later you plant soybeans how it negatively affects the yield. Now you almost have to take a look at the beans that were planting this late and say they're not a full-season crop. They’ll be more similar to what you get when you plant soybeans as a second crop after wheat. That's probably what we're looking at for a lot of the crop in the U.S.”

For instance, if the national soybean yield drops by 5 bu./acre, that’s equivalent to 400 million bu. based on how many acres USDA has allocated, Gulke says. 

“We have 900 million bu. too much right now,” he says. “But that could be cut in half just in yield alone.”

Gulke expects USDA to continue to fiddle with the corn and soybean production numbers. “I think this is there going to be a long-drawn-out affair,” he says. “It may be Jan. 11, in their final crop report, when they finally come to grips with it.”

Find previous audio and written reports with Jerry Gulke at agweb.com/Gulke

 

Read More

Jerry Gulke Takes A Long-Term Look at Corn Prices

Technically Speaking: Production Destruction vs. Demand Reduction

Jerry Gulke: Prices Blow Through Overhead Resistance; What’s Next?

Jerry Gulke: How Long Will This Weather Market Last?

 

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