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Pressure on USDA to Increase Yields

09:50AM Oct 07, 2012

Market expert Jerry Gulke says if USDA doesn’t change their production estimates on Thursday, we have a problem.

Thursday, Oct. 11 will prove to be an interesting day for the grain markets. USDA will release its monthly Crop Production and World Agricultural Supply and Demand Estimates, in which it will likely reconfigure its corn and soybean yield estimates.

This week, Informa Economics raised its corn crop estimate to 11.194 billion bu. with a yield of 127 bu. per acre. It also says its "likely final" corn estimate is 11.147 billion bushels. In September, USDA pegged the crop at 10.727 billion bu., with a yield of 122.8 bu. per acre.

For soybeans, Informa pegged the soybean crop at 2.86 billion bu., with a yield of 37.8 bu. per acre. In September, USDA pegged the crop at 2.634 billion bu. with a yield of 35.3 bu. per acre.

Jerry Gulke, president of Gulke Group, says we could stand a 2 bu. per acre increase in yield, if there was also an increase feed usage. "We haven’t been liquidating the livestock herds as much as we thought we would."

Gulke says, if you have less and less corn, you have to use less. If you have more corn, you have to use more.

"My theory is for every 100 million bushels of increase in production, you’re probably going to get rid of two-thirds of that. If USDA changes nothing from last month, we have a problem."

He says if USDA doesn’t adjust its corn yield estimate, USDA could justify a billion bushel carryover next September. "That’s not good."

In soybeans, Gulke says he agrees with the around 2 bu. per acre increase, but he’s worried that a better-than expected U.S. crop and large South American soybean production could cause problems.

"The monkey is on the back of South America to produce more soybeans on more acres." If South America gets a big crop and USDA increases soybean yields by a few bushels per acre, there isn’t going to be a lot of pressure to produce soybean acres next spring, he says.

Listen to Gulke's full analysis:

Tune into AgWeb next week for pre-coverage of the USDA reports, as well as full report data and analysis on Oct. 11. 


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