The corn and soybean markets were already under extreme pressure, and the latest round of USDA reports continued the squeeze. On Sept. 12, USDA’s monthly round of Crop Production and World Agricultural Supply and Demand Estimates confirmed that bigger crops do get bigger.
Corn production was increased by 2% from August estimates and last year. It is now forecast at 14.8 billion bushels. Based on conditions as of Sept. 1, yields are expected to average 181.3 bu. per acre, up 2.9 bushels from the August forecast and up 4.7 bushels from 2017. If realized, this will be the highest U.S. yield on record.
Soybean production was also increased by 2% from August and 7% from 2017. Production is forecast at a record 4.69 billion bushels. Based on Sept. 1 conditions, yields are expected to average a record high 52.8 bu. per acre, up 1.2 bushels from last month and up 3.7 bushels from last year.
“I think corn was a shocker to a lot of people,” says Jerry Gulke, president of Gulke Group. “In the back of our minds, we knew this was the big crop. But I didn't think they would admit to 180 bu. per acre or more. The traders will say, ‘Well, if it's this good in September, and they haven't seen a lot of combine yet, maybe it's even better yet?’”
Luckily, Gulke says, USDA did slightly increase demand for corn.
“They didn't put everything into ending stocks, and that's good news,” he says. “We always say that we do not want to see them raise the yield and lower the demand.”
Even though demand is on the rise, Gulke says, the bottom line is: We're not going to run out of corn before we harvest the crop.
Gulke says he agrees with USDA’s high soybean yield estimates. “My concern is that we end up even higher yet when we get all done,” he says.
For the week, corn prices were down around 15 cents, and soybean prices were down around 13 cents.
“We ended the week negative, but we ended on Friday without collapsing again,” he says. “I think there's still some downside risk. We’ll probably go sideways for a while. It's going to be hard to work our way out from under these big numbers. But we're not doing a thing to hurt demand, that's for sure.”
Earlier this week, Gulke republished a previous Top Producer column, entitled: “The 800-lb. Gorilla.”
“If you read that, you’ll see my whole idea was that we were relying on 60% of our production going to China,” he says. “When you rely on a big amount going to one person, it wasn't good for either one of us. If we get into a fight for some reason, somebody's going to get burned. Well, we got that.”
Gulke says it will be difficult and a long process to grow demand in other countries to replace what has been lost with China.
“We cannot ignore the fact that 40% of global growth in soybeans and soybean equivalents is coming from the non-Chinese sector,” he says. “That sector has to double to offset the lion’s share of China’s demand for U.S. soybeans as recent as a year ago.”
Find more analysis and audio reports with Gulke at AgWeb.com/Gulke
Contact Jerry Gulke at www.gulkegroup.com, 480-285-4745 or 707-365-0601.