The jury is out whether we’ll produce a record corn crop, despite the probability of high yields
USDA this month lowered its estimate for planted corn acres. But Jerry Gulke, president of the Gulke Group, doesn’t think government forecasters have reached low enough.
"It is doubtful that 91.6 million acres estimate is correct," says Gulke, basing his assumptions off recent conversations with farmers. "We have few if any clients in North Dakota and Minnesota that actually planted their intended corn acres. Ditto for Michigan and Wisconsin."
One problem is that information for USDA’s June 30th acres report was gathered during the first two weeks of June. Moreover, the report revisited planting intentions made during the first two weeks of March. Gulke questions whether record rainfall north of I-90 and in the Northeast after the survey was taken changed how much corn was actually planted.
USDA’s data show that farmers in Illinois and Iowa planned to plant 400,000 fewer corn acres, even though they didn’t have to grapple with intense rain. Also, farmers in North Dakota, despite wet planting conditions, reported an increase in planting intentions.
"I doubt it!" Gulke says.
The broker is looking forward to USDA’s August 12th report, which will include the first survey based on actual yield observations, including failed acres.
Despite these question markets, given the downward direction of corn and soybean prices during the week, the market seems to be bracing for record corn and soybean production. Gulke says the general belief is that the corn crop is so good south of I-90 that it will make up for any losses incurred up north.
"We’re seeing some estimates of upwards of 300 bu. per acre corn, where they only got 240 before," he says.
Gulke’s assumptions are shared by many other analysts who also believe USDA has underestimated average corn yields. Darrell Good of the University of Illinois wrote this week that the market already seems to be factoring in an average yield of 170 bushels per acre, rather than the USDA’s official forecast of 165.3 bushels per acre.
That yield, when multiplied on USDA’s projected harvest of 83.8 million acres, produces 14.25 billion bushels, a record harvest. That’s 390 million more bushels more than USDA’s current projection.
Weather, as always, is a wildcard in any harvest scenario. Gulke says that much of the nation’s corn crop has reached pollination. Only an intense heat spell will prevent record yields. Also, persistent cold in the North could delay corn development and create a challenge for that region to finish strong.
Soybeans face a bigger potential weather threat than corn, he adds.
"The soybean crop may be behind a little bit because of excess moisture that we had," Gulke says.
Cold weather in August and early September could derail the crop. And some meteorologists have raised the potential for early frost. But even if evidence mounts, it may not affect prices.
"My perception is that the market will say, ‘You guys talk about that every year and it never happens.’ This will be the year that we have to be careful that it could happen. We haven’t had a major [early] frost since the 1970s."
Based on forecasts he’s seen, Gulke expects weather conditions in the Midwest to revert to normal next week, now that the so-called polar vortex has passed by. He reports that The Australian Bureau of Meteorology recently reported that the El Niño conditions it expects to develop over the next several months won’t be as strong as earlier predicted.
Meanwhile, all eyes are focused on the health and progress of the corn crop, especially in the region above I-70. In USDA’s most recent report, crop conditions were largely unchanged.
"I was near Galena, Ill., this morning, and the 160-mile drive from Chicago saw nothing but the greenest corn I have seen for this time of the year in memory," Gulke says.