For the week September corn lost 1 ¾ cents, December corn was 2 lower, September soybeans dropped 11 ¾, November soybeans were 11 ¼ lower, September soybean meal fell $6.00, September soybean oil gained 98 points, September soft red winter wheat was 8 ½ higher, September hard red winter wheat tacked on 14 ¼, September hard red spring wheat was 8 ½ higher.
Corn and soybeans lower for the week as the markets were pricing in more favorable weather in the Corn Belt and positioning before the Aug. 12 WASDE Report. Private estimates were released ahead of the report as well as average trade guesses.The estimates put yield at 182 bu. per acre on corn, down from USDA’s 183 bu. trend line yield and 52.9 bu. on soybeans compared to USDA’s 53 bu. projection.
Crop Condition Update
Prior to the report, Jerry Gulke, president of the Gulke Group, conducted his own crop tour in Illinois to get a better sense of the crop’s yield potential.
He traveled from their branch office at Hinsdale, Illinois, which is about 25 miles west of Chicago, and then branched out in Central Illinois.
“I didn’t see a problem anywhere. Not a yellow leaf in the corn and not a yellow leaf in the beans.”
However, he stopped at several locations in Dekalb County and found corn with tip back, pollination problems and short ears. This is typically an area with rich and productive soils and record setting crop potential.
“This is probably the worst I’ve seen in the years that I’ve farmed there, and 1988 was bad. I know in DeKalb County, that year we had a 140 bu. corn yield, but that’s when we were getting 150, 140 back then,” he describes.
He says the best corn he found was actually in his own backyard in northern Illinois.
The soybean crop was similar in DeKalb County, with short beans in contrast to northern Illinois which he says is as good as last year and could be even better with another rain to fill out the crop.
High Variability Means Lower Yield
Gulke says they have clients across the Corn Belt and conditions are highly variable with farmers in central Iowa and Nebraska reporting good crop conditions, while in North Dakota the crops are suffering from heat and drought.
He thinks the U.S. corn yield is below last year’s record 186.5 bu. per acre and could be closer to 180.5 to 181 bu. per acre.However, Gulke is not certain USDA will lower the yield in this report.
“I’m a little nervous as to what we’re going to find from the government and what they’re going to see because they’re getting farmers surveys, observations. And, you know, last year the farmer said he had a record crop in just about every state. We don’t see that this year and farmers out west say the crop is not as good as last year.”
Even with the wide variability he doesn’t think it will be accurately reflected in the Aug. 12 WASDE.
“We’re going to have to wait until September to get any real meaningful results from the ground,” he adds.
Risk Management Pre-Report
Going into the report, what should farmers be doing for risk management?
Last year USDA raised corn yield in the August WASDE to a record 188.8 bu. per acre, only to end up lowering yield in the September report after incorporating actual field data.
The USDA also increased acreage and could again this year based on the FSA certified acres.
Gulke says their annual farmer survey is showing strong corn acres and so the report could provide higher acreage than expected.
With that risk in mind, he says producers can use options for price protection.
“I’m not a fond user of puts and calls, but I’ve used them in the past and have some on now. If you’ve got a lot of grain sold, then you might want to buy an option, a call option. If you look at the September calls, for both corn and soybeans. They only last about another 18 days, but it gets you through some more weather and the report,” he explains.
He says farmers can buy some decent protection for five to seven cents on corn, and around 10 cents on beans.
“I look at it and say, if I got a bias and I think this crop’s not there, I’m probably going to buy a call. And just in case the market, they blindside us and we come in with 180 or 179, you know, 180 bushels. or 179, that’s still a good corn yield.If you’re negative and think the crop is 186 or something and we get blindsided by bigger yield and more acres the market will probably move one way or the other more than the call costs.”
If the market doesn’t do anything it takes the premium out of the options quickly and Gulke says a farmer can lose half of what he/she spent.
Another option is to buy inexpensive short-dated calls according to Gulke.“And that’s kind of like buying protection for really two days but by Wednesday, you’re going to know.”
Gulke adds his firm is also getting calls from many clients that have a large percentage of old crop corn left they need to move before the end of August to make room for the new crop.
For more information you can contact Jerry at info@gulkegroup.com.
