With market prices strong, are we headed for a dilemma of not enough crop acres to fill the cropping demand of American farmers? Jerry Gulke, Illinois farmer, veteran commodity trader and frequent voice to American farmers, suggests such an acreage battle may be looming. And U.S. Department of Agriculture supply/demand table that theory.
Gulke noted since prices peaked in 2012 with soybeans at $17 and corn at $8, overall price direction of American crop commodities trended downward until ‘price discovery’ came back again this season.
Gulke comments, “Rarely do we producers have the luxury of making planting decisions based on profit potential — regardless of planting choices. But now I’m having concern about enough acres of corn and soybeans to meet 2021-22 demand, while having enough access for a yield cushion just in case.”
On the Nov. 30 Linder Farm Radio noon show, Lynn Ketelson said wheat farmers too are projecting expanded acres for 2021.
Gulke is saying soybean stocks under 190 million bushels could be an understatement. A year ago, USDA estimated Chinese usage at 85 million metric tons. Current estimates are near 100 mmt this year and 105 mmt next year. Carryout evaporates this 2020-21 marketing year if South America production falters more or usage estimates are still too low.
On corn, unchanged acres (91 million) for 2021-22 takes ending stocks number to 1.4 billion bushels, leaving no cushion for adversity. Gulke says 94 million acres of corn is needed to rebuild that market cushion.
He also noted Russia has wheat production issues; the Ukranian corn supply dropped 10 mmt affecting their exportable supplies; price action is not an issue for China as currency issues are not as relevant when stock are tight.
In Gulke voice, “Technical price chart action brought me to the dance to warn of a turnaround last August. The media is running amuck with innuendos. Price auction is already indicating not IF but HOW robust the competition for acres will be in 2021.
“I can see 94 million acres of corn, but not 90 million acres of soybeans. The needed 10-million-acre increase of U.S. production is a tall order for 2021. Price is a great fertilizer. I’ll go home with the one that brought me to the dance to help ascertain how high is high enough!”
Gulke cushions his ‘bottom line’ with these three factors: South American weather/production; Chinese demand exceeding expectations; and Covid-19 and its implications to encourage building strategic reserves.
History teaches us Gulke is generally right when sounding off. And as usual, his advice is no guarantee of profitable projections. And at our morning coffee table brain storming sessions, we don’t make any guarantees either.