News

JANUARY 19, 2013
By: Nate Birt, Farm Journal Social Media and News Editor

Corn and wheat enjoyed favorable market conditions this week as they continued riding on the Jan. 11 USDA reports, says Jerry Gulke, president of the Gulke Group.
“What we can say is the report was bullish, and it extended,” Gulke says. “In other words, not just for a week, but now we’re extending the second week. And going into a three-day weekend, you would think this thing would set back more than it did. Sometimes you lose half of what you gained … . I think the market’s still concerned, in the grains at least, how are we going to curb demand and can we do it enough?”
Meanwhile, new numbers from Informa Economics show an increase in planted acres for corn.
“I think we have to remember that Informa does this stuff using some economic model,” Gulke says. “They compare cost or return on investment or what’s the growth in beans versus corn, and the net profit, and as those fluctuate they have a tendency to change their acres. The USDA does the same thing.”
The decision by Cargill to close a cattle processing plant in Texas had repercussions this week, as well.
“The cattle market and feeder cattle market does not look good,” Gulke says. “It is a bad situation that says that if you buy feeder cattle here and you’re going to pay more for corn, you’re not going to make any money. And I think this week we lost about $40 worth of potential profit in live cattle … . So if it was bad, it got worse this week, and that’s what we’re trying to digest.”

Friday’s USDA reports injected some excitement into the markets. Jerry Gulke provides analysis.
Historically, the reports USDA releases around Jan. 12 are major market movers, and this year’s were no disappointment.
Yesterday, USDA released its Annual Crop Production, monthly Crop Production, Grain Stocks, Winter Wheat Seedings and World Agricultural Supply and Demand Estimates reports.
USDA estimates the total 2012 corn crop to be 10.780 billion bushels. In 20122, the corn crop was 12.358 billion bushels. USDA’s national average corn yield came in at 123.4 bu. per acre, compared to 122.3 bu. per acre estimate in November. Corn harvested acres were estimated down 346,000 from November, which was more than offset by the increase in yield.
Jerry Gulke, president of the Gulke Group, says the information released in the reports should provide some support for the corn market. “USDA lowered harvested acres and increased production. But, the kicker was we dropped carryover. We produced more, but will have less left over going into next year.”
USDA increased corn feed and residual use 300 million bushels from December, to 4.45 billion bushels. Gulke says this increase could be credited to livestock producers locking in feed prices early in 2012. “Maybe they loaded up when they saw the dry weather coming earlier this year.”
Gulke says the updates USDA provided on Friday should lead to some exciting times in the corn markets. “I don’t know how high it will go,” he says. “What I do know, when you’re given a financial report like this, corn shouldn’t close below today’s lows going forward.
For soybeans, USDA increased 2012 production to 3.015 billion bushels, up 44 million bushels from the November estimate. It pegged the national average bean yield at 39.6, up 0.3 bu. from the November estimate.
Gulke says the bean market was down hard, following the reports. “Really, there is no good or bad news in beans. Now we’ll start to focus on Brazil production.”
As for wheat, USDA estimates 41.8 million acres of all wheat has been seeded, which is up 1% from 2012. Gulke says the trade was expecting to see a much higher amount of wheat in the ground, which could have some looming implications.
“We’ve got a crop that not only went into dormancy in poorer condition than you wanted to see, but you also have less acres than expected. That would imply the guys in wheat country are going to plant more corn or beans.”

Landowner newsletter reports:

Based on history, expect a fourth consecutive year with below-trendline corn yields in the Midwest in 2013, says Iowa State University climatologist Dr. Elwynn Taylor.

“Historically, severely deficit precipitation years of the magnitude of 2012 do not recover to normal annual precipitation in a single year. Accordingly, an additional year of significant moisture stress is considered to be not unlikely and a fourth consecutive year of below-trend U.S. corn yield is a distinct possibility,” he says.

Taylor points to the precipitation patterns that followed the droughts of 1956 and 1988 – the two driest years in central Iowa since 1950 prior to 2012. “In both cases, the subsequent year also received below-normal precipitation and experienced below-trend yields in Iowa,” he states.

“It is not likely that subsoil moisture will be fully replenished by the beginning of the 2013 planting season.”

He says the precipitation outlook will become more definitive in the early weeks of 2013 as the likely phase of the El Niño/La Niña for the growing season becomes more clear. Writing in an online forum sponsored by Reuters, Taylor said he is using a corn trendline yield of 160 bu. an acre for 2013, based on USDA’s past 30 years of crop data. He also wrote he sees the 2013 U.S. corn yield at 147 bu. per acre compared to USDA’s 2012 estimate of 122.3 bu. per acre.

By: The Columbus Dispatch (Ohio)

While Big Oil and multinational food corporations continue to spend millions shamelessly exploiting this year’s drought in key agricultural states by spreading misinformation about American-made corn ethanol and the Renewable Fuel Standard (RFS), the fact remains the RFS is achieving what it was designed to do.
Some of these attacks come on the heels of a Nov. 16 decision by the U.S. Environmental Protection Agency declining waiver requests to suspend the RFS for 2012 and 2013. The RFS is a requirement that renewable fuels be blended into petroleum transportation fuels such as gasoline.
Blending corn ethanol into gasoline reduces our reliance on foreign oil, helping to meet our nation’s goal of energy independence. In 2011, thanks in part to corn ethanol, the U.S. imported 485 million fewer barrels of oil — greater than all the oil we import from Saudi Arabia.
The drought certainly has had devastating effects on many families, but waiving the RFS will not change that. We are very sympathetic to those in the livestock industry who are concerned about the corn price and supply, as many corn farmers raise livestock as well. However, even the EPA’s analysis of more than 500 scenarios confirmed that only a 1 percent reduction in corn prices would have occurred had the RFS waiver been approved.
The corn price plays only a minor role in the cost of food, as it makes up only 3 cents of every dollar spent on food at the grocery store. One fact conveniently left out of the rhetoric about food prices is that world crude-oil prices have more than doubled since 2005, a much more significant component of food cost than corn. According to the U.S. Department of Agriculture, a 50 percent increase in the farm price of corn means just a 0.5 percent to 1 percent increase in food prices at the grocery store. Even a questionable anti-ethanol study commissioned by the National Council of Chain Restaurants notes that any potential price increase in corn related to the RFS would be nowhere near 50 percent.
Recognizing the small impact the price of corn has on the cost of food, this study designed to disparage ethanol could suggest that any food-price increases as a result of corn would be nearly imperceptible to the average consumer.
Corn growers throughout the country have met all needs, and despite the recent drought, are expected to harvest the eighth-largest corn crop in recorded history this year. Only the starch in the corn kernel is used for corn ethanol, while the protein and nutrients return to help feed our animals.
Even with all the uncertainty, projections are there will be enough excess corn this year to fill the Empire State Building more than 20 times.
Finally, the ethanol industry supports more than 400,000 American jobs and is the most readily available and economical American-made renewable fuel on the market. Allowing access to the fuel market for ethanol through the mandate of the RFS is the only way to break the petroleum monopoly that has […]