Are the grain markets on pause or just building up a charge?
The week started out with a bang. On Monday, March 10, USDA’s World Agricultural Supply and Demand Estimates (WASDE) provided the trade with a few surprises. (Read full coverage of the March 10 reports).
But, for the week, grain prices didn’t make major moves. "An orderly market should stop and think a little bit to catch its breath," says Jerry Gulke, president of The Gulke Group. "I think that’s what it’s doing right now."
Hear Gulke's full audio analysis:
This pause in the markets is fueled by several factors, Gulke says. The first is farmers have to make their crop insurance decisions by March 15. The spring insurance prices are at $4.62 for corn and $11.35 for soybeans, which means there is some major market risk before insurance kicks in.
Additionally, the questions are still swarming around this year’s acreage mix. "For soybeans, a lot of private forecasts are suggesting bean acres may be 1 to 2 million acres more," Gulke says. "That has the bean market nervous."
Universally, Gulke says, forecasts are predicting less corn acres. "I don’t think there’s anybody out there thinking we will plant more corn acres than last year," he says. "We did some brainstorming and you could end up with 92 or 93 million acres of corn and 83 million acres of beans. You could grow enough acres of both to where a below-average yield would not be price explosive."
Gulke says corn acres need to go below 90 million acres to make the market nervous. "That’s a 5-million-acre reduction," he says. "I just don’t know if we can do that, especially by the March 31 reports."
Until crop insurance and acreage decisions are made, Gulke doesn’t expect the markets to drastically move one way or another. "The market is doing a few things that give me pause," he says. "I figure we’ll be smarter in a week. We are in an interesting market that we didn’t think we’d see three months ago."
The Word in Farm Country
Gulke spent the week traveling through Minnesota and the Dakotas. He was shocked to see no snow in the Dakotas. "We may see an early spring there," he says. "It actually looked like spring there this week."
Gulke’s other key takeaways from farm county: