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The Upside of Low Prices

February 1, 2014
By: Sara Schafer, Farm Journal Media Business and Crops Editor
Dairy feedlot steers
  

While most grain farmers would love to see last year’s high prices, today’s lower prices are rejuvenating demand.

With grain prices, market expert Jerry Gulke says he doesn’t know for sure where prices are going, but he does know where they are not going – back up to record highs. But, he also doesn’t think they are headed too much further south, either.

Farming is entering a systemic change, Gulke, president of The Gulke Group, told attendees at the 2014 Top Producer Seminar in Chicago, Ill. "The easy money of selling high and buying low is gone," he says.

Hear Gulke's full audio analysis:

 

 

Record-high prices for corn and other grains turned on production in other areas of the world, Gulke says. "This global marketplace is now a two-way street," he says. Of course, more competition typically equals a much larger supply of grain, which was the case last year. This caused prices to drop.

But, today’s low prices are the source of some good news. Gulke says we are now in a demand-rebuilding state. "With today’s prices, we can buy demand back and slowly build our way out of this," he says.

The livestock industries, exports and ethanol will all be anxious to use $4 corn, Gulke says. "Our feeding rates go up when corn is cheap," he says.

Of course, $4 corn doesn’t sound as grand as the $6 and $7 corn seen recently. "But, I think most guys think they can make money at $4.50 corn, assuming they get a reasonable yield," he says.

With these tighter margins, Gulke says, farmers should really explore their crop insurance options for this year. He says farmers should aim for 85% protection. Additionally, he says farmers should look to reduce their input costs and cost of production, if possible.

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