After soaking rains hit the upper Midwest this week, should we still expect a record corn crop? Jerry Gulke offers his insights.
"Rain makes grain," the old saying goes, but after storms trashed fields in the upper Midwest this week, producers in the region are probably thinking "rain ruins grain."
Farewell, record corn crop. Or is it?
"The general belief at the board of trade is that ‘rain makes grain,’" says Jerry Gulke, president of The Gulke Group. "I had a comment from a trader who said there’s no such thing as too much water, because what you’re losing where there’s too much water, you’re gaining where it isn’t flooding. But I would beg to differ."
Hear Gulke's full analysis:
Up to 6 inches of rain fell Thursday night in northern Iowa and southern Minnesota, causing widespread flooding and mudslides in an area that was already set back by a late planting season. Some areas also experienced damage from hail and tornadoes. So far, 35 counties in Minnesota and three in southern Wisconsin have declared a state of emergency.
"I think as we see the reports coming out of Minnesota and Iowa, there’s significant grain that’s not just waterlogged but under water in some cases," Gulke says. "Of course, that’s going to subside and drain away and look better, but I think we’ll do some damage to corn irrespective of the fact that it dries up later."
Gulke says some farmers in the area are taking 10% to 15% of the yield potential off of their corn, and will likely turn it into crop insurance. "So there’s a little reluctance to go in there and spray it with fungicide or something to help things along," he says.
There is one silver lining from all the damage, though: Corn futures closed higher this week. But will the rally continue?
The answer is anyone’s guess. Gulke says the market has been pricing for a potentially record crop, but now it’s all in Mother Nature’s hands.
"There’s just a lot out there that can change these markets," he says.
Soybean prices, meanwhile, have been resisting the pressure of a potential global surplus, and this week posted a weekly key reversal higher.
"They took out the previous week’s low and the previous week’s high, and closed above the previous week’s high," Gulke explains. "Which means we have the highest close, believe it or not, in the last four weeks."
Gulke suspects the market is questioning whether all the anticipated soybean acres were planted, and whether some that were planted were lost in the recent bout of wet weather.