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$4 Corn May Become the Norm Again

February 2, 2013
By: Sara Schafer, Farm Journal Media Business and Crops Editor
unstable money
  

A huge crop in 2013 could pummel corn prices, says Jerry Gulke, president of the Gulke Group. He provides an outlook for this growing season.
 

It wasn’t that long ago that corn prices were around $3. Even though current corn prices are near $7.50, Jerry Gulke, president of the Gulke Group, believes prices will be closer to $3 for this production year, and maybe the next several years.

Gulke, who spoke at the Top Producer Seminar this week, is predicting that if the national corn yield average reaches 160 bu./acre in 2013, prices could fall to $3.40. That is, if a new demand source isn’t created.

Due to a short crop in 2012, overall demand for U.S. crops was reduced. "Our exports are terrible. We have cut demand for exports in half, and we still may have tight stocks."

Currently projections are showing corn acres for the U.S. to come in at 99.3 million for this year. Soybean acres are projected at 78.8 million acres. This will be the largest acreage for both crops in history.

Yet, what happens if the current drought lasts through this year? Gulke says the kicker in the price equation will be production levels. "We don’t know the crop size at this point, but what we do know is the demand side, and it is significantly less."

Gulke believes that if the drought does continue and the national corn yield average is 125 bu./acre, which is just a little less than last year, prices will reach $7.30. He says with the current demand picture, even 125 bu./acre can meet all needs. "We could get by with last year’s yield, which is scary."

If the national corn yield comes in around 152 bu./acre, Gulke believes prices will hover around $4.25.

Gulke says the high prices of 2012 lit a fire under other countries that can grow corn, and now U.S. corn has a lot more competition. "When you are running out of something, the price goes up and incentives the market to provide more. What we’ve done is entice the rest of the world to grow corn."

And, some other countries can sell grain for less than the U.S. "It’s not the lowest cost producer that gets the business, it’s the lowest cost seller," Gulke says.

Yet, Gulke reminds a large crop and low prices aren’t a bad problem. "Even if you grow 180 bu. corn and sell it for $4, that’s still $720 an acre."

He provides his weekly market analysis:

 

 

See full coverage of the 2013 Top Producer Seminar.

 

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Thank you to the 2013 Top Producer Seminar sponsors and co-sponsors:

Agrigold, Agrotain, Asgrow/Dekalb, Apache Sprayers, BASF, Bayer, Cargill, Challenger, Dow, ESN, Firestone, DuPont Pioneer, RCIS, SFP, Syngenta, Top Third Ag Marketing, Advance Trading, Integris, Michelin, Novozymes, Kennedy & Coe, Illinois Soybean Association, Water Street Solutions  

 

 


 

 

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COMMENTS (4 Comments)

jimmu
The best way to head off further price depression is to offer the corn the sane world wants to buy.... Non-GM products. Russia is the latest buyer to bail, headed for Brazil. My clients throughout the eastern belt are done with GM for lots of reasons, one of which is market and price. Wake up you producers. You are not the only show in town anymore. Folks don't want your distillers either.
5:13 PM Feb 26th
 
flipped56 - Sioux Falls, SD
In all honesty the American farmer for the most part is doing very, very well. It is not only because of good crops and prices, it is also due to good sized tax breaks and subsidies. I would venture to say that this does help the economy in some ways but in the long run is may not be helpful. The tax breaks are another reason why the land prices have gone so high simply because a good share of the saved taxes are used to buy land. Mega farms get the most in tax breaks so consequently are buying land with tax breaks money more so than smaller farms. What is the result? More wealth is concentrated in a smaller percentage of people and the farm lobbies promoted this to happen. Is this good for the country? Most sensible farm folks would say no....a mega farmer who was praised for being a mega farmer on this very website filed for bankruptcy shortly after getting that praise. Praised for going bankrupt?? While pushing many other financially responsible farmers in the area out of the business...and gets an award?? You decide if that is good for the area or the country....
9:36 PM Feb 4th
 
Harold Smith - IA
Only one solution. Burn up even more of our corn and soybeans into ethanol and biodiesel. That will raise the price in a hurry. Who cares if people and animals starve, at least us rich corn farmers will keep corn and land prices high. I mean, if we don't burn up some more corn then how will I be able to justify that 200 acres that I bought last year for $12K per acre on loose FCS loan qualification criteria. Farmland prices only go up, right...right? Us corn farmers are better than livestock farmers and all other farmers. We were hand selected by the Lord to burn up as much crop as possible into a fuel nobody wants and that gets 2/3 the mileage of gasoline and to raise food prices for everybody and bankrupt the livestock sector wih no environmental benefit.
12:03 PM Feb 4th
 
Harold Smith - IA
Only one solution. Burn up even more of our corn and soybeans into ethanol and biodiesel. That will raise the price in a hurry. Who cares if people and animals starve, at least us rich corn farmers will keep corn and land prices high. I mean, if we don't burn up some more corn then how will I be able to justify that 200 acres that I bought last year for $12K per acre on loose FCS loan qualification criteria. Farmland prices only go up, right...right? Us corn farmers are better than livestock farmers and all other farmers. We were hand selected by the Lord to burn up as much crop as possible into a fuel nobody wants and that gets 2/3 the mileage of gasoline and to raise food prices for everybody and bankrupt the livestock sector wih no environmental benefit.
12:03 PM Feb 4th
 



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