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How to Prepare for $4.50 Corn

April 21, 2012
By: Sara Schafer, Farm Journal Media Business and Crops Editor
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A record corn crop could be in the cards for this season, which may send corn prices spiraling downward.

 
 
The past few years, corn has definitely been the golden crop of choice. Record-high prices and a favorable outlook have pushed millions of acres into corn production. With the near-perfect start to this growing season, those high prices of the past may not be part of the future.
 
Jerry Gulke, president of the Gulke Group, says Informa released a report this week that looked how much corn was harvested in September, over the last 11 years, in the major corn-growing states.
 
"They are predicting nearly 500 million bushels more corn could be harvested in September compared to last year, which is almost three times the normal."
 
Gulke says that’s almost like having stocks sitting there to be used in September. He says this will really add a question market to how long old-crop corn stocks could be considered tight.
 

Corn Price Slide

On Friday, Mary 2012 corn closed at $6.12, July 2012 corn at $6.03 and September corn at $5.45. (See current grain prices in AgWeb's Market Center.)
 
"We’re down at $6 corn," Gulke says. "If we get all of our acres planted and have normal yields, we could go down to $4.50 corn, certainly in the cash market. To not think we can’t drop another dollar a bushel is a little naïve."
 
Gulke says he encourages his clients to plan ahead and use marketing tools so they don’t have to sit around and wish Iowa or some other location to have a bad corn crop. "That’s a bad place to be in."
 
At this point, he has all his farming operation’s corn 100% sold.
 
"If I was just selling now, I wouldn’t want to be more than 25 to 40% hedged. Time is on your side. You may get a second chance."
 

Soybean Prices Shine

Because such a focus has been on corn, Gulke says the market is trying to buy bean acres back.
 
The enticement is clear. On Friday, May 2012 soybeans closed at $14.46, July 2012 at $14.49 and September 2012 at $13.95. "$13.50 for new-crop beans has to have a lot of people thinking about planting soybeans," he says.
 
The economic incentive is definitely there, but Gulke says farmers who are thinking of changing their acreage mix need to exercise a little caution.
 
"Anything I switch, I’m going to contract half of those bushels to the elevator or some other form of risk management so I don’t get caught holding more beans than I wanted."
 
 

Related Audio Report:

Listen to Gulke's full market audio analysis.

 


 

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COMMENTS (2 Comments)

NW Iowa Farmer - IA
I'm laughing. If corn drops to that price, the government better brace for an entire meltdown of the crop insurance companies. Insurance alone will make sure I get between $800-$1000 gross on my fields. Drop the price to $4.50 and let them break the crop insurance companies. LMAO.
8:11 AM Apr 23rd
 
NW Iowa Farmer - IA
I'm laughing. If corn drops to that price, the government better brace for an entire meltdown of the crop insurance companies. Insurance alone will make sure I get between $800-$1000 gross on my fields. Drop the price to $4.50 and let them break the crop insurance companies. LMAO.
8:11 AM Apr 23rd
 



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