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Why Hold Grain?

September 3, 2011

 

 

In the face of rising prices and declining yield projections, Jerry Gulke had a strange dream on Thursday night. That dream would transfer risk to the end user and away from the farmer.

"I thought, wouldn’t it be great if the morning the September crop report came out and it was bullish, that everyone said they were going to sell all their crop?"

Click to hear the full interview with Gulke.

That would mean the farmer has a known profit early on and the end users get the crop they need. Then the market can play out as it will.

"For me personally I can’t imagine storing $7.50/bu. futures price corn in the bin. I don’t know that I want to take that risk. I look in the back of my semi when it’s full of 1,000 bu. of corn and it’s worth $7,500. That’s about $1,500 more than soybeans were worth 10 years ago."

At some point, be it through demand changes or catastrophic economic news, Gulke believes this market is set for a correction. At these prices, profit is likely built in and he’s going to be happy with that on his farm.

Unemployment numbers released Friday morning don’t paint a rosy picture. For the first time since 1945, no new jobs were added in the month of August. With that struggling economy, people may have to look at changing their eating habits. Particularly if grocery-store prices for protein continue to rise.

"We are going to have be more, not only more astute marketers, that goes without saying, but we’ll have to be more flexible. We have to use futures and options more selectively and more often. We’re in uncharted waters and we’ve never been with these high prices before to know how the end user population will deal with this. Will the consumers be able to pay the high prices needed to eat the animals we’re going to feed this $7.00-$8.00/bu. corn. I don’t think it’s there with the economy."

Driving this is the fact that Gulke believes sooner or later, grain buyers will stop placing orders further than 30-40 days out. That then places more risk back to the farmer. For now, he’s not going to let that happen to him.

 

 

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RELATED TOPICS: Corn, Weather, Marketing, Crops, Economy

 
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COMMENTS (8 Comments)

farmerjones - MN
Jerry is right on with his comments. Farmers are always the most bullish right at the top of markets. How much profit per acre do you need? $9 corn, $15 beans, get real! The demand base is already starting to be destroyed at $7 corn.
Obama adding trillions to the national debt, I do not think so. Remember who got us into this national economic mess? It was not our current President!
6:36 AM Sep 8th
 
farmerjones - MN
Jerry is right on with his comments. Farmers are always the most bullish right at the top of markets. How much profit per acre do you need? $9 corn, $15 beans, get real! The demand base is already starting to be destroyed at $7 corn.
Obama adding trillions to the national debt, I do not think so. Remember who got us into this national economic mess? It was not our current President!
6:36 AM Sep 8th
 
farmer72
This is the first time I feel like I got dumber for reading something from this guy.
1:57 PM Sep 6th
 
farmer72
This is the first time I feel like I got dumber for reading something from this guy.
1:57 PM Sep 6th
 
WhyMeJake
I sometimes think that all these people who are giving advice to the farmers are pawns of big business. Maybe that isn't being fair but I don't understand how anyone can reach such conclusions.
OK, let's pretend for a moment that the economy tanks and inflation hits. Duh, all of a sudden that cash price of $7.50 is a very cheap price. Especially if we have inflation hit 25, 50 or even a hundred per cent. I hope that doesn't happen, but after Obama added trillions to the national debt, how long can this last?

Encouraging farmers to dump their grain now when it appears to be the shortest supply in my memory seems utterly ridiculous and coming from such a learned man seems troubling at best. Sell now????? Really??? Before corn hits $9 and beans hit $15? Maybe we can get another government report where they find millions of bushels they missed before?
9:11 AM Sep 6th
 
HARVEY - BROCKWAY, MT
What was the price of gas, fertilizer, and fuel 10 years ago??? People like you aren't working for the good of the American Farmer.
10:56 AM Sep 3rd
 
HARVEY - BROCKWAY, MT
What was the price of gas, fertilizer, and fuel 10 years ago??? People like you aren't working for the good of the American Farmer.
10:56 AM Sep 3rd
 
PullMyFinger - Chappell, NE
Instead of constantly declaring current grain prices to be so "high" let's take a look at the price of ANYTHING else. Sure enough, grain is the cheapest thing on the planet, as always.
8:51 AM Sep 3rd
 



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