Demand for corn and soybeans going into planting season is curbed, says Jerry Gulke. He explains what that means for prices.
Considering several key corn-growing states are still experiencing extreme drought conditions, predicting the size of the 2013 corn and soybean crops is a crap shoot. Will enough rain come between now and planting time to convince farmers to plant?
One thing that is known know, says Jerry Gulke, president of the Gulke Group, is demand for the 2013 crops will be reduced. "We have curbed demand ahead of time. We didn’t get a crop last year, and we had to ration demand last year."
U.S. corn export sales for delivery before Sept. 1 are 53% lower than a year earlier, and heading for the smallest annual total since 1972, according to a recent Bloomberg report.
"We’re entering a year where demand is for sale," Gulke says. "You can’t recover demand quickly for corn."
He says demand levels are always at what you could use last year. "If you don’t increase demand, then you really just need a crop the size of last year’s."
Gulke says until more clues to the supply side of the corn and soybean equation are revealed, the market will continue to focus on demand.
He reminds: "Getting around 200-bu. corn on my farm at $4 is the same profitability as around 100-bu. corn at $7."
His advice for farmers is to spend the next few weeks weighing the pros and cons of the various insurance and revenue protection options available to farmers. "We have a lot of ways to manage risk, and we’re going to need flexibility this year. This is not the year to just sell your grain out of the field."
Hear Gulke's full audio analysis:
February Price Trends
Corn prices have been trending consistently for the last few weeks, consistently down. Until Friday, corn prices retreated for 10 straight sessions. This was the longest decline in 48 years.
See an overview of this week’s market movement:
Reminder: Markets and government offices will be closed on Monday for Presidents Day.