Déjà vu All Over Again?

 
Déjà vu All Over Again?

The general negativity in the market feels frightening familiar to many producers who were around before the big run-up in prices a few years ago. This week, all the ag markets were lower with the exception of cotton and soybean oil. For a table showing where prices ended up and how deep the red ink was, click here.

The live cattle market, which lost more than $4 this week, and feeders, which lost $7.93, were due for a break and seems to have run out of gas, says Jerry Gulke of the Gulke Group. He notes that we’ve seen about a 50% drop in hog prices since last fall but retailers didn’t pass on cheaper pork to consumers. Now they are buying at lower prices for grilling features later. That may shift consumer demand to pork. “As we saw when corn came off about $7.50, once you turn demand, falls like a rock. It is is like trying to catch a knife," says. "Producers really have to lock in a margin.”

Regarding crops, he adds, “The only good news is that with profit margins being squeezed, it might reduce acres a little. Old-crop soybeans closed the day and the week at their lowest price of 2015. Technically, that isn’t good.”

The dollar is our nemesis, Gulke says. It takes some time to have an effect but that now is kicking in. South America hasn’t hardly missed a beat. We’ve been hurt more than they have. If everyone has a reasonable crop this year, we're going to have to find a way to become least-cost producers. It’s not going to be easy. We’ll have more bumps in the road ahead of us. I’m surprised land prices haven't fallen more already but we'll get an update this summer and I think it will show they are." 

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Comments

 
Spell Check

Jeff
Stockton, IL
4/13/2015 06:30 AM
 

  As producers we have done a good job of buying into the hype of "feeding the world". In order to meet this so called demand and survive we have been told to become more efficient (more acres,bigger machinery,more technology) which produces more commodities. As soon as prices of commodities rise what do we do but strive to produce more by breaking out marginal land for production and in turn add to supplies. American farmers are experts at becoming efficient but at what long term costs. Having survived through the '80s, it looks to me like we are positioning ourselves for similar consequences. Do we keep on this track so we can demonstrate how to pay for $300,000 combines and $10,000 land with $2.00 corn and $6.00 beans? Expect to see the government be asked for a "bailout" in the future.

 
 
Sam DePino
Chatsworth, IL
4/12/2015 01:52 AM
 

  In my humble opinion, Gulke is always spot on and worth listening to. It has seemed to me for the 21 years I've been a farm owner and screwed up many times marketing my grain. that ttoo many of the "paper farmers" don't care whether our corn is 1 dollar a bushel, but do if it gets too high for them to make a BIG profit. I have no problem with anyone making a fair profit and am not sure I am right. It just appears that way to me. After all, if the prices go up 15 cents, a holder of a thousand or multiple thousands of bushels(or other measures of their products) selling could bring $150 more per thousand bushels. Big holders, i.e.. individuals, funds, big ag biz etc, of course, probably have higher turning points in such, but they can make profits whether the commodity is low or at a certain point in highs. Mr Gulke, am I at least partially right with this theory. I am all for everyone profiting in the market, but when prices get well below the cost of producing the product, we are in deep doo doo that is useless as a fertilizer, or motivator. The old saw and truth is supply and demand dictate our income and we only have some control over what we supply. Of course, the goal is to get as many bushels to the elevators as possible and we want lots of whatever. Perhaps there are formulas beyond what we can afford to produce enough to support our families and maybe even have enough some left over to buy some land or take a real vacation. As 145 tillable acre owner, I find it impractical to own high priced equipment and moreover, to even buy more land. The powers that be...the people with the most...and the middlemen need to consider us smaller farmers when they don't back off their higher prices and adjust as we have to. Anyway Jerry, keep up the good work and maybe in another quarter century my children will be able to do all those things or at least have a more comfortable retirement than I anticipate. Thanks to all of you who read this lengthy comment.

 
 
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