Farmers who expected Informa Economics to challenge USDA’s assertion of a sizeable corn and soybean crop faced disappointment this week, says President Jerry Gulke of The Gulke Group. What could have been a kill-shot to overall crop strength actually bolstered USDA’s August reports
“They didn’t do us any favors,” Gulke tells “Weekend Market Report” radio host Pam Fretwell. “They actually increased the soybean yield a little bit, even though they lowered some of the acres, and they think there’s going to be even less acres out there, they’re pretty optimistic about the corn yield. They have a lot of respect in the business. They confirmed kind of what USDA is saying. I would have liked them to come out and say, ‘Boy, USDA missed it. Here’s what we see, and it’s 4 bushels less,’ or something. They didn’t do that. It’s kind of like taking the wind out of my sails.”
Reducing the odds of a supply scare further is the fact that a major frost event isn't likely.
“We’re hearing there’s no killing frost in the next two weeks, and even if it did come, you’re not going to kill many bushels of beans,” Gulke says. “Now we run out of time to kill the crop, so to speak, so what else could go wrong? Some places got rain, and where it’s bad, we know it’s bad. Where it’s good, there at the beginning, a little better especially in the soybeans. That scared me for a long time. We are going to have to deal with what we have, and now it’s going to be up to the demand side of the equation.”
Review Marketing Strategy. For farmers wondering what to do next about their crop marketing plan, Gulke suggests looking into tools such as calls.
“If you say to yourself, ‘Doggone it, I missed $3.80 or $3.90,’ well, look at how much they would pay you for a $3.80 or $3.90 call,” he says. “That’s the option for someone else to own your crop, and they’ll pay you maybe 10 or 15 cents for the right to own your crop, 25 or 30 cents higher. If you’re right, keep the 15 cents; if it doesn’t go up, you keep that premium. If you’re wrong and corn goes up over $4, that just means you’ve got a second chance to sell corn at a profit, and that’s better than selling it down in a hole.”
Yet many farmers don’t use futures and options, instead choosing to sell out of the field as they did two years ago amid higher commodity prices.
“It was the degree of how much profit you were going to make when you sold the grain,” Gulke says. “Now it’s the degree of how much you’re going to lose selling it against how much you made in your paper profits by hedging it off at $4 or $3.90 or $4.50 or whatever. Some people who have sold corn, they tell me they have averages of close to $5 because they sold it two years out. They looked ahead and called their elevator and said, ‘I’ve got to book some corn, 20% at that level, because I can make money there,’ and they managed the farm as a business. I think this is what’s going to come out as to how many guys did that, who’s selling at the bottom and who’s going to make a profit yet this year.”
On-farm storage should continue to be a consideration, as well, Gulke says.
“Act like a mini-elevator,” he says. “Usually you can make in bad times where there’s too much, and they pay you to carry it, you can hedge your corn off and a basis gain and a carry in the market, if you can hold it until next July or next May or June, you can make from 40 to 50 to 60 cents a bushel, depending on where you’re at. That has served a lot of people well. The easy money’s gone. It’s all about nickels and dimes now and not about quarters and half-dollars.