Despite a wild week in the grain markets, Jerry Gulke says there's still reasons to be hopeful about our economy.
It’s been a down week for the grain markets, with soybeans and wheat both taking hard hits. The soybean market broke its sideways trading range by posting a key reversal down, despite initial support from a trucking strike in Brazil.
Wheat fared no better, dipping to new lows in light of a rising U.S. dollar that raised concerns about its competitiveness on the global market.
“When you have too much, wheat gets priced as a feed grain; when you don’t have enough, it gets priced as a food grain, and right now it’s going to have to compete with corn,” on the feed market, says Jerry Gulke, president of The Gulke Group.
But despite the down market, Gulke remains optimistic about the country’s economy. A government report released Friday pegged the unemployment rate at 5.5%, with U.S. employers adding 295,000 jobs—a 12th straight monthly gain above 200,000.
“I just have rose-colored glasses on when it comes to our ability to do things,” Gulke says. “We’re the best economy and the best country in the world, and we’re proving that now, even coming out of bad times.”
In short, more consumers have money in their pockets, and more people are looking for jobs.
“That bodes well for our overall economy,” Gulke explains, “and while agriculture is taking a set back, the jury’s still out yet on how bad it might get. But certainly, there are cash flow problems coming at these prices.
“What’s concerning to me is that there are a lot of farmers out there who still have last year’s grain left, and they’re going to plant more of it…. Let’s just hope we don’t produce ourselves into a big ending stocks problem that we can’t come out of in one year.”
Listen to Gulke's full analysis:
Even though the wheat market was hurt by the dollar’s increasing value, exports remained strong this week, with soybean sales above the five-year average. But, Gulke says, freight rates have been exceptionally low, and combined with low prices, that’s kept the U.S. competitive. The question is, how long will it last?
“I’ve been concerned about the rising dollar—others have, too—and we’ve not necessarily seen (the impact) yet. Maybe that day is coming,” Gulke says.
“If you look at the dollar historically…we aren’t even half recovered from the total collapse from 2001. We’ve got some room to rally the dollar yet. That concerns me, that could give us some fits. We’ve got to be the lowest cost producer in the world, including some effects from the dollar.”
Gulke says he doesn’t expect too much excitement to come out of the March 10 WASDE and Crop Production reports. Rather, he’s looking ahead to the March 31 Prospective Plantings report.
The crop to watch this year: Corn.
Gulke says he expects farmers who had successful crops last year will plant the grain again this year, particularly southern growers. His concern is whether farmers in the fringe states—and even the major corn states—will follow suit.
“We dare not plant as much corn as we did last year, and the sooner we realize that, the better,” Gulke says.
He’s not as concerned about soybean acres.
“A million acres more or less in beans won’t make much difference,” he explains. “There’s too many, so you might as well have too, too many and have not quite enough corn and maybe hold one commodity up.
“Hopefully, we’ll keep treading water here to where spring planting weather will be more important than perhaps it might’ve been otherwise.”