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Gulke: Don’t Give Your Grain Away

05:51AM Sep 06, 2014
grain bin storage

As yield projections inch higher and the corn prices sink, Jerry Gulke wants farmers to act as though they have nerves of steel.

"The key is to get that stuff put away," says Gulke, president of The Gulke Group in Chicago. "We have more of an ability to manage our financial outcome by having grain storage on the farm or by looking for an elevator. You don’t have to sell it just because everyone wants to give you a dollar a bushel less than you think it might be worth, just because you have 10 percent too much."

He says: "It’s a cat and mouse game, and it’s going to be decided by who’s going to blink first."

Listen to Gulke’s full analysis here:

With all eyes on Thursday’s WASDE reports, that will be important to remember. Gulke still has plenty of reservations about the acreage numbers being used by the government, due to the number of fields that were flooded earlier this year, but he does expect yields to be revised upward, to roughly 170 bu. per acre. "What we’re getting is higher and higher yields on lower and lower acres, which what has kept production right around 14.2 billion bushels," he says.

But there’s still plenty of uncertainty in today’s market, especially for those farmers getting hit by basis challenges. "Farmers are already looking ahead, and they’re saying, ‘if this is all you’re going to pay me for this crop for the next 18 months until I plant and harvest another crop, I’ve got a huge financial cash flow problem.’ Gulke says. "Why would I sell something at below the cost of production in many areas? I don’t care how cheap you farm in North Dakota, $2 a bushel, $2.50 a bushel doesn’t cut it."

He thinks the market is somehow trying to account for those types of decisions in current grain prices. "They see, ‘Hey, we’ve got too much now, but what is going to happen a year from now? How much demand are we going to build at $3 corn?"

He urges farmers to do their homework, calling multiple elevators to make sure they’re getting the best price they can and sitting tight if the price and basis get too brutal. "If we give it away, shame on us," says Gulke, who says government commodity loan programs may be a better option for some than selling their grain at such low prices.

He says the next year could be interesting as other countries step up their corn production, creating more competition for U.S. farmers. "We were probably at $7 corn for too long," he says. "We invited too many people to the party."