Patience. Yep, that’s it.
“This is no time to take wild chances,” says Jerry Gulke, president of the Gulke Group. “We all need to exert some patience right now. The one good thing about low prices is they eliminate the need for decisions—there’s not many decisions to make when you’re at ground zero.”
July corn was down 5¢ and July soybeans up nearly 10¢ for the week ending, May 1. July wheat down 14¢.
Soybean prices were supported by China purchases, Gulke says.
“USDA recently came out and said they had no reason to believe that China was not going to honor their commitments,” he says.
That included an announcement by China to add about 10 million tons of soybeans, 20 million tons of corn and 1 million tons of cotton to its state reserves. Gulke says this move is important for U.S. grain demand and could even be an idea for other countries to emulate.
“If we didn't learn from COVID-19 how astonishingly something can disrupt the food chain, shame on us,” he says. “I think it would make sense for the importers to develop some storage facilities called a ‘strategic reserve.’ I think it makes good common sense.” (Read more of Gulke's thoughts on a strategic reserve.)
U.S. Corn Planting Charges On
The 2020 U.S. corn crop is being planted at a nice clip. As of April 26, USDA reports 27% of the U.S. corn crop is planted, which compares to a five-year average of 20% by late April.
“We knew the weather was good,” Gulke says. “I think the market knew we were going to make good progress, and we did. I think that was in the market.”
The combination of good planting weather with low ethanol and feed demand continues to pressure corn prices. The May corn contract sank below $3 per bushel.
“That's pathetic,” Gulke says. “You subtract 70¢ from that for a basis in North Dakota or subtract 30¢ in Northern Illinois, and it doesn't work out.”
At least with prices this low, farmers with 85% crop insurance have defined support. The 2020 corn crop insurance price for 2020 is $3.88 per bushel, a level which December corn prices hit this week.
“If prices don’t get any better those with 85% coverage are at least covered,” he says. “You don’t need to put on new hedges or make panic sales. You can just wait until October to see how it is and get the insurance payment.”
Gulke says the markets need a weather event, most likely in the form of dryness, for them to ignore the rapid planting progress in Midwest. “We have no weather premium in any of these markets.”
The current price forecast combined with the health and economic impacts of COVID-19 are causing unprecedented stress levels for farmers, Gulke says.
“This has probably been my most unhappy time in farming since I started nearly 50 years ago,” he says. “It just is not fun anymore. We're down here for a reason, and that we came down here pretty quickly—in about six weeks. You would think enough is enough. Prices will probably only go higher or sideways until you know more information. That's the sad truth about the situation we're in.”
Yet, Gulke remains optimistic and he hopes other farmers do, as well. Now is the time for patience.
“We put a seed in the ground every year and we expect it to grow,” he says. “So far, in my career, it has not failed to come out of the ground, so we’ve got another year ahead of us.”
Find more written and audio commentary from Gulke at AgWeb.com/Gulke
Follow comprehensive COVID-19 and agriculture coverage at AgWeb.com/coronavirus.
Check the latest market prices in AgWeb's Commodity Markets Center.
Jerry Gulke farms in Illinois and North Dakota. He is president of Gulke Group. Disclaimer: There is substantial risk of loss in trading futures or options, and each investor and trader must consider whether this is a suitable investment. There is no guarantee the advice we give will result in profitable trades. Past performance is not indicative of future results.