Sleepy Grain Markets Wake Up

March 2, 2018 04:00 PM

The corn, soybean and wheat markets all broke out to the upside this week. December corn closed above the magical number of $4, and soybean prices exploded despite prospects for a strong crop in Brazil. After constant pressure to the downside, wheat prices posted the highest gains of the three crops.

“Depending on your cash flow, everything is profitable again,” says Jerry Gulke, president of the Gulke Group. “Boy, it can turn around quickly. That’s why we preach flexibility. Just when you think you’ll never see $4 corn again—we blew right through it.”

The market fundamentals changed quickly in South America, Gulke says. In Argentina, crop conditions are facing severe drought conditions. The country is a leader in corn and soybean production and exports more soybean meal than the U.S.

As a result, the unfavorable weather conditions created some buyer panic for corn and soybeans, Gulke says.

“The market is saying, ‘I don’t care how many acres you want to plant, Jerry. We need them all because of South America,’” Gulke says. “Then for corn, what if we lose 1 million of acres to soybeans? The corn market gets excited.”

With the close of February, RMA has released its 2018 crop insurance spring prices. The corn price is $3.96, the same price as last year. For soybeans, the price is $10.16 compared to $10.19 in 2017. Spring wheat is at $6.31, which is higher than $5.65 for 2017. Durum wheat is also higher at $7.11 versus $6.38 in 2017.

Since the corn and soybean prices are similar to last year’s insurance prices, Gulke says, they won’t play a big role in what farmers choose to plant.

“This creates a nice dilemma for us to be in,” he says. “Now if the market believes it needs acres, it has to go to the futures market, and it’s running out of time.”

On Thursday, March 8, USDA will release its monthly round of Crop Production and World Agricultural Supply and Demand Estimates Report (WASDE) reports.

Gulke encourages farmers to watch the export sales for corn and soybeans. “We need to see export market sales go up for soybeans and corn,” he says. “We don’t want to see USDA lower exports of corn or soybean again, during a time when we know supplies are in question in the Southern hemisphere.”

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