It was a tough week for both the grain and livestock markets with new contract lows in corn, wheat, soybeans, cattle and hogs all warning of changes for agriculture in the future, Jerry Gulke, president of the Gulke Group, said on this week's Weekend Market Report.
“It’s rare that I’ve seen the grains and the livestock getting hammered like this all at the same time, and that’s not good for agriculture,” he said.
The December corn contract dredged a new contract low of $3.56/bu., before ending the week at $3.58¼/bu. January soybeans fell to a new contract low of $8.50/bu., but finished at $8.55¼/bu. Kansas City December wheat notched a new contract low of $4.55¼/bu., but posted a modest bounce to end the week at $4.65½/bu.
In the livestock, December live cattle plunged to a new contract low of $127.425/hundredweight before ending the week at $130.6750/hundredweight, while January feeder cattle dropped to a new contract low of $160.7750/hundredweight but ended Friday’s session at $164.5500/hundredweight. December lean hogs posted a new contract low of $52.8000/hundredweight and ended the week at $54.8000/hundredweight.
“This is kind of demoralizing,” Gulke said of the contract lows posted across the grain and livestock markets.
He suggested that the dismally low prices are a clear signal to producers: Retire crop acreage and stop herd expansion.
Listen to his full comments here:
“The market is kind of telling us you need to curb [livestock herd] expansion, and that’s really interesting compared to where we were just a year ago where they were encouraging expansion,” Gulke said, adding that when the livestock markets were posting strong rallies last year, it made sense for farmers to feed corn to livestock rather than sell it.
Now, that’s no loner a viable option for many corn farmers with livestock prices also in the tank. “You could walk that corn off the farm by feeding it to animals and make more money than selling the corn,” he said. “Now there’s not a lot of interest in doing that. There’s no place to hide this stuff.”
New farm ground that came into corn production in fringe growing areas around the world, Gulke added, will have to go unplanted next spring to adjust for the grain supply glut.
In the long term, some farmers will likely chose to go out of business with others waiting to buy land at a lot cheaper prices, he pointed out.
But in the near term, Gulke says it’s going to be a painful readjustment as farmers hope for a recovery from the new contract lows recorded this week in the grain and livestock markets.
“We need a crop problem somewhere, or someone to say 'uncle'and not produce corn any longer,” Gulke said. “And I think that’s going to take a while.”
Are you reconsidering how many acres you might plant next year? Let us know in the comments.