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What is “Normal” for Corn Prices?

03:00AM Mar 16, 2013

The 2013/14 marketing year might set up as a new dawn in agriculture, says Jerry Gulke. He explains.

Few will argue the extremely high prices seen in 2013 seemed normal. Overall, corn prices have a tendency to normalize.

As drought conditions lessen in parts of the country, Jerry Gulke, president of the Gulke Group, believes the assumption that high prices will continue is also fading. He says through his travels this winter, he’s had a hard time finding anyone who things corn should be $6 this fall.

"We’ve already cut demand and we are opening up production," he says. "With high prices, we’ve incentivized the rest of the world to produce more and for us to consume less internally."

The rainfall and snow cover seen in many areas of the country are bringing optimism about production levels. "We may end up in a late spring, but I think the idea that we can’t produce enough this year is a figment of our imagination."

Gulke believes that the market agrees the yields won’t be as dire as 2012. "We run a risk of having lower prices this year."

But, Gulke says, "low" prices may not be as low as they used to be. "I’m hoping we look at a new paradigm where we have a low of $4.50 and high of $6.50, as we build demand back."

Looking Long-Term at Prices

Gulke says if you look at a corn chart from 2007 forward, you can get some interesting perspective on prices. He says the price rallies of 2010/11 and 2012/13 saw prices peaking in both corn and soybeans -prior to or just at the beginning of the their respective marketing years (Sept—Aug).

"Both rallies were due to production reduction, not demand explosion. China helped in part, but without their year-over-year increase in soybean demand, the rallies would not have been what they were since the global demand base." He says had global ethanol usage didn’t increase, the lofty prices would have been short-lived.

"The price explosion in corn above $6.50/bu in 2008 only lasted six months!" he says. "Corn spent almost 3 ½ years waiting for either a demand explosion (China to the rescue) or a drought to get prices back and hold above $6. China didn’t come but the crop problems of 2011 and 2012 did."

Hear Gulke's full audio analysis:

For More Information
See current market prices in AgWeb's Market Center

Read Gulke's March 2013 Top Producer column: A New Dawn in Agriculture