For now, no great force is affecting the grain markets. During this time, farmers should brush up marketing skills.
Selling grain out of the field and cashing in on high crop insurance levels have made profits pretty easy to earn in grain farming for the past few years. But, the tide is changing.
For 2013, the spring insurance prices topped $5.50 for corn and $12.50 for soybeans. While soybean prices have shown some strength recently, corn prices haven’t been near that level for several months.
"Last year we were insured at a high level, where we could lose 15% of our production and still make money," says Jerry Gulke, president of the Gulke Group. "Now we can lose."
Hear Gulke's full audio analysis:
Prices showed a strong increase after the Jan. 10 USDA reports, but have since fallen. "Anytime the market makes a big move, it is not uncommon for the market to retrace," Gulke says. "We are close to making new lows again."
With planting still several months away for most U.S. farmers, Gulke says, the market has little information to digest. "For now, I think we need some patience and let the market buy information."
Time to Crunch Numbers
Most farmers know commodity markets cycle and expect to just breakeven some years, Gulke says. 2014 might be one of those breakeven or even loss years.
Farmers will likely base their planting decisions on not how much can they make, Gulke says, but instead on what will help them lose the least. "Even with average corn yields, profits don’t look great," he says.
"We’ve had some good years recently," he says. "When times are good, you need to prepare for when times are bad."
Luckily, Gulke says, there is some good news out there. "Demand is still strong on the global scale and now we’ll start building demand, especially in the U.S.," he says. "We just have an oversupply of grain right now, and we’ll have to deal with that."
Have a question for Jerry? Contact him at 815-721-4705 or firstname.lastname@example.org.
Gulke will be speaking at the 2014 Top Producer Seminar in Chicago, Ill. Learn more about the conference and make plans to attend.
For More Information
See current market prices in AgWeb's Market Center