Jerry Gulke: Are We Witnessing a Paradigm Shift in Commodity Demand?
The markets were active this week, with May 2021 corn futures topping $7. July corn prices were up 40.75¢ and July soybean prices were up 19.50¢, for the week ending April 30. July wheat prices were up 23.50¢.
The big market moves this week show just how tight the supply situation is for commodities, says Jerry Gulke, president of the Gulke Group. Export, ethanol and livestock feed demand are all strong, rebounding from lower levels during the last year.
“Now we’re sitting here with demand and not enough supply,” he says. “So, the market is begging those with grain to sell by offering a lot more today than later on.”
Gulke says his concern with these high prices is demand destruction.
“The objective of the market is to curb demand,” he says. “When we had $7 corn back in 2011 and 2012, we said there’s nothing you can do with $7 corn. You can’t feed it, you can’t grind it, so you can’t make money with it. But these are different times. They say 65 is the new 40. Well maybe $10 corn is the new $7 corn, relative to everything else.”
This has been a demand-driven market, Gulke says. The focus will soon shift to supply, as estimates are showing the South American corn crop is smaller than previously expected.
“We have yet to ascertain in the U.S. how many acres of corn we have and what kind of crop we’ll get,” he says. “We could find another 3 million acres of corn, but if yield is down 10 bu. per acre because of dryness, we’re back to square one. Then you’d have a supply-driven market on top of a demand-driven market. I just don’t know how high is high enough. The market will have to determine that.”
As of April 26, USDA estimates 17% of the corn crop is now planted, which is up 9% from last week but still 3% behind the five-year average. For soybeans, 8% of the U.S. crop is in the ground, which is trending 3% ahead of the five-year average.
Gulke is planting corn in northern Illinois this weekend. He expects farmers to make major planting progress through the weekend and for Monday’s Crop Progress report to show significant jumps.
“There’s a good chance we could see 45% to 50% planted in corn, depending on rain,” he says.
Listen in as Gulke discuss basic level trends, what could cause prices to drop and more:
Read More
CME Group Expands Daily Price Limits for Grains
3 Reasons Corn Prices Shot Past $7
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.
