Jerry Gulke left the Top Producers Summit in Kansas City this past week with a bearish outlook for the grain markets and a bearish sentiment from the farmers attending. The president of the Gulke Group spoke on a possible new era in grain markets and says he presented to a room full of producers who wanted to know more about how to market their product.
“Producers are finally interested in marketing now that prices have fallen further,” he says.
Survey work conducted during the conference found 73% of farmers are pretty much holding to their rotation. The remaining 17% was basically evenly split between decreasing corn and increasing soybeans.
Gulke says that response is consistent with what he’s heard at meetings.
He says the other takeaway from Top Producer Summit was that there is a lot of unsold corn in farmers’ hands.
Based on survey results released by commercial firms at TPS, Gulke says only 7% of farmers are using futures and/or options to market the crop. “This means if they didn’t cash contract, they didn’t do anything with the remaining old crop that wasn’t priced.” he says.
Nathan Kaufman with the Kansas City Federal Reserve also painted a picture of higher interest rates until late 2024. Those higher interest rates are starting to negatively impact agriculture and the borrowing of money for inputs, Gulke says.
The Fed also shared their farm income outlook says Gulke. “And the best-case scenario the Fed came up with for 2024 is breakeven levels for corn and soybeans.”
On Thursday, the February WASDE was released and Gulke says he was closely watching the South American numbers. He says he was as surprised USDA didn’t lower both Brazil corn and soybean production more, but also that they didn’t raise Argentina’s production.
Gulke thinks the reason USDA only lowered Brazil soybean production for 2023-24 by 1 million metric tons (mmt) was because they raised the previous year’s production by 2 mmt.
“USDA said there must have been more soybeans because Brazil kept selling them after everyone thought they were out of soybeans. They attributed it to more acres last year. and so that meant that they started the acres out higher for this year.” he adds.
There is a wide disparity in Brazil corn and soybean production estimates, but according to Gulke, it doesn’t seem to matter to the market. Plus, now there is a sense that the second crop safrinha corn crop is getting planted at or ahead of schedule.
The USDA Ag Outlook Forum is next week, and Gulke says the grain market is leaning bearish heading into that meeting with ideas the agency will increase carryout for grain and oilseed crops, but especially corn.
For more information contact Jerry at info@gulkegroup.com.
