Jerry Gulke: Are Grain Prices Getting Too High?

The grain markets posted another healthy week of higher prices. But are these prices getting too high?
The grain markets posted another healthy week of higher prices. But are these prices getting too high?
(AgWeb)

The grain markets posted another healthy week of higher prices. But are these prices getting too high?

May corn was up 22¢ and December corn prices were up 19.5¢, for the week ending Thursday, April 14. May soybean prices were down 6.5¢ and November soybean prices were up 6¢. All of the wheat contracts were up this week by 15¢ to 47¢. 

The continued unrest due to Russia’s invasion of Ukraine is weighing on the markets. 

“More and more people are saying this could drag out for months or maybe even years, depending on the success of Putin and whether he can win the war,” says Jerry Gulke, president of the Gulke Group. “I think the bottom line is we've disrupted the flow of grain enough to where time is running out.”

Even though farmers in Ukraine are planting some of their spring crops, he says the general perception is the world will be short some grain this year. 

In addition, Gulke says, the markets are still feeling the shock from USDA’s March 31 Prospective Plantings report.

“December corn took off and shot straight up,” he says. “And now soybeans are trying to keep from losing acres.”

Gulke says the continued high prices in corn and soybeans could be illustrating a paradigm shift.

“I'm concerned even as friendly as I might be that I am underestimating the degree of the prices we're going to have to see before someone doesn't use our grain and we curb demand significantly,” he says.

So how high will be too high for grain prices?

“The definition of a bull market is higher and higher highs and higher and higher lows,” Gulke says. “Markets get to a point where they no longer have to go any higher because it has priced the product high enough to where demand reduction is occurring.”

A few weeks ago, he says, old-crop corn closed below the previous week's low. 

“That gave me caution that at $8 you’re going to start curbing demand,” Gulke says. “We did hit $8 in the lead contract. When you make new highs over $8 in the old crop corn, you got to reassess what in the world is going on.”

Beyond the political and economic upheaval, Gulke adds, this year’s planting season is delayed — unlike last year. 

“We have a lot of a lot of stuff in the mix,” Gulke says. “It's good news for farmers and bad news for suppliers and buyers. A lot of reckoning is going to have to happen in the next few weeks and months.”

 

Check the latest market prices in AgWeb's Commodity Markets Center.

 

Get in Touch with Jerry

Do you have questions for Jerry? Contact him at info@gulkegroup.com or 312-896-2090 or GulkeGroup.com 

Jerry Gulke farms in Illinois and North Dakota. He is president of Gulke Group Advisory Services. 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.

 

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