Jerry Gulke: Will Exploding Prices Reduce Demand?
The grain markets posted another round of strong prices. Corn, soybeans and wheat prices were all up 30¢ or more.
Could 2022 repeat the appreciating prices posted in 2021?
“It sure looks like it,” says Jerry Gulke, president of the Gulke Group. “March corn is closing at the highest level it has closed that since its inception. The same is true for March soybeans.”
Since Jan. 1, March corn prices are up 57.5¢ and March soybean prices are up $2.44.
“It is like the market is now saying we want you to plant more of everything,” Gulke says. “We're going to pay you to do it.”
On Feb. 9, USDA released its monthly World Agricultural Supply and Demand Estimates (WASDE). In the reports, USDA made more cuts to South American crop production due to dry conditions.
USDA’s current estimates include:
- Brazil’s soybean crop is 134 million tons, down 5 million from January.
- Argentina’s soybean crop is 54 million tons, 1.5 million lower from January.
- Paraguay’s soybean crop is 6.3 million tons, down 2.2 million from January.
“I think USDA will cut Brazil’s soybean production by another 5 million tons next month,” Gulke says. “I see them continuing to lower it slowly. They want to see proof of physical deterioration in the crop.”
Gulke says due to the decreases in soybean production in Brazil and South America, the burden will be on U.S. production to fill to void.
“USDA sees that there's going to be a shortage of meal, and how you get by as you ration demand,” he says. “The market is kind of doing that.”
Even though U.S. farmers will plan a significant number of soybean acres, Gulke says, South America will be basically out of supplies by Aug. 1.
“There will be very little if no competition for the United States,” he says. “That's unlike we've seen in the last four or five years. That's hard for the traders and buyers to get their arms around. There's been a dynamic shift in the situation in agriculture and in particular with soybeans.”
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. 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.
