For the week, September corn was 11½ cents lower, December corn fell 10 cents, August soybeans lost 7¾ cents, November soybeans dropped 29¼ cents, August soybean meal fell $2.00 per short ton, August soybean oil slid 9 points, September Chicago wheat lost 8 cents, September hard red winter wheat gained 2¼ cents and September Minneapolis wheat rallied 13¾ cents.
New crop corn and soybeans were down sharply again this week. The National Weather Service and other outlets are predicting a favorable weather forecast through the end of August, which continued to pressure the market with growing sentiment yields are increasing.
Jerry Gulke, farmer and president of the Gulke Group, says estimates are starting to exceed USDA’s figures of 52 bu. per acre on soybeans and 181 bu. on corn.
“Some firms are starting to talk about yields on soybeans rising to the 53 to 54 bu. per acre level with yields on corn possibly hitting 182 to 183 bu. on corn,” he says.
Gulke says with the risk of a bumper crop in 2024 and old crop inventory still in farmer’s hands there’s potential for more downside risk in corn and soybeans ahead. As a result, he thinks there is a case to be made for hedging.
He looked at both fundamental and technical action to make his decision.
Gulke has been following the monthly chart for December corn for 17 years. It recently broke through key support on that chart at the $4.50 level. It followed up with new lows for the move this week. While the contract is still above $4.00, this creates concern for the future.
“Corn has entered a price void with seemingly nothing but air under it, especially with reports of huge unsold inventories in farmers hands yet to come to market,” he adds.
Gulke suggests farmers look seriously at risk management strategies beyond crop insurance to hedge the crop as a way to pass off risk.
He doesn’t advise farmers to do it on 100% of the crop but instead about 40% of expected bushels.
“In the 80s, when I started this business, I made the decision to use futures and options to forward price 40% of my crop before I planted it if I had the opportunity to lock in a profit. Historically, May and June are when markets top,” he says.
This approach still affords farmers the ability to lock in a price without the obligation of delivering it, he states.
“So, farmers can adjust their approach as the market outlook changes,” Gulke adds.
Downside risk is also growing for new crop soybeans with November making new contract lows again on Friday around $10.35¼.
He says bear markets will continue to go down to discover a price that will find new demand and clear out excess supplies.
“It is essentially like when Macy’s has a big sale on clothing to move inventory at the end of the season and make room for the new inventory,” he explains.
Gulke says corn exports have been running nearly 38% ahead of last year as lower prices have stimulated demand.
For soybeans he also acknowledges the big export purchase of nearly 19 million bushels of new crop to unknown destinations as evidence of lower prices that are at a value to the end user.
Unfortunately, he explains, the U.S. has been running 14% behind last year’s pace on old crop and new crop is roughly 50% behind. The market will need bigger business to chew through the growing supplies and keep prices from falling further.
For more information, contact Jerry at info@gulkegroup.com.
