For the week July corn was 7 cents higher, December corn rallied 7 ¼ cents, July soybeans gained 11 ½ cents, November soybeans were 13 ¾ cents stronger, July soybean meal gained $1.50 per short ton, July soybean oil was up 60 points. Wheat led gains for the week with July Kansas City climbing 71 ¼ cents, July Chicago wheat tacked on 55 ½ cents, July Minneapolis was 50 cents higher.
With planters rolling in parts of the Corn Belt this week Jerry Gulke made some last-minute planting decisions on his own Illinois farm. The president of The Gulke Group, who watches the daily market prices and signals, said “no” to paying high prices for inputs without the reward of profitable corn and soybean prices.
“With rising prices of N32 and Urea for corn. I made the decision to switch 200 acres of corn to soybeans,” he says. According to Gulke’s calculations, corn cost him about $325 to $350 more to plant/harvest per acre than soybeans. That takes into account the extra expense for trucking, seed, fertilizer, drying and harvesting labor for corn.
He also recalled the analysis of the ag economist for the Kansas City Federal Reserve where he recently estimated a mere breakeven (if lucky) for corn and soybeans in 2024. (See insert below)
“Why would I spend $350 more to just breakeven? I can keep the money in the bank at 5.3% interest and gain another $7.50 per acre for the 6 months the money will be used, or about the cost of one application of commercial spraying,” he says.
Gulke also based his decision on what he gleaned from his local retail supplier that there was a late rush to buy inputs like fertilizer, seed and herbicide which hinted that other farmers made the last-minute decision was made to plant corn. “Maybe it was the acreage estimate in March that showed less corn than had been anticipated. If that scenario is true, bean acreage might be less than anticipated,” he says.
That may be why November soybeans have gained over corn the last six weeks and are up 37 cents, while December corn is up just 15 cents during that time. “So, there’s been a little bit more concern about the new crop beans perhaps and that may have come as a result of the acreage report at the end of March where we showed a lot less corn but hardly anyone believed it and soybeans may have put in a little bit of weather premium with the thought, we were going to plant less beans,” he says.
Meanwhile, old crop corn and soybean prices have been sideways for the last several weeks. Gulke says, “Corn is up about 12 cents, from February 16 when they decided to take profits and sell calls instead of being short and July soybeans are up four cents in six weeks.”
However, Gulke says the markets can change at any time, most notably due to weather. Take for instance the rally in the wheat market this week. The move came as a surprise to Gulke.
“That is the one market that has shocked me and continues to shock me and other people because it’s the one I called the dog of the market. We were overpriced compared to the rest of the world; the war hasn’t caused much problem in wheat but yet here we are up 60 cents. There is something going on in the wheat market. I know there’s problems right now in Russian and European wheat.”
He says the global wheat stocks are relatively tight so there are some fundamental reasons for the rally especially if one of the large wheat suppliers has a problem. So, Gulke says the wheat market is putting in risk premium as a result of weather or war concerns.
With the higher week in corn and soybeans, those markets were followed wheat but can a sustained rally pull corn and soybeans out of their sideways trading ranges? Gulke says with the 50 to 70 cent rally in wheat that could be expected but its not a given and corn and soybeans may also need a weather story.
Rain forced Gulke out of the field on Friday and he says if it stays wet as the calendar flips to May, corn and soybeans may need to put in more risk premium.
For more information contact Jerry at info@gulkegroup.com.
