Jerry Gulke: Are Higher Grain Prices Curbing Demand?

Corn prices are above $7.50 per bushel and soybean prices are near or above $16 per bushel. As prices stay elevated, will demand diminish? Time will tell, says Jerry Gulke, president of the Gulke Group. 
Corn prices are above $7.50 per bushel and soybean prices are near or above $16 per bushel. As prices stay elevated, will demand diminish? Time will tell, says Jerry Gulke, president of the Gulke Group. 
(AgWeb)

Corn prices are above $7.50 per bushel and soybean prices are near or above $16 per bushel. As prices stay elevated, will demand diminish? Time will tell, says Jerry Gulke, president of the Gulke Group

May corn was up 8¢ and December corn prices up 26¢, for the week ending March 11. May soybean prices were up nearly 19¢, and November soybean prices were up nearly 43¢. All of the wheat contracts were down significantly for the week. 

Market volatility is being fed by political, economic and technical issues, Gulke says. 

“The volatility continues, but I think the underlying fundamentals with what's out there has not changed any,” he says. “The market is trying to come to grips with reality, and it is really difficult when you can't see the forest for the trees to be able to get your arms around what's really going on out there.”

The continued unrest in Ukraine is playing it’s part to market uncertainty. Gulke says the market is trying to curb demand, but will it be enough to offset the loss of reduced exports from Ukraine or farmers there possibly not planting this year’s crop?

“We had a stocks problem before the Ukraine and Russian fiasco; it's just gotten even worse,” Gulke says. “This is helping keep prices elevated. At the end of the week the market turned around and finally realized we have problems in supply regardless of what happens in the short run with that war. That kind of tempered how bad things look on a weekly basis.”

A Smaller South American Crop

In the March World Agricultural Supply and Demand Estimates (WASDE) report, USDA cut global soybean production, primarily in South America. The changes included: 

  • Lowering Brazil’s soybean crop by 7 million metric tons (MMT) to 127 MMT.
  • Lowering Argentina’s soybean crop by 1.5 MMT to 43.5 MMT
  • Lowering Paraguay soybean crop by 1 MMT 5.3 MMT
  • Lowering Uruguay’s soybean crop by 0.6 MMT to 2.0 MMT

Gulke says USDA will probably lower South American production 4 MMT to 5 MMT each month until they catch up with other private and South American estimates.

“I think USDA wants to be very careful and not cause even more panic or concern for food inflation,” he says. “It will come.”

As planting season approaches, Gulke says questions are circling about fertilizer availability. 

“There are concerns with logistics and trucking if we’ll really get what we’ve bought or need,” he says. “I talked to my corn buyer who trucks for me, and he warned me my cost for trucking will probably almost double.”

In addition, natural gas prices are going to go higher, which means drying costs will increase.

“All of a sudden my costs went up in corn pretty quickly,” he says. “They will be higher than I had budgeted just three or four weeks ago.”

Going forward, the markets will focus on the weather in the U.S. and South American and the March 31 Prospective Plantings report, as well as the latest from the Ukraine-Russia conflict. 

“All of this makes it much more difficult to determine what is high for grain prices,” Gulke says. “Is $7 corn high or is will it look cheap to somebody that doesn't have it? The same thing with soybeans? These are good times for farmers, if we can grow another crop.”

 

Read More

 

Jerry Gulke: A Paradigm Shift in Soybeans

Jerry Gulke: 10 Thoughts on the Paradigm Shift in Global Agriculture


The Gulke Group conference is set for March 17-18 near Chicago. Speakers will cover weather, fertilizer and market outlooks, and special guest Dr. Mark Jekanowski, Chairman, WASDE, who just concluded the Annual Outlook Forum. If you’d like to attend, visit GulkeGroup.com for more information.

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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