Harvest still a few months away, but could the harvest price lows already be in? Last week Jerry Gulke, president of Gulke Group, asked: Did grain prices fall too fast?
This week we saw prices rebound just as fast. For the week ending July 29, corn prices were up 55¢, soybean prices were up $1.50, soybean meal was up $36 and soybean oil was up almost 8¢ per lb. In addition, canola prices were up $91 per ton, wheat prices were up over 50¢ and cotton prices were up 6¢ per lb.
After rising steadily this year and into May, the grain markets shifted down in June and July.
“We saw the markets made an extreme low, rally back up, went back down to test the lows again, then turned up with a vengeance,” Gulke says. “Sometimes markets are volatile and fast — too fast for a lot of lot of traders to catch, let alone producers. It was an opportunity to take profits and accept risk if you’re a producer with two or three months left before harvest.”
Shift in Market Psychology
Gulke says the last few months of volatile prices make it very hard for farmers to market grain.
“It was very difficult for a lot of people, including myself, to sell grain as it was going up,” he says. “I started selling corn when I could get over $6 out of the field and all of a sudden it was $7. Then I sold some for $7.27. But it was hard to sell more because it looked like the market was going straight up.”
Typically, Gulke likes to be 40% sold in the cash market, with the rest in hedges.
“When the market fell, I bought the hedges back basically and took the profits,” he says. “Now the market rallied again, with some healthy moves of prices being 50¢ higher than what we were last week. There’s a place you accept the market risk and a place when you put off the risk.”
If the weather forecast look hot and dry on Monday, prices may go even higher, Gulke says.
Potential Climate Policy
Senate Democrats announced Wednesday they agreed on a plan that includes a record $370 billion in spending to fight climate change. If approved, the deal would cut greenhouse gas emissions by about 40% by the end of the decade, reports Farm Journal Washington Analyst Jim Wiesmeyer.
That helps put the U.S. on track to meet President Joe Biden’s goal of cutting emissions by as much as 52% from 2005 levels by the end of the decade. In the deal is a $1-a-gallon tax credit for biodiesel and renewable diesel through 2024, plus other alternative fuel and biofuel credits, and a new $1.25/gallon credit for sustainable aviation fuel (SAF), which could help lower airlines’ soaring energy costs.
Sustainable aviation fuels, which can be made from renewable biomass and waste, have a lower carbon footprint than jet fuel and are intended to reduce airplane emissions. The White House estimates 4.5 million gallons of the fuel are now produced domestically each year — less than 1% of the goal that must be hit in less than a decade.
“The market saw the news and it was reflected directly into the soybean oil, which is very exciting,” Gulke says. “It turned on a dime went relentlessly higher — a move that I hadn’t seen in many years, not since mid-2000.”
Check the latest market prices in AgWeb’s Commodity Markets Center.
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.
