Jerry Gulke: What Impact Will the Financial Black Swan Have on Agriculture?
A black swan event is an unforeseen event that typically has extreme consequences. The financial industry was hit with a black swan, with the shuttering of two high-profile banks: Silicon Valley Bank and Signature Bank.
This has implications for the agricultural markets and lessons for farmers, says Jerry Gulke, president of Gulke Group.
Weekly Market Action
May corn prices were up 17¢ and December corn prices were up nearly 4¢ for the week ending March 17. May soybean prices were down 30.5¢ and November soybean prices were down 44¢. Wheat prices were up across the board—30¢ to 37¢, depending on the contract.
Crop concerns in South America and buying from China helped support corn prices this week, Gulke says.
“Corn is kind of a competitor for wheat or vice versa, and we got some cold weather coming for across the U.S. in wheat areas, plus Ukraine is still in limbo, which all helped wheat prices,” he adds.
With a positive-looking spring weather forecast, Gulke says this could be a year where yields could reach trend-line levels.
“Weather may end up being a lesser concern than normal,” he says. “We have planted a pretty good crop under adverse conditions before.”
Lessons from the Bank Collapses
The recent bank collapses sent tremors through the financial system — surfacing memories of the global crisis in 2008 which most can remember. but it is the 1970’s the early 1980’s that most tend to forget. Luckily, it doesn’t seem to be as widespread or massive this time around.
“Many banks are telling me farmers are pretty well capitalized in terms of working capital and they haven’t had to borrow as much capital amidst higher rates,” Gulke says. “This situation tells me we have to do our due diligence on excess capital over $250,000 that is not covered by insurance.”
Gulke will keep his eye on this situation as it unfolds; due dilligence is a personal responsibility.
“I sure wasn’t expecting this black swan,” he says. “But it happened very quick over a weekend, and the government's been quick to respond to that for fear of a growing contagion that's under that tip of the iceberg. They want to nip it in the bud real to keep the market psychology from doing what we all fear and that's a run on banks.”
Gulke Group Conference
This year the Gulke Group conference is set to take place at the Embassy Suite in Lombard, Ill., on March 30-31. Speakers include Drew Lerner (weather), Roger Wallace (livestock), Michael Drury (economy) Brian Phillips (European outlook) and Jerry Gulke (commodity outlook). Learn more and register at GulkeGroup.com or call Jamie @ 707-365-0601.
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.
Learn more at GulkeGroup.com
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