With only a few trading days left in 2012, the grain markets have headed south. Jerry Gulke explains why and provides predictions for 2013.
All leading contracts for corn, soybeans and wheat finished the week more than a dime lower, some closer to a quarter. Wheat fell below $8 and corn sunk below $7. January soybeans dropped to around $14, while November soybeans are close to $12.
Jerry Gulke, president of the Gulke Group, says a lot of technical damage was done this week. "The markets aren’t looking good and something farmers want to see at the end of the year."
The price recession in soybeans is due to a good-looking South American crop, Gulke says. "South American farmers had difficulty getting the crop in the ground, but now there’s plenty of moisture. I think the market got complacent and believes they have a good crop."
Gulke says in addition to grains, silver and gold were also down for the week. He says a lot of the commodity funds wanted to take profits this week, before the end of the year.
Predictions for 2013
Overall, Gulke believes crop prices will be lower in 2013. He is predicting large amounts of corn and soybean acres in the U.S. and abroad.
"We’ve got new land into competition. We could easily plant just as many soybean acres next year, and maybe close to 100 million acres of corn."
He believes this because the market, with its high prices in 2012, has provided an incentive for farmers to grow more corn and soybeans. If this happens, prices will plummet.
"If we get an average crop in South America and an average crop here, we could be back in a place of lower prices for grains. We could take corn back down to $4 with no problem. That’s my concern for next year."
He is also nervous farmers may skimp on their marketing efforts, since "doing nothing" actually aid out this year for many farmers. But he reminds: just because you sold grain out of the field at the highest prices of the year, doesn’t mean you’ll have the opportunity to do so next year.
Gulke also advises farmers to get a good handle on their cost of production this winter, so they know exactly what they need to sell grain for to profit in 2013.