Jerry Gulke: Is A Major Acreage Switch in Our Future?
Commodity prices have dipped down to levels that haven’t been seen in more than a decade.
July corn down 7¢ for the week ending April 17, while July soybeans are down nearly 29¢. July wheat is down nearly 24¢. Just take a look at the downward path of July corn, since January 2018.
With prices at these subdued levels, could farmers switch their crop mixes this spring? It is likely, says Jerry Gulke, president of the Gulke Group.
“In our survey, 90% of the producers had all their inputs purchased for spring. We didn’t get a lot of anhydrous on in the fall, so I still think there’s some potential to shift some,” he says. “But I find it highly unlikely we’ll shift more than about 2.5 million acres out of corn into beans.”
USDA’s Prospective Plantings report showed the following estimates for 2020 acres:
- Corn: 97 million acres, up 7.29 million acres or 8% from 2019
- Soybeans: 83.5 million acres, up 10% over last year
- Wheat: 44.7 million acres, down 1% from 2019
- Cotton: 13.7 million acres, down less than 1% compared to last year
Gulke says the corn-to-soybean ratio suggests you’ll make money or lose less planting soybeans. “The last thing I saw suggested a $50 to $60 an acre advantage to soybeans versus corn.”
Some farmers in areas such as the Northern Plains could plant alfalfa or alternative crops versus corn, Gulke says.
“We really need to entice the farmers in the Norther Plains to do that,” he says. “We’re looking at that on our farm in North Dakota. Corn just doesn’t work when you have a negative 70¢ basis. When corn is $3.40, you’re looking at $2.70 per bushel. That just doesn't work.”
Only 3% of the U.S. corn crop has been planted, per USDA, which tracks with the five-year average. With open weather, Gulke expects that number to jump.
“Farmers are ready to just plant a crop under normal conditions compared to last year,” he says. “I think next week is supposed to open some up in terms of weather, so I think we can get a lot done in a hurry.”
In addition to weather, Gulke says, any new type of government assistance program for farmers could influence crop decisions.
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Jerry Gulke farms in Illinois and North Dakota. He is president of Gulke Group. 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.
