Gulke: Beware Out There!

In last week’s column, I mentioned to “turn out the lights” on soybeans, meaning January soybeans had retraced (lost) the complete benefit from the harvest buy signal on the “China Deal” rally of nearly $1.40 from Oct. 10 to Nov. 18. You will recall my suggestion back then about catching the data-driven but data-starved trade and the benefits of buying cheap call options for those forced to sell off the combine. 

The gap higher on Oct. 27 confirmed what price discovery said on Oct. 10. The “lights out” comment last week meant anyone watching the market like a deer in the headlights watched a $75-per-acre increase and then a $60-per-acre decrease vanish — or a max swing of $135 per acre in what was either an opportunity or adversity.

The latter (adversity) further brought out the negative price risk management of the advisers who failed to recognize first a bull market and then a top, and for some producers, it was a further excuse to complain to the government of the market doing them wrong. Even capturing one-half or one-third of the opportunity/adversity move helped to cover the greedy increases in input prices. Add in the Trump bump to bridge the gap payment to come, and in one short month, the market and government helped the plight of farm ag and bankers as well. The result: another lesson in Risk Management 101, again!

The 2026 market had similar movements, but not of the total magnitude. November 2026 soybeans moved only about 80 cents higher and 70 cents lower, but the result was the same: a complete loss of the China Deal benefit. In full disclosure, Tuesday was a decision day to capture (put in the bank) the aforementioned activity in new-crop soybean hedges on acres that I consider flexible. Here is why.  

At $10.70 with a negative 60-cent new-crop basis in northern Illinois, further deterioration into Q1 of 2026 means an 80% insurance coverage of say $8 makes avoiding crop insurance like blowing in the wind. If media coverage of recent surveys is correct that over half of borrowers are in trouble financially, it is doubtful bankers will loan working capital to plant soybeans with an $8 floor. Will corn acreage win (or lose) by default? In 2020-21, we planted 90.7 million acres of corn versus 98.7 million acres last year.

So, this leaves a planting decision after considering what we’ll do with the “bridge” money. That bird in the hand of $35-per-acre soybean and $50-per-acre corn payments should have implications for those who can make a decision without having a banker breathing down their neck.

The question to ask is this: Do I re-invest that trove of cash back into high-priced nitrogen, P and K, and seed with the hopes of breaking even? Or do I pocket the money and plant soybeans against a backdrop of government money already in hand and say no to corn? That becomes a personal decision, but there ARE options.  

If I don’t like soybeans and/or if the current price for November 2026 (SX26) goes even lower, I can buy my 2026 soybean production on paper and maybe buy up my corn insurance. The speculative part is placed now on the January WASDE, in which everyone seems to believe the corn yield has to be lower. If it is not, we’ll plant too many acres of everything, and it will be up to Mother Nature to hurt crops on someone else’s land — but not ours. We have time yet to manage price risk going into that WASDE.

BUYER BEWARE

During times of depressed prices and negative psychology, the parasites come out of the woodwork, providing snake-oil-type opportunities. I recall the “accumulator programs” of the past that led subscribers down a primrose path with the motivation to obtain the physical production. Some schemes are rising out of the ashes again. These schemes seem to come out when the price outlook looks the worst. They seem to involve paying a certain price per bushel for someone (pushing paper at a desk) to manage the price risk, not having any outright farming experience.

Let’s say the cost involves a charge per bushel. Using a typical 10 cents for corn and 15 cents for soybeans to do for you what you should be doing for yourself seems common. To pay someone $20 per acre of corn or $9 per acre of soybeans — whether 500 acres or 5,000 acres, or worse yet, 10,000 acres — looks unrealistic. What isn’t disclosed initially is that there are likely commissions on brokerage trades, plus the initial downstroke of a futures contract, if used, even if “no margin calls” are advertised. The incentive is to promote “margin-free” management. Bankers are not likely to embrace something that requires additional working capital, especially if they are second in line to receive repayment. Better perhaps, to buy up insurance and pass the price and weather risk to the government.

It is a matter of whether one wants to become a plant manager and maximize yields, or a CFO and learn how to earn the only green worthwhile — money left over after expenses. I know of perhaps one or two entities I would risk my farm operation with — and it wouldn’t be someone who doesn’t have real skin in the game. What I chose to do isn’t for everyone, I understand, but to give up control to a partner in whatever form or whomever it may be is not what freedom to farm is all about. Be careful out there with whom you partner.

Merry Christmas.

Jerry Gulke can be reached at (707) 365-0601 or by email at Jerry@gulkegroup.com