Gulke: Decision Time

During the last five days fishing off Kodiak Island with grandchildren and family, I had time to reflect on harvest and marketing decisions that will be made. There are two important times for marketing — before harvest and after harvest. So, what is left after delivering on cash forward contracts? The decision to lift hedges (or not) and deliver off the combine; store commercially; store on-farm. Contemplating these sets the stage for short-, medium- and long-term thinking in developing respective outlooks.

Looking back at my columns for the past year, markets have been trending up and down in both corn and soybeans. I like to call them bull and bear markets, as it seems more exciting. A bull market in corn and beans started (bottomed) in early September 2024 after a long slide of $2 in November soybeans and 75 cents in December corn futures 

The bull markets ended on Feb. 21, 2025, as did the wheat bull. It was about that time media analysts figured out we were in bull markets, and rhetoric suggested tops would come in the traditional time at or near Father’s Day. That did not happen, as predictions of record corn crops and lack of demand led to excess stocks depressing markets right through harvest into 2025. In fact, around June 15, prices had actually deteriorated only about half of the total slide from Feb. 21 to Aug. 8-15 (August WASDE time period) when prices bottomed again. 

That was then, and this is now. One has to agree that there were opportunities for both buyers and sellers in the past year. Only personal biases got in the way. Moves of $150/acre in corn and $100/acre in soybeans are nothing to sneeze at but fail to gain much publicity, as risk management seems to have been left to the RMA scheme. As an exercise, you might want to search the internet for the profit and loss over its inception. I bet it parallels general insurance companies’ profitability, even with government subsidies. This year will probably be a winner for RMA as well.

POST-HARVEST OUTLOOK

Last week’s column focused on the commercial storage dilemma. Some surveys suggest only 15% of producers use futures and options, although the surveys don’t say how many acres those 15% represent. A decision must be made once production outlook is largely quantified, like NOW! I will assume those with on-farm storage understand market carry and understand that just because cash July corn is worth 50 cents more delivered July 1 than Oct. 1, that doesn’t guarantee cash will be on July 1 what is bid today. It requires as much risk management post-harvest as pre-harvest.

Ironically, grain prices are exhibiting the same kind of focus (positive) since late August as they were last year. I’ve covered that scenario multiple times in the past months. What I am looking for now is the mass media to pick up on my previous scenarios of an early harvest low, more on-farm storage available than the media would like you to believe, and a huge carry that most who are still looking at supply and not demand would suggest the markets will not earn the carry. If you recall, last year, corn earned its carry and more as it got to a 37-cent premium to December 2025, encouraging selling. This was contrary to the previous two years, when corn did not earn the carry. But last year was supported by USDA’s underestimating final stocks by 800 million bushels (mb). This year looks even more positive than last, unless USDA is overestimating exports so as not to be caught unawares again. 

If you are in the “have to sell off the combine” camp, the decision is not easy and is costly; timing is of the essence. My “store-commercially” calculations give legalized theft a whole new meaning, as it reflects negative return on investment (ROI) unless July corn heads to $5. Commercial storage folks will have many reasons/excuses, but the end result is the same. My calculations, which include extra shrink, drying and storage, will mean a net loss of over 30 cents per bushel versus what the same location will bid for Feb delivery versus fall off the combine, as basis is quoted wider for early 2026 than fall/December 2025. So, it is what it is, making on-farm storage one of the best investments, unless falling in love with a bin of grain is a handicap.

Medium Term: July 2026 corn futures reached $4.99, ironically on Feb. 21, 2025, so the precedent is there and with a lot less demand than currently stated. If USDA got religion in regard to future benefits of the Trump tariffs adding to U.S. demand, paying for storage with a belief that the big carry will be earned if not improved is in your DNA. I will say, personally, that with buy signals developing currently on a monthly basis, odds favor a positive bias for the long term.

What concerns me is that for the first time, I heard on an ag TV program that perhaps record corn exports in the USDA balance sheet is a real possibility. Last year, we topped corn short-term on Oct. 1, and it took until Dec. 31 for the market to realize we were in a bull market. It seems obvious this year, as demand is robust. Managing that price risk on or off the farm will be important over the next three months, as the underlying negativism regarding oversupply is still in the background. History dictates that when your broker wants you to buy back hedges and/or go long the market, beware. Before you take that advice, ask how much he/she owns physically or on paper. Talk is cheap; it takes money to buy cheap whiskey.

Long Term: Just about every commodity I watch with interest is biased positive with even some taking on a monthly positive outlook. Usually, monthly buy signals will last 18 months before a new crop becomes a burden. With a record crop in corn, even at 181 bpa, and a near record in beans, it seems like a tall order to maintain a price chart that goes from lower left to upper right. But a year ago, I saw a new paradigm shift in global ag trade, and so far, so good!

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