Déjà vu All Over Again?
The general negativity in the market feels frightening familiar to many producers who were around before the big run-up in prices a few years ago. This week, all the ag markets were lower with the exception of cotton and soybean oil. For a table showing where prices ended up and how deep the red ink was, click here.
The live cattle market, which lost more than $4 this week, and feeders, which lost $7.93, were due for a break and seems to have run out of gas, says Jerry Gulke of the Gulke Group. He notes that we’ve seen about a 50% drop in hog prices since last fall but retailers didn’t pass on cheaper pork to consumers. Now they are buying at lower prices for grilling features later. That may shift consumer demand to pork. “As we saw when corn came off about $7.50, once you turn demand, falls like a rock. It is is like trying to catch a knife," says. "Producers really have to lock in a margin.”
Regarding crops, he adds, “The only good news is that with profit margins being squeezed, it might reduce acres a little. Old-crop soybeans closed the day and the week at their lowest price of 2015. Technically, that isn’t good.”
The dollar is our nemesis, Gulke says. It takes some time to have an effect but that now is kicking in. South America hasn’t hardly missed a beat. We’ve been hurt more than they have. If everyone has a reasonable crop this year, we're going to have to find a way to become least-cost producers. It’s not going to be easy. We’ll have more bumps in the road ahead of us. I’m surprised land prices haven't fallen more already but we'll get an update this summer and I think it will show they are."
