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Six Dollar Corn is Out of the Question Now

October 1, 2010

In one stroke of the pen, in yesterday’s Grain Stocks report, USDA took care of the tight-stocks issue that has carried the market since June, says Jerry Gulke of the Gulke Group. “Maybe the 2009 crop was larger than reported. For whatever reason there now are 300 million more bushels than the trade expected, that’s what the market will trade.”

LISTEN TO GULKE'S AUDIO ANALYSIS

Several other factors point to at least a temporary top in the market, he adds:
  • Everyone was finally bullish on corn. When everyone turns bullish, it’s usually an indicator the top is in the market, at least for the short-term.
  • Looking at day trading only, here is a potential for a double top in corn, which usually marks a change in trend.
  • If the market closes below $4.95 today, it will be a weekly key reversal down on the charts—a negative signal. You can request Gulke’s chart analysis at www.GulkeGroup.com.
  • Large speculators have been in an extreme long position for a long time. “I doubt they’ll stay waiting for another $1 now,” says Gulke. “We’ll see.”
 
“Next week’s Crop Production report next Friday may not be positive enough to feed the bulls. Unless it comes in with a yield under 160-bu., I think the corn market will have a weak tone until January, when the stocks report should imply better usage,” he says.
 
“Our clients are covered in futures and option on over 70% at prices over $5. If we close under $4.95 today, we’ll be even more sold,” says Gulke. “We’ll worry about how we might want to re-own later—for instance, by selling put options.”
 
Selling Out of Soybeans
Jerry Gulke has sold a lot of cash beans for delivery out of the field over $11 and will sell more today, he says. “I’m on record that I’ll be sold out by the time harvest is over, and that’s still on target. If we don’t close over the $11.06-$11.07 area in November beans today, we’ll have a 2¢ to 3¢ trading island, which isn’t good.
 
“I don’t want to have any wheat in storage either,” he adds. “Current prices are high enough that those who are going to plant wheat will—there’s no need for prices to push higher to ensure plenty of wheat.”

 

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