Grain Markets Continue Technically Positive

December 7, 2018 04:45 PM
 
 

Positive political news and good technical signals and are giving the grain markets a positive bias.

Last weekend, President Donald Trump and Chinese President Xi Jingping agreed to a trade truce. The U.S./China talks led to an agreement to hold U.S. tariffs in place and not escalate for 90 days, while further negotiations continue for a total trade pact.

On Wednesday, Jerry Gulke, president of the Gulke Group, outlined the talks and provided perspective on how it could affect he grain markets. Read that column: Technically Speaking: Market Impacts of the Tariff Meeting

“They still haven’t come out with any actual numbers,” Gulke says. “So, you have to read between the lines, especially when they use words like ‘significant’ or ‘optimistic.’”

The follow-up news out this week continually highlights soybeans, Gulke says, which has helped the psychology of the markets.

“We’ve seen some significant increases in all the grains this week,” he says.

Corn prices were up 7¢, soybean prices up 20¢ and Chicago wheat prices up 15¢. Both corn and soybeans gapped higher on Monday, meaning they opened higher than Friday’s close.

“The bottom line is that we've got some positive bias in the news,” Gulke says. “If you go back and look from back in September and October, we’re up considerably. We’ve gotten our rally—whether we can continue it is a day-to-day affair.”

Gulke says the technical moves of the corn and soybean markets are critical.

“If it wasn't for these doggone tariffs, you'd have to say this is pretty significant given when it is doing it—in December,” he says. “Any other year, you'd say there must be something going on in the South American crop, but we all know that it's a good crop this year.”

The markets are showing a somewhat clear picture of price support, Gulke says. For soybeans, that’s around $9. In his September 2018 Top Producer column, Gulke detailed the long-term outlook for soybeans.

“We need to hold this and go higher from here—or at least not go back below $9 in any lead contract,” he says. “That’s a benchmark the technical guys will use.”

On Tuesday, Dec. 11, USDA will release its monthly Crop Production and World Agricultural Supply and Demand Estimates reports.

The corn demand picture should stay unchanged, Gulke says. For the supply side, USDA could lower production since some corn and soybean fields are still unharvested in the U.S. But they may wait until the January report to do so.

The key number to watch, Gulke says, is USDA’s estimate of export demand.

“We don’t want to see them lower demand in general,” Gulke says. “Somedays you can lose in one day what it takes three or four days to get These beans are pretty tweet-sensitive.”

 

Want to learn more about the future of the grain markets? Gulke will speak at the Top Producer Seminar, which takes place Jan. 15-17, 2019 in Chicago. Learn more and reserve your spot now at tpsummit.com.

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