Gulke: Week's Rally Defied Expectations

September 26, 2015 05:03 AM
Gulke: Week's Rally Defied Expectations

It was an impressive week in the grain markets despite seasonal harvest pressure with corn posting a strong rally, signaling that the market is dialing in lower-than-expected corn yields as harvest moves deeper into the Midwest, Jerry Gulke, president of The Gulke Group said on Friday’s broadcast of Weekend Market Report.

“I’m pretty excited about today,” Gulke said of Friday’s recovery. “…All of this happened in the backdrop of this tremendous rhetoric about how strong the dollar was. According to that, this shouldn’t happen.”

CME December corn futures ended the week at $3.89/bu., up 11 ¾ cents from last week’s close.

Farmer clients in Minnesota and Iowa, Gulke noted, had reported that corn harvest this year would indeed be good, but not a record. The rally in corn, he added, signals that the corn market’s lows likely have been established and that prices now appear to be on an upswing with strong global demand underpinning the recovering.

USDA’s weekly crop progress report released Monday revealed 16% of the Illinois corn crop had been harvested with Indiana at 8%, Iowa at 2% and Minnesota at 1%.

Soybean prices, meanwhile, also rallied in tandem with corn with bullish support coming from the surge in the Brazilian real.  

“[The real] was up 3%. Three percent times $8 beans is 25 cents-a-bushel right there that it now costs somebody else 25 cents-a-bushel more to buy Brazilian beans, even though our dollar didn’t do very much,” Gulke explained. “Our dollar is an index and includes a lot of other currencies, so if the real goes higher, that means that anyone who buys from Brazil is going to have to spend more reals to do that.

“So, they got costlier and we got more competitive,” he added. “This is exactly what we needed to do at such low prices in grain to try to put a bottom in this.”

The CME November soybean contract closed the week 22 cents higher to end Friday’s session at $8.89 ¼/bu., with Friday’s sharp rally accounting for most of the recovery.

“We’ve probably seen the lows behind us in corn,” Gulke said. “And certainly now we’ve probably seen them in beans.”

Wheat Continues Recovery

CME wheat prices also scored gains for the week with talk circulating of concerns in major exporting regions like Russia and Argentina, Gulke pointed out.

December Chicago wheat futures rallied 21 cents on the week to end Friday’s session at $5.07 ¾/bu.

The rally this week was a continuation of the reversal in wheat prices after having dredged new contract lows in the first week of September.

“Wheat’s been biased positive for about two weeks now,” he said. “I don’t know how high it’s going to go, but we always hear about how much wheat is in the country, and you and I talked about it in the past where we have people in Eastern Europe and the CIS region who said this crop is not there.”

Strong world demand, he noted, likely has been the key to supporting the market from tumbling lower.

Added Gulke: “I think if there’s an error out there in spite of all the negative rhetoric we hear about the stocks and the economy and you name it. I think our global demand is pretty solid, if not better than agriculture analysts think.” 

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Spell Check

Watseka, IL
9/26/2015 10:50 AM

  I think we still test the lows or at least the 3.65 area in corn. Funds like to bank profits and add longs at cheaper prices. Revenue prices set in October. We move up after stocks report.

Adrian, MN
9/26/2015 10:44 AM

  Just want to thank you Jerry for the insight year in and out. Great articles. Thanks again.

Chicago, IL
5/14/2016 11:39 AM

  We are in the same situation now thus year. All analyst are wrong again. As they calculate what was and what is. As one poster points out...futures trade the future. Gulke points this out.


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