Gulke: Hedge Corn; Price Opportunity in Soybeans

July 23, 2010 02:48 PM
The markets have decided it is too late now to kill the corn crop, says Jerry Gulke of the Gulke Group. “Last week—the 15th—December futures gapped higher than the previous day, and then Friday, again closed firm on the theory that weekend weather could be adverse. Then this past Monday, weather turned more promising again and the gapped lower, leaving those two trading days as an island high. It looks like we can produce a 165-bu. national yield—but we need it. I think it’s time to hedge again.
“If the market’s as good as I think it is longer term, we could see a close over $4.10 again, prompting talk of $4.50,” he adds. “But for now, I think it’s low risk to be hedged. I won’t use a forward contract because our basis fell out of bed, to -50¢ recently, and because that would lock in the price.”
Soybeans rate a “watch and see what happens” mode, he says. “I’m not sure we can produce big crops of both; we don’t usually. And world oilseeds have some trouble spots: A 20% cut in China is likely, Canada’s canola may be off 20-25%, and Russia grows something like 70% of the world’s sunflower seeds and 50% of exports. Their heat wave is causing problems not just for wheat but for sunflowers, too. A 10% drop in world stocks could mean a 50% increase (from a small base) in U.S. soybean oil exports.
So it’s still a weather market, though more for beans than corn. This year, we’ll prove whether these biotech hybrids can produce with water and heat, as opposed to last year’s water and cool temperatures.

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