Jerry Gulke: Has Reality Turned Into Fear?

23:15PM Apr 26, 2019

The grain markets suffered another down week. For the week ending April 26, December corn was down about 5¢, November soybeans down around 25¢ and Kansas City wheat down around 18¢. 

Why do the prices keep sinking lower?

“The markets and those people that trade markets globally, got tired of waiting for some news for the tariff to make it better,” says Jerry Gulke, president of the Gulke Group. “I think that the longer they did their pencil work looking at supply and demand, the more reality set in.”

Even if China were to buy a significant number of soybeans, Gulke says, those beans will be put into storage since global demand has fallen.

“It started falling around a year ago,” Gulke says. “Combine that with the swine fever that started in August and it seems the demand has been cut. Plus, we’ve got weather that is, ironically, not very good at all. We're going to plant it late, and it doesn't make any difference.”

Common knowledge would say, Gulke points out, that at some point the markets would catch a price and hold. “But when you look at the total global situation, there's really no big incentive for anybody to want to be long.”

Gulke says the markets are in the fear stage, asking: How low can we go?

“Trying to pick a bottom in soybeans is like trying to catch a falling knife,” Gulke says. “We broke some significant support this week. We are not priced right, and the rest of the world is trying to see which one can race to the bottom to sell their grain and get rid of their stocks before we harvest.”

Gulke and his team do regular competitive analysis on U.S. grain and shipping costs versus other countries. Currently, the picture doesn’t look good for the U.S.

“We’re are not competitive all the way through the end of December this year on anything,” he says. “It used to be that we'd run out of beans and corn in South America in August and then we would be ready to harvest, and China would come to us. We’re not competitive all the way out. I think the market is realizing this is a major, major problem.”

This situation puts the tariff situation into perspective, Gulke says.

“I think China realizes that we need them more than they need us, which is a complete flip over from what people thought last May when the tariffs first started,” he says. “It's amazing turn of events that has happened, and I’m not old enough to have seen this before.”

Jerry's Take on the Charts

Technically speaking, if a picture is worth a thousand words, the charts below speak volumes.

CORN was the hope of most traders and pure fundamental analysts, yet corn continued to disappoint for nearly a year now. Failure of significant price formations told the story along the way giving multiple risk assessment hints of what was coming. Largely overlooked in the media has been the significant increase in Argentine and Brazilian crops and therefore stocks, as mentioned in the radio message. 

(click charts to enlarge)


December 2019 corn
SOYBEANS had been forming the bear flag for some time, and the catalyst for a breakdown has been there for also about a year. Not the support giving way a year ago, then the long duration of a rally and negative bear flag. The direction of the arrow in June 2018 and now in April are concerning to say the least. Soybeans have been begging to not be planted and the rush to lower prices sending a signal that might be headed at the last minute. 


November 2019 soybeans

WHEAT is often the leader and needed to be priced as a feedgrain which happened. Note the familiar support being broken in February leading the way for corn and beans to mimic. Traders often say that wheat leads the way. 

July Wheat

LIVE HOGS seemed to begin to top out, about the time analysts were falling all over each other try to outdo the most recent estimate of hog destruction in China. So much so that June hogs “gapped” higher on April 2 on the way to $100. The breaking of steep uptrends was my first signal to hedge hogs coincident with the most bullish news in the media. The retracement in price failed to fill the gap, however one day later the priced “gapped” lower and below the gap on April 2 thus leaving a three-week “island” all by itself as an exhaustion of price discounting news. The situation in China is a fluid one and it would be naïve for China to put all their eggs in one basket by relying on the US to fill meat demand. They’ve been there a likely won’t rely on the US as a major supplier of anything. We shall see but selling call options for the premium plus placing hedges on the technical proved successful similar to what happened in corn and soybeans. In a recent radio show a listener called in to ask how I could advcate near 100% hedge coverage in soybeans when he needed $2/bu more to make money. I learned long ago the market in its price discovery under a surplus scenario doesn’t care what we need. Costs are local and price is global---a lesson we seem to be learning daily in the month of April. 

Live hogs

Good Marketing,
Jerry Gulke
Contact [email protected] if you have questions or comments. 


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4-26-19 Jerry Gulke