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Jerry Gulke: Prices Blow Through Overhead Resistance; What’s Next?

03:10AM May 31, 2019

The grain markets are on a roll. This week marks the third week of higher weekly closes. ( AgWeb )

The grain markets are on a roll. December corn was up 24¢ and November soybeans were up around 48¢. July wheat jumped 13¢ for the week ending May 31. This is the third week of higher weekly closes. 

The weather market continues, as planting progress creeps forward across the U.S. As of May 26, only 58% of the country’s estimated 92.8 million corn acres have been planted. The five-year average for this notch on the calendar is 90%. Soybean planting is only at 29% complete on the U.S.’s 84.6 million acres planted. The five-year average for late May is 66% planted.

“Weather markets can last four to six weeks,” says Jerry Gulke, president of the Gulke Group. “In my opinion, we started the weather market about a week before President Trump made the tweet about increasing tariffs to China. We broke down, turned around had that key reversal higher and closed back above some of the resistance—and off we went.”

Several weather forecasters have been calling for drier weather toward the end of May and beginning of June, Gulke says.

“And here we are, I've got three or four days of sunshine ahead,” he says. “Give me three days of sunshine here and in parts of Illinois with wind, and we’ll dry the ground out and we'll be back into plant. We’re probably won’t be planting in ideal conditions, but $4.50 corn on the Chicago Board of Trade makes it worth it.”

When planting conditions are conducive, Gulke says, the first acres will go to corn. “It may be beans that end up being unable to be planted,” he says.

Gulke says the weather market is likely starting to fizzle. “In about another week, we'll have probably exhausted this,” he says. “This could be the beginning of an exhaustion phase in these markets based on how they closed on Friday. We'll see what happens on Monday and the weather forecast.”

The good news is the dynamics of the markets have shifted. 

“We've done some significant things to the corn market,” Gulke says. “Corn closing above the highest level it has had in multiple years tells you the dynamics in agriculture have changed. We blew through a $4 corn like it wasn't even there. You can't help but think that maybe $4 is a support for quite some time to come, or a new dynamic takes precedence.”

The mood of the market is dramatically different from the low volatility seen for the last several months. “Who would have thought a year ago that we'd be talking about these prices? But weather is a fickle friend sometimes,” Gulke says.

 

Technically Speaking: Blowing Through Sell Orders

By Jerry Gulke

A lot of analysts for a long time had recommended selling corn every 5 cents higher or for sure if we ever saw corn above $4 futures again. Conventional wisdom also had those with insurance to sell up to their coverage level, say 75-80%, and let insurance due it thing. That may work in a normal year, but this year could have producers in harm’s way. Ditto the “accumulator programs, or HTA’s that seemed so convenient. 

All can be useful tools but now there may be pain to be felt if weather does open up and corn planters roll next week. Eighty degrees and a 15-20 mph wind can work wonders and we had both on Friday, likely spooking the market a little.

Having ridden the market down to lows of three weeks ago and the exiting hedges is one thing but to capture some “profit enhancement,” using worthless call options that no one wanted back then could have provided dividends that help mitigate upside risk and offered some relief of poor yields. 

The longer-term weekly corn chart depicts what’s going on in corn and to a smaller extent in wheat and soybeans. A lot of firms are doing the math multiplying harvested acres X yield X price to determine the validity of planting beyond insurance cutoff dates. 

Ag Secretary Purdue isn’t helping things with vague comments on how he will administer the money that he has discretionary income over. Either he realizes that we need every acre planted we can have in order to prevent shortages and worse yet importing corn from our competitors, or he doesn’t have a final plan and wants to see another week or two of weather where even a novice realizes it is too late and we ran out of time. 

corn chart

I didn’t think I’d see the day that Republicans would/could rise to the point of starving for media attention that they would block a disaster bill in Congress knowing full well the bill will pass under a majority vote next week. Terry Rose (TN), Chip Roy (TX) and Thomas Massie (KY) managed to do just that as congressmen blocking the bill this week for no other reason that grandstanding. I agree with Rep Scott (GA) it was ridiculous. So it is with politics; at least they got mentioned on CNN. A missed chance to show a least a token effort to participate in a bi-partisan bill as important as this one. If we can spend billions on worthless wars, perhaps we have money to support our own when in need? 

Good Marketing,
Jerry Gulke

Contact Jerry at 480-285-4645 or 707-365-0601; or info@gulkegroup.com.

Find previous audio and written reports with Jerry Gulke at agweb.com/Gulke

 

Read More

Jerry Gulke: How Long Will This Weather Market Last?

Jerry Gulke: Government Intervention Back In Vogue

Jerry Gulke: Has Reality Turned Into Fear?

Are the Grain Markets Facing Reality?

 

Check current market prices in AgWeb's Commodity Markets Center.