For farmers wanting corn to close above $6.00/bu. and soybeans to post major gains, Thursday brought an early Christmas present their way. March corn closed at $6.14/bu. and January soybeans closed 20 3/4 cents higher at $13.49 1/2/bu. In fact, the entire soy complex close higher.
"One of the significant things that I saw today, if you look at a weekly continuation, was that back in November we made a high on the 9th. Then we had a key reversal and things go very weak technically and we dropped $1.90/bu. December dropped off the board and March (see March chart) came on, and now while we’ve not exceeded the high yet, we did close higher than we closed that day. The market is telling me that we’ve gained that demand back such that the world is going to pay more for corn now than it did at any time before the crash in 2008."
So, is $7.00/bu. corn next? "It’s wherever the price of corn has to go to finally curb demand."
Hear Gulke's audio commentary here.
To date, Gulke says he has no indication that demand has been destroyed at any level. He doesn’t expect that answer to be solved anytime soon. "I go back to 1995-96 when we went to $5.00/bu. the first time and China bought corn. Nobody believed we would run out of corn until we got to the June 30 stocks report. Then it went crazy. What you find out after a while, so you do nothing. It’s almost that we have to curb demand quickly so we have enough to get us through July. I would expect old crop months to go up faster than new crop."
The timing factor of this shouldn’t be lost. Heading into the January stocks report, when the government will release final production estimates for 2010, the government is in the position to report record usage. Users have yet to buckle at any price thus far, so how much usage the report will is a key question.
All indications, Gulke says, are for higher prices in the last week of the year next week. However, expect some volatility throughout the week.