For the week, December corn was down 2 ¾ cents, November soybeans gained 7, December soybean meal was up $5.80, December bean oil plunged 146 points, December soft red winter wheat fell 11 cents, December hard red winter wheat lost 14 ¾, December hard red spring wheat was 3 ¾ lower.
This week soybeans held weekly gains, with a lower weekly close in corn. However, corn and soybeans have been essentially trading sideways since the September WASDE.
Corn and Soybeans Consolidating, While Funds Add Length
While November soybeans tried to retest the contract high set on Sept. 11 at $13.35 ¼ the contract did not have enough momentum to break to new highs. The market is in a holding pattern awaiting the results of the U.S. China Summit between President Trump and President Xi in Washington D.C. on Sept. 24.Soybean and corn are also waiting for additional harvest results to determine yield.
Jerry Gulke, president of the Gulke Group says at the same time the latest CFTC Commitment of Traders report showed the large speculator adding to their net long positions in corn and soybeans and have been extending that position since the week of July 6.
He says this has allowed the Relative Strength Index (RSI), which is an indicator of the overbought or oversold status, to go from 85 down to 62 in corn and soybeans.
What Does This Mean For Farmers?
Gulke’s observation of the large speculators over the years is they are generally ahead of the trend or ahead of the market.
“They start buying, anticipating the market will go up, or their analysis says the market’s going to go up or it’s going to go down, whichever position they take they’re in the position before the market starts to really move.”
He says their historical analysis shows the speculators will have around half of their desired position before the market establishes a strong trend. “Then they’ll buy or sell to extend the rest of their position, and the market will finally follow,” he notes.
The COT Report shows that funds are currently near to record long in soybeans, soybean meal and corn.
Gulke says many in the trade think that once the large speculators reaches this record level they are more likely to liquidate than to add to that length. However, he says the market can fix its overbought status just by moving sideways and the large speculator can often stay long until the market resumes its uptrend and the fundamental come to fruition. So, he thinks the funds could stay long in corn and soybeans for a while.
“When they’ve got a significantly long position they can stay that way a lot longer than a lot of the bears can manage their margin money,” he states.
Unfortunately, the funds often sell when the media or other market participants get the most bullish or the news is the most bullish.
How Can Farmers Protect Themselves?
Gulke says early yield results from their client base indicate yields are better than expected in soybeans and steady in corn. So, he thinks there is at least some risk that soybean prices could go lower due to increasing supplies in future USDA reports.
Gulke does not want to risk a lot of money on the upside at $5.50 corn and $13 soybeans. “So, at those levels, we increased our hedge coverage and that’s the beauty about using futures. We’ll stay with those positions until we take out last week’s highs or take out that high that we made when Pro Farmer numbers came out.We’ve not gone higher since,” he explains.
Technically, a signal the market is going to take out those highs is if corn and soybeans close September above the August highs.
“If we continue to do that in the fall until October coming up here, and we’re trading higher than September, you got something going that you hadn’t anticipated,” he concludes.
For more information you can contact Jerry at info@gulkegroup.com.
