For the week September and December corn were down 23 ½ cents, September soybeans fell 69 ½, November soybeans plunged 66, September soybean meal lost $15.90, September bean oil tanked 621 points, September soft red winter wheat sank 38 ¾, September hard red winter wheat fell 37 ¾, September hard red spring wheat lost 24 ½, December cotton gained 181 points.
Corn, soybean and wheat markets all scored bearish lower weekly closes just a week after November soybeans hit new four-year highs and both classes of winter wheat also hit new contract highs.The markets saw end of month profit taking but were also removing weather and geopolitical premium.
Summer Rally Stalls
So, are the highs in the grain markets?
Jerry Gulke, president of The Gulke Group says he thinks it is too early to call a top in the grain markets and he prefers to wait for more information.He called early season lows in the grain markets on June 30 with some important technical reversals.
Gulke says those lows have not been taken out and so until they are he remains bullish and chalks the selloff up to end of month positioning, weather and some concerns about China trade relations.
“We saw wheat get hit pretty hard and it had a strong month. So, if you really want to dress your books up so that you look good to your customers, you bank some profits in the positions you made money in.And so, I don’t think you can say a whole lot about what happened on Friday, especially on the end of the month,” he explains.
With a new month starting Monday the key will be holding the previous month’s lows which coincided with the lows scored in tandem with the USDA Acreage and Quarterly Stocks Reports. “So, you’ve got a long way to go to even test those lows, and we established back then that the lows are in probably for the year,” he adds.
Funds Buy Grains
The CFTC Commitment of Traders report showed that the large speculative trader had been a buyer of grains as of last Tuesday.In fact, funds were long in the soft red winter wheat for the first time since 2022.Plus, the speculative traders increased their new crop sales significantly from the week prior.
“So that’s pretty encouraging,” he remarks.
Watching Weather
Gulke says he wants to see how the weather plays out over the weekend.Some areas of the Western Corn Belt did receive rain on Thursday night into Friday morning but there were dry areas that missed out in Northwest Iowa, Southeast South Dakota and parts of North Dakota.
“I want to see where we’re at Sunday night because so far, the rain has been a bust at our farm in North Dakota. We got some rain in certain spots, but 200 miles away from where we have other farms, we got nothing. That’s serious, serious trouble up there,” he states.
To change the trend of the market he thinks the dry areas need to get significantly smaller, and the crops need to show improvement.He thinks the rain may have been too late in some spots.“The question is, how much damage did we already do by the end of July, and how much will this rain that we the last couple days and what’s forecast for the weekend help?”
At his farm in Northern Illinois they have also largely missed the recent rains.
Uncertain Market
Gulke says the abnormal market action is making it difficult to have a position.
He points to the inability of the wheat market to hold war premium this week despite the shutdown of exports in the Black Sea region.
“It looked strong. They were bombing Odessa and Russian ports and yet the price of wheat was going down,” which has many farmers confused.
He calls it shaking the loose leaves off the tree. “If you’ve got people that are kind of bullish and all of a sudden, they get slammed, now they’re not so bullish and now they’re wishing they’d have sold some corn and beans last Friday and a week ago.”
So, while his short-term technical signals have turned negative the medium and long term indicators are still bullish.“I’m still friendly to the market we’ll see what China does and what the weather does over the weekend.”
What Should Farmers Do Now?
Last Friday Gulke advised clients that had done any marketing to pull the trigger on sales.
“We were back up to very good prices. I sold a semi-load of beans just to see whether my theory is right or wrong and sold a little bit of corn. And I think we got like 70 cents a bushel more than we got last year in the fall. You know, that’s $140 an acre. That covers a lot of fertilizer and fuel costs,” he adds.
He says they were also long calls after getting out of short positions in June 30th.
“So we took profits on all that because it’s one thing being long in the field, long in the bin, and then buying long calls, which I rarely do. You take profits somewhere and sit and wait, and that’s what we did,” he says.
Gulke says they are 40% to 50% sold in the cash market and have out-of-the-money call options including September $4.50 calls and $12 bean calls on about 20% to 25% of production. Those allow upside if the rains don’t confirm and the heat returns.If the market goes up they’ll get the chance to sell again.
“They’ve got problems in areas of North Dakota and they’re not the only ones. And we’re seeing it in our backyard as well. So, I think you wait and see what happens.”
He says if the war in the Black Sea continues, the EU confirms a short crop and the U.S. crop continues to deteriorate the grain market could go back and retest last week’s highs.
53. And at 180 or 179, I know a very popular person,
“So, I don’t think we’re not done with this dance yet,” he concludes.
For more information contact Jerry at info@gulkegroup.com.
