For the week July corn was up 16 3/4 cents, December was 14 ½ higher, July soybeans gained 24 ¾, November soybeans soared 27, July soybean meal was up $.20, July soybean oil surged 383 points, July hard red winter wheat was 24 ¾ higher, July soft red winter wheat gained 21 and September hard red spring wheat was up 12 ½.
Higher Monthly Closes in April
Grain markets were all higher for the week and closed April with a second consecutive higher monthly close.
Jerry Gulke, president of The Gulke Group, says technically it is a very bullish to see grain markets making new highs for the year starting in May.
What Does it Signal?
“When you close above the previous month’s high, usually what that tells you is that going all the way back to January the market is digesting and discounting all the fundamental news that came out, even the most bearish news in the January 12 WASDE,” he explains.
The market also rejected the bearish news from the USDA Ag Outlook Forum in February and the delayed meeting with China in March.
“All that was digested and you couldn’t close below the previous month’s low like we did in past down trending markets.The market indicated it needed to push prices high enough to ration the demand for some reason and it exceeds all those fundamentals that are there. And we did it in April,” he adds.
Now the market is looking ahead at acreage according to Gulke and trying to determine if there will be more acres of soybeans and less acres of corn because of high fertilizer prices.
“So, you end up on Friday with corn going up more than beans or as much as beans, five cents. So, it looks like there’s a concern out there that even with lower exports to China and a record crop in Brazil, we need more acres of soybeans. That’s pretty exciting,” he says.
Now that the market has moved above the April highs he says the confirmation of a bull market is to see that uptrend continue in May.
“I want to see that continue in the first full trading day and week in May and through the WASDE report.Historically this time frame in May 10-13 has been a time when the market prices in the best news.So, we need to hold above that April high during May or there is a problem,” he says.
Currently he thinks the market is acting like it doesn’t care how many acres of corn or soybeans farmers grow because it is not going to be adequate.
Start of a Bigger Bull Market?
So, is this the beginning of a bigger bull market like the one that started in 2020 coming out of COVID?
Gulke thinks so and it’s being pushed by demand.
Two Large Demand Factors
1. Global Biofuels – The first demand component is the global push for biofuels.
Gulke says it’s not just the U.S. but economies around the world are looking at alternatives to mitigate $100 plus crude oil prices, plus high gasoline diesel fuel prices.
Countries like Indonesia are pushing from a B40 to a B50 biodiesel mandate and Brazil is increasing their ethanol blending rate from 30% to 32%.
Gulke says even in Illinois they have increased their vegetable oil based biodiesel blending rate from 10% to 20%.are using a 20% biodiesel blend made from soybean oil.
He says, “If crude oil stays above $100 suddenly everyone is going to need alternatives.”
2. Food Security – The second demand component is a function of food security.
Gulke says with near to record higher global fertilizer prices and a supply crunch in many countries’ food insecurity is on the rise.
“If you’re in a crisis area for crude oil and energy, you’ve got to say which is more important, the food I eat or the fuel that I burn in a car to go get my groceries?”
While the U.S. doesn’t have a problem with energy supplies, the prices are globally driven.
“Countries that have to import 70% to 80% of their energy, and they’re also importing food. You’ve got to be thinking about storing a little more grain in your country just in case,” he adds.
Plus, if tariffs are causing countries to buy more from the U.S., Gulke thinks that helps with demand.
Bull Markets Difficult to Manage
So, if the U.S. is on the verge of a bull market what should producers do?
Gulke says bull markets are difficult to manage.
“Bear markets, when something happens, you can sell on the bottom, gravity takes over. Bull markets just keep eating away at the negative rhetoric, like we’ve seen for months in the agriculture community. The price of inputs is going up but the price of commodities is also going up to help mitigate some of that, unless you are highly leveraged,” he describes.
According to Gulke, the problem is also if farmers sell now and the price goes up, they feel like they’ve left money on the table.
“So, it’s very difficult to handle bull markets because you can’t pick a top until it’s behind you in most cases but it’s still exciting,” he concludes.
For more information contact Jerry at info@gulkegroup.com.
