For the week December corn was 8 ¼ cents lower, March corn fell 9 1/4, January soybeans plunged 34 ¼, March soybeans lost 32 ¼, December soybean meal dropped $21.50, December soybean oil fell 93 points, December soft red winter wheat was 21 ½ lower, December hard red winter wheat was down 20 ½, December hard red spring wheat fell 17 3/4 and December cotton sank 237 points.
The grain markets ended lower for the week, concluding an ugly slide for the month tied to massive fund selling and liquidation.
As the calendar flips to November can the markets finally find some stability?
Grains in Free Fall
Jerry Gulke, president of The Gulke Group, says the grains are in free fall. “If you look at the weekly chart it looks pretty bad. We’re a long way away from the highs set the first part of September.”
Gulke says from January into August the grain markets continued to make new highs, taking out the previous month’s highs and keeping the uptrend alive. However, in September that trend reversed and now the markets continue to take out the previous month’s lows.
“So now if we start November out and we stage sustained lows below the October lows, then we’ve probably got more to go to the end of the year,” he explains.
More Corn to Pressure the Market
Farmers haven’t completed the corn harvest in the western Corn Belt but there are already piles at elevators. Gulke says elevator managers are telling him if farmers don’t have corn contracted, they should not try to deliver it.So, there will be corn left to be sold.
“I’m just afraid a lot of farmers didn’t get a lot booked at $5 and above or $5.50. So now the market’s going to seek a level low enough to increase corn exports. And there’s a lot of people out there that globally don’t think we can do this for another year,” he adds.
Gulke says corn exports have the ability to grow when prices are at $3.90 or $4.20 but USDA cannot expect another 20% increase in exports when corn is at $5.50.
However, corn has dropped $1 off the Sept. 2 contract highs and wheat has fallen around $2, as the market is in price discovery mode.
“We’ve discovered a price now that’s going to try to get us back to being competitive in corn. And sounds like maybe in wheat, China is looking for some wheat, but not very many cargoes. So, we’ll see how that works,” he states.
Close to a Bottom?
Gulke says the market always looks the best at the top and the worst at the bottom.
Whether corn and wheat have put in lows or not, his firm started to take profits on Friday on some of their hedges.
“That’s the ones we put on September 1st and September 11th,” says Gulke, “Some of these were 40 or 50 cents a bushel in corn. I don’t ever remember taking that kind of profit on a hedge account.”
Still, he reiterates that they did not make money because they covered hedges. “It just means you didn’t lose that money.”
At these price levels Gulke believes the market is trying to give farmers a disincentive to plant corn.
November Recovery?
So, can the markets stage any kind of recovery in November or could they possibly take out the critical June 30 lows?For December corn the market bottomed at $4.25 ¾, January soybeans at $11.39 ½, December soft red winter wheat at $5.90 ½ and December hard red winter wheat at $6.26.
Gulke says there is a possibility of that especially if USDA raises soybean yields in the November WASDE. “Even a half bushel is about 40 million bushels. Pretty soon you tip the scales give buyers a lack of interest in buying it.” That could push us back to the June 30 lows.
It also depends on the outcome of geopolitical events, including the Black Sea peace talks, the Iran war and the U.S. elections.
President Trump has warned of renewed strikes on Iran after the mid-terms.
“If he does that it may be the catalyst, we need to get people nervous about getting the physical commodity next year,” he remarks.
So, if farmers did not sell when December corn futures hit new highs at $5.50 he says there is no reason to sell at levels that are under their cost of production.If farmers have grain bins on their farm, they should store grain and wait for better prices.
Often the market bottoms when the news looks the worst.
For more information contact Jerry at info@gulkegroup.com.
