For the week December corn was down 6 ½ cents, November soybeans lost 13 ¼, December soybean meal was $2.30 lower, December bean oil gained 41 points, December soft red winter wheat fell 8 ¾, December hard red winter wheat was down 3 ¾, December spring wheat was unchanged.
Grain markets ended lower on Friday and posted lower weekly closes across the complex.
Have Soybeans Topped?
Technically the November contract had been trading in a 20-cent trading range above $13 for several days and then broke above resistance on Thursday to score a new contract high at $13.31 ½. The soybean market fell nearly 36 cents on Friday on profit taking.
Jerry Gulke president of The Gulke Group says it isn’t surprising with the funds holding a near record long position in soybeans. “The large spec has been long for quite a while and was in this market before it even reached this point. This is probably hit one of its objectives,” he explains.
With the bearish weekly reversal, he thinks the soybean market saw buying exhaustion and may have put in at least a short-term top.
“That was a massive key reversal down. We not only took out the highs for this year but the contract highs and then turned around and closed below that that breakout area,” he explains.
What Drove Soybeans to Contract Highs?
Demand had been underpinning the soybean market with breaks being bought by soybean processors to fuel the record crush pace and strong margins.
Soybean oil has also been supporting soybeans with record RVOs for bio-mass based diesel and diesel prices hitting a record $6.06 this week.
Additionally, China was buying soybeans at a steady rate.Gulke says their running total was estimate at around 12.5 million metric tons (MMT) or around 50% of the 25 MMT they have committed to buy by Dec. 31.
News reports on Thursday indicated China had bought another 1 MMT this week alone and was ramping up purchases ahead of the U.S. China Summit on Sept. 24 in Washington, D.C.
Gulke says the naysayers in the market that downplayed the chance of China upholding their promise to buy U.S. soybeans have been short and wrong and may have finally thrown in the towel.“And they get out of the market right at the top. That’s how these markets work. You force the shorts out or force them into a margin call,” he says.
He points out that when the market is up at contract highs and 80% of the trade is bullish the market also runs out of buyers.
WASDE Adds Pressure
Bull markets also need to be continually fed, and the bulls did not get that fodder with the September WASDE.That added to the selling pressure.
The market was expecting a fractional yield cut but instead USDA raised yield by .1 bu. per acre to 52.8 billion bu. and raised production to a record 4.535 billion bu. as a result of key rains in August and September.
Gulke says the precipitation he received on his farm in Northern Illinois even the last two weeks have helped the crop put on some additional pods and filled out the soybeans.“We’ll probably have a record yield in northern Illinois and even Illinois now is pretty high, according to the WASDE,” he says.
When traveling through the dry areas of Minnesota and North Dakota in the last two weeks he also did not see the disastrous soybean crop he was expecting which fed ideas the national yield would continue near trend.
In fact, Gulke thinks it is possible the soybean crop could get bigger in futures reports.
As a result, he says he doesn’t want to be long soybeans at this is a price level.
For more information you can contact Jerry at info@gulkegroup.com.
