For the week, grains were all lower. March corn was down 1½ cents and December corn was 5¾ lower. March soybeans fell 11 cents, November soybeans were off 10¼, with March soybean meal $5.60 per short ton lower. March soybean oil dropped 135 points. March Chicago wheat was 2¾ lower, March Kansas City wheat dropped 7¼ cents and March Minneapolis wheat fell 3¼ cents.
Grains continued to feel the hangover of the bearish January USDA reports this week and the shock of higher corn and soybean yields at 177.3 bu. and 50.6 bu., respectively. On report day, March corn made a new contract low of $4.41 and March soybeans put in a low of $12.03. The markets took out those chart levels during the week but still closed above those prices on Friday. In the process, the markets held long-term support lows at $12 on March soybeans and $4.40 on March corn and reversed off those levels.
Jerry Gulke, president of the Gulke Group, says when you look at the daily and monthly chart for both corn and soybeans he considers the bounce off the lows a victory: “This was a win, even though we had markets down a little bit for the week.”
He says it was encouraging to him that when those chart levels were taken out there wasn’t massive selling.
What does this price action mean? “The market is trying to decide if the lows are low enough for now. Or, fundamentally, do we need to trade in a lower sideways trading range with the upside at $4.40 corn and $12 soybeans in order to influence planted acres for 2024,” Gulke says.
The market is trying to discourage corn acres and has a big job to do, he adds. Acreage needs to drop 4 million to 6 million acres because with a 181-bu. yield, carryout could approach a burdensome 3 billion bushels.
“We had to get corn down low enough to where it took the excitement out of growing it,” he says.
If these long-term lows are violated it will catch Gulke’s attention.
“If we go back down and close below the levels of this week, it will then take out last week’s lows. It kind of tells you there isn’t a whole lot of support in these markets, and the market will believe we’re going to grow too much of everything,” he says.
Funds are short in the corn and soybean markets and have continued to sell and drag prices lower. This week’s technical action might also signal they are done pushing the short side of the market and are waiting for new news out of South America’s crop, Gulke says. There is a great deal of uncertainty about the size of the Brazilian soybean crop with a wide range of estimates from 135 million to 157 million metric tons.
“Our contacts that grow soybean in Brazil say their crop is about 152 mmt as they see it,” he says.
Farmers are still storing a great deal of inventory with USDA’s Quarterly Stocks Report showing roughly 8 million bushels of corn in on-farm storage. Gulke says that will also have an impact on corn prices ahead.
“The big question is, are they going to sell it or are they going to store it and hold it?”
Many farmers will sell corn if it gets back to $5, but Gulke thinks that is unlikely.
“Again, that shouldn’t happen because we just had a crop report last week that says we’re awash in corn,” he explains. “There’s no reason to get excited about an end user covering anything. We should never go back to $5 unless there’s some kind of a black swan event.”
On soybeans, he says there were many farmers who sold calls for the premium above $13, which is well above the current market. Unfortunately, the value has dropped from $1 to only 20¢. However, he is storing his grain on the farm and taking advantage of the carry in the market, which he says has turned out to be a good strategy.
“Doing nothing and storing grain at home or paying storage like I did, at least I made enough to pay the storage and then some,” Gulke says.
For more information, you can contact Jerry at info@gulkegroup.com.
