For the week May corn ended down ¼, December corn fell ¾, May soybeans lost ¾, November soybeans dropped 4 cents, May soybean meal gained $4.20 per short ton, May soybean oil slid 70 points, May soft red winter wheat was 4 ½ lower, May hard red winter wheat lost 8 ¼ and May hard red spring wheat fell 5 ¼.
Despite a highly volatile week in the markets with on again-off-again tariffs on Mexico and Canada the grains ended steady to only slightly lower for the week.
Jerry Gulke, president of the Gulke Group, says prior to the USDA Ag Outlook Forum he bought downside protection in the form of April $4.90 corn puts at a price of $.07, which were only good for about three weeks.
Gulke is not a fan of buying out of the money call options because most expire worthless and instead he would rather sell calls.
So, what was the strategy behind this?
He says they use them as a risk management tool just before a major report that could result in a surprise.
“So, you really need insurance through the report, and after that the market will tell you what it’s going to do.If the market is leaning one way and saying, “Well, this won’t be much of a report, it’ll be a ho -hum thing,” and then the market gets a shock.An example is the higher-than-expected corn acreage forecast from USDA’s Ag Outlook Forum,” he explains.
The case could also be made for using option strategies to lower risk and manage volatility in weeks like this week where markets chased tariff headlines.
The May and July corn contracts lost around $.60 cents from the February highs to this week’s lows, so it was a wicked correction.
Gulke says they exited their options during the volatile week and took profits, netting around $.30 per bushel.
Despite the volatility tied to tariffs, the corn and soybean markets closed only slightly lower for the week and Gulke was impressed at the reset off the lows that produced a hook reversal on the charts.
July corn closed 24 ¾ cents off the weekly low, Dec corn ended 27 ¼ cents off the weekly low, Nov soybeans closed 29 ¾ off the weekly low and July soft red winter wheat closed 21 ½ cents off the weekly low.
“If it takes out the low and goes higher above the previous week’s high or month’s high, that’s pretty positive. That says all the information that I gauge my impressions upon, my outlook on, are now for naught because something changed,” he says.
Gulke says the rally off the lows in the December corn is the most impressive considering the market is also pricing in a big acreage increase for 2025.
“Now, you got to ask yourself if things are so bearish out there, and we get 94 to 96 million acres of corn and the USDA Ag Outlook Forum predicts 1 .9 billion bushels, which is a comfortable margin. Then why did why did December corn close that far off the lows?”
For the last few weeks Gulke says the market has also been extremely concerned with how long the funds had gotten in the corn market.
Gulke says the heavy selling pressure early in the week was likely fund liquidation.
Friday afternoon the CFTC’s weekly Commitment of Traders report confirmed that showing funds, as of last Tuesday, were net long +219,752 contracts reducing their long position by a whopping 117,702 contracts vs the previous week.
He suspects those same traders bought back grain starting Wednesday to produce the hook reversal.
Regardless, it was a positive way to end the week in the corn market.
For more information contact Jerry at info@gulkegroup.com.
