For the week, July corn was 2½ cents higher, December corn was up ¼, July soybeans were down 25¾, November soybeans lost 26¾ cents, July soybean meal fell $4.00 per short ton and July soybean oil was down 189 points. July Chicago wheat dropped 51 cents, Kansas City wheat fell 43 cents and July Minneapolis wheat was 46 cents lower.
Last week we debated whether or not the charts were signaling a top in the grain markets or an end to the spring weather rally. Soybeans, soy products, canola and all three classes of wheat were sharply lower again this week, with corn the only exception.
Jerry Gulke, president of the Gulke Group, says: “These markets collapsed this week. It was like farmers threw in the towel after getting sick of waiting for better prices or realized time is running out and they’re going to need bin space.”
So, is there any hope for soybeans? Gulke says there are four red-letter points on the November soybean chart with accompanying events that might indicate lower prices ahead.
First, he points to a daily price down-gap made on Jan. 2, 2024, which resulted in a selloff of over $1.22 through Feb. 26 when the market put in a contract low in at $11.22 ¾.
That low was scored as farmers sold through the end of February when those with basis fixed contracts had to decide to capitulate or fix futures.
Gulke says a low was posted and, as we went into early March preparing for insurance and planting decisions, it was as if the market was saying: “If you didn’t sell today, odds are you’ll hold inventory (old crop) and help new crop prices.”
He says November futures managed to recover half the losses from Jan. 2 through March 21, which is not unusual in price discovery. However, they then retracted, just not to the Feb. 26 lows.
The subsequent rally during the end of April into mid-May tried to get soybeans back to the down gap of Jan. 2 but failed.
“It should be noted that if prices rally to a down gap, fill and close above it, it would represent a move that would basically state the negative bias on Jan. 2 (the gap) was no longer significant. That didn’t happen,” he explains.
The third red flag was another attempt to attack the gap, but it couldn’t even take out mid-May prices.
“The key reversal down that day put the nail in the coffin. The rest is history as we are on attack for the Feb. 28 low, which might indicate the market believes producers are still holding 2023 inventory just as South America comes on board as a major competitor, whatever the crop size,” Gulke says.
The December corn chart looks more hopeful, he adds, and the December corn had a massive capitulation at the end of February but managed to rally back to nearly $5.
“However, that was a point where many farmers thought it would be a good time to sell some corn. The market failed to go higher, not just once but several times and then posted some bearish reversals,” he states.
The good news, according to Gulke, is this Thursday the market posted a key reversal higher.
“We held the lows that were made in the March 28 USDA report, then again in the middle of April and finally this Thursday. We touched some levels that had fundamental importance and corn decided to rally with a vengeance,” he says.
Friday’s sell-off in corn was just a 50% retracement of Thursday’s gains.
“Markets often want to go back and test the charts at the scene of the crime, I call it, and say was this a good move or just a flash in the pan,” he says.
That action did not do technical damage, so Gulke elected to take profits on short corn hedges. “We put a lot of money in the bank,” he adds.
Now the rest of his marketing plan will depend on the weather. Currently, the market believes the crop will get planted and off to a good start. However, Gulke has 1988 on his mind.
“In 1988, things looked very good on June 21, and then temperatures shot above 100 degrees for several days and it stayed hot past July 4th. This is not a good time to become complacent.”
For more information, contact Jerry at info@gulkegroup.com.
