For the week September corn was 12 ½ cents higher, December corn was up 15 ½, August soybeans gained 23 ½, November soybeans soared 28 ½, December soybean meal added $5.20, December soybean oil gained 194 points, September hard red winter wheat was up 4 ¾, September soft red winter wheat was 1 ¼ higher, September hard red spring wheat lost 19.
Grains ended mostly higher for the week with corn making a bullish weekly reversal.
Is the Low in the Corn Market?
Jerry Gulke, president of the Gulke Group, says the technical action in corn this week signals an early harvest low in the market.
He says the bullish turn started on Monday, July 14, “When corn made new contract lows with the spot month September hitting $3.91 ¼ only to reverse higher and put in a key reversal.”
Looking at a weekly continuation chart for corn Gulke says there was a gap area left in August of 2024 between $3.78 to $3.98 and the market got down to the middle of the gap but didn’t completely fill it before moving higher.
For Gulke that signals an early low in the corn market.
“So, the market went down there and said here’s what happened last year. I don’t think it’s going to work this year. This looks like pretty cheap corn given where we’re at. We’re in July, we’re not August. And there are some other things from too much rain and now the pollination problem that create anxiety,” he explains.
According to Gulke that caused the market to determine there was no weather premium in corn, triggering some buying and short covering.
Is This a Weather Rally?
Gulke says the reversal in corn happened before meteorologists started forecasting a ridge of high pressure for the week of July 20.
This change in the weather pattern will bring heat and drier conditions into the Corn Belt the week of July 20 when a good percentage of the corn is pollinating.
However, if the weather forecast stays hot and dry and the market gaps higher on Sunday night and closes higher on Monday, Gulke says it will be a full-blown weather market.
“The market looks ahead. It doesn’t look at, you know, 12 hours or what happened overnight. It looks at the 6-10 or the 10–15-day forecast,” he says.
Lack of Farmer Selling
USDA’s Quarterly Stocks Report on June 30 also showed farmers holding a much smaller percentage of the crop in on farm storage this year versus 2024.
Gulke says that may have also contributed to an early harvest low in the corn market.
“I think you asked me if that would mean less farmer selling than last August, and if could we put in an early harvest low as a result? I think the market answered that for now,” he explains.
Gulke Buys Calls as “Cheap Insurance”
Gulke says to mitigate the weather risk his firm used an option strategy he rarely uses.
“We were over 100 % sold at one time, took profits, resold about half of it again and we’re short about 35% to 40% of our corn and beans again. So, we bought call options and anybody that listens to me for the last decades knows I don’t like buying options because I think it’s like throwing money out the window as they expire worthless,” he says.
However, he advises farmers to be selective and use the call as “cheap insurance”.
“Options are good in time like this when we can buy the call for four cents and have the right to be long September corn at $4.05 and it had seven days left in it as of today.”
If they are right, Gulke says they can exercise the calls and be long the market to take advantage of the weather rally.
If Weather Trims the Crop Size How High Could Corn Rally?
Gulke says the market may be perceiving that with weather stress and pollination concerns the size of the corn crop is shrinking but that won’t be confirmed until the August or more likely the September WASDE.
He says the market is continually in the process of price discovery based on current fundamentals, which also include demand and the progress made on trade deals.
So he’s not sure how high corn prices will go. “But I do know what we’re not going to do.We’re not going to go back and make new lows,” he adds.
For more information contact Jerry at info@gulkegroup.com.
