For the week, grains were mixed with March corn up ¾ cent and December corn up ¼. March soybeans lost 4 cents, new crop November dropped 6¼, March soybean meal fell $7.50 per short ton and March soybean oil was 3 points higher. March Kansas City wheat led the complex climbing 16¾ cents, March Chicago gained 7 cents on the week and March Minneapolis wheat 8 cents higher.
Soybeans and soybean meal tanked going into the weekend as funds hit the sell button and ended lower for the week. On Thursday, March soybeans hit chart resistance right around the highs on report day at $12.46, and profit taking ensued after a nearly 45-cent rally off the lows.
While March soybeans are still above long-term support at $12, November soybeans dropped through that level, which concerns Jerry Gulke, president of the Gulke Group. He says the collapse of cash basis levels in Brazil contributed to the sell off.
“There was a huge drop in basis last week, and again this week. In fact, the rumors we got from our friends in Europe was that there’s a cargo of soybeans sold to be delivered on the east coast of the United States out of Brazil. That really hurts the market psychology,” he says.
Corn also saw technical selling heading into the weekend with spillover from lower soybeans, but the market also hit chart resistance and retraced. March corn got above $4.50 but couldn’t stay at that level very long, which Gulke says was disappointing, but the corn market at least ended with a slightly higher weekly close.
Wheat was higher for the week. Gulke thinks the world turmoil in the markets might be putting in war premium with the Black Sea and Red Sea as looming black swan events if they escalate. He says lower wheat acreage continues to be slightly supportive.
So where do markets go from here? Gulke says the corn and soybean markets might trade rangebound until there is confirmation of the South American crop size.
“I don’t think we are going to see huge losses in prices from here forward, but these are not exciting prices,” Gulke says. “I’m a little disappointed we didn’t hold better than we did, but next week’s another week.”
Gulke says they have been trying to capture the carry in the markets with short calls, but this week they lifted some of those positions and took to the sidelines.
“Our whole focus has been to capture some of the market carry: sell July futures and ride it or sell the options out there and flip the premium,” he says. “We did a little bit of both, and this week we thought it might be a good time to stand aside, put some money in the bank and if the market takes out $12 and $4.40 with a vengeance in the old crop, we’ll re-enter the market again. However, that didn’t happen this week.”
For more information, contact Jerry at info@gulkegroup.com.
