Grains put in lower weekly closes again this week and did significant technical damage. December corn lost 33¢, November soybeans were down 49¢, soybean meal lost $11 and soybean oil was down 25 points. The biggest loser for the week was the wheat complex with September Chicago wheat dropping 71¢, Minneapolis was 73¢ lower and Kansas City lost nearly $1.04.
Jerry Gulke, president of the Gulke Group, says the action was disappointing and the losses the past seven to 10 days have cost farmers dearly.
“Obviously if one places a dollar value on the effect both up and down on a producer’s bottom line it makes timing and risk management important items,” he says.
Gulke says the chart action tells the story in many of the markets. December corn is acting like it has more confidence of rain and broke $5 this week. The market put in a bearish performance after completing a 62% retracement of the total move from $6.29 to $4.81.
“December corn had a gap lower and a key reversal lower just days before new crop ratings and the August WASDE report,” he explains. “Markets could react ahead of the report, but the past 10 days of trading should give one pause to comprehend what the markets are saying beneath all the confusion and volatility.”
The markets are trying to determine how low prices have to go to get back lost demand, he says.
All classes of wheat displayed further negativity, despite the escalation of the Black Sea conflict, daily war headlines and what Gulke calls “Putin Speak.”
“It did little but give sellers an opportunity,” Gulke says.
And the markets have suffered significant chart damage, and it doesn’t look good from here, he adds.
After Chicago wheat had a knee-jerk reaction and posted a limit-up close on July 24 the market has given up war premium ever since and all but ignored the shipping difficulties in the Black Sea. Gulke was also disappointed in the market action in Minneapolis wheat after spending a week in western North Dakota.
“We saw questionable HRS wheat. It’s variable and still subject to the need for good weather for final fill. Price activity was disappointing to say the least; all this while Canada burns,” he explains.
When fundamentals don’t influence prices the way you have come to expect, Gulke says it is time to look behind the scenes.
“Complacency seems to have become a plan of sorts to just sit and wait out the events, weather, price volatility and economic events,” he explains.
Soybeans are actually holding together technically better than corn or wheat, according to Gulke. That’s mostly a function of an improving demand picture with recent export business, which includes to China. However, he says, the market has failed to stay around $14 and only July 27 scored a key reversal that was coincident with a major reversal to the upside in the U.S. dollar Index. Soybeans followed up by breaking and gapping below a long-term uptrend. All of this occurred after completing the third wave higher the previous week.
The price action this week puts even more emphasis on the Aug. 11 WASDE, according to Gulke: “What we don’t want to see is a crop report that holds yields steady and we lose demand.”
