For the week, December corn ended 5¼ cents higher, July corn was up 8 cents, November soybeans gained 5 cents, July soybeans tacked on 4¾ cents, December soybean meal surged $11.40 per short ton and December soybean oil plunged 238 points. December soft red winter wheat was 15½ higher, December hard red winter wheat was up 12¼ cents and December hard red spring wheat put on 13¼ cents. November canola dropped $45.50.
Despite higher weekly closes in all the grains, the markets had a sharp sell-off on Friday, which left poor technical signals on the charts.
Jerry Gulke, president of the Gulke Group, says there might have been some spillover from the collapse in outside markets, such as the stock market.
However, he thinks it was mostly profit taking by speculators and farmers putting on hedge protection going into the September WASDE Report.
He says many of the private analysts have released surveys and are forecasting yields below USDA’s August numbers, while social media posts are varied.
However, Gulke is looking at a big crop on his own farm in northern Illinois.
“I can’t tell you exactly what my yield is, but I can look at a field and tell you it is much better than it was a year ago and potentially one of the best crops I’ve ever grown on my farm, at least the best crop of soybeans,” he explains.
There is still a great deal of uncertainty going into the report about the size of the corn and soybean crop.
“December corn had a weekly key reversal higher last week, which was positive, and that momentum extended into Friday before the market reversed. You have to ask yourself do I want to own a lot of grain going into that report? It might not be as good as they thought it was, but I doubt you’re going to see USDA go from 183 down to 179 or something like that,” he says.
Gulke is more concerned the soybean yield could actually be much bigger than what USDA estimated in August.
“We could end up with carryover that is approaching 700 million bushels next year,” he adds.
Gulke says even if the crop is a little smaller than August’s forecast, the U.S. isn’t going to run out of corn or soybeans any time soon.
The charts, according to Gulke, already point toward the idea that USDA is going to confirm the large crop size.
On the soybean chart, November rallied on Friday right up to a key level of resistance that signals the September report will not be bad enough to warrant taking out those price levels.
“We were eyeing the $10.45 gap, but we didn’t get there, and instead hit resistance and had a pretty massive reversal down, closing well off the highs. That’s not good,” he says.
December corn also rallied up into resistance around the $4.20 level, but it reversed as well and closed right above the 50-day moving average.
Soybean oil and canola also had a rough week and got beat up on the charts, according to Gulke, as these two biofuels feedstocks were dealt yet another negative blow.
China announced it would launch an anti-dumping case against Canadian canola imports as retaliation against imposed tariffs on electric vehicles, aluminum and steel, which tanked canola and soybean oil.
In regard to the financial markets, Gulke says the meltdown is coming as a result of talk that the economy is slowing and so is demand, which is not good for commodities.
Where do the markets go from here?
Looking at continuous corn and soybean charts, Gulke says the big question is will the markets go back down and retest the pre-harvest contract lows during harvest? If the September WASDE or harvest results confirm the crop size is there, it is a distinct possibility, he adds, which is why the Gulke Group has been suggesting hedging strategies, especially with the recent rally off the lows.
For more information, contact Jerry at info@gulkegroup.com.
