After a rough week last week, grain prices have rebounded. March corn prices were up 46.75¢ and March soybean prices were up 56¢ for the week ending Jan. 29. March wheat prices were up 28¢.
“We had a big trading range again this week in corn – around 40¢,” says Jerry Gulke, president of the Gulke Group. “We turned around this week and closed right around $5.50 per bushel.”
Meanwhile, soybean and wheat prices rallied up, trying to claw their way back up from the monstrous losses they had last week.
“Soybeans lost $1.10 last week, and we didn’t get all that back,” Gulke says. “Corn got all theirs back and then some. In fact, corn made a key reversal higher.”
A big impact on the markets this week were big buys from China. On Tuesday, USDA announced its first flash sale, which amounted to 1.36 million metric tons of corn to China. That one sale marked the biggest purchase by China in six months. On Thursday, USDA confirmed the buying continued, with China buying another 1.7 million metric tons of corn.
Gulke says farmers need to understand the logistics of these flash sales.
“It is explained to me that a U.S. entity has to report any U.S. sale made — when it is made. But an export entity for instance (Cofco, Cargill or whomever) can make a sale delivered to China with the potential of coming from the U.S.,” he says. “But until the sale is assigned to their U.S. entity, it may sit in limbo.”
Thus, he says, it is possible those big Chinese “flash sales” of corn reported this week are old news and just now catching up with sales that were rumored in weeks prior.
“So, under such a ridiculous protocol it is like putting the fox in the chicken house — get the corn covered and maybe even buy grain on paper, and then announce it for a flash sale, sell the announcement and capture profit enhancement,” he says. “In the U.S., a stock market entity would likely go to jail under such a scenario — outside the U.S. — all is fair in love and trading commodities and thus the “buy the rumor; sell the fact.’”
This situation can really add volatility to the markets, Gulke says.
“There were times we sit and watch this thing and we’d say, ‘Oh for the good old days when we get a 20¢ move in corn.’ Now we get that kind of move in just a few hours,” he says.
Read More
Jerry Gulke: The Markets Giveth and Taketh Away
Jerry Gulke: Not Your Father’s Markets
Jerry Gulke: Lessons Learned in 30 Years of Grain Marketing
Find more written and audio commentary from Gulke at AgWeb.com/Gulke
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Jerry Gulke farms in Illinois and North Dakota. He is president of Gulke Group. Disclaimer: There is substantial risk of loss in trading futures or options, and each investor and trader must consider whether this is a suitable investment. There is no guarantee the advice we give will result in profitable trades. Past performance is not indicative of future results.
