The grain markets posted major moves this week. December corn prices were up 45.50¢ and November soybean prices were up 62¢, for the week ending June 4. July wheat prices were up 23¢.
Welcome to a summer weather market, says Jerry Gulke, president of the Gulke Group.
“The weather is key,” he says. “The weather turned on a dime again. We’ve had some good rains, areas with no rain, frosts and 100-degree days. Some of the corn that was out of the ground in North Dakota was killed by frost.”
If the weather forecast on Monday morning shows these 100-degree days will lock in and stay, Gulke says, the grain markets could gap higher and be off to the races.
“We have history of what can happen to the grain markets if it gets hot and dry in June,” says Gulke, referencing 2012. “Traders like to look for an analog year as a comparison to current evolving markets; 2012 could be an example this year.”
Gulke was in North Dakota viewing potential damage of frost/freeze in late May 2012.
“It is interesting to see what happened in June 2012; it’s about as good an indicator as any,” he says. “By August 2012, corn had rallied from about $5.51 to $8.24 to $8.44 (a jump of at least $2.75). While the magnitude is a subject of debate this year, it is the direction that is important.”
Gulke says so far this June the markets have exploded similar to 2012.
“Estimating when we will rally high enough to satisfy this bullish market is conjecture,” he says. “But we do have history this time to help validate some estimates. The market will likely top out when things look the most bullish, as tops have a tendency to do that. I wouldn’t doubt that at some point we use the limits on both sides of these grain markets before it’s all over.”
On Thursday, June 10, USDA will release its monthly Crop Production and monthly World Agricultural Supply and Demand Estimates reports.
USDA is in between a rock and a hard spot, Gulke says. Will USDA go ahead and lower yield because of dry weather?
“USDA doesn’t like to predict what’s going to happen,” he says. “I think they will be very cautious in this situation. It will be difficult for them to come in during a hot and dry week and tell us production is going to be higher. But I don’t think they change much of anything now. They will likely wait until July to make yield changes.”
Read More
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Jerry Gulke: Are We Witnessing a Paradigm Shift in Commodity Demand?
CME Group Expands Daily Price Limits for Grains
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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.
