For the week July corn was down 15 ½ cents, December corn fell 12 ½, July soybeans lost 31, November soybeans were 18 ¾ lower, July soybean meal was $14.60 higher, July bean oil was down 44-points, July soft red winter wheat was 16 ¾ higher, July hard red winter wheat gained 12 ¼ and July hard red spring wheat tacked on 7 cents.
Corn and soybeans were lower for the week on technical selling and profit taking following disappointment over the lack of details regarding U.S. agricultural purchases out of this week’s China summit.
Recently, Jerry Gulke, president of The Gulke Group, had been talking about the building uptrend in the grain markets which made higher highs for two consecutive months. The key to keeping that uptrend intact was for the market to make new highs again in May. However, that trend fell apart with the lower closes in corn and soybeans this week.
Grain Bull Market Stalls
“Yeah, we were watching it very closely, and we kept getting new news ever since January 2 when the market started to go higher. There were some bumps in the road, but the market, especially soybeans, recovered from that,” he says.
The corn and soybean markets kept attempting to make new highs the last two months according to Gulke and even recovered from the selloff on from the shock of the WASDE on January 12 when USDA increased corn production to a record 17 billion bu. and found another 2.4 million harvested acres of corn.
Gulke says the market continued to shake off bearish trade headlines and rallied to close higher for February and above the January high.“March took out the February high and April took out the March high. So, there was no doubt about what the trend was.”
And then, according to Gulke, market analysts started getting bullish.
China Optimism Fueled Rally
“Many were recommended buying calls in case China came in to buy the additional 8 million metric tons (MMT) of soybeans or even corn.That was before we even knew the number of acres or the yield of this year’s crop, which could really make things exciting, “he explains.
Gulke says the market’s job is to digest all the information and make a price commensurate with what it hears or anticipates coming down the road, including optimism about the China meeting.
“It failed a couple of different times where we had key reversals up, key reversals down. We just couldn’t extend. And when you go sideways for a while, and say, if you ever extend to the upside and you break out to the upside then Katie bar the door,” he adds.
At that point Gulke says the markets go up just because they haven’t gone down for such a long time and it brings people into the market. “I even heard on CNBC that some people were selling some socks to buy commodities because of inflation,” he describes.
Monumental Week in Grain Markets
This week several markets, including new crop corn, soybeans and bean oil made contract highs and then reversed.
“What happened this week was monumental in my mind,” says Gulke, “The market tried to get higher again and there was enough information out there. Not so much what we heard, but what we didn’t hear.”
He says the lack of news on China ag purchases really topped the market from a technical standpoint.“I’ve seen this happen before. Markets tops are made on the most bullish news,” he says.
The same is true of lows, which are made when the news is the worst.Gulke says a prime example is the lows made in corn and soybean markets in August of 2024 on massive forced farmer selling ahead of first notice day for September contracts.
“And then we turned around and went higher from there. So, the reverse is true.”
Market Ripe for Profit Taking
Gulke says the correction wasn’t a huge surprise because the grain markets were due for a correction, especially as traders get caught leaning the wrong way as push the market farther or higher than it fundamentally should trade.
Has the Grain Market Topped?
So, with lower weekly closes on corn and soybean have those markets topped?
Gulke thinks from a technical standpoint it is possible, “I’ve got to ask myself, what is it going to take now for the market to go back up to those price levels and make new highs?”
He says the market started falling apart overnight Wednesday when President Trump and President Xi were meeting in China.
“You could just see that this thing was unraveling because things weren’t what we thought they were going to be. So, now the market looks at the prices on Tuesday and Wednesday and by Thursday morning thinks we were way too high, and sells off,” he says.
USTR Jamieson Greer stated China will buy double digit billions of dollar of U.S. ag goods over the next three years.
However, Gulke says the 25 MMT of soybeans China verbally agreed to buy is the only framework for bushels the market currently has to work with as no agreement has been signed.
“Once you harvest the crop, we’ll find out whether China wants to buy at a cheaper price. You know, if I were China, no way in the world I would step in and buy $12 soybeans after they’d been $9.50, 18 months ago. And you’ve got Brazil still selling cheaper beans. Same way with corn,” he says.
So, until more details are known about China trade, he adds the only hope for a recovery in the grains markets is weather.
For more information you can contact Jerry at info@gulkegroup.com.
