For the week March corn was up 2 ¼ cents, March soybeans climbed 21 ¾, March soybean meal was up $7.70 per short ton for the week, March soybean oil lost 47 points, March soft red winter wheat gained 5 ¼ cents, March hard red winter wheat was 11 cents higher, and March hard red spring wheat was 11 ¾ cents higher.
Corn and soybeans closed higher for the week in the face of heightened uncertainty tied to a new administration regarding tariffs and South American weather.
Jerry Gulke, president of the Gulke Group, says to him that kind of resilience is an underlying sign of a bull market.
“That’s how bull markets start,” he explains, “And we’ve seen that happening, as you know, for quite some time in corn.”
All the grain markets started the week rallying as the trade seemed to be relieved about the lack of immediate blanket tariffs imposed by President Trump, including on China.
However, even when the tariff news reemerged during the week the news did little to break the markets, with both corn and soybeans posting new high closes for the move this week.
President Trump threatened to impose 25% tariffs on Feb. 1 on imports from Mexico and Canada and 10% on China and the European Union if these countries do not assist in securing the border did little to break the markets.
Gulke says, “Soybeans have been resilient in spite of the Chinese trade tensions and tariff fears and the big crop in South America.”
The corn market, he reiterated, has seen a paradigm shift and it may be starting in the soybeans as well.
It was supported initially by strong demand and then culminated with USDA lowering corn ending stocks to 1.54 billion bu. in the January 10 report and even dropping soybean carryout to 380 million bu.
He reflects on how the market psychology was so bearish last spring and during the growing season as the funds were near to record short in the corn market and they were also heavily short in soybeans.
However, Gulke says with the paradigm shift the managed money traders have exited their short positions and are now estimated to be long over 300,000 contacts in corn and have pushed to more than 35,000 contracts long in the soybean market as well.
This change in fund position and change in ownership, according to Gulke, has supported the continued rally and resilience of the corn and soybeans markets.
“It’s not uncommon either for a market to find a bottom and rally after a big flush of selling from farmers in the cash market like we saw in corn September 1st.There is an old trader saying that you need to take the grain out of the weak hands and put it into the strong hands,” he explains.
So where does the market go from here?
Based on a chart corn and soybeans look poised to move higher but Gulke says he’s reserving an upside prediction due to the long list of unknowns.
“Markets like to go in multiples of, say, 10 cents. And I think it’s fruitless to look at what target you might have unless you have an understanding of what’s coming up with South American weather and President Trump and that’s hard to predict,” he says.
As bullish as corn and soybeans have acted Gulke says he has been disappointed the wheat market has not kept up with the strength in corn and soybeans and the funds remain heavily short in all three classes.
“I am a little disgusted about wheat because it’s lagging behind and it’s now at a price it’s being fed instead of corn.I understand they’re feeding wheat in Kansas and places in the South,” he says.
What could change that?
Gulke says global wheat stocks are some of the tightest in many years and some day that will be a story for the market to trade, but not today.
For more information you can contact Jerry at info@gulkegroup.com.
