For the week December corn was down 14¾ cents, January soybeans were ¾ lower, December soybean meal up $18.50 per short ton and December soybean oil lost 112 points. December Chicago wheat ended 10½ cents lower, December Kansas City wheat was off 27 cents and December Minneapolis wheat dropped 10½ cents. November crude oil lost $2.51 a barrel with the DOW off 726 points.
Soybeans were down just 3/4 cents for the week but was supported by December soybean meal which was up $18.50 for the week and scored a new contract high on Friday. It reflects the strong demand for United States soybean meal. Currently, Argentina soybean processors are running at only a third of capacity after historic drought cut their crop by more than half.
Jerry Gulke, president of the Gulke Group, says: “We finally got what we were promised last summer or really last spring when Argentina had a half a crop, so people came to us to buy meal. We’ve seen that happening in our exports. They also do like our meal better than they do Argentina’s.”
That demand has shown up in the weekly export sales the past few weeks with commitments for soybean meal sales running 44% above a year ago. Gulke talks in more detail about the technical action in the soybean complex this week below in his technically speaking blog.
Is the South American weather market starting early? Gulke says that might be the case.
“It’s in the news sooner, so I think it’s getting more attention sooner than normal because even USDA was expecting a big increase in production from 156 to 163 million metric tons, which is seven million metric tons or 200 million bushels more.” Gulke explains. “That’s quite a bit, so I think we’re going to watch weather sooner.”
He says China might also be watching the weather in South America earlier than normal as evidenced by their purchase of U.S. soybeans for November delivery and market talk of China washing out of 8 to 10 cargoes of Brazil soybeans for November.
Conditions have been less than ideal in many areas of Brazil, and there is growing discussion of El Nino re-intensifying, which could shave their record production estimates. Gulke says farmers in Brazil have been planting as fast as they can because it has been dry.
“El Nino isn’t treating them so well and maybe they have a crop problem. Maybe not,” Gulke says.
Meanwhile Argentina has received some recent rain, though soil moisture is still running at a deficit making a rebound in production uncertain.
Gulke says with soybean harvest past three-quarters complete in the U.S., farmers might be done selling for a while and will wait for higher prices.
“There is money to be made in storing, but you have to almost hedge it off for future months to capture that,” he explains.
The slowdown in farmer selling, plus higher water levels on the Mississippi River as a result of recent rain, also helped to firm soybean basis levels and the cash market this week, Gulke adds.
The big losses for the week came in the stock market with the Dow down 726 points as macroeconomic concerns continue to grow.
“A lot more people are getting concerned that interest rates may be higher for longer, not just high longer,” he says. “Goodness, if we see a 6% increase on the 10-year bond that ought to be a wake-up call for everybody. That’s not the place I want to be when they’re playing with the economy, trying to slow it down when everything gets too hot.”
For more information, contact Jerry at info@gulkegroup.com.
Technically Speaking Blog for Oct. 27, 2023
This time of year, media analysts question if the harvest lows are behind us.
Quite some time ago, I stated the pre-harvest lows were in. September corn at the first of September traded about $4.60 and posted a key reversal higher on Sept. 15 after posting a low near $4.61 December futures took over leadership about 17 cents to 18 cents higher and traded last week at $5.09 1/2, or just above the key reversals highs back on Aug. 11 of $4.94¾ when September was still the lead contract. The rally of nearly 40 cents for December futures over the last month to the aforementioned prices likely met a lot of analysts’ objectives; inventory moving out of weak (producer) hands is welcomed by traders.
So far selling CZ futures above $5 has worked with corn now about 20 cents off $5. Analysts will point out former December support at $4.73 and $4.71 as the likely downside target. The $4.60 level posted by September is of more consequences, in my opinion, and would represent an increase in negative attitudes and that South America weather doesn’t matter.
A brief look at soybeans is warranted as weather in South America is getting a reprieve, which is bound to happen intermittently from now on; it rains periodically.
Spreaders lean to one commodity over another almost daily and trade the soybean crush almost daily. All interfere/influence prices, but new highs in soy meal may be a wake-up call. Ideas were first thrown out when Argentina was seen as a short soybean (crush) market and could not provide exports as usual. It has taken some time, but the recent move is worth noting. The steep uptrend (dotted line) shows some vulnerability, and it is yet to be determined if meal has once again taken a leadership role in the price of beans, but the price action shows it has for now. Soy oil has taken the brunt of the crush spreading (buy meal/sell soy oil), but when that spreading unwinds, price reacts accordingly. Interestingly, the last trading day of this week had soybeans, soy oil and soy meal all higher. That’s something to consider if you dumped beans off the combine.
Soy oil is now defending a 62% retracement. Is it soy oil’s time in the sun? Soy meal’s monthly reversal higher is still positive the meal/oil crush, however.
