Grains were mostly higher for the week with December corn up 1¼ cents, November soybeans 14¼ cents higher, December meal up $17.90 per short ton and December soybean oil down 97 points. December Chicago wheat gained 11¾ cents, December Minneapolis wheat was up 1½ cents and December Kansas City wheat lost 4¾ cents.
The mostly higher weekly closes in grains were a direct reflection of the rally on Thursday. Jerry Gulke, president of the Gulke Group, says corn, soybeans and wheat closed higher after the release of the October WASDE, which was a game changer for the markets.
“We often say it’s not so much what the report says but what the market does with the report, and we saw a big bounce in everything really, corn and wheat and beans,” Gulke says.
The lower yields on corn and soybeans were a bit of a surprise, he adds.
“In corn and soybeans, the fact the yield went down caught at least the speculators off guard because they had been leaning toward the yield being better,” Gulke explains.
The yield drop has the market concerned the crop will continue to get smaller.
“Statistics show that November yields might be a little less so we can’t afford to lose another bushel on beans, that’s over 80 million bushels on harvested acres, which takes carryover down to an impossible 140 million,” Gulke says. “On corn, supplies are still adequate at 2.11 billion. Another bushel drop in corn yield is another 80 million and affordable.”
Soybeans closed higher for the week breaking a streak of several lower weekly closes. So, can the market build on that momentum? Gulke says yes: “I think the trend is much, much better now and we have much more information than we did a few days ago.”
Gulke thinks the soybean market will eventually have to ration demand with higher prices.
Corn also saw friendly reaction from the USDA report and posted another higher weekly close. However, $5 on the spot month is still serving as overhead chart resistance. Gulke says getting corn above that level is difficult with all the pre-placed sell orders waiting to execute at that price. However, if the market could close above that level it would open up the door to a bigger rally.
Even wheat saw a reversal on report day on bearish news with U.S. ending stocks increasing 55 million. The focus in the wheat market has been shifting to global production concerns with the strengthening El Nino and dry weather cutting production in major producing countries such as Australia and Argentina. USDA confirmed that in the report, he adds.
Gulke warns the other significant geopolitical development that bears watching is the Middle East conflict as it could turn into another black swan event.
Crude oil and heating oil had higher weekly closes as a result of the escalating tensions combined with additional Russian sanctions. He says if the conflict intensifies it could have a ripple effect in all of the markets, especially if it shuts down energy supplies.
“When you can’t get a hold of something you’ll pay whatever it takes to get it, price is immaterial,” Gulke says. “If your car is out of gas or your refrigerator is empty, we don’t know what that’s like.”
He advises farmers to have their energy and fertilizer supplies in hand and stored on the farm in the event this turns into another war.
