For the week, December corn was up 6 ¾ cents, November soybeans lost 28 cents, with December soybean meal falling $13.60 per short ton, December soybean oil surged 161 points, December Soft Red Winter wheat gained 9 ¾ cents, December Hard Red Winter wheat was up 21 ¼, December Hard Red Spring wheat tacked on 31 cents.
Grains were higher for the week except November soybeans which posted a lower weekly close for the first time in six weeks.
So, is the rally over in soybeans and what about the rest of the grain complex?
Jerry Gulke, president of The Gulke Group, thinks the party is over in the grains, at least for now, due to several key factors.
He first points to history, “I have some charts I sent out to customers showing that weather rallies here or in other countries generally last about six weeks.”
Gulke says the weather rally was two-fold as hot dry weather in parts of August and September in the Midwest were viewed by the trade as taking the top end yield off of corn and especially soybeans.
However, he says yield reports may still indicate a record crop.
“We are finishing the last field of soybeans today on our farm and these are probably the best yields this farm has ever seen,” he says.
Many soybean fields were below 11% moisture which hurt yield but overall he thinks they’ll still have a record crop.
South American weather also played a role, with hot dry conditions in Brazil as farmers started the planting season.
However, he says with forecasted rains in Brazil and Argentina traders are taking weather premium out of the soybean market and if those rains materialize soybean prices could see even more downside risk.
Technically for soybeans the lower weekly close is also a signal of a top.
The managed money traders have also been exiting their record short position in the grain complex and may be close to neutral and may not have any more ammunition to buy.
Gulke says after a $1 plus rally in soybeans and a nearly 40 cent rally in corn he elected to reward the market by making some cash sales and going short the futures market.
He says, “There could be a setback in the corn market before it recovers and forms a longer sideways to up trending market, but the downside in the soybean market scares me due to the big U.S. crop.”
Gulke is concerned about a bigger yield estimate on soybeans in the October WASDE and while he is more unsure about USDA raising corn yields, he does not see a cut in the cards.
“I don’t see USDA lowering yield and even if they did a half bushel here or there doesn’t make a whole lot of difference if it starts to rain in Brazil and Argentina,” he adds.
With the rally corn and soybeans have had off the contract lows, he says producers should protect themselves ahead of the WASDE because if USDA does raise yield there is substantial downside risk.
For more information contact Jerry at info@gulkegroup.com.
