For the week, May corn was 7¾ cents lower, December corn was down 5 1/4 cents, May soybeans lost 6½ cents and November soybeans slid 1½ cents. May soybean meal lost $4.60 per short ton and May soybean oil gained 94 points. May Chicago wheat rallied 7 cents, May Kansas City wheat fell 3 cents and May Minneapolis wheat was 2¾ higher. December cotton fell 131 points. June DOW futures fell 914 points.
The week was relatively quiet for the grain markets, but the stock market was down over 900 points. What is the correlation?
Jerry Gulke, president of the Gulke Group, says the DOW, NASDAQ and S&P 500 just hit record highs at the end of March.
Meanwhile, grains were hitting contract lows in February and were caught in a “sell the rallies” cycle as farmers were bearish on ideas of large supplies.
“While the grain markets were walking down the stairs, the stock indices all walked their way higher to make new highs,” he says.
Gulke says the funds also got overextended in the grains and added to the bearish grain market sentiment as they went near to record short with their positions.
“We’ve had so much negative news in the grains and the fund traders have not wanted to be long in the market so they don’t extend the upside very much,” he says.
However, this week the stock market crashed on concerns about the escalation of the Middle East conflict and fear the Fed will keep interest rates higher for longer because the economy is too strong. As a result, we had a major key reversal down, Gulke explains.
Markets get overextended, according to Gulke, and need to equalize. The financial markets got too high and are correcting, while the grains got too low. He thinks grain markets might be in that process too.
“We just need some kind of event to bring us out of it,” he says.
Weather might be the catalyst to finally trigger a sustained rally in the grain markets, and he says there has been a shift in the weather. Some areas of the Corn Belt that were talking about early planting are not getting too much rain.
“We had five inches of rain in northern Illinois, so now we have mud in the fields,” he says.
The economics of the corn and soybean markets are also trying to equalize, Gulke adds, as indicated by last week’s USDA Prospective Plantings Report that showed farmers intend to plant 4.6 million fewer acres of corn than in 2023 and 2.9 million acres more soybeans.
“The acreage report last week says, logically, why would we spend $350 more to plant corn just to break even when we can do it with less money invested and plant soybeans. As a result, we saw that surprise reduction in corn and the increase in bean acres,” he says.
For more information contact Jerry at info@gulkegroup.com.
