Wow. This week saw corn prices top $6 and soybean prices top $15.
July corn prices were up 61.25¢ and July soybean prices were up 94.25¢, for the week ending April 23. July wheat prices were up 59.50¢.
“We’ve sat sideways here for almost eight years, and now we’ve blew up,” says Jerry Gulke, president of the Gulke Group. “These are unprecedented moves. If we would had moves like that in a year, we’d thought we were lucky.”
What caused these major moves? Both supply and demand are at play, Gulke says.
From a supply standpoint, challenges are surfacing for the South American crops. Dry weather is starting to reduce production estimates.
“Planters will be rolling next week, so we’ll be running out of time to find more acres in the U.S.,” Gulke says.
USDA’s March 31 estimate of total planted acres of nearly 179 million to main row crops, leaves a deficit of 4 million to 6 million acres.
“The market is saying we need to find those 4 million to 6 million missing acres, or we’re going to cut demand severely,” he says.
On the flipside, demand has stayed strong thanks to China, Gulke says.
Gulke is working up ground on his Illinois farm. He hopes to plant corn next week.
Technically Speaking by Jerry Gulke
It took eight years, but the weekly down gap shown on the chart below was filled this week and done so with a vengeance. It is rare that such a bull move happens during the early months of the crop year with planting hardly started in earnest.
Planting will indeed happen next week, and we may set a record for a weekly rate. All this was really known last week as forecasts showed little planting resistance starting the last week of April on into May.
May options expired on Friday, April 23, with little profit taking resulting. Grains in general are acting like there is more going on than an effort to buy more acres from either a competitive grain or from the missing 4 million to 5 million acres.
Carbon credits and finally the reformulated biodiesel situation I’ve been mentioning for some time are both getting more attention in the press. The Green Imitative by the Biden Administration is getting more attention not only from a U.S. perspective but from a global perspective, as well.
All things considered, grains closed very positive considering the run they had this week.
The chart below shows how difficult pricing has been. Buying put options and rolling them up has likely cost more money than most had anticipated, a reason why I am not a fan of that strategy.
Selling and defending with call options has its money problem due to the very high costs of re-ownership. Think of the difficulty that lies ahead if/when weather turns price adverse in either direction. Looking back at the previous three runs of 2008, 2011 and 2012 show how swiftly markets can turn on a dime.
So far, a dime has found buyers! Watching markets on a weekly basis should make for interesting times ahead and give volatility a whole new meaning especially with new limits widened appreciably.
CME Group announced that after a routine biannual review, it has decided to expand daily price limits for Chicago Board of Trade grain and soy futures. The new limits will take effect May 2 for trades dated May 3. Following are some of the new limits. (It also widened limits for oats, rough rice, lumber futures and other grain futures contracts.)
- Corn: 40¢ per bu. (currently at 25¢ per bu.)
- Soybeans: $1 per bu. (70¢ per bu.)
- Soymeal: $30 per short ton ($25 per short ton)
- Soy oil: 3.5¢ per lb. (2.5¢s per lb.)
- SRW and HRW wheat futures: 45¢ per bu. (40¢ per bu.)
Check the latest market prices in AgWeb’s Commodity Markets Center.
Jerry Gulke farms in Illinois and North Dakota. He is president of Gulke Group. Disclaimer: There is substantial risk of loss in trading futures or options, and each investor and trader must consider whether this is a suitable investment. There is no guarantee the advice we give will result in profitable trades. Past performance is not indicative of future results.
