Jerry Gulke: Will High Prices Find the Missing Acres?
The grain markets posted another active week. May corn prices were up 9¢ and May soybean prices were up 30¢, for the week ending April 16. All May wheat classes were up, with Kansas City up nearly 23¢.
Why are prices elevated heading into the planting season? The markets are trying to buy more acres, says Jerry Gulke, president of the Gulke Group.
“Since the shockingly low Prospective Plantings report of 91 million acres of corn, the market has a job to do—that’s not enough to fill needs,” he says. “Corn is trying to compete with soybean acres.”
USDA’s total planted acres of nearly 179 million to main row crops, leaves a deficit of 4 million to 6 million acres, Gulke says. “The market is trying to buy some of those lost acres. Maybe $5 will be the low for December corn prices going forward.”
Gulke says some of his clients in Iowa and Nebraska have converted a pivot or two from soybeans to corn. Farmers are seeing almost $65 an acre more profit than it was a few months ago, he says.
Wheat prices are breaking out to the upside on weather concerns, he says.
“There is supposed to be cold weather from Canada down to Texas,” he says. “Wheat is well enough along that if we get it too cold, we might nip the crop.”
While many commodities were higher this week, livestock prices were all down, especially hogs which are down $7 per hundredweight for the week.
Gulke points to exports as the main price drag in hogs.
“This week exports of hogs were about 17 million pounds,” he says. “The week before it 33 million pounds, and the week before that it was about 64 million pounds. Now you’re exporting about one-fourth as much as three weeks ago—that speaks volumes.”
Hog prices had been in an uptrend. But the week started with a daily key reversal lower, then continued to go lower and ended with a weekly key reversal lower, which was one of the first major sell signals since when the rally began last November.
“After the export report came out, hogs were limit down, Gulke says. “We closed limit down again on Friday. There’s a lot of rhetoric out there that China is going to buy more hogs, but the evidence doesn’t show that. Technically, we may have put a top in for the season.”
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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.
