Jerry Gulke: Is It Time to Reward the Market?

The October USDA reports delivered a few surprises and price gifts. December corn prices were up 15.25¢ and November soybean prices were up 45¢ for the week ending Oct. 9. December wheat prices were up 21¢.

The October Crop Production from USDA includes:

• Corn: Production forecast at 14.7 billion bushels, planted area at 91.0 million acres, 178.4 bu. per harvested acre national average yield
• Soybeans: Production forecast at 4.27 billion bushels, planted area at 83.1 million acres, 51.9 bu. per acre per harvested acre national average yield

“In beans, USDA lowered production through the abandonment of harvested acres and left the yield alone,” says Jerry Gulke, president of the Gulke Group. “In corn, they lowered the production a little bit and they also lowered the demand. They didn’t do anything with the yield in corn. But when you lower the production in corn, and they also then continued to lower feed and residual, as well as ethanol.”

Going forward, Gulke says, any further production changes will come from changes to yield. “I think they’ve milked the harvested acres down enough in both corn and soybeans to where they probably won’t touch that, and it’ll be up to yield from now on.”

The production changes helped springboard prices, especially in soybeans.

“We’ve got a straight-up market, and this market is looking like it wants to seek levels at which you start to curb demand,” he says.

Gulke went back and looked at previous price patterns and saw soybean prices hadn’t hit these levels since 2018.

“It’s a big inverse market, with people not paying that much for soybeans further out, assuming South America is coming on board,” he says.

Stay cautious and be proactive, Gulke encourages. “These prices are good profitable levels, which will likely instill planting more beans next year.”

With corn and soybean prices significantly higher now than in the last few months, Gulke is encouraging farmers to make sales, which he’s also doing himself.

“We’re rewarding the cash market,” he says. “These prices pay a lot of bills. But it’s always difficult to sell the rallies, because no matter what you do, you’re wrong the next day. But you’ll never go broke taking a profit. These are times to write down and remember. We’re seeing corn, soybeans and wheat all at levels where most people can make a profit.”

Gulke says next weekend could be interesting, based on how many areas receive rain and take a break from harvest.

“We are going to get some rain, but we do have an open weekend again with excellent harvest weather. I’m not going to have the drying bill I had last year—some good news all around,” he says.

Technically Speaking by Jerry Gulke

Technical price action pointed the way coinciding with the August Crop Report. The key in analysis in making or setting targets/objectives of the past is to know if the fundamental reason that cause the price rally the same now as it was back when those areas were printed before.

It is not just a matter of looking at a price chart but more of knowing the total story whether perceived or actual. The market perceives a lot of things now, and reality is yet to evolve. The same or similar price action will indicate when the rally is over than what occurred at the turning point in August.

A lot of money was lost in the sell and defend analysis as well as buying a floor under the market using put options. Time spent understanding both technical and fundamentals are well rewarded. It is called doing due diligence.

View a PDF of the chart.

View a PDF of the chart.