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Jerry Gulke: How Long Will This Weather Market Last?

16:21PM May 24, 2019
Jerry Gulke WMR

The corn market continues its ascent. December corn was up nearly 22¢ for the week ending May 24.( AgWeb )

The corn market continues its ascent. December corn was up nearly 22¢ for the week ending May 24. That follows last week when December corn climbed 25¢ for the week.

November soybeans also finished the week on a high note at 8¢ higher for the week, while July wheat jumped 25¢.

“This was really exciting for farmers who got some of their equity back,” says Jerry Gulke, president of the Gulke Group.

The markets continue to be led by the weather. The planting pace for corn and soybeans is dramatically behind average. As of May 19, just under half of the U.S. corn crop is planted, which compares to a five-year average of 80% for this time period. This year’s corn planting pace is the slowest since 1995.

For soybeans, the planting pace is equally slow. As of May 19, 19% of the U.S. soybean crop is in the ground. The five-year average for May 19 is 47% planted.

“Most weather markets will go from four to six weeks,” Gulke says. “And we probably started this weather market about two to three weeks ago, which is about 10 to 15 trading days. We’ve had a 50¢ move in about 10 trading days.”

It’s interesting to note, Gulke says, that corn was up almost three times the amount of beans was up this week.

“So, you can kind of tell that the traders are thinking we may not have as much corn as we need and farmers will probably plant more soybeans,” he says. “But, with the lack of Chinese buying, prices don’t need to go as high.”

This weather market could last two to three more weeks, if farmers are lucky, Gulke says. 

“That puts us into the first two weeks of June,” he says. “After June 10, it probably matters not anymore because we’ll be forced to make decisions that are more due to climate and weather than economics. We’ll truly run out of time. That’s probably when we exhaust the upside.”

These dramatic market swings highlight why flexibility is important for grain marketing, Gulke says. 

“You just can't be complacent in these kinds of markets, especially when government is kind of running the show and Mother Nature is on their side this time,” he says.

 

Technically Speaking: Volatility Can Be Your Friend

By Jerry Gulke

For weeks media analysts were warning that fund shorts were a catalyst for a market rally. I guess if you preach the same sermon long enough, it will be right. Timing was right for a turnaround last week as we mention one of “biblical proportions,” and it continued this week in a bold day to close near the highs of the move to date going into a three-day weekend?   

With forecasts suggesting some kind of break in the weather later next week but no end in the trend to be wetter in June, the market either assumed the worse or the digital traders were tired of being on the wrong side, or funds finally blew out of their short positions, or a combination of all three, we won’t know until Monday night trading resumes. Safe to say sellers had their head handed to them if they were short anytime in 2019, unless they were timely in their executions, which I doubt.

Typically fund/specs buy their short positions from producers who have been told to sell any rally. According to information released today via the CFTC report, managed money bought a record number of CBOT fut+opt contracts in the week ended May 21 (166,189), edging old weekly record of 165,128 set on June 30, 2015. Producers also sold a record amount of corn: 159,778. Fund net short dropped to 116,729 from 282,918 the prior week, right on cue. Ag commodities began the transfer from weak to strong hands—so we’ll see!  

When I began this column, I mentioned that not all things I use to be proactive in marketing and making decisions on when to hedge and when not to. So it was with corn and soybeans as well as wheat where things evolved such that I felt time to take profits on hedges and employ cheap upside protection, which proved worthy of considering when you look at charts, as well as keeping in place my negative bias on soybeans, at least for now.

JULY CORN: July is the lead contract and likely the one funds and traders were short. If one looks at the 50¢ move down and up in the last three months or so, and consider using price risk management on 50% of production; that is about $100/ac opportunity lost if not captured. Even part of it makes President Trump’s second tariff benefit package seem pale in comparison. Being restricted by cash only sales or some kind or accelerator program makes matters even worse. Notice that all the media hype this spring about selling any rally or buying puts at every 5¢ to 10¢ higher, was met with buying by whomever. Only the seller of those options likely made money. Tuesday should be the beginning of an interesting week. 

 

July 2019 corn

JULY SOYBEANS:  July soybeans managed to gap higher last week to fill the down gap posted previously in a valiant attempt to appear as positive as corn, but failed again this week to take out the previous week’s high. The new payment program and a break in weather, even if it comes later in June, promises to result in too many beans regardless. There is an interesting chart pattern in soybeans desire to back and fill previous losses so we’ll see how market reacts to next week’s weather and the 6-10 day forecast. 

 

July 2019 soybeans
 
JULY WHEAT:  Even wheat, the other billion-bushel stocks commodity fared better than soybeans and closed strong. Wheat has a tendency to move for no obvious reasons. This week there were news items that seemed to dictate that scenario again. 

 

July 2019 wheat

If you missed the 50¢ move down and up and are concerned for the future price discovery, call Jeff or Jamie at 480-285-4745  or 707-365-0601, or go to info@gulkegroup.com and leave contact info and we’ll call you. We may have just begun a volatile year price wise. 

 

Find previous audio and written reports with Jerry Gulke at agweb.com/Gulke

 

Read More

Jerry Gulke: Corn Moves in Biblical Proportions

Jerry Gulke: Government Intervention Back In Vogue

Jerry Gulke: Has Reality Turned Into Fear?

Are the Grain Markets Facing Reality?

Grain Markets: The Calm Before the Storm

Check current market prices in AgWeb's Commodity Markets Center.

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