For the week May corn was down 11 ¼ cents, December corn fell 9, May soybeans were 12 ¼ higher, November soybeans were up 3 ¾, May soybean meal surged $16.60 per short ton, May soybean oil fell 185 points, May soft red winter wheat fell 27 ¼, May hard red winter wheat lost 25, May hard red spring wheat plunged 35.
Corn futures scored a bearish lower weekly close for a second week and are now around 30 cents off the highs the market hit during the Iran war.
Jerry Gulke, president of the Gulke Group, says the corn market was higher in February but hit a high on March 9.
July corn rallied up to $4.87 ½ and December up to $4.98 ½ in tandem with a spike in crude oil to over $120 a barrel as the Iran war shut down the Strait of Hormuz.
However, since that time corn market has been correcting.
Gulke says, “Corn made the highs right at the peak of the Iranian war. Then we tried two different weeks to go higher and couldn’t do it.”
Corn Technicals Turn Bearish
July futures have fallen 34 cents and retraced a full 62% from the low Jan 15 to high March 9.
December corn futures during the same period have retraced 50% and are within 4 cents of the 62% retracement.
In both cases, the 50-day average has or is close to being violated.
Gulke more closely watches weekly charts and says an up trending market makes higher highs and higher lows and he gets concerned if in any week the market closes below the previous week’s low.
“It doesn’t have to have a major key reversal. But after going up for five, six, seven, eight weeks, and if that uptrend falters, the market better turn around and make new highs off of last week’s low and get this uptrend going.If not there’s something going on that we don’t know yet, but the managed money does and that happened last week,” he explains.
Corn Removes War Premium
According to Gulke the corn market also tested the breakout point from the late February when the Iran war started.
“We’ve gone back to that point now. So, the market discounted all the potential bullishness out of the war if that’s what we were doing, in fact, is worrying about the war from a trade standpoint. We’ve gone back now and we’ve wiped all that out,” he says.
Gulke says that tell him the corn market doesn’t care about the war anymore and is instead trading its own fundamentals.
That includes too much corn, and the market was reminded of that in the April WASDE with the 2.127 billion bu. ending stocks figure.
He thinks there may be some concern about lost demand with global customers after the war in Iran.“Are we really going to get people to want to buy our grain when we’re not making any friends?”
Funds Exiting Long Corn Positions
The CFTC Commitment of Traders Report on Friday showed speculative traders had exited a larger percentage of their long position in corn.
He says, “When you look at it, it’s quite a percentage and this report lags as it is as of last Tuesday.So, they probably dumped a lot more because the price dropped significantly.”
Corn Losses Ground to Soybeans
During the time that corn was going down, soybeans stayed stronger which Gulke says may have bought a few soybean acres.
He is already planting more soybeans this year at a ratio of two to one but says his profit potential just got even better with the difference between his net profit before expenses.
“That spread widened in favor of beans at about $50 an acre in my books. So, it didn’t mean that soybeans took off and went through the roof. It’s just that corn went down,” he explains.
So, for farmers that waited to buy fertilizer the decision to stick with corn hasn’t gotten any better and Gulke says they may plant soybeans.
Is the Corn Rally Over?
He says the corn market rallied and gave farmers a chance to lock in higher prices than last year and gain from $60 to $80 an acre more gross income to help pay for fertilizer.
That incentive is now gone according to Gulke and he thinks the high may be in the corn market at least for old crop.
“It sure looks like it. In fact, if old crop corn July does not turn around and reverse itself next week and close above this last week’s high, which is a pretty tall order, then the weekly technicals I watch will turn negative.”
So now the hope for a corn rally he says is tied to weather.
For more information you can contact Jerry at info@gulkegroup.com.
