Weekend Market Report

Gulke: Soybeans Offer Technical Signals

Thu, 19 Nov 2020 01:41:07 GMT

On this week’s Weekend Market Report, Jerry Gulke, president of the Gulke Group, talks with host Pam Fretwell about what has happened since their discussion on stage at the Top Producer Seminar.

“Corn wasn’t up a lot this week, only four cents , but that’s a lot better than being down four cents,” says Gulke.

Beans were down seven cents for the week, new highs on Monday but closing lower than a week ago gave us some technical signals.

“That’s important because we got above that $10 range in July beans … and then we closed right below that and anything below $10 was a key reversal down, more information on weather, and demand and exports helped to support that key reversal,” he says.

Gulke also noted Minneapolis wheat was down 10 cents this week.

On the livestock side, March feeder cattle were up $4 and live cattle were up $1.50, probably a result from the Cattle on Feed Report.

Gulke goes on to talk about the weather forecasts for South America and what he is hearing from famers when it comes to planting intentions for next spring and what we should remember when going into this February price determination for insurance prices.

Listen to Jerry Gulke’s full commentary on this week’s Weekend Market Report.

Jerry Gulke: Is Government-Induced Supply Control In Our Future?

Fri, 13 Nov 2020 02:28:41 GMT

COVID-19, freeze risks, USDA report and government influence on agriculture are all weighing on the markets this week. July corn prices up 1¢ and July soybean prices up 1.5¢ for the week ending May 8. July wheat prices were up 6.25¢ for the week.

“We just kind of stabilized here,” says Jerry Gulke, president of the Gulke Group . “That’s kind of good news since we had outstanding crop progress. It will lead some to believe we have maybe seen a bottom in this.”

On Tuesday, May 12, USDA will release its monthly Crop Production and World Agricultural Supply and Demand Estimates (WASDE) reports.

Gulke says a surprise is likely in store.

“We know we’ve lost ethanol demand this year and possibly for next year,” he says. “There’s all kinds of questions and opinions on how long it’ll take to get ethanol back and whether we’ll ever get back to where we used to use that much ethanol.”

So, will USDA reflect a dramatic crop in corn-for-ethanol usage in this current marketing year? Or will they kind of kick the can down the road?

The same questions exist for feed usage. “We’re killing sows and pigs right now,” Gulke says. “So, we know feed usage is down. The surprise would be as if the government doesn’t reduce feed usage as much as the market thinks. Right now, it’s very hard to find anybody who doesn’t know this can be a really bearish report coming.”

While ethanol and feed demand are suffering, at least soybean exports are positive, Gulke says. China has purchased significant amounts of soybeans from Brazil and the U.S., with plans to create a strategic reserve.

“It looks like it could be a pretty friendly report in the beans, and we’d be lucky if the report wasn’t very negative in corn,” Gulke says. “A neutral-to-good report in corn would be if USDA keeps 2020-21 corn carryout at less than 3 billion bushels. It would be a miracle for that to happen.”

Supply Control in Beef

COVID-19 continues to disrupt the food supply chain. For example, the beef industry has struggled in recent weeks with cattle harvest 30% to 40% below year ago levels.

A proposal that would fund placing feedlot cattle on a maintenance diet for 75 days is being circulated in Washington D.C.

The seven-page proposal, called a “Fed Cattle Set-Aside Program,” would seek to “alleviate the risk of massive economic collapse in the beef cattle industry.” The proposal was developed by the Beef Alliance and modeled after a set-aside program used in Canada after the BSE crisis in 2004.

“The goal would be to delay the rate of gain and flatten that curve, so to speak,” Gulke says. “To me, if they hint about a set-aside program for livestock, they’re essentially back in our back pockets again – managing supply control.”

While this program is for the livestock industry, Gulke believes it could translate into grains. “You can probably bet if things don’t look so hot and China doesn’t fulfill their phase-one agreements, I wouldn’t put it past Trump at all to do something in the supply control area.”

That could be raising the loan rate, having a farmer-owned reserve, a set-aside program.

“I hope that doesn’t happen, since it hasn’t worked in the past. But you never know what can be done to salvage an election. That’s where we’re at now; it’s all about buying votes.”

A Threatening Weather Forecast

As of May 3, 51% of the U.S. corn crop is planted . That compares to a five-year average of 39% planted by early May, according to USDA. For soybeans, 23% of the U.S. crop is planted. That compares to a five-year average of 11% for early May.

Gulke has finished planting corn on his Illinois farm, but still needs to plant soybeans. “Believe it or not, in the first week in May it is just too cold to plant soybeans,” he says. “It feels more like April 8 instead of May 8.”

For the next few days, much of the eastern Corn Belt and northern U.S. are under freeze and frost warnings. (Read: Ken Ferrie: Crop Risk from this Weekend’s Frost? 7/10 )

“The one thing I gathered from the weatherman is soybeans could get hurt,” Gulke says. “If they’re out of the ground, they’ll get nipped and maybe killed. But you can replant them. We planted beans last year in July. You can replant this soybean crop a couple times and still maybe get an average crop.”

Corn shouldn’t be significantly hurt, Gulke says, but it could be set back a little.

“ Drew Lerner said the corn that’s delayed could be in harm’s way in July and August when it gets drier and hotter,” he says. “But, I’m certainly five weeks ahead of last year. So, what could go wrong? People will certainly pencil in a record yield for this corn crop.”

Find more written and audio commentary from Gulke at AgWeb.com/Gulke

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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.

Gulke: Markets Disappoint Despite Trump's EPA Reversal

Fri, 13 Nov 2020 02:21:08 GMT

What should have been good news for the grain and oilseed markets ended up having the opposite effect as we ended the week down, sharply down some cases. “Corn feels like it didn’t go anywhere and it was kind of like watching paint dry, but there were some significant moves,” Jerry Gulke president of the Gulke Group says in this week’s “Weekend Market Report” on Farm Journal Radio.

Earlier this week, President Donald Trump ordered the Environmental Protection Agency (EPA) to stand down on efforts to lower ethanol mandates. Ideally, that would’ve spelled good news for corn, but in spite of this corn still closed down for the week. “It looked like, at first, it was something good but obviously … at the end of the day it’s what happens at the marketplace,” Gulke says, “and the marketplace chose to hammer corn a little.”

In the soybean complex, there’s been some on-going concerns regarding South American weather and expectations they will plant less beans; however, there’s some doubt whether that prediction will come to fruition. “There’s a lot of talk about less bean acres this year, less soybean crop production in South America and maybe more corn. I don’t yet see that happening at all,” Gulke says. It comes down to simple economics, he explains. The market is telling producers not to plant corn, so the incentive to plant less soybeans just isn’t there.

The Cattle on Feed report was also released Friday afternoon and there was one unusual jump to note—placement numbers. For the most part, the report was in line with what everyone anticipated, but the real shocker—if you want to label it that, Gulke admits—was the placements were significantly higher than what the trade was expecting.

Listen to Jerry Gulke’s full commentary above.

New Era Begins, Thanks to Fed and Argentina

Fri, 13 Nov 2020 02:13:50 GMT

This week has been full of game-changers for agriculture.

Congress finally repealed the country-of-origin labeling law known as COOL , thanks to the threat of $1 billion retaliatory tariffs by Canada and Mexico . Crop insurer RCIS was bought by Zurich Insurance. Argentine president Mauricio Macri scrapped export taxes on wheat, beef and corn, trimmed tariffs on soybeans , and devalued the Argentine peso.

And the Federal Reserve raised interest rates for the first time in nearly a decade.

“The bottom line is that we ended an era and started a new one,” said Jerry Gulke, president of the Gulke Group in Chicago, speaking on Farm Journal Radio with Pam Fretwell. “We’ve ended 10 years of zero interest rates, and we’re starting whatever it is … that rodeo is over.”

It means a very different economic environment going forward.

“If you think about it, anyone who has been in the business for 10 years—if you started in the business of analysis or stock market or advisory service when you were 25 or 30 years old, you haven’t seen a market when you have to deal with higher interest rates. It’s always basically been free money,” Gulke observed. “It’s the same way with our young farmers. If you’re 40 or under, you don’t know what kind of effect rising interest rates can have on our economy.”

Listen to Gulke’s full comments about interest rates, Argentina, and the cattle markets on Farm Journal Radio here:

In Argentina, growers and exporters are also adjusting to some big economic changes as their new president moved quickly to cut export taxes and address currency issues.

“They had a 30, 40, 50 percent devaluation (of the Argentine peso), and that meant huge benefits for their farmers internally,” Gulke explained. “Corn got 70% more profitable in terms of pesos for the Argentine farmer. When he sold the grain in dollars and brought it back home, he got 70% more for his corn that he would have otherwise. So those guys holding did well.”

And those Argentine growers have plenty of corn, wheat, and soybeans to sell, after stockpiling their crops as a hedge against inflation rates as high as 40% in 2014.

“This is going to take a long time to unravel given the fluctuation of the currency,” Gulke predicted.

But the good news was that the market seemed to take much of the week’s news in stride.

These developments “should have been negative, but whenever we get a positive result from a negative comment or a negative result, you have to step back and say, ‘Maybe it was all in the market,’” says Gulke. Soybeans, for example, closed up 15 on Friday, despite all the bearish numbers from South America. “That tells us that something is up … Is the market now telling us we can take all the soybeans Argentina can sell because El Nino is going to curtail production or lack of operating funds is going to curtail production somewhat in the U.S. and elsewhere in the world?”

It makes Gulke wonder if maybe, just maybe, the markets have already posted their winter lows.

Where do you think the markets are going? Share your thoughts in the comments below or on the AgWeb Discussion Board .