Does the Market Have a Psychology Problem?01/18/2016
When it comes to how the market ended this week, it’s all psychological, according to Jerry Gulke of the Gulke Group.
Whereas corn finished up 6 cents on Friday, soybean prices couldn’t hold onto the gains they made after USDA’s Tuesday reports. “You have to look over your shoulder because all you hear about is that big crop in South America,” Gulke says. “…We’ve got this psychological thing hanging over our heads out of South America that we‘ve got to get rid of this supply, and they’re trying sell them as quick as they can. China is buying beans from them and us, which is good news.”
Wheat, too, which spiked Tuesday after USDA revealed smaller than expected plantings of winter wheat, slipped back down.
“We’re getting more volatility in these grains, which is good,” Gulke says. “We need more traders coming into this thing and not everybody just be absent … For the grains side, it wasn’t a bad week. It could have been worse.”
Why? The stock market, which fell nearly 400 points on Friday, worrying investors large and small.
While Gulke himself sees the drop as a “garage sale” in the stock market that gives people the chance to snatch up a valuable stock at bargain prices, he also says producers need to be prepared for the negative effects of this plunge to spread to the ag markets as well, thanks to people’s investment in stocks via their retirement funds.
“In the short term, people will look at their portfolios and think, ‘whoa, maybe I better not go out to dinner tonight. I better not have that steak,’” Gulke says. “That’s why we should be concerned, because those consumers eat the things we produce, whether it’s corn or cattle or whatever.”
He points to the recent upticks in the cattle and hog markets. “We brought some profitability back into the livestock market,” Gulke notes, but “we ended the week on a sour note on the live cattle and the feeder cattle. I think that’s more psychological due to the stock market … and another reason why we should be concerned about the stock market, because it affects all the other markets around it. … That’s why I watch it.”
Source: Alison Rice, AgWeb.com