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Don't abandon seasonals in marketing

Agriculture.com Staff 08/23/2007 @ 3:42pm

Even during the volatile biofuels price boom, Nebraska farmer and marketing analyst Roy Smith sees value on using seasonal trends when making marketing decisions.

Right now, Smith told the Agriculture Online Marketing Talk Meeting in Des Moines, Thursday, that, if you look at a long term seasonal soybean chart, "we are in a normal seasonal trend right now."

This time of year, the market tends to be oversold, he said. Then, market psychology starts to focus on what could go wrong--whether it's drought, wet harvesting conditions in Ohio, the chance for an early frost in the Dakotas.

What Smith calls the frost scare, usually ends with the September crop report.

If you're going to go to the elevator to price beans, early September is a good time, he says. "Seventeen of the last 19 years it's been a good decision."

The second soybean selling opportunity this time of year is the post-harvest rally that Smith calls the dead cat bounce.

Smith defines the rally as a bounce of at least 35 cents off the cash low that runs for at least 10 days. It normally ends before the new year, although last year was an exception.

It's a popular selling strategy for part of your soybeans for several reasons, he said. There's no production risk because it takes place after harvest. It comes at an opportune time when farmers need money for buying inputs. And there's little storage and interest cost involved.

Commenting on the large carry in the current corn futures market, Smith said that past experience shows that a tight or negative carry indicates a good chance of higher prices later on. A big carry suggests lower prices.

The carry (the difference between nearby futures prices and prices for the next delivery month) is currently more than 30 cents a bushel.

"If the carry is extremely wide, by that I'm talking about 30 cents or over, odds are pretty high that the price will go down later in the year," Smith said.

A topic that often comes up in Agriculture Online's marketing discussion group is market advisers.

When choosing an adviser, Smith said that "You need to select an advisory service that is complementary to your own personality and skill level."

It shouldn't be someone that you'll constantly disagree with nor someone who just echoes your own opinions, either. It should be someone who can give you valuable advice.

When choosing an adviser, "probably the best thing is to talk to other farmers who are their clients," Smith said.

Smith, who considers himself an educator, not a marketing adviser, said he knows many of the professional advisers personally.

"With one or two notable exceptions, I think they are very competent and try to do the best for their customers," he said.

Yet, you shouldn't expect them to be able to forecast market trends accurately all of the time, either, he said.

Even during the volatile biofuels price boom, Nebraska farmer and marketing analyst Roy Smith sees value on using seasonal trends when making marketing decisions.

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