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Frustrating time

Agriculture.com Staff 07/06/2007 @ 12:34pm

I wonder how many years farmers in eastern Nebraska have wished for rain on July 4. This year the holiday came on Wednesday, so we were cheated of a long weekend.

The results were the same, however, hot and dry. When discussing this with Sharon, she responded that this is the second consecutive year that we have set a record for the driest June on record. Last year tied with the driest at .85 inches. This year, we beat that by a wide margin with .31 inches.

I had the marketing situation judged pretty well. I anticipated that the dryness in Illinois and Indiana would cause the top of the weather rally to be earlier than the normal June 25 date, because of the proximity of the dryness to Chicago. I was correct in that assumption. I also thought that making a trip to the dry area would give me a unique perspective on conditions. That was my mistake! I was so surprised at the stress the crops were under that I got bullish at the exact time when I should have been aggressive in making sales.

It is almost always a mistake making a judgment on price direction based on conditions in one area. It is also a mistake predicting price direction based on that judgment. When there are so many psychological factors involved in pricing, it takes a major change in the fundamental situation to change the price trend. In this case, three to five inches of rain in the dry parts of farm country was enough to take almost a dollar off December futures.

It is psychologically tough to get the crop planted under some very stressful conditions, only to see the moisture situation reverse itself so quickly that the outlook becomes threatened by too little rain. Even after 39 years of farming, I struggle with the irrationality of having prices rise sharply when conditions are very good at my farm, then have the price drop so fast as conditions approach disaster.

Regardless of what has happened the past few weeks, prices seldom go straight up or straight down. We are still more than two months from harvest. There is time for more weather worries. In my July newsletter that went to subscribers this week, I said that I anticipated that the price for both corn and soybeans would rally following the holiday. So far, that anticipation has been correct. I look for the rebound to continue. How high and how long will depend on the perception by traders as to how much the crop has been hurt by weather problems. I always look for a 50 percent retracement when the market drops as it did. If you need to make sales of old crop corn, you might not want to wait for that much of a rally to begin. If you are mostly sold out, there is time to gamble with the rest.

I wonder how many years farmers in eastern Nebraska have wished for rain on July 4. This year the holiday came on Wednesday, so we were cheated of a long weekend.

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