The grain markets haven't done much of anything good this week. That should not be a surprise for those of you who are familiar with the long term seasonal charts. Soybeans and corn have both taken a hit. That is more normal for corn than for soybeans. However, after their performance in August, a retracement in the soybean market is not totally unexpected.
The two big factors to watch in the week ahead are the government report due out on September 11 and the upcoming change in seasonal trends that takes place at about the same time. My theory is that the two are linked together.
The normal psychology of the soybean market at this time is for the focus to be on the potential for an early, damaging frost in the last half of August and first week of September. The September crop report has a tendency to change the psychology of the market from risk of early frost or late drought to one of a big crop coming in the next few weeks.
A look at the history of the soybean market during this time shows just how profound this shift in outlook is. I have thirty years of soybean futures price history in my database. From 1980 to 2009, the May soybean futures price dropped 23 years and went up seven years from September 10 to October 3. That is a probability of 76 percent. The only year the price went up substantially during that time was 2003 when it went up 55 cents. The worst year was 2008 when the price dropped $2.37.
The lesson from this brief study of history is very simple. If you have new crop soybeans to sell at harvest, it is usually better to price them next week than to wait until the combines roll. The case for corn marketing is not a straight forward. Historically, corn futures are very close to the harvest low. In reality the corn market has not had any kind of a move that would put the price into attractive selling range.
Just out of curiosity I looked up my break even costs I calculated last winter when doing marketing workshops. At that time my production cost for corn was $3.57 and for soybeans $7.77. Today's quotes still offer a profit for soybeans but fall far short for corn. If I plug in what I think my average yields will be, the outlook is better but still not profitable for the anticipated corn crop.
The seasonal move in soybean futures from the top of the frost scare to the bottom of the harvest low is the most reliable move in the commodity market. For those farmers who need to price more new crop soybeans, selling next week shows much better odds than waiting. There is always the strategy of storing and waiting for the 'Dead Cat Bounce'. The risk of that approach is that it could start from a much lower price than being offered today. I hope that is not the case but it is far better to spread the risk than to take the chance on one single strategy being the best!
Note: Yesterday, September 3, I attended the Nebraska State Fair. This week is the last time the fair will be at the location in Lincoln. I started attending the fair with my parents in the late 1940's. It was our annual vacation. I started showing livestock in 1955. I participated in the fair as an FFA advisor in 1964-1967. I took my granddaughters to the fair last year. I hate to see it move but the land in downtown Lincoln had become too valuable for other purposes to have it set empty for 364 days a year. I wish the people of Grand Island success in the future when the fair moves to a new location in that city next year.