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Proceed at your own risk

Agriculture.com Staff 09/15/2009 @ 6:17pm

In the past week, I have had farmers comment about how accurate my July 1 cutoff date was for old crop corn in 2009. In every case, they still have 2008 crop corn in bins that needs to be moved before harvest. The principle of "drop dead" dates is one that I have used over the years that has been very successful in helping me avoid a condition I call "agricultural acupuncture". That is being stuck with last year's crop.

I most often think of the drop dead dates as a time when I need to have my entire crop sold to avoid the wash out in price that precedes a big harvest. You can pick any date that suits your operation and cash flow needs. For me the date is January 1 for soybeans in commercial storage and July 1 for corn in bins at my farm.

This year, as in many years, the day before the September crop report looks as if it should also make the list of drop dead dates. The odds of soybean prices dropping between the September crop report and October 1 are better than three out-of-four. The most recent crop report did not appear to be a reason for the futures price to drop. However, the negative psychology of a big crop about to be harvested was all it took to turn soybean futures prices negative after the initial reaction to the report was past. The result was a closing price well below a long standing uptrend line. That technical indicator adds to the negative sentiment.

One thread on the marketing talk page questioned what the odds are of a harvest low in September. A quick study of price history over the last 20 years shows the harvest low in soybeans in September in 1998, 2006 and 2007. There was no identifiable low in 2003. The low came, in November, in 1990, 1996, 1999 and 2004. In 2004, the cash low was in October but the futures low was in November. In the other 12 years the harvest low was in October.

The use of seasonal dates is not a sure fire way to make money in the markets. However, ignoring them you proceed at your own risk of selling later at a lower price. My experience tells me that I should possibly add September 10 as an additional 'drop dead' date for selling new crop soybeans ahead of harvest. As of the close on Monday, the sale I made on Thursday before the crop report is profitable. It was encouraging that the close was well above the day's low. My hope is that prices do not trend down from now until the harvest low. If prices can hold in this area, the odds are much better for a good bounce once this year's beans are in the bin.

In the past week, I have had farmers comment about how accurate my July 1 cutoff date was for old crop corn in 2009. In every case, they still have 2008 crop corn in bins that needs to be moved before harvest. The principle of "drop dead" dates is one that I have used over the years that has been very successful in helping me avoid a condition I call "agricultural acupuncture". That is being stuck with last year's crop.

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