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Roy Smith: Ho-hum days of August

Agriculture.com Staff 08/28/2009 @ 10:35am

There is not much marketing excitement this week that is different than the last two weeks. I finished updating and analyzing my long term charts as I have mentioned the last two weeks. They are now posted on soyroy.com in the "charts and graphs" page. The corn and soybean markets are following the normal seasonal pattern as closely as they ever do. The corn market during the last week of August is flat to slightly lower. The soybean market trend is higher based on fears of early frost.

You would think that the corn market would also be hurt from an early frost. The corn market seems to ignore the potential for early frost in about eight years out of ten. The flip side is that the soybean market anticipates an early frost even when there is little chance it will take place. I suppose that is because frost damaged soybeans are worth a lot less than frost damaged corn.

Regardless of the psychology behind prices, it seems that this time of year the soybean market can come up with any number of reasons to go higher. Since lack of rain was not a big issue this year, the trade now has the development of Sudden Death syndrome and other diseases to worry about.

It is easy to understand the concern. Even those of us who got our crops planted early are finding factors that might reduce yield. Very cool night temperatures do not bode well for record yields. That has not yet been mentioned as a factor in determining yields. SDS is making an appearance in Eastern Nebraska for the first time. In scouting my own fields, I found spots that were heavily infested with aphids.

All of the above add up to potential for less than record yields. In the final analysis the effect on total production will probably be less than the positive effect of ideal temperatures and rainfall during July and August. If this year follows the pattern of earlier years, the high soybean futures price for the move will come a day or two before the September crop report. This makes forward pricing during the next week a good strategy for that portion of the crop that you do not have bin space for.

It seems that the crop report brings the realization that there is a big crop coming. Prices then fall going into the first week of October. The price drop following the September crop report is the most reliable market move during the marketing year. It happens about eight years out of ten.

Unfortunately I do not have similar guidelines for making corn sales. My long term analysis shows that the best strategy for those bushels not already priced is to store on the farm for the basis improvement and carry that have a very high likelihood of higher cash prices by spring. For those farmers who are aggressive and have forward priced new crop corn using the futures or options markets, selling the carry using May or July futures is an alternative that can diversify strategies and has a high potential for a positive return on storage.

There is not much marketing excitement this week that is different than the last two weeks. I finished updating and analyzing my long term charts as I have mentioned the last two weeks. They are now posted on soyroy.com in the "charts and graphs" page. The corn and soybean markets are following the normal seasonal pattern as closely as they ever do. The corn market during the last week of August is flat to slightly lower. The soybean market trend is higher based on fears of early frost.

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