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Roy Smith: Rally, when?

Agriculture.com Staff 08/01/2008 @ 3:24pm

The grain markets seem to be unwilling to press the short side of grain prices. Market watchers, including me, keep thinking that prices have dropped far enough for the time being. Long term seasonal charts show a rally in the soybean market during August and the first week of September. Farmers are impatient for prices to improve. Inquiring minds want to know.

My long term seasonal studies show that the odds of soybean prices rallying are about 60:40. In layman’s language, a rally now is not a sure thing. If it comes, it could start as early as today. From the looks of prices as this is being written, that is not going to happen. It could come as late as the last week of August. The move will probably come sometime in between. My bias is that there is a better than average chance of a rally because of the late planting of much of the crop.

The odds of a rally in the corn market are less than 50:50. However, with the condition of the crop and the late planting I expect some type of frost scare this year. The risk could be more of a quality issue with corn because of an early frost causing light test weight.

This morning was our monthly meeting of farmers at Mom’s Café in Plattsmouth. The guest resource was the owner of the local fertilizer and chemical business. Most farmers in attendance think we are going to have one of the best crops in history here in Eastern Cass County. However, they are also skeptical that the crop in other areas is as good as some observers think. In the western part of the county the heavier soils did not handle the excess rainfall as well. Those who have traveled east reported that many areas of Iowa were planted so late or replanted that even a normal frost will do a lot of damage.

It was interesting to note that some farmers are still holding old crop grain in their bins. It is easy to be critical when my strategy has me sold out during the recent down draft.   However, I do have to wonder what their target was after cash corn hit $7 locally. I suppose “A dollar more” is the answer to that question!

I got the data to update my long term charts last week. I had anticipated having them done by today. That was before a computer virus stopped my analysis work for several days. Updating charts with 29 years of data seldom results in any big change in the appearance of the graph. However, I anticipate this year will again show that storing soybeans has been more profitable than it was in the 1980’s and earlier.

The grain markets seem to be unwilling to press the short side of grain prices. Market watchers, including me, keep thinking that prices have dropped far enough for the time being. Long term seasonal charts show a rally in the soybean market during August and the first week of September. Farmers are impatient for prices to improve. Inquiring minds want to know.

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