Roy SmithAnalog years
One tool that market analysts use in predicting future price moves is to look at what prices did in previous years that are similar to the current year. There is no analog year in which prices are similar to this year. When prices are at historic highs, it is impossible to draw exact parallels. However, there are years when planting and growing conditions were similar to this year.
The two years with the worst planting conditions in my farming career were 1982 and 1984. In both of those years, there was essentially no planting done in May. Some farmers got corn planted in April. The rest was finished in June.
These two years look quite different in the market's response to late planting. In 1982 the corn market completely ignored the late planting. The price trended down from April to November. December futures started out in the $3.00 neighborhood and ended at $2.15. November Soybeans peaked in May. Then they trended lower through October. The total price move was from $6.90 to $5.25.
I do not remember how widespread the planting delays were in 1982. It is possible that the worst might have been in eastern Nebraska. I do remember that it was very frustrating to have the crop conditions so bad with prices dropping at the same time.
Planting conditions were similar in 1984. However, the market responded with an early weather rally in both grains. I remember that there was concern about the late planting nation wide. The crop finally did get planted in most areas. When the crop was finally planted, prices dropped from late June through harvest. In 1984 December corn futures went from approximately $3.16 to $2.55 from June through October. November soybean futures dropped from $7.65 to $5.85 from June through harvest.
In the two years discussed, yields were affected by late planting. In 1982 my farm average corn yield was 84. Much of the yield reduction was the result of light test weight and high harvest moisture content. Soybeans yielded 19.7 in 1984. It was the lowest soybean yield in my farming career. Following a very wet April and May, the summer was very dry.
There are some obvious differences between those early years and today. At least at my location, no-till makes it possible to plant sooner following rain. Planters are much bigger and more sophisticated. The other side of this the excellent demand and the need for a bumper crop.
From analyzing other years, it appears that rallies caused by late planting are opportunities for selling. It is difficult to sell when there is a concern about not getting your crop into the ground. It amazes me how much corn was planted in my neighborhood this week. I finished my corn on Wednesday. It will not take many nice days for my neighbors to finish up. Good luck to all of you, especially if you farm in areas that were already too wet before today's rain.