Seasonal update time
The August crop report has come and gone. Traders the first two days after the report seem to not know what to do with the information. That is typical for August because the yield numbers in the report are really just a guess. Looking at the seasonal charts does not help a lot because, in a normal seasonal pattern, corn futures go up and soybean futures go down.
People quiz me for advice but there is really not much to be done during these dog days of summer. Old crop grain should have been moved long ago. Plans for new crop should be firmed up in preparation for harvest. The one marketing activity that I have on my agenda is making preparations for the season of marketing meetings following harvest. The first part of this consists of updating my seasonal charts for 2009.
Because I chart March corn futures and May soybean futures to do my analysis, the data for this year is already available. Yesterday, I started the process by working on my soybean chart. Analyzing thirty years of prices, I do not expect the long term charts to change much from year to year. Even with the highest price last year being triple what is considered normal, I did not expect any major changes in the appearance of the chart.
As everyone would expect, adding the marketing year 2008-2009 with sharply higher prices raised the average price range. On the 2008 chart, it was roughly $6.35 to $6.65. After adding the higher year, it was $6.45 to $6.95. Not only was the average price higher, but the range from low to high was about 50 cents compared to 40 cents on the previous chart.
One of the techniques I use to evaluate the reliability of my analysis is to graph the last ten years compared to the 30 year average. For the last few years the ten year graph has taken on a decidedly different look than the one that shows the whole range of years. The chart with the ten years from 1999 through 2008 shows a definite up trend from August through March. This was in contrast to the thirty year charts most of you are accustomed to seeing where the eight seasonal events are clearly evident.
When I dropped off 1999 and added 2009 to the data I base the chart on, the graph from that data again looked almost identical to the thirty year chart. What this indicates to me is that the seasonal trends are still valid. Even though last year was an anomaly from the perspective of how high prices went, the price pattern was normal in terms of when prices went up and when they went down. The seasonal events and the psychology driving them were close to being at the expected time.
I still have a lot of analysis to do. I need to look at corn prices and see how closely they followed the usual pattern. I also need to work on the price pattern analysis to see how the seasonals would have worked for timing speculative transactions. I have not been trading the speculative system since prices went sharply higher more than a year ago. I had a couple of trades with big losses that indicated to me it was time to reevaluate.