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Seasonal strategies review

Agriculture.com Staff 04/04/2008 @ 10:53am

A posting on the 'Marketing' talk page prompted me to review the principles of seasonal price trends as I use them. My approach to seasonal trends is to graph soybean and corn futures from 1980 through 2007. I will add 2008 prices to the charts after the May soybean futures go into delivery after the end of April. I show average dates on my charts anywhere there is a peak or valley.

These dates are only averages, not predictions of what is to come. Historically these moves come within the general time of the average date about seven years out of ten. Occasionally, they will hit the exact date. That does not happen very often. About three years out of ten the market will move in the unexpected direction. Seasonal charts are good guidelines. Understanding the psychology of the market as prices move is more important than making a purchase or sale exactly on the chart date.

The rationale during the move in the soybean market this February had the psychology normally associated with the spring rally that comes in March and April, in most years. Traders were focused on having prices high enough to bring additional acres into soybean production that were in corn in 2007. Projected carry over at the end of the marketing year is tight. The world demands more beans. Farmers are responding.

The question now is whether the corn market will follow the normal seasonal pattern. If so, prices are putting in a top now and will drop from here. My most recent charts show the high on Monday, the fifth trading day in April. The version Frank looks at may show the top today, the fourth trading day of April. Whichever is the case, if corn prices drop next week, it will make my seasonal charts look like good predictors of prices.

I have already started to get comments from farmers thinking about leaving acres in corn that they had planned to rotate. In my community, there is almost no corn planted on land that was in corn the previous year. In irrigated areas or in locations where rainfall is more consistent, continuous corn is a viable alternative. Judging from comments that I heard at a meeting in Kearney yesterday, the switch has already started. How many acres actually get left in corn and how soon the market knows it will determine what markets do now. Price action this week indicates that the change is already happening.

A posting on the 'Marketing' talk page prompted me to review the principles of seasonal price trends as I use them. My approach to seasonal trends is to graph soybean and corn futures from 1980 through 2007. I will add 2008 prices to the charts after the May soybean futures go into delivery after the end of April. I show average dates on my charts anywhere there is a peak or valley.

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