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Long-term lows are due this fall

05/04/2011 @ 10:13am

Corn Monthly Low To Low

Since 1969, corn prices have had a reliable pattern of bottoming about every 68 months. This low-to-low pattern has come in just 48 months apart and as long as six years apart. Al Kluis' current analysis would project a low between August 2011 and March 2012.

Do your chart patterns work when you have earthquakes, tsunami, and a nuclear meltdown?” was the first question from a nervous farmer before the meeting even started. The meeting was on the day last March when corn and soybean prices had dropped the limit down. Her second question and comment were, “Why is this so hard? The volatility has made it impossible for me to sleep some nights. I feel like I don't have any control even though I watch the markets all the time.”

Answer To Question #1

The chart patterns I work with do not work all of the time, but they do work the majority of the time.

When you have a dramatic fundamental event (like the earthquake and tsunami in Japan this winter), grain prices can move sharply higher or lower for a few days before other global fundamentals again take control of the price action.

Day to day, no one can forecast fundamental changes, so no one can predict the short-term gyrations in the market. I believe if you are farming and marketing your grain, you should not be so close to the market that you are watching every tick.

I use all kinds of market cycles and studies of patterns to fine-tune the recommendations that I make. The study of time cycles has helped me make better decisions. The longer-term patterns have been very reliable and useful in making decisions.

The long-term patterns will help me avoid having to sell in the months when prices are low. The short-term patterns are not as reliable, but they can help me get the crop sold on the right days and avoid the lows when prices collapse.

The corn and soybean markets tend to move up and down together. But the timing of when prices put in major long-term highs and lows is quite different.

Following are explanations of the patterns and when I think you should avoid sales in the corn and soybean markets.

Corn patterns and strategies

The long-term corn price cycle I work with averages 68 months low to low. The monthly corn chart (above) shows the lows that have developed in the corn market since 1975.

This is not a perfect pattern. Some of the lows are just three years apart, and the longest low-to-low pattern is seven years apart.

The most significant low that I work with is from the low that occurred in 1999. That was 30 years from the 1969 low and 60 years from the depression low of 1939.

The time counts I work with project a 68-month low between August 2011 and March 2012. I also watch a 24-month and a nine-month pattern in the corn market.

Rarely are these cycles all in sync, and that creates a lot of market volatility.

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