Markets enter harvest-low zone
This is a busy time at the Smith farm. I am preoccupied with getting ready for harvest. That is still a couple of weeks in the future. The soybeans have just started to turn color. Corn is not yet into black layered. It will be there in a few days. Crops have been speeded up by the hot/dry weather. How much yields have been hurt will not be known until the combines are in the field. We will have a crop. It will not be as great as anticipated a month ago.
This is a time of year when watching the market is a must if you want to take advantage of volatility in prices. From early August until September 12 (the date of the next crop report), it is common to see prices rally as traders try to evaluate the extent of damage from unfavorable weather. That is certainly the case this year. If the report next week proves to be bullish, the current rally could continue into harvest. Historically, the odds are better that the report will say that yields will be better than expected and prices will drop. This is the move I call the harvest low.
Scanning the history of the harvest low shows that in seven of the last 10 years, the low was in October. One year it was in September. One year it was in November. In 2003, the market was in a sustained rally brought about by hot/dry weather late in the growing season. There was no identifiable low. With the odds of prices dropping prior to harvest, I made my first sale of 2013 crop soybeans this week. I sold them using January futures to take advantage of what I hope will be basis improvement once harvest gets underway.
With this being the first increment of new crop sales, I hope that it is the lowest price of the marketing year. Time will tell. This week is the annual harvest festival in my hometown. It is the oldest event of its kind in Nebraska. It was previously known as the Kass Kounty King Korn Karnival, until the political correctness police objected to having five letters strung together that formed the name of a radical political group. Now we suffer because it was “necessary” to give up a tradition that had been in place for 60 years to avoid hurting someone’s feelings.