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Markets See June As Crop-Critical Timeframe
The third week of June is normally a critical time in the grain markets. The long term seasonal charts show that it is common to have a price peak during that week. Normally, we would be thinking that a price peak would take place following a sustained rally. However, it can also come on a short covering rally after a down trending market. The market has recently experienced a brief rebound after a long sustained down trend. Therefore, it appears to me that what is seen now on the charts is not the beginning of a rally but a bounce after coming down so far so fast it was bound to bounce a little.
The one caveat to my conclusion that prices will soon continue lower is that there have been years in the past when a cold wet spring has shifted quickly to a hot dry summer. The most notable of that type of weather problem shift came in 1974 and again in 2012. Last year, 2013, also had that kind of rapid weather change to a lesser degree. If this year, 2014, turns out to be hot and dry the current tightness of old crop supplies will quickly turn markets bullish. This makes marketing decisions difficult.
Adding to the difficulty of making profitable moves is the fact that many farmers have suffered cropping problems in the last week because of storms at this critical juncture. So far, my farm in Cass County, Nebraska, has escaped storm damage. That is not the case for farmers 150 or more miles north. Tornadoes and hail ruined new crop prospects over a wide swath of northeast Nebraska. At this late date, about the only recourse left for those farmers is to collect on crop insurance. By the time the soil dries enough to plant, it will be too late to have any hope of benefitting from a cash crop.
Flood watchers are forecasting the Missouri River to reach flood stage before this weekend is over. At that point, I am glad I have only 13 acres on the river bottom. Losing a crop to weather problems is always stressful. There is nothing in the way of marketing that will ease the pain of crop failure. Having little at risk compared to neighbors who have several hundred in that area is small consolation.
We can hope that the markets will respond to the crop damage by rallying higher. Unfortunately, that is not usually what happens. There is a lot of summer before the 2014 crop is ready to harvest. Patience is difficult to come by under the current circumstances. Because of the approach of the July 4 “drop dead” date, I sold the last few bushels of cash soybeans and a portion of the last increment of cash corn this week. The price was not what I could have had in April or May. However, it was 25 cents higher what was offered after harvest on January 2. Time will tell if the last will be possible at a more profitable level.