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Roy Smith: Seasonal highs in cash corn

09/17/2010 @ 11:49am

Two week ago, I shared the results of my study on the seasonal highs in the cash soybean market. Today, I will explain the results of a similar study of cash corn prices. Unfortunately, the results are not as clear cut with corn as they are with soybeans. With soybeans, there was no example of the highest return after storage costs being in February, March or April. The goal there should be to get sales made before the end of the year on the 'dead cat bounce' or wait until May, June or July to the summer high. 

In the cash corn market, there were instances of the yearly high coming at least once in every month from January through August. In fact, the month of March was second only to July in being the month most likely to see the highest return for the year.  The highs returns were grouped in the months of March, April and May. The second time-period likely to see the highest returns was the month of July. Surprisingly, the month of August saw the highest return in only one marketing year, 2001. 

It is easy to understand why in many years the month of July produces the highest price. July is generally a critical time for corn yields. If the weather is hot and dry, there is fear of lower yields. This causes a rally in price. I suppose that the spring months normally show high prices because the harvest rush is past and prices need to be bid up to encourage farmers to open the bins and move some corn. 

It is difficult to develop a good marketing plan based on my research. It would seem that my “drop dead date” of July 1 is premature, if a farmer wants to hit the absolute high in the corn market. On the other hand, holding past the end of that month has very poor odds of getting good returns. At least one neighboring farmer empties the bins every year before he starts planting. Given the odds of hitting the highest returns in the three spring months, he probably has a good approach. 

Your results will vary depending on the basis patterns in your area. They will also vary depending on your cost of storage and operating money. The big conclusion I come to is that in most years it is possible to store corn profitably. However, developing a strategy to get the price and deliver the corn is not nearly as obvious. 

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