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Seasonal trend updates help your marketing odds

12/03/2010 @ 3:32pm

This is the time of year when I begin preparations for winter meetings. The first step in that process is to update charts for 2010. These charts include December and March corn futures, November and May soybean futures and December hard red winter wheat futures. In addition I graph cash bids for corn and soybeans at my local elevator in Cass County, Nebraska.

It is always interesting for me to see how much change there is from one year to the next. I track thirty years of price history, so I generally do not expect big changes in the appearance of the charts. In addition, for corn and soybeans I plot charts for the latest ten years. My theory is that if there is a change in the basic nature of the market, it should show up in the charts of the most recent years.

Changes in the March corn charts are very subtle. The shape of the graph has not changed much. As would be expected, the general price level is much higher. In the 23 years beginning in 1980, the average price beginning April 1 is around $2.75. The most recent years the price on the same date is around $3.30. The yearly high in prior years is very near the price on April 1. However, on the most recent ten-year chart the high is approximately $3.45 the last week of June. The harvest low during the earlier years was $2.43. For the most recent ten years it was around $2.80.

The charts show a definite advantage to forward pricing during the months of April to June. There are examples of years, such as 2010, when prices did not follow the long-term patterns. My study shows how prevalent the long-term trends in corn futures are. They also show that most of the price appreciation from harvest until spring is from basis improvement, not from the futures prices going up.

Soybean charts paint a much different picture. The general price level is much higher now than it was in earlier years. The advent of the Southern Hemisphere crop parallels changes in the shape of the price graph, but probably not the way most marketers would probably guess. Where in earlier years there were two distinct lows, one near October 1 and the other close to March 1, now only the October low is evident on the graph. 

It is the event popularly referred to as the harvest low. The John Deere low, which was prominent on earlier charts shows up in recent years as a minor correction in a strong uptrend. The rally which was evident on early charts now begins sometime in the fall instead of in March. From this fact I conclude that the larger crops in Brazil and Argentine have not had a negative effect on the price of United States Soybeans.

In charts of early years the annual high came toward the end of June prior to harvest. Now the high is more likely to come in March and April following harvest. Twenty or thirty years ago there was a distinct advantage to forward pricing new crop beans in the early summer. In recent years it has been more profitable to store for price appreciation in both the futures and cash markets. Knowledge of the seasonal price patterns is a useful tool in making a marketing plan.

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