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SoyRoy: Miss May 8 Rally, Eye the 29th

05/16/2014 @ 10:33am

One of the things I have learned from 40 years of studying markets is that important events take place when farmers are most busy. That was certainly the case the past two weeks. I finished planting corn on May 3. Finishing that early gave me time to mow the lawn and prepare for soybean planting without being in a hurry. The conversion to planting soybeans normally takes most of a day of switching metering units, leveling the hitch, adjusting row markers, and all of the other details. After taking Sunday off, on Monday I discovered a tire fluid leak on the planter tractor.

That was just one of the major problems that bugged me as I started planting soybeans. Without going into details, it took two more days before I had the issues solved and for planting to begin in a routine manner. By Saturday afternoon, I had all but a few acres of my 108 acres of beans in the ground. This was after a major problem with the planter hitch on Saturday, resulting in dropping the planter on the blacktop road that runs past my rental farm.

Needless to say, my mind was on solving mechanical problems, not on the markets. I was aware that the first week of May is usually a critical time, especially in the soybean market. Because of the fact that May 8 is the long-term high for new-crop soybean prices, I at least spent enough time to get my soybean speculative position that had been long in April rolled from neutral to short. The transaction resulted in my being short November futures at $12.22. For several weeks, both corn and soybean futures went only higher. This made me a little nervous being short in the market where everyone seemed to be bullish. Today the short position looks good!

On Monday morning, traders that had been bullish on the previous Thursday came to the floor with a negative psychology. Since then the direction of corn and beans, both old crop and new crop, has been down. This leads to my conclusion that selling both cash and futures the first week of May is almost always a wise move.  Seldom does the market turn on the exact days as it did this year. However, the window is big enough that selling on May 8 or a few days before or after is seldom a bad move. In my own case, I am glad I was not distracted by production problems enough to ignore a good trading signal.

Like a lot of farmers, I did not sell enough when I did pull the trigger. Based on the long-term charts, odds are good that this down move will not last very long. History shows May 29 to be a time when odds are good for another minor rally to begin. This rally lasts until the middle of June. My observation of summer markets over the years is that the date for the early summer high is not nearly as reliable as the spring high that just took place. Selling on rallies between now and the end of June has the probability of getting a price that will be better than those at harvest on October 1.

If you missed the most recent sale date, resolve to not be distracted on the next rally. It  will probably come when least expected as it did this time.

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Soybeans Rally on Demand, Weather