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Lately, Big Corn Moves Are Rare

Computer simulations don’t show much help.

A famous person once said, “The function of the market in February is to make farmers depressed.”

Hasn’t it been working well this year! If you have a bin full of corn that is not priced, as I do, waiting for market price to give you a profit is like watching paint dry.

I can sit at my desk for days on end and not see enough movement in the price offered to get to a level that will be profitable. Even at the workshop last week, profitable strategies were difficult to come by with the computer simulations. 

In certain scenarios, it was possible to get a positive cash flow by leaving fixed costs out of the equation. For most farmers that approach amounts to going broke gradually. It is a strategy but not a solution to our economic problem.

The situation would be even more depressing if it were not for knowing the normal price patterns for grains and being willing to time sales to take advantage of those patterns. I submit that the proverbial dead-cat bounce is a good time to sell grain for the cash flow that you need for those winter payments that come due at that time.

In my early years of marketing, I had a price move I called “the John Deere low.” It relied on grain sales in November for machinery notes due in February. Yes, you can sell before the note is due. Most farmers, unfortunately, wait until it becomes a crisis.

On Friday of this week, we finally got a move in grain futures we have been waiting for since Thanksgiving. When the dust settled at the CBOT on Friday, all three grains showed a pattern of breaking out of a trading range that had been in place since the depths of winter. A look at the long-term charts shows a similar pattern for the 20 years of corn and soybean futures markets. This is surely a sign that the current rally has some underlying strength.

I can only guess that the strength in the soybean futures is based on cropping problems in South America. Strength in the wheat pit is based on the government crop report this week showing fewer acres planted. The corn continues to have good demand, but it also tags along with the other grains when they rally.

By now you have probably guessed that the famous person I mentioned in the first paragraph is me. I sit with the gun loaded and my finger on the trigger waiting for that long-awaited sign that the time for action is rapidly approaching.

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