No magic!

Agriculture.com Staff 05/05/2006 @ 10:30am

The turn of the calendar from April to May means that I was able to update my 27-year soybean futures chart. I finished that pleasant task this week. It was made easier by the fact that the seasonal turn dates did not change from last year.

Adding a year to the data base when there are already 26 years worth of prices does not change the graph much unless the year has been really unusual. The year May 1, 2005 to April 30, 2006 was close enough to normal that the updated charts look pretty much like last year's.

I always warn people using the charts that these are long-term averages. There is nothing magic about the high for the spring soybean rally being on May 9. Having said that, the spring high in corn futures came on April 7, the exact day shown on the chart. In the month since then, corn futures fell 12 cents.

This week I got calls from farmers wondering what was going to make the price of soybeans go down next week. That is not how it works! The charts do not predict what will make prices go down, or even that they will go down. The charts show what has happened in previous years. If these patterns repeat over a period of several years, there is some fundamental or psychological factor that causes it. In the case of soybeans in May, there is a production risk premium bid into the price before the beans are planted.

When the bean seed is put into the ground, the production risk starts to lessen. This factor causes prices to drop during the last weeks of May. Not every year do prices follow this exact pattern. It happens often enough that the long-term charts are useful guides to making marketing decisions. Soybean futures dropped 18 of the last 27 years between May 9 and June 5. Odds for a price break are almost 100 percent in years when the futures price was over $6 in the spring.

The latest seasonal corn chart is currently on my website, soyroy.com. The soybean chart will be posted this weekend. In addition, my weekly radio show on station KTIC is now available on the website. Today's show will be posted over the weekend.

The turn of the calendar from April to May means that I was able to update my 27-year soybean futures chart. I finished that pleasant task this week. It was made easier by the fact that the seasonal turn dates did not change from last year.

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