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Grain markets on roller coaster ride

11/19/2010 @ 11:15am

Last week’s column about horse trading looks amazingly appropriate looking back at what has happened since the government crop report on November 9. Initially corn futures put in a key reversal down that day while soybeans reacted positively. Since then all of the grains have been jerked around with volatile moves both up and down. I need a new Murphy’s Law that includes a roller coaster to describe markets that move so quickly in both directions.


Since the report that showed the fundamental factors in this country and world wide, prices seem to have been affected more by the Chinese Currency moves, Irish credit problems and strength of the dollar. It seems that every tidbit of news causes a violent reaction one way or the other.


Meanwhile the long term seasonal charts and the current dead cat bounce guidelines have been good tools for timing sales. The harvest low this year came on the anticipated day, October 4.  The top of the dead cat bounce came on November 11, less than a week later than the average date of November 5. Prices dropped following the peak. However, they have not gone straight down but have bounced around slightly below the top.    


I made some incremental soybean sales of the 2010 crop beans on the way up. Knowing that prices do not usually go straight down gave me the courage to wait for a bounce to make additional sales. I did that on the rebound yesterday.


In addition to the tendency for prices to be volatile after the peak has been reached, a dramatic basis improvement usually takes place. That happened here in Eastern Nebraska on Wednesday. The basis at the processor in Lincoln improved by 12 cents. That is an indication that the demand for soybeans remains strong at these price levels.


Making sales after seeing the top on the charts is difficult. There is a tendency to procrastinate, hoping that there will be another chance to hit the top. There is always the possibility that the price seen on November 11 is not the top. To counter this psychological hurdle, I keep back a few “gambling” bushels to sell later so that I will have bragging rights if soybeans go to $15. Dividing the crop into five increments and selling at setting appropriate targets of either price or time raises the probability of getting close to the top on a portion of the crop and a good average on the whole amount.     

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