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SoyRoy: Historic Events

08/08/2014 @ 3:24pm

I call the time period that the soybean market is currently in the “Frost Scare Rally”. A more appropriate name might be “weather problem high” because the common cause might be dry weather or late planting as well as early frost. Whatever you choose to call it, it is one of the most reliable market moves.  It comes at an opportune time for pricing soybeans. That is especially true for those beans that will go to the elevator right out of the field.

For most of the last half of June and the first half of July it appeared that the only direction for the soybean market was down. Surprisingly the rally began right on time on July 14. Since that time there have been three price peaks that could fulfill the normal pattern seen on many years of soybean charts during this time period. The first move to a price high began with November futures at $10.75 and topped out at $11.02.  The second started out at $10.57 and terminated at $11.07. The third started out at 10.58 and I hope has not topped out yet.

Those who want to use these rallies to forward price new crop sales have had opportunity to price cash beans at $10 or more twice. In some areas three times. The 30 year charts show that there are normally three price peaks making a triple top. It is a good idea to have orders in near the peaks to improve odds for getting orders filled. I prefer to sell at least a day before the report is released on September 10. Odds are that the price will be better at that time than when the combines roll.

It is fortunate that the recent rainfall has not resulted in a sharp drop in prices. Here in Eastern Nebraska we finally have had some moisture. It has been spotty at best. In the last rain I had only a half inch, while just four miles away the official amount was one and a half inches. Even though it was not what I wish it had been the cool temperatures ensure better yield than earlier anticipated. 

The long term seasonal chart shows that the frost scare lasts until September 13. Under normal conditions the rally will last that long. Target September 9 or earlier to get an increment sold. Besides avoiding hitting a down draft in futures, the basis ahead of harvest will probably be better than at harvest. Sales in September also provide late season cash flow and the possibility of balancing income for tax purposes. Also, by now we all have a good estimate of the size of the crop, not just on our farms but also nationwide. If the crop on your farm looks as good as those in Nebraska, you might find it profitable to forward price a few extra bushels! 

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