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SoyRoy: Reaction to June 30 Report

07/03/2014 @ 1:14pm

The June 30 government report is now history. All that is left is to digest the numbers and trends and make plans for the rest of the growing season.  Looking back at recent market action shows the importance of understanding the seasonal price trends and acting accordingly. Not every seasonal event has been right on target. However, most have been close enough to serve as valuable guides for making marketing decisions.

Most recently the drop dead practice of not holding cash corn past July 1 proved to be a good omen. I actually made the last sale the last week of June. Waiting until July 1 would have been an expensive decision! Likewise holding soybeans through February again proved to be a profitable strategy as prices rallied nicely in February and March.  The majority of my soybeans were actually sold on the “dead cat bounce” after harvest last fall.

It is going to be difficult to time sales accurately in July and August. A typical price pattern for these two months includes at least one price peak before prices head into the tank as harvest begins in early October.  Look for a rally taking soybean prices higher to make a retracement higher  in July or August. Normally, I expect at least 50 percent of the move down as a target for the retracement. That large of a move up may be too optimistic after having seen a loss of 70 cents in the first trading day after the report. The second approach is to sell the day before the September crop report if weather conditions cause a rally before September 10. There is about an 80% probability prices will be higher on September 9 than they are on October 1.  Avoid the harvest low when planning sales.

The recently released report will be what guides the markets for the next months whether we agree with it or not.  Jumping the soybean plantings by two million acres will be tough to digest. However the results of that increase this year and in earlier years are what makes the seasonal strategies work. As a side note, my speculative strategy went short November futures on June 20. As of the close Thursday there is $.87 cents profit on the trade in seven days of trading.  The speculative system illustrates the usefulness of the seasonal price trends in pulling the trigger on sales.

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Soybeans Rally on Demand, Weather