Typical 'dead cat' bounce?
The soybean market has completed all of the necessary elements of a normal dead cat bounce. With the passing of ten trading days since the October 4 harvest low, we are now into the territory where a top in prices could be expected at any time. Even though ten trading days is the minimum experienced in other years, it is more common for the move to last fifteen trading days. That milestone will be met on Tuesday, October 26. Especially where the rally is as strong as this one has been, a minimum of fifteen trading days is anticipated. The maximum length of the bounce is three months. There come a point where the bounce turns into a full fledged bull market.
So far this year the price move has been $1.51 from the low on October 4 through Wednesday, October 20. The big question is whether this is only a bounce or if it is a continuation of the bull market that will take prices to new highs. The high in futures from the summer of 2008 is in the neighborhood of $16. At this point I cannot tell whether to expect a top in the next few weeks or if we are headed for a record high before the South American crop comes onto the market.
My guidelines are good for making short term selling decisions, especially for beans that are in commercial storage. They do not attempt to pick the day or the price at the top. They do give a range of prices and times for farmers who sell in increments. Making sales during the dead cat bounce will not usually result in hitting the yearly top. However, sales on this move reduce storage costs and are very attractive from a cash flow perspective. If you need immediate cash it is available. If you need to defer income for tax purposes, the new year is only a little over two months away, so a deferred payment contract is a good tool for tax management.
I do not have good guidelines for selling corn on this bounce. In the past I have recommended selling corn at the same time as you sell soybeans using the same technical triggers. Since the southern hemisphere corn crop is not nearly as big of a factor as their soybean crop, the two grains do not necessarily follow the same patterns. Storing corn into the spring for basis improvement and to capture the carry works better for corn than for soybeans.
My corn harvest was finished last Saturday. As with farmers in many areas, my yields were good, but disappointing compared to last year. The crop was very dry, so storage will not be a winter-long concern as it was with the 2009 crop. I suspect that a very wet spell early in the growing season resulted in some of the nitrogen leaching out of the root zone. I have been experimenting with different approaches to nitrogen management, but at this point I am still looking for answers.