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Get Ready to Make More Sales
May has quite often been a good month to make some additional cash corn and soybean sales and to get some new-crop hedges in place. How has it worked lately for corn? Let’s look at the numbers over the last two years.
In May 2015, selling cash corn was not a good move. Nearby futures averaged about $3.60 that month. Prices dropped into the second week of June and then exploded higher into mid-July before collapsing lower into August.
This is the weekly corn continuation chart. You can see the double top at $4.38 in 2015 and 2016. The highs came between June and July. The corn market went down to seasonal lows in 2015 and 2016 between August and October. Prices bottomed between $3.01 and $3.16.
In 2016, your May cash corn sales turned out to be really good sales. Prices went a little higher into the second week of June and then turned sharply lower before dropping to the major low at $3.01 in late August.
In 2015 and 2016, you may have put on some new-crop hedges or bought puts to protect new-crop prices when it wasn’t the high. However, the hedges looked very good when you were delivering on them at harvest.
What About Beans?
If you sold cash soybeans in May 2015, you did OK when futures averaged about $9.80 per bushel. If you held on into the second week of June, then you were able to add on about 80¢ per bushel.
If you wait until August to get the last of your corn sold, then it is going to be a big mistake – just like it was the last two years.
In 2016, the results were similar. The average futures price was at $10.40. If you waited until June 2016, then you were able to add on about $1 per bushel. If you had put on some new-crop hedges in May of both years, you were happy when you delivered on those hedges at harvest.
If the month of May has been good about 50% of the time in the corn market and has been about 80¢ to $1 off the top in the soybean market, then what should you do this May?
When I study charts, I don’t just look at the key months to sell; I also look at the relative price levels.
The corn chart shows a broad trading channel over the last two years. The highs in June or July were $4.38 in 2015 and 2016. Lows were $3.01 to $3.20 between August and October in 2015 and 2016.
This price analysis makes the decision easier. If the nearby corn futures is about $4 or $4.20 in May, then get aggressive with making cash sales. If May corn is at $3.60 or less, then wait until June or July. If you wait until August to get the last of your corn sold, then it is going to be a big mistake – just like it was the last two years.
This is the weekly soybean continuation chart. You can see the highs in 2015 at $10.50 and at $12.08. Both highs were in June. From those highs, prices went down to below $9 per bushel between August and October, when the markets put in harvest lows. In 2017, don’t be surprised to see a counter-seasonal low come in June.
For soybeans, the decisions are a lot more complicated. The high in the second week of June 2015 was $10.50. In the fourth week of June 2016, the high was at just over $12. Neither of those price targets are realistic in 2017.
I recommend cash soybean sales to be at 90% to 100%. For the 2017 crop, I recommend using a combination of hedges and puts to have 80% to 100% of the crop protected. I am not just a chartist. When all of the global numbers started turning bearish in January and February, I got very aggressive in getting soybean price protection in place.
Because the soybean market put in major highs in mid- to late June 2015 and 2016, be on guard for a potential low in that same time period in 2017.
7 Key Weeks to Watch
Every year I build a fresh set of my hand-drawn charts in early January. I sketch a number of studies on each chart to help me see seasonal trends and key change-of-trend weeks.
Here are the seven key weeks that I have marked on my charts for corn and soybeans as being major change-of-trend weeks:
- May 26
- June 16
- June 23
- July 7
- September 1
- October 27
- November 24
There is also one particular day that I am anticipating: June 13. This will be the most interesting day of the year to watch in corn futures.
June 13: This will be the most interesting day of the year to watch in corn futures.
In 2015, the second Tuesday in June was a major low in the corn market. Corn prices bottomed at $3.47 before going on a three-week 90¢ rally to the high at $4.38.
In 2016, the second Tuesday in June was a major high. Prices peaked at $4.38, and three weeks later, prices were down over $1 per bushel.
So what will happen in 2017 on the second Tuesday in June? I will be watching corn prices that day for a potential high or low.
For soybeans, I do not have a specific day that I’m watching. However, after seeing the soybean market put in major highs in mid- to late June 2015 and 2016, I am on guard for a potential counterseasonal low in that time period in 2017. Until then, I will be watching to see how low prices go.