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'Prices Should Continue to Improve to End of August,' Says Soy Roy

This is a critical time of year when the psychology of the markets is likely to change in a very short time period. Except for a late irrigation run, most work has been taken care of for the 2016 crop year. All that’s left is to get the harvesting equipment ready to run in a month or so. This week, I attended two field days to get caught up on the latest technology. Attendance at the events was very good. I wonder if the excellent crowds were due to a lot of new innovations in production technology or if it is an act of desperation in response to lack of profitable prices available at harvesttime. I suspect it is a combination of the two.

It would seem to the inexperienced marketer that the period immediately before a big harvest would find the trend to be generally down until the size of the bumper crop is known. That is not usually the case. A scan of the long-term chart shows a period of time in August when prices go flat prior to rallying for a period of about three weeks. I attribute this time of little activity to the market getting oversold earlier in the summer. Also, there is a lack of farmer selling as farmers evaluate their yield prospects. As farmers start thinking that yield prospects might not be as good as earlier thought, prices flatten out, then begin a short rally.

That is where the markets are this week. If the trends follow the path I just described, prices should continue to improve going into the end of August. At some point the market watchers decide that, in fact, a big crop is about to be harvested. Prices drop prior to the September crop report. The harvest low comes around the first of October when everyone realizes that there really is a big crop about to be harvested. Everyone knows that most of that huge crop will come to town as the combines roll.

It’s important to understand the psychology at the turning points in these long-term events. More often than not the best strategies will be the result of making sales based on discipline and self-control, not on supply and demand. Understanding when the top of the frost rally is likely to come will help farmers to avoid selling on the depressed prices at harvesttime.

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