Soy Roy: With Marketing, Timing Is Everything
Farmers in eastern Nebraska are eagerly awaiting what most of us think will be extremely good crops of soybeans and corn.
Harvest of soybeans is still about a week away. A few of the earliest fields of corn have already been combined where the terminals will take wet corn. I do not know of anyone who is drying corn at this early date.
Many farmers watch the crops with one eye and the markets with the other eye for a signal that it is time to sell soybeans. I get calls asking me if the recent price rally is an indication that the harvest low is past and that they should be selling new-crop grain. To qualify my comments, I will describe the current market situation and where I think prices are headed.
First of all, on September 9, I started tracking the prices that are necessary to make a judgment on selling in the dead-cat bounce. I am tracking new-crop cash bids at my local elevator as well as January futures. Tracking these two numbers gives me not only the prices but also the basis between cash and futures. To get a sell signal for making sales, the prices for both need to be at least 35¢ over the harvest low. This means that I also need to know the price at the harvest low.
One of the things that makes the process difficult is that you do not know where or when the harvest low is until it is past. The low normally comes around October 1. On rare occasions, it has been much later. There were occasions when it was as late as November or early December. The important thing to consider is that the October time frame is so reliable that that marketers need to treat the major low as the harvest low, even if there is a rare occurrence when it comes much later.
The most difficult judgment that has to be made is knowing when the bounce is over. It has always lasted at least 35¢ over the harvest low. A rally of 50¢ is common. In high price years the price improvement can be as much as $1 a bushel. As of the close of trading this Thursday, the price rally was good for 46¢ before falling back on Friday.
That exceeds our goal of 35¢ but less than 50¢. The elapsed time so far has been seven days. That also falls short of our goal of 10 days over the harvest low. The harvest low, so far, has been a little earlier than normal. Yet, there are still several days to go.
Is it possible that the harvest low is past? Anything is possible. Is it possible that the dead-cat bounce has started? It could be, but not likely. Patience and self-discipline are the keys to successful use of the dead-cat bounce. There have been years when the profit from a year’s crop has come from the better prices the farmer got from this one strategy in the futures and cash markets. Stay in touch. I will keep the action in the soybean market updated on a regular basis.