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Farmers, Did You Let the Big Market Fish Get Away?

Is the weather-driven rally over, analyst asks.

The weather rally that takes place during the summer is widely used by farmers as a benchmark for making sales of grain they expect to be delivering at harvesttime.

At the same time, this indicator is notorious for being difficult to predict both in terms of time and price. Farmers who wish to nail down either price or time for the peak of the rally must take into account that it is difficult to predict with any degree of accuracy.

In 40 years of farming, about 80% of the years, there have been moves in the futures market that could be considered weather rallies. Some years, it has come late in the summer close to the time when we usually are thinking more about Labor Day.

In other years, it has been early, soon after June 1. Some years the rally is very small. In other years, it may turn into a full-blown bull market.

Price action in the grain markets this week has the appearance of being a true weather rally. For several days, any little bit of bullish news was enough to send prices sharply higher. It was difficult to make sales for fear that the next day would bring more margin calls in the futures market. Large positions in the market by traders made for volatility in prices. 

Just the opposite was true when the big players left the game. Players with big positions could not get through the door fast enough. In the course of less than a week, soybean prices went from sharply lower to sharply higher, then back again to the starting price.

In other years, I have seen prices in a wide range in a week. I have never before seen prices go through the full range in five trading days or less.

I hope all of you got your drop-dead cash bushels sold in the last two weeks.

Prices did not look exactly like the pattern. Selling may not have been easy, but aren’t you glad it was done?

There were ample opportunities on the same rally to make new-crop sales. Most of us are still waiting for profitable prices that may or may not come. 

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