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Grain Marketing Decisions Using History
Commodity prices can have a cyclical nature to them. Using history is a type of analysis available when trying to forecast future prices.
Examining past price movement may give some insight to future price movement, though there are no guarantees for this to hold true. We compile historical data to provide an insight into price movement over the previous 10 years on a designated futures contract.
For this Perspective, we will concentrate on the corn and soybean markets.
To compile this data, we ask the question: How many times in the last 10 years have futures prices moved higher seven, 14, 30, 60, and 90 days out from today?
As an example, let’s use December futures. Ask this question on July 10, and you would find that this contract finished higher two years out of the past 10 years on July 17 (seven days out from July 10). Another way to view it is that December corn futures finished lower eight out of 10 years one week after July 10. By utilizing this data, we can look for trends (or patterns) which can guide or help make selling and buying decisions.
On July 11, looking seven days out, December corn futures finished higher four out of the past 10 years. Looking 14 days out from July 11, the number drops to two; 30 days out and the number goes to three years. At 60 days out, the market finished higher three out of the last 10 years. At 90 days, the market also finished higher three years out of the last 10.
What this pattern suggests is that corn prices could be weaker over the next two weeks to 90 days, which likely reflects crop maturity and the impending harvest. The implication is that in most years, as the crop matures and harvest approaches, prices are generally trending downward, so sales prior to July 11 may be warranted.
Soybeans have a similar pattern, though not as pronounced.
On July 11, looking out seven days, November soybean futures finished up six out of 10 years; looking out 14 days, up only four out of 10. Out 30 days, the market was higher three years in the last 10, and 60 days out higher five out of the last 10 years. Move to 90 days out, and the market was higher only three out of the last 10 years.
Again, this could imply that over the next three months, prices have a tendency to move lower into late summer and the start of harvest season. Selling in advance of this lower price pattern may prove beneficial.
As with any analysis, use it as one guide to decision-making. This research is based off of history, and there is no guarantee that future price movement will follow past trends. In addition, this research simply states that prices either finished higher or lower. It does not provide a magnitude of price movement. Arming yourself with some perspective as to how prices may move based on history puts another tool in your marketing toolbox.
If you have questions or comments, contact Top Farmer at 1-800-TOP-FARM, ext. 129.
Futures trading is not for everyone. The risk of loss in trading is substantial. Therefore, carefully consider whether such trading is suitable for you in light of your financial condition. Past performance is not necessarily indicative of future results.
Front Desk Administrative Assistant | Stewart-Peterson
Office: 800.334.9779 | Fax: 262.334.6225
Futures and options trading involve significant risk of loss and may not be suitable for everyone. Therefore, carefully consider whether such trading is suitable for you in light of your financial condition. Hypothetical performance results have many inherent limitations. No representation is being made that any account will or is likely to achieve profits or losses similar to those shown. No representation is being made that scenario planning, strategy or discipline will guarantee success or profits. The data contained herein is believed to be drawn from reliable sources but cannot be guaranteed. Reproduction of this information without prior written permission is prohibited. This material has been prepared by a sales or trading employee or agent of Stewart-Peterson and is, or is in the nature of, a solicitation. Any decisions you may make to buy, sell or hold a futures or options position on such research are entirely your own and not in any way deemed to be endorsed by or attributed to Stewart-Peterson. Stewart-Peterson refers to Stewart-Peterson Group Inc. and Stewart-Peterson Inc. Stewart-Peterson Group Inc. is registered with the Commodity Futures Trading Commission (CFTC) as an introducing broker and is a member of National Futures Association. Stewart-Peterson Inc. is a publishing company. A customer may have relationships with both companies. Accordingly this email is sent on behalf of the company or companies providing the services discussed in the email.