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SoyRoy: Sell This Corn, Soybean Weather Rally

One of the most anticipated moves in the grain markets is what I call the Weather Rally.” Traditionally, this move takes place in the summer when the odds are good for some kind of production risk to surface. Normally, it is difficult to predict both in terms of timing and duration of the move. Maybe more importantly, there is usually only one of these rallies per year. They therefore offer the last opportunity to make sales of new-crop grain before the prices head south into harvest.

I realize that most farmers who regularly watch grain markets are already familiar with these principles. Probably more important than these technical factors is some of the psychological makeup that plays a part in implementing strategies based on the move. I learned these things from years of nail biting in trying to get the biggest return from my production. First, I have found it difficult to pull the trigger on sales when the markets are most volatile. When everyone is most sure we are in the middle of a production disaster is the time when producers should be selling.

Secondly, the markets are most responsive to production problems the closer to Chicago the problem surfaces. Maybe it is my imagination, but it seems that the market reaction to weather problems comes sooner and lasts longer when the problem is in Illinois or Indiana than if the problem is in Nebraska, Kansas, or South Dakota. Thirdly, sometimes weather rallies last a week, and sometimes they last several months. This makes timing sales more of a gamble than a well thought out strategy. It is difficult to rationalize strategies when big bucks are at stake and it seems as if everyone is going crazy.  

Finally, the market does not care what your estimated cost of production might turn out to be until the crop is harvested. Cost of production targets bounce around from day to day, when we would most like to do something simple like setting price targets to make sales.  This is based on the simple principle that the market does not care what your breakeven is.

We are now in the weather rally for 2015. I do not know how long it will last or how high it will go. I do know that it fits the pattern mentioned above. There has been such a rally in all but three of those years since 1981. If you have grain to sell, especially if you plan to sell it at harvest, do not miss this opportunity to get at least an increment done during this rally. 

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