What is in this article?:
- Odds Favor An Early Top
- Putting It All Together
The charts below are both interesting and revealing. History does seem to repeat itself when it comes to the seasonality of the cash corn market making its highs and lows.
Since 1970, 76% of the highs in the cash corn market in central Illinois have occurred between June 1 and Sept. 30. That’s pretty high odds. For the 2010/11 marketing year, the highs occurred in June with cash corn prices in central Illinois hitting $7.80. The lows were the first day of the marketing season in September at $3.98.
What Does That Tell Us? First, let’s identify what type of bull market we have in corn currently. Yes, demand has been strong, but the last leg up has been caused by supply issues due to last year’s short crop. Supply-driven bull markets driven by short crops normally peak just before, during or right after harvest. This one will likely be no different.
In looking at the seasonality chart this would give a strong leaning toward the highs for this marketing year occurring in September. Twenty-four percent of the highs have occurred in September since 1970. This fits not only the seasonality but the type of bull market currently occurring in corn.
What about the lows? We’re going to assume that current high prices will result in planted acreage this coming spring in the 93-93.5-million acre range. Midwestern farmers, particularly in the eastern part of the Corn Belt, have experienced two very poor crops in a row. The odds of three in a row would be relatively small.
Consequently, with a sharp increase in planted acreage combined with a good chance of a yield closer to trend-line next year means this market has all the makings of an early top and a late bottom. Thirty seven percent of the lows in cash corn since 1970 have occurred in the July/August timeframe. That would certainly seem to make sense going into this year.