“I have a great memory, it's just short.” — Will Rogers
The older we get the more we can relate to the above quote. When it comes to marketing, memories get even shorter. Unfortunately, most of our neighbors still compare today's price of corn and soybeans to the highest or lowest prices in the last six months. Why? That's about all the longer we can remember prices.
Now that we're in the middle of another weather market, as is always the case in June and July in the central Corn Belt, it's important to remember more than just what happened last year.
This year we already know that the majority of corn producers LDP'd their corn early under the anticipation that prices were headed higher. Why? Because grain prices were strong last summer, some people think they should use the same marketing strategy this summer. Make any sense? No, but that's how the human mind normally works.
The charts below give a revealing glimpse of what has traditionally happened with cash corn prices throughout the marketing year.
The official marketing year for corn begins on Sept. 1. What these tables indicate are the odds of the highest price and lowest price of cash corn occurring during each marketing year. For example, since 1970 26% of the annual highs of cash corn prices occurred in the month of September. The top of the year has never occurred in February, and 21% of the tops have occurred in August.
On the bottom side, 24% of the lows have occurred in October and 26% of the lows have occurred in August. Astonishingly, the absolute bottom in the cash corn market has never occurred in March, April, May or June. No one is saying that the bottom can't occur in those months — only that it never has.
So what does that tell us about this year? As this column goes to press, the highest price of cash corn in central Illinois for this marketing season occurred on the very first day of September at $2.30. The low occurred in November at a $1.69. History would indicate that with 26% odds of the high occurring in September, unless a weather disaster occurs, the high of the cash market is already in.
The odds of lows are a different story, however. Since 1970 the bottom of the corn market has occurred in November only twice. As of early May, cash corn prices have not yet taken out the November low because of a relatively strong basis, but prices certainly look as though they're headed for that area. Forget what you “want” to happen in a market.
Without major production problems, the low in the cash corn market is going to once again occur in the July/August time frame. Grain markets typically make both the highs and lows either early or late in the season as a result of supply driven issues. The highs occurred early this year as a result of last year's late weather rally. The lows would appear to be headed late this year because of the large amount of corn that has been LDP'd and with more than double the amount of corn being held on farms.
Richard A. Brock is president of Brock Associates, a farm market advisory firm, and publisher of The Brock Report. For a trial subscription and information on Brock services, call 800-558-3431 or visit www.brockreport.com.