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Take advantage of the early June corn rally

Getty/iStockphoto Corn kernels falling
Be aware of this seasonal tendency: Historically December corn futures drop after June WASDE report.

Corn futures prices have been trending higher since January. However, December corn futures have endured a recent price selloff thanks to ideas that grain from the Black Sea region would be exported, and that U.S. farmers would get this spring’s corn crop planted despite soggy weather conditions in the Northern Plains.

Over the past few days, corn futures have been gaining back a large portion of the recent price setback.

There will be plenty of uncertainty to keep prices hopping with dramatic flair in the coming months. Questions like, how many acres actually did get planted in the United States? What will yield be? How is the corn crop fairing in the rest of the world? Will the crop in Ukraine get exported to the world?

There is plenty of uncertainty surrounding current corn market fundamentals. Tight ending stock supplies in the United States and globally should keep corn futures prices supported.

Nevertheless, the June WASDE report – due out June 10 – has a tendency to bring very little fresh news to the marketplace. History suggests that only minor adjustments are made to demand numbers, saving acres and yield for reports later this summer.

Rally killer ahead?

What does that mean to you? With little fresh news to trade on, in most years this can bring the corn rally to a grinding halt. There’s a seasonal tendency for December corn futures to drop shortly after the June USDA report into “late June.”

While past performance is not indicative of future results, you need to be aware of this seasonal tendency. In fact, 14 out of the past 15 years, the average price drop for December corn futures is close to 50 cents for that two-to-three-week time frame!

Even in 2012, the market followed this seasonal pattern for over a week, before the news of the drought caused prices to rally. The one year where the market did not fall after the June USDA report was in 2008. That year there was a rally, but please note that in 2008, the rally lasted until just after the 4th of July – then corn prices lost nearly $4 by harvest!

While anything can happen in the coming weeks, please have a plan ready for this potential price scenario to unfold. Often times the price fall does only last for a few weeks before a weather scare or a surprise reaction on the June 30th planted acres report justifies a price rally. However, a seasonal price fall, 14 out of 15 years, is something you can’t ignore. So be ready.

Reach Naomi Blohm at 800-334-9779, on Twitter: @naomiblohm, and at naomi@totalfarmmarketing.com.

Disclaimer: The data contained herein is believed to be drawn from reliable sources but cannot be guaranteed. Individuals acting on this information are responsible for their own actions. Commodity trading may not be suitable for all recipients of this report. 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. No representation is being made that scenario planning, strategy or discipline will guarantee success or profits. 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 Total Farm Marketing. Total Farm Marketing and TFM refer to Stewart-Peterson Group Inc., Stewart-Peterson Inc., and SP Risk Services LLC. 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. SP Risk Services, LLC is an insurance agency and an equal opportunity provider. Stewart-Peterson Inc. is a publishing company. A customer may have relationships with all three companies. SP Risk Services LLC and Stewart-Peterson Inc. are wholly owned by Stewart-Peterson Group Inc. unless otherwise noted, services referenced are services of Stewart-Peterson Group Inc. Presented for solicitation.

The opinions of the author are not necessarily those of Farm Futures or Farm Progress. 

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