Don’t wait the wheat out, now is the time to sell

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So, now it is June. Ask any farmer, and he will say that June is the month when grain prices go up. He will say that the peak price for corn comes on July 4.

As they say, the trouble with a half-truth is that sometimes you get the wrong half. Take that July 4 expectation.

In reality, we tend to get the seasonal high price in late June, get cheaper and then confirm it in early July, depending upon when the weekend comes.

That can leave a farmer reluctant to sell in late June and then missing the sales in early July when the price might tumble after traders sell the market, knowing that after the first couple of days of July, we will likely get a crash.

The really dangerous thought is believing that the prices will rally in June. I got to thinking about this after reading an article by Bruce Knorr of Farm Futures that I saw online this evening.

In an article about the possibility of a June rally, he pointed out what I already knew — that the market only rallies in June half the time. All of a sudden, we are not talking about a seasonal pattern, but a seasonal possibility.

I can make it easy for you. First, sell all the wheat, old and new. We have had an amazing rally after we had mostly given up hope. This is a no-brainer, even if it goes higher. If it goes higher, it is likely for the same reasons that corn and soybeans go up, so then you can sell them.

Based on the rallies we have seen in corn and soybeans, until last week, it is time to get some sales on to reward the rallies we have already seen.

The next step is to put some targets in for cash sales reasonably above the market, the kind that actually have a chance of sticking. Your perspective should be that there is more reason for corn and soybeans to get worse than there are to get better.

We are primed to make big crops, with the caveat that current forecasts have us getting wet and cool weather starting before you get this in the mail. This is a bad time of the year to get wet and cool.

Corn

Let’s look back at the rallies and the reasons for them. First, corn. Near the end of March, we were shocked to discover that the U.S. Department of Agriculture expected us to plant 90 million acres of corn. We do not need that much, and it will ratchet up our carryout.

The only reason it would not is if we end up with a poor crop, and you should never bet against yourself by assuming the crop will be poor. It rarely is as poor as we fear, and the fear of a poor crop keeps you from doing orderly marketing. (What if I sell it and don’t grow it? We have all said that.)

Remember that even in the amazing drought of 1988, we really did not grow a crop that was anywhere near as poor as we expected, except in small areas. On the whole, we ended up with modest reductions in yields.

Corn started to rally on slightly delayed planting, but mostly on the idea that the Brazilian safrina corn crop was being badly hurt by weather problems. You still see articles about different private forecasters cutting the safrina crop, but this is old news. The market has already used it to rally.

The history of prices since harvest is ugly. We put in the futures high Nov. 15, with the July contract that day getting to $5.14 1/4. From there, we had a quick cycle and then a free fall to the low of $4.22 1/4 at the end of February.

At that point, there was serious talk of corn falling below $4. Instead, we bounced to a high of $4.75 1/2 by May 13. We have not had news to sustain that price, and fell by June 3 to $4.39.

Soybeans

Now, the soybeans. We had a similar slump in soybeans coming out of harvest. The harvest high also came Nov. 15, and then we plunged to $11.40 1/2 on Leap Day, Feb. 29.

Less than a month later, we had recovered to $12.40, two ticks from a dollar gain. The next cycle got us to a high of $12.56 1/2 May 7. We dipped lower and then ran to a cycle high of $12.58 1/4 May 23. The time since has not been kind, however. We traded at $11.82 1/2 June 3.

Wheat

The really dynamic market has been Chicago wheat. Our cookie wheat had a low of $5.37 3/4 March 8. By May 28, we traded at $7.20. Prices June 3 got us thinking about lower prices again. We traded a high of $6.97 3/4 on June 3, but closed at $6.72 3/4.

The last month of that market has been mostly about the drought in Russia, which is the world’s largest exporter of wheat. The market from June 3 looks like either profit taking or just a turn for the worse. Don’t wait the wheat out.

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