Try to envision a scene from a movie or television program where one of the characters comes across a surprise situation and then begins blinking and/or rubbing their eyes in disbelief. That is kind of how I felt this morning when I turned on my quote screen and was greeted with higher prices uniformly higher across the grain and soy complexes. Granted, since the initial jolt of optimistic trade, we have surrendered most if not all the gains but deference to current myth, these markets can trade positive, albeit for short periods right now.
It would seem the dominant influencing news this week centers on the results that have been published from the Farm Journal Midwest Crop Tour. Of course, at this point, they are little more than bits and pieces but someone or something that is starving for nutrition, this case in the form of fresh news, is grateful to lap up even the tiniest crumbs that fall from the table. We shall, of course, hear the final report come Friday and then the trade can stew about them until markets reopen on Sunday night.
While I do not want to get too far ahead of myself, I actually would like to look beyond this report and the weather conditions for the balance of August and begin to think about post-Labor Day trade. I have probably been referring to this more under the technical comments each day, but I do believe that often times we begin to see a transition in markets after that date that really has little to do with weather or crop size or if indicators happen to be overbought or oversold. It has to do with seasonality, and if nothing else, large speculative money (funds) do appear to pay attention to historical seasonal patterns.
Looking at historical price patterns for spot corn futures, it would probably surprise none of you for me to say that over the past 25 years, the month(s) that record the most highs are June and July. What may surprise you though is that the post-summer months when record the greatest number of lows are the months of August, September, and December. Now, this certainly does not mean you should rush out and begin getting long just because we have reached those times of the year but what I do believe it says is that large speculative funds will begin reducing their short positions during those periods, which in turn, of course, begins to reduce pressure on markets. Of course, often, or at least for the fund’s sake, they hope there is new hedge selling to provide them with the liquidity to do this without sending prices higher, but that does not always work. While there are a number of other factors at work this year as well, it is at least partially with this in mind that I believe the downside potential for markets is rather limited at this time regardless of crop news and weather.
While it wrapped up this past Sunday, round one of the NAFTA negotiations are complete with round two scheduled for the 1st to 5th of September in Mexico City. Actually, round three takes place in Ottawa, Canada in late September and then they are back in Washington in early December. By the end of the year, they have the ambitious agenda of completing seven meetings and have the goal of hammering out a new agreement before June of next year. From what I can gather, round one was less than congenial, with the main disagreement centering on the auto industry. Top U.S. negotiator Robert Lighthizer is quoted as saying “For countless Americans, this agreement has failed.”
Obviously, the countless Americans he was referring to were not from the agricultural sector. No doubt, Mr. Lighthizer was doing little more that voicing the administrations wishes and last evening President Trump provided this less than encouraging statement; ““I don’t think we can make a deal because we have been so badly taken advantage of.” “They have made such great deals—both of the countries but in particular Mexico—that I don’t think we can make a deal. So I think we’ll end up probably terminating NAFTA at some point.” If you have not done so already, I would encourage anyone in the agricultural sector of this country to work through your farm organizations or be in direct contact with your representatives as ag should not be the sacrificial lamb to defend the auto industry. It would be a challenge to feed the world with auto parts.
Read more from Dan Hueber’s blog on www.AgWeb.com.
