A quick look at historical price action during the end-of-year “holiday trading period” shows rather impressive price gains in recent years.
In a recent blog, R.J. O’Brien’s Market Research team took a look at corn, soybean and wheat price action from Dec. 20 through the end of the year over the last 20 years.
In the “for what it’s worth” category, some rather impressive and consistent, price strength has been seen to end the year over the last five years.
When R.J. O’Brien looked at the corn market, it was able to see each of the last five years having price gains achieved to end the year, with each of the last four years posting impressive 17- to 26-cent gains from Dec. 20 to Dec. 31.
While the longer-term split between end-of-year price gains and losses is nearly even, it is interesting to note that not a single year over the last 20 years has seen a price decline of greater than 8.5 cents during this timeframe, with only two years seeing losses of greater than 5 cents per bushel.
On the other hand, eight years since 1989 have seen gains of greater than 5 cents/bushel to end the year.
A very similar situation has been seen in soybeans, with each of the last four years posting impressive end-of-year price gains of 28-to 104-cents/bushel. However, the overall bias has been a bit more skewed toward slightly lower price action when looking at late-year price moves in general over the last 20 years.
Nonetheless, it is clearly the recent-years’ performance in soybeans that grabs the attention.
Chicago wheat has been a bit more of mixed bag in recent years. While five of the last six years have seen outright price gains from Dec. 20 to the end of the year, 2007 saw notable price weakness during this timeframe. Additionally, the price gains that were seen in five of the last six years were rather modest in nature, in most cases, ranging from 2- to 13-cents/bushel.
The exception to this was in 2008 with a 48-cent/bushel rally to end the year.
Overall, though, outside of 2007 and 2008, most years since 1989 saw rather limited price moves of 10 cents/bushel or less.
Corn closed the week $.17 1/2 higher. Last week, private exporters reported a sale of 116,000 metric tons of corn sold to an unknown destination.
This year’s net export profile is now at 995 million bushels versus the USDA forecast of 1.950 bb.
Strategy and outlook: Going into the January crop report, the downside is likely limited as end users should be buyers on weakness.
Farmers will not be too willing to part with inventory until after the crop report.
Producers have sold/hedged a portion of the 2010 crop and re-owned cash sales with call options and bought call options when corn hit $5.26 to re-own 2010 cash sales.
Don’t become too aggressive marketing the 2011 crop until more is known about the 2011 marketing year.
Soybeans closed the week $.50 3/4 higher from last week. Last week, private exporters reported sales of 110,000 mts of soybeans to China and 150,000 mts of soybeans to an unknown destination.
The U.S. Census Bureau crush report was released for the month of November. The report was slightly disappointing at 154.99 million bushels, slightly below trade estimates of 155 to 156 mb and down 2.5 million bushels from October and 14 mb less than a year ago.
This year’s export pace stands at 1.261 bb versus the USDA foreecast of 1.59 bb.
Strategy and outlook: Weather forecasts in South America will be closely watched for price direction. Soybeans have major chart support near $12, which will only be broken if Argentina receives major rainfall amounts as that country has been extremely dry.
Major upside potential exists if weather turns hot and dry in Brazil.
Brian Hoops is president and senior market analyst of Midwest Market Solutions Inc. Midwest Market Solutions is a full-service commodity brokerage and marketing advisory service, clearing through R.J. O’Brien.
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