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BRIAN HOOPS

By Staff | Aug 16, 2013

One of the most reliable, but underutilized seasonal indicators is commonly referred to as “The Voice from the Tomb.”

Despite it’s catchy name, this seasonal indicator has been nothing short of amazing during the last 10 years or more that I have been aware of it.

A seasonal indicator occurs at consistent times of the year and results in similar price activity during those times.

The short version of the story is as follows: Years ago, there was an extremely wealthy wheat speculator. After his wife died, he raised his three children by himself and dedicated his life to them.

However, his children were lazy and they thought they would inherit all the money. He believed his children were wasteful and grew to believe they took him for granted. When he died, he left nothing to the children; all his money went to charity. All he left them in his will were dates of when to buy and when to sell wheat.

He further explained in his will that if the children would only follow the six sell signals, they would have the fortune they always thought they were going to have.

The six signals occur throughout the year and follow a strong seasonal pattern for wheat.

In the last year, the signals generated by the Voice have been highly reliable for the wheat market, as five of the last six signals have proven to be profitable, an 83 percent winning percentage.

It needs to be stressed that no trading system or seasonal study is 100 percent accurate and this seasonal pattern is not guaranteed to make you profitable.

You still have to find your own entry and exit points and always use sound money management decisions; this pattern should be used as a guide for trading.

Here are the key dates for corn:

  • March 1: Buy May corn.
  • May 10: Sell July corn.
  • June 25: Buy September corn.
  • Aug. 10: Sell December corn.

CORN ANALYSIS

Corn closed the week $.10 1/2 lower. Last week, private exporters did not any private export sales.

In the weekly export sales report, new crop corn sales were 8.7 million bushels.

In the weekly crop progress report, corn conditions improved 1 percent to 64 percent good-to-excellent.

Silking is pegged at 86 percent and corn in the dough stage is estimated at 18 percent, behind the five-year average of 31 percent.

There is enough crop problems and uncertainty this summer to question if the 14 billion bushel crop will be delivered as forecast by the USDA and private forecasters.

The crop continues to be late in maturity and with the late maturity, the threat of an early frost would be a bullish catalyst to send prices soaring.

Additionally, demand will look to improve as we get closer to harvest as foreign buyers will try to time the harvest lows to gain forward coverage.

The worst case scenario for prices looks to be weekly support of $3.87.

Strategy and outlook: Producers are now 100 percent sold of 2012/13 crop and are also 50 percent sold of the 2013/14 crop.

Producers own December corn puts on 50 percent of 2013 production. We will look to buy at-the-money calls if weather turns adverse.

SOYBEANS ANALYSIS

Soybeans closed the week $.00 3/4 higher from last week. Last week, private exporters reported sales of 330,000 meteric tons of U.S. soybeans to China.

In the weekly export sales report, new sales were decent at 37.4 mb. New crop soybean commitments are the second largest since 1990, trailing only last year.

The crop progress report showed soybean conditions improved 1 percent to 64 percent good-to-excellent. The nation’s soybeans are 79 percent blooming, behind last year’s 85 percent; and 39 percent are setting pods, behind last year’s 51 percent.

The soybean crop is made during August, which means it will need good rains during this time frame to reach maximum yield potential.

Currently the USDA is forecasting a record large crop that will need perfect growing weather to be achieved.

Normal weather during August will push prices lower as a huge, record large crop will be realized.

The soybean crop remains behind normal due to the late-planted nature of this spring. Due to the strong demand, it looks like worst case price scenario is weekly support of $11.29.

Strategy and outlook: Producers are 100 percent sold of the 2012/13 production and are 40 percent sold of 2013/14.

Sell 10 percent at $13.45 against the January contract. Producers own November puts on 50 percent of 2013 production.

Lift the puts if November trades to $11.29.

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. He can be contacted at 605-660-1155.

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