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Taming the Bulls and Bears Ready for the Rally: If the Spring Rally Comes, How Long Will it Last? By Betsy Jensen
Wheat is different than corn or soybeans when it comes to weather problems. With corn and soybeans, we don’t know the crop size until late summer at the earliest, but we find out about the wheat crop in May and June when the winter wheat farmers are harvesting. As wheat producers, our window of opportunity for rallies is usually quite a bit shorter than for corn and soybean prices. Fortunately, our window for weather scares also begins much earlier. USDA issued its first crop progress and condition report on March 31, and every Monday at 3 p.m. CDT, traders watch winter wheat conditions and progress to see if there is reason for concern (the report can be found on the Internet at usda.mannlib. cornell.edu/reports/nassr/field/weather/2003/). Traders aren’t concerned about corn or soybean plantings until mid-May, when time starts to run out for planting. Wheat growers usually have some sort of scare during April when the crop is too dry, or a freeze is forecasted, or some other natural disaster occurs in the winter wheat belt. Last year the rally in wheat was very late, because there were actual problems. A weather scare is a short-term price blip, but last year’s weather scare turned into true problems and the market rallied throughout the summer as the scare turned into reality. I do not recommend you try to market your crop based on crop problems, but it’s common to see weather scares, and those are good times to sell. The trick is to recognize the weather scare and sell. It’s very easy to get caught up in the momentum of a scare, and not sell anything. I think many farmers learned last year that selling on the way up is a lot easier than selling on the way down. Keep that in mind as you sell wheat in 2003. Even though the wheat market begins to settle down in June, we still have the volatility in corn and soybeans to give us some excitement. The biggest news in the corn and soybean market comes in August, when USDA releases its first survey-based crop estimates. USDA will release a production estimate earlier than August, but that’s just based on acreage and trend yields. In August, USDA tries to make an educated guess on the size of the spring-planted crops, and traders just drool in anticipation of this report. Mark down Tuesday, August 12 at 7:30 a.m. on your calendar. It will likely be a big day on the markets, for good or bad. Keep in mind that a crop problem may cause futures prices to increase, but your local cash price might not reflect that because of basis. Many farmers clean out their bins during the summer, causing a pre-harvest rush of grain. Stocks of spring wheat and soybeans are very tight this year so we may not see a significant drop in basis, but be watching for signs that basis is slipping. Spring wheat basis often begins its decline in mid-June, as farmers begin delivering old crop and new crop harvest is just around the corner. The markets can be very volatile during the summer, and we should learn to take advantage of this volatility and not be intimidated by it. Stick to your price targets, keep a level head, and hope we get some weather scares—and if we do, be sure to take advantage of them. Jensen farms with her husband Brian near Stephen, Minn. Her market education activities including this column are supported in part by the Minnesota wheat checkoff, directed by the Minnesota Wheat Research and Promotion Council. If you have a question or topic related to marketing that you’d like to see addressed in this feature, call 1-800-242-6118, or email Jensen: bjensen@nctc.mnscu.edu . |
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I don’t know about you, but I’m ready for that
spring rally. In fact, a good share of us have been waiting for that spring rally since we realized we missed selling wheat for $5. Now the big question remains: If we get a spring rally, how
long will it last?