February 22, 2001

Market Advisor: New Study Helps You Evaluate Your Market Timing

George Flaskerud, Crops Economist
NDSU Extension Service

Plan your marketing for the right time of the year. The best time is usually not mid-February. Seasonal price patterns are the tools needed to identify times when prices are the highest. Are those patterns changing?

Results of a study completed during December are presented in Extension Bulletin 61, Seasonal Price Patterns for Crops. The study was completed by myself and Demcey Johnson of the North Dakota State University Department of Agribusiness and Applied Economics and is available from county offices of the NDSU Extension Service.

The behavior of the indexes is described here for spring wheat, durum, corn and soybeans, although the study also included feed barley, malting barley, oats and oil sunflowers. The baseline is Minneapolis Grain Exchange (MGE) to-arrive cash prices during 1978-99 unless otherwise specified.

For hard red spring (HRS) wheat, prices bottomed during August and peaked in the fall during November and then again during May, on average. From harvest lows, the price increased 4.1 percent by November and 6.6 percent by May, on average. Prices were the least variable in December and the most variable in May.

During the 1990s, the HRS price pattern remained the same but the prices were more variable. Also, the least amount of variability occurred in January instead of December, although December was the second lowest.

When new crop supplies were smaller than expected, HRS prices peaked during June, on average. A pronounced increase occurred in the growing season during 1988 when both the all wheat and HRS wheat new crop supplies were smaller than expected. The increase was less pronounced in 1980 and was less than the peak in 1997, when only HRS wheat new crop supplies were smaller than expected.

All wheat, but not HRS, new crop supplies were smaller than expected in 1989, 1991 and 1996. Prices peaked early in 1989. Prices strengthened during the last half of 1991 in anticipation of substantial exports to the former Soviet Union. Prices fell sharply from the peak in 1996 as the HRS crop turned out better than expected.

When new crop supplies were larger than expected, HRS prices peaked by April and generally bottomed during harvest. Prices continued falling into November-December in 1990 when large new crop supplies existed for HRS, all wheat and world wheat.

At Minot, similar price patterns for HRS were exhibited for comparable years. In contrast, the behavior of the futures contract was markedly different.

For the September HRS futures contract, a modest seasonal pattern was revealed, on average, although the pattern peaked during the same month of May. In addition, price variability was about the opposite for the futures, being low in March and high in August. Similar price patterns prevailed for the smaller and larger crops.

The seasonal pattern for terminal quality Hard Amber Durum (HAD) prices resembles the pattern for HRS, on average, but with less variation among months. The greatest price variability occurred in July.

When new crop supplies were smaller than expected, terminal prices peaked in July, on average. They generally remained strong into November.

When new crop supplies were larger than expected, the seasonal price pattern was similar to HRS. On average, both reflected a small post harvest recovery in prices.

At Minot, the average price patterns for milling and terminal were similar to the one for the Minneapolis Grain Exchange. The variability was greater at Minot, but that could be due in part to the difference in price periods.

The seasonal price patterns for corn were the most pronounced of the commodities. Prices peaked in June and bottomed in October, on average. The smallest price variability occurred in February, the greatest in July. The price pattern and variability were similar during the 1990s.

When new crop corn supplies were smaller than expected, price peaks were established during July in 1988, August in 1983 and December in 1993. On average, prices strengthened into July and remained strong until the end of the year.

When new crop supplies were larger than expected, corn prices peaked, on average, by June . Prices fell by 21.9 percent, on average, between June and October.

For the December corn futures contract, the average price pattern varied little throughout the year. Price variability was at a low in May and at a high in November. The situation was similar during the 1990s. For smaller-than-expected supply years, the price, on average, increased into July and remained strong during the balance of the year. For larger-than-expected supply years, the price remained strong into June before collapsing.

For soybeans, prices were the lowest in October and the highest in May, on average. The price pattern was similar during the 1990s.

During smaller-than-expected new crop supply years, soybean prices peaked in various months of the year. On average, they peaked in August and remained high through November.

During years with larger-than-expected new crop supplies, prices fell by 18.2 percent, on average, between June and October. On average, the price in March was almost as high as in June.

As with the HRS and corn futures prices, the soybean price pattern was modest for November futures, on average. The situation was the same for the 1990s. Cash and futures prices had similar patterns for smaller and larger-than-expected new crop supply years.

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Source: George Flaskerud, (701) 231-7377, gflasker@ndsuext.nodak.edu
Editor: Tom Jirik, (701) 231-9629, tjirik@ndsuext.nodak.edu