Are You Ready for a Surprise July Market Rally?

What Happened

Despite strong demand, the lack of inclement weather has limited selling opportunities this year, and time is running out for a weather rally. Producers were hoping for a spring weather rally that never materialized, but with planting delays, some are still hopeful for summer weather rally.

Timely rains and lack of excessive heat have left traders assuming a bumper crop is on the horizon both here and in South America, keeping selling pressure in place. Since the end of April, December corn had been trading around $4.40 until recently, when it fell below $4.20. Soybeans managed a run thanks to soy oil and higher potential biofuel demand, but only rose to the $10.75 area before sliding back to near $10.20.

Crop ratings for both corn and soybeans are impressive, and without drought concern, prices could bleed lower into harvest from here. Even world conflicts failed to spark a price rally.  

From a Marketing Perspective

It has been a challenge to market this spring and summer, to say the least. If there is any kind of weather market in July, be prepared to pull the trigger on remaining old crop bushels. Consider making new crop sales and buying puts.

Be very mindful of bushels you may produce beyond your storage capabilities. It’s rare to pay for storage in a good crop year and have it pay off, which would only diminish your returns. Markets need a definite attitude shift in production expectations to really change the downward trend.

Consider targets of $4 and $10 cash prices to lock in sales, and if storing, consider buying puts for protection. 

Prepare Yourself

Should record crops materialize here and in South America, there could still be significant downside risk to sub-$4 December futures and a slide to $9 November soybean futures.

Although demand has been strong, traders are uncertain about demand for next year. That’s why large crop potential continues to provide a headwind to price recovery. With the funds short, it wouldn’t take much of a surprise to spark a run. You must be aware and have offers out at your elevator to capture selling opportunities, because a rally up could be violent and short lived. 

Below are the results of Monday’s acreage and quarterly grain stocks reports. The next important USDA data is the Monthly Supply and Demand Report, scheduled for July 11.

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