It looks like the old pattern, slightly abbreviated.
However, analysts say it is premature and probably wrong to assume the trusty old harvest market is back with us, five years after it seemed to die.
The recovery of crop prices almost certainly has more to do with the rebound in commodity and stock markets in the past two weeks and with generally tight crop supply and demand fundamentals than with the once-typical pattern.
And those factors probably will determine the way forward, rather than seasonal patterns.
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“Those (harvest market) issues are not important any more, or at least they have sharply declined in importance in the commodity boom era,” said analyst Rich Nelson of Illinoisbased Allendale Inc.
“The break we had a few weeks ago wasn’t related at all to harvest pressure.”
Jon Driedger of FarmLink Marketing Solutions also thinks the harvest market isn’t a dominant force any longer, although he thinks it is still present in a smaller form.
“To a certain extent it’s still a little bit of a factor, but it’s not big,” said Driedger.
Crop markets have taken a pounding since September but then recovered sharply since the second week of October. That creates on the charts an appearance of the old harvest market.
For decades, prices would typically slump in the fall as farmers harvested crops and dumped large amounts into the country grain elevator system. Farmers cared more about moving grain than getting good prices and buyers sold futures to hedge their grain purchases. As a result, prices were under a lot of pressure until the harvest season subsided.
Then, typically in late fall or early winter, prices would bottom and begin to slowly recover through the winter and into the spring.
However, Driedger and Nelson said the present sell-off and recovery do not seem to be a product of farmer selling. The slump in crop prices has roughly mirrored the slump in overall commodity prices, and those occurred when the world markets became terrified of a euro currency zone meltdown.
Corn futures slumped from almost $8 per bushel in late August to $6 in early October, while soybeans fell from more than $14.50 to $11.60.
Early this week corn was about $6.40 and soybeans $12.50.
Spring wheat futures in Minneapolis fell from more than $9.40 per bushel to $8.20 before recovering to $8.40, while Winnipeg canola futures fell from about $13.40 per bu. to slightly more than $12, before recovering to almost $12.50.
What does that mean for the future? Analysts say farmers can’t rely on the harvest market pattern being in control, as satisfying as that might be, because the “harvest lows” used to set the low prices for the year.
However, it might be better for farmers to have the other factors in play because they suggest that both crop supply and demand fundamentals and general world mood could take crop prices higher.
Last week’s updated U.S. Department of Agriculture crop production numbers were close to traders’ assumptions. Stocks are still tight for corn and not overwhelming for other crops, so there is still room for today’s high prices to continue.
“It was uneventful, which I guess is a good thing,” said Driedger. “It’ll help settle things down a bit.”
The fall from summer’s peak has been hard to watch, Driedger acknowledged, but farmers should be happy that buyers piled in when prices fell.
“People have been stepping in and buying on the breaks, so perhaps we’re range bound.”
Driedger isn’t optimistic about prices surpassing late August levels, even if the freefall has been reversed.
“I think the highs are behind us.”
However, being range bound at levels that are far higher than farmers could have imagined a few years ago is still a good situation.
“These are still pretty good prices, so that’s good,” said Driedger.
