Have Soybeans Peaked #2

Following on with the theme of have we now seen a top in the soybean market, I thought I'd check out some seasonal trends to see how things have panned out in previous years.

The research has thrown up some interesting information.

Since 1970, either May, June, July or August prices made the yearly high in 22 of the 38 years. The worst months to sell beans were February and March — not once in the last 38 years did either month’s price make the yearly high — closely followed by the harvest months of September, October and November whose monthly prices each led just once since 1970.

If you look at the seasonal trend, there is a tendency for the market to dip in February, commonly referred to as the John Deere low, followed by a rally to the spring high, frequently set around May. We then have an early summer low as planting gets underway and before any weather scares emerge, frequently followed by a weather-related rally to post a yearly high in June.

After that the market often dips quite sharply setting an August low, before staging a mini rally, before finally slumping to a yearly low at harvest-time in October.

Once harvest pressure has subsided, the market often recovers quite sharply during November/December and through into January, before the whole cycle starts over again.

The chart below shows the 40 year seasonal average (blue line) for front month beans, and the 15 year average (brown line), with the current spot month to date overlaid in purple. (The months highlighted in yellow across the top are the contract month being plotted):

And here is a similar chart plotting the May soybean future from 1980-2008, with the usual highs and lows indicated:

Spookily similar n'est pas?

It is interesting to note the strong seasonal tendency for the market to fall out of bed mid-June, stage a half-hearted weather-related scare mid-July, before completely capitulating into an August, then October harvest low.

It is also worth noting that these two lows are usually well below the February John Deere low, which was around $8.50 this year, suggesting that a move to $8/bushel might be on the cards by October for the November future. That's $1.80, or around 18%, below last night's close.

You can all buy me a beer on the strength of that lot if it comes to pass. Right, who wants to buy any forward soya or rapemeal?