Posted by: usset001 | June 28, 2011

“July makes the corn crop”

I’m not certain of the origin of this saying, but it was etched into my brain very early on in my grain trading career. The numbers support the saying but, if I could, I would rewrite it to say “The last-half of June and July make the corn crop.” This revised version is more accurate but less pithy.

Since 1990, there have been 37 months in the January-September period (out of 189 months total) with a December futures price spread greater than 12% (measured as the difference between the maximum and minimum closing prices of the month, divided by the price at the start of the month). That’s about one in five months displaying a large degree of price volatility in the new crop December contract. However, nearly half of the months of June and July since 1990 have displayed this level of volatility. June has done so again this year — the Dec’11 contract has, so far, had a range of 87 cents from the maximum on June 9 ($7.14) to last night’s minimum of $6.27 per bushel.

Volatile is not the only way to describe the months of June and July. A better description might be volatile and lower. Since 1990, 3 of 4 months of June and July have had lower prices (December new crop futures) at the end of the month than the start of the month.

And what might a lower June portend for July? Of the 15 Junes where prices decreased since 1990, 10 of those years continued to trend lower in July.

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