Posted by: usset001 | October 6, 2011

Timing of December corn futures highs and lows

I received an interesting question from a colleague. I thought I would share the question and my response.

Question: I had a producer call and ask how often we saw new crop contract lows for corn and beans occur in October. Can you help?

Answer: I went back to 1980 to review the timing of December corn futures highs and lows starting in January of the contract delivery year. This is not “life-of-contract” highs and lows – I’m simply looking at the last 12 months of trading activity, starting as early as January 2 and ending with expiration. Please note also that I am looking at closing prices, and not the high or low prices within any day.

A month-by-month analysis does not shed much information. Your producer friend may be surprised to learn that December lows occurred in the month of October only twice in 31 years (I’m not including 2011 because we are not done). December lows occurred most frequently in December – 6 times – hardly a pattern.

Looking at the frequency by quarter (January-March, April-June, etc) is more revealing (see chart). Here you can see a broader pattern – the highest prices are more likely to occur in the first half of the year, while the lowest price is most likely to appear in the last half of the year.

This is a tendency, not a certainty, but it speaks to my preference for earlier sales.

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