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Veteran Advisor

Do Seasonals & Technicals Still Work?

Al Kluis says marketing has changed.

 

https://www.agriculture.com/markets/analysis/crops/here-are-the-new-rules-for-marketing-in-2019?did=...

 

1.  Crops are better - production increases

2.  Global competetion

3.  Communication - everyone knows everything right away

4.  Funds and algorythms

 

New rules:

 

1. Sell early and sell often. 

2.  Realistic price targets

3.  Seasonal selling

4.  Use all the tools (hedges, puts, etc.)

5.  Trade 17 hrs/day and have good till filled offers on

 

Al claims things have changed in the last 20 years.  Agreed.  That is one reason to questions long range and old fashioned cycles and patterns.  All the 1-4 above is different than 20 years ago, no reason a 20 year history is powerful today.

 

Big farmers may go to a factory model - lock in a profit and take it.  Small farmers still need to hit a home-run now and then to make any money, but the risk is high and the casualty rate is too.

 

 

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8 Replies
Esteemed Advisor

Re: Do Seasonals & Technicals Still Work?

More Drivel....I suspect he wrote the same article in 2005.

 

His rules:

#1: well that is just stupid after 6.5 years lower in a row. Some advanced statistics classes he must have missed.

#2: "Realistic"....wow there is a scientific term! Realistic to who? Just completely unhelpful.

#3: The oldest rule in the book, how he can call it a new rule is well....ridiculous

#4: Duh, see answer to #3

#5: Again, new since when, 2000? Good till filled orders, ok, if you are just admiting that you

are pathetic business manager and can't change your mind, or are too weak to follow through.

Most GTC orders are seldom optimum ones in the moment.   

ie, just ask the hog farm who had in orders to sell June hogs at $85...a very "realistic" price and way

above "cost of production". if they would have just used the previous days low for a selling

trigger (instead of the 85 gtc) they would have sold at $94, yes $9 better just by using the simplest

of logic.

 

A better analysis is given by Soloman about 3000 years ago...."nothing new under the sun"   :-)

 

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Honored Advisor

Re: Do Seasonals & Technicals Still Work?

Didn`t SoyRoy also amend his "always and never rules"   like maybe you should sell in February and maybe you shouldn`t always sell in May?  

 

With marketing I like to twist Thomas Edison`s quote a bit and make it "I didn`t fail at marketing, I just found the 10,000 ways that you lose money marketing"    Smiley Happy

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Veteran Advisor

Re: Do Seasonals & Technicals Still Work?

I probably did Al an injustice in how I phrased his comments.  My main take-away was that times have changed and maybe some of us might look at marketing differently.

 

I use GTF orders regularly and they have often been pretty profitable.  Not as good as if I'd picked the market top, but in my entire farming life I think I picked the top once.  Smiley Happy

 

Al's list of rules was not a list of new rules, but a new list of rules.  My error in how I presented it.  IOW, seasonal selling is not a new rule but is on his new list of rules.  I'm sure it was also on his old list.  Seasonal selling has been useful for a long time.  New circumstances like a SA bean crop and more corn does challenge whether seasonality is the same today as it was 20 years ago.  That refers to BA's comment on SoyRoy's adjustment to his "always/never" rules.

 

The funds use algorithms extensively and seem to be a market moving force looking out over the next year or less.  The big outside money and use of computer technology is new to me so I've been trying to figure out how to use it.  I faded it on corn to me chagrin.  

 

Global competition seems to be reality.  It's why I doubt myself if the flooding in NE and IA is going to make much a difference in global pricing.

 

I guess this all proves that I don't have the wisdom of Solomon, because marketing is challenging and, to me, changing.

 

 

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Contributor

Re: Do Seasonals & Technicals Still Work?

Novice marketer here.  I need to ask though--what's different?  Isn't it the large supply?  And aren't end users getting VERY accustomed to above trend yields?  I'm just wondering if the same rules apply, but that the effect in our present environment is different.  Let's say the corn ending stocks were projected at 1.3 billion, rather than the current 1.85 or wherever it presently sits.  Wouldn't the spring moisture trends and flooding get the traders and end users a little bit exited?  Wouldn't that suddenly be a market moving story and we'd get our spring high?  Yet they sit short and pretty disinterested in buying since in recent years, they've been rewarded for that--which seems pretty lucky to me.  Isn't it true that no amount of computer generated shorts can compete against a major drought or ending stocks projected to be tightening for one reason or another?  Interested in what others think.    

 

But the projections for tightening stocks just aren't forthcoming.  

 

Maybe it's not the rules that have changed, but rather a "rest easy" psychology in the market place.  Whether it's trader or end user, they're waiting for us to  tire out and crack open another bin.  Then they crack open another beer.  The hopper bottoms keep thundering down the road where i live, one after the other, likely with very unhappy occupants.  

 

 Any thoughts?  Beyond more computer generated trades, are the rules really that different?  We can still sell early and often by the old rules can't we, if that's where the fundamentals lead us? 

 

The other thing I'm wondering is, while we might not be able to take the trade talks to the bank, there's a distinct possibility that these talks will positively affect agriculture.  Has anyone done the math on how many TRILLIONS the administration is pushing that CHINA buy over then next 20 or so years, and realistically, how much of that would be Ag?  How does that translate to metric tons?  If this is a legitimate goal, and being China is disinterested in almost everything except Ag, what could the effect be?  I for one think a trade deal is a 50/50 shot, but if it goes through, I'm not sure anyone in Chicago or elsewhere will want to be short.  It seems there is a bullish story, apparently not in the least bit interesting to corn and bean traders.  I sorta think they should be neutral corn/beans right now.  Any thoughts?

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Veteran Contributor

Re: Do Seasonals & Technicals Still Work?

Chinese will just wait it out. Why negotiate with Trump when they can watch him squirm through elections? IF he gets reelected then they may go for a deal, if he doesn't they get to play ball with a different lineup. 

 

Here is the big issue, Xi has all the time in the world and Trump doesn't. 

 

Most funds are momentum traders... which means until the momentum goes against them they won't exit their positions, but they will exit them quickly IF a deal is signed and the ink goes dry.  

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Contributor

Re: Do Seasonals & Technicals Still Work?

I think the argument is that the Chinese will see the impending (no deal scenario) tariffs as very disadvantageous, since we can tariff far more goods than they can.  So maybe in this sense, they don't have time?  

 

Not to say I understand this argument to be most compelling.  Maybe there's a "no concession"mentality in the Chinese govt.  Doesn't seem anyone knows what will happen.  Could end very badly and not "bigly".  Thanks for your input!

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Veteran Advisor

Re: Do Seasonals & Technicals Still Work?

I think the young fellow might have some good
Questions.

As far as the trade...I think partly, no body in
A hurry.. we keep hearing big stocks, and it
Finally dawned on them ....no need to push
Higher...plenty of stocks, and additionally...they
Know the farmer must sell ..and they can wait...
Much the same Xi and Trump.

Neither of us in good place
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Veteran Advisor

Re: Do Seasonals & Technicals Still Work?

The Chinese are paying more for soybean meal, but they don't need as much because of African Swine Fever.  They have alternate suppliers that they want to cultivate and build up the infrastructure so they always have an option and dont' have to buy American.  

 

The trade situation is not painless for the Chinese, but it is tolerable and to develop their long-term options it may well be worth it to them.

 

It's kind of like a game of chicken.  The Chinese probably figure the US election cycle will be in their favor if they can tolerate the higher internal prices.

 

When all is said and done, the US farmer is going to wake up in a world where China has many suppliers of which we are one and where over supply is going to keep prices down and margins slim.  Trade wars and tariffs won't matter.  It will be trade in general. 

 

In my opinion, it's a time for the US farmer to take a hard look at how to make money.  Doing the same old thing might not be viable for many.

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