Commodity Trader's Almanac 2O11

62

MOTHER NATURE

MAKES CORN POP

Corn tends to peak in June under normal crop

years, as planting is complete and farmers are

looking for cooperation from Mother Nature

to produce increased production yields. Look

to sell on or about June 24 and hold through

August 1. This is when we typically get a

“drought scare” or mid-summer rally. The 40-

year history of this timing strategy shows a win

in 27 of those years, for a success rate of 67.5%.

With the price increase in corn headed into

summer, we normally see the market settle back,

as farmers have a better idea of their crop size

and start to hedge or forward contract sales out

to lock in a profit. Depending on the levels of

volatility, traders can look to sell futures or buy

put options or once again look for alternative

trading opportunities.

The chart below has Deere & Co. (DE)

overlaid with corn prices and the bottom line

showing the seasonal tendency of corn prices

since 1970. As you can see, there is a high

correlation of the price of corn and the share

price of DE. One can look to sell DE, buy puts,

or write calls in the seasonally weak timeframe

that starts in June and goes into July. See pages

133–138 for additional correlated trades.

Chart courtesy TradeNavigator.com

CORN (C) BARS AND DEERE & CO. (DE) CLOSES

(WEEKLY DATA JANUARY 2009–MAY 2010)

ENTRY EXIT PROFIT/

YEAR DATE CLOSE DATE CLOSE LOSS

1970 6/24 133 1/4 7/30 130 5/8 $131

1971 6/24 154 1/4 7/30 132 1/2 1,088

1972 6/26 122 3/8 8/01 126 5/8

–213

1973 6/26 210 1/4 8/01 278 –3,388

1974 6/26 291 3/4 8/01 369 1/2 –3,888

1975 6/25 262 1/2 7/31 287 –1,225

1976 6/24 294 3/4 7/30 280 1/4 725

1977 6/24 228 1/2 8/01 195 1,675

1978 6/26 257 1/4 8/01 225 1/2 1,588

1979 6/26 315 1/4 8/01 288 1/2 1,338

1980 6/25 290 1/2 7/31 335 1/4

–2,238

1981 6/24 347 7/30 335 1/4 588

1982 6/24 271 1/4 7/30 245 3/4 1,275

1983 6/24 304 1/4 8/01 330 1/4

–1,300

1984 6/26 322 1/2 8/01 293 1/4 1,463

1985 6/26 257 8/01 232 1,250

1986 6/25 189 3/4 7/31 165 1/4 1,225

1987 6/24 196 1/2 7/30 162 1/2 1,700

1988 6/24 347 1/2 8/01 290 2,875

1989 6/26 244 1/4 8/01 222 1/2 1,088

1990 6/26 283 3/4 8/01 255 1/2 1,413

1991 6/26 237 1/4 8/01 262 1/2

–1,263

1992 6/24 253 3/4 7/30 221 3/4 1,600

1993 6/24 226 1/4 7/30 235 3/4

–475

1994 6/24 250 1/2 8/01 217 3/4 1,638

1995 6/26 272 1/2 8/01 282 1/2

–500

1996 6/26 388 3/4 8/01 360 1/2 1,413

1997 6/25 242 1/4 7/31 265 1/2

–1,163

1998 6/24 265 3/4 7/30 220 1/4 2,275

1999 6/24 216 1/2 7/30 203 1/4 663

2000 6/26 202 3/4 8/01 179 3/4 1,150

2001 6/26 193 1/4 8/01 215 1/4

–1,100

2002 6/26 229 8/01 249 1/4 –1,013

2003 6/25 234 3/4 7/31 206 1,438

2004 6/25 280 1/2 8/02 218 1/4 3,113

2005 6/24 242 8/01 231 3/4 513

2006 6/26 234 1/2 8/01 240 1/2

–300

2007 6/26 367 8/01 319 2,400

2008 6/25 744 1/2 8/01 565 8,975

2009 6/24 395 7/30 332 1/4 3,138

40-Year Gain $29,669

JUNE SHORT CORN (SEPTEMBER)

TRADING DAY: 18—HOLD: 25 DAYS

Corn Seasonal Pattern since 1968

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MONDAY

20

TUESDAY

21

WEDNESDAY

22

THURSDAY

23

FRIDAY

24

SATURDAY

25

SUNDAY

26

Markets are constantly in a state of uncertainty and flux, and money is made by

discounting the obvious and betting on the unexpected.

— George Soros (Financier, philanthropist, political activist, author, and philosopher, b. 1930)

It is totally unproductive to think the world has been unfair to you. Every tough stretch is an opportunity.

— Charlie Munger (Vice-Chairman Berkshire Hathaway, 2007 Wesco Annual Meeting, b. 1924)

Whenever you see a successful business, someone once made a courageous decision.

— Peter Drucker (Austria-born pioneer management theorist, 1909–2005)

There is no great mystery to satisfying your customers. Build them a quality product

and treat them with respect. It’s that simple.

— Lee Iacocca (American industrialist, former Chrysler CEO, b. 1924)

There is a perfect inverse correlation between inflation rates and price/earnings ratios...

When inflation has been very high…P/E has been [low].

— Liz Ann Sonders (Chief investment strategist, Charles Schwab, June 2006)

Start Long Cattle(J)—65.0% Accuracy Since 1970—End Feb. 7 , 2012—Page 60

End Short Silver(N) (May 13)

Start Short Corn(U)—67.5% Accuracy Since 1970—End Aug. 1—Page 62

JUNE

LT:

US(M), CL(N)

FN:

KC(N)

FN:

CL(N)

OE:

C(N), S(N), W(N)

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