December corn futures typically rally at least once during summer (May 1 to Sept. 30). To qualify as a rally, prices had to reverse a downtrend and break out of the price channel or clear overhead resistance in a sideways trading market. The rally had to continue without a significant pullback that violated major support.
Since 1981, there have been only six years without a summer rally. Of the 32 years with a bull move during summer, 25 years experienced only one rally; seven years had two to three rallies. The average price increase was 19.2%, no matter the number of rallies, and the average duration was 32 calendar days. The biggest price gain was 66% in 2012 and the longest summer bull move was 92 days in 2002.
1993 and 1995 are comparable with very wet springs
Given the very wet conditions this year, we looked back to 1993 and 1995 for comparisons.
In 1993, there was a modest rally from mid-June to early July. But prices trended down from early July through early September. The big price move that year didn’t start until fall when severe crop losses became reality.
In 1995, there were three waves to the summer price rally. The first was from mid-May to mid-June as the market factored in historically slow plantings. The second wave occurred from late June to mid-July. The strongest rally that year was from early August through early November. December futures rallied nearly 30% from the May low to the November high in 1995.
Is the rally done or just pausing?
The current rally in December corn futures started after the contract closed at $3.72 on May 10 and posted a bullish reversal on May 13. The contract has already exceeded the historical average by surging nearly 22% since then. From a historical perspective, the rally in December futures already could be about complete — at least the first wave.
December futures could pull back to the $4.20 area and still maintain bull-market status. But if the contract doesn’t push to new for-the-move highs by mid-June, a period of sideways-to-lower price action may ensue.
The market has factored in acreage losses and some yield declines. But once the crop is planted, the market may take some time to reevaluate yield prospects based on summer weather. If summer conditions aren’t highly favorable, the realization of an “even smaller” crop could fuel a rally in late summer and fall — similar to 1993 and 1995.