December corn futures are seeing the first durable summer rally in three years, and history suggests, but doesn’t guarantee, there’s more room to the upside.
Record demand, weather and world production concerns have driven prices higher. Over the past several weeks, U.S. weather has enticed funds back into the long side of the market, flipping from a net-short position just a few weeks ago. As the rally has accelerated, volatility has increased, widening daily price swings. A look back at past summer rallies provides targets and guidance for an ongoing uptrend.
At Pro Farmer, we consider May 1 the beginning of summer for the corn market. For this exercise, we’re not counting a brief spring rally that extended just past May 1 then quickly fizzled out. The current rally got under way after December corn bottomed at $4.30 on a closing basis on June 29, the day before a relatively bearish June Acreage Report and a bullish Grain Stocks Report. That is a little later than the average starting date for the first rally of the summer, June 14. Since then, prices have rallied 40 1/2¢. The first rally of the summer typically gains around 19.2%, about 83¢, which would peg the top at $5.13, roughly a dime above the May highs. The percent gain varies from year to year, with most rallies rising between 10% to 20% from the start.
The duration of the rally varies quite a bit as well. The average summer rally lasts 31 days, which would be the end of July as June 29 marked prior low.
A close below the previous low in the rally (presently $4.64) or a close below the 20-day moving average (presently $4.58) would signal an end of the rally. A drop of more than 3% (about 14¢) has proven to mark the top in most rallies as well.
We will continue to let the market work in our favor but will look to advance new-crop sales if the rally looks to run out of steam.