Kub's Den

In a few weeks, we will all be acting like NASA engineers, poring over weather forecasts to see if the skies are clear and conditions are favorable for our one window to experience a major astronomical phenomenon -- the first total solar eclipse in the continental United States since 1979.

The only thing that will ruin eclipse viewing may be cloud cover, which you can hopefully drive around. But back at NASA, on launch days, a rocket's takeoff can be prevented by any number of things: weather, mechanical malfunctions, communications malfunctions, or even boats that have drifted into the hazard area. Determining whether all the conditions are right for a rocket launch is always framed as a "go" or "no-go" decision. Either everything is OK and the mission can proceed, or if even one little thing is wrong, the mission is halted.

I feel like we experienced one of those critical decision moments for the row-crop markets. Either production conditions were bad enough -- dry throughout the Western Corn Belt and a little dry through the center of the Corn Belt -- to spark a major rally and we could proceed onward toward $5 corn, or the conditions just weren't right for a late-summer rally and we might as well call it all off. There was probably some date, some precise moment, when we could assess the go/no-go decision for grain market rallies.

Previously, when I have examined the past 15 years of new-crop futures data to find seasonal expectations for market highs, I've found that December corn futures charts tend to follow one of three patterns:

1) In "Supply Crush" years when huge U.S. corn production follows a year after tight supplies, the new-crop market tends to post its annual high early in the year, around mid-April, then drifts lower all through the growing season as traders recognize the coming onslaught of grain.

2) In "Normal Abundance" years when nice, big, typically-expected U.S. corn crops follow previous years of plentiful inventories, the new-crop market tends to post its annual high sometime in the summer whenever there happens to be a bit of a weather scare to boost it out of its otherwise sideways range.

3) In "Short Crop" years, the new-crop market tends to post its annual high at harvest. Think of 2002, when December corn futures topped out on Sept. 9, or 2006 when they hit their high on Nov. 30, or 2010 (Nov. 4), or 2011 (Sept. 1), or of course the very memorable 2012 when the market topped out on Aug. 20.

The trick in all this, however, is being able to recognize which kind of a pattern any given year is going to take.

Unfortunately, it's impossible to say if we'll certainly be in a "Short Crop" year until it's already too late to take advantage of the spring and summer opportunities.

So what, I wondered, would be the "go/no-go" date for calling which kind of year it is? Here again, a look at the pattern displayed by those past December corn futures charts during the "Short Crop" years can help us.

The market appeared to drift along sideways through spring and early summer, just like it would during a "Normal Abundance" year, until it broke out in a clear upward movement. Those upward movements happened on fairly reliable dates. Remember June 18, 2012? Corn started heading upward and never looked back. In fact, late June has typically been as long as it has taken for the corn market to recognize whether it will experience a shortage or not. I will admit there was an exception in 2006, when prices drifted lower through Sept. 14, and only then took off on their harvest-time rally.

But if I had to pick a "go/no-go" date for determining whether the corn market was heading toward a harvest rally or a more normal harvest slump, I think I would pick July 1. If nothing has been sparked by the end of June, historical patterns suggest that nothing is going to be bad enough to keep things sparked through the rest of the summer.

Note that July 1 is already behind us. Yes, it looks like our annual high was a few weeks later than usual this year, which makes sense considering that everything with this crop just seemed a few weeks late this year. But the seasonal expectation appears to call for continued price decay as we head toward harvesting another large crop, which will have to find bin space after a series of previous large crops.

Fortunately, we still have one thing to look forward to in August -- that solar eclipse. Get your welding masks ready!

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Editor's note: Elaine Kub is the author of "Mastering the Grain Markets: How Profits Are Really Made" and can be reached at elaine@masteringthegrainmarkets.com or on Twitter @elainekub.

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