Market analyst: Being thankful

Ray Grabanski
Special to the Farm Forum

Reflecting on Thanksgiving this year, we have a lot to be thankful for in agriculture.

Prices have rallied sharply this year, with a big rally in all grains since August. On Aug. 12, corn prices were $3.20. Today, corn prices are trading at $4.27 for Dec. 20, a $1.17 recovery or well over 33% higher. Soybean prices bottomed out on Apr. 21 at $8.35, and they have rallied $3.42 to $11.77 today - 41% higher in less than seven months! Of course, the price rally has a lot of reasons for happening:

1) China is hungry again for grains, with their hog herds expanding. They also want to improve trade relations with the U.S.

2) South America is off to a relatively bad start, planting two to three weeks late into mostly dry soils. Matto Grasso, their largest producer of soybeans, already says they have taken the top end of their yield potential due to the late and poor start.

3) Pandemic fears are easing. With two vaccines with above a 90% efficacy, it seems as though COVID could eventually be in the rearview mirror.

4) Farmers are just plain tired of bad prices, and have put the brakes on expansion and excessive spending on crops. Argentina’s socialist government has shrunk planted area this fall despite sharply higher prices - a backward result.

So the outlook has greatly improved, with projected carryover of grains shrinking by as much as 70% in some crops (soybeans) since just August, and the outlook greatly improved worldwide economically.

Weather continues to show some adversity in South America, with normal and above normal precipitation in the northern half of the country, and below normal in the southern half for the next seven days.

The 8-14 day forecast pushes toward normal rainfall in all of South America. Temperatures are mostly normal in Brazil (where more rain is falling), and above normal in Argentina for the entire 14-day period. Overall, this is slightly bullish to markets as some stress will occur in South America.

We are targeting just under the resistance areas of $4.40 corn and $12 soybeans to price additional crop; after all, this price is way above the $9.85 high in January for soybeans, which many ‘experts’ said would be the top for 2021 - especially after the pandemic started. But, long-term charts are powerful predictors, and they didn’t agree with the assessment of the so-called ‘experts’. In fact, they were only greater than 20% too low in their price assessment - which is more than the profit margin in soybeans by a lot.

Thank God the experts were wrong again, but, then again, we might be getting used to that lately. The U.S. Department of Agriculture has probably made some of the biggest mistakes by projecting this year’s crop sizes and carryout. I’ve never seen the USDA backpedal faster in the nearly 30 years I’ve watched their work being done. It’s astounding to have soybean carryout drop from 600 mb in August to 190 mb in November - and in the same year!

I doubt that has ever happened with a still ‘trend’ yield crop projected. Wow! The error on demand was nearly as bad, as China and - other countries have systematically stepped up imports of all products including wheat, corn and soybeans.

So, the outlook for the coming year is about 110% better than it was just a few months ago. I guess we really do have a lot to be thankful for, as God has been very good to agriculture in the past six months or so. Let’s hope and pray that this promise continues into 2021. But, quite frankly, long-term charts are suggesting it could continue to improve for much beyond just the coming year. Have a blessed and happy Thanksgiving - we really do have a lot to be thankful for!