Market analyst: Be thankful for weather forecasts this holiday season

Ray Grabanski
Special to the Farm Forum

It’s the holiday season, and things will slow down for a time while Christians celebrate Jesus Christ’s birth and life. Our whole world revolves around this event, as even time itself is measured by it.

Regardless of your beliefs, I think that no person who ever walked the earth has had more impact than this man with virtually no possessions, no earthly title (like King or President) and no children. Perhaps that could be your first clue that, maybe, he wasn’t just a man?

In U.S. agriculture, we have a lot to be thankful for this holiday season.

For example, the weather problems in South America that are propelling grains to near five-year highs.

Or vaccines, which are expected to significantly strengthen the world’s economy.

Currently, South American weather forecasts are almost identical to the past few weeks, with the next week’s forecast to include mostly above normal temperatures and below normal precipitation in both Brazil and Argentina.

That doesn’t mean it won’t rain, as it rains a lot in South American this time of year - in fact, it’s peak rainfall season in a tropical weather environment. But if it rains only two inches each week in an area that normally gets three inches a week, that is the definition of drought in South America. In most areas, it rains in Brazil every other afternoon, with a chance of rain every afternoon. So, it’s different for a tropical environment like South America compared to the U.S., where we are much further away from the equator. For example, in Brazilia (Brazil’s capital), the average high for temperature in summer is probably 84 degrees Fahrenheit, and the average temperature high in winter is 82 degrees Fahrenheit — the only difference between summer and winter is rainfall, and virtually all of it falls in their summertime, which is currently ongoing.

Private U.S. forecaster Informa estimates 2021 acreage today using an economic model; previous numbers included 91.7 million acres of corn, 89 acres of beans and 46 acres of wheat, but the corn and hard red spring wheat numbers will likely be reduced, and soybeans added to that as soybean prices continue to rally. This ‘economic model’ is really based on the relative prices of corn, wheat and soybeans in the U.S. as price attracts acreage or repels them by crop.

There are some South American corn crop estimates at 14 mmt (560 mb) below the United States Department of Agriculture’s December estimate - that would be bullish corn if it comes to fruition. The last start to the rainy season, which delayed corn planting, will impact second crop corn acreage (down) and yields (also down) - so that is where most of the loss comes from along with lingering drought.

Soybeans tested resistance of $12 yesterday and have so far failed; that indicates we have a potential double top in soybeans. At best, that means we will likely set back for a time in soybeans. If prices can make another test of $12, that will be a good time to buy it, as triple tops almost never happen. If we can eventually push through $12 resistance, there isn’t much resistance until about $15.

The dollar made new multi-year lows under 90 on Dec. 17, matching the March 2018 lows made almost three years ago. The only time the dollar has been lower in the past 20 years was from 2006 to 2014 - the best pricing years in world history for grains! I believe that the collapsing U.S. dollar is a reflection of the collapsing U.S. country - the death of the “American dream” forged by this countries’ founders when they left Europe. They rejected the European class system where your lot in life was determined by your birth, not your ability or skills. The European immigrants to the U.S. sought “equal opportunity” here, and guaranteed it in our constitution. Immigrants from around the world continue to come to America for the chance at “equal opportunity”.

With farming, you need to be aware of the forces dominating our economy. A shrinking dollar is a powerful one! But for now, take heart, America is still America, the land of equal opportunity.