Is it just me, or does anyone else out there think the soybean slump of the past few days has really been mostly about the overall world market zeitgeist and only marginally about soybeans?
Yes, yes, yes I know: soybeans have skyrocketed in recent months, the drought impact may already be factored-in, demand is being destoyed, there have been showers in the Midwest.
But as I have listened to, read and followed traders and analysts and economists over the past few days I have been surprised how little most people are paying to the “outside markets.” I mean, we’ve had a massive sell-off in world equity markets in exactly the same time as the soybean/wheat/corn slump, and when you chart the two together, they look pretty similar.
Here’s an intraday chart of an American equity market index vs November soybean futures. What do you notice?
Considering that soybeans and equity markets are in no way linked by asset class, that’s a pretty telling chart, methinks. Look at the end. That’s this morning so far. Both soybeans and equities turn up – at the same time and in the same way. The soybean slump began a day after equities turned down, but after that it’s been dittoworld.
Other commodities have been echoey too. Look at this CRB commodity index vs Nov soybeans chart:
So soybeans shot up stupendously, then sold off as equity markets sold off, and today seem to be following outside markets higher.
So what do we learn from the past three days sell-off? You tell me. It certainly shows that even crops with super-bullish stories can break in the blink of an eye and that farmers shouldn’t assume bullish fundamentals mean prices have to keep going higher. Historically, drought-induced market rallies break in midsummer.
But I think it’s idiotic to think the last three days was all about soybeans. Maybe a bit, but not a bunch.