Have you been transfixed by the mayhem in the world’s stock markets?
If you’re a fan of financial news, it’s been the most dramatic time in recent memory, with explosive volatility erupting out of a glib and complacent equity market. It’s been big. It saw the biggest one-day selloff in history (by points if not percentage).
But as I crawled through charts and screens, I really couldn’t find a big direct impact on crop futures or cash markets.
The business news wires and Bloomberg Radio micro analyzed the impact of the stock market violence on bond yields, but little was said about agricultural prices. That’s not too surprising, considering how little impact there has seemed to be.
No news ain’t really news.
But it’s an interesting phenomenon to ponder. What is this saying about our crop markets? It has not always been this way.
I didn’t trust my own analysis, so I called some brighter crop markets folks to see if they had seen significant impacts on crop futures from the stock market mayhem that I had missed.
“Not enough that we can identify,” noted Rich Nelson of Allendale.
“I don’t think there is,” said Darin Newsom of DTN.
On Twitter, some market watchers have been finding what they think are interesting impacts and crop market phenomena, but most is obscure stuff that is far from clear.
Arlan Suderman of Intl FCStone said in a TV interview that he thought he was seeing “early indications” of some money flowing from equities into commodities.
Certainly for farmers, there has not been a noticeable impact on prices of the trillion-dollar gyrations, or at least not a direct one. Crop futures have generally trended higher since mid-January and have rallied during the stocks selloff, but not in lockstep with stock market moves.
There could be a flow of money from the equity markets into commodities, as sometimes happens in stock market slumps. There could be money making it into crop futures from the equity markets, but it’s certainly not a flood.
What’s interesting about this is that crop futures still seem to be trading on their own supply-and-demand fundamentals, and by their own technicals.
They don’t appear to be either subject to “linkage,” which was a big concept of the mid-2000s that suggested all asset classes from stocks to commodities were moving in unison.
That linkage was stark in 2005-07, and in the 2008 meltdown and the 2009-10 reflation. Crop prices followed equities into hell’s toilet and back up.
Nor do they appear to be playing the role of countering trends in the stock markets, as has been argued is a historical pattern. When equities are strong, commodities are weak, and vice-versa. You can argue that has been the case since 2013, with the stock markets on a historical rally and commodities weak and stuck in a range well beneath the 2000-12 period.
So today we could be seeing crops rising as investors bail out of stock and look for hard assets. Or we could be seeing crops slumping as investors run away from all asset classes due to fear.
Instead, we’re looking at pretty normal crop markets, where the real-world situation of supply and demand (and the value of the U.S. dollar) appear to be giving the orders.
“By and large, things are acting independently at this point,” said Newsom.
This has been an interesting couple of weeks of market mayhem to watch. But for crop watchers it’s just been a spectator sport.
Crop fundamentals still count. Crop-specific technicals still count.
And agricultural markets are still their own masters.