Get ready for a most excellent adventure: crop markets look like they’re going back to the 1970s, 1996 or a mix of both, says technical analyst David Drozd says.
“We only have to wait about two more months and we’ll find out,” Drozd told the young farmers section of Keystone Agricultural Producers.
“I figure it’s worth the wait.”
The 1970s and 1996 were boom times for crop prices.
“I believe we’re in a fully entrenched bull market. We have not seen the highs for the year. I believe we’ll see a good spring rally like we traditionally do, especially in this environment where there’s going to be a real battle for acres taking place,” Drozd said.
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“It is possible that we could challenge the ’96 highs for corn and wheat.”
Present stock-to-use ratios are at about the same as they were in the early 1970s when crop prices spiked. Market sensitivity is similar to 1996, when buyers were scared of not being able to secure supply.
There will always be price fluctuation, but powerful bull market forces are engaged, preventing much downside potential.
Most winter crops around the world are considered to be in good condition and the potential of crops yet to be seeded is also considered good, but Drozd said they are questionable assumptions.
“At this time of year you always hear projections for trend line yields or a bigger acreage,” he said in an interview.
“It’s almost become the norm. I’m not sure why that is, because there’s no guarantee any of that will happen.”
Because the market already expects at least average crops from all parts of the globe, problems arising in the next few months could provide the impetus for the next price rally.
“I just don’t see a lot of downside potential going forwards here two and a half to three months,” Drozd said.
“We’d rather wait and see if we can get back to those ’96 highs.”
Attaining those peaks would make most farmers happy because wheat sold for more than $7 US per bushel and canola prices hit a record.
Canola has great potential this year, Drozd said. Prices will be supported by U.S. soybeans, which are in a battle with corn for spring acreage.
Soybean prices will have to keep pace with rising corn prices to ensure supply.
“Beans are too cheap. That’s why they’re moving up,” he said.
If corn can stay above $4 per bu., soybeans need to move to $8.95 per bu. to maintain acreage, he said.
