Well, I’m not quite sure what to do. S and Ds count again.
A few years ago the world stopped making sense to the sane and rational ag commodity analytical community. Ags had traded for what seemed like forever based on the basics of supply and demand fundamentals. A bit more grain getting grown, prices go down a predictable bit. A bit more demand appears, prices go up a predictablish amount.
After decades of that, it was discombobulating for many analysts to find out, in the mid-2000s, that S and Ds were only half the price equation for crop prices, and maybe only 25 percent of it. The roaring commodity bull market had caught the ags on its horns and was carrying them along for its run. S and Ds still counted on the margins, but the basic level of most crops was set by the price of oil, gold, copper, etc. When the commodity complex went up, the ags went up. When it fell, ags fell.
Read Also
Manitoba horticulture hits the books
The 2025 Horticulture School in Brandon covered tools to extend Manitoba’s vegetable and fruit growing season, horticulture crop agronomy and new research like peat sustainability
And then – beyond the relatively comprehendible greater relationship with other commodity classes – the world market’s moods began to play a bigger and bigger part, as the world zeitgeist began creating wild swings from day to day and month to month known as “risk on” and “risk off” days. For years, many analysts kept giving fundamental factors the lead in their commentary on the day’s market actions, but this seemed sillier and sillier as time went by. I would often snigger when reading commentary on corn, soybeans, wheat, pork and beef markets that would work very hard to find independent S and D factors to explain that day’s price action for each independent commodity, but never note that all of the ag commodities had moved almost exactly the same amount in the same direction that day. Really, S and Ds didn’t count, and that was a hard lesson for many analysts around the world to accept. Eventually ag market analysis started containing lots of stuff about Greece and the U.S. fed decisions and things like that. These days it’s pretty commonplace to have that megamarket stuff up front.
But now, very obviously, they do again, and have at isolated times in the past six years. The present powerful weather rally in crop prices is fun to watch if you have or are growing crops right now, and it must be nice – just for old time’s sake – for many traditional commodity market analysts to once more be able to rely on crop S and Ds to explain why the markets are moving the way they are moving. Crop prices are soaring on Midwest drought problems, but oil has been falling and the equity markets are off. Greece imploding again? Who cares? All you need to know, right now, is the balance sheet of each crop.
At least for now. The world is still awash in problems and a Euromeltdown could make the whole house of cards collapse, recreating a 2008 for us all to suffer through again. But at least for now we can pay attention to statistics again – such as the StatsCan acreage report yesterday and the USDA tomorrow – and believe they actually count for something.
