The ag commodity markets have been doldrummy recently.
So have commodities in general.
Arrrrrr, but don’t let that fool yer remaining eye, matey! Because this is the time of year when squalls can appear on the horizon and rapidly become storms.
There’s a lot of chop in the markets right now, with bad weather in North America trying to knock ag markets up, but better weather in the Former Soviet Empire trying to knock them down, and mixed weather everywhere not letting anyone know which way to turn.
And in the broader markets, both commodities and equities are being pulled between the bullish momentum of the long equities rally and Wall Street’s and Bay Street’s eternal optimism, and the bearish realities of Europe’s grave debt problems, China’s attempts to stop coming apart at the seams, and weak U.S. economic performance.
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But this is the time of year, especially for prairie-dominated crops like oats, canola and spring wheat, when things good and bad can send markets flying like a cannonball. Remember last year, when long-simmering worries about late-seeding on the prairies and Dakotas boiled over in early June when more wet weather came? That suddenly launched the markets higher as buyers panicked about supply and farmers stopped selling crops they might not be able to seed. It seemed like a crisis evolved overnight, when everyone realized the problems weren’t just typical seeding time struggles, but a game-changing situation.
This spring’s late-seeding woes in Canada, the Dakotas and the corn belt, plus the continuing problems in the hard red winter wheat area are part of the price of the crops from those areas right now. This chart shows how spring wheat has pushed its spread to Chicago winter wheat recently.
That could set up prairie-based crop prices to blow sky-high again if seeding problems worsen and lots of crop doesn’t get in, or get in too late. But it also sets up the potential for a big price slump if the problems – which are already factored-into prices – are alleviated. A week that’s drier than expected that lets millions of acres get quickly seeded could brutalize the market. A week that’s unexpectedly worse could let the bull break out again.
But one thing I know about this time of year, even if the markets seem flat and we’re floating in the doldrums, squalls and storms on the horizon can quickly develop and send us surging suddenly into new seas before we have time to batten the hatches and tie our hats on more securely.
