I believe I have finally proven (to myself at least) my long held theory that my body and well-being are completely attuned to the markets.
I say that because last week I pulled my back Tuesday, forcing me to lie on the couch aching, whining and eating Robaxacet, and this situation of woe was compounded Wednesday and Thursday by an outbreak of itching and swelling hives, causing more lying about, itching, aching, whining and ODing on Benadryl. Simultaneously the grain markets – especially corn, but also wheat and oats – fell to the ground, after being kneecapped by a USDA report that found extra corn acreage had been planted and submitting to the growing winds of doubt about world demand in the light of worsening economic situations. My body, like a barometer, shifted two days before the storm came, and kept me safely away from the computer screen and all those ugly charts.
But, now it’s Monday and wellness has returned, let’s look at an ugly chart or three:
Look ugly to you? They sure do to me. While everyone stateside has focused on corn, because that’s one of the two bigboys down in the republic of disloyalty, spring wheat has been more disappointing and alarming after having raised hopes early in the year, oats has been a frustration to those hoping for super-tight S and Ds for next year to translate into a rising market this summer, and canola’s gone nowhere.
The big story with corn is that it has been THE story of the markets so far this calendar year, and it was the strongest and most resolute of the North American food crops. Its big reversal is a breaking of one of the supports holding up the general crop market rally – what else gave wheat a reason to be strong? – and casts a raven-like shadow over the summer and fall markets.
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Fortunately soybeans weren’t crushed in last week’s general rout, and are still looking peppy. And you see that on those charts above, with canola continuing to hang around the levels it’s been at since early spring.
But the corn slump, if it doesn’t prove itself to be a correction but instead a longer-term trend reversal, is something all prairie farmers should take seriously. It shows that overwhelming popular stories like the corn-bull-market story can be quickly ended if people get rattled, and they got rattled last week.
The USDA’s finding of extra corn acres wasn’t the only thing causing this. Corn rose very high without serious corrections along the way, so it was due for something bad to happen. That’s why it’s possible this is just a correction, even if a deep one. And economic jitters have grown in the world’s markets for a couple of months, with a lot of problems that had been shoved off into the future beginning to reappear as time has marched back on top of them.
I wrote a couple of stories for the paper recently about possible problems with demand for the second half of 2011 – one about China and one about the overall global demand situation – and so I can’t say I’m surprised to see the wind getting sucked out of the sails of the commodity bull market. The market has been driven up on real and perceived demand for commodities around the globe and the assumption that “recovery” of the world’s economies was more than just stabilization of a severely injured patient.
Now that the patient is once more faltering, we have a chance to reassess how confident we are about world demand for crops and other commodities. If we’re lucky, this is just a healthy correction and a chance to think a bit more about hedging.
The one silver lining to this dark cloud is that with prices falling off so much, the thousands of farmers who have been unable to seed millions of acres across the prairies won’t be quite as frustrated by the idea of how much money they would be making if only they’d been able to seed a crop . . .
