Oilseeds are beating the joy out of farmers’ hearts across the world right now, with an ugly slump in prices coinciding with farmers planting tens of millions of northern hemisphere acres with the stuff.
It’s been hard to watch – if you have unpriced canola. It’s no doubt been a delight for food processors and crushers.
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But so far there’s no reason to panic. Like the prodigal son of the Good Book, canola and soybeans have simply left their wayward ways behind them and rejoined the commodity family.
So let’s look at this story in the form of beautiful pictures, like these charts.
Here is new crop soybeans versus new crop corn (Dec and Nov Chicago contracts) since the new year. Soybeans in red.
Quite a beautiful mirror image, methinks. Not perfectly opposed, but like a reflection seen in a pool of water on a day of light wind.
It’s not as mirrory when you just look at it over the course of two and a half months.
At six months you see that soybeans rallied much more powerfully than corn weakened over the winter.
Over the course of a year, corn and soybeans moved together, until the start of January, when worries about South America took over.
That’s when the oilseeds started to fly high in defiance of gravity. When I say gravity, I mean the inexorable power of the commodities complex, which has defined the course of crop prices since 2007.
The blue line at the end there is the CRB continuous commodities index. Note the very tight correlation to corn prices? Note the completely opposite course soybeans took? Hence the nosebleed soybean and canola prices got a little while back, and the way they fell once the wax holding the feathers on their arms melted.
That last chart is a year-long picture. This next one goes back to the start of 2012. Check out the corn CRB correlation even closer.
So those charts tell me that vegoils thought they could wander off, live the high life, ignore the mundane concerns of the ordinary workaday world around them – carefree and thoughtless. But then the cash and good fortune ran out, and the wandering one stumbled back home.
Will we welcome him home, like the father in the parable? Or resent him, like the responsible brother who wonders why he’s never even qualified for a goat, let alone the fatted calf?
Methinks it’s the former, because unlike the prodigal son, canola made a bunch of money for farmers while it was running away from the commodity family. If anything, we’d like vegoils to get back out and party some more.
