Tomorrow in Yorkton oat growers are going to be able to witness two radically different approaches to market analysis and price predictions. Two analysts are going to try to give farmers an idea of where oat prices are likely to go in the next year and while they might end up with the same conclusions, it will be for entirely different reasons.
Market analysis is broadly broken into two divisions: technical analysis and fundamental analysis.
Although most analysts combine features of both, at their core, in the innermost sanctum of their souls, every analyst has to decide which approach they will mostly rely upon. It’s like religion: you can appreciate aspects of all the world’s major religions, and accept that each has uniquely valid ways of approaching God, but in the end you can’t really practice all of them at the same time in any committed way. There just aren’t enough hours in the day and your mind will go crazy trying to make all the different approaches dovetail.
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Fundamental analysis is analysis of the markets based on “fundamentals,” which in the crop markets are things like production prospects, farmers’ seeding intentions, weather events, demand estimates and stockpile estimates. It’s the most popular form of market analysis, partly because it often seems to work and partly because you don’t need much education or specialized knowledge to dip your toe into. Anyone can form a simple opinion from scanning world news headlines and guessing how those events will affect supply and demand.
Technical analysis is analysis based on technical indicators, of which there are a huge range, with the most common and simplest form being chart formation analysis. This is the form of analysis where you’ll hear “double tops,” “bottom head and shoulders” and “flag formation” referred to. You can also get into Japanese candlestick formation analysis and point and figure charting, or if you’re a true intellectual of the market, you get into Elliott Wave analysis. There is also lots of fun to be had with oscillators and sentiment indicators. Technical analysis is less popular because it requires more education and math skills – something most traders don’t have – and to practitioners of “common sense,” it seems too complex, arcane and weird.
The Prairie Oat Growers Association conference is going to have presentations from two widely followed and generally admired analysts. Randy Strychar is probably the world’s best known and informed fundamental analyst of the oats industry and the oats market. He knows pretty well all the major buyers and sellers of oats in the world and can estimate how this year’s production is going to fit in with the demand from the world’s buyers. If you want a solid, well-founded fundamental analysis of the oats market, Randy’s the man for you.
David Drozd may refer to the underlying supply and demand fundamentals of the oats market, but it won’t be what his predictions are based on. He’s a technical analyst and he’s more interested in what the “slow stochastic” tells him than what he’s hearing from the racehorse feed industry in Georgia. His reasons for his conclusions may strike some producers as weird, but remember, this was the guy who called for seven dollar wheat a couple of years ago, something that made many other analysts smirk in his direction.
Regardless of which approach you prefer or have a feel for, the two analysts’ presentations are a great way to witness a fundamental difference in outlook, and who knows, at the end of it we may all have a better sense of where the smart money says oat prices are going.
