I imagine one particular analyst wasn’t jumping up and down and offering Thanksgiving praise on Friday morning, as the agricultural futures markets shot through the roof and began setting two year highs.
He was the guy whose ag market analysis appeared in an email mail-out I always get Friday mornings. Unfortunately for the analysts it contains, it often carries their analysis a few days late. And often it’s outdated. And sometimes it’s dead wrong by the time it hits my inbox.
Like this beauty Friday, as the markets shot higher – amazingly higher – based on a USDA report:
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Worrisome drop in grain prices
Prices had been softening for most of the previous month, but heading into the Labour Day long weekend, the price drops were startling.
“Wheat, Corn and Soybeans Topped-Out Markets?” was the title. The analyst’s lead-in paragraph was “It appears that outside markets – equities, U.S. dollar and economic concerns have had a greater impact on wheat, corn and soybeans than USDA numbers and known demand side considerations. Now, technically inspired, I believe these markets have topped-out.”
Well, that’s about as wrong as you can be, at least in the short-term, as all the big Chicago ag futures went locked limit-up. Who knows, maybe he was right, sort of. Today everything dropped down a few cents, so maybe he saw the beginning of a peak and just called it early. But Friday I’ll bet he was wishing there was a “recall” button on his computer that could suck all those reports back to the shredder. And we’re still sitting most of a buck higher in most crops to a week ago.
However, for most of us, especially up here in Canada, it’s been a time of Thanksgiving, both spiritually and in the pocketbook. And I think these words of Deutoronomy, which my wife read aloud as the Old Testament lesson at our church last Sunday, sum up that Thanksgiving feeling about as well as possible:
“For the Lord your God is bringing you into a good land, a land with flowing streams, with springs and underground waters welling up in valleys and hills, a land of wheat and barley, of vines and fig trees and pomegranates, a land of olive trees and honey, a land where you may eat bread without scarcity, where you will lack nothing, a land whose stones are iron and from whose hills you may mine copper. You shall eat your fill and bless the Lord your God for the good land that he has given you.”
That’d be a pretty good description of the prairies, I’ve gotta say. Except for the bit about pomegranates. And rather than giving praise we seem to spend most of our time as a society whining and complaining and wanting Ipads and new cars. And endlessly whining about – what are those crops above? – oh yeah, wheat and barley. Golly, maybe even the ancient Hebrew tribes were endlessly arguing about wheat and barley marketing. From the Bronze Age until now, some things never change.
The next bit of Deutoronomy points out that the Hebrews shouldn’t take this wonderful bounty of the promised land for granted, but understand that it comes from a higher source, and to not forget about that simple fact:
“Do not say to yourself, ‘My power and the might of my own hand have gotten me this wealth.” But remember the Lord your God, for it is he who gives you the power to get wealth, so that he may confirm his covenant that he swore to your ancestors, as he is doing today. If you do forget the Lord your God, and follow other gods to serve and worship them, I solemnly warn you today that you shall surely perish.”
Well, at the risk of being profoundly profane and blasphemously misrepresenting scripture, I must admit this bit of spiritual wisdom seems to apply pretty well to the ag markets and to farmers’ marketing plans. In a religious sense, people at harvest in most religions and cultures are urged to not take for granted the bounty that has been provided to them, but to give thanks. I saw this in a harvest festival I stumbled into one night in 1986 in Mali, west Africa. All around me people were exchanging ears of corn and crops that I couldn’t identify, going hut to hut to share the harvest. And singing.
How are we feeling about this pleasant crop market rally that’s suddenly broken out, at the end of a long run-up in crop prices since mid-summer? Are we feeling thankful, or just that this is what’s owed to us by the market? Are we taking it for granted, or somehow protecting these prices that are dangled in front of our eyes? When things get good we tend to expect better. When things are bad, we expect things to get worse. But this present rally offers us a chance of better prices than many expected. Certainly the analyst I quoted above didn’t think you’d get a shot at today’s prices just a week ago.
Now that markets have broken to the upside, I seem to be reading a lot of bullish projections of where they could go from here. That’s the kind of thing that could make one unthankful of present prices and impatient to get The Prices We Are Owed By The Market. So, in a spirit of trying to make us a little more appreciative of what anyone should consider fairly good prices, allow me to quote a mega-bear and his grim projection:
“Some agricultural commodities have jumped enough to excite inflationists, but wave patterns suggest they are in bear market rallies . . . This is not the start of a big commodities rally; it’s near the end,” writes Robert Prechter, the head of Elliott Wave International, his monthly Elliott Wave Theorist, which was published yesterday.
“You can get the right perspective by looking at the recovery of the CRB index since its low a year and a half ago . . . It has had a ‘dead cat bounce,’ far weaker than stocks . . . Do commodity traders feel the way this chart looks? No, their optimism is way outpacing prices . . . This sentiment is characteristic of a topping market, not a basing one.”
Prechter isn’t necessarily any more right than the analyst I quoted above, and has been wrong before. Like everyone. But in the spirit of the Thanksgiving season, let’s consider what he says as possible, and give thanks to the market for those higher-prices that suddenly appeared before us last Friday.
