Mid Week Comments
Being Thankful - 11/24/20
As we approach Thanksgiving 2020, we have a lot to be thankful for in
agriculture. Prices have rallied sharply this year, with a big rally in
all grains since August. On Aug. 12, corn prices were $3.20, and today
corn prices are trading at $4.29 Dec20, a $1.19 recovery or well over 33
percent higher. Soybean prices bottomed 4/21 at $8.35, and they have
rallied $3.49 to $11.84 today - 42% higher in less than 7 months! Of
course, the price rally has a lot of reasons for happening:
1) China is hungry again for grains, with their hog herds expanding.
They also want to improve trade relations with the US, regardless
who is the next US President.
2) South America is off to a relatively bad start, planting 2-3 weeks
late into mostly dry soils. Matto Grasso, their largest producer
of soybeans, already says they have taken the top end off of their
yield potential due to the late/poor start.
3) Pandemic fears are easing. With vacinne's galore and 95%
effectiveness in tests, it looks like all the fear/hype of the
Covid impact may have been way overblown.
4) Farmers are just plain tired of bad prices, and have put the brakes
on expansion and excessive spending on crops. Argentina's
socialist government has shrunk planted area this fall despite
sharply higher prices - a backward result that socialism always
So the outlook has greatly improved, with projected carryover of grains
shrinking by as much as 70% in some crops (soybeans) since just August,
and the outlook greatly improved worldwide economically.
Weather is becoming more clearly adverse to SAM now, as the forecast
swings more convincingly toward warm and dry for Brazil in the next 2
weeks. That will provide more support for grains if we continue to hurt
the soybean crop there. But today, after soybeans ran to new 4.5 year
highs in the past 2 days, we are seeing a setback in grains as they
struggle to overcome the next resistance level in soybeans. In fact, it
could very well see a 50c or more setback after the historic rally of
almost 50% from the lows earlier this year - and without a yield much
different than 'trend' in either corn or soybeans.
The stock market, though, is roaring higher as it approaches the all-time
high of 30,000 set just a few days ago, and higher than the previous all-
time high of 29,500 Dow before the pandemic. Its amazing that we have
rallied back ALL of the losses from the pandemic that caused the highest
unemployment rate since the Great Depression earlier this year. But then
again, it is absolutely amazing we've developed multiple, highly
effective vaccines to treat Covid in less than one year. Ironically,
Pres. Trump predicted in the fall debates that the vaccines would be
available shortly after the election - and was ridiculed by his opponent
and the lamestream press for that statement. Five days after the
election, the vaccines were announced!!!
We are targeting just under the resistance areas of $4.40 corn and $12
soybeans to price additional crop; after all, this price is way above the
$9.85 Jan high level in soybeans which many 'experts' said would be the
top for 2021 - especially after the pandemic started. But long term
charts are powerful predictors, and they didn't agree with the assessment
of the so-called 'experts'. In fact, they were >20% too low in their
price assessment - which is way more than the profit margin in soybeans.
So much for 'experts', and marketing fools that are still listening to
Thank God the experts were wrong again, but then again we might be
getting used to that lately. USDA has probably made some of the biggest
mistakes ever projecting this year's crop sizes and carryout. I've never
seen USDA backpedal faster in the nearly 30 years I've watched their work
being done. Its astounding to have soybean carryout drop from 600 mb in
August to 190 mb in November - in the same year!!! I doubt that has ever
happened with a still 'trend' yield projected. Wow! The error on
demand was nearly as bad, as China and other countries have
systematically stepped up imports of all products - wheat, corn, and
So the outlook for the coming year is about 110% better than it was just
a few months ago. I guess we really do have a lot to be thankful for, as
God has been very good to agriculture in the past 6 months or so. Lets
hope and pray that this promise continues into 2021, but quite frankly,
long term charts are suggesting it could continue to improve for much
beyond just the coming year. Have a blessed and happy Thanksgiving - we
really do have a lot to be Thankful for!!!
Ray can be reached at email@example.com.
Ray is President of Progressive Ag Marketing, Inc., a top Ranked
marketing firm in the country. See http://www.progressiveag.com for
rankings and link to data from Top Producer Magazine and Agweb.com.
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