It happened again the other evening, just as it happens every year after the USDA farmer-rattling August Crop Production Report. The setting this time was a junior high baseball game at the diamond across the backstreet.
“Well,” asked a farmer whose son was starring in the outfield and at the plate, “what do you think the report will do to the markets now?” I had seen the August report – record corn production, near-record soybean crop, a bigger wheat crop, huge cotton numbers – but hadn’t digested it well enough to spit out the clean, what-should-I-do answer my friend was trolling for. I rarely do for two reasons.
I’m outta here. First, market analysis ain’t my gig. It was, ‘way back in 1981, when I was a market watcher and writer at Pro Farmer. I left that job within a year, however, after one of my bosses asked me to tip him for the right time to short a fat million in the Board of Trade’s speculative T-Bond futures.
“You must be nuts,” I told him.
“That’s your job,” he shot back.
“No mas,” I replied. “Adios.”
Second, until I inherited the job of marketing the few thousand bushels grown on my father-in-law’s modest corn and soybean acres late last year, I never had a crop to sell. As such, market watching and market advising were little more than professional hazards. They came with the ag writing territory.
On the line. With bushels on the line last year, however, the game became very serious. When friends asked for my market opinion, my answer was very specific: bin the crop, lock the bin, call me in February. If you need cash before then, lend some grain but retain ownership.
Moreover, unlike most professional market advisors I know, I followed my own advice. I held my in-laws’ small amount of soybeans and bigger pile of corn into March – after, I’m not ashamed to tell you, a nervous harvest.
I then thumped the early spring market for some lovely change.
Price predictable. Beginner’s luck? Sure, but it wasn’t dumb luck. A year ago, the August crop report showed shortened crops, dwindling carryovers and stable, or even building, demand for both corn and soybeans.
All meant heavy odds that buyers and sellers would fight a price tug-of-war most of the winter. Indeed, the tussle ignited before harvest began.
The only big unknown was South America. And here, I confess, I got lucky. Soybean rust in Brazil, coupled with our tiny soybean carryover, propelled the bean fight into America’s spring planting window.
It spilled over into a nervous, demand-driven corn market and, voila, I skinned a fat hog in March. (My commission, enjoyed each time I now visit my mother-in-law’s, is brewed in Dublin. Before March it was brewed in St. Louis.)
Similarities. The corn and soybean picture isn’t all that different this year. Yes, both crops will be bigger in 2004 – especially corn, an anticipated record 10.9 billion bu.
But supply is only one side of the price equation; demand is the other. If USDA’s estimated 2004/05 corn demand, another record at 10.73 billion bu., is remotely accurate, any hiccup in the crop before it’s binned – dryness, frost, bugs, a wet fall – means futures, even if beaten down during harvest, will be unable to stay down long.
Bears at bay. Likewise, USDA pegs 2004 soybean demand at 2.8 billion bu. With production estimated at 2.87 billion bu. and only 105 million bu. left over from 2003, the government’s numbers suggest bean bulls won’t need much of a reason – say an early frost or a continued cool August – to hold the bears at bay for months.
On the other hand. Can corn and soybean prices slip lower as harvest progresses? Certainly; especially if USDA is 100 or 200 million bu. light on estimated production or 100 to 200 million bu. too starry-eyed on demand.
For now, however, I’ll trust the numbers, the base-building futures market and my sloshing gut. If friends ask for advice I’ll tell them to bin the crop, lock the bin and call me in early November. I’ll be at my mother-in-law’s.
(Alan Guebert’s Farm and Food File is published weekly in more than 75 newspapers in North America. He can be contacted at email@example.com.)