After hiring into the market newsletter biz 30 years ago, my new bosses informed me that I’d sink or swim on how well I learned either fundamental or technical market analysis. I had two weeks to master one.
Since fundamental analysis centres on farm and ranch facts and figures and technical analysis relies on charts and graphs that resemble more astrology than agronomy, I swam to what I knew – acres, yields, sows and cows – and away from double-bottoms and upsidedown bear pennants.
Curiously, however, it soon became apparent that most successful elves used market fundamentals to confirm their chart biases and, likewise, the best fundamentalists often leaned on charts to back up their facts and figures.
Read Also
Canada’s Grocery Code of Conduct just window dressing
The voluntary nature of Canada’s Grocery Code of Conduct robs it of effectiveness and won’t result in the food system accountability that’s needed.
When I pointed out this anomaly to the office’s resident elf, he offered a Yogi Berra-like insight that explains everything from cotton exports to the fed’s monetary policy: “No one wearing a belt and suspenders ever lost his shirt.”
That view fits today’s markets to a T. Everywhere you look there are chart patterns, production facts and usage figures – belts, suspenders and even twine string – to support today’s fabulously high commodity prices. Monthly futures charts show cotton at record prices, corn and soybeans on a steady march toward 2008 records, wheat feeling its oats at $9 plus and hogs dancing around $90.
Only cattle futures seem to be drifting for direction but, even then, they are adrift in extremely deep water – $110 a hundredweight.
Wow.
Jittery day trading aside, there’s not much argument over what is likely to happen when the weather heats up: the markets will heat up, also, because today’s demand and tomorarow’s anticipated supply just don’t jibe.
Two weeks ago, veteran University of Illinois market watcher Darrel Good highlighted 2011’s high-priced battle for acres between corn, soybeans and cotton.
With record-low corn stocks and stable to slightly less 2011- 12 demand, Good reckons this year’s corn plantings “need to be near 90.3 million acres, 2.1 million more than planted in 2010.”
If corn demand increases or “stock rebuilding” begins or “some allowance for yield risk” is added into the equation, then “planted acreage may need to be… 92 million to 93 million acres.”
Where’s corn going to find a coupla’ or three million more acres? Beans?
Not a chance. Global soy demand and record-low American supplies suggests 2011 planted acres need to grow, not shrink, by at least “1.1 million more than planted in 2010.”
That total, 78.5 million, will climb by another million if “rebuilding of stocks” and some “yield risk” get built into plantings, he notes.
All told, then, total corn and soybean acres need to grow by a collective 6.5 million “to allow for some modest rebuilding of (domestic) inventories.”
One look at today’s world record cotton prices suggests the cotton crowd, whose younger generation has seen far more red ink than blue sky, will not give one acre to corn and very few – if any – to beans. Indeed, the National Cotton Council’s 2011 survey of growers forecasts a 14 per cent jump in U.S. cotton acreage this year over last.
So where will we get the acres?
All I know is that March markets, through higher prices, will try to pick a winner and both elves and fundamentalists will claim they saw it coming. The Farm and Food File is published weekly in more than 70 newspapers in North America. Contact Alan Guebert at http://www.farmandfoodfile.com.
