Farmers have a lot to be thankful for, analyst says

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 of well over 33% higher.  Soybean prices bottomed 4/21 at $8.35, and they have rallied $3.49 to $11.84 today – 42% higher in less than seven 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.  It also wants to improve trade relations with the U.S., regardless of who is the next U.S. president.
2. South America is off to a relatively bad start, planting two to three weeks late into mostly dry soils. Matto Grasso, its 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.   
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.  

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 South America now, as the forecast swings more convincingly toward warm and dry for Brazil in the next two weeks. That will provide more support for grains if we continue to hurt the soybean crop there. After soybeans ran to new four-and-a-half-year highs in the past two 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 50¢, 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. It’s 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. Then again, it is absolutely amazing we’re developing multiple, highly effective vaccines to treat COVID in possibly less time than estimated.  

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 that assessment. 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 who are still listening to them.  

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 its work being done. It’s astounding to have soybean carryout drop from 600 million bushels (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 soybeans.  

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 six months or so. Let’s 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.