The 'bear' roars
Last week we wrote about how the bear market was starting to re-emerge as prices were sliding lower, with lower lows and lower highs in corn and wheat. Soybeans were less conclusive, but this week pushed to the downside in spite of confirmation from USDA that South American crops had indeed suffered through hot and dry weather in the past month.
While fundamentalists point to the tightening soybean fundamentals, the technical objectives continue to point toward the $8 level for soybeans and the $3 level for corn as we head into spring. These were near the lows for the fall after our blow off summer top, and will be tough for growers to swallow as they enter the fields this spring.
There won't be a farmer in the US who will likely be able to pencil a profit at these price levels, and the disgust with the market action will be widespread when this occurs. That's not really 'bidding for acres' as we like to call our typical spring time rally.
The problem seems to stem from the economy, and the old saying "It's the economy, stupid!" might reverberate again in many circles. We continue to get negative news out of our media that now seems so adept at finding all the worst economic news. World trade and exports are dropping worldwide, with US export down 6% in December while imports dropped 5.5%, a sign that the US economy is still plunging in its performance overall. The more bad news we hear, the worse it seems to get and the snowball just continues to get larger as it rolls downhill. Chinese exports were even worse, dropping 17.5% from Dec. to Jan. in its worst performance since the 1990's Asian financial crises. It isn't any better elsewhere, as Taiwan's exports were down 42% in December, Japan down 35%, and South Korea down 17%. This is not the kind of news that inspires more consumer confidence!
While agriculture outlooks seem somewhat bleak, its really much worse for the rest of the economy. The US continues to look for creative ways to drive us out of our slump, but so far politicians are slow at getting things done. The trouble seems to stem from being afraid of making a mistake with all this public money. In the mean time, though, the world economy is struggling mightily.
It appears it will take at least 3-6 more months for any action to work, and in the mean time the consumer confidence continues to take a hit. While governments can do what they can to prop up an economy, ultimately it's the people themselves in a capitalist society that determine the ultimate destination of an economy. So until our own consumers start spending money again and business becomes confident everything will indeed be OK, then it probably won't.
While the negative news persists, Pro Ag is not bearish Agriculture, which should continue to be the bedrock solid part of the US economy. But before agriculture can get a lot better, the US economy has to stabilize along with the rest of the world. For now, the waiting game is about the only game in agriculture!