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Elections sagging stocks, and commodities
We've completed our elections in the US and made history, and now resume the day
to day activities of the world. Stocks and the economy, though, remains in the
doldrums and the world needs to discover again what brings value to our economy
and what has value in our world.
Once again, we turn to the stock market for direction, and stocks just seem
unable to vary more than 1000 points from the 8400 DOW mark, with stocks
rallying to 9400 or so for a while and making people optimistic again, and then
stocks selling off to less than 8400 for a time, only to find bargain hunters
who see a value buy. We seem to be at some type of stalemate as far as stock
prices go, and commodities thus are in about the same mode.
While new elections bring the possibility of an entire new policy direction in
the world, that still doesn't change much the dynamic that prices are still
determined in a large part by private individuals. These private individuals
across the US (and world) are who really set prices, and governments certainly
can impact those decisions, but in the end, private individuals make most of the
decisions in a market economy. All those private decisions (mostly to buy or
not to buy) sum up the whole of the world economic picture, and if the US
consumer is not buying, mostly the world consumer is not buying as well since
the US makes up over 20% of the world economy. As the US goes, so does the rest
of the world.
And the US right now is seeing a retrenchment of sorts, where people are more
cautious with their money. When the US consumer becomes cautious, the world
consumer becomes the same. So here we are, with the history of a very wild
commodity market which took prices to heights unimaginable just a year or two
ago. Even now, with prices down considerable from June/July it's hard to believe, after the fact, that we had $147 crude, $8 corn, $16 soybeans, and $13-$24 wheat.
But have it we did! Now we are looking up at these numbers, wondering if it
really indeed did happen, or was it just a dream?
So what's next for the market? While some doom and gloomers are expecting
things to pile into a depression like situation, it doesn't appear at this
point that will happen. Instead, it looks like things are finally starting to
stabilize in current price levels. We may not go above some of these recent
price levels for the next 20 years or more, as they were indeed lofty levels.
But we could see some spike back in some grains to some previous resistance
areas. Could we see $5.40 corn, $7.50 wheat, and $12.80 soybeans again in the
The one market that has outstanding export sales yet is soybeans, a crop that
also had disappointing yields in northern areas. It will be interesting to see
the next USDA yield estimate in soybeans, as some southern areas had a very good
soybean crop. Did the good yielding soybeans in the south make up for the poor
beans up north? This could be a major question for the soybean market coming
up. With harvest nearly done, soybeans could finally turn the corner from their
current downtrend. Snow is also hampering the completion of harvest in the
northern Corn Belt, and that combined with later than normal harvest progress
could push prices higher in the near term.
For corn, the question is not whether the yield is there (it is) and whether
USDA will raise projected yields (they should). Instead, it's a question of
harvest ability - will farmer in the snow belt get their corn out of the field
this fall? Or, will they suffer some significant harvest losses due to late
harvest and the beginning of the snow season? These are the major questions to
be answered in the near term, and it's likely price direction will be determined
by these new variables.
The information contained, while not guaranteed as to accuracy or
completeness, has been obtained from sources we believe to be
reliable. The opinions and recommendations contained are based on
our judgment and do not guarantee that profits will be achieved
or that losses will not be incurred. Recommendations should not
be construed as an offer to buy or sell commodities. There is
substantial risk of loss in trading futures and options on
If you have questions about this column, call Progressive Ag at 1-800-450-1404,
or email ray at email@example.com.
We've completed our elections in the US and made history, and now resume the day to day activities of the world. Stocks and the economy, though, remains in the doldrums and the world needs to discover again what brings value to our economy and what has value in our world.