The Election's Over! Any Farm Market Implications To The Results?

The election is over. And the Republican party has moved back into the majority in much of the country, including state ag leadership positions.

After a campaign that featured record spending by candidates in key legislative races, Republican candidates won all seven open state ag secretary and commissioner positions -- Alabama, Florida, Georgia, Iowa, North Dakota, South Carolina and Texas -- and took a majority in both chambers of Congress.

Now, beyond the partisan politics, what do the election results mean to the agriculture industry?

Some in agriculture say Tuesday's results won't mean much, if anything, to the day-to-day business in the agriculture industry.

"Washington may look different come January, but fundamentally, things have not really changed. There is no sign that the gridlock of the past few years will diminish. Like many Americans, corn farmers are frustrated that their voices go unheard and so little gets done," says Chip Bowling, Maryland farmer and president of the National Corn Growers Association in an NCGA report. "We welcome both new and returning Members of Congress back to Washington, and we urge them to set aside partisan politics and meet their obligation to conduct the nation's business."

The marketplace is where the most profound implications will be felt at this point, especially in the context of the ag commodities in the overall U.S. and global financial picture. Major outside factors like the equity market and U.S. dollar had already reacted to the veritable GOP takeover in Washington, D.C., on Wednesday morning.

"Gold is getting its head kicked in and is down $28.10 at $1,140.29. The midterms go the Republicans' way. The stocks like it, and the S&P is up almost 10 points today," options specialist, broker, trader, and Agriculture.com contributor Scott Shellady said Wednesday morning. "The 10-year is rising and stands at 2.35%. The dollar is stronger again, up .58 to 87.57."

That last one -- the U.S. Dollar Index -- is carrying the greatest implications for the ag market sector in the early hours after the election. It touches just about every commodity, and as it strengthens, it makes the export market a tougher place to make a deal for U.S. commodities, including grain.

"With the election results and the Republicans taking control of both the House and the Senate, the U.S. dollar has spiked higher once again this morning reaching up to the highest levels since the middle of 2010. We are now up over 11% since the lows posted this past spring and just over 20% from the lows posted in 2011," says market analyst Daniel Huebner of the Huebner Report and The Center for Agriculture. "If something sounds vaguely familiar with this, it should: Commodity markets have been the mirror image of this move and as would be expected, we've been tracking lower as the dollar advances. There are always exceptions such as the livestock markets but note that grains, metals, and energies have all be tracking lower since spring, right when the dollar turned higher."

Taken alone, this upswing in the U.S. dollar is bearish for the grains on the global market. However, there are other factors in play right now that could counteract that bearishness, adds Teucrium Trading, LLC, broker and market analyst Sal Gilbertie.

"I believe the effect of falling energy prices on the entire global economy (in the form of more disposable income to individuals and businesses) will have more of an effect than any election outcome," Gilbertie says. "I think any impetus that dims the prospect of a gold rally, be it political or economic, will drive investors toward the other golden colors important in the commodity world like corn, wheat, and soybeans. We have certainly seen inflows to our agricultural ETPs this year; I think it is because asset allocators seem to be taking advantage of the price dip in grains caused by record production this year by rotating assets into grains. Some of those assets may be coming from gold investors looking to diversify their portfolios with other commodities, especially the big four of corn, soybeans, wheat, and sugar, all of which are less correlated to the S&P 500 than gold over long periods of time."

In the long run, look for any bullish jolt to the grains stemming from these types of factors to be light, he adds.

"I believe the movement of money into the agricultural commodities has very little direct effect on prices because supply and demand factors overwhelm all else in commodities, and the paper money is just that -- paper -- which means it has no direct effect on actual spot prices to the consumer because it never culminates in delivery of the grains," Gilbertie adds. "More important to grain prices is the potential Q4 seasonal effect caused by harvest in the Northern Hemisphere -- the looming influx of supply this year just may give investors an opportunity to buy into grains at a cyclical low in the next few weeks."

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