As Country Guide market columnist Errol Anderson (who returns next month) always is sure to remind us, commodity markets trade more on emotion than on fundamentals.
Markets climb on a combination of confidence and optimism — and maybe a touch of greed — and they fall on fear.
The same emotions drive the same cycles, time and again. They always have, and they probably always will.
But that isn’t to say that fundamentals have no role at all.
The truth is, the world’s supply and demand of grains and oilseeds — and increasingly its supply and demand of meat as well — are in precarious balance.
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It’s why we’ve been reading so many headlines that say either that the sky is falling, or that the sun will shine merrily down on farmers forever.
In the recent past, I’ve read that within 10 years, the world will safely be able to idle a chunk of farmland the size of France. Of course, I’ve also read myriad reasons why humanity is on its inescapable way to famine.
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It’s why this month we sent associate editor Gord Gilmour out on assignment to ask whether there is any rationale for deciding which forecasts we should listen to. Does anyone really know which forecasters have the best records?
We knew it wasn’t the kind of question we should expect a definitive answer to, but sometimes our job is just to ask the questions anyway and to try to listen for the interesting insights that bubble to the surface. Not surprisingly, though, in this case the answers that Gord got from some of Canada’s brightest ag economists are mainly that long-term forecasting simply doesn’t work in agriculture.
It doesn’t mean that the question wasn’t worth asking. Read Gord’s story and you’ll find out why, but it’s related to the fact that farmers can’t escape having to predict the future. How else could you decide when it makes sense to invest, and when it doesn’t?
So in the context of that story, yes, we agree it’s reasonable to predict we’re heading into a stretch of $4 corn. But it’s more reasonable to predict it than to expect it.
With El Niño, and with the prospects of political strife in critical regions around the world, and with climate change, and with burgeoning global populations, and with the rise of the global middle class, and with our dependence on ethanol, and with… Well, you get the picture.
Maybe the bears will retain control for a year, or for two. Or maybe for only another month. But the bull will wake up.
