Weekly Market Update With Lilja, Progressive Ag
History was the one subject that I did very well at. I’ve always liked evaluating what happened as I do believe it gives clues to the future. I’ve mentioned before that a former boss of mine was a firm believer in history repeating itself. I was at a wedding reception last weekend and got into a conversation with a successful farmer from northern Minnesota. Over the years he and his family had acquired an elevator and have handled large scale amounts of grain.
He stated that this soybean / oilseed thing has the feel of the wheat run back in 2008. Wheat prices ran to $25.00 per bushel because everybody around the globe had bad weather. Farmers sold early at what they thought were good prices only to see it run much higher. He said he dumped a fair amount
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of wheat at $22.00 and felt like a failure for dumping the rest of it at $13.00. I remember that timeframe because a friend of mine was working for a wheat gluten facility. He was over in Germany with his supervisor and every field they saw was a disaster. His company had to shut down for a few months because they couldn’t source their supply and what they could source was far too costly. This was also the same timeframe that the North Dakota State Mill and Elevator ran into similar problems.
Could something like this happen again? Sure, but every country would have to have bad weather. Longer term charts would say that the 2008 wheat move was a once in a lifetime event. Longer term charts would also state that periods of high sustained grain prices of the early to mid 1970’s and late 2000’s / early 2010’s were roughly 35 years apart and that we wouldn’t be due for that activity until the mid 2040’s. But the other thing that the longerterm charts do show is a solid base that was built from 2014-2020. Despite a pandemic and a trade conflict with China; corn, wheat and soybeans could not push below 2016 bumper crop price lows.
Overall, the charts point higher and here are a few other factors to consider: South America, Russia and the US southern plains are all off to relatively bad production starts. Top end yields have almost certainly been taken off unless the weather is absolutely perfect from here on out. Pandemic fears are easing with recent announcements of a vaccine with the Dow Jones Industrial Average hitting 30,000 for the first time. China is expanding their hog herd and has been in the market aggressively for grains over the past 5 months. Argentina’s government in a backwards edict lowered crop production areas despite good prices.
Things are looking up for the agricultural sector as we celebrate Thanksgiving. Whether the northern Minnesota farmer ends up being right or not will remain to be seen, but I did wish him a Happy Thanksgiving. I’d like to do the same here to you.