Expectations for 2014: Our Agricultural Economics Will Take Care of It

photo     Sometimes life is all about expectations, like me hoping and dreaming that someday I will be able to sell soybeans for $20 a bushel.  Now, that is an expectation, which I don’t think will come true this year or the year after.  However, there is always hope.  Getting my expectations in line with reality sometimes can be daunting.

Recently the grain markets have been whacked pretty hard with expectations.  Of course the big one is down in South America where heat in Argentina and Brazil has put a little bit of nervousness in the market.  However, as the heat has dissipated and the news of rain showers has come to light, much of this has inspired the bears in the grains.  Markets have been retreating on the expectation that everything is just fine.

With the January 10th USDA report looming in the distance next week there are a plethora of expectations in the markets.  Of course, we have heard for quite some time now that many analysts are expecting a boost in both US corn and soybean yield for 2013.  Many analysts are expecting the USDA to boost production, sending prices even lower than they are now.  In fact, it hardly seems there are any expectations from market bulls.  There aren’t any and as we lead up into January 10th, maybe that should be telling us something.

We shall see.  As many of you know I am a full-time farmer in southwestern Ontario.   When I plant corn on my heavy clay soils I plant them into a stale seedbed.  The summer before I plow the land and then level it with the land leveler.  The land leveler creates a tumbling and crumbling action, which creates a smooth soil surface.   That smooth soil surface is left to the vestiges of the sun, rain, wind, snow, ice and over time all of these things condition that soil.  When I dip my planter into the spring, soil, conditions are perfect for seedling emergence without the compaction.  That is my expectation for next April.

However, that theory didn’t quite add up the first time I went to the field after creating my first stale seedbed.   It was springtime and I visited the field to see if I could simply drop that planter in the ground without working the soil.   The soil seemed hard almost like a rock and I didn’t think it would work.  Fast-forward a week and I showed up in the field where my late father was looking at the land and I could tell by the look on his face that he didn’t think it would work either.  However, I told him we have to give it a try.  Within two minutes of dropping the planter into the ground we knew it was going to work perfectly.  I’ve been growing great corn crops on heavy clay land ever since.  My expectations that day had been exceeded.   It is rare when that happens.

So of course the question is as we lead up into January 10th, are our bearish expectations be completely misguided.   Will we be slightly fooled going into it like that stale seedbed and will the January 10th US report have that surprise that sends the bears to the woodshed.   Of course the answer is I don’t know.  You are almost labeled a crackpot if you are not beer these days.  Needless to say, there is always hope.

The unfortunate part is in agriculture hope usually comes about from somebody else’s misfortune.  This year many of us have been hoping that might be in South America, at least to give us an opportunity to market some soybeans.  It surely looks like that will not be the case now, but rest assured it will come along.  Our agricultural economics are the same everywhere and always lead to overproduction.  You know the drill.  Farming is a potpourri of change with constant up-and-down of revenues and expenses.  It’s just that over the last 5 years it’s mostly been on the upside.  Lower expectations and lower prices is not the tonic that makes us happy.

Expectations are also about emotions.  There will certainly be many emotions on January 10th when the report is released.  6 out of the last 8 years we’ve seen limit moves in corn, 2013 being one of those exceptions.  I think it is unlikely for a limit move this year.  This market seems to have all those bearish expectations lined up in a row.  Isn’t there grain everywhere?

It would seem so and maybe it’s a fait accompli.  Who knows, maybe the managed futures industry has it all right.  Trade the systems and leave the emotions at home.  As it is, I’ve got great expectations for 2014.  Let’s start with that as we look ahead.  Our agricultural economics will take care of the rest.