Our World Is Normal. Our World Is Crazy

Corn harvest ended for me this week. It was somewhat of a long season. I started harvesting corn in October, which I consider kind of early but it almost took me the whole month of November to get done. Several major rain events during the month of November delayed things continually. I now find myself on December 1st with fieldwork still to do. However, like many years before sometimes the best thing to do at this time of year is just wave the white flag. There are different ways to get those fields ready in spring with much warmer weather.

Our grain prices remain very bearish. There are the usual culprits for that, which we have gone over many times in this column. Simply put, my record yields were reflected in many other places across the American corn belt. It was an uneven year, but it didn’t matter. Eventually the surpluses will go away, but after a year like this its kind of hard to see how. Needless to say, history tells us it will happen when we least expect it.

As many of you know I write a lot of commodity commentary. I have been fortunate through the years to write for DTN in Omaha. Part of this has been very beneficial to me simply because I get to rub my agricultural economic mind against the many great commodity analysts that DTN has had over the years. Reading and talking to people like Darin Newsom, Elaine Kub and Todd Hultman and others has rubbed off on me. I understand the nuances of markets much better than I ever did in my early days. Markets are fascinating and constantly changing. Understanding those changes has been a fascinating journey.

Of course, there are many variables to these commodity markets and if you turn to the writings of my colleagues I’m sure you will learn quite a bit about them. However, there is always one factor that I write about when it comes to grain prices that doesn’t get a lot of consideration. That market factor is something I call geopolitical issues. Simply put, geopolitical issues are things that happen in our greater global political world that can affect grain prices sometimes in a significant manner. Usually, they are in the background, but is never far away from roaring onto the commodity stage affecting everything.

I’ve often thought that commodity analysts, commodity traders and many of my farmer colleagues need a greater appreciation of history when they think about the geopolitical issues behind our agricultural prices. I’ve always felt how can you comment on prices coming out of a region, where you know little of the history from that place. The Black Sea region of Russia and Ukraine is one such place. It is an area of the world with a very violent history over the last 100 years. When Russia annexed the Crimea a few years ago, I was alarmed. I wondered how this may affect grain prices if things got out of control.

However, I also thought a lot about somebody named Stalin. The brutal leader of the Soviet Union was responsible for the deaths of about as many people as Hitler and Mao. So when the Crimea was annexed into Russia and fighting took place in the Eastern Ukraine, all I was thinking about was Stalin. To understand him, gave me a greater understanding of how things worked over there. In 2017, its surely different, but still the historic legacy lingers on.

What happens if a stray nuke gets shot out of North Korea? With the American president calling the rogue leader of North Korea “Little Rocket Man” and a “Sick Puppy”, things are getting a little bit tense. It was learned this week, Canada and United States even had exercises earlier this year on what to do during a nuclear attack. Simply put, one stray nuke in Asia would destroy the soybean market. One stray nuke would destroy everything.

I’m not here to yell fire in a crowded theater. There are other geopolitical issues that affect grain supply and demand such as environmental policy in China, Europe and South America. Of course, there is the whole world of interest rates and central banks in Europe, North America and Asia. Every morning people wake up looking for something to eat. That’s where farmers come in like us. However, sometimes-geopolitical issues take over and affect everything.

In 2017, we’re not there yet. The stock market is at record levels, a crypto digital currency called Bitcoin is going crazy, and nearby corn futures are trading near the $3.50 level. Grain moves every day. However, keep in mind, more than futures spreads and the cost of commercial carry affects markets. Geopolitical issues sometimes force themselves to the front. Our world is normal. Our world is crazy. Geopolitical issues might matter big time soon.