Black Cats and Black Swans: We’re Hoping for Good Things

This past week I was part of the US Farm Report. Some of my American readers would surely know who and what that is. I really didn’t know, but it is one of the most watched American farm shows. Last year the Grain Farmers of Ontario (GFO) had planned to have the show produced and broadcast from their annual “March Classic”, which usually takes place in London Ontario. This past year it was cancelled because of Covid, the 2021 version was all virtual. That’s where your loyal scribe came in.

I had been contacted earlier by the GFO to participate in the virtual US Farm Report to lead any discussion on Ontario cash grain market conditions. Shortly after that, I was contacted by the American host Tyne Morgan who asked me who I’d like on the show with me to discuss the grain markets. Needless to say, week’s later American grain analysts Darin Newsom and Dan Hueber joined your loyal scribe on the virtual show. This involved three different days of “tapings”, which ultimately culminated with about an hour-long discussion of North American grain markets packaged as the US Farm Report from the GFO March Classic.

Kudos to the Grain Farmers of Ontario for some serious work putting together a virtual “March Classic”. It’s always a show piece, with great speakers, and this year in its virtual format, a real challenge. However, they pulled it off under tough conditions. It wasn’t always easy, as internet goes down. Clearly, we all want to get back to normal and hopefully next year, the GFO “March Classic” is post pandemic.

It was particularly poignant the last day of taping for the US Farm Report. I noticed my small black cat “Scarlett” behind me during one of the live segments. Scarlett really likes me and commonly jumps up on my desk when I write or broadcast. I initially tried to deflect her away, but I quickly gave up. She jumped up on my desk, in full view of the camera, where I looked at her and calmly took her off the desk back onto the floor. I was trying to be graceful with the camera rolling. As our taping ending, all the participants commented on the cat. I laughed and said, well, it was a black cat and not a black swan. Everybody laughed.

Of course, I’m wondering about the analogy about the black cat and a black swan in the grain market context. A black cat is often seen as a symbol of bad luck in some circles, while a black swan in a market context is a totally unexpected event that comes along to affect markets, often in a negative way, but not sometimes in the other direction. In other words, a black swan usually comes out of the blue to affect your marketplace. One of the best examples of a black swan in Canada came along in 2003. One mad cow decimated Canadian cattle markets overnight. Combine the black cat and the black swan, and it doesn’t sound good.

It makes me wonder. A year ago, soybean prices were $5 lower than they are today. This is happening within a soybean market which is structurally bullish. Did we have a black swan come along? Well, not really, Covid put the market in the dumps last March, but it’s been a slow-motion incremental rally up into February of this year. Needless to say, we got here, and we’ll take it. $15 soybeans off the combine were available last week in Ontario. So, does that Black Cat mean, prices will be $10 come fall? I certainly hope not, but we got here with our eyes wide open.

As all of you know, my mantra, is, nobody knows what markets will do. I farm for a living, but my background as an agricultural economist has led me into writing about markets. However, I don’t live and breathe them like market analysts do. I live and breathe farming. On the US Farm Report, I found myself checking myself, as the host was asking me for hard predictions of future price action. My American colleagues were much more intuitive than me. However, they live and breathe markets. I’m a farmer who understand the mechanics of the agricultural economics beneath them. Taking flyers on future grain prices you take at your peril.

We might get some more clues this coming week when the USDA bequeaths us with a huge data dump, quarterly grain stocks and their much-ballyhooed March 31st Prospective Plantings report. Earlier the USDA had mused about 92 million acres of corn and 90 million acres of soybeans. The record high soybean corn ratio of 2.59 based on US crop insurance levels usually results in an even split of corn and soybean acres. Putting it more succinctly, the US needs all of those soybean acres and a good crop to boot in 2021. If the USDA comes in with 88 million soybean acres or less, that’s not enough this year.

We’ll see, both new crop corn and soybeans spreads are growing less bullish, but the difficult thing will be to discern moving ahead whether this is a real trend and will futures spreads “keep their heads” going thru a tumultuous USDA report March 31st.

Let’s just say, “Scarlett” the small black cat just found herself in the middle of something last week. The US Farm Report will probably never be the same, first a Canadian guest, and then an uninvited black cat. Let’s hope it has nothing to do with upcoming grain market action moving ahead. Black cats and black swans are probably not the best mix. As we look ahead into 2021 spring and summer grain markets, we’re hoping for good things.