A couple of weeks ago, I mentioned my dislike for making predictions, and I won’t repeat the reasons here. But before I declare all predictions worthless, I have to admit they do have educational purposes, if used correctly.
As a market analyst, one of my yearly rituals is to go back over Todd’s Takes of the previous year and see how the market comments either held up or fell flat. For me, it’s a learning process and a form of exercise I recommend for all practicing risk managers.
I have no doubt game film will show that Tom Brady sees the field under pressure much better than I do, but I have to say that in 2019, this play caller did pretty good, operating within the framework of DTN’s Six Factors Market Strategies.
One of the first articles of consequence was “Bullish Clues Increase for Soybean Oil” from Jan. 25, 2019. here
Spot soybean oil was trading at 29.56 cents at the time and finished the year at 34.49 cents. The article acknowledged that the fundamental arguments were not especially bullish, but ended with the conclusion: “I can’t guarantee how this one will turn out, but from a technical perspective, higher soybean oil prices look promising in 2019.”
It (2019) was a big year for corn and I’m glad to say, several corn articles held up well. “Does Corn Still Have a Chance?” was posted on March 15 when May corn was near $3.70 a bushel. I pointed out a situation in 2017 when managed funds made a similar mistake early in the year by going heavily net short. here
The 2019 conclusion speaks for itself:
“None of us have a crystal ball as to how 2019 will play out, and like 2017, we may very well see lower corn prices again by harvest time. But, between now and then — with funds heavily net short and so many unknowns still on the table — it seems reasonable that producers should still have a chance at a higher selling price before this market becomes more confident about the 2019 crop.”
Grain News on AgFax
A month later, May corn was trading at $3.60 when I wrote “Corn’s Volatile Season Nears.” here
After explaining the seasonal nature of price volatility, which is one of DTN’s Six Factors, I finished with these three paragraphs:
“If corn planting does become a bigger problem than usual in 2019 (and that is still an “if”), the most bullish feature will be that it could happen at a time when managed futures funds have already made big bearish bets. CFTC said funds were net short 263,768 contracts as of April 2, which is near their largest bearish bet on record.
“Holding such a large commitment to the short side of the market and having no corn of their own to deliver, funds are bluffing based on the hope that bigger crops in Brazil and Argentina will be enough to cash in.
“But the U.S. corn market is nearly twice as big as Brazil, Argentina and Ukraine put together — and the U.S. season is just getting started. As I’ve said for corn prices before, get ready to buckle in. If the past is any guide, things are about to get volatile.”
As expected, corn prices did get more volatile after May 1. July corn hit a high of $4.64 1/4 on June 17.
Two days after the June peak, Todd’s Take was discussing the pros and cons of buying a December 2020 $5.00 corn call in “Pondering a Corn Call.” here
As I explained at the time, I normally don’t like buying corn calls in the summer after markets have already turned volatile, but I had another group of customers in mind — those who had not yet made any forward sales at corn’s high prices.
Again, the most interesting comments came at the end: “Having thought through the situation, I decided not to recommend the calls to Strategy customers. For corn growers who haven’t forward sold any 2019 production yet, I can’t help but think you are passing up some good opportunities.
“You don’t need to buy a cheap corn call to make a forward sale, but if it helps you pull the trigger, you might want to consider it. These opportunities for high prices don’t last forever.”
At this point, some are going to think I made this up or just cherry picked the best quotes of 2019 and left out the bad quotes. I’m sure if we kept poring over old articles, there’d be some stinky fish in the pile and anyone that’s familiar with this column has read more than once I don’t have a crystal ball.
Often at farm shows, people say they don’t need DTN because they get “free information” on the internet. I’m not trying to be braggadocious, but I’d put DTN’s newsroom up against the free sites any day. I enjoy helping customers understand markets and it’s even more fun to share good results.
Consider a free trial to DTN and find out what I’m going to say about markets in 2020.
Todd Hultman can be reached at email@example.com
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