Everyone has a way of trying to escape reality now and then. For many people it’s taking a long fishing trip. Maybe it’s a hunting trip or maybe just a family vacation. A place where you can get a different perspective on what’s going on in the world and, in our case, in the markets. It’s helpful. The game plan is to clear your mind out of all the bad ideas and look at the world in a more positive manner.
On July 13, my wife and I boarded a cruise ship in Reykjavik, Iceland. Her idea, not mine. There are times where all of us are in a position such that when you ask your wife where she wants to go on vacation, the safest thing to do is just say “yes, dear.” The fewer the questions, the better. We spent a week cruising around the country of Iceland and then went south and cruised down the west side of Ireland, stopping at five small villages each in both countries, and then we ended up in Southampton where we took a car to tour of Stonehenge on our way to London and spent three days there. It was the longest trip away from the U.S. I have ever had in my life and at this stage, I hope it’s my last.
But for now, I’m not going to bore everyone with the geography and the sights that we saw. No one really cares. The important part of our trip was the people that were on the ship and the fact that we started the tour the day after the attempted assassination of former President Trump. My estimate is that passengers on the ship were 45-50% American, 30% European and the rest a mixture of Australians (quite a few), Asians and several other countries around the world. It was quite the mix.
When checking in on the boat and sitting in the lounge waiting to get into our rooms, the conversation as always on a trip like this starts with, “Where are you from?” The answer was, at this time of year, I’m from Milwaukee. This was two days prior to the beginning of the Republican National Convention. Right away everyone centered on politics and what a firestorm it was. I received an earful right away, particularly from the Australians who I found are a quite outspoken group and not bashful about expressing their opinions. I must say my international travel is not extensive and I was naïve not to realize how important the United States is in the eyes of non-Americans. The importance of our presence in the world, particularly to Australians and Europeans, is for the most part extremely high. We are expected to set the example and be the leader of the free world. The first question from several people was “What are you people doing?!” I do not want to get into politics, but it was very clear that the vast majority of people on this ship were anti-Biden and Harris. “Can’t you Americans do any better than this?”
The vast majority were all of the opinion that the assassination attempt on former President Trump was just that, an assassination attempt followed by a conspiracy cover up. As one Australian told me, “Just like in the assassination of Kennedy, none of us are ever really going to know the real story behind what happened this past July.” I don’t doubt that he is correct. So much for wasting our time talking about politics.
Other Items Learned on This Trip:
1. Political volatility is higher than ever.
2. Emotional volatility is also higher than ever. People are extremely opinionated on both sides.
3. This results in extreme price volatility.
4. Electric vehicle sales, previously led by European countries and cities, are starting to faulter. Many cab drivers that we rode with are going away from electric vehicles to hybrids. As a couple told us, “We can’t afford to sit in line for 45 minutes every time we need a charge.” The infrastructure is not available to keep this system going.
5. England, as in the U.S., is supplying more free housing and social services for migrants. Same is true in Ireland where hotels have been closed to provide free housing and social services for families from Ukraine.
6. In the United Kingdom, depends somewhat by country, home mortgage rates have very limited deductions. One can apply for tax credits but is not nearly the same as being able to deduct the entire interest cost as in the U.S.
7. Coming back to the U.S., the housing market is starting to soften in many areas of the country, impacted by higher interest rates, higher insurance costs and inflationary costs.
8. Many people around the world are concerned that AI (Artificial Intelligence) is going to result in significant job losses. They are probably right.
9. Improved technology is accelerating these changes.
Shifting Gears
Now let’s turn our attention to what has happened in the commodity markets in the last couple of weeks. On Wednesday, July 31, corn and soybean prices closed at the lowest monthly price since October of 2020. By now, we would have to assume that everyone realizes the trend is down. This started last fall. But not everybody catches on as quickly as others.
People in the coffee shop keep asking, “Where is the bottom going to be?” No one knows the answer to that. Bull markets always go higher than expected and bear markets go lower than expected. For those who were in the hope phase based on potential weather problems, the time is running out. The only weather issue to “hope” for now is an early frost. It’s a no-win situation.
The key fundamental near-term is how much old-crop corn (and in some areas soybeans) have yet to move to the market. In the case of corn, while we have no way of quantifying it, we feel that there is still a large amount of corn that has been put on September DP contracts that is yet to be priced. That is overhanging the market and while the corn itself may have already been moved, it doesn’t make a lot of difference. The corn still has to be priced and those are all sell orders.
So, in a nutshell, it’s been a very good year for everyone who has followed our advice. Corn harvested this past fall was sold at an average price of $5.50 and soybeans at an average price of $14.11. It hasn’t been easy and the results certainly were not as high as the previous year but, based upon what the market has given us to use, it’s been a very good year.
For the crop that is growing in the ground, read our specific recommendations on page 7 and 9 for corn and soybeans and page 13 for wheat. Markets are not always difficult. But people make them difficult. Those who have missed this market are, of course, asking where the next opportunity is going to be. There will be one but, to be honest, we don’t know where it will be or when it will be. Market bottoms are long and flat. This one could last for quite some time. Supplies are much too large. The only thing we can say with confidence for right now is this is not a time to be making catch-up sales. The strategy now is to wait for a bottom, which will eventually happen, take profits on hedges and sit back and watch.
