Wild Markets, Past & Present

by John DePutter, Jul 6th, 2012
The current market situation is a historic one: we are seeing devastating drought in the US, but good crops in Canada. Disaster for American farmers, bounty for Canadians. Dramatic upward revisions for crop profits are taking place. This week saw one of the biggest rallies ever for corn futures; soybean futures were driven to the highest level in four years and came within 20 cents of their record high; and wheat futures jumped the most in 16 years.

Amidst all this excitement, I took a moment today to remember some of the other radical market changes I’ve seen over the years, and what it means to be in the markets at times like this.

I remember the great drought markets of 1983 and 1988. Back then there was not so much of a fund presence but lots of farmers suddenly became speculators. A few people made money and kept it. Most made money and then over the years gave it back to the market.

I remember the tops came when the markets failed to keep moving higher despite bullish weather forecasts and continued reports of crops burning up. People paid more attention to the newspapers, radio and TV back then, because we didn’t have the Internet. When it hit the nightly news on the CBC we had a pretty good idea the news was out, the move was over.

The 1988 bull market came and went very quickly in the spring. The markets were trending slightly higher and then suddenly picked up speed. The fireworks ended approximately the time the Americans were celebrating their July 4 Independence Day holiday.

The 1983 bull market had been different, as it just got started about that time. Crops looked great, stocks were ample, most crop price trends were down or sideways, and then suddenly the weather turned hot and dry.

The peaks came with short covering by commercial companies plus rampant speculation.

I remember in 1983 a broker in Chicago that a grain-trading friend of mine was dealing with called and yelled, “it’s over” and hung up. The market collapsed. I had already done some work with timing indicators, Fibonacci relationships, Elliott-Wave chart work and so forth and was ready for the top.

In 1988 I was participating in a trend-trading fund investment designed by a friend and we rode the corn and soybean markets up and made more money than ever before. We were disciplined enough to get out when the trend shifted, following the trading system.

The 1996 bull market for corn should be mentioned here. It was different – it was a demand driven bull market, not a sheer weather bull. A mediocre crop helped drive prices up but the Americans were simply not producing enough corn to meet burgeoning demand and a lot of people did not recognize that until the market was already near its highs and was rationing demand.

The 2008 markets were different too. They were part of a macro-economic upshift, similar to that of 1973-74. And into 1980. The macro-economic upshift involves a transition to a higher trading plateau. We had the initial upswing to the higher plateau in 2007 and 2008 and a secondary set of generalized bull markets in 2011. Now within this higher plateau we are getting this sudden bullish weather flare up which is testing those highs for some markets.

Veteran farmers will say they’ve done best in bull markets to sell in bits and pieces as the market rallies. That said, I do like to try to help farmers fine-tune their sales by identifying signals that typify major peaks. I’m watching the markets very closely these days in an effort to do that. When you’re steering through wild times such as this, it’s important to monitor chart patterns, fund activities, the “tone” of the market, the contrary opinion/sentiment indicators and also the fundamentals, which include the weather.

These bull markets in grains and oilseeds are offering tremendous profit opportunities, and for some, once-in-a-career opportunities. Farmers are invited to contact us for assistance