HOWEVER, there are some early indications that the regime that has produced the almost-thirty-year run of favorable crop conditions—a run not seen for some 800 years—is coming to a close. These indicators are tentative and are NOT immediately actionable but should the good times end, fortunes will be made.
In this piece Agrimoney looks at a couple factors slightly different from those we're hinting at but which should push things in the same direction.
From Agrimoney, October 3:
Farm commodities appear to be "in the early deals of a bull market", according to the operator of the Bcom index, proving particularly upbeat over prospects for corn, soybean and wheat prices.Bloomberg Intelligence acknowledged that the depression in the Bcom agriculture index, as measured on a spot basis, was reaching "historic extremes" in terms of its weak performance."Since 1991, the 52-week rate of change in the Bloomberg agriculture spot index has never been lower for longer in a four-year period," the business said, highlighting the weight on prices in particular from a cool US August which, in boosting US row crop yields, undermined values.However, the extent of the downturn represented a contrarian buy signal, Bloomberg Intelligence (BI), said, saying that "agriculture prices are about as buried as they get" and that "price gains are likely for agricultural commodities" in the newly-started October-to-December quarter.The comments come amid some recovery in hedge fund sentiment towards the sector, with managed money returning to a net long in major ag contracts last week, although many commentators remain cautious over prospects for price gains given large world supplies of many crops.'Early days of a bull market'BI's forecast reflected in part an assessment of demand exceeding supply in many crops, with commentators such as the International Grains Council, for instance, seeing a drop in world grain stocks this year, albeit to still-high levels.In the July-to-September period, "primary demand and supply drivers", as measured by Bloomberg Intelligence, "held above par [for] the first quarter in six years".However, the index operator highlighted in particular the deep nature of the so-called contango in futures – in which prices of distant contracts exceed those for spot lots, "indicating little incentive to sell", and indeed rewarding producers for storing crop instead.The steepness of the contango in ags is the steepest since August 2006, after which the Bcom ag index rallied 140% to a peak in 2008."Futures curves signal agriculture prices are establishing a bottom," Bloomberg Intelligence senior analyst Mike McGlone said, adding that "agriculture appears to be in the early days of a bull market"....MORE