By Elaine Kub
DTN Contributing Analyst
Exactly 70 years ago, on Dec. 20, 1946, New York moviegoers first heard Jimmy Stewart exclaim, "I wish I'd never been born!" (in character as George Bailey from Bedford Falls). The classic Frank Capra film, "It's A Wonderful Life" has been an indelible part of Americana ever since. The grain markets have experienced their own "dark night of the soul" in 2016 -- although perhaps not quite as dramatic as poor, suicidal George Bailey's.
It's so tempting to think along the lines of, "If only x hadn't happened, then we wouldn't be in the sorry state we're in." George Bailey moans in despair to his guardian angel Clarence Odbody: "I'm worth more dead than alive! If it hadn't been for me, everyone would be a lot better off. My wife and my kids ... Now why don't you go off and haunt somebody else?" That's something like saying, "If only the Fed hadn't stopped pumping oodles of money into the markets back in 2014, then maybe corn would still be $4." Or something.
The angel Clarence goes on to show George an alternate universe, "a chance to see what the world would be like without you," to illustrate the movie's moral message. If George hadn't been such an upstanding father / husband / brother / nephew / friend / neighbor / community member before he got into some financial trouble, then his huge collection of caring friends and family wouldn't have been around to help out when he really needed it.
I suppose it's possible that someone out there hasn't yet seen this movie, or maybe it's been several years since you last encountered a re-run on TV, so I'll go through a few examples of the seemingly small good deeds done by George Bailey and their far-reaching consequences in the lives of those around him. Similarly, certain events happened in the grain markets this year that went on to shape prices in lasting ways.
As children ice skating on a pond, George saved his brother Harry from drowning. Harry grew up to become a war hero and win the Congressional Medal of Honor. In the alternate universe, Harry dies at the age of 9 and every soldier dies on the ship he was supposed to save. THE 2016 GRAIN MARKETS: The new-crop soybean-to-corn price ratio spent most of April and all of May above its historical average 2.5-to-1 relationship, growing more and more favorable to soybeans as time went on. If the soybean market hadn't made that push, it may not have motivated the extra 1.5 million acres of planting (83.7 million acres total) that ultimately occurred above the USDA's original projection in May (82.2 million acres).
As a boy working at a drug store, George prevented Mr. Gower the pharmacist from accidentally sending out poison in some medicine capsules. In the alternate universe, Gower's mistake went unnoticed and "that rumhead spent 20 years in jail for poisoning a kid." THE 2016 GRAIN MARKETS: A big pocket of drought was hovering over the central Corn Belt at the beginning of July, a timeframe crucial to corn silking and pollination. Ultimately, that very region, stretching across Iowa, Missouri, Illinois, and Indiana, racked up anywhere from 5 to 15 inches of rain during the month of July -- truly a billion-dollar rain. If that hadn't happened, we probably would not have seen the record-breaking nationwide average yield of 175.3 in 2016.
When his father had an unexpected stroke, George gave up his dream of going to college and becoming an engineer, and instead took the helm of the Bedford Falls Building & Loan, saving it from collapse. In the alternate universe, Bedford Falls no longer has financing for affordable housing and is ultimately named Pottersville in honor of a conniving profit-driven evil banker. THE 2016 GRAIN MARKETS: Halfway across the world, palm oil yields in Southeast Asia were negatively affected by El Nino in the first few months of the year. Throughout the rest of the year, the global edible oil market struggled to find equilibrium once large traders refused to buy palm oil that wasn't sustainably sourced. During the last half of 2016, the soy complex rallied alongside this unpredictable bubble.
When his childhood friend Violet Bates needed a personal loan to move to New York, happily-married George risked the town's gossip to help her out. In the alternate universe, Violet gets hauled off to the Pottersville jail amid a riotous scene of drunks and dance halls and fallen women. THE 2016 GRAIN MARKETS: The talk was all gloomy for commodities at the start of 2016, with worries about the Chinese economy and falling global demand for raw materials, plus the supposed end of some artificial "Super Cycle" for investors. By the end of 2016, the headlines were driving investors' interest back into commodities, especially after surprising cooperation was demonstrated among OPEC's members, driving crude oil above $52 per barrel.
It wasn't all saintly behavior from George Bailey. He lost his temper at his Uncle Billy and even his own wife and kids. He yelled at his daughter Zuzu's teacher, Mrs. Welch, then got punched in the face by Mr. Welch while he was drinking at a bar. In the alternate universe, his face is no longer bleeding from the punch, and even the weather is different! But his own mother doesn't recognize him, and Uncle Billy's been in the insane asylum ever since losing his business. THE 2016 GRAIN MARKETS: It's hard to measure to what extent we may still be suffering from demand destruction that occurred during the bad old days of $8 corn four years ago. Sure, we're projected to ship out over 2.2 billion bushels of corn exports during the current marketing year, but how much higher might that have been if the 2012 drought had never occurred? So many moving pieces affect commodity prices, and it's virtually impossible to isolate the cause-and-effect of any one factor.
By today's movie-going standards, "It's A Wonderful Life" may be a mild, platitudinous film. Nevertheless, its inevitable appearance at this time of year is a good reminder that all the things we wish for may not always turn out as we expect, and we may be better off spending our energy feeling gratitude for the many blessings we already share.
Merry Christmas!
Elaine Kub is the author of "Mastering the Grain Markets: How Profits Are Really Made" and can be reached at elaine@masteringthegrainmarkets.com or on Twitter @elainekub
(GH/BAS)
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