Pro Farmer’s Tech Talk | November 16, 2015

Corn: Next 20 years: Super cycles have been found in commodity prices and indices back to the year 1200. The business cycle model uses three super cycles: 216 years, 54/72 years and 27/36 years. These numbers are labels and the actual cycle length is highly variable hence the development of a clock like model when cycles are integrated for improved value. I believe the model is an improvement and expansion upon the Schumpeter Business Cycle Model. The 54-year cycle likely relates to the Kondratieff cycle that was discovered in prices and inflation. A 36-year cycle bottomed in the 1830s alongside banking and dollar troubles for the U.S., which preceded a more important 72-year cycle low placed during the Civil War. The next 36-year low was in 1896 for the stock market, corn and oil. Such a fluctuation related to a depression, but the more important crash was the 1929-32 bear market into a 216-year cycle bottom.

The U.S. nominal GDP per capita fell by 47% from a 216-year cycle high near the 1812 War. Corn topped in 1816 following a bull market related to snow during every month of the year for a major crop failure. Following a recovery late in the 1800s, the great bear of the 216-year cycle again returned for a 48% crash in nominal GDP per capita. I think of this as the value of the nation if for sale: 50% off its regular price. From the 1930s and the 2000s, the three super cycles are up into the 2030s to early 2040s for commodities, stock market and the economy. But for commodities, the trend will be a wide ratchet process. I favor ranges of $3.00 to $8.00 per bushel this decade for corn (already seen), $4.00 to $10.00 in the 2020s, $5.00 to $13.00 during the 2030s. The more important drought of the past 200 years is due during the 2030s. With the splicing of wheat to corn, I have created a chart back to the 1500s and find that $20.00 corn would not be a new cyclical statistic. In Georgia, during the revolutionary war prices may have touched $90.00 in today’s dollars. So $13.00 is not unreasonable. Supporting fundamentals are rising democracy, a global rise in capitalism (even communists are creating a new form of capitalism), rising national capitalization (printing of money) and the more important -global population growth. In recent weeks, China announced they will allow couples to have an additional child. This was welcomed support of the population growth forecast made many years ago that food consumption is likely to double this century. A 216 year cycle bull market during the 1500s related to wheat prices in Europe rising 3,000% to 6,000%, corn up 2,250% in the 1700s and since the 1930s corn rallied by 3,600% as of 2012. This showed the cycle continues to work.

Next few years: The nine-year cycle is a component of the larger super cycles. A nine-year cycle of the economy since year 1800 shows economic growth lasts 7 to 12 years and then there is a one to three year recession. This cycle forecasts the economy is set to grow until as late as 2019. Commodity and specifically corn prices are due for such a cycle bull market with a related low likely already in place and due no later than 2017. So this reflects improving demand/buyer interest during 2016-19. On the supply side, a 5-to-7-year cycle low in corn yield and production is due 2016-18. It may occur as a single poor crop year or one year lower followed by a recovery and finished by another down year. The cycle may cause lower yield and production during each year during the time objective. Climate studies also offer the same cycle to fluctuate enough to cause the largest negative crop impact since the 2012 major crop loss. Weather Trends International has forecast a crop problem in 2016 and corn at $7.00. My objective is $6.50-$7.50 and was made before learning of other firms making a similar call.

Near-term: A Level 1 cycle low and the second chance for a seasonal low are due now. Prices have been weaker than expected. I believe bearish speculation is too high, but the trend is down until a weekly reversal. A clue of a reversal would be a close above $3.63 ½ for the December contract. A monthly point and figure chart has built potential for $4.80s and higher, so long as support is around the $3.50s. I believe a three-year cycle low was placed last year and the market is base building. On a short-term basis, the dollar has caused problems, but on a long-term basis weather is likely to support bulls.

Weekly Soybeans

Wheat: In 2005, prices placed nine-year and super cycle lows. A super cycle bull market was volatile and brief and into the 2008 minor super cycle high. The nature of that bull market was similar to one during the Civil War. The nine-year trend has been down from 2008 and was likely placed in September. If not, then at least a three-year cycle low was likely placed, which allows wheat to trade alongside the long-term forecast for corn. Its ratio to corn may improve or erode, but the two should rally together due to similar cyclical trends. A monthly close above last month’s high at $5.31 ½ would signal a significant low is in place. Trade above the three-year cycle high placed this year at $6.15 ¾ for the spot SRW contract and before the next related top would signal still higher prices. There is potential for $7.00s to $8.00s, which would still likely be a low ratio to corn. Some foreign markets show signs of a three- year cycle low in recent months or such was placed late 2014.