As the snow falls and we wrap up another year, I realize that this is the last column that I will write of this decade. It doesn’t seem like it was that long ago when we were debating the fear of “Y2K” and wondering if our society would grind to a halt as the computers lock up.
Clearly this turned out to be an unfounded fear and not a beat was missed as we entered into the decade of 2000. The drive to replace our old computers drove the technology market into a frenzy and we thought all business was going to be done over the internet. The technology bubble burst leaving investors in “dot-com” businesses (that never generated a profit) holding worthless stock.
This frenzied pattern of investing was repeated several times during the next 10 years. We saw this happen in real estate, equity markets and credit default swaps, just to name a few examples. The psychology of the masses seems to push markets to extremes and leave many “holding the bag.”
We in the grain industry certainly saw our share of extremes in psychology, which led to volatility that tested our management. Looking at the extremes of the corn market over the last decade, we saw the “spot month” low made in August of 2000 at $1.74 per bushel. This was followed by the high in June of 2008 $7.62 1/2 on the July contract.
The soybean market found a low on the “spot month” during January of 2002 at $4.15 1/2. The decade high in the delivery market was found in July of 2008 at $16.60. We would have to call these markets frenzied with a $5.87 1/2 swing in the corn market and $12.44 1/2 swing in the soybean market over the decade.
How many people were left “holding the bag” in these markets? Markets like these have real consequences to all who are involved. This is why margin management is so important for those who want to look to the next decade.
As I travel the back roads of Minnesota farm country, I am continually impressed with the spirit of rural communities and the folks who bring life to rural America. This is life for sustenance and life for longevity. The land and people who tend to the land have a relationship that is tested most every year. It is out of this give and take that the world is fed, fiber is produced and energy is derived. It is truly, a miracle of creation. Take a moment during this holiday season to give thanks for the opportunity to be a steward of the land.
Let us remember those who have gone before us and the ones who bring meaning to our lives. Many times it is too easy to focus on the struggle that we forget to enjoy the journey.
The next decade will give us many chances to work on the grain angles. A wise man said, “Remember to manage the things that you can manage and manage around the things that you cannot.” If only it were so easy.
Grain Angles is written by Tom Neher, AgStar Financial Services vice president of agribusiness and grain specialist from Rochester, Minn.
