Federal Reserve Bank

Midwest farmland values continued an upward trend, but slowed in the first quarter, according to a survey in the Seventh Federal Reserve District.

Over the past few weeks, and now that we are into the second quarter of the year, a number of commodity markets have been chopping around with a downward bias, or simply remained bearish.

The first quarter of 2023 has ended, and moving forward, the financial environment for commodities should be far more bullish than what was seen the past few months.

In my column from Dec. 30 last year, entitled “Cattle report bullish for prices,” I wrote: “Moving forward, I am uncomfortable with the long side of most markets for the first quarter of 2023."

Volatility in the agricultural industry creates opportunities, not just challenges. “A good manager positions himself to capitalize on that volatility,” said David Kohl, professor emeritus of agricultural and applied economics at Virginia Tech.

A few days ago, former President Barack Obama, a basketball junkie, said “this is the best time of the year.” What he was excited about was the fact the NCAA Division 1 men’s basketball tournament is played each March to determine the national champion.

It is not unusual for markets to be blindsided by a shock of some sort. But lately, markets of all kinds are being caught flatfooted and hit with shocks and aftershocks.

The second to the last column I penned for this newspaper in 2022 was entitled “The super cycle is alive and well.” I wrote: “Commodities in the new year will outperform the other major asset classes, stocks, bonds and currencies.”

Over the past few weeks, a host of markets have turned lower to sharply lower. The reason for the weakness is the money managers, the funds, the “algo boys” high-frequency traders and chartists are finally reluctant to fight the Fed.

In the world of investments and trading, there are two rules always to be followed and never forgotten that stand above all others. One is “don’t fight the Fed.” The other, “don’t fight the tape.”

In the absence of weather-related problems this growing season in the United States, grain prices are now at levels that are simply unsustainable.

Farmland values in the 7th Federal Reserve District increased 12% during 2022, which helped reach a new peak, even though the yearly gain was smaller than that of 2021.

The land market momentum that began in late 2021 accelerated into 2022 and was driven by competition for high quality cropland. It resulted in both record sales and overall increases in land values across the country.

Rising factory output led to strong U.S. sales at the end of last year, pushing General Motors’ fourth-quarter net income up 16% over the same period a year ago.

Thus far, the outstanding feature of the new year is the money flowing into the commodity markets, per se. There is a growing belief among several major financial institutions that the commodity markets will do better this year than they did last year.