Four Seasons – Q4 2020 Market Commentary
Market Commentary for Q4 2020
Three years of excess supply and muted demand have made it tough to trade global agricultural markets. However, 2020 saw a dramatic shift in volatility and trading opportunities for ag traders like Four Seasons Commodities Corporation. It seems like every week presented us with something new to trade.
In the last few months of the year, these “somethings” almost always bent bullish. There are too many to discuss individually so we’ll go with a list and not necessarily in order of importance: COVID pandemic exhausts global food stocks; China buys to both replenish its cupboard and comply with U.S. trade agreements; China buys to feed its hog herd, which is recovering from African swine fever; American dollar falls sharply, making our products cheaper; La Nina weather pattern threatens South American crops; Brazilian and Argentinian farmers sell too much of their crop in advance; U.S. farmers sell too much of their crop in advance; Russia institutes export taxes to protect internal wheat supply; Argentina halts corn exports to protect livestock production; a pandemic-plagued USDA publishes reports that are the complete and total opposite of a previous report, and on and on.
The last four months have created more than a perfect storm…it’s more like a perfect hurricane. From June 30 to December 31 of 2020, corn rallied 34%, beans 48%, and wheat 26%. We have traded opportunities in flat price, spreads and options–and there is more to come. We do not think the top is in, but certainly, the easy money on the upside has been made. And traders know that on the other side of a good bull market there always lies a good bear market.
We happily sign off on a good year (in the market anyway) still carrying conservative long futures, spreads and option strategies in corn, soybeans, soymeal and soyoil. Additionally, we are long hard red wheat and short soft red wheat on a spread. The plan is to stay bullish so long as the global weather is threatening and global stocks keep shrinking. You don’t often get to see a supply bull and a demand bull running side-by-side, but we are enjoying the view.