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Limit Up

By Tori Uhland

March 8, 2024

March is off to a very quiet start in terms of news in the agriculture commodities sector. It’s the same story over and over again – weather is warm, cattle numbers are low, and demand is abysmal. If I’m being honest, it’s a little difficult to find something worth talking about. The upcoming presidential election has been a popular topic lately with Super Tuesday last week and the many hot button issues that our country is facing. Of course, politics play a role in agriculture – policy and trade agreements can have big impacts on the markets. Patterns in the market have always intrigued me, and there have been some guesses on whether or not we will see a rally this year…because of the election. My question: is an “election year rally” probable?

There does seem to be some truth to the theory; in 2004, 2008, 2012, 2016, and 2020 all saw major rallies in the corn and soybean markets. There were many different factors to consider in each of these years, but it is rather remarkable that the “election year rally” theory has held true for the last two decades.

I had a hard time finding much market commentary discussing the rally in 2004, especially anything on how the election may have played a role in that. From what I can gather, the year started off with bullish news in the January 2004 USDA reports. The supply and demand balance was changing in the corn market, and despite a record corn production in 2003, the 2003-04 US ending stocks fell below a one billion bushel carryout. World supplies were also tight. Soybeans were also in short supply after a smaller crop. Wheat prices were up trending, and the Winter Wheat Seedings Report in January 2004 estimated that winter wheat seedings were down from the year prior and well under trade expectations.

There was a poor start to the growing season in 2008, so production was a major concern. Corn started the year around $4.50, and by June it was above $7. This rally didn’t last through December, though. Weather improved in the critical periods of July and August, and prices began to retreat as the trade realized that poor production was no longer a major threat. 2008 also brought the housing crisis, and the world fell into a recession. After a sharp sell off, corn prices finished the year around $4.

2012 sticks out in my mind because of the miserable heat that summer that came along with a devastating drought. Prices were already above average to start the year. Corn was around $6.50 to start off 2012. In the spring and summer, markets saw a major rally because of the drought and production worries. In August, corn was over $8, but retreated back to $7 to finish out the year.

In 2016, corn started the year out around $3.50 but rallied to $4 by May. The growing season had gotten off to a rough start, but crops received rains at the right times and production was better than expected. Corn ended up finishing the year back down close to where it started at $3.50.

2020 was the COVID year. Corn prices started off around $3.90, but then hit pandemic lows in the spring – around $3.20. It seemed like all hope was lost. And then everything changed. Demand jumped up, and we also saw the historic derecho event in the corn belt, leading to tight ending stocks. By December, corn had rallied to $4.80. I think we can all agree that 2020 was a weird year, and in my opinion, it was the end of the world as we knew it. In my opinion, there isn’t any such thing as “normal” anymore, so it will be interesting to see what 2024 brings and if we will get to witness another election year rally. If nothing else, the year will provide opportunities that we need to take advantage of. And to answer my earlier question, I think a rally is possible, but I’m not convinced that the election will be the reason for it.

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