Kub's Den

In 2017, if farmers see a neat or funny image that they'd like to share with their friends, they save it on their smartphones and forward it along. I swear that half of the Snapchat photos I've received over the past month showed cute little baby calves, one of which was memorably stuck in a huge badger hole. There are pictures floating around the internet captioned, "Money can't buy happiness, but it can buy cows and that's pretty much the same thing." And of course there are the photos of the tractors that fell through a bridge or ran into a transmission pole or got stuck in mud past the axles. Those are farming's sharable moments. They become "memes."

There have always been memes -- cultural snippets that get passed from person to person -- but it wasn't always so easy to pass them along. Pity the poor Indus Valley farmer 8,000 years ago who, if he had a funny joke to share about the harvest moon, he had to physically walk over to his neighbor's farmstead to share it. At least farmers in the time of the Roman empire (approximately 2,000 years ago), had a Latin alphabet they could carve into stone tablets to perpetuate their memes.

And that's just what they did. The Sator Square is thought to be the world's first meme -- a Latin phrase that has been found on stone tablets anywhere from Pompeii to Britain. And it's about farming! Agriculture has been "in" on memes from the very get-go.

The phrase, translated, says something like, "The farmer reaps with the plow." That's meaningful enough on its own -- poetically reminding us that a good harvest depends on the good, careful planting of a crop. But the really memorable thing about this saying was that, when written in Latin in a certain order, "Sator arepo tenet opera rotas," the phrase is a palindrome. Its letters are exactly the same forwards and backwards. Not only that, but when written in a square, it's a two-directional palindrome. The letters form the same words up-and-down as forwards-and-backwards. Now that was meme-worthy in Roman times! (And at least as meme-worthy as dogs in cowboy hats are today.)

It's still a memorable and important concept for farmers today -- planting seeds carefully, at precise depths, in properly warm soil, with as little weed and pest pressure as possible, on a date that will give the plants the best chance to avoid excessive heat during pollination -- all of that matters very much to the ultimate yield prospects of an individual field. Individual farmers tend to get antsy about planting their crops as early as possible in the spring. They buy wide pieces of equipment so they can put in as many rows as quickly as possible once the soil warms up. They do this because scientific studies from their local universities show corn yield drags after May 15, for instance, and we never know when an extended period of rain may set in, limiting the local planting window to a very narrow period of time.

But collectively, are all the participants of the corn, soybean and wheat futures markets moved by the poetic wisdom of the Sator Square?

Not so much. It would require extreme circumstances for the futures markets to rally based on planting weather anymore. I took a quick look at the new-crop corn futures charts during the past several April-May timeframes, and planting rallies have become virtually nonexistent, with a sideways or downward trend much more likely during this season, while traders watch ever more acres being planted day by day and the plants are too young to exhibit many agronomic problems yet.

This week's Crop Progress report showed that the 2017 corn planting pace has caught up to normal, and the soybean planting pace is faster than normal, so of course those futures prices have no reason to add on risk premium right now. But last week, corn was behind pace, and for all we know, it might fall behind again before the spring is over.

There are three main theories about why the futures markets may seem unconcerned about adding risk premium during planting weather, even bad planting weather:

1) The "rain makes grain" argument. Pretty much the only thing that slows down planting is excessive moisture, but one excessive rain in one county could be 'just right' for the neighboring county. So whatever potential late-planting yield loss may occur would generally be offset by surrounding areas with yields that are boosted by sufficient moisture.

2) The lack of observable vegetative matter. A larger portion of today's futures trades are directed by computer algorithms than by the excitable human rumors of the past. If those algorithms rely on fundamental crop condition data, either from on-the-ground observations or from satellite imagery, to tell them about crop yield prospects, then they need green vegetative matter to observe. Before the seed is in the ground and germinated, there's not a lot that a brown field can tell a satellite about crop conditions.

3) The confidence in global grain inventories. Maybe if grain stocks weren't so overwhelming in 2017 (and other recent years), the futures markets would be more high-strung about tiny fluctuations in yield and supply prospects. We may get a chance some year in the future to see another planting weather rally, but at this point, it's not looking as if 2017 will be that year.

That still leaves the possibility of a summer weather rally, but a good risk manager won't rely 100% on that expectation. I'd love to see a farming meme to emphasize that!

Elaine Kub is the author of "Mastering the Grain Markets: How Profits Are Really Made" and can be reached at elaine@masteringthegrainmarkets.com or on Twitter @elainekub.

(BAS/SK)

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