Kub's Den

This is a golden age of television. It's also a golden age of social media, which makes life challenging if you are trying to avoid spoilers for the latest episode of your favorite TV series, as I have been doing for the past several days. Various personal logistics left me unable to access my HBO subscription for a while, but I was able to keep up with the news and the grain markets.

Part of what makes a good TV series so addictive is its episodic nature. At the end of each week's show you, the viewer, are meant to wonder: "And then what happens?"

I've been taught that that's the key to great writing in any form -- to make a TV watcher or moviegoer or novel reader or legal brief reader wonder what will happen on the next show, in the next minute of film, or on the next page. It's what makes writing columns about the grain markets so easy. There is a permanent, deeply-ingrained sense of "And then what happens?" already present in the mind of every reader. The price of corn is $3.50 today, but what will it be tomorrow?

A good story doesn't need to be told in three formal acts. All it really needs is a situation, a spark to incite the characters to do something, and then a conclusion. Nevertheless, the three-act structure has become entrenched in our expectations, so I have decided to use it to tell the story of this year's growing season. The protagonist will be someone who is bullish on corn prices, for instance, a farmer with unhedged 2017 corn bushels that will need to be marketed in the coming months.

The first act sets up the story and states a theme, then shows the "inciting incident." It is the spark that incites action just like in the story of the Wizard of Oz when Dorothy's house got sucked up by a tornado.

The inciting incident in this story is the wet, spring weather patterns across pockets of the Corn Belt on the 2017 grain markets.

December 2017 corn futures prices were bouncing along in a fairly boring sideways pattern between $3.65 and $4.05 for most of the year leading up to planting, just like Dorothy going about her daily life of school and chores and helping Auntie Em. Then one day ... relatively late planting progress and slow nationwide progress numbers during the early part of the growing season started to give the market hope that the ultimate yield might be low enough to justify some higher prices. The bullish observer wondered what to do.

In the second act, the hero should make a choice (in this case, let's say our protagonist decides to hold out for $4.25 futures). There might be side quests and love interests and various hijinks in the script, but eventually, Act II reaches the midpoint of the story. Let's say the corn market's midpoint was the $4.17 1/4 high on July 11, which conveniently enough, was probably about the midpoint of the growing season in the heart of the Corn Belt.

In a typical Hollywood script, all goes downhill, with conflicts layered upon conflicts. The bad guys close in. All is lost. The hero wallows in hopelessness during "a dark night of the soul."

Well I dare say, we've found that dark night of the soul for corn market bulls. From Aug. 10 onward, the December corn contract has dropped 38 cents while generally favorable yield estimates were published. Weather reports stayed reasonably fair for the Corn Belt, outside markets panicked about news headlines of the day, and Hurricane Harvey added challenges for the vessels being loaded in the Delta and in the Gulf of Mexico. Conflicts upon conflicts. Some hopelessness and wallowing definitely feels warranted.

Now if the corn market really were in a Hollywood movie script, Act III would provide the bullish hero with some fresh bit of inspiration. There would be a climax when the enemies were vanquished and the goal was reached. Then there would be a finale that incorporates the original theme of the story, and ideally, a final image that somehow bookends the opening image of sideways, neutrally-priced corn.

I don't think we are in a Hollywood movie script, and most days I'm thankful for that. But with corn harvest about to start working its way north out of Texas, I feel that the story is moving toward its finish, one way or another. The December contract may not ever reach $4.25, and certainly not before harvest, but a weather forecast that hints at a cold snap in September, could be fresh inspiration to kick off Act III and reach a satisfying conclusion.

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Editor's note: 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.

(AG/BAS)

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