I’ll always have a soft spot for Alan Greenspan. I don’t know many folks who agree, outside of presumably his wife, long-time NBC correspondent Andrea Mitchell. But one of my first assignments for Farm Futures back in 1987 was to profile Greenspan, who had been nominated by President Reagan to replace Paul Volcker, who was reviled by many for the Farm Crisis, thanks to his persistent interest rate hikes.
One official who provided key background for me was Wayne Angell, who was known as the farmer on the Fed due to his background in agriculture. Angell died last year, but he recognized Greenspan’s experience trading markets, including agriculture. That expertise was invaluable as the new Fed chairman had to deal with the 1987 stock market crash, and then fallout from a series of headlines about war.
The media liked to make fun of Greenspan because of the way he talked. Even trained economists sometimes had trouble following his line of thinking. But all the “economic mumbo-jumbo” worked. Markets eventually stabilized and then kept rising — and rising.
Traders had a term for his effect: the Greenspan put. He helped set a floor under the market, the same way a put option does for your crops. Unlike puts, it was free, assuming you could ignore the rest of the chaos.
So, as the U.S. prepares to change leaders at the central bank, it’s a reminder that in the short run you may not get what you want right away. Eventually, however, these officials follow form — remember that this term is borrowed from the Daily Racing Form. (I grew up in a “track town” and learned first-hand at a too-early age about the risk/reward of gambling)
Rate cuts needed?
President Trump continues to push for lower rates. Whether he’ll get them quickly is still an open debate, thanks to economic data that suggests neither unemployment nor inflation is anywhere near levels triggering central bank moves in the past.
This relative equilibrium may not change this week, for a truly mundane reason. The U.S. is open for business after the Presidents Day break. The rest of the world, particularly Asia, is not. Today is the first day of Lunar New Year. Activity in China is limited, and other countries are also enjoying time off.
Thin volume during holidays can exacerbate price moves so farmers interest in taking positions “home” with them overnight must be carefully weighed, especially with stop-loss orders. Fills can be unpredictable.
Holidays end, eventually. In the case of Lunar New Year, markets officially reopen in China Feb. 24, though it can take days if not weeks for trading to crank back up.
Acreage estimates begin
Of more interest to farmers will be acreage forecasts for 2026, which will start to hit the market from official and unofficial sources. USDA normally updates a relatively soft forecast from its annual Outlook conference, and those numbers could drop early Feb. 19.
Make sure your business needs protection before trying to get it from the market. The ratio between new crop corn and soybeans favors beans but is similar to where it was in 2022. Prices were twice as high back then, which on its face may lessen the importance of this ratio.
And, of course, markets can be like Midwest weather — if you don’t like it, just wait a few hours.