Years ago, an enterprising neighbor operated a palm reading business from her home with just a secretary, fax machine, and telephone. Her business model was simple: After clients faxed their photocopied handprint and sent some form of payment (rumor had it was $20), our neighbor telephoned them with the results of the “reading.”
While no one called her a fortune “teller,” it was easy to tell she was indeed earning a small fortune. In our town of 1,800, her chauffeured Cadillac and indoor swimming pool were dead giveaways.
Did she really know the future?
It didn’t matter because most of her clients were searching for different “facts”—answers and ideas different than the ones they were living under—that might steer them out of trouble or towards happiness.
The past week offered several examples of this very human, often delusional search.
One is the National Climate Assessment issued the day after Thanksgiving. It restated (for the fourth time) that “climate change is affecting every part of the United States… be it agriculture or forestry or energy,” Andrew Light, a professor at George Mason University and an author of the report, told National Public Radio.
Despite this evidence, most U.S. farm groups, like the White House, said little about the report. When finally asked if he thought climate change would “wreak havoc” on the U.S. economy, as the report suggested, President Donald J. Trump offered his review: “I don’t believe it.”
Somehow the Wall Street Journal anticipated his response because, on the same day as the President’s declaration, the newspaper published a front page story that detailed how Canada’s farmers were making hay—actually a lot of corn and soybeans—because climate change had raised local temperatures an average 3.6 degrees Fahrenheit since 1950.
“Before 2013,” reported the Journal’s Jacob Bunge, “provinces such as Saskatchewan and Alberta grew no significant amounts of soybeans… Now soybeans cover 425,000 acres in those provinces.”
Moreover, climate change has been good for Canadian farmland prices: “While U.S. corn-belt land prices stagnate, per-acre prices across Canada have climbed 8.4% in 2017,” noted the Journal.
Interestingly—or maybe it was just another curious coincidence—the Journal published another forest-for-the-trees financial story Nov. 26 that carried another hard punch of reality. Here’s its opening paragraph:
“Stocks, bonds and commodities from copper to crude oil to burlap are staging a rare simultaneous retreat, putting global markets on track for one of their worst years on record and deepening a sense of unease on Wall Street.”
And that’s just the windup; here’s the pitch: “All told, 90% of the 70 asset classes tracked by Deutsche Bank are posting negative total returns in dollar terms for the year through mid-November. The previous high was in 1920, when 84% of 37 asset classes were negative. Last year, (it) was just 1%...”
This is not news to farmers. The November AgLetter from the Seventh Federal Reserve District (that includes all of Iowa and Michigan and two-thirds each of Illinois, Wisconsin and Indiana) reported that third quarter farmland values, when adjusted for inflation, continued their four-year slide south.
“Although nominal farmland values” remain relatively stable across the center of the corn belt, said the Chicago Fed, “real farmland values”—those adjusted for inflation—have “been eroding since the third quarter of 2014.”
What kept farmland values across this district from experiencing “more downward pressure,” however, explained the Fed, was 2018’s “exceptional crop yields.”
So, all you have to do to stay above water next year is dodge a weather calamity, pray that 70 global investment asset classes stage a Lazarus-like comeback, and deliver another bin-buster of a crop while Congress passes a long overdue Farm Bill, the White House and China (and Europe and Mexico and Canada…) settle their tariff wars, and a $1 trillion federal budget deficit doesn’t ignite inflation.
At least that’s what the facts suggest. Feel free to consult your neighborhood palm reader, though.