Commodity Investors: How to Train Your Disobedient Price Dragon

In one year, soybean prices went from 11-year lows to 8-year highs. Believe it or not, that's exactly what was supposed to happen

by Nico Isaac
Updated: June 25, 2021

From lumber to rubber, grains to livestock, 2021 has been a dramatic year so far for global commodities. Wild price swings may have investors feeling like Hiccup in the animated trilogy "How to Train Your Dragon."

Just when the markets look like they're ready to sit still and behave, they take off in the opposite direction, burning the previous trend to a scorched crisp.

Take, for example, the Past year in soybeans. Back in March of 2020, soy prices were clinging to their lowest level in 11 years, while the grain belt reeled with unanswered questions; namely, how much crop to grow amidst the Covid pandemic, questions about global demand changes, the open-ended trade war with China, and so on.

According to mainstream outlets, "beans in the teens" was a thing of the pre-pandemic past. One March 16, 2020, Farm Lead article warned the ag market faced a lethal combination:

"As these are unknown times, there is obviously a lot of fear in the market and accordingly, things get volatile, but mainly, fear is a price killer."

Added another April 7 fb.org: "Coronavirus sends crop prices into a tailspin."

And finally, a March 28 CNBC hammered this nail into the grain's coffin:

"Coronavirus Hits Already Struggling US Farmers: 'We've stopped saying it can't get worse.'

And yet -- "get worse" it did not. This chart shows what happened instead: Soybean prices reclaimed the upside, rocketing to their highest level in eight years come May 2021.

How could the mainstream experts have been so far off target?

The answer: Their market forecasts are based on external factors; in this case, the crater in demand caused by the global pandemic.

But in our view, the main driver of price is investor psychology, which unfolds as clear Elliott wave patterns on the price charts themselves.

In fact, in our March 2020 Monthly Commodity Junctures, editor Jeffrey Kennedy outlined the year ahead for soybean prices with the following chart and called for further consolidation followed by a game-changing -- BULLISH -- breakout:

"I believe we have put in a very significant low back in 2019 and we will indeed advance. Ultimately, we expect the larger, five-wave structure to the upside in wave C to carry to $11 a bushel by the time we move into the end of the year."

From there, beans took off to the upside. By December, prices stood at $12 a bushel, exceeding the initial Elliott wave target. That's when our December 2020 Monthly Commodity Junctures gave this update:

"We could easily see the move up in soybeans continue to grind higher. We've made it to $12 a bushel. We can move up to $13 and then $14 and then $15."

And from there, beans continued to rally to 8-year highs on May 10 before losing steam. Once again, our May 2021 Monthly Commodity Junctures was in front of the grain's next turn -- this time down -- as shown on this chart:

In the movie "How to Train Your Dragon," Hiccup is given this sage advice. "What you're searching for isn't out there... It's in here."

For investors, our advice is similar: The answer to where commodity markets are headed isn't outside; it's directly on the price charts.

Right now, our complete Commodity Junctures Service provides Elliott wave guidance and in-depth video lessons that arm investors with the tools to recognize major market turns early on.