Ag Markets..a Black Swan?

The black swan theory or theory of black swan events is a metaphor that describes an event that comes as a surprise, has a major effect, and is often inappropriately rationalized after the fact with the benefit of hindsight.

Does this sound like the event currently happening in farming? It should.

We cannot prepare ourselves for Black Swan events but we can take advantage of them. The first step is to recognize one when it happens. The fact that nearly constant rain occurring in the corn-belt that may be preventing millions of acres from being planted should now be recognized as a black swan event.

Many Black Swan events have occurred over history which include natural disasters, financial disasters, political disasters, energy breakthroughs and technology breakthroughs. None of which were predicted and all of which could only be reacted to after occurring.

We may come to find out the experiencing one overly wet growing season month may not be as dramatic a Black Swan event as a nuclear power plant meltdown or a financial collapse on Wall Street but we should nevertheless prepare ourselves for what our reaction might be when presented marketing opportunism as a result.

You can prepare yourself for times when markets become irrational by first having a plan and executing that plan in a timely fashion. Second, think beyond the event. Be a contrarian, trade opposite of the crowd. That means that you follow other contrarians and pay close attention to the numbers. That may mean that you take a little (or perhaps a lot) of extra time studying markets and market technical indicators. The numbers will tell you what to do.