Market Analysis with Chris Robinson

Improving weather in South America pressured most prices but not before a cold snap settled into the Wheat Belt. 

For the week… The nearby wheat contract added 17 cents and the March corn contract put on 9 cents. Farmers in Brazil have entered the home stretch of their harvest.  The March soybean contract weakened 14 cents while March meal fell $5.50 per ton. March cotton expanded $1.55 per hundredweight. Over in the dairy parlor, March Class Three milk futures increased 33 cents. The livestock market was mixed. April cattle declined $2.53. March feeders added $1.45 and the April lean hog contract put on 45 cents. In the currency markets, the US dollar index lost 134 ticks.  March crude oil fell 35 cents per barrel. COMEX gold expanded $12.90 per ounce, and the Goldman Sachs Commodity Index added more than 6 points to settle at 570 - 40. Joining us now is regular market analyst Chris Robinson.  Welcome.

Chris Robinson: Hi, sir. How are you doing?

Paul Yeager: I'm better than it is in Wheat Country right now here, it's snowing, it's cold. There's no snow. That's really enough to move the market, just cold.

Chris Robinson: You know, it happens every year. But that's the risk is that there isn't enough snow cover. Is there going to be winter kill And and I guess, you know, beggars can't be choosy. It's a good thing we had a nice recovery rally. You know, we were basically dancing at these four year lows. And wheat. Wheat has been the laggard. You know, we had a nice rally in spot corn, close to a dollar over a dollar 20 or so in spot beans. And the we just couldn't get any traction. Every time we rallied 30 or $0.40, it would break. So we had a good recovery was a good way to end the week. It's the middle of the month. We'll see. The other thing we bulls have going for him is the managed funds. They're short selling. They're really short. And, you know, if they have to buy that back, they're there. Covering those losses will help. Hopefully, it gives producers an opportunity to catch up on sales or $0.60 off a low. You know, we need another dollar.

Paul Yeager: That would be your advice if I'm still sitting with some. Wait, hold for a little bit of.

Chris Robinson: Holy cow or. Yeah, if you don't want to sell it if you need cash flow. I mean I'm always say I like selling into 60 cent rallies, not 60 cent breaks. And if you don't want to if you don't want to make the sale, you know that's this is when you use a poor option because it's like you're climbing up the mountain. You know, you put your crampons on the wall so you hold it. So if it falls, you can say, you know, we rallied $0.60, try and protect 40 of that 60 in corn.

Paul Yeager: This is the market that continues to defy a lot of things. It proved it again this week. Why?

Chris Robinson: Well, I mean, I think that the one thing we've seen, we haven't had a long time. We're starting to see some export things. Actually, the exports for corn have been really very healthy. And then there are, people hadn't expected that. So that's been a great support to the market. You also had for the past six months have people always said they don't like the benefits funds, but they're part of the reason we have this rally. They started buying it quite a while ago. They've worked up to a, you know, over 3,000 contracts. They are supporting the market and they're continuing to defend that position. Now, the only thing I don't like is what we haven't been able to do. For some reason, they will not give us a $5 print on March corn 499 and 3/4s. Same thing with DEC corn. DEC corn couldn't get the $4.75. But if you look at where we were 424, eight 4.99, that is a gift. It's been the one thing I think, and a lot of farmers out there that are watching. You've got corn in the bin. You know, you do the math. I think a dollar rally is worth defending or rewarding. I'm not saying it can't go higher. I hope it does. But we've had a lot of volatility, too.

Paul Yeager: Yeah, I think since January ten, since that USDA report, $0.96 off the August low coming into today. So technically speaking, can we print that five come Tuesday?

Chris Robinson: I've been surprised that we haven't because generally these computers will try and go run stops. What does that mean? Well, anybody that's short because about $5, they'll have a buy stop. So hopefully we'll get pushed up the next level. A lot of people are looking at is 508. That's the old high from last June. So we saw this on the way down with wheat. Wheat's old low was going to stop the slide. Now it's going to be which old high is going to, you know, be a good target. I will say this. You know, when we had the tariff announcement, we opened up, you know, last Sunday night, everything gapped open, lower that to come back as well. That's really impressive. Of course, with the headlines that we have. You go to bed one night, somebody says, well, something else, it changes. Sometimes it's good, sometimes it's bad. That's the unknown. But again, big picture, a 30,000 foot view, $0.96 off the bottom. That's real money. And producers need to either, you know, figure out some ways to reward it. You have to reward it. And if you can't reward it, defend it.

Paul Yeager: Okay. How far into that rewarding an old crop am I? Should I be emptied and sold of 24?

Chris Robinson: Yeah. And if you're if you're worried that it's going to go higher, I mean, if you if you've written this all the way up for a dollar, make the good cash, sell, pull back ten, 12, $0.15, whatever you want. You can rely on it for the what if what if we have in the 88 drop. What if this what if what if what if the tariffs turn out to be good and the sudden you know, they cut a deal. So I think that that also caught a lot of people flat footed. They automatically assume that it was going to be a disastrous and it is kind of like they put their hand on the hot stove and pulled it away, which is good.

Paul Yeager: Let's go to where it's a little warmer in South America. And we're going to open up with a question from Phil in Ontario to start our soybean discussion. He wants to know, have Argentina crops been damaged significantly or is it all priced neutral at the moment? And Argentina specifically first and we'll talk.

Chris Robinson: About Argentina specifically. Well, it's interesting. They did lower the the kind of numbers came out where they lowered the corn more so than the soybeans. It doesn't look like the soybeans have been hurt as much as corn was. And also, we've gotten some good rains in the last eight days. Now we have the next week. Next week, they're going to it's going to be drying out. And, you know, there should be some harvest pressure there. So we're into the time of the year where you've seen it, where a lot of our exports historically, this time of the year, they kind of dry up because China's realizing that and to feed for more weeks, all those beans are going to come on. So I think the proof is in the pudding. We've had a good rally in March, soybeans, spot beans, but again, very technical. We have not been able to get above the tune of the moving average if we ever got above the trade moving average, I think you'd see more money coming in from the speculators. That's a big thing that they follow going back for 20, 30 years, which Dennis that's how he made all his money. Just all we did was trade the two or three day moving average. And so it's a long term big level, but I don't think that there's been enough damage and Argentina beans to really be a story.

Paul Yeager: How about Brazil? What's the story there?

Chris Robinson: Apparently there's a big crop coming. I mean, people found that out, you know, even after the last report. I mean, it is the USDA didn't change any numbers, but not drastically. There was really nothing drastic on that report. Thankfully. But yeah, we're going to get a record crop in Brazil. Everybody's known it now for a while. We never really got stress on the crop down there. We did have some drought scares earlier, but it's a big crop coming. China knows that we know it. And now we're have to sit back and see, you know, what happens. And if we can get some of that export business back.

Paul Yeager: If I have quickly acres up for debate between corn beans, Cotton, and am I soybeans winning in that discussion?

Chris Robinson: I don't think so. I think, you know, some of the numbers that we've seen lately, the break even for new crop beans is 1040. We're right there at the break even for corn is around 430. These are rough numbers. So I know everybody is different, but we're 30 in a world where we're at 470 with new crop. So it's just a math problem. And the question is, is how many acres of corn are we going to plant? We get over 95 million acres and you discuss cotton. Cotton is, you know, just getting completely beaten up at four year lows in danger spot cotton was look like it might go below 63 go back to 60 and even new crop has been in a big downtrend really for the past year. It's fighting it out here trying to hold on to 6570 area. I think if you saw new crop cotton drop lower, why would somebody plant cotton? They're going to plant beans, but I think before they plant cotton. So that's going to be something to watch.

Paul Yeager: Let's go to happier times in the live cattle market. We've lost 9% since the top of that one more percent. We've got ourselves a correction. Is that what's happening?

Chris Robinson: Yeah. I mean, it's like for a while I was like, Hey, Chris, how high can we go? Right? If you look at feeder cattle, I think if my memory serves me correctly, you know, if you take the September low to the high was 53 bucks. I mean, you know, and a lot of people this has been the market that puts work best in because if you were short futures, wherever you were short from, you left all that dough on the table. f you had to put on, yeah, you're put lost value. But if you had $0.03 in put and the market rallied and we've seen this, we've gone up $0.10 a week means some really impressive moves and nothing lasts forever. We have, we did have that kind of a 25% correction area, which we sat out for four or five days. We'll see if it can, you know, catch a bid next week. But there are some nervous people out there, especially if you're buying cows for next year. You have to go out and buy cows When they're this expensive, you better make sure you know where your defense is because like everything else, when it corrects, it usually corrects very sharply. The same old story, right? It takes we go up the escalator when be correct, we go down the elevator shaft so we know what's coming. But that's what puts a before.

Paul Yeager: You mentioned the hanging at four day levels. Feeders have hung at the same levels for about seven days, almost twice the length. Is that party over?

Chris Robinson: Well, we'll see you next week. It's fundamentally nothing's changed. The stock market continues to hang in there. We haven't had a real hiccup more than five or $0.06. Why does that matter? Historically, if the stock market has a big move lower, usually they'll sell live cattle and feeder cattle. It's just a kind of a knee jerk reaction. Live cattle have had a bigger correction. And I think that, you know, you can talk all you want about box beef and the cut out and the cash market and the Packers. But I think everybody is you know, this market looks like it's a little bit overdone. We've had a healthy correction. What's healthy? We've lost 38% of the rally. We'll see if we can, you know, catch it again. But I think anybody out there, even if you've done nothing, these are such good prices that if you if you make your first highs next week, you're still on you're a lot better shape than you were back in September.

Paul Yeager: Hog markets also a little bit on a run, maybe a little bit of a bull run. That's trending higher, though.

Chris Robinson: Yeah, Well, I think a lot of people I mentioned in my letter about the beginning of the month, historically, the spread between the price of cattle and the price of hogs have gotten ridiculously wide. And since now this has come a snap back. I would say this if I'm a hog producer and I look out of those deferred months, we've gone vertical. We've gone up 20 bucks in the past three or four months were contract highs. The market's telling you it wants to go higher. That's and then those deferred months. It's really something to watch. But if I'm a producer and I'm looking out there, you've got that's a gift. And again, it's always nice when prices go up. If you're a producer, you're always long. What you want to do is play good defense. So take advantage of that, start looking at doing some hedges and you never know where one headline away from, you know, a correction.

Paul Yeager: The sport has to say defense wins championship, Defense wins champion. All right. Chris Robinson, thank you. Thanks. I appreciate it. We're going to pause this analysis, continue our discussion about these markets in our Market Plus segment. You can find both analysis and Plus on our website of Market to Market dot org. We like to keep our inbox open and reliable for you on a cold winter's morning, noon and night. Send us a note any time by emailing us Market to Market at IowaPBS.org. Next week, clothing manufacturers who survived when others unraveled. Thank you so much for watching. Have a great week.

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