Market Analysis: Chris Robinson

The first weekly report of USDA crop conditions revealed poorer wheat and at pace planting for corn. For the week, the nearby wheat contract added 67 cents, while May corn expanded 34 cents. Friday’s WASDE report came in below expectations for ending stocks. The May soybean contract gained $1.06. May meal increased by $18.20 per ton. May cotton shrank $2.14 per hundredweight. Over in the dairy parlor, May Class III milk futures enlarged 36 cents. The livestock sector was down. June cattle shed $2.02. May feeders lost $6.75. And the June lean hog contract declined $5.87. In the currency markets, the U.S. Dollar index rallied 120 ticks. May crude oil cut $1.32 per barrel. COMEX Gold strengthened $19.10 per ounce. And the Goldman Sachs Commodity Index decreased more than 7 points to finish at 714.10.

Yeager: Joining us now to provide some insight is Chris Robinson. Chris, good to see you.

Robinson: Good to be here.

Yeager: Last week of course there was the big intentions report, I'll ask you about that. But today we had a WASDE report. This was the other half of the shoe that some felt we didn't get last week. I mentioned a couple of headlines below expectations. But where did you see the WASDE report today?

Robinson: I think it came in actually a little bit negative more than people thought if you dug into the numbers right away. In fact, we had a little blip right when it first came out. But we're back to, the market is very, very uncertain about what is going to happen with this growing season. So you saw that again with a really nice move, you mentioned it, the weekly changes for soybeans and corn. In the last six days, new crop corn, especially this is a new crop issue, new crop corn at contract highs, $7.15, $7.16. You had November beans which really got hammered on the acres report. That was a surprising acres number. That has come back strong. We were up $1.03 in the last six days right back up to north of $14.50. So the market is going to make sure that farmers get out there and plant this crop and I think they're worried about the weather really at this point, that's the driver.

Yeager: Let's talk weather in wheat because it is dry as the report was earlier in the west, talked to a Kansas producer this week and he was just like, we are dry, we feel everything has moved east of us and we keep missing. What does that weather story say on the winter wheat crop? And what are the ramifications for the world?

Robinson: We're going to have to keep watching the wheat condition reports. I think that is going to move the market and we've already had tremendous volatility. We started in January, we were at $7.50, we rallied basically about 70%, the wheat just exploded. And even today we're at $10.50, we're $3 higher than where we were in January. So that is I think going to be a continuing thing to watch. And it's going to be the condition of the crop. The carryout today actually, they increased the carryout for U.S. wheat. I think that was something that was a little bit surprising. I think that the other thing we've seen too is we haven't had a huge increase in our exports. The exports for wheat are still running behind and so I think that's going to be something to continue to watch. But yeah, it's definitely going to be, the wheat condition reports are going to be the driver. Also, I think as we start planting corn, corn may become the driver, the leader for the next few weeks.

Yeager: Well let's go into corn and I'll tie in my first part about last week's intentions. That was as of March 1. March, as you mentioned, the last six weeks have been crazy. And it's cold and wet, all of these things combined. What is the biggest pull if there is a change in acreage and we're going to end up maybe planting more corn?

Robinson: Well, as soon as the acres report came out people said wait until June, that's just the way it is, we'll see when they update the acres. I think a lot of people when you saw $7 corn, if anybody had a chance to re-evaluate whether or not they want to plant corn or beans that may be happening or about to happen. And I've seen some estimates and I kind of agree with them, you could see a half a million acre shift. But that certainly was surprising to see 90 million acres for corn and about a million and a half less acres, excuse me, 90 million acres for soybeans and about a million and a half acres less for corn. That may come out in the wash. The cure for high prices is high prices and I think if anybody was on the bubble about planting corn certainly the action that we had this week with new contract highs is going to make them want to plant corn.

Yeager: Even as we sit here and it's cold and I saw snow this morning in Iowa and everywhere, it's cold. Nobody is getting any early planting done. What does that mean? What's the impact of that?

Robinson: Well, every year there's always issues with delayed planting. We'll see. The American farmer is great at doing one thing, getting the crop in. We've seen that in the past few years where it was too wet, '19 was terrible, people were planting in July, that's how late it was, it was really, really a wet year but yet we had a good crop. So the American farmer, there's nobody better in the world at growing crops and they'll get it in. But yeah, every time we have a delay of planting, a delayed planting issue or anything like that it's going to be supportive. And not that this market needs any support --

Yeager: But you wrote just this morning, you said, six week rally. And so I'm asking, is that about to come to an end?

Robinson: That's the big question. We'll see. Now it's going to come down to are we going to continue, there's the old expression the bull market needs to be fed every day. Right now everybody is long, the farmer is long, I haven't seen the commitment of traders yet for today but my guess is they bought more corn and beans just from the price action. You still have people in the financial community that want to own commodities because for the inflation hedge. And I think that's the biggest risk. The biggest risk is everybody gets very, very bulled up and then we have a perfect growing season and then that's your risk.

Yeager: Speaking of bulls, are they coming into the soybean pits any time soon from China? Is that going to drive us?

Robinson: That was the one thing today in the WASDE report they had lowered expectations for Chinese imports. Right now with what is going on in China their crush is lower, they've been kind of nibbling at the soybean market but they're running way behind schedule and I don't know what the exact number is for how far behind they are on their commitments. I think a few months ago Mr. Vilsack said they were $13 billion light so they're still kind of lagging behind. I think that that's going to be something at the end of the day you need the demand to hold these prices up. But I’ll say one thing, the Chinese they've tended to step in and buy the dips, they're very good at that and I would continue to see that, that was a pretty good dip that we had after the acres report and they did step in and buy.

Yeager: Another thing you like to write about is Mr. Market. What is Mr. Market telling you about soybeans right now?

Robinson: Mr. Market is telling you that anybody that had a knee jerk reaction to that acres report, if you made an emotional decision you probably wish you hadn't. That was a pretty big break and then another rally. I think also too for seven years, eight years we were pretty spoiled. We didn't have this type of volatility. We started seeing this volatility really coming off the bottom in 2020. I don't think it's going away any time soon. But at the end of the day when you see $15 beans, $14.50 beans and $7.50 corn and it's not even tax day yet, this is a market that for better or for worse, especially the corn market, this is a market and you can go out and look at the deferred months, '22, '23. It just keeps grinding higher. So that speaks volumes.

Yeager: All right. Well let's flip this around and let's take a viewer question. This comes from Gary in Franksville, Wisconsin on Twitter. He's @farmer_kolb. He says, Chris, times like this when every piece of news seems bullish and planting looks to be heading towards more of a normal time versus previous years. So his question is, what are the bears holding on to?

Robinson: They're holding on to above trendline yields and if we do have a good growing season, we're going to talk about the Drought Monitor later on and what does that portend, I don't know, it's really going to be in the hands of Mother Nature. But if we were to get -- right now the market is factoring in weather issues completely. If we were to get a perfect growing season we could fix the carryout problem in one season. Also too you've got to remember they're harvesting now in South America, they're going to take a look and see what happens with our corn prices and they will be very, very interested in planting more corn. So I think the market will fix it. You go back and look, every time we've had these spikes the corrections are pretty painful to the downside. Everybody seems to think that maybe this time is different. I haven't heard a lot of that yet. I think if we start hearing that, that might be the warning signal.

Yeager: All right. Well let's look at livestock because that's a little bit a drought story but it's also a feed issue. Both cattle and feeders this week looked to be reacting to higher corn. Let's start with cattle. Do you buy that that was the biggest weight on that market?

Robinson: Well, it's interesting, just a couple of months ago we were at seven year highs, we had had a tremendous rally in the cattle, both fats and feeders. So we had that nasty correction in February to March both in the feeders and the fats, really substantially though in the feeders, the feeders really a $20 break from a contract high to eight months lows. I think that caught a lot of people surprised at how quickly that happened and it was almost a knee jerk reaction I think from the market, well corn is going to be higher, you have to sell feeders. Now, we caught a little bit of a bid here towards the end of the week. I know a lot of guys that are long-term very, very friendly cattle. We're all familiar with the fact that the herd is too small. But I would continue to watch that. I think longer term that's the other thing too, the deferred months continue to look pretty good, especially for fat cattle and even lean hogs. We've had a little bit of a pull back. But those have been good trending markets. But yeah, I'd say the weak link of all three of them has been the feeders and it's just because it did not like $8 corn.

Yeager: But it has that pull of well maybe we do want some beef, maybe we are going to grill and we have to get that through the system, therefore we need some feeders. What if we didn't have that pull?

Robinson: Well, if we didn't have that pull then I Think that you might see some pushes towards other things. You were talking earlier about the bird flu, a lot of people thought that was going to be really more supportive I think for cattle and for the lean hogs, it really wasn't. It really hasn't had much of a draw. But yeah, at the end of the day protein is protein, we'll find a substitute for it. But I was just visiting with one of my cow-calf guys in Indiana and they'll ride through the storm. At the end of the day they're committed to that business. And I think if we can get a handle on really where corn is going to be that is going to be the key.

Yeager: What are you telling those hog producers right now?

Robinson: You better have corn calls on and actually I've been trying to have guys do that really for the last two, three, four months. December new crop corn was at $5.40. In three months we've gone up tremendously already. So I don't want to be behind the eight ball if we go and have like an '88 type market. So the only way to prevent being surprised or hurt by a move like that if we go vertical, you have to have the only protection you have that will really help  you for feed is you've got to have those calls on. And I don't care if you have out of the money calls or vertical bull call spreads, something where you've got a defined risk where you know how much it's going to cost you where you can't get whipsawed. I don't really recommend trading futures. That's too hard when it's moving like this. But go buy yourself call options and hope you don't need them.

Yeager: All right, thank you Chris Robinson. Good to see you.

Robinson: Thanks.

Yeager: That will do it for the installment of the TV show Market to Market. We're going to keep going in Market Plus. I've got a bunch of questions here from you. You can find that free on our website of MarketToMarket.org. The site that is rooted in images is springing to life. As you head to the field, follow and then tag MarketToMarketShow on Instagram in your posts so that we can see your photo and then share it with others. Next week, we look at how one Kansas producer is answering the acreage question in a different way. Thank you for watching. Have a great week.

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