Market Plus with Ernie Goss and Chris Robinson

Paul Yeager: Welcome into the Friday, July 5th, 2024 installment of Market Plus Chris Robinson, Ernie Goss back with us. We are recording this on Tuesday ahead of the holiday because, you know Chris needs a break. Ernie, it's been a tough couple of weeks for him.

Ernie Goss: We're always on break.

Paul Yeager: We're always yeah, academics. So I'm just lucky. Doctor Goss, let's go back to this housing discussion. We were chatting between programs here. There's this insurance issue that's impacting the coast, specifically Florida, California about insurance companies. It's happening. And what's going to happen in other states? Are there different factors involved with housing or is all housing the same when it comes to ups and downs?

Ernie Goss: Oh, it's absolutely local, but a lot of the locals are being affected by the same thing. The, the, for a new home buyer right now, you're going to have to pay 40 to 45% of your income just to pay off your monthly payments. In addition to that, you've got rising insurance costs, significant rising insurance costs, you've got taxes, property taxes, which have gone up significantly. And finally, you get maintenance costs which have gone up significantly. So it's very difficult for a new home buyer or a buyer that in a house has got a three an old mortgage, 3 to 3.5% to move into that new house and move to a new job are, you know, you're having people probably I don't have this down, but people are getting divorced and deciding to stay in the same house because they can't. Neither one can afford to move to another house.

Paul Yeager: But this and that happens. Housing was a big part of the 08-09 issues, and housing continues to be a story just because of the economic things that it drives. I mean, I think we're on, we've had growth in New Home Builds or in existing home sales, but it's been slow and I want to get to tariffs. Now for a minute, if we could does the election have an impact on the economy this time differently or more than other times?

Ernie Goss: I think it does in this case. But both are talking about that. The two, the primary again principal candidates, are talking about raising tariffs, trade restrictions. Again, those don't from an economist standpoint don't make sense, particularly for the two industries that we survey at Creighton University. That would be manufacturing and agriculture. Not good, that's certainly one of the big issues looking forward. Secondly, you're talking about both of both candidates. The chief candidates are talking about spending more. I mean, is they disguised it somewhat, but they're talking about spending more. One would increase the debt significantly. And that and the other would increase taxes. In other words, President Biden has talked about throwing out some of the 2017 Trump tax cuts. December 2017, Trump’s talked about keeping them all in addition to more tax cuts. So we're talking about both of them are talking about blowing up the deficit more than it already is. So that's going to put pressure on the Federal Reserve back to I saw talked about reducing interest rates. That's in the short to intermediate term. Long term we're talking about higher interest rates. And looking ahead for for a long time.

Paul Yeager: Chris, I asked you on the main program about interest rates on commodities. But what about elections on commodities. What's the impact there?

Chris Robinson: Well, I think you've seen it. The Chinese have been sitting on their hands because they're as far as, being aggressive, buying our, supposedly our new crop soybeans, new crop. Soybean exports are at 19 year lows. You know, we grow 4 billion bushels, roughly a billion of that usually goes to China. So we're feeling that now. And I think that they're going to fold their arms. They're not in a good situation at home anyhow. They've got their own domestic problems, their own economic problems with their real estate system. And, I think that they're going to wait and see. So they're doing one of these, they're waiting and they're going to, they don't know who's going to be president in either. So I think that that that's one of the reasons we haven't had really strong exports.

Paul Yeager: But there was a report early in the week that said China may start to finally dip their toe back into buying. I think that's old crop, though.

Chris Robinson: Old crop. I mean, you know, three year lows brings out everybody. And that's when we see wheat drop $1, you know, 80 and a month. You see corn drop. Basically we lost $0.84 that month. You see soybeans dropped by $1.20. And we are at three year lows. Anybody who in May was worried about what if prices go higher now they're like oh they just got it's a blue light special. So you're going to see people come in and buy some. Is it going to be enough? I don't know those numbers. We talked about the carryout the close to 3 billion bushels of corn. There's I think 456 million bushels of beans, which is about 140 million bushels. We had more than at this time last year. So again, those beans and corn that's got to get moved before we can start going higher.

Paul Yeager: We'll get to the stock question in a moment, but I want to start with the holiday. And the fourth. Craig in Minnesota wants to know. Chris, do you see any grain market fireworks in the weeks ahead?

Chris Robinson: There's always the big water now, now that we're into the July 4th weekend and and, we don't have a heat dome. We've gotten plenty of rain, rain, mixed grain. Now for the areas that have gotten too much, obviously that's going to be a problem. But right now, for the next 15 days, we don't have weather stress. so there's no weather risk priced in. And that's why you see prices sitting where they're at currently.

Paul Yeager: Well, you also bring up a point of east versus west here. Mark in Nebraska wants to know from the western side of the corn Belt perspective on farm corn seems to be more of an eastern problem. Do you agree or disagree with that? And what does that mean for the market going forward.

Chris Robinson: Then all basis is local. I mean, I'm lucky enough to work with guys all over the country. Everybody has to make their own basis decisions. You have to keep track of that. The only thing we can hedge is flat price, and it's not surprising to see the basis move on. Again. Flat price moves down to three year lows because that elevator, he needs to make some, concessions to get you to go, you know, sweep out your bins. So of course the basis is going to get better, but that can change very quickly because as soon as they have more they need, they can go away very quickly. So if you see an opportunity, take it.

Paul Yeager: We have two in Ohio. And Terry is the first one that I want to ask you about. Does a basis contract get counted as farmers stored grain when in reality the grain was delivered and processed in some cases months ago?

Chris Robinson: No. If it's already been sold and priced, it does not count.

Paul Yeager: So okay then the other question, from Brock, in Ohio, why is farmers storing the grain looked at is such a bad thing versus commercials story? 

Chris Robinson: Well, commercials are in the business of storing grain, and I always work with customers and I always say, you know, you are an elevator, but do you really want to be an elevator or an elevator because you're long all the grain you have now and all the grain you're going to grow for the next for the rest of your life? But if you're going to be competing with elevators, they're probably going to have the edge on you. And there's an old axiom in the business that the market doesn't turn until the farmer, the last farmer, kind of throws the towel in. And that's typical, if you don't have to sell it, you probably won't. There are a lot of guys I'm working with currently that are being forced to sell now because for one reason somebody won't let them roll it in the next month. So you're going to see more and more of that, and especially now that the cat's out of the bag with the numbers of that, you know, with all that on farm storage, it kind of gives the, elevator a little bit more of an edge to the farmer because the elevators in the business to do that, most farmers aren't.

Paul Yeager: Ernie, as you look at or hear what Chris is saying, does that change anything? Do you think in those survey months ahead, more than, say, the Federal Reserve cutting interest rates, any of these, the amount of grain in the field, the amount of acres not planted, how do you see the two mixing?

Ernie Goss: Well, they obviously have strong connections and the connection in some cases is just the interest rate in the overall economy, in the global economy and tariffs. Again, back to that. But one thing I failed to mention, early on, a fairly significant to this program, I think, is we recorded 53 straight months of growing agricultural land prices, farmland prices, I should say. And in addition to Real seeing weakness in residential real estate, we're now seeing at 53 straight months, two months in a row where it's moved sideways a bit down. So not only are we seeing weakness there, we're also seeing it here. And look at farm income for 2024. USDA is number and our number as well. Well we don't have a number. We just say the direction is down for income 2024 versus 2023 versus 2022. So that means again the market I see weakness in. I shouldn't call it weakness, but growth is not there in terms of farmland prices. And I think we're going to see it coming down. But not like we're seeing residential housing come down. Those are going to be fairly dramatic. We're going to see that soon. Look no further than the employment report for the month of June, which is released on Friday. That's very important.

Paul Yeager: I'm going to take away the easy answer for this question. But in the last six months, the biggest story besides the Federal Reserve's action is….

Ernie Goss: In the last six months…

Paul Yeager: In the last six months of 24, what do you see?

Ernie Goss: I think the issue is going to be the stock market coming down between now and September the 18th and interest rate cuts and the overall economy, showing that we're in a recession. I think that's going to be the big story. But again, we economists that's the National Bureau of Economic Research. We designate the recession. We don't do it till sometime in 2022, 2025, when it's a no value to the individuals, businesses and farmers as well. And farmers, are a little bit contrarian, thank goodness. In terms of recessions, this is not going to be a tough recession on the farm, is it is on non-farm.

Paul Yeager: Chris, what do you see is the biggest story in the last six months of 2024 as we wrap up the year.

Chris Robinson: The next six months is, are we going to hold, $4 beans, excuse me, $4 corn and $11 beans. I mean, that's a big revenue bump there. And people are concerned about sub4 dollar corn and, that's I think that the big water up here and, again, real quick look out to 2025 and 2026. They're both at 450 for corn. Look out to 2025 and 2026 beans. They're both at $11. So these are going to be key pivotal areas for it to hold. And what I don't want to see is let's go back to where we were 2014 to 2019, where we had kind of sideways lower prices. And that's not a good environment for the American farmer.

Paul Yeager: You're saying without saying you're not quite jumping on the table. However, we are, at a time and a place where we have the opportunity to to put something on the books right now that we quickly saw disappeared. You're saying this is a good chance right now, because if we have above trend line yields that that everybody thinks who's trading is possible, we're going to have a lot of grain to sort through, right?

Chris Robinson: Absolutely. And the market does not care what your cost of production is. That's why it's brutal it's a brutal fact of life. And, you know, back in 2014 and 2019, everybody needed corn. You can go back there and look and see. Sometimes we were there for two days during a marketing year and then in the last. So and I was when I was here the last time I said this was going to be a year of the spreadsheet, you had to know where your number was and this has been a difficult marketing year because we haven't had very many choices, chances and, that these corn, it got so close to $5 there for 96 just a month ago. And that's the big psychological. And now the key is again, moving forward, you say what's the big risk you we need. We don't want to have corn of the three in front of we don't want to have beans with the nine in front of it.

Paul Yeager: I'd like to say that's a good positive note, but it's nowhere close. So Chris, we'll just leave it at that. Chris Robinson, good to see you. Thank you so very much, Doctor Garth, as always. Thank you.

Ernie Goss: Thank you Paul. Thanks, Chris. Good to see you.

Paul Yeager: All right. That'll do it for Market Plus. Next week we are going to revisit our producer farmers for an update to the growing season in Nebraska and Michigan. We'll also have market analysis with Matthew Bennett. Thanks for joining us. Have a great week.

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